US & World Daily Markets Financial Briefing 22-05-2006

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U.S. stocks open lower: NYSE in $10.2B bid for Euronext

NEW YORK - U.S. stocks lost ground in early trading Monday as energy and metals shares came under pressure with a fresh decline in oil and other commodity prices, in a market that remains nervous about the outlook for interest rates and economic growth.
   
The Dow Jones Industrial Average was down 22 points at 11,122. The Nasdaq Composite Index fell 12 points to 2,182 while the S&P 500 Index dropped 3.5 points to 1,264.
   
"The major averages are clearly in a corrective phase," said Marc Pado, U.S. market strategist at Cantor Fitzgerald. "Not only has price taken out some technical support levels, but the group action confirms the palpable caution we have been seeing in investor sentiment."
   
Technology is also a big loser. "Money is running away from growth, and that speaks volumes as to what investors feel about the prospects for future economic growth and corporate profits," Pado added.

The Philadelphia Semiconductor Index dropped more than 9 points. The Morgan Stanley High Tech 35 Index and the Goldman Sachs Hardware Index both lost more than 1 point. Last week, stocks lost ground and the Dow industrials posted its biggest one-day point drop in more than three years.
   
Stock exchanges in play
   
Shares in NYSE Group Inc. fell 1.4% to $63.60 after the operator of the New York Stock Exchange unveiled a $10.2 billion proposal to buy Euronext. The deal sparked a battle with Germany Deutsche Boerse for control of the pan-European exchange operator.
   
The battle for Euronext is heating up just as the race to win control of the London Stock Exchange appears close to being settled. On Friday, Nasdaq Stock Market Inc. raised its stake in the LSE to 25%.
   
Analysts at Citigroup said the stake could allow Nasdaq to block major corporate events at the LSE, such as a takeover attempt by another exchange. Nasdaq shares were off 3.6% at $31.84.
   
Other merger and acquisition deals
   
Wal-Mart Stores Inc. said it's selling its South Korean unit to local retailer Shinsegae for $882 million. Shinsegae, Korea's largest discount retailer, operates 79 E-Mart discount stores. Wal-Mart's 16 South Korean stores will continue to operate under the E-Mart name. Wal-Mart's stock was unchanged at $47.32.
   
Germany's BASF raised its all-cash offer for materials-sciences company Engelhard Corp.
   
A group of private investors said they have succeeded in a $9.7 billion bid for Dutch publishing company VNU . In addition to its Nielsen market research brand, VNU publishes Billboard and Hollywood Reporter magazines.
   
Elsewhere, shares of Yahoo Inc. rose 2.3% to $30.20 after an article in Barron's. The weekly financial magazine said the lackluster performance of Yahoo's stock, especially since rival Google Inc. came to market, offers a "great opportunity to buy a powerful money spinner." Barron's said Yahoo revenue is climbing 30% to 40% a year, while cash flow, by most analyst estimates, is forecast to jump 60% to $2.5 billion.
   
Shares of Starbucks Corp. rose 21 cents to $36.54 after UBS upgraded the coffee chain to buy from neutral, citing accelerating same-store sales momentum and better-than-expected cost controls.

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Dollar at two-week high vs. yen, flat against euro

NEW YORK - The dollar extended last week's gains against the yen Monday, touching a more than two-week high, but was little changed against other major foreign-exchange counterparts after continued setbacks in gold and commodity markets prompted traders to trim bearish dollar positions.
   
The euro was virtually unchanged at $1.2765. Against the yen, the greenback rose 0.7% to 112.43. The British pound was at $1.8755, down from $1.8786. The dollar was at 1.2145 Swiss francs from 1.216 francs late Friday.
   
The greenback staged a modest recovery last week following a sharp correction in commodity prices and as hawkish comments from Federal Reserve officials fueled expectations the interest-rate differential continued to benefit the dollar.
   
With little economic data to guide the price action until Wednesday, "trading is likely to be range bound as the market digests the massive euro/dollar rally over the past 8 weeks," said Boris Schlossberg, senior currency strategist at FXCM.
   
