US & World Daily Markets Financial Briefing 18-01-2007

The world's most trusted name in professional trader education. Click Here

Stocks mixed; market awaits Bernanke

NEW YORK - Wall Street opened mixed Thursday as investors awaited a speech by U.S. Federal Reserve Chairman Ben Bernanke for clues to how policymakers think the economy is faring, and to gauge whether an interest rate move is in the cards.
   
Bernanke's morning testimony to the Senate Budget Committee is expected to describe moderating growth -- a picture revealed by economic data released Thursday by the Labor Department. The reports showed consumer prices slowly rising, jobless claims at an 11-month low, and an increase in housing construction.
   
If the economy is growing slowly and steadily, and inflation is under control, the Fed is unlikely to lower rates soon. Some investors are now worrying about a rate rise, which would hurt consumers and the slumping housing market by making mortgages more expensive.
   
Investors also sifted through more earnings reports Thursday. As they did a day earlier, the reports showed strength in financial services and potential weakness in technology.
   
Blue chip stocks rose after Merrill Lynch & Co., the nation's largest brokerage, reported fourth-quarter profit that surpassed Wall Street expectations -- just as rival JPMorgan Chase & Co. did on Wednesday.
   
Meanwhile, technology stocks fell after Apple Inc.'s forecast for this quarter came in below estimates, leading investors to reconsider their high hopes for computer and electronics sales this year. The news came a day after Intel Corp. said its fourth-quarter profit plunged 39 percent.
   
In early trading, the Dow Jones industrial average rose 20.34, or 0.16 percent, to 12,597.49.
   
Broader stock indicators were mixed. The Standard & Poor's 500 index was up 1.64, or 0.11 percent, to 1,432.26, and the Nasdaq composite index was down 8.97, or 0.36 percent, to 2,470.45.
   
Bonds fell, with the yield on the benchmark 10-year Treasury note rising to 4.80 percent from 4.78 percent late Wednesday. The dollar was mixed against other major currencies, while gold prices rose.
   
Apple fell $3.49, or 3.6 percent, to $91.47. Though the company said its profit surged last quarter, its outlook for the current quarter fell below the market's expectations.
  
Merrill Lynch rose $1.45, or 1.5 percent, to $98.26, after reporting fourth-quarter earnings that blew past the average analyst forecast.
  
The Russell 2000 index of smaller companies was down 1.93, or 0.24 percent, 786.84.

VantagePoint's market forecasts are nearly 80% accurate.  Take a look at actual  forecasts and see the difference they can make in your trading. Click here to see two recent forecasts now.

Dollar continues to strengthen after US data

LONDON - The dollar extended the gains built up steadily over the course of the day after in-line US inflation figures and jobless claims data showing a resilient labour market.
   
US CPI rose 0.5 pct, the first increase since August. Core CPI rose 0.2 pct in December after remaining unchanged in November. Both figures came in as expected by analysts.
   
Meanwhile, first time US jobless claims dropped 8,000 to 290,000 in the week ended January 13. That's lower than the 315,000 new claims economists had expected and the lowest level since the week ended February 18. Also, housing starts rose for a second consecutive month, raising hopes that the severe slump in housing may be levelling off.
     
The euro temporarily dipped below the 1.2900 usd level on the publication of the figures, while the pound slid further to 1.9650 usd.
   
Elsewhere, the yen recovered slightly from strong losses this morning after the Bank of Japan decided to leave interest rates on hold and issued a fairly dovish accompanying statement.
   
The BoJ had broadly been expected to raise rates by a quarter point, though newspaper reports yesterday gave the market an advance hint that the central bank would hold fire this month.
   
Nevertheless today's decision was a clear reminder to the market that interest rates in Japan are set to remain very low for some time, giving the green light for carry trades -- when investors borrow in low-yielding currencies in order to invest in higher yielding assets elsewhere -- to continue.
   
Meanwhile, the pound remained strong as it continues to benefit from last week's surprise rate hike by the Bank of England as well as views that another hike may come as soon as next month.
   
The euro fell to new 31-month lows against the pound, around 0.6566, driven partly by comments by Bank of England board member Tim Besley, who said he expects limited spare capacity in the services sector to drive up wages in the wider economy.
   
