US & World Daily Markets Financial Briefing 20-11-2006

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Stocks mixed in early trading

NEW YORK - Stocks are mixed Monday amid a wave of merger-and-acquisition activity, including Freeport-McMoRan agreeing to buy Phelps Dodge for $26 billion and The Blackstone Group offering $20 billion for Sam Zell's Equity Office Trust.
   
In the opening minutes, the Dow Jones industrials added 17.93 points to 12,323.75, the S&P 500 was unchanged at 1,401.20 and the Nasdaq was also unchanged at 2,445.86.
   
U.S. stock markets ended mixed on Friday, with the Dow industrials rising 36.7 points to a new closing record, but the Nasdaq Composite falling 3.2 points to snap a winning streak. Nymex Holdings more than doubled in its stock market debut.
       
Economic leaders meeting in Australia over the weekend urged caution regarding inflation, saying "ongoing" monetary and fiscal policy changes were needed to contain inflation.
   
Stocks in focus
   
Freeport-McMoran Copper & Gold agreed to buy Phelps Dodge Corp. in a cash-and-shares offer valued at $126.46 per Phelps Dodge share, in what will create the world's largest copper miner.
   
Blackstone agreed to buy Equity Office for $20 billion, or $48.50 a share. Including assumed debt, it's the largest ever private equity buyout.
   
The London Stock Exchange on Monday spurned a fresh takeover bid from Nasdaq Stock Market Inc, saying it "substantially under-valued" the London Market.
   
Bank of America has reportedly agreed to buy U.S. Trust from Charles Schwab for $3.3 billion, The Wall Street Journal reported.
   
Russia's Evraz said it's agreed to buy Oregon Steel Mills for $2.3 billion, or $63.25 a share, in cash.
   
In another Russian deal, Norilsk Nickel agreed to buy the nickel assets of OM Group for $408 million in cash.
   
Israel's Check Point Software agreed to buy Sweden's Protect Data for $586 million.

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Yen stays under pressure as 'carry trade' phenomenon continues

LONDON - The yen stayed under pressure on continued 'carry trades', where traders sell low yielding currencies in order to plough funds into higher yielding ones.
   
The euro hit a fresh all time high against the yen, with one euro worth 151.70 yen before settling under that level. The dollar and the pound were also well bid against the yen.
   
The yen's weakness started after Japanese newspaper Nihon Keizai Shimbun reported of a possible downgrade to Japanese GDP growth for the first time in 23 months. Falls also accelerated after the weekend's G20 meeting failed to say anything about the yen's recent weakness and the phenomenon of carry trades.
   
The yen's slide came alongside a steep drop on the Tokyo Stock Exchange, with the benchmark Nikkei index to its lowest level in nearly two months.
   
The euro, meanwhile, got a modest lift from comments by European Central Bank president Jean-Claude Trichet, who warned that oil prices still threatened to fuel inflation, posing a risk to global economic growth, and that central bankers must remain vigilant.
   
Trichet was speaking in Sydney as the spokesman for the G10 central bankers. The G10 "are in the same mood as before" on inflation, he said. "We have to continue to be very alert. We have to be, with regard to my own institution, totally vigilant," Trichet said.
   
Elsewhere, the dollar stayed well bid despite a drop in US housing market numbers released last week.
   
But with little on the data calendar this week and the upcoming Thanksgiving holiday on Thursday, the dollar looks set to be captive to movements elsewhere.
   
The pound was up after some mixed data showing a strong rise in house prices and an improvement in government finances alongside early signs that the property market may be due for a slowdown.

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LONDON -  FTSE 100 risers

Antofagasta 484-3/4 up 27  Sector in focus after Freeport-McMoRan acquire Phelps Dodge for 25.9 bln usd

Home Retail Group 425 up 8-1/2  KKR, Blackstone bid speculation; Citigroup starts as 'hold'; H1 tomorrow

Enterprise Inns 1,174 up 33 Dresdner Kleinwort upgrades to 'buy' from 'hold' in UK pubs review

Lonmin 3,000 up 70 Sector in focus after Freeport-McMoRan acquire Phelps Dodge for 25.9 bln usd

British Land 1,588 up 26 Plans 1.015 bln stg Meadowhall shopping centre refinancing; H1 tomorrow

Rio Tinto 2,727 up 58 Sector in focus after Freeport-McMoRan acquire Phelps Dodge for 25.9 bln usd

ICAP 486-3/4 up 4-1/4 H1 due tomorrow

Hammerson 1,464 up 19 Citigroup reiterates 'buy', ups target to 1,630 pence from 1,470

Carnival 2,658 up 39 Crude prices remains under pressure

Scottish Power 756 up 1 Iberdrola bid talk; Lehman Brothers ups to 'overweight', raises tgt to 800p

Corus Group 500-1/2 up 5 Tata Steel seen raising offer to counter CSN bid

Resolution 660 up 2 Takeover speculation continues despite Swiss Re denial of interest

FTSE 100 fallers

ITV 114-1/2 down 1-1/4 BSkyB has no plans for takeover, NTL bid seen blocked; CS Group downgrades

Amvescap 592-1/2 up 5-1/2 Seen as potential bidder for Marsh & McLennan's Putnam Investments - WSJ

BG Group 700 down 3   Oil prices remain weak

BSkyB 529-1/2 down 7-1/2  Deutsche Bank downgrades to 'hold' from 'buy' after ITV stake acquisition

Lloyds TSB 563 down 5  Cazenove cautious in UK Banks note, 'in-line' reiterated

Royal Dutch Shell 1,877 down 18  Oil prices remain weak

BP 580-1/2 down 2  Oil prices remain weak

Standard Chartered 1,497 down 3  Global markets weaker

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Asian shares close mostly lower as Tokyo plunges more than 2 pct

HONG KONG - Shares across the Asia-Pacific region closed mostly lower, with Tokyo shares plunging more than 2 pct on fears for Japan's economic outlook.
   
