US & World Daily Markets Financial Briefing 22-03-2006

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U.S. stocks open mixed; Nasdaq hit by Microsoft

NEW YORK - U.S. stocks opened mixed Wednesday as the technology sector came under pressure after Microsoft said it would delay the launch of its new Vista operating system.
   
The Dow Jones Industrial Average, however, received a boost after component General Motors Corp rallied on news it has sealed a labor deal with its main union.
   
The Dow industrials was last up 27 points at 11,262. The Nasdaq Composite Index fell 6 points to 2,288 while the S&P 500 Index put in a fractional gain, up nearly 1 point to 1,298.16.
   
Stocks in focus
   
General Motors Corp. was the biggest percentage gainer on the Dow, up 2.6% at $22.58, after the carmaker, the United Auto Workers union and bankrupt auto parts maker Delphi Corp. agreed on a plan to buy out 13,000 hourly workers with a maximum of $35,000 payments each.
   
Shares of Microsoft Corp. were down 2.5% at $27.05 in early trading. Late Tuesday the company said the next version of its Windows operating system won't be available to consumers until January, a delay that means the product won't be available in time for the key holiday sales season.
   
As recently as late last month, Microsoft said the software would be available for both consumer and corporate customers in the second half of this year.
   
Other tech stocks that were pulled lower after the news included Intel Corp. which fell 8 cents to $19.69, and Dell Corp. which dipped 24 cents to $30.02.
   
Apple Computer was up 26 cents at $62.07. Merrill Lynch analyst Richard Farmer believes Apple will benefit from "a less competitive market for another holiday season against an aging Windows offering."
   
Morgan Stanley shares edged up 64 cents to $61.05 after its first-quarter earnings handily topped Wall Street expectations, with a 17% jump in net income driven by record revenue at its institutional securities, fixed-income and hedge-fund servicing businesses.
   
The investment bank's results cap what has been a good quarter for the sector, with Goldman Sachs , Lehman Bros. and Bear Stearns all reporting earnings ahead of expectations.
   
Bristol-Myers Squibb was up 12.1% at $25.59 and Sanofi up 9.3% at $47.74 in early trading.
   
The two companies reached an agreement with Apotex Inc. over that company's attempt to market a generic version of the blockbuster blood-thinner Plavix. UBS upgraded Bristol to neutral from reduce, saying the news eliminates the key risk
to owning its shares.

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Dollar mixed against major rivals

NEW YORK - The dollar was higher against the euro, but lost strength against the yen early Wednesday.
   
With no major economic data on the U.S. calendar today, traders looked head to next week's Federal Reserve monetary policy meeting for further hints about the U.S. interest rate outlook.
   
In early New York trading, the dollar was changing hands at 116.84 yen, down 0.3%. The euro was down 0.2% at $1.2091. The British pound last traded down 0.04% at $1.7484, while the dollar was fetching 1.3016 Swiss francs, up 0.2%.
   
The Fed officials will meet on March 27-28, where policy-makers are widely expected to raise overnight interest rates to 4.75%, from 4.5% currently.
   
The dollar staged a broad rally Tuesday, after Federal Reserve Chairman Ben Bernanke's upbeat comments about the U.S. economy and a stronger-than expected core wholesale inflation reading fueled expectations that the Fed will continue to lift interest rates after the March monetary policy meeting.
   
The market is now pricing in a 60% chance of a hike in May versus a 52% chance on Monday. The chance of a quarter-point rate hike sometime between the March and June meetings has increased to 100% from 84%.
   
Euro pressured by disappointing data
   
Earlier in European trading, the euro weakened after a surprising decline in the euro zone's new industrial orders and a ballooning deficit in countries that use the common currency.
   
Industrial orders in the euro zone slumped 5.9% in January from December, against expectations of a month-on-month rise.
   
In addition, the trade deficit widened to 10.8 billion euros in January, far ahead of the 1.2 billion-euro deficit that was expected.
   
However, December's deficit was revised lower to 700 million euros from 900 million euros, said the Eurostat statistics agency.
   
Yen
   
The yen moved higher against the dollar in part on heated speculation of a further revaluation of the Chinese yuan and expectation that the Bank of Japan will start raising interest rates this year, said Naomi Fink, a currency Strategist at BNP Paribas.
   
Overnight, Bank of Japan Governor Toshihiko Fukui reiterated his commitment to keeping interest rates near zero for a while in an address to parliament.
   
"We have had the impression that after the ending of the quantitative easing framework (by the central bank earlier this month), the markets correctly understood that zero interest rates will continue for the time being," Fukui told an Upper House financial committee.
   
He added the central bank has no immediate plans to reduce the amount of government bonds it purchases each month, and that the bond-buying program will continue even when current account deposits fall to a normal level.

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The European Markets at 12.00 GMT

London - Share prices were slightly down at midday as gains in Fiat and Mediaset were offset by losses among blue chips like Unicredito, which unveils its results later today, dealers said.

Frankfurt - Shares were slightly lower in midday trade as Metro and TUI slid after the pair reported full-year results and as their 2006 outlooks disappointed investors, though losses were limited as automakers posted solid gains, dealers said.
   
At 11.56 pm, the DAX 30 index was 5.80 points or 0.10 pct lower at 5,906.06, having moved between 5,859.52 and 5,913.23 so far this session.

Paris - Shares were higher midday as sharp gains by Sanofi-Aventis pulled the CAC-40 index up to a fresh four-and-a-half-year high, indicating an apparent end to the market consolidation that began on Monday, dealers said.
   
