US & World Daily Markets Financial Briefing 20-04-2006

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U.S. stocks open mixed; GM surges on earnings report

NEW YORK - U.S. stocks were mixed in early trading Thursday as investors mulled several upbeat earnings reports led by General Motors Corp., Apple Computer Inc. and Nokia Corp., but share of eBay Inc. fell amid some disappointment over its profit outlook.
    
The Dow Jones Industrial Average rose 9 points to 11,287. The Nasdaq Composite Index fell 7 points to 2,363 while the the S&P 500 Index was down 1 point at 1,308.92. 
   
Stocks in focus
   
Intel Corp. shares rose 3 cents to $19.59 amid some relief that the chip maker's first-quarter results managed to match analyst expectations. Chief Executive Paul Otellini, however, said the company would embark on a "wholesale" review that would lead to the streamlining of its operations as it battles slumping market share and a stock price that has fallen more than 20% this year.
   
Otellini's fighting words came as it was forced to issue a June quarter forecast that lagged Wall Street expectations. The company said its outlook reflected higher inventory levels.
   
Elsewhere on the Dow, shares of General Motors Corp. gained 4.4% to $21.48 after the carmaker's losses shrank in the first quarter as sales jumped 14%.
   
Merck & Co. rose 24 cents to $34.64 after the drug giant offered an upbeat second-quarter profit outlook. The company, meanwhile, posted a rise in first-quarter earnings as sales rose 1%.
   
Altria Group Inc. reported a higher first-quarter profit, helped by a favorable tax settlement, and as the results reflected improved contributions from the company's domestic tobacco business. The stock added 21 cents to $69.20 in early trading.
   
Other stock standouts
   
Shares in Apple Computer Inc. rose 5.1% to $68.99 after the company posted forecast-beating quarterly results as sales of its iPod portable music players continued to surge.
   
U.S.-listed shares of Nokia Corp. surged 5.2% to $22.87 after it posted a forecast-beating 21% jump in first-quarter profit on higher sales in India and China.
   
On a more sour note, online auctioneer eBay Inc. slumped 7.3% to $37.42 after its profit slipped 3%, and after reiterating its outlook, which some analysts called conservative.

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Dollar gains on jobless claims, market awaits Philly Fed

NEW YORK - The dollar strengthened against major rivals early Thursday, breaking a three-session losing streak, after economic data suggested a healthy labor market in the U.S.
   
U.S. jobless claims fell 10,000 to 303,000 in the week ending April 15. The consensus forecast of Wall Street economists was for claims to inch lower by 3,000 to 310,000. The four-week average of initial claims fell 2,250 to 305,250, the lowest level since the week ended Feb. 25.
   
"Though the data may have been impacted a bit by Easter, the trend in claims is nevertheless consistent with another healthy employment report for March," said analysts at research firm Action Economics. They added that market activities "may remain restrained into the noontime release of the Philly Fed report."
   
The U.S. dollar traded higher against its major counterparts. The euro was off 0.3% at $1.2340. Against the Japanese yen, the greenback rose 0.1% to 117.50. The dollar also rose against the British pound after UK retail inflation grew at its slowest rate in 13 months. Sterling was last off 0.5% at $1.7817. The dollar
changed hands at 1.2762 Swiss francs, up 0.7%.
   
Markets will be looking to see if the Philly Fed survey, due out at Noon Eastern, will show the same level of weakness as a recent New York area poll. Economists polled by MarketWatch are expecting a rise in the April Philly Fed survey to 14.6 from 12.3 last month.
   
The Conference Board, a non-profit research group based in New York, will release data on March leading indicators at 10 a.m. Eastern.
   
"Any disappointment with the Philadelphia Fed Survey could lead to renewed dollar selling," said Marc Chandler, currency strategist at Brown Brothers Harriman, in a note. "A weak number would confirm the earlier survey and suggest a downside bias in the next ISM manufacturing report."
   
"The economic performance is taking on even great significance in the market's understanding of the trajectory of Fed policy," he said.
   
The dollar has been under broad pressure in recent sessions as traders pared bets that the Federal Reserve will continue to lift rates aggressively.
   
The greenback accelerated its downward spiral Tuesday after minutes from the latest Federal Reserve monetary-policy meeting suggested the Fed may pause after boosting interest rates to 5% after its next policy meeting May 10.
   
The Fed has increased rates for 15 meetings, bringing its benchmark back to 4.75%. Higher interest rates have given the dollar a very attractive rate differential against the euro and yen.
   
Adding to the dollar's woes was a remark from the International Monetary Fund that the dollar will have to depreciate over the medium term to facilitate adjustments to global economic imbalances.
   
Meanwhile, persisting concern about the clash between Iran and the West also weighed heavily on the greenback.

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The meeting between Chinese President Hu Jintao and President Bush Thursday will spotlight China's currency issue, but analysts doubt Hu's visit will result in any breakthrough.
   
China will continue taking steps to increase flexibility of the yuan, Hu said Wednesday. Hu appeared to rule out any rapid revaluation of the currency.
   
China's goal is to maintain the "exchange rate basically stable at an adaptive and equilibrium level," Hu said through a translator. "This serves the interests of China, the interests of the United States, and the common interests of all countries in Asia and the world at large."
   
Sterling down after weaker data
   
The British pound came under pressure after data showed that U.K. consumer prices grew at the slowest rate in 13 months.
   
The U.K. consumer price index grew a slower-than-forecast 0.2% in March, or up 1.8% year-on-year, according to the National Statistics Office.
   
