US & World Daily Markets Financial Briefing 18-06-2007

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Wall Street heads higher on deal news

NEW YORK - Wall Street extended its rally with a modest advance Monday, boosted by takeover news that included speculation that aluminum producer Alcoa Inc. might again be in play.
   
The rise follows last week's sharp rally, when tame inflation data pushed the Dow Jones industrial average to its biggest three-day point gain since November 2004. Investors, lacking any significant economic data due at the start of the week, will likely use acquisitions and other corporate news to pick a direction.
   
Alcoa, the biggest gainer Monday among the 30 stocks that make up the Dow, moved higher after a report Australian mining company BHP Billiton Ltd. is reviving plans to make a $40 billion bid. In other deal news, General Electric Co. and Pearson PLC is said to be mulling a joint $5 billion bid for Dow Jones & Co.
   
In economic news, the National Association of Homebuilders is set to release its housing index for June. The housing sector has been one area of worry for investors, along with interest rates and a general economic slowdown that has at times upended the stock market in recent months.
   
In the first hour of trading, the Dow rose 14.72, or 0.11 percent, to 13,654.20. The blue-chip index is about 20 points away from its record close on June 4.
   
Broader stock indicators also advanced. The Standard & Poor's 500 index was up 1.01, or 0.07 percent, at 1,533.92, and the Nasdaq composite index added 1.75, or 0.07 percent, to 2,628.46.

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Euro rises above 1.34 usd level as dollar losses continue

LONDON - The dollar fell further today, with the euro rising back above the 1.34 usd level for the first time in 10 days, as market players continued to scale back US interest rate expectations after Friday's weaker-than-forecast core CPI data.
       
"The Fed continues to obsess about inflation risks, but the decline in core CPI is making this view more difficult to defend," said Mitul Kotecha at Calyon.
   
The inflation news was compounded by a raft of other weak US data, including industrial production and the latest University of Michigan consumer sentiment reading.
     
The euro was little impacted by French President's Nicolas Sarkozy's unexpected setback in Sunday's legislative elections, with Sarkozy insisting he can still push through reforms despite the small parliamentary majority he now controls.
   
Meanwhile, the pound came off earlier highs but remained firm, having risen above the 1.98 usd mark for the first time in 11 days, supported by positive M&A talk, as well as the dollar's weakness.
   
Thomson IFR Markets analyst Robert Howard noted talk of sterling buying out of the Middle East, possibly related to a Sunday Telegraph report that Qatari fund Delta Two is plotting a full bid for J Sainsbury PLC.
   
He also pointed to news that Dutch chemicals company Akzo Nobel NV made a 7.2 bln stg bid for Imperial Chemical Industries PLC. Though this was rejected, Akzo Nobel has said it will continue to evaluate strategic opportunities, including ICI.
   
The pound has also gained after the Bank of England's quarterly bulletin, released overnight, warned public inflation expectations in the UK may not decline in line with falls in inflation data.
   
Among major currencies, however, the yen was the weakest performer, hitting fresh four-and-a-half year lows against the dollar, record lows against the euro and multi-year lows against the pound.
   
The Japanese currency came under renewed pressure on Friday after a dovish speech from Bank of Japan governor Toshihiko Fukui suggested interest rates will not rise again any time soon, while gains on equity markets overnight caused the yen to add to its losses.
   
This has kept the carry trade -- where investors borrow in low-yielding currencies, most typically the yen, to invest in higher-yielding assets elsewhere -- alive and well.

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Euroshares off lows at midday on Dow futures; ICI up on bid news

LONDON - Europe's leading indices were off lows midday with the Dow expected to add to last week's gains and with ICI up 16 pct after it confirmed it has received -- and rejected -- an offer from Akzo Nobel. At 12.19 am, the STOXX 50 was down 4.58 points at 3987.09 and the STOXX 600 was down 0.37 points at 398.91.
   
The chemicals sector was in focus, and the UK's Imperial Chemical Industries stormed 16.94 pct higher after it confirmed it has rejected a 7.2 bln stg all-cash approach from Dutch rival Akzo Nobel NV, with analysts suggesting Akzo could afford to raise its bid.
   
