US & World Daily Markets Financial Briefing 21-03-2006

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U.S. stocks to open little changed; Oracle falls

NEW YORK - U.S. stock futures are pointing to a flat open Tuesday after a fall in energy prices saw wholesale inflation post its biggest decline in nearly three years, but Oracle Corp. is set to open lower after some disappointment over its quarterly results.
   
Investors continued to mull a speech by new Federal Reserve Chairman Ben Bernanke late Monday. The Fed chief gave a bullish assessment of the U.S. economy that seemed to imply interest rates will continue to rise.
   
The futures contract for the Dow Jones Industrial Average was down 2 points at 11,355.
   
Futures contracts for the S&P 500 and the Nasdaq 100 were down 1 point at 1,314.40 and down 0.5 point to 1,705.

On Monday, stocks closed mixed after a range-bound session spent in anticipation of Bernanke's speech. The Nasdaq Composite ended higher, but the Dow Jones Industrial Average and the S&P 500 both finished a bit lower.
   
Stocks of note
   
Shares of Oracle Corp. in premarket electronic trade dropped 32 cents to $13.40. Late Monday, the company said revenue in its database segment, while higher, fell short of some investors' hopes and overshadowed a 42% jump in profit on strong sales of new licenses.
   
Merck & Co. should be active later. The company agreed to license technology to make anti-hypertension drugs from French biotech NicOx, in return for up to $340 million in milestone payments as well as other payments.

Retailer Target Corp. after Monday's closing bell said it now expects March sales at stores open at least one year to rise 1.5% to 2.5%. The discount retailer had previously forecast March same-store sales to increase 1% to 3%. There were few premarket quotes for the stock.

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Dollar higher after Bernanke, Feb. PPI data

NEW YORK - The dollar edged modestly higher against its major rivals early Tuesday, following comments from Federal Reserve Chairman Ben Bernanke late Monday that were interpreted as suggesting that further monetary tightening is to be expected.
   
At the same time, a Labor Department report that showed the core producer price index rose higher-than-expected, also provided some support for the U.S. currency.
   
"The forex market will follow the bond market reaction. The bond market seems to be reacting to the core number which was an upside surprise," said Lara Rhame, a currency strategist at Credit Suisse First Boston. It "implies that rates maybe going higher...supporting the dollar."
   
In early New York trading, the dollar was last changing hands at 116.55 yen, up 0.1%, while the euro was down 0.3% at $1.2128. The dollar also firmed 0.4% against the British pound with one pound fetching $1.7484. The dollar was last up 0.5% at 1.2975 Swiss francs.
   
The dollar regained some strength overnight after markets viewed Bernanke's upbeat description about the U.S. economy as a sign that U.S. interest rate increases would last a little longer and go a little higher than the market now expects.
   
Futures markets now expect the federal funds rate to peak at 5% in May.
   
Higher-than-expected core PPI
   
Earlier, the Labor Department said U.S. wholesale prices plunged 1.4% in February, the biggest decline in nearly three years. Energy prices fell 4.7%, also the biggest drop since April 2003. Food prices fell 2.7%, the most in four years.
   
Economists expected the PPI to fall about 0.3%.
   
The core producer price index - which excludes food and energy prices - rose 0.3%, stronger than the 0.1% gain expected by Wall Street economists surveyed by MarketWatch.
   
Bernanke speech
   
Late Monday, in a speech to the Economic Club of New York, Bernanke offered upbeat comments about the U.S. economy and said the recent inversion of the yield curve is not a signal of a coming period of economic weakness.
   
"Although macroeconomic forecasting is fraught with hazards, I would not interpret the currently very flat yield curve as indicating a significant economic slowdown to come," Bernanke said in a much-anticipated speech to the Economic Club of New York.
   
But he gave no hints about the path of monetary policy decisions at the Federal Reserve Open Market Committee meeting on March 27-28. Nor did he offer any clue about when tightening of the U.S. monetary policy might come to an end.

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The European Markets at 12.00 GMT

London - UK blue chips remained lower at midday, as expectations of an uninspiring start on Wall Street added to weakness in heavyweight miners and oil stocks, dealers said.
   
At 12.01 pm, the FTSE 100 was down 18.1 points at 5,973.6, well off the key 6,000 mark and in line with the downbeat wider market. Volume was average, with 1.136.6 bln shares changing hands in 116,285 deals.

Frankfurt - Shares were lower in midday trade, falling further from the psychologically important 6,000 point mark as investors took advantage of profit-taking, and trade was dampened by a mixed session overnight on Wall Street, dealers said.
   
At 12.03 pm, the DAX 30 index was 34.14 points or 0.58 pct lower at 5,868.65, having moved between 5,847.90 and 5,909.62 so far this session.

Paris - Shares were lower at midday, weakened by profit-taking ahead of the release of the US producer price figures, and weighed by an oil price drop, said dealers.
   
At 12.40 pm, the CAC-40 was down 22.87 points or 0.44 pct to 5,115.73, on volume of 1.91 bln eur. Among CAC-40 stocks, 28 were trading lower, ten were higher, and two were unchanged. 

