US & World Daily Markets Financial Briefing 20-02-2007

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Stocks slip after Home Depot results

NEW YORK - Wall Street retreated Tuesday as a huge decline in Home Depot Inc.'s profit last quarter offset excitement over the deal between XM Satellite Radio Holdings Inc. and Sirius Satellite Radio Inc.
   
The world's largest home improvement store chain reported a 28 percent drop in fourth-quarter earnings, indicating that the home improvement industry is still being dragged down by the sluggish housing market.
   
But the wider retail sector still looked healthy after Wal-Mart Stores Inc. issued its financial results, which showed fourth-quarter profit growth of 8.8 percent, better than analysts expected, and an upbeat forecast for 2007.
   
Also keeping a floor under stocks was the buzz over new takeover activity. In addition to the merger between XM Satellite and Sirius announced Sunday, the markets also got a lift from Tuesday's news that British pharmaceutical company Shire PLC is buying U.S. drug maker New River Pharmaceuticals Inc. for about $2.6 billion, and that Vulcan Materials Co. is buying construction aggregate maker Florida Rock Industries Inc. for $4.6 billion.
   
In early trading, the Dow Jones industrial average fell 37.41, or 0.29 percent, to 12,730.16, pulling back after rising more than 200 points over the past four trading sessions. Markets were closed Monday for Presidents Day.
   
Broader stock indicators also fell. The Standard & Poor's 500 index was down 4.74, or 0.33 percent, at 1,450.80, and the Nasdaq composite index was down 10.18, or 0.41 percent, to 2,486.13. The Russell 2000 index of smaller companies fell 3.55, or 0.43 percent, to 814.60.
   
Bonds fell, with the yield on the benchmark 10-year Treasury note rising to 4.70 percent from 4.69 percent late Friday, even after the Federal Reserve Bank of Chicago reported in its index of business activity that economic growth in the region was below average in January.
   
Oil prices tumbled $1.49 to $57.90 on the New York Mercantile Exchange after the Iranian president said his country would stop enriching uranium and return to negotiations, but only if Western nations do so, too.
   
Stocks in focus

Home Depot fell 30 cents to $41.14 after reporting earnings that fell short of analysts' expectations.
   
Wal-Mart rose $1.28, or 2.6 percent, to $49.76 following its more optimistic financial results.
   
XM Satellite rose $1.39, or 10 percent, to $15.35, and Sirius Satellite rose 24 cents, or 6.4 percent, to $3.94, after their announced merger of equals. The deal still faces significant obstacles from the Federal Communications Commission.
   
Vulcan Materials Co. fell 60 cents to $111.21, while Florida Rock Industries Inc. soared $19.64, or 42 percent, to $66.58, after the acquisition announcement.
   
Meanwhile, Shire's proposed buy of New River caused the U.S. drug marker's stock to surge $5.21, or 8.9 percent, to $63.56. U.S. shares of Shire rose $1.92, or 3 percent, to $65.20.

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Pound rises in delayed reaction to strong morning data

LONDON - The pound rose, mostly against the dollar and yen, in a delayed reaction to strong data this morning. UK M4 money supply accelerated to an annual 13.0 pct in January, above the 12.8 pct expected by markets.
   
The UK money supply growth data "is lending support to the pound," said Robert Howard at Thomson IFR Markets, adding that "in written evidence for the Commons Treasury Select Committee, the BoE yesterday said that it would be 'unwise to ignore money supply data entirely.'"
   
Also, considering that BoE governor Mervyn King has in the past stressed the importance of money supply as an influence on inflation, analysts said the data may affect the rate-setter's views on future rate hikes.
   
"These numbers probably tilt the risks to a further hike as soon as the March meeting," said David Brown at Bear Stearns.
   
In addition to the money supply data, figures from the British Bankers Association, the British Building Societies Association, and the Council of Mortgage Lenders showed mortgage lending and approvals remaining quite robust.
   
Elsewhere, the euro and the dollar continued to trade in ranges, although overnight the euro touched a five week high against the dollar at 1.3189 usd before easing back down today.
   
The dollar has weakened since a string of soft data published last week showed a weakening property market and consumer confidence. Investors will now look to the US CPI figures tomorrow for more direction.
   
Meanwhile, the Japanese yen remains in focus ahead of the rate decision tomorrow, with analysts split over whether the Bank of Japan will hike rates.
   