Akzo submitted an "indicative" offer of 600 pence a share to the ICI board on June 4, an ICI spokeswoman told Thomson Financial News. "The board rejected the indicative bid because it doesn't believe it's representative of the full value of ICI," she said.
   
Akzo -- for its part -- fell 0.65 pct. Rabo Securities cut its recommendation to 'hold' from 'buy'. Collins Stewart said Akzo could pay up to 650 pence for ICI.
   
It said one key hurdle is ICI's pension fund - as the gross liability is 9.3 bln stg but the broker added that pension fund trustees should gain confidence from Akzo's financial strength and Akzo's experience dealing with UK deficits -- based on its Courtaulds acquisition in 1998.
   
BASF was also rumoured to be preparing a counter-bid for ICI although French broker Chevreux said the scenario is unlikely. The German group's stock gained 2.52 pct. 
   
Other chemical stocks were in play amid consolidation hopes Elementis up 2.68 and Linde up 2 pct. But Dutch peer DSM underperformed this morning, up 0.27 pct, after JP Morgan cut its stance to 'neutral' from 'overweight' following a 14 pct rise in the share price since March, according to dealers. Shares added 0.6 pct.
   
Adecco shares were sharply higher in early deals, up 1.92 pct, as investors cheered news it has acquired Germany's Tuja Group.
      
Invensys added 2.73 pct as bullish analyst comment about the possibility of restructuring refuelled talk of a Siemens bid. United Utilities added 1.3 pct amid vague talk it may also be being eyed.
   
Among ongoing M&A activity, there are reports that General Electric and Financial Times publisher Pearson are discussing making a joint bid for Wall Street Journal publisher Dow Jones & Co.
   
The joint venture would combine the Financial Times, Dow Jones and business channel CNBC in a privately-held joint venture, the Wall Street Journal reported, citing people familiar with the matter. Pearson lost 0.92 pct. 
   
LVMH chief executive Bernard Arnault is considering selling French business daily La Tribune which he has owned since 1993, French newspaper Journal du Dimanche reported, without citing its sources.
         
Rolls-Royce gained as it kicked off the Paris air show with a flurry of orders for the group's engines and traders said Exane BNP Paribas has upgraded the shares to 'outperform' from 'neutral'. This morning, Rolls-Royce announced it has won orders from International Lease Finance Corporation (ILFC), Flyglobespan and Hainan Airlines.
        
Rival Thales is "in no rush" to make acquisitions even if it "has the means" to do so and has no current plans to merge with Safran, chief executive Denis Ranque said on Friday.
    
BAE Systems was down 0.39 pct with sector watchers expecting the group to face questions about its planned US defence industry expansion following claims that US prosecutors may probe bribery allegations surrounding the Al-Yamamah arms-for-oil deal between the UK and Saudi Arabia.

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Asian shares close higher on Wall St rebound; Tokyo at 4-month high

HONG KONG - Shares across the Asia-Pacific region closed higher after a firm close on Wall Street on Friday night and strong interest in China stocks.
   
Tokyo shares closed higher, pushing the Nikkei 225 to near its best level in four months, as investors cheered Wall Street's rally on Friday, with a softer yen also boosting exporters.
   
The Nikkei 225 Stock Average ended up 178.03 points or 0.99 pct at 18,149.52, off its intraday peak of 18,194.26. It is the second highest closing since the blue-chip gauge settled at 18,215.35 on Feb 26. The TOPIX index of all first-section issues rose 15.45 points or 0.87 pct to finish at 1,788.39, off the day's high of 1,791.81.
     
Australian shares finished higher with investor sentiment buoyed by the US stock market rebound on Friday, which saw the Dow Jones Industrial Average record its highest 3-day gain since November 2004.
   
Diversified miner Rio Tinto touched 100 aud per share before pulling back below that level - the first company on the Australian Stock Exchange to reach 100 aud since the late 1960's. Fellow global miner BHP Billiton also hit a record close. The S&P/ASX 200 closed up 49.6 points or 0.79 pct at 6,343.4, below the day's high of 6,355.8 and above a low of 6,304.0. The key index is still below its record close of 6,392.9 set on June 4.
   
