US & World Daily Markets Financial Briefing 17-11-2006

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Stocks fall in early trading

NEW YORK - Stocks fell in early trading Friday following strong advances all week and after the Commerce Department reported that housing construction fell to its lowest level in more than six years.
   
A pullback in the markets wasn't surprising after stocks advanced for five straight sessions and the Dow Jones industrials logged three consecutive record closes this week. Heading into Friday's trading the major indexes were up at least 1 percent for the week, with the Nasdaq leading the way with a gain of nearly 2.5 percent.
   
In the first hour of trading, the Dow fell 23.46, or 0.19 percent, to 12,282.36. Broader stock indicators also fell. The Standard & Poor's 500 index was down 4.44, or 0.32 percent, at 1,395.32, and the Nasdaq composite index was down 11.68, or 0.48 percent, at 2,437.38.
   
While investors were well aware of a slowdown in the housing market, the figures on housing starts showed a precipitous decline. Construction of single-family homes and apartments fell to an annual level of 1.486 million units last month, a 14.6 percent decline from September.
   
In corporate news, Starbucks Corp. posted a lower fiscal fourth-quarter profit.

Hewlett-Packard Co. shares slipped Friday after the company said fiscal fourth quarter earnings quadrupled but the Securities and Exchange Commission had ordered a formal probe of its boardroom spying scandal.
   
Shares of Palo Alto-based HP fell 33 cents to $39.80 in early trading on the New York Stock Exchange. Analyst Shaw Wu with American Technology Research chalked up a dip in the stock in after-hours trading Thursday to "minor profit taking" following a "very solid" quarter.

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Dollar buoyed by receding US rate cut expectations despite housing slide

LONDON - The dollar firmed further in quiet trade as it continued to garner support from receding expectations of an impending reduction in US interest rates.
   
That general market view remains intact even though US housing starts data disappointed massively to the downside as the US currency continues to benefit from a hawkish-sounding US Federal Reserve.
     
If US data continues to come in as weak as today's housing starts, then the market is likely to make a quick re-assessment about the interest rate outlook though.
   
Despite that, the dollar seems to have taken the data in its stride, partly because trading activity has diminished following a long data week.
   
The minutes to the last rate-setting meeting of the Federal Open Market Committee, when the key Fed funds rate was left unchanged at 5.25 pct, was the key event of the week for the dollar's fortunes.
   
They showed that inflation remains the "greatest" worry for policymakers. Since then, Fed officials Michael Moskow and William Poole have underlined this over-riding concern, diminishing talk of any imminent interest rate reduction.
   
Elsewhere, the euro has been undermined somewhat by comments from French President Jacques Chirac. He said euro zone member states should be allowed more say in the monetary policy of the European Central Bank, two days after Prime Minister Dominique de Villepin said the strong euro was damaging exports.
   
This week's calls by the French leaders reflect anxiety in euro zone countries that the high level of the single currency penalises European companies, making their exports expensive in foreign markets.
   
Nicolas Sarkozy, expected to be a leading candidate in France's presidential elections next year, has also criticised the lack of control over the level of the euro, and his likely Socialist opponent Segolene Royal has lashed out at the power of the ECB.

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The European Markets at 12.30

London - UK blue chips remained weaker, near session lows at midday, with Wall Street seen a touch easier today, and easier commodity prices dragging oils and miners lower, offsetting Friday bid talk in Cadbury Schweppes. At 11.58 am, the FTSE 100 index was 32.6 points lower at 6,222.3, just off the late morning low of 6,218.9, having dropped back from an opening peak of 6,249.1.

Frankfurt - Shares were flat in thin midday trade as Commerzbank's losses offset the strong gains posted by Infineon and Hypo Real Estate. At 11.45 am, the DAX 30 index was 2.78 points or 0.04 pct higher at 6,445.80, having moved between a low of 6,436.35 and a high of 6,451.69.

Paris - Shares were down at midday with heavily traded bluechip Total leading the decline, as investors sold shares after the company's latest dividend payment. At 12.20 pm, the CAC-40 index was down 29.23 points or 0.53 pct at 5,476.49. Volume was 1.8 bln eur.

Milan - Share prices were slightly lower at midday, weighed down by losses in the energy sector on the back of tumbling oil prices, though Alitalia rose strongly on alliance talk. At 12.01 pm, the Mibtel index was down 0.18 pct at 31,293 points and the S&P/Mib fell 0.07 pct to 40,790.
   
Amsterdam - Share prices were slightly off in early afternoon trade marked by lower oils and US futures pointing to a negative Wall Street opening. At 1.11 pm, the AEX index was down 0.16 pct or 0.79 point at 495.20, after opening at 495.55 and trading in the 495.05-496.03 range.

Madrid - Share prices were lower in midday trade as investors digested a run of regulatory and legal developments in the Endesa bid saga, while Repsol YFP underperformed on growth concerns after third quarter results yesterday. At 12.10 pm, the IBEX-35 index was down 28.0 points at 14,214.6, after trading in a range of 14,200-14,245, on turnover of 2.3 bln eur.