Analysts note there is growing tension over carry trades -- when investors borrow in countries with low interest rates, such as Japan, to invest in higher-yielding economies -- but that the BoJ statements will temper fears of any rapid monetary tightening.
   
"Even assuming there is a hike, Bank of Japan governor Fukui is likely to stress that the pace of future tightening will remain measured," said Daragh Maher at Calyon.

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The European Markets at 11.00 GMT

London - Beleaguered UK music company EMI Group PLC said it has received another takeover approach from US rival Warner Music. EMI, which has issued two profit warnings since mid January, said Warner Music had not tabled a firm proposal, and that there was no guarantee it would do so.

SAAB, the engineering group 20 pct owned by BAE Systems, is under investigation by Swedish authorities over bribery allegations relating to the UK arms manufacturer's dealings in the Czech Republic, according to the Financial Times.
 
Christer van der Kwast, Sweden's chief prosecutor, told the paper he was conducting preliminary work on Saab's involvement in a deal to supply military aircraft to the Czech army.  A decision on whether to launch a full enquiry will be made shortly, said the report.

Paris - European Central Bank board member Gertrude Tumpel-Gugerell said the plan for a single euro payments area (SEPA) is still on track to begin operations from Jan 1 2008, despite ongoing disputes about organising cross-border operations.
 
SEPA would allow consumers to make non-cash payments throughout the euro zone as easily as in their own countries, and forms one part of several efforts to harmonize financial operations throughout the EU.

Assurances Generales de France, a unit of Germany's Allianz, said net profit reached 1.899 bln eur last year, an 18.4 pct rise from the 1.604 bln eur profit seen in 2005. Underlying profit, excluding capital gains, climbed 31.6 pct to 1.926 bln eur, on sales that rose 5.9 pct to 18.583 bln.

Hamburg - Siemens AG is on track to meet its profit margin targets in all divisions, chief executive Klaus Kleinfeld told AFX News partner dpa-AFX in Hamburg. All divisions were profitable in the first quarter of the current business year and are to reach their margin targets by April, he said.

Copenhagen - Carlsberg AS posted full year operating profit of 4.046 bln dkr, up 15 pct from 2005 up 15 pct from 2005 and beating market expectation, driven by strong performances in Western Europe and at the group's BBH unit. Analysts polled by RB-Borsen had forecast a consensus operating profit of 3.977 bln dkr.

Zurich - Clariant AG said its fourth quarter net loss narrowed to 1 mln sfr from a loss of 30 mln sfr a year earlier, with sales in the period rising to 2.010 bln sfr from 1.958 bln sfr. The group also issued a positive outlook for the 2007 full year, saying this will be another year of top-line growth.

Milan - Italy's environmental service company Biancamano SpA said it is being valued at 85-102 mln eur in its initial public offering, including the fresh capital raised in the IPO.
 
The IPO comprises an offer of 14 mln shares, equivalent to 41.18 pct of the capital, priced at 2.5-3.0 eur each, with up to 11.2 mln for institutions, and 2.8 mln for Italian retail investors.

Amsterdam - Aegon NV said it increased the price for its previously announced takeover offer for all outstanding shares of Clark Inc to 17.21 usd per share from 16.55 usd. In addition, the tender offer has been extended to 5.00 pm New York City time on March 6, unless further extended.

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Asian shares make little headway in holiday thinned trade; Seoul shines

MANILA - Shares across the Asia-Pacific region ended a generally listless day making little headway amidst a shortage of leads, with Wall Street closed for a holiday Monday and with most regional markets still shut for the Lunar New Year celebrations in Asia.
   
In Korea though prices advanced, with the KOSPI nearing its record high, supported by ongoing foreign investor interest.
   
In Tokyo, share prices ended little changed with few investors willing to take aggressive positions ahead of the conclusion of the Bank of Japan's policy meeting tomorrow , dealers said.
   
The blue-chip Nikkei 225 Stock Average closed down 0.97 points or 0.01 pct at 17,939.12 while the TOPIX index of all issues listed on the Tokyo Stock Exchange's first section ended the session up 2.77 points or 0.16 pct at 1,782.73.
   
In Australia, share prices also drifted in a narrow range, although the All Ordinaries index scraped its way to a new closing high.
   
