US & World Daily Markets Financial Briefing 20-03-2006

U.S. stocks open higher; Wal-Mart up on China expansion

NEW YORK - U.S. stocks rose in early trading Monday, with Wal-Mart Stores gaining on news that it is to invest heavily in China, but shares of Lucent Technologies came under pressure on a negative article in weekly financial journal, Barron's.
   
Investors are also awaiting a speech by Ben Bernanke that investors hope will offer clues on the future course of interest rates.
   
The Dow Jones Industrial Average rose 26 points to 11,306. The Nasdaq Composite Index gained 10 points to 2,316. The S&P 500 Index was up 2 points at 1,309.
   
Stocks in focus
   
Wal-Mart Stores Inc. rose 81 cents to $47.50 after an executive at the world's largest retailer said the company could hire 150,000 people in China over the next five years and open 20 stores in the country in 2006.
   
General Motors Corp, another Dow component, was up 52 cents at $21.65 after its board reportedly asked top management to explain newly uncovered accounting problems that forced it to delay its annual report. Separately, GM, Delphi Corp and the United Auto Workers union reportedly continued negotiations on possible labor deals that could lead to contract buyouts of thousands of Delphi employees.
   
Shares in Lucent Technologies Inc. fell 4.1% to $2.78 after a negative article in weekly financial magazine, Barron's.
   
Barron's said the maker of telephone-network equipment faces "long odds in its comeback effort," due in part to a smaller pool of customers and third-generation high-speed data services that have not proved as successful with cell phone customers as initially hoped. Lucent is a main supplier of this 3G technology.
   
Insurance groups remained in focus in what appears to be a new round of consolidation for the sector.
   
Prudential plc , which isn't related to the U.S. insurer of the same name, rejected a $30 billion stock-swap buy-out offer from UK rival Aviva. U.S.-listed shares of Prudential were up 10.3% at $26.41 in early dealings.
   
Shares of Zurich Financial, meanwhile, extended gains seen on Friday, even as St. Paul Travelers publicly denied it is in talks to buy the Swiss insurer.
   
Elsewhere on the merger and acquisition front, shares of Michaels Stores Inc. surged 13.8% to $38.65 after the retailer of arts-and-crafts supplies said its board is exploring strategic alternatives to boost shareholder value, including a potential sale.
   
Oracle Corp was unchanged at $13.60 as the data and business software giant prepares to report its fiscal third-quarter results after the market closes.
   
The company is forecast to report earnings of 18 cents a share, up from 16 cents a year earlier, according to a Thomson First Call survey. On Friday, the stock rose 10 cents to $13.60.

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Dollar mixed ahead of Bernanke speech

NEW YORK - The dollar stabilized against the euro as investors awaited a speech from Federal Reserve Chairman Ben Bernanke that could shape interest-rate expectations.
   
The dollar weakened sharply last week, hitting a seven-week low against the euro and two-week low against the yen, as investors scaled back expectations for an aggressive rise in U.S. interest rates.
   
The euro was off 0.2% at $1.2174. Against the Japanese yen, the greenback was virtually unchanged, off just 0.03% at 115.84.
   
Bernanke will deliver an address to the Economic Club of New York at 7 p.m. Eastern tonight, just a week before he pounds the gavel for the first time at a Federal Open Market Committee meeting.
   
Financial markets will likely hang on his every word, trying to figure out where he stands on the threat of inflation and the strength of the economy.
   
"The market is now expecting U.S. Fed funds (futures) to top out at 4.75%, suggesting that U.S. rate expectations have declined by almost a quarter point within the past couple of weeks," said currency analysts from BNP Paribas.   

"The Fed is likely to keep its options open suggesting that today's Fed speak is likely to allow the U.S. dollar to rebound somewhat. However, we suggest selling into dollar strength," the analysts continued.
   
At 10 a.m. Eastern, currency traders will also review leading indicators for February, with economists polled by MarketWatch expecting an unchanged reading after a 1.1% rise in January.
   
In Europe, the euro moved off lows of $1.2154 in Asian trading hours after data showed the fastest rise in German producer prices in 23 years.
   
Producer prices in Germany rose 0.7% in February from January, or 5.9% year-on-year, the fastest year-on-year growth rate since June 1982, the Federal Statistical Office said Monday.
   
The rise was much higher than the 0.1% monthly rise forecast by economists.
   
Also on Monday, ECB president Jean-Claude Trichet said that the central bank will do everything needed to ensure price stability.
   
Sentiment towards the euro was also boosted by comments from ECB chief economist Otmar Issing that the central bank cannot ignore the liquidity build up in the 12-member region, said Boris Schlossberg, senior currency strategist at Forex Capital Markets.
   
"The EUR/USD has been the primary beneficiary of this shift in sentiment as traders now expect the Fed to terminate its hikes at 5% making only two further increases while ECB is projected to move four more times to 3.5%," he said in a note.

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The European Markets at 12.00 GMT

London - Leading shares remained in demand at midday, with Aviva's bid for Prudential generating excitement in the insurance sector and propelling the FTSE 100 index comfortably above the 6,000 level, dealers said.
   
By 12.05 pm, the FTSE 100 was 22.5 points higher at 6,030.9, with the broader indices all in positive territory.

Frankfurt - Shares were higher in midday trade approaching the symbolic 6,000 point mark as trade was boosted by the strength of the euro, strong gains in Tokyo and on Wall Street on Friday as well as comforting news that prime rate increases in the US will slightly wane in the future, dealers said.
   
At 12.16 pm, the DAX 30 index was 35.62 points or 0.61 pct higher at 5,918.00, having moved between 5,895.78-5,932.46 so far this session.

Paris - Shares were up midday, buoyed by merger rumours and speculation in several sectors and the positive sentiment seen in Friday's trading on Wall Street, dealers said.
   
