US & World Daily Markets Financial Briefing 21-09-2007

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Stocks rise following earnings reports

NEW YORK - U.S. stocks opened higher Friday as Wall Street, looking to resume this week's rally, drew confidence from strong earnings from Oracle Corp.
   
After the market closed Thursday, the software maker reported a 25 percent jump in quarterly profit and said its software sales accelerated at the fastest pace in seven years. Nike Inc. also cheered investors late Thursday, when the athletic shoe and clothing company said its quarterly profit rose by 51 percent.
   
The pair of earnings reports served as a positive sign that despite the recent market turmoil and apparent slowdown in consumer spending, many companies are still thriving.
   
Some mixed earnings reports, along with a weak dollar and record-high oil prices, contributed to a dip Thursday in the stock market. But Wall Street is trading more optimistically this week than it has in a while, following the Federal Reserve's half-point interest rate cut Tuesday.
   
In early trading, the Dow Jones industrial average rose 71.78, or 0.52 percent, to 13,838.48.
   
Broader stock indicators rose. The Standard & Poor's 500 index rose 7.89, or 0.52 percent, to 1,526.64, while the Nasdaq composite index rose 14.67, or 0.55 percent, to 2,668.96.
   
Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.64 percent from Thursday's close of 4.69 percent. Treasurys have sold off for three straight sessions amid concerns about the possibility of increasing inflation and the prospect of Saudi Arabia lightening its U.S. government holdings. The gains on Wall Street have also drained some money out of the bond market.
   
Crude oil futures for November pulled back by 39 cents to $81.39 per barrel on the New York Mercantile Exchange. On Thursday, the October contract, now expired, closed at an all-time high above $83 a barrel.
       
There are no major economic reports scheduled to be released Friday. Instead, Wall Street's focus is on corporate news and speeches by Fed officials, including Philadelphia Fed President Charles Plosser.
   
In corporate news, Oracle rose 89 cents, or 4.2 percent, to $21.93, while Nike rose 94 cents to $59.26 following their quarterly reports.
   
The Finnish paper and forest products company Stora Enso Oyj is selling its North American unit for about $2.1 billion to NewPage Holding Corp., an Ohio-based coated paper producer owned by the private equity firm Cerberus Capital.
   
Advancing issues outnumbered decliners about 5 to 2 on the New York Stock Exchange, where volume came to 672.6 million shares. The Russell 2000 index of smaller companies rose 3.58, or 0.44 percent, to 813.34.
   
In trading abroad, Britain's FTSE 100 rose 0.35 percent, Germany's DAX index rose 0.56 percent, and France's CAC-40 rose 0.07 percent.

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Euro slips back after hitting record high above 1.41 usd

LONDON - The euro fell back after earlier hitting a record high of over 1.41 against the dollar on profit-taking and as weak euro zone PMI surveys increased speculation that the European Central Bank will not
raise interest rates any further.
       
"The marked correction observed in those surveys is a first evidence of the recent market turmoil filtering through the real economy... In that context, there seems to be a strengthening case to argue that ECB rates will peak at 4 pct after all," said Audrey Childe-Freeman.
   
Moreover, market talk is just beginning to switch to a discussion on when the ECB will cut interest rates. Following the weak PMI data, analysts at RBS now say they are forecasting the ECB will reduce borrowing costs in 2008 as growth falls below potential.
   
On top of that is the possibility of combined central bank intervention to prop up the dollar as the euro zone economy suffers as a result of the sharp increase in the value of its currency.
   
Earlier this morning, the euro hit a new all-time high of just below 1.4120 against the dollar.

The Canadian dollar moved back above parity against its US counterpart after a very weak set of retail sales data for July suggested the strong currency is starting to take its toll on the economy.
   
Official figures showed retail sales slumped by 0.8 pct in July from June and by 0.3 pct excluding autos, way below forecasts for a modest rebound after falls in June. Statistics Canada said the declines were widespread, though led by the auto sector.
   
"These numbers even without reading through them are ugly," said Peter Wadkins at Thomson IFR Markets. "Traders have been fretting about the impact of the high (Canadian dollar) -- this looks like it," he added.
   
In the wake of the data, the US dollar rose back up to a high of 1.0055 against the Canadian dollar from around 1.0011 cad just before the figures were released.
   
