US & World Daily Markets Financial Briefing 21-08-2006

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Stocks are down after gains last week

NEW YORK - Stocks are lower in early trading after last week's gains, with a run up in commodity prices possibly blocking further gains in equity markets.
   
In the opening minutes, the S&P 500 declined 3.09 points to 1,299.21 and the Nasdaq declined 15.39 points to 2,148.56. The Dow industrials weakened 29.78 points to 11,351.69.
   
U.S. stock markets rose each day last week, with the Nasdaq Composite rising 5.2 percent, the Dow industrials rising 2.6 percent and the S&P 500 index improving 2.8 percent.
   
But Monday is pointing to a pullback.
   
Iran over the weekend continued to reject calls by the United Nations to stop its uranium enrichment program, setting it on a collision course with the world body as an Aug. 31 deadline approaches for the oil-exporting country to end its nuclear program.
   
There's isn't much on the earnings calendar for Monday, save for a quarterly report from Lowe's Cos., the home improvement retailer.

Stocks in focus
   
Barron's magazine suggested that insurer Aetna may stage a robust recovery in the next year, as an article suggested the company's problems aren't as bad as bears portray.
   
Citadel Broadcasting wants to renegotiate some terms of its purchase of Walt Disney Co's radio assets, The Wall Street Journal reported. Citadel has agreed to pay $1.3 billion in stock and $1.4 billion in cash for the assets, and Citadel's stock has dropped 27 percent since the deal was agreed.
   
After Friday's close, Pilgrim's Pride offered to buy Gold Kist, a chicken processor, for about $1 billion, or $20 a share in cash.
   
Shares of Anglo American rose after a report from a U.K. newspaper suggested that potential bidders CVRD, Rio Tinto and Xstrata have all hired bankers to prepare for a possible bidding war.
   
Oil producer BP was upgraded to neutral from sell by Goldman Sachs, while the Financial Times newspaper reported BP is the subject of a probe into whether it tampered with data on its Prudhoe Bay field in Alaska. BP denies those allegations, the newspaper reported.

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Yen falls to new record lows vs euro as BoJ seen leaving rates on hold

LONDON - The yen continued to weaken, reaching new record lows against the euro, on worries that the Bank of Japan will not raise interest rates again soon, while the dollar stayed weak following last week's spate of disappointing US data.
   
The combination of yen selling and euro gains against the dollar pushed the euro as high as 149.52 against the Japanese currency.
   
4CAST currency analyst Paul Bednarczyk said talk in the market that Japanese CPI inflation numbers on Friday will come in below expectations, coupled with a growing belief that the BoJ will hold off on raising interest rates again for the time being, has weighed on the yen.
   
The dollar has fallen against every other major currency and this has merely exacerbated the yen's losses across the board, he said, though he added that the euro is likely to succumb to profit-taking as it approaches the 150 yen mark.
   
The dollar has continued to suffer in the wake of last week's bout of weak US data, which led many to believe that the US Federal Reserve will not raise interest rates any further.
   
With little in the way of significant US data this week, Friday's poor US consumer sentiment survey was for many the nail in the coffin for further US rate hikes, particularly following soft data on inflation, industrial production and housing starts earlier in the week.
   
Meanwhile, the euro has benefited from renewed confidence in the euro zone economy, emphasised by comments in a weekend newspaper interview by Bundesbank President Axel Weber, who said that the German economy could grow by more than 2 pct this year and that the economic recovery will "continue dynamically".
   
While the market fully expects the European Central Bank to raise interest rates again in October, much uncertainty remains over when and whether further rate hikes will be forthcoming in the US, Japan and the UK.

The rouble changed hands on the foreign exchange market at 26.70 roubles per dollar, compared with 26.75 roubles on Friday.
  
Against the euro, it traded at 34.40 roubles, compared with 34.33 roubles on
Friday.

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The European Markets at 11.00 GMT

London - By 12.00 BST the FTSE 100 index was up 8.8 points at 5,911.9, having risen from an earlier low of 5,883.8, with the broader indices mixed.

Frankfurt - At 12.17 pm, the DAX 30 index was 15.41 points or 0.26 pct lower at 5,801.61, having moved between 5,771.93 and 5,810.67 so far this session.
   
