US & World Daily Markets Financial Briefing 20-09-2006

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Stocks up on Oracle's strong quarter

NEW YORK - Stock prices rose in early trading Wednesday after Oracle Corp. said its quarterly profit rose 29 percent. A strong quarter from Morgan Stanley also cheered traders in advance of a Federal Reserve meeting later Wednesday. In the opening minutes, the Dow Jones industrial average gained 36.18, or 0.31 percent, to 11,577.09.
   
Broader stock indicators were higher. The Standard & Poor's 500 index rose 5.43, or 0.41 percent, to 1,323.74, and the Nasdaq composite index rose 23.35, or 1.05 percent, to 2,245.72.
   
The Fed was widely expected to leave its benchmark short-term interest rate unchanged at 5.25 percent, but markets will be reading the central bank's policy statement closely for signs on where interest rates may be headed.
   
While the Fed spent the summer eyeing inflation, some economists are now fretting about the possibility of a recession, as housing starts plummet and commodities prices slip. Oil prices fell toward their lowest level in six months Wednesday.
   
Markets had been roiled Tuesday by a bloodless coup in Thailand that ousted the unpopular caretaker prime minister and left the chief of the army in charge. European markets rebounded smartly Wednesday.

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Major currencies tread water ahead of Fed rate verdict, statement

LONDON - Major currencies were pretty much static ahead of the main event of the day, the US rate decision and accompany statement this evening.
   
While no change is predicted, the statement accompanying the verdict will receive close scrutiny for hints on future decisions.
      
A growing number of analysts predict that the benchmark US Fed funds rate has hit peak at 5.25 pct in this rate hiking cycle. US rate setters brought to a halt a run of 17 rate hikes in August.
   
Some sections of the market are even betting that the Fed will have to reduce borrowing costs next year to prop up the economy.
      
Also making the news today was the Thai baht after the military coup in the country. The news led to a scaling back in risk taking with the dollar and Swiss franc emerging as the winners while the Australian and Kiwi dollars suffered falls.

At 1.28 pm GMT, the Australian dollar was trading at 0.7532 against the US dollar, well below yesterday's high of 0.7577, while the New Zealand dollar was trading at 0.6589 usd after earlier reaching a six-day low of 0.6548.
   
Against the Canadian dollar, meanwhile, the US dollar was at 1.1270 cad after earlier just failing to breach the 1.13 level as it reached a five-week high of 1.1298.   
 
The euro continued to feel the effects of the slump in a key indicator of German confidence yesterday.
   
The ZEW economic expectations index plummeted to minus 22.2 in September from August's minus 5.6, coming in substantially below analysts' expectations for a much more moderate drop to minus 6.9.
   
The ZEW index has now fallen for eight straight months, with sentiment dragged down by concerns over German exports in the face of a slowing US economy, as well as worries over rising interest rates, a stronger euro and a more restrictive fiscal policy.
   
Elsewhere, the pound stayed little changed even as the Bank of England expressed concern about the possibility of a pick up in inflation, indicating that investors are pretty much resigned to the prospect of another UK rate hike in November.
   
Also out today, there was more evidence that the UK housing market remains robust despite the BoE's first rate hike in 2-years in August.
   
The minutes of the central bank's rate setting body revealed a unanimous vote in favour of no change in September. 

The rouble was trading at 26.80 to the dollar, compared to 26.78 yesterday.
   
Against the euro, the rouble was trading at 33.96, compared to 34.02 yesterday. Turnover was 807 mln usd, against 968 mln yesterday, and 22.2 mln eur against 17.6 mln eur yesterday.   

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The European Markets at 11.30 GMT

London - Leading shares remained slightly higher at midday, with a scattering of upbeat broker recommendations and bid talk offsetting further weakness across commodity stocks. By 12.10 pm, the FTSE 100 index was up 4.6 points at 5,836.4, although the broader indices were mixed.

Frankfurt - Shares were higher in midday trade, as they shrugged off a slump in the ZEW economic expectations index yesterday with M&A speculation continuing to fuel the top gainers. At 1.21 pm, the Dax was up 39.28 points or 0.67 pct higher at 5,912.74.

Paris - Share prices were broadly higher in midday trading, helped by fresh declines for oil prices and anticipation that the US Federal Reserve will indicate that it has no plans to raise interest rates further at its meeting later today. At 12.25 pm, the CAC 40 index was up 26.81 points or 0.5 pct at 5,142.80, on volume of 1.4 bln eur.

Amsterdam - Shares were up in early afternoon trade as investors looked to US futures, which indicated a higher opening on Wall Street, while Aalberts Industries fell after being fined 100.8 mln eur.
   
At 12.53 pm, the AEX was up 2.52 points or 0.54 pct to 472.84, after opening at 470.45 and trading in a range of 470.04-473.00.

Madrid - Share prices were higher midday as firm US futures offset concerns ahead of today's FOMC rate decision, with main blue chips in demand. At 12.10 pm, the IBEX 35 index gained 65.0 points to 12,307.2, after trading in a range of 12,216-12,310, on turnover of 1.055 bln eur.

Milan - Share prices were slightly higher at midday, with sentiment benefiting from decreasing crude oil prices, and cooperative banks higher in a rebound following recent weakness on easing merger speculation. At 12.23 pm, the Mibtel index had gained 0.22 pct to 28,912 points and the S&P/Mib was up 0.25 pct at 37,773, while volume was 1.49 bln eur.

Stockholm - Shares remained in slightly positive territory in midday trade, off just a touch from morning levels, with telecom issues leading the market higher.
   