At 12.38 pm, the CAC-40 index was 23.20 points or 0.44 pct higher at 5,171.40 -- off a high of 5179.51 -- on volume of 3.50 bln eur. Among CAC-40 stocks, 27 were lower and 13 higher.

Madrid - Share prices were flat in moderate midday trade as heavy gains in Banco Popular and other medium-sized banks offset losses in blue chips such as BBVA and media issues like Antena 3, dealers said.
   
At 11.56 am, the IBEX-35 index was down 7.1 points at 11,926.3, after trading in a range of 11,860-11,930, on turnover of 1.1 bln eur.

Amsterdam - Shares were mostly lower, tracking lower US futures which pointed to a lower opening of Wall Street, while local issue Athlon soared more than 15 pct after the company accepted a takeover bid, dealers said.
   
At 12.00 pm, The AEX was down 0.36 points or 0.08 pct to 466.72, having traded in the 464.72-467.17 range since market open.

Milan - Share prices were slightly down at midday as gains in Fiat and Mediaset were offset by losses among blue chips like Unicredito, which unveils its results later today, dealers said.
   
At 12.40 pm, the Mibtel index was down 0.20 pct at 29,656 points and the S&P/Mib was off 0.24 pct at 38,509.

Stockholm - Shares were marginally higher in midday trade underpinned by Ericsson but with the banks weaker, and engineering stocks mixed amid indications of a weak start on Wall Street today, brokers said.
   
At 11.50 am, the OMX was up 0.26 pct at 334.18 points, and the OMX Stockholm up 0.32 pct at 1,048.47. Turnover was 11.114 bln skr.

Helsinki - Helsinki shares were lower midday following a weak session on Wall Street overnight, led by Nokia and Stora Enso, the latter trading ex-dividend, dealers said.
   
At 12.08 pm, the OMX Helsinki 25 index was 0.84 pct weaker at 2,718.36. The OMX Helsinki index was down 0.80 pct at 9,380.14, while the Helsinki CAP portfolio index was 0.68 pct lower at 5,050.77.

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Asia shares close mixed, Tokyo lower on profit-taking, softer Wall St

HONG KONG - Share prices across the Asia-Pacific region ended mixed, with Japan lower as investors opted to pocket gains after the main Nikkei index hit a six-week high on Monday, dealers said.
   
They added that sentiment was also hurt by a pullback in US markets overnight. Financial markets in Japan were closed yesterday for a public holiday.
   
The blue-chip Nikkei 225 Stock Average ended the day down 129.32 points or 0.8 pct at 16,495.48, after touching a low of 16,477.26.
   
The broader-based TOPIX index of all first-section issues shed 1.87 points or 0.1 pct at 1,686.35, off a low of 1,680.64.
   
"After share prices surged two trading days in a row, market participants chose to lock-in profits. A softer New York market also helped accelerate the move," said Toshihiko Matsuno, senior strategist at SMBC Friend Securities.
   
In Australia, share prices closed at a new record high, with the key S&P/ASX 200 finishing above the psychologically important 5,000 points level for the second time this week, dealers said.
   
They said the local market began the trading session in the negative following losses on Wall Street overnight, but investor sentiment lifted to propel the market further into record territory.
   
Dealers said the nation's top bank by assets, National Australia Bank, led the banking sector on rumors the bank may announce a share buyback at its next financial results release.
   
The S&P/ASX 200 jumped 22.1 points or 0.44 pct to close at a fresh record high of 5,013.4, surpassing Monday's record close of 5,000.4.
   
Share prices in Hong Kong were trading lower in the afternoon, tracking Wall Street's falls, dealers said.
   
At 3:30 pm, the Hang Seng Index was down 251.6 points or 1.58 pct at 15,761.15.
   
In mainland China, A-shares in Shanghai and Shenzhen closed higher on follow-through interest after recent gains with real estate developers and metal stocks in demand, dealers said.
   
The Shanghai A-share Index rose 6.45 points to 1,359.81 on turnover of 10.82 bln yuan and the Shenzhen A-share Index was up 2.90 points at 326.67 on turnover of 7.19 bln yuan.
   
Share prices in Seoul finished sharply lower with the key KOSPI index threatening 1,300 points as Samsung Electronics and Hynix tumbled more than three pct on massive foreign investor selling, hit by a delay in Microsoft Corp's Vista, dealers said.
   
Sentiment was initially undermined by Wall Street's overnight declines, they added.
   
Kookmin Bank came in focus, rallying 1.6 pct, on a report of its successful bid to take a controlling stake in Korea Exchange Bank.
   
The KOSPI index closed down 26.82 points or 2.01 pct at 1,309.83.

Asian Bourse Round-Up

For a full list of closing figures, click here

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The 10-year benchmark Treasury note last was up 2/32 at 98-11/32 with a yield of 4.710%, little changed from its Tuesday close at 4.717%.
   
Overall analysts expect the 10-year yield to trend higher to keep pace with the expected increases in the Fed funds rate.
   
Restrained selling of the 2-year note put its yield at 4.72%, keeping it slightly above the 10-year yield and leaving the yield curve upside down. Analysts think inversion is likely to persist until the Federal Reserve stops hiking rates.
   
Silver futures were edging back from 22-year highs hit the day before after proposed silver exchange-traded fund came closer to a launch. Silver for May delivery was last trading down 5.5 cents at $10.51 an ounce.
   
Gold futures fell $3.30 to $549.90 an ounce, extending prior-day losses made on the strength in the U.S. dollar.
   
Crude futures were down 19 cents at $62.15a barrel ahead of the latest inventory tallies.

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