US & World Daily Markets Financial Briefing 21-12-2007

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This is the last World Daily Markets Bulletin to be sent by ADVFN until Wednesday 2nd January, when they will resume as normal.

ADVFN would like to wish everyone a Merry Christmas and a Happy New Year.

US Stocks at a Glance

Stocks open higher on Merrill report

Stocks jumped Friday following a better-than-expected rise in profits at Research in Motion Ltd. and on word that Merrill Lynch might have lined up a big cash infusion from a Singapore fund.

Research in Motion said late Thursday its fiscal third-quarter profit more than doubled on strong demand for its BlackBerry smart phones. The results gave Wall Street hope that the technology sector has room to expand and that consumers and businesses are still spending.

Adding to investors' upbeat mood, The Wall Street Journal reported that Merrill Lynch & Co., facing hefty writedowns due to losing bets on subprime mortgages, may get a capital infusion of as much as $5 billion. The money is expected to come from Singapore state-owned investment agency Temasek Holdings Pte. Ltd., a fund that in late July said it would buy a 1.77 percent stake in Barclays PLC for $2 billion.

Sovereign funds have been providing troubled U.S. and European banks with much-needed cash. Over the past month, the Abu Dhabi Investment Authority bought a stake in Citigroup Inc. for $7.5 billion; the Government of Singapore Investment Corp. invested $9.75 billion in UBS AG; and this week China Investment Corp. paid $5 billion for a stake in Morgan Stanley.

Meanwhile, a Commerce Department report on personal spending brought investors mixed news. Spending rose by 1.1 percent in November, the largest amount in 3 1/2 years. But the Fed's preferred inflation measure -- the year-over-year core personal consumption expenditures deflator -- rose 2.2 percent. That's above the Fed's comfort level of 1 percent to 2 percent, and could make it harder for the central bank to justify further rate cuts aimed at spurring economic growth.

In the first hour of trading, the Dow Jones industrial average rose 143.72, or 1.09 percent, to 13,389.36.

Broader stock indicators also rose. The Standard & Poor's 500 index gained 17.57, or 1.20 percent, to 1,477.69, and the Nasdaq composite index advanced 37.76, or 1.43 percent, to 2,678.62.

Bond prices fell. The yield on the 10-year Treasury note, which moves opposite its price, rose to 4.07 percent from 4.06 percent late Thursday. The dollar was mostly lower against other major currencies, while gold prices fell.

Wall Street appeared to be attempting a late-December rally with six trading days left in the year, but no doubt some skepticism remains about whether investors can pull off a so-called Santa Claus rally.

Companies like Research in Motion have reported solid sales growth, but others have had a harder time staying profitable as U.S. consumers struggle with sinking home prices and high energy and food costs. Research in Motion jumped $11.65, or 10.9 percent, to $118.64. Electronics retailer Circuit City Stores Inc. fell $1.40, or 21 percent, to $5.26 after posting a wider-than-expected loss for the most recent quarter due to lower extended warranty sales and restructuring costs.

And in yet another sign of distress in the banking industry, Midwest regional bank KeyCorp said late Thursday it expects to report a fourth quarter loss after setting aside additional reserves for loan losses. It also said it would lay off more than 700 workers. KeyCorp rose 29 cents to $22.20.

Light, sweet crude rose 69 cents to $91.75 per barrel in premarket trading on the New York Mercantile Exchange. Advancing issues outnumbered decliners by more than 4 to 1 on the New York Stock Exchange, where volume came to 770.9 million shares.

The Russell 2000 index of smaller companies rose 12.95, or 1.69 percent, to 780.49. Overseas, Japan's Nikkei stock average rose 1.50 percent, and Hong Kong's Hang Seng index added 2.26 percent. In afternoon trading, Britain's FTSE 100 gained 1.31 percent, Germany's DAX index advanced 1.51 percent and France's CAC-40 lifted 1.51 percent.

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Forex - Dollar flat ahead of personal income figures, pound remains weak

The dollar was steady ahead of US personal income figures and the results of the second US Federal Reserve auction, having fallen overnight on year-end profit taking. Trade is particularly quiet ahead of the Christmas holidays, and news that Merrill Lynch is set to receive up to a 5 bln usd investment from Singapore sovereign wealth fund Temasek Holdings failed to give the greenback an extra boost.

Figures out this afternoon are expected to show personal income in November increased by around 0.5 pct after October's 0.2 pct rise, while the Federal Reserve's preferred measure of inflation, the core PCE index, is expected to have edged up to 2.0 pct from 1.9 pct. However analysts are doubtful they will provide much direction for currencies.

"With Christmas around the corner it probably requires a significant surprise in the US PCE report to impress the FX market," said Niels From, currency strategist at Dresdner Kleinwort.