At 12.20 pm, the OMX Stockholm index was up 0.24 pct at 332.23 points, while the OMX Stockholm 30 index was up 0.29 pct at 1,029.66.

Helsinki - Shares were slightly lower in midday trade, led by Neste Oil and Fortum amid ongoing concerns about the increased costs the utility is facing as it ups reliance on thermal power following shortfalls from other sources.

At 12.43 pm, the OMX Helsinki 25 was 0.16 pct lower at 2,545.95 points and the OMX Helsinki was down 0.04 pct to 8,606.24 points, on 354 mln eur turnover. The HEX Tech was up 0.50 pct at 1,057.27 points.

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Asian shares close mostly lower ahead of US FOMC; Thai coup

HONG KONG - Shares across the Asia-Pacific region closed mostly lower ahead of the US FOMC meeting tonight and on nervousness following the military coup in Thailand.
   
Tokyo shares closed sharply lower, the market's mood having been dampened by losses on Wall Street overnight and the Thai coup, dealers said.
   
Investors were also cautious as they awaited the governing Liberal Democratic Party's (LDP) election of its new president, who will automatically become the next prime minister, they added.
   
Just before the closing bell, the LDP elected Shinzo Abe, now chief cabinet secretary, as its new president, succeeding Prime Minister Junichiro Koizumi.
  
The blue chip Nikkei 225 Stock Average closed 155.61 points or 1 pct lower at 15, 718.67, off a low of 15, 622.28. The broader TOPIX index of all first-section issues closed 21.80 points or 1.4 pct lower at 1,570.18, after touching a low of 1, 563.04.
   
The election of Abe will have little impact on the market because he has not made clear what his policies are, apart from expressing willingness to pursue Koizumi's reforms, said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.
   
Australian shares ended sharply lower as investors sold resource stocks following the drop in metal and oil prices overnight, dealers said. They said the Thai coup added to the nervous investor sentiment, which weighed on the banking sector.
   
The S&P/ASX 200 lost 58.3 points or 1.15 pct to close at 4, 998.5, above the day's low of 4, 997.1 and well below a high of 5, 041.0.
   
Hong Kong shares were slightly higher in afternoon trade as investors took the view that the Thai coup will not cause long-term damage to the region's economic prospects.
   
They said investors awaited the outcome of the US Federal Reserve policy meeting tonight. At 3.25 pm the Hang Seng Index was up 63.51 points or 0.37 pct at 17, 410.21.
   
In mainland China, A shares in Shanghai and Shenzhen closed mixed with some profit-taking seen and with metal firms and telecom stocks under pressure.
   
The Shanghai A share Index fell 3.09 points or 0.17 pct to 1,820.84 and the Shenzhen A share Index was up 1.43 points or 0.32 pct at 448.22 .
   
Seoul shares closed lower in tandem with other regional markets as foreign investors cut their positions on key exporters, with sentiment undermined by the coup in Thailand and downbeat US housing data, dealers said.
   
The impact of the coup was limited but many investors remained cautious ahead of the US rate decision tonight, with the main board index falling through the five-day moving average, they added.
   
The KOSPI index closed down 7.51 points or 0.55 pct at 1, 366.44, off a high of 1, 369.18 and a low of 1, 355.04.

Asian Bourse Round-Up

For a full list of closing figures, click here

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Oil hits fresh 6 month lows; copper dives as gold recovers

LONDON - Oil hit fresh 6 month lows again today on expectations US data will show that brimming US winter fuel stocks rose again last week and after US President George Bush backed a "diplomatic solution" to the Iranian nuclear dispute.
   
The fall in oil, which marked a resumption of a 6 week downtrend, weighed on commodities like gold, which traded near 3 month lows earlier before recovering slightly, and copper, which fell more than 4 pct earlier.
     
At 14.25 BST, November-dated Brent futures lost 89 cents at 61.29 usd, after hitting an intra-day low of 61.16 usd, the lowest since March, while October- dated US crude futures, which expire later today, lost 77 cents at 60.87 usd.
   
Spot gold, which earlier hit a near 3 month low of 572.10 usd, was quoted up at 582.05 usd against 576.80 usd at the time of the COMEX close yesterday, while LME copper for 3 month delivery plunged to 7,270.00 usd against 7,500.00.
   
Oil prices have slid around 22 pct in value since striking record highs above 78 usd in July and August, as inventories rise, supply risks ease and signs of economic weakness in the US signal a potential cooling of demand.
   
Prices fell yesterday as much softer than expected US economic data re-ignited economic slowdown fears and after comments by US President George Bush over the Iran nuclear crisis eased supply concerns.
   
They have continued even lower today, ahead of US inventory data which are expected to show distillates, which include the key heating oil fuel, rose by 1.8 mln barrels last week while gasoline stocks gained 650,000 barrels.
   
"Supply fundamentals remain strong and are putting a lot of downward pressure on the market, in addition to the already harmed sentiment from weak technicals," said Sucden analyst Michael Davies.
   
The dramatic retreat in oil prices has led funds, which are losing millions of dollars, to exit not only oil markets, but also precious and base metals markets.
   
"The weaker tone in commodities, fed by exiting fund money, is being encouraged by the prospect of slowing economic growth, particularly in the US," said Man Financial analyst Ed Meir.
   
Gold fell to near 3 months lows earlier and although it has since recouped, analysts warn with oil in a downtrend and the dollar steady in the face of weak US data, the selling in precious metals is set to continue.
   
Meanwhile, all eyes are on the US rate decision this evening.  While no change is predicted, the statement accompanying the verdict will receive close scrutiny for hints on future Fed rate decisions.

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