The MDAX was at 8,109.02, down 21.84 points or 0.27 pct, while the TecDAX was at 656.17, down 4.36 points or 0.66 pct. The DAX futures contract was at 5,815.00, down 37.00 points or 0.63 pct, while bund futures were at 117.27, up 0.29 points.

Paris - At 11.58 am, the CAC-40 was down 23.76 points or 0.46 pct at 5,111.93. Of the 39 stocks currently in the index as it awaits a replacement for Arcelor, 30 were down and nine were up.
   
Volume was thin at 726 mln eur. On the Matif, September CAC-40 futures were trading down 21.0 points or 0.41 pct at 5,124.5.

Madrid - At 12.08 pm, the IBEX-35 index was down 19.9 points at 12,047.6, after trading in a range of 12,003-12,055, on turnover of about 455 mln eur.
   
Equities opened lower, in line with European markets and weighed down by a fresh spike in oil prices, with little fresh news to spur investor interest.
   
NH Hoteles led the gains, soaring 1.42 eur or 8.6 pct to 17.94, amid renewed talk that Barcelo could make a tender offer for the hotel chain at 20 eur per share.   

Milan - At 12.50 pm, the Mibtel index fell 0.09 pct to 28,601 points and the S&P/Mib was off 0.17 pct at 37,498, while volumes stood at 800 mln eur.
   
Decliners outnumbered gainers 154 to 132, while 13 shares were unchanged. Dealers said activity was thin as many market players were still on holiday, and as there was little newsflow and macroeconomic data to focus on.

Brussels - At 11.21 am, the Bel 20 was down 16.80 points or 0.43 pct at 3,896.06.
   
Agfa-Gevaert was down 1.00 eur or 5.52 pct at 17.10 eur after it was downgraded to 'reduce' from 'accumulate' and saw its price target cut at KBC Securities.

Stockholm - At 12.10 pm, the OMX Stockholm index was up 0.19 pct at 315.27, while the OMX Stockholm 30 index was up 0.26 pct at 980.68. Turnover was 6.12 bln skr.
   
The main sub-indices moving at midday were telecommunication services, up 0.24 pct; energy, 0.28 pct higher; and materials, up 0.11 pct.
   
The major movers were TeliaSonera, up 0.70 pct at 43.30 skr bid; Vostok Nafta, 2.65 pct higher at 485; and Lundin Mining, up 5.12 pct at 226.

Copenhagen - At 10.50 am, the OMXC20 index was 0.53 points lower at 381.00 and the OMXCB Benchmark index was down 1.03 points at 363.01.
   
Bang & Olufsen was up 3 dkr at 629. Analysts polled by RB-Boersen are forecasting a full-year pretax profit of 454 mln dkr on sales of 4.129 bln dkr and focus will be on the guidance for the year 2006/2007, a possible share buy-back and the launch of new products.

Helsinki - At 12.19 pm, the OMX Helsinki 25 was 0.01 pct higher at 2,534.83 and the OMX Helsinki was down 0.04 pct at 8,862.51 on a turnover of 240 mln eur.
   
Nokia was 0.24 pct off at 16.51 eur on profit-taking after last week's solid gains, dealers said.
   
In other news, Nokia said it has won a two-year contract from Norway's Telenor ASA to supply its global operations with cellular transmission systems and services.

Athens - At 1.10 pm the ASE general index was flat at 3,945.3 points, with advancers outnumbering decliners, 111 to 72. The blue chip index was 0.2 pct lower at 2,140.3 points. Mid caps were 0.8 pct higher at 4,217.8 points, and small caps were up 0.9 pct at 781.6 points.
   
Refiner Motor Oil Hellas was up 1.6 pct to 21.54 eur, and other major refiner Hellenic Petroleum was up 1.3 pct to 10.7 eur, both tracking rising oil prices.

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Asian shares close mostly lower on profit taking, China rate hike

HONG KONG - Shares across the Asia-Pacific region closed mixed, with Tokyo falling on profit-taking and the Hong Kong and Korean markets sliding in response to China's interest rate hike over the weekend.
   