Later this afternoon, the Fed will announce the results of the second tranche of its injection of liquidity into the money markets. The first auction of 20 bln usd on Monday was covered more than three times, and markets will be waiting to see whether demand for this second one has eased -- indicating the availability of cash is improving.

Meanwhile, stronger-than expected UK retail sales figures meant the pound was able to narrowly avoid falling to its all-time low against the euro. The euro hit 0.7249 stg ahead of the numbers, just a whisker away from the all-time record of 0.7254.

Retail sales in November rose by 0.4 pct on the month, above forecasts for a smaller 0.2 pct increase. In addition to that, retail sales for October were revised up to show a flat reading on the month, compared with the previous estimate of a 0.1 pct fall.

This meant the pound was able to stabilise slightly, though the news that the GfK/NOP consumer confidence indicator fell to a 12-year-low of -14 in December meant it was unable to make any lasting gains.

Geoffrey Yu, currency strategist at UBS said the pound is likely to continue its slide into 2008.
"We continue to see the pound under pressure into first quarter next year as markets choose to price in further easing by the Bank of England," he said.

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Euroshares gain midday on expected Wall Street rally; tech sector paces gains
 
At 12.09 pm, the Dow Jones STOXX 50 Index was up 41.89 points, or 1.2 pct, at 3,686.05 while the DJ STOXX 600 rose 4.05 points, or 1.1 pct to 363.51.

The DJ STOXX 600 Technology Index was up 2.3 pct, outperforming all other sectors except metal and mining stocks which benefited from a rise in base and precious metal prices. Over in the US, stocks are seen opening higher on a report that another sovereign fund is set to come to the rescue of a sup-brime-hit US bank, this time Merrill Lynch.

According to spread bettors IG Index, the Dow Jones Industrial Average is expected to open up 95 points at 13,340. Separately, S&P 500 futures were up 9.90 points at 1,484.60, while Nasdaq 100 futures rose 16.75 points to 2,115.25.

Back in Europe, Dassault Systemes was up 4.6 pct, with strong results from US peer Tibco Software underpinning gains.

Telecom equipment makers also fared well, given Research In Motions's strong performance, with Ericsson up 3.1 pct while Nokia rose 3.2 pct. The banking sector gained on a news report that Merrill Lynch may receive a 5 bln usd cash injection from Singapore's state-owned investment agency Temasek.

Temasek would be the latest in a number of sovereign funds to have invested in US and European banks hurt by their exposure to the ailing US sub-prime mortgage market.

Credit Agricole, however, underperformed, managing only a 0.2 pct gain against a sector rise of 1.2 pct, after it said higher than previously forecast writedowns and provisions stemming from the ongoing credit crisis will have an additional 1.6 bln eur impact on its 2007 earnings. It said it will also cause its investment banking unit Calyon to post a loss for the year.

UBS also lagged the banking sector, up just 0.3 pct, on reports that it is facing a shareholders revolt over plans for a massive infusion of funds from Singapore and the Middle East to improve its capital ratios. In other news, BMW shares were up 2.8 pct. The German auto maker plans to cut "several thousand" jobs in 2008, primarily in production, a spokesman for the company said, partially confirming an earlier report.

Shares in Fast Search & Transfer surged 18.4 pct after major shareholder Orkla announced plans to shake-up the firm's board and replace the chairman with a former chief executive of Aker Kvaerner and Statoil. Carrefour added 1.4 pct even as it denied a report in Les Echos that it was considering the sale of its ED and Dia discount chains in an operation that would replace plans to sell as much as 20 pct of Carrefour Property to investors.

Carrefour said "a management team is currently being put together" for the new real estate unit, Carrefour Property, which it described as a "not just a financial operation but the creation of a new business activity." In another property deal, Allianz shares were up 2.2 pct after the insurance giant said it sold a number of German commercial properties for some 1.7 bln eur, which analysts said should moderately raise 2008 earnings.

Jeronimo Martins SGPS climbed 3.4 pct after it said it has bought the Plus Discount stores in Portugal and Poland from Tengelmann Warenhandelsgesellschaft KG for about 320 mln eur. The news more than made up for a bearish note from Goldman Sachs which initiated the group with a 'sell' recommendation.

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Asian stocks end higher as investors seek bargains; Singapore, HK lead

The Straits Times Index closed up 1.2 pct at 3,398.10. The Hang Seng Index closed up 2.3 pct at 27,626.92, and the Shanghai Composite rose 1.2 pct at 5,101.78 as investors shrugged off an interest rate hike in China.

The People's Bank of China on Thursday raised its benchmark one-year lending rate by 18 basis points to 7.47 pct and its one-year deposit rate by 27 basis points to 4.14 pct. The increase, the sixth this year, takes effect today and is aimed at cooling the economy and reining in inflation.

"The rate increase is quite mild and it has been expected already, so the market is not overly concerned about it," said Peter Lai, a director at DBS Vickers in Hong Kong. Most analysts were expecting China to raise its key lending rate by as much as 27 basis points.