Madrid - Share prices were lower, but off intra-day lows in light midday trade, in line with the broad European trend after Wall Street's mixed overnight showing, with the main blue chips on offer while Banco Popular extended yesterday's outperformance, dealers said.
   
At 12.45 pm, the IBEX-35 index fell 29.5 points to 11,892.5, after trading in a range of 11,857-11,944, on turnover of 1.1 bln eur.

Milan - Share prices were lower at midday trade, led by losses among oil sector stocks, while Fiat was driven up by upbeat comments by its CEO Sergio Marchionne, and AEM benefited from strong full-year results yesterday, dealers
said.
   
At 12.16 pm, the Mibtel index fell 0.42 pct at 29,511 points and the S&P/Mib was off 0.51 pct at 38,294, while volumes stood at 1.70 bln eur.

Stockholm - Shares were flat in midday trade after Ericsson clawed back earlier losses and then moved slightly higher, offsetting widespread weakness throughout the rest of the market on profit-taking, brokers said.
   
At 12.10 pm the OMX was up 0.08 pct at 332.58 points, and the OMX Stockholm down 0.11 pct at 1,042.54. Turnover was 14.847 bln skr.

Helsinki - Share prices were almost flat in midday trade, underpinned by Nokia and Rautaruukki, with the latter benefiting from renewed interest in the steels sector following a report that Anglo-Dutch group Corus may look to merge with Russian peer Evraz, dealers said.
   
At 12.26 pm, the OMX Helsinki 25 index was 0.13 pct weaker at 2,730.15. The OMX Helsinki index was up 0.04 pct at 9,429.15, while the Helsinki CAP portfolio index was 0.06 pct lower at 5,070.18.

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Asian shares close mostly down, Australia pulls back after record highs

HONG KONG - Share prices across the Asia-Pacific region ended mostly down with Australian stocks mildly lower after the market pulled back from record highs reached yesterday as investors consolidated positions, dealers said.
   
The market in Tokyo was closed for a holiday.
   
They said oil stocks were responsible for much of the Australian pull back but leading miners BHP Billiton and Rio Tinto held up, helped by reports that China's steel mills had decided that supply tightness in the iron ore market means price increases are likely.
   
The S&P/ASX 200 ended down 9.1 points or 0.18 pct to close at 4,991.3 off yesterday's record close of 5,000.4.
   
The key indicator managed to trade above the psychologically important 5,000 points barrier to a high of 5,003.1 but below yesterday's fresh intra-day high of 5,005.9 points. Today the index traded as low as 4,985.0.
   
Dealers said volumes were healthy despite the flat market with hedge fund activity said to have driven trading.
   
In Hong Kong, share prices were trading slightly weaker on mild profit-taking after gains over the last four sessions, dealers said.
   
Wall Street's mixed performance overnight and PetroChina's unexciting 2005 results prompted caution but the downside was limited by interest in select China-related stocks, they said.
   
At 3:30 pm the Hang Seng Index was down 12.51 points or 0.08 pct at 15,917.44.
   
In mainland China, A-shares in Shanghai and Shenzhen closed higher on fresh capital inflows thanks to a rising yuan with Shanghai local listings and lenders gaining ground in particular, dealers said.
   
The Shanghai A-share Index rose 2.03 points to 1,353.37 on turnover of 11.83 bln yuan and the Shenzhen A-share Index was up 1.08 points at 323.77 on turnover of 6.61 bln yuan.
   
Share prices in Taiwan ended at their lowest levels for the day in reduced trade as some high-priced technology stocks were hit by a bout of profit-taking following Wall Street's mixed showing overnight, dealers said.
   
TSMC and AU Optronics held their ground but High Tech Computer fell sharply as investors reacted negatively to its 2005 dividend proposal and planned sale of new shares, they said.
   
The weighted index closed down 58.49 points or 0.90 pct at the day's low of 6,458.03.
   
Share prices in Seoul finished lower, ending a four-day winning streak, with Samsung Electronics, POSCO and Hyundai Motor leading the decline, dealers said.
   
After a firm start, the market was weak most of the session, as investors remained cautious amid lack of strong momentum both home and abroad, leading to thin trade.
   
Renewed worries over first quarter earnings by major corporations and US interest rates also dampened overall sentiment here.
   
Late program selling, amounting to 105.2 bln won, led the index to close near its low for the day.
   
The KOSPI index closed down 10.04 points or 0.75 pct at 1,336.65.

Asian Bourse Round-Up

For a full list of closing figures, click here

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Following Bernanke's speech there was some buying of longer-term notes and sales of short-term instruments.
   
Kim Rupert, managing director of fixed income at Action Economics, said "The fact that he didn't suggest any time frame for a pause is going to leave rates biased slightly higher."
   
"People still think a yield near 4.7% on the long end is a pretty good deal," she said.
   
The yield on the 10-year note last stood at 4.667%.
   
Gold futures were backing lower, last trading down $4.10 at $552 an ounce
   
Crude futures also were on the decline, falling 36 cents to $60.06 a barrel.

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