The CPI was expected to grow 0.4% on the month and 2.1% for the year. Lower milk, airfares and computer-game prices helped offset rising gas and electricity bills.
   
The figures came just a day after the Bank of England released the minutes from the last interest-rate meeting, with the market generally deeming the minutes hawkish. The central bank had warned of a pickup in the public's inflation expectations.
   
Also in Europe, Italian consumer confidence slowed to 106.1 in April from 109.1 in March, according to research group ISAE. The poll was taken amid the recent general election; challenger Romano Prodi was declared the victor in that election only late Wednesday.
   
Separately, consumer prices in the euro zone rose 0.6% in March, or up 2.2% year-on-year, in line with the Eurostat statistics agency's initial projection.
   
Traders have fully priced in three more rate hikes by the European Central Bank in 2006.
   
Zero rates will stay
   
The yen remained under pressure as Japanese finance officials continued to play down the notion of raising interest rates anytime in the near future.
   
Bank of Japan Deputy Governor Toshiro Muto, in testimony, said the central bank will maintain the zero interest rate policy until economic conditions warrant a shift.
   
"With little help from monetary officials, yen bulls will now have to look to the rise in the yield of 10-year [Japanese government bonds] above the psychologically important 2% level as a possible trigger for yen strength," said Boris Schlossberg, senior currency strategist at Forex Capital Markets.
   
"At 2% or above, many of the Japanese institutional investors including life insurance companies are likely to repatriate investment funds from abroad, which would strengthen the currency," he said in a note.
   
The euro strengthened to a high of 145.5 yen before slipping back to trade at 145.08 yen, down 0.1%.

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Asian shares close mostly lower, Tokyo ends mixed on high oil prices

HONG KONG - Share prices across the Asia-Pacific region finished mostly lower with Tokyo finishing mixed on high oil prices and ahead of upcoming corporate earnings releases, dealers said.
   
The Nikkei 225 Stock Average closed down 32.59 points or 0.2 pct at 17,317.53, off a low of 17,283.97.
   
The broader TOPIX index of all first-section issues edged up 0.54 point or 0.03 pct to 1,747.86, off a high of 1,755.07.
   
Oil prices remained above 72 usd a barrel in Asian trade, after touching a fresh record intraday high overnight of 72.40 usd, on fears of a possible military strike on Iran as well as concerns over tight US supplies, dealers said.
   
Hideyuki Suzuki, a strategist at SBI Securities, believes the broad market trend remains upward, given optimism over the recovering economy, but short alarm over the continued spike in crude prices and a desire to wait for the outcome of earnings results weighed on the market today.
   
Year to March earnings results are set for release from next week.
   
Share prices in Australia closed lower as investors took profits after two record breaking days following the Easter holiday, dealers said.
   
They said local buying lost momentum after oil prices rose above 72 usd a barrel overnight, fuelling inflation worries which weighed on the banking sector.
   
Dealers said index-leading resources stocks BHP Billiton and Rio Tinto fell from record levels on profit taking while other resource stocks were mixed.
   
The S&P/ASX 200 fell 7.0 points or 0.13 pct to 5,276.9, slipping from Wednesday's record close of 5,283.9.
   
In Hong Kong, share prices were trading almost flat as profit-taking eroded modest early gains driven by follow-through interest after the market's sharp rise over the last three sessions, dealers said.
   
At 3:30 pm, the Hang Seng index was up 34.73 points or 0.21 pct at 16,865.17.
   
In mainland China, A-shares in Shanghai and Shenzhen ended lower on profit-taking and worries over record high crude prices with airlines and telecom counters hit in particular, dealers said.
   
The Shanghai A-share Index slipped 11.24 points to 1,453.38 on turnover of 23.47 bln yuan and the Shenzhen A-share Index was down 1.54 points at 358.87 on turnover of 14.02 bln yuan.
   
Share prices in Seoul finished lower, ending a two-day rise, as many investors decided to lock in gains in the face of downbeat results from some blue chips, dealers said.
   
Initial sentiment was buoyed by Wall Street's rise on positive corporate results but the market eventually lost ground as LG Electronics and KT&G suffered huge losses due to weak first-quarter results, they added.
   
Samsung SDI jumped while Hynix was flat both after reporting quarterly results well in line with market projections.
   
The KOSPI index closed down 3.69 points or 0.26 pct at 1,434.15.

Asian Bourse Round-Up

For a full list of closing figures, click here

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Crude futures slip in early trading; May contract under $72

SAN FRANCISCO - May crude fell 32 cents to trade at $71.85 per barrel as traders continued to eye developments in Iran and weighed concerns over U.S. gasoline supplies ahead of the summer driving season. Prices climbed to a record
$72.40 on Wednesday. June crude, which will become the lead-month contract at the session's close, was down 22 cents at $73.90.

May natural gas was down 3.2 cents at $8.16 per million British thermal units ahead of an update on supplies of the commodity due out shortly from the Energy Department. Analysts surveyed by Platts expect the data to show an increase of 58 billion cubic feet for last week.
   
Gold futures continued to surge as the precious metal continued to benefit from its reputation as safe-haven investment in times of political tension. Investors, worried about inflation, are also flocking to gold. The benchmark June contract was last up $3 at $639 an ounce.
   
On the bond market, long-term Treasury prices dipped, keeping yields above 5%. The benchmark 10-year note was down 4/32 at 95 27/32, with its yield at 5.03%.

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