Stockholm - Share prices were lower in midday trading, with heavyweights Ericsson and Atlas Copco leading the fallers. At 11.50 am, the OMX Stockholm all-share index was down 0.62 pct at 356.30, while the OMX Stockholm 30 index had fallen 0.60 pct to 1,105.62.

Zurich - Share prices moved slightly higher in afternoon trade after another record performance by Wall Street last night, but with losses in heavyweight Nestle weighing on the index. At 1.20 pm, the SMI was up 13.63 points at 8,803.01, while the SPI was up 0.56 points at 6,891.33.

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Source: AFX News/Associated Press

Asian shares close mixed; Japan cautious, China higher on fund inflows

HONG KONG - Shares across the Asia-Pacific region closed mixed, with the Japanese market continuing in a cautious mood while Chinese shares were boosted by fund inflows.
   
Tokyo shares closed lower, having shed morning gains on lingering concern about the prospects for the economy. Early gains were spurred by rises in US stocks overnight but could not be sustained, they added.
   
The blue-chip Nikkei 225 Stock Average closed 72.14 points or 0.45 pct lower at 16,091.73, after touching a low of 16,067.27. Over the week, the index fell 0.13 pct.
   
The broader TOPIX index of all first-section issues dropped 8.50 points or 0.54 pct to finish at 1,573.54, off a low of 1,571.44. Over the week, the index declined by 0.49 pct.
   
Hideyuki Suzuki, a strategist at SBI Securities, said the market's recent bearish performance reflected a cooling of investor sentiment caused by recent weak economic data.
   
Australian shares finished higher as investor sentiment rose after Wall Street hit a fresh record high. The S&P/ASX 200 rose 27.1 points or 0.50 pct at 5,419.7, advancing back towards the record close of 5,491.6 set on Nov 7. The benchmark index closed below the day's high of 5,426.0 and above the low of 5,356.9. Over the trading week the key index lost 17.0 points or 0.31 pct.
   
Hong Kong shares were higher in afternoon trade on fresh fund inflows, although trading was cautious after recent record-breaking runs.  Buying was encouraged by another record-breaking performance of the Dow Jones industrial Average overnight. At 3.22 pm the Hang Seng Index was up 22.67 points or 0.12 pct at 19,176.74.
   
In mainland China, A-shares in Shanghai and Shenzhen closed sharply higher on strong follow-through buying, with blue chips and airlines snapped up. The Shanghai A-share Index jumped 31.67 points or 1.55 pct to 2,072.75 and the Shenzhen A-share Index was up 7.35 points or 1.59 pct at 469.0.
   
Seoul shares closed slightly higher in volatile trade as foreign investors unloaded IT stocks to take profits, with Wall Street's continued gains providing support. The KOSPI index closed up 1.47 points or 0.1 pct at 1,412.22, off a low of 1,407.31 and a high of 1,416.40. The week ended with a gain of 16.49 points.

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Gold edges lower as dollar firms, oil dips to lowest point this year

LONDON - Gold prices edged lower, extending yesterday's falls, as the dollar remained well-supported while oil prices fell to their lowest points this year, reducing gold's appeal as a hedge against inflation.
   
At 12.28 pm, spot gold, which earlier touched an intra-day high of 621.00 usd, was quoted at 617.30 usd, down from 620.40 usd at the time of the COMEX market close in New York yesterday.
   
Other precious metals were mixed. Spot silver was down at 12.73 usd an ounce against 12.90 usd, platinum fell to 1,147.00 usd against 1,185.00 usd, while palladium edged up to 320.50 usd against 316.00 usd.
   
"It is hard to see a quick snap back in gold with energy prices under pressure," said UBS Investment Bank analyst John Reade.
   
Gold closed lower yesterday after oil fell to its lowest point in a year and as the dollar stayed firm despite a spate of weak US data including a lower than expected rise in core inflation for October.
   
Gold often moves counter to the US dollar as it is seen as an alternate investment to the US currency. Also, a weak dollar makes gold cheaper for holders of other currencies.
   
Brent crude oil prices fell in London, while US crude dived to its lowest point since June last year as traders fretted over high fuel stocks in the US, forecasts for a warmer-than-average winter and doubt over OPEC output cuts.
   
At one point today, the front month December-dated New York light sweet crude contract, which expires later today, hit 54.86 usd a barrel -- its lowest point since June 14, 2005.
   
At 2.08 pm, the contract was trading down 66 cents at 55.56 usd.
   
Meanwhile, the front month January dated Brent futures contract was trading down 26 cents at 58.28 usd a barrel, after sinking 2.07 usd to close at 58.54 usd yesterday.
   
Calyon analyst Mike Wittner said a lot of the weakness in the front month US crude contract was due to its expiry later today. "On the days ahead of expiry you are always susceptible to prices swings in either direction," he said.
   
The contract plunged 2.50 usd by the close yesterday after the US National Weather Service forecast above-average temperatures over much of the country from December to February, and as markets reviewed conflicting reports on OPEC's exports.

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