Tokyo's benchmark Nikkei index closed at its lowest level in nearly two months on concerns about the pace of economic recovery in Japan, with many companies opting for conservative full-year earnings forecasts despite better first-half results.
   
Over the weekend, the Nihon Keizai Shimbun newspaper reported the government is likely to downgrade its monthly assessment of the domestic economy for the first time in 23 months when it releases its report on Wednesday, amid signs of weakness in consumer spending.
   
The Nikkei 225 Stock Average finished down 365.79 points or 2.27 pct at 15,725.94, its lowest closing level since Sept 26 when it ended at 15,557.45. The broader TOPIX index of all first-section issues fell 39.60 points or 2.52 pct to settle at 1,533.94.
   
Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Securities, said it appears that Japanese companies are cautious about the economic outlook with many of them maintaining their earnings forecasts for the full year ending March 2007 despite improved half-year results.
   
The index of leading economic indicators for September was revised down to 18.2 from the initial reading of 20.0, the Cabinet Office reported earlier. A reading above 50 indicates economic expansion over the subsequent three to six months, while a reading below 50 suggests a contraction.
   
Australian shares closed lower as negative investor sentiment weighed on the banking sector, while a drop in base metal prices on Friday led to selling of resource stocks. Leading telco Telstra also added to the downside momentum after shares from the government's third sell-down were traded on the market.
   
The S&P/ASX 200 retreated 97.3 points or 1.80 pct to close at 5,322.4. The benchmark index closed at the day's low and well below the high of 5,419.4.
   
Hong Kong shares had fallen by over 1 pct in afternoon trade as investors took profits from recent gains and reacted to the plunge on the Japanese market. At 3.33 pm the Hang Seng Index had dropped by 242.54 points or 1.26 pct to 18,940.17.
   
In mainland China, A-shares in Shanghai and Shenzhen closed sharply higher on sustained follow-through buying with banks and real estate developers in demand. The Shanghai A-share Index gained 47.92 points or 2.31 pct to 2,120.66 and the Shenzhen A-share Index was up 2.13 points or 0.45 pct at 471.14.
   
Seoul shares closed lower as foreign investors and institutions rushed to sell blue chips, with sentiment undermined by weak US housing data on Friday and the sharp decline in Japanese stocks.
   
The KOSPI index closed down 10.01 points or 0.71 pct at 1,402.21, off a low of 1,400.94 and a high of 1,413.88. Investors are waiting to see if further selling by foreign investors continues to threaten the 1,400-point support level.

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LONDON - Copper prices rose as the market recovered from last week's slump, aided by news Freeport-McMoRan will acquire Phelps Dodge for approximately 25.9 bln usd in cash and shares.
   
However, with stockpiles still rising and recent US economic data providing fresh cause for concern over growth prospects in the world's largest economy, analysts warned copper's gains might be limited.
   
At 1.15 pm, LME copper for three-month delivery rose to 6,900.00 usd a tonne against 6,800.00 usd at the close yesterday, and aluminium climbed to 2,647.50 usd against 2,625.00.
   
Other base metals were also higher. Nickel rose to 30,400.00 usd against 29,900.00 usd, lead climbed to 1,512.50 usd against 1,484.00 usd, zinc was up at 4,145.00 usd against 4,025.00 usd, while tin was up at 9,850.00 against 9,700.00 usd.
  
"The big story of the day giving the copper complex somewhat of a boost is news that Freeport-McMoRan Copper & Gold has agreed to buy Phelps Dodge Corp. for 25.9 bln in cash and stock," said Man Financial analyst Ed Meir.
   
The merger will create the world's largest publicly traded copper company and represents the world's biggest mining takeover. Meir added, however, that "as this news (merger) wears off, we expect the market to focus once again on rising stocks and a slowing US macro environment".
   
The LME said today copper stocks monitored in its warehouse rose by another 2,050 tonnes to total 158,025 tonnes. LME copper stocks have now risen 44 pct from a recent low of 109,600 tonnes. 

At 2.44 pm, spot gold, which earlier touched an intra-day high of  626.80 usd, was quoted at 626.30 usd, up from 621.80 usd at the time of the Comex market close in New York on Friday.
   
Other precious metals were also up. Spot silver rose to 12.98 usd an ounce against 12.77 usd, platinum surged to 1,250.00 usd against 1,186.00 usd, while palladium edged up to 324.50 usd against 318.00 usd.

Oil prices fell towards 58 usd as traders continued to doubt OPEC's ability to cut output and as winter fuel stocks remain high because of mild temperatures in the northern hemisphere.
   
At 11.23 am in London, front month Brent North Sea crude contracts for January delivery were down 39 cents at 58.61 usd a barrel, after settling up 45 cents at 58.99 usd on Friday.
   
Meanwhile, New York light sweet crude contracts for January delivery, the new front month contracts, were down 40 cents at 58.57 usd a barrel. On Friday, December New York crude contracts expired at a 17 month low of 55.81 usd.   

Data out last week from tanker tracking agency Petrologistics has thrown up fresh scepticism about the OPEC output cuts.  OPEC, supplier of around 40 pct of the world's oil, agreed last month to cut production by 1.2 mln bpd to 26.3 mln bpd, effective Nov 1, in a bid to defend oil prices, which have fallen 28 pct off all peaks above 78 usd in July. 

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