Hong Kong shares were sharply higher in afternoon trade as strong interest in China stocks, particularly financial and telecom counters, helped push the benchmark index to a new record.
   
Expectations of some positive policy announcements by mainland authorities ahead of the 10th anniversary of Hong Kong's hand over to China on July 1 fuelled strong interest in H-shares. Sentiment was also supported by Wall Street's gains Friday. At 3.25 pm the Hang Seng Index was up 462.25 points or 2.20 pct at 21,479.29.
   
In mainland China, A-shares in Shanghai and Shenzhen closed higher on easing concerns about further government moves to tighten credit, with financial and steel stocks leading the gains.
   
They said there were fears the government would announce moves to curb overheating in the economy over the weekend, after Premier Wen Jiabao last week urged the government to pursue "moderate tightening." But investors were relieved when no such announcement came.
   
The Shanghai A-share Index was up 127.03 points or 2.93 pct at 4,461.62 and the Shenzhen A-share Index was up 36.28 points or 2.83 pct at 1,316.97.
   
Seoul shares closed sharply higher, rising past the 1,800-point mark for the first time, with investors encouraged by Wall Street's strong gains on Friday. Firmer regional markets and easing geopolitical risks also provided a boost, after North Korea invited UN atomic inspectors to discuss the shutdown of its nuclear reactor.
   
The KOSPI index closed up 34.62 points or 1.95 pct at a record 1,806.88, extending its gains to a third successive session. The low for the day was 1,784.44 and the high was 1,807.51.

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Gold hits one week high on weak dollar, Copper continues higher

LONDON - Gold hit its highest point in a week, underpinned by falls in the dollar against the euro and weakness in the yen, which spurred buying interest in alternative assets.
   
"Overnight the yen has weakened to multi-year lows against several currencies, as investors seek assets offering strong returns ... with gold and platinum rallying strongly," said TheBullionDesk.com analyst James Moore.
   
He added that sentiment towards gold has improved after it formed a good base around the 645 usd level last week, when the metal hit a 3 month low of 642.90 usd before recovering strongly by the close on Friday.
   
At 9.46 am, spot gold was trading up at 657.38 usd per ounce against 654.90 usd in late New York trades yesterday, having earlier hit a one-week high of 659.08 usd an ounce.
   
"There is no major economic data release scheduled during the European trading hours. Thus, the US dollar might weaken further against the euro, which would be supportive for gold," said Dresdner Bank analyst Peter Fertig.
       
In other precious metals, platinum was up at 1,291 usd per ounce against 1,280 usd, supported by ongoing supply concerns.
   
Anglo Platinum announced plans this morning to suspend operations at its Rustenburg site in South Africa for 7 days due to safety concerns. The suspension will reduce total output for this year by 10,000-15,000 ounces.
   
Silver was up at 13.28 usd per ounce from 13.22 usd yesterday, while palladium was flat at 368 usd per ounce.

Copper held onto earlier gains as the threat of supply disruptions in South America and elsewhere continued to buoy prices. Easing fears of an imminent rate hike in the US following Friday's softer-than-expected CPI data, which some market watchers had feared could dent demand, also supported the base metals complex.
   
Lead was steady close to this morning's all-time high of 2,430 usd per tonne, lifted by technical buying after previous highs were breached, analysts said.
   
Further stock drawdowns of the metal, used chiefly in battery manufacture, is helping push the gains. LME-monitored stocks of the metal were down a further 375 tonnes this morning.
      
At 12.37 pm, LME lead for three-month delivery had risen to 2,420 usd per tonne against 2,365 usd at the close on Friday. Copper meanwhile stood at 7,580 usd per tonne, against 7,510 usd on Friday.
   
Among other base metals, zinc eased to 3,735 usd from 3,745 usd on Friday, while aluminium dipped to 2,746 usd from 2,750 usd. Nickel meanwhile dropped to 41,500 usd from 42,210 usd, while tin eased to 14,150 usd from 14,200 usd.

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