The pound also "gained delayed support from the (strong labour market) report yesterday," according to economists at BNP Paribas. Unemployment yesterday fell to 5.5 pct in December from 5.6 pct the month before, while jobless claims fell by more than analysts expected.

Inflation picked up in September in Europe as both areas show fragile economic growth. Just as in the U.S., rising energy prices are to blame. Read free, daily market reports available only at CMS Forex and open your free demo trading account today. Click here

The European markets at 13.00 GMT

London -  UK blue chips continued to trade higher at midday, with Enterprise Inns topping the gainers, while Wall Street is expected to open firm as renewed dollar strength offsets US inflation data concerns. At 11.57 am, the FTSE 100 index was up 20.1 points at 6,224.6, albeit off an earlier high of 6,244.4, while the broader indices were also higher. Volume was moderate, with 1.07 bln shares changing hands in 165,879 deals.

Frankfurt - German shares are higher midmorning as heavyweight auto and chemicals stocks gained ground, although there was some caution ahead of important US data later today. At 11.35 am, the DAX was up 28.97 points or 0.43 pct to 6,730.67, trading between 6,716.62 and 6,737.98, with the MDAX adding 30.41 points or 0.32 pct to 9,580.17. The TecDAX gained 8.26 points or 1.04 pct to 799.07, and the DAX futures contract added 19.50 points or 0.29 pct to 6,767.50.

Paris - Share prices rebounded from yesterday's decline, thanks in part to a series of positive corporate sales reports. At 12.01 pm, the CAC-40 index was up 41.25 points or 0.74 pct at 5,603.03, on volume of 2.5 bln eur.

Milan - Share prices were higher in midday trade, with Eni and other oil sector plays leading the advance as crude oil prices continued to rebound, while Alitalia was supported by reports about potential bidders. At 12.01 pm, the Mibtel index rose 0.41 pct to 32,257 points and the S&P/Mib was up 0.45 pct at 41,935, while volumes were 1.5 bln eur.
   
Madrid - Share prices were higher at midday, with domestically focused banks in the limelight amid full-year earnings reports, while the main blue chips were firm. At 12.45 pm, the IBEX-35 index added 36.2 points to 14,331.2, on turnover of about 1.5 bln eur.

Zurich - Share prices were slightly higher midday, supported by fresh buying interest in heavyweights Nestle and Roche, while Novartis continued under pressure as its fourth quarter profits failed to meet the market's consensus. At 12.20 pm, the Swiss Market Index was 24.05 points higher at 9,128.65, and the Swiss Performance Index was up 20.60 points at 7,217.85.

Get a FREE $50,000 Forex demo.  Free streaming quotes, guaranteed executions, 1% margins, and zero commissions! Click Here.

Asian shares close mostly higher as Bank of Japan holds rates

HONG KONG - Shares across the Asia-Pacific region closed mostly higher after the Bank of Japan decided not to raise interest rates, dealers said.
   
Tokyo shares closed higher, with investors'  focus shifting back to the general prospect of higher corporate earnings, after the central bank's decision to keep rates on hold got a limited response.
     
The blue-chip Nikkei 225 Stock Average closed 109.58 points or 0.63 pct higher at 17,370.93, off a high of 17,408.62. The broader TOPIX index of first-section issues closed 8.41 points or 0.49 pct higher at 1,715.17, off a high of 1,719.13.
   
Hiroichi Nishi, general manager of equities at Nikko Securities, said: "Recent trading has revealed that investor hopes for higher share prices remain strong, despite uncertainties over interest rate outlooks."
   
He added: "There have been such hot debates over a 25-basis-point hike but, after all, it would not add much to Japan's super-low interest rates. Investors are now waiting for the Bank of Japan to confirm its view of the economic recovery and elaborate on its decision."
   
In early afternoon trading, the central bank announced that its policy board had voted 6-3 to keep the overnight call rate target unchanged at 0.25 pct.
   
Australian shares closed up as investors bought resource and bank stocks, reversing yesterday's selling action and helping to boost sentiment for the wider market. Energy stocks also rose after oil prices jumped in overnight trading on bargain-hunting.
   