Currency traders will scrutinize readings on durable goods orders and new home sales, due out later this week, for further clues on the U.S. economy and interest-rate outlook, according to CMC's Wilbraham.
   
"If U.S. housing data proves resilient and if U.S. GDP figures confirm the market's lofty expectation of upward revisions, the dollar counter rally may have more fuel left," said Schlossberg in a note. "But for now it remains just that - a counter-trend rally in an overall dollar bearish market."
   
Yen hurt by interest-rate outlook
   
The yen remained under pressure after Bank of Japan Governor Toshihiko Fukui dampened expectations the central bank will start raising interest rates in June.
   
The BOJ on Friday kept interest rates unchanged at 0%. At a post-policy meeting press conference, Fukui said that "we did not specifically discuss the end to zero interest rates at this policy meeting," and that "We have no preset idea on the specific timing for exiting zero interest rates." He also reiterated that rates would be kept low after the central bank ended its zero-rate stance.
   
In European trading, the euro found modest support after stronger-than-expected data showed the euro-zone external trade balance swung to a surplus of 1.2 billion euros in March. In February, the euro zone showed a 3.1 billion-euro deficit.
   
Commodity currencies suffer
   
Currencies that are particularly linked to commodity prices, such as the Australian dollar and the New Zealand dollar, came under particular pressure as commodity prices declined.
   
The Australian dollar last traded down 0.9% at $0.7498, while the New Zealand dollar was down 0.7% at $0.6165.

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The European Markets at 12.00 BST

London - Leading shares were well above early lows at midday, as consolidation hopes in the banking sector and safe-haven buying across utilities helped the FTSE recover from another triple-digit battering amid continued selling across the miners, dealers said.
   
By 12.05 pm, the FTSE 100 index was down 36.8 points at 5,620.6, well above an early six-month low of 5,538.9, while the FTSE 250 was down 144.5 points at 9,048, having earlier slipped below the 9,000 level.

Frankfurt - Shares were lower in midday trade after losses across Asia, with US futures indicating a fall on Wall Street, and with Deutsche Boerse down on fears of a bidding war for Euronext after the New York Stock Exchange announced an offer this morning, dealers said.
   
At 11.34 am, the DAX 30 index was 48.91 points or 0.86 pct lower at 5,623.37, having moved between 5,569.10 and 5,653.85 so far this session.
   
The MDAX was at 7,988.75, down 193.50 points or 2.36 pct, while the TecDAX was at 643.94, down 12.77 points or 1.94 pct.

Paris - Shares were down in line with the other European markets, as investors continued to take profits against ongoing concerns over the effets of possible interest rate hikes, dealers said.
   
At 1.01 pm, the CAC-40 index was 40.55 points or 0.82 pct lower at 4,903.99, off a morning low of 4,847.80, on heavy volume of 2.83 bln eur.

Amsterdam - Share prices were broadly lower in midday trade pulled down by negative US futures pointing to a lower Wall Street open, dealers said.
   
At 12.40 pm, the AEX index was down 4.60 points or 1.05 pct at 434.38, after opening at 434.75 and hitting a low of 430.54.

Madrid - Share prices were lower in moderate midday trading tracking the rest of Europe and US futures, with only selected few stocks enjoying gains, dealers said.    
   
At 11.47 am, the IBEX-35 index dropped 113.4 points to 11,157.4, after trading in a range of 11,074-11,248, on moderate turnover of 1.5 bln eur.
   
Equities opened lower as interest rate concerns weighed on trader sentiment and ahead of important US data due later this week.

Milan - Share prices were down sharply in midday trade, tracking the international trend, with Fiat leading the way, and hit by a number of shares going ex-dividend, dealers said.
   
At 12.37 pm, the S&P/Mib index was down 1.85 pct at 35,966 points, off an earlier low of 35,496, and the broader Mibtel index was off 1.87 pct at 27,520.

Stockholm - Shares remained in negative territory in midday trade, off a touch from morning lows, but with oil and mining firms still showing sharp losses, dealers said.
   
At 12.25 pm, the OMX Stockholm index was down 2.33 pct at 299.84, while the OMX Stockholm 30 index was down 1.72 pct at 935.18. Turnover was 18.25 bln skr.