At 12.55 pm the CAC-40 index was up 11.31 points or 0.22 pct to 5,152.39, on volume of 1.90 bln eur. Among CAC-40 stocks, 27 were higher, 12 were lower and Sanofi-Aventis was unchanged.

Amsterdam - Share prices were up in midday trade bolstered by Wall Street's strong close Friday, with Imtech and financials leading the index, dealers said.
   
At 12.17 pm, the AEX was up 2.74 points or 0.59 pct at 466.79, after opening at 466.28 and reaching a high of 467.56.

Madrid - Share prices were higher in thin trading, tracking the firmer trend across Europe amid ongoing M&A speculation, with talk of consolidation among European insurers helping Mapfre, and main banks also firm, dealers said.
   
At 11.43 am, the IBEX-35 index put on 62.8 points to 11,935.7, after trading in a range of 11,904-11,962, on turnover of 506 mln eur.

Milan - Share prices were higher at midday, supported by gains in the insurance sector on merger news, including in the UK, brokers said.
   
At 12.05 pm, the Mibtel index was up 0.44 pct to 29,679 points, and the S&P/Mib up 0.52 pct to 38,564.

Stockholm - Shares were slightly higher in early afternoon trade, led by Ericsson which was up sharply but off earlier highs, while engineering stocks were providing further support but the banks were all lower, brokers said.
   
At 1.00 pm the OMX Stockholm index was up 0.58 pct at 332.01, while the OMX Stockholm 30 index was up 0.66 pct at 1,040.89. Turnover was 17.421 bln skr.

Helsinki - Shares were slightly higher midday, led by Nokia and TietoEnator on a broker upgrade, with forestries lower after a report that Stora Enso is considering making an approach for Mondi, the paper arm of UK mining firm Anglo American, dealers said.
   
At 12.08 pm, the OMX Helsinki 25 index was 0.25 pct higher at 2,724.99. The OMX Helsinki index was up 0.46 pct at 9,410.06, while the Helsinki CAP portfolio index was 0.26 pct stronger at 5,062.99.

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Asian shares close higher; Tokyo, Australia at record highs

HONG KONG - Share prices across the Asia-Pacific region ended higher with stock markets in Japan and Australia finishing at record highs.
   
Share prices in Tokyo closed sharply higher, with the blue-chip Nikkei index at a six-week high, led by brokerage shares, following a rise in equities markets around the world, dealers said.
   
Dealers said the strength of the US dollar, which was hovering around 116.20 yen shortly after the close of equities trading here, having touched 115.87 yen in New York late Friday, supported the stocks of exporters.
   
Brokers said offshore investors also bolstered the market, having been net buyers of 11 mln shares today, having been net sellers on Friday.
   
The Nikkei 225 Stock Average closed 285.07 points or 1.7 pct higher at 16,624.80, its highest finish since Feb 7, when it ended at 16,720.99
   
The broader-based TOPIX index of all first-section shares rose 24.24 points or 1.5 pct to 1,688.22.
   
"Overseas investors were net buyers this morning, and the dollar has settled down at around 116, from 115 yen overseas, and a rise in global equities markets -- those factors boosted the market," said Hideo Mizutani, chief strategist at Sieg Securities.
   
Share prices in Australia also closed at record highs after the key S&P/ASX 200 index traded above the psychologically important 5,000 points barrier for the first time, dealers said.
   
The S&P/ASX 200 rose 28.7 points or 0.58 pct to close at a record 5,000.4, surpassing the previous record closing high of 4,977.9 set last Thursday.
   
The key indicator closed below a fresh intra-day high of 5,005.9 points and above the low of 4,980.9.
   
The All Ordinaries Index climbed 28.9 points to close at a fresh record high of 4,961.6, replacing the previous record close of 4,936.7 also set on Thursday.
   
Dealers said investor sentiment was boosted by a solid rise on Wall Street on Friday while stronger base metal prices lifted resource stocks such as global miners BHP Billiton and Rio Tinto.
   
Share prices in Hong Kong were trading higher on follow-through interest after gains over the last three trading sessions, dealers said.
   
Wall Street's firmer close on Friday and the Japanese market's steep gains today also helped underpin buying interest, they said.

PetroChina was in focus as it rose sharply ahead of its 2005 results announcement later today.
   
At 3:45 pm, the Hang Seng Index was up 150.42 points or 0.95 pct at 15,952.08.
   
In mainland China, A-shares in Shanghai and Shenzhen finished higher on the back of some bargain-hunting interest and hopes for prospective fund inflows with Shanghai local firms and blue chips in demand, dealers said.
   
The Shanghai A-share Index added 19.70 points to 1,351.34 on turnover of 9.64 bln yuan and the Shenzhen A-share Index was up 3.43 points at 322.69 on turnover of 5.05 bln yuan.
   
In Seoul, share prices ended higher, extending their advance for a fourth session, with KEPCO, POSCO and financial stocks leading the rise, dealers said.
   
After a firm performance in early trade, supported by Wall Street's modest gains last Friday and a solid advance in Tokyo shares, the market turned sideways before a late push due to program buying.
   
Financial stocks were strong gainers, boosting overall market sentiment.
   
The KOSPI index closed up 5.57 points or 0.42 pct at 1,346.69.

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Gold futures were lower in early trading. The benchmark April contract was down $2.20 at $552.90 an ounce after rising 2.5% last week.
   
On the bond market, long-term Treasury prices were marginally higher, sending yields lower. The yield on the benchmark 10-year note stood at 4.64% versus 4.674% at Friday's close.
   
Crude-oil futures moved lower as traders weighed above-average supplies of oil and its products. The benchmark contract was last down 47 cents at $62.30 a barrel.

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