The S&P/ASX 200 advanced 26.3 points or 0.47 pct to close at 5,672.4, just shy of Monday's record close of 5,673.8. The key index closed below the day's high of 5,679.5 and above the low for the day at 5,650.9. The broader All Ordinaries index rose 24.6 points to close at a fresh record close of 5,650.7, surpassing Tuesday's record close of 5,650.4.
   
Hong Kong shares were higher in afternoon trade, reversing morning weakness after a lacklustre performance on Wall Street and mixed US economic data. China property stocks saw selling pressure after news that mainland authorities will begin enforcing a land appreciation tax from Feb 1.
   
At 3.45 pm the Hang Seng Index was up 183.80 points or 0.92 pct at 20,248.37.
   
In mainland China, A-shares in Shanghai and Shenzhen closed mixed as the market corrected, with real estate developers and banks under pressure. The Shanghai A-share Index lost 23.74 points or 0.81 pct to 2,896.34 and the Shenzhen A-share Index was up 8.94 points or 1.34 pct at 673.59.
   
Seoul shares closed slightly higher, reversing their initial weakness, with investors relieved by the much-expected rate freeze by the Bank of Japan (BoJ).
   
The market opened lower following Wall Street's overnight retreat due to fears of inflation pressures but managed to rebound as the BoJ's decision to leave rates on hold eased concerns over global liquidity tightening. The KOSPI index closed up 3.73 points or 0.27 pct at 1,383.21, off a low of 1,372.93 and a high of 1,385.22.

Trade with RCG fxtrader™, the platform offering instant access to 12 major FX trading pairs with low spreads (2 pips EURUSD, USDJPY) and global news from 3 major sources.  Trade with a registered and regulated company in business for 80 years. Smart money trades here – Get your FREE Trial Today!

Oil prices steady after touching 20 month lows; traders await US inventory data

LONDON  - Oil prices steadied after touching 20 month lows yesterday, as traders awaited the weekly US inventory report, expected to show gains in both crude and fuel stockpiles.
   
At 1.47 pm in London, front-month Brent North Sea crude contracts for March delivery, were up 12 cents at 52.90 usd a barrel. The contracts sank to 50.75 usd yesterday, a level last seen on May 31, 2005, before closing higher.
   
Meanwhile, front-month New York light sweet crude contracts for February delivery rose 1 cent to 52.25 usd a barrel. Yesterday, the contract closed strongly higher after first falling to 50.28 usd, the lowest point since May 25, 2005.
   
Prices plummeted yesterday after key OPEC member Saudi Arabia said there was no reason to fret over the 18 pct dive in oil prices this year and ruled out calling an emergency meeting ahead of the scheduled mid-March meeting.
   
However, oil recovered by the close as cold weather moved into the US Northeast, the world's largest heating oil market, and as forecasts pointed to below normal temperatures in the area for the next two weeks.
   
Man Financial analyst Ed Meir said forecasts for continued cold weather should provide some "staying power" to yesterday's move higher, but added a lot depends on the inventory data later today.
   
Analysts expect the data will show crude stocks rose by a slight 100,000 barrels last week - reversing recent falls - while distillates, which include heating oil, grew by around 1.9 mln barrels.
   
The report will be published at 3.30 pm, a day later than usual on account of the US public holiday on Monday.
   
"We don't expect anything out of today's numbers capable of reversing the sharp price plunge that is now into its third week," said Jim Ritterbusch, president of Ritterbusch & Associates.
   
US heating fuel inventories have been rising steadily this winter as temperatures have been extremely mild up until very recently. As a result, demand for heating fuel has been falling.
   
As today's data is expected to show a continuation of this trend, it will likely serve to pressure prices further. Meanwhile, the market is having to contend with other news that is set to dampen sentiment.
   
The International Energy Agency cuts its forecast for 2007 world oil demand growth earlier, citing large revisions to US data, mild weather and adjustments to US GDP assumptions.
    
Meanwhile, Saudi Arabia said earlier it plans to increase its crude oil production capacity nearly 40 pct by 2009 and double its refining size over the next five years.

Increase the odds for Forex Trading success with this free online course. Learn to build a solid Forex Trading foundation and discover proven strategies for continued success.  Access this wealth of knowledge here absolutely free.

Online Trading Academy - Learn more to earn more.