The Canadian currency broke through parity against the dollar last night for the first time since 1976 and today hit a new high of 0.9932. It has gained support from broad dollar weakness as well as sharp gains in the oil price. At 1.03 pm GMT, the US dollar was trading at 1.0035 cad.

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Euroshares higher midday as Dow set to open higher, techs and autos gain ground

LONDON - Europe's leading exchanges added to morning gains midday as the Dow looks set to start the day in buoyant mood with car and tech stocks leading the advance in Europe.
   
At 12.16 am, the Dow Jones STOXX 50 Index was up 23.18 points, or 0.61 pct, at 3,832.17 while the DJ STOXX 600 Index rose 2.15 points, or 0.57 pct, to 377.1.
   
Fiat shares rose 3.13 pct and Renault climbed 3.19 pct as the broker said it sees around 60 pct upside to its 12-month price targets for the pair. Fiat shares received a further boost after it said it has sold its 1.83 pct stake in Mediobanca SpA to Goldman Sachs International for a book gain of around 118 mln eur.
   
Goldman was less upbeat about Peugeot SA, rating it a 'conviction sell'. "We remain unimpressed with Peugeot's restructuring prospects and concerned by the industrial challenges," the broker said in a note to clients. Peugeot shares underperformed their sector, adding only 0.39 pct.
   
In the financial sector, Fortis rose 3.04 pct as investors rushed to take advantage of the bank's rights issue. The Belgo-Dutch banking group announced a two-for-three rights issue priced at 15 eur a share to help fund its 24.7 bln eur bid for Dutch peer ABN Amro Holdings NV as part of the consortium led by Royal Bank of Scotland Group.  Fortis shares currently trade around 27 eur.
   
Tech stocks also made good gains. SAP edged up 0.67 pct as stronger-than-expected results from its US competitor Oracle Corp suggest the software market remains buoyant.
   
Infineon moved up 1.18 pct as the market cheered the chipmaker's successful placement of 25 mln Qimonda American depository shares amid vague talk the group is set to win a contract to provide a UMTS chip for the next generation of Apple Inc's iPhone.
   
Siemens was up amid talk it is to announce plans to spin off its OSRAM light bulb unit at a strategy update next week. Shares were also boosted ahead of the Dax re-weighting on Monday. Siemens' weighting will be increased to 9.87 pct from 8.65 effective Monday.
   
British Energy added 5.32 pct as investors switched out of peer Drax which leaves the FTSE 100 tonight.
   
Elsewhere, Shares in Stora Enso stormed 8.79 pct as investors cheered the higher-than-expected price the Finnish paper group secured for its underperforming US operations. The high multiple paid for the division also boosted peers M-Real and UPM Kymmene -- up 5.05 pct and 3.45 pct respectively.
   
Nestle rose 1.47 pct, recouping some of its prior session losses, as investors welcomed news that chief financial officer Paul Polman would be staying on at the company despite failing to secure the post of chief executive. Yesterday, Nestle chose the head of its American operations, Paul Bulcke, as its next CEO over Polman, who was the favourite among investors and analysts.
   
TomTom climbed 3.57 pct as Merrill Lynch upped its price target to 64 eur from 48 and reiterated its 'buy' recommendation. ABN Amro has initiated coverage of Hennes & Mauritz with a 'buy' rating, according to dealers, and a price target of 470 skr.
   
But Pernod Ricard shares fell 2.36 pct after Dresdner Kleinwort downgraded the drinks group to 'add' from 'buy,' following its half-year results yesterday. Dresdner also cut its price target on Pernod to 164.0 eur from 172.50 eur, traders said.
   
And Sanofi slipped 1.41 pct amid a flurry of cautious broker notes with Goldman Sachs and Lehman Brothers among those expressing concern about delays to the launch of key drugs.

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Asian shares mostly down as oil spike, weak dollar re-ignites US concerns

SINGAPORE - A lacklustre performance on Wall Street set a cautious tone for Asian stock markets Friday, with investors eyeing record oil and metals prices and a dramatically weaker dollar.
   
Benchmarks across the region were mostly lower, pulling back after two days of gains as investors worried the commodity surge and soft dollar would crimp consumer spending in the US, a key market for Asian goods.
   