Tokyo shares finished lower on profit-taking after the market's recent advance, with declines in technology and financial stocks pushing the benchmark Nikkei index below the 16,000-point level for the first time in almost a week, dealers said.
   
The blue-chip Nikkei 225 Stock Average closed 136.94 points or 0.85 pct lower at 15,969.04, finishing below 16,000 points for the first time since last Tuesday.
   
The broader TOPIX index of all first-section issues lost 17.24 points or 1.05 pct at 1,624.21.
   
"Because last week's advance was so rapid and sharp, investors have become doubtful whether such a run-up can be sustained," said Naito Securities market analyst Yuzo Asai.
   
Australian shares closed higher on the release of solid earnings reports and expectations that other reports this week will be equally strong, dealers said.
   
However, they said the shares of the nation's largest telecom company, Telstra, weighed on the market. Telstra dropped to its lowest level since 1997 following revised earnings guidance due to recent adverse regulatory pricing.
   
The S&P/ASX 200 gained 11.1 points or 0.22 pct to close at 5,063.6. The benchmark indicator closed off the day's high of 5,090.4 and above a low of 5,054.7.
   
Hong Kong shares were sharply lower in afternoon trade following China's decision to raise lending rates to cool its economy, dealers said.
   
The People's Bank of China announced on Friday evening that it was raising benchmark one-year interest rates by 27 basis points in the country's second rate hike this year. The increase took effect the following day and sparked selling of China and Hong Kong-based property stocks, dealers said.
   
At 3:26 pm the Hang Seng Index was down 328.59 points or 1.86 pct at 17,012.11.
   
In China, A-shares in Shanghai and Shenzhen closed slightly higher as investors sought bargains after the market opened significantly lower due to China's interest rate hike, dealers said.
   
The Shanghai A-share Index added 3.30 points or 0.20 pct to 1,683.16 and the Shenzhen A-share Index was up 1.28 points or 0.31 pct at 413.16.
   
Seoul shares ended lower with foreign investors selling exporters on concern that their sales may be hurt by higher interest rates in China, South Korea's largest export market, dealers said.
   
Wall Street's stronger close on Friday provided support at the start but the market turned lower on heavy selling of stocks and futures by foreign investors, falling below the 120-day moving average of 1,329 points, they added.
   
The KOSPI index closed down 9.43 points or 0.71 pct at 1,321.67, off a high of 1,337.70 and a low of 1,316.51.

Asian Bourse Round-Up

For a full list of closing figures, click here

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Oil prices rise near $72 a barrel

VIENNA, Austria -- Oil prices rose back near $72 a barrel Monday, rebounding from declines the week before, after Iran insisted ahead of an official response to a package of incentives on its nuclear program that it will not suspend uranium enrichment.
   
Prices also appeared underpinned by concerns about supply disruptions in Nigeria due to civil unrest and fear of potential hurricanes that could strike Gulf of Mexico refineries. Traders were also watching for signals of where fuel demand is headed in the wake of BP's production woes at its Prudhoe Bay field in Alaska.
   
Light, sweet crude for September delivery rose 61 cents to $71.83 a barrel by 14.00 GMT on the New York Mercantile Exchange. October Brent on London's ICE Futures Exchange spiked 86 cents to $73.16 a barrel.
   
Heating oil futures jumped by more than 3 cents to $2.0201 a gallon and gasoline futures by less than half a cent to $1.9700 per gallon (3.8 liters). Natural gas futures fell 14 cents to $6.589 per 1,000 cubic feet.
   
Iran has said it will respond by Tuesday to the incentive offer but insisted on Sunday that it would not suspend uranium enrichment altogether.
       
Elsewhere in the Middle East, a cease-fire in Israel and Lebanon was in its
seventh day, although Israel on Saturday conducted a pre-dawn commando raid deep into Lebanon's eastern Bekaa Valley, prompting U.N. Secretary-General Kofi Annan to declare the Israelis in violation of the Security Council truce resolution.
   
Oil prices had hit a record high of $78.40 a barrel on July 14, two days after fighting erupted in Lebanon.

Metals futures also were on the way up, with gold futures up nearly $10 an ounce.

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