The main feature of trade was a shift into resources and out of banks after strong gains in the latter in recent trading sessions. Dealers noted too, that even while a number of firms posted strong double digit rises in fiscal first half earnings, the numbers failed to beat market expectations, prompting some investors to cash in gains.
   
The S&P/ASX 200 ended down just 0.4 points or 0.01 pct to 5,989.7, off a fresh intraday record high of 6,003.3 while the broader All Ordinaries index added 0.1 points to nudge to a fresh record close of 5,969.4 from 5,969.3 on Monday.
   
In Seoul shares closed up with the main index extending gains for a fifth consecutive session supported by foreign investor interest. Dealers noted though that the upside was capped as the main index nears its record high and ahead of the Bank of Japan's interest rates policy meeting tomorrow.
   
The KOSPI index closed up 4.15 points or 0.29 pct at 1,452.96, not far off its record high on May 11 of 1,464.70.
   
Samsung Electronics was in the spotlight, gaining more than 1 pct, supported by expectations of a recovery in chip prices while POSCO gained more than 2 pct on a rating upgrade by Standard & Poor's.
   
On the KOSDAQ board shares also closed up with the tech-laden index hitting its best level since mid-January, supported by the main board's foreign-investor driven gains. The KOSDAQ index closed up 2.41 points or 0.4 pct at 607.48, off a low of 605.87 and a high of 608.17.
   
Shares in New Zealand closed weaker on profit taking as corporate results for the current earnings season have largely failed to meet expectations.  The benchmark NZX-50 index ended down 29.74 points or 0.72 pct, at 4,110.48.    

In Manila, shares closed higher, ending two days of losses, as investors snapped up stocks after rates on benchmark Treasury bills fell to fresh all-time lows at yesterday's T-bill auction.
   
The main composite index finished up 46.28 points or 1.39 pct at 3,375.31, while the broader all-shares index gained 32.38 points to 2,143.09.
   
Markets closed for the Lunar New Year holidays today include China, Taiwan, Hong Kong, Singapore and Malaysia.

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Gold edges lower as dollar recovers slightly
 
LONDON - Gold edged lower after touching a seven-month high yesterday, as modest improvements in the dollar triggered profit-taking, but analysts said they remain upbeat about the metal's prospects.
   
At 10.57 am, spot gold was quoted at 667.40 usd an ounce, down from the 670.95 usd level seen at Friday's close. Yesterday, gold struck a seven-month high of 673.15 usd.
   
"The dollar is a bit firmer so its triggered some profit-taking," said TheBullionDesk.com analyst James Moore. He added the market is also awaiting direction from New York when trading reopens tonight after the President's Day holiday yesterday.
   
Light selling and quiet trading send copper lower; tin hits new high

LONDON - Copper edged down amid light selling and quiet trading conditions with Chinese players on a week-long holiday celebrating the Lunar New Year.
   
Tin hit a new contract high of 13,450 usd a tonne amid falling inventories and continued concerns over supply disruptions in Indonesia.
   
At 12.57 pm, LME copper for three-month delivery was down at 5,740 usd a tonne having shed 5 usd to settle at 5,805 yesterday.
    
Although daily LME stocks data showed a slight drop in stocks today of 650 tonnes to 210,425 tonnes, global copper inventories are building, said the International Copper Study Group.
   
However, UBS Investment Bank analyst Robin Bhar said the growth in stocks was slow "and from a low base".
   
Elsewhere, copper was "unaffected by a one-day strike today in Mexico", added Carson of Triland.
   
Tin climbed to a new high even after PT Timah Tbk assured customers it will export tin from Indonesia after a government-set deadline. The Indonesian government is cracking down on illegal tin mining. Last week, authorities shut down most of PT Koba Tin's operations.
   
BaseMetals.Com analyst William Adams said some players are looking for a tin deficit of 30,000 tonnes. "For tin this is large, especially when you consider LME stocks are only just above 10,000 tonnes."
   
Tin was up at 13,450 usd a tonne against 13,200 usd at the close yesterday.
   
In other metals, nickel surged to 39,800 usd a tonne against 38,800 usd at the close yesterday, lead edged up to 1,805 usd a tonne against 1,780 usd while zinc was down at 3,350 usd against 3,392 usd.
   
Aluminium was also lower at 2,755 usd against 2,780 usd at yesterday's close.

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