In Tokyo, the stronger yen weighed on export-oriented shares. When the dollar is weak, exporters receive fewer yen when they repatriate dollar earnings. Investors are also cautious ahead of the long weekend -- Japanese financial markets will close for a public holiday on Monday.

The Nikkei 225 Stock Average closed down 0.6 pct at 16,312.61. The broader TOPIX index slipped 0.9 pct to 1,552.07.
   
On the political front, the ruling Liberal Democratic Party is expected on Sunday to choose a successor to prime minister Shinzo Abe, who stepped down recently after only a year in office.
   
In Sydney, The S&P/ASX 200 fell 0.6 pct to 6,357.9 and the All Ordinaries was down 0.5 pct at 6,371.2.
   
"We didn't really see too many reasons on overnight markets to be coming in on the buy side today," ABN Amro head of sales trading Justin Gallagher said. Trading volumes were lower after the expiry of September futures contracts on Thursday sucked "an enormous amount of liquidity" out of the market,
Gallagher said.
   
Hong Kong's Hang Seng Index closed up 0.6 pct at a record 25,843.78 as strong gains in Hong Kong Exchanges & Clearing Ltd (HKEx), commodity stocks and airline counters helped the market swing to positive territory in late trade after losses in the morning.
   
In Seoul, the KOSPI index closed up 0.5 pct at 1,919.26 as earnings hopes gave the market a last-minute boost. Trading was erratic earlier ahead of the long Korean Thanksgiving holiday. The South Korean market will be closed Monday through Wednesday.
   
China's benchmark Shanghai Composite Index ended down 0.3 pct at 5,454.67 as investors worried that large upcoming initial public offerings will drain funds from the market. The Shanghai A-share Index fell 0.3 pct to 5,725.37 and the Shenzhen A-share Index was down 0.4 pct at 1,574.08. The Shanghai B-share Index fell 0.3 pct to 359.28 and the Shenzhen B-share Index was down 1.1 pct at 770.67.

Indian shares staged a late comeback to notch another record finish on Friday, led this time by energy stocks, which rose on foreign fund buying. Early trade was lacklustre with technology stocks hitting 52-week lows on fears that a strong rupee will hurt revenues from exports, but rebounded towards the end amid reports that the country's central bank had intervened to halt the rising rupee.
   
The Bombay Stock Exchange's Sensex closed up 216.28 points, or 1.32 pct, at 16,564.23 as many large-cap stocks hit fresh 52-week highs. The National Stock Exchange's S&P CNX Nifty ended up 1.9 pct at 4,837.55.

Elsewhere, the Singapore Straits Times index closed down 0.3 pct at 3,542.22, the Kuala Lumpur Composite was down 0.2 pct at 1,305.94 and the Philippines Composite Index fell 0.5 pct at 3,423.73. The Taiwanese Taiex outperformed, gaining 1.4 pct to 9,105.28, while Indonesia's Jakarta index rose 1.3 pct to 2,335.49.

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Gold near 27-yr high as dollar slumps, oil close to record highs

LONDON - Gold stayed close to a 27-year high set earlier today as the dollar's value plummeted against major currencies, making the metal more attractive as an alternative asset.
   
Dollar weakness also made the dollar-denominated metal cheaper for those trading in other currencies. The dollar hit a record low against the euro earlier today.
   
Meanwhile, gold, seen as an inflation hedge, drew strength from sky-high oil prices that are within sight of record levels.
   
"We believe the US dollar is in serious risk of overshooting against the euro," said analysts at Deutsche Bank. This would "enable the gold price to move above 800 usd during next year."
   
At 1.08 pm, gold was trading at 735.25 usd per ounce, against 734.60 usd in late New York trade yesterday.
   
Gold struck an intra-day high of 739.50 usd earlier, the highest level since Jan 1980 when it hit 850 usd. The metal has rallied some 18 pct since hitting a low of 626 usd on August 23.
   
While gold has risen 11 pct since August 23, from the highs, silver has gained 15 pct. Silver was up 13.47 usd per ounce against 13.39 usd, following in gold's footsteps. Platinum and palladium have also gathered upward momentum.
  
Platinum rose to 1,329 usd per ounce against 1,327 usd an ounce, having hit a high of 1,339 earlier, while sister metal palladium was steady at 336 usd against 339 usd.

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