In Tokyo, Nikkei closed up 1.5 pct at 15,257 and the Topix added 0.8 pct to 1,469.20. Australia's S&P/ASX 200 index closed up 1.1 pct at 6,247.0 and the All Ordinaries rose 1 pct to 6,309.4. South Korea's KOSPI closed up 1.8 pct at the day's high of 1,878.32. The Taiwan weighted index closed up 1.1 pct at 7,941.44, and the Manila composite index rose 1.2 pct to 3,532.98. Malaysia's Kuala Lumpur Composite Index ended up 1.2 pct at 1,403.56.

Banking on gains
Among individual stocks, ANZ ended up 2.1 pct at 27.40 aud, National Australia Bank gained 3.7 pct to 37.81 aud, Westpac added 0.8 pct to 27.53 aud while Commonwealth Bank slipped 1.0 cent to 57.77 aud.
Leading investment bank Macquarie Group rebounded 4 pct to 76.09 aud after coming under selling pressure for most of the week.

Miners also made solid advances with BHP Billiton gaining 0.4 pct to 39.65 aud, Rio Tinto adding 0.4 pct to 128.55 aud and base metals miner Zinifex jumping 4.6 pct to 12.53 aud. Steel, precision equipment and rubber product sectors rose in Tokyo, while financial and shipping issues were weaker.

Nippon Steel finished up 2.5 pct to 646 yen. Camera-maker Nikon climbed 4.3 pct to 4,090 yen. Bridgestone Corp was up 2.7 pct at 2,015 yen. Mitsubishi UFJ Financial ended down 1.2 pct at 1.041 yen. Toshiba Corp advanced 2.5 pct to 837 yen after Sharp Corp said it is studying an alliance with Toshiba in the field of LCD panels. Sharp rose 2.9 pct to 1,956 yen.

Hitachi Ltd rallied 3.6 pct to 805 yen after it said it is taking steps to turn around its hard-disk drive business but has not decided yet whether to sell it. Canon Inc fell 2.2 pct to 5,240 yen. The Nikkei daily reported earlier that Canon is expected to post record net profit of 488 bln yen in 2007, up 7 pct from a year earlier on strong sales of digital cameras and copiers.

The net profit projection is below the previous estimate of 500 bln yen, dampening investor sentiment. In Hong Kong, Property stocks were higher on expectations of strong real estate demand. Cheung Kong (Holdings), Hong Kong billionaire Li Ka-shing's flagship property company, gained 4.5 pct at 140.60 hkd.

Sun Hung Kai Properties, the city's biggest developer, rose 4.2 pct to 160.20 hkd. Hang Lung Properties advanced 1.8 pct to 33.60 hkd, and Henderson Land added 2.5 pct to 70.55.

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Metals - Copper up for 3rd day as players scale back bets on price falls 

Copper continued higher for a third day as traders with short positions or bets on price falls continued to scale back their bets, and as a stronger tone in global equities lent support. European shares opened up today following a late year-end rally on Wall Street that has helped reassure traders worried that a slowdown in US economic growth might crimp metals demand.

"Stronger equities and the run up in momentum in copper suggests there may be more room on the upside, but overall we expect volatile trading over the next few trading sessions," said BaseMetals.com analyst William Adams.

He added that longer term, the weak metals outlook remains in place, and that "the metals will have a lot more work to do on the upside if they are to turn their recent down trends around". At 11.40 am, LME copper for 3-month delivery was up at 6,689 usd a tonne against 6,530 usd at the close yesterday, when it added another 0.5 pct onto Wednesday 2 pct gain.

Over in Shanghai, data showed stocks fell by 686 tonnes in the week to Thursday, extending a month-long decline that has pushed overall stocks down more than 50 pct. The data helped Shanghai copper close up by its 4 pct daily limit for a second day running, and drove LME copper up amid speculation Chinese demand is holding up well.

On the downside, however, players are contending with news out yesterday that China, the world's biggest copper user, has raised interest rates for a sixth time this year.

"We think these measures, along with the steep rise in banking reserve requirements, will eventually slow the Chinese economy down since the hikes are now occurring from elevated base levels," said MF Global analyst Ed Meir.

Elsewhere, further increases in LME copper stocks, which have almost doubled since July, were capping the upside in copper. The LME said in a daily report copper stocks rose by 2,650 tonnes to total 198,325 tonnes.

In other metals, lead was up at 2,615 usd a tonne against 2,605 usd, still benefiting from reports of production stoppages in China, while zinc rose to 2,380 usd a tonne against 2,320 usd. Nickel was up at 27,000 usd a tonne against 26,350 usd, tin rose to 16,300 usd against 16,200 usd while aluminium was up at 2,417 usd against 2,406 usd.

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