Helsinki - Helsinki shares were lower in midday trade, with industrial and steel issues heavily hit by renewed profit taking and with Nokia outperforming the benchmark index, dealers said.
   
At 12.27 pm, the OMX Helsinki 25 was 2.59 pct lower at 2,371.01, while the OMX Helsinki was 1.82 weaker at 8,496.23.
   
Industrial stocks were sharply lower as investors continued to exit these issues, dealers said.

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Asian shares close mostly down, Tokyo sharply lower on US rate worries

HONG KONG - Share prices across the Asia-Pacific region ended mostly lower with Japan's benchmark Nikkei index down more than 290 points, with investors worried about increases in US interest rates, dealers said.
   
The blue-chip Nikkei 225 Stock Average closed 297.58 points or 1.8 pct lower at 15,857.87, off a low of 15,837.26.
   
The broader TOPIX index of all first-section issues closed 22.71 points or 1.4 pct lower at 1,615.86, after touching a low of 1,614.92.
   
The market had opened higher, in tandem with a rally in US stocks on Friday, but plunged into negative territory in the afternoon.
   
"The market tumbled substantially in the afternoon," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.
   
"Because the trend is so weak, after a sell-off in futures, there was no buying-back," he added.
   
Akino said that behind this bearish tone were fears about further increases in interest rates hikes in US, which would hurt the US economy and so hurt Japanese companies.
   
But he said the yen's fall against the dollar provided a degree of support to stock prices.
   
"If the dollar hadn't risen against the yen as it did, the market would have dipped much further," Akino said.
   
Share prices in Australia finished down as investors sold resource stocks following sharp falls on commodity markets on Friday, sparked by speculators unwinding positions, dealers said.
   
They said the subdued investor sentiment led to selling in the wider market which was added to by falling sharemarkets in Asia.
   
Dealers said index leading resources BHP Billiton and Rio Tinto led the resources sector lower, and investors dumped other base metal stocks.
   
The S&P/ASX 200 dropped 70.1 points or 1.37 pct to close at 5,030.8 and is now off 6.95 pct from the May 10 record high of 5,406.7 prior to the sell-off in commodity markets.
   
In Hong Kong, share prices were trading sharply lower in the afternoon led by Chinese metals and oil stocks following a steep drop in commodity prices on Friday, dealers said.
  
They said the benchmark index was also pressured by falls in heavyweights HSBC and China Mobile.
   
At 3:29 pm, the Hang Seng Index was down 405.00 points or 2.48 pct at 15,908.36.
   
In mainland China, A-shares in Shanghai and Shenzhen closed mixed with investors cautious as the key index approaches a two-year high, pressuring heavyweight oil refiners and metals stocks, dealers said.
   
The Shanghai A-share Index lost 1.69 points to 1,741.24 on turnover of 43.45 bln yuan and the Shenzhen A-share Index was up 5.29 points at 430.76 on turnover of 23.15 bln yuan.
   
Share prices in Seoul ended sharply lower, with foreign investors continuing to sell amid growing concerns about the prospects of the global economy, dealers said.
   
Shinsegae's unexpected announcement of a deal to buy Wal-Mart Korea failed to boost sentiment, with the composite index falling back below 1,340 points.
   
Investors were also cautious ahead of the national election. The head of the nation's largest opposition party was attacked by a knife-wielding man during a campaign rally over the weekend, they added.
   
The KOSPI index closed down 33.70 points or 2.46 pct at 1,338.59.

Asian Bourse Round-Up

For a full list of closing figures, click here

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Crude-oil futures fell to their lowest levels in seven weeks, continuing a trend from last week when reports showed that inventories climbed for a third week. Crude for June delivery was last down 84 cents at $67.69 a barrel.
   
Gold futures fell in early trading, extending a prior week decline. Gold for June delivery was last down $6.20 at $651.50 an ounce.
   
On the bond market, long-term Treasury prices rose, pressuring yields, ahead of speeches by several Federal Reserve officials and an announcement by the Treasury about upcoming auctions. The benchmark 10-year note was up 10/32 at 100 26/32, with its yield at 5.3%. 

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