US & World Daily Markets Financial Briefing 22-05-2007

The world's most trusted name in professional trader education. Click Here

Stocks flat in directionless trading

NEW YORK - Wall Street traded mostly flat Tuesday as the latest round of takeover activity offered some support to stocks but wasn't enough of a catalyst to push the markets higher.
   
Investors didn't get the direction they wanted despite further takeovers that signaled corporate executives remain optimistic about the state of the economy. The latest pitch came late Monday from billionaire Kirk Kerkorian, who plans to start talks to buy two Las Vegas properties from casino operator MGM Mirage Inc.
   
In addition to mergers and acquisitions, Wall Street also analyzed its last batch of first-quarter results. Office supply chain Staples Inc. said profit rose 12 percent, but sales came in lighter than expected.
   
Bereft of major economic reports during the session, Wall Street will also closely monitor talks between U.S. and Chinese government officials about trade and foreign exchange policy. Chinese stocks rose to a fresh record high for the second day in a row on Tuesday, as investors there were encouraged by expectations for a stronger yuan and robust housing demand.
   
In the first hour of trading, the Dow Jones industrials rose 8.12, or 0.06 percent, to 13,551.00. Broader stock indexes were narrowly mixed. The Standard & Poor's 500 fell 0.03, or less than 0.01 percent, to 1,525.07. The index, considered by market professionals as the best indicator of stock performance, briefly passed its record close of 1,527.46 on Monday.
   
The Nasdaq composite index, which has lagged the other major indexes in recovery from Wall Street's prolonged slump early in the decade, rose 1.41, or 0.05 percent, to 2,580.20.
   
Bonds were flat, with the yield on the benchmark 10-year Treasury note at 4.79 percent. The Russell 2000 index of smaller companies was up 0.36, or 0.04 percent, at 834.01. Overseas, Britain's FTSE 100 was down 0.09 percent, Germany's DAX index was up 0.63 percent, and France's CAC-40 was rose 0.21 percent.
     
The spike in Chinese stock markets coincided with high-level talks between the U.S. and China aimed at lessening economic tensions. Leaders began meeting on Monday for two days of talks to ease conflicts in bilateral trade and an under-valued yuan.
   
Though Chinese stocks are now at highs, it was a plunge in the Shanghai market in February that provoked worries worldwide about the global economy and valuation of share prices. Investors remain nervous that global markets might have gotten ahead of themselves, and are poised for a pull back similar to what happened earlier this year.
   
Oil prices backed off its recent run, with a barrel of light sweet crude falling 32 cents to $65.95 on the New York Mercantile Exchange. Prices have been driven higher on continued concerns that U.S. refiners are not producing enough gasoline to meet peak summer demand.

Stocks in focus
   
In corporate news, MGM Mirage surged $16.56, or 26.3 percent, to $79.51. Kerkorian said he expects to pursue "financial restructuring transactions for the casino. His investment vehicle, Tracinda Corp., owns a 56 percent stake in MGM Mirage.
   
Chevron Corp., the world's second-largest oil company, said it will sell its 12 percent stake in power producer Dynegy Inc. The move is part of Chevron's push to shed non-core operations, and sent its shares up 16 cents to $82.99. Dynegy fell 39 cents, or 3.9 percent, to $9.79.
   
Fremont General Corp. agreed to sell its commercial real estate lending business, and some of its loan portfolio, for $1.9 billion to Financial Inc. The Santa Monica-based company has been dismantling its business because of troubles in the subprime mortgage sector. Shares of Fremont rose $3.12, or 44 percent, to $10.23.
   
Staples fell $1.37, or 5.3 percent, to $24.30 after the world's largest office products retailer reported light first quarter sales, and nudged its profit guidance lower.

VantagePoint's market forecasts are nearly 80% accurate.  Take a look at actual  forecasts and see the difference they can make in your trading. Click here to see two recent forecasts now.

Euro dips vs dollar on disappointment German ZEW was not stronger

LONDON - The euro dipped against the dollar on disappointment that today's ZEW survey of German economic expectations was not even stronger.
   
The ZEW research institute said its economic expectations index rose to +24.0 points in May from +16.5 points in April. This was well ahead of the consensus of analysts polled by Thomson Financial News for a more moderate increase to +21.0 points but in the event was disappointing because of talk of an even better reading ahead of the release.
   
Matthew Foster-Smith at Thomson IFR Markets said hopes had been "elevated" ahead of the data as rumours did the rounds of a reading around 30. He added that speculators that had been long of euros in anticipation of a boost from an upbeat ZEW reading have been unwinding those long trades.   
   
Analysts also pointed to the fact that the news will do nothing to alter interest rate expectations in the market, which is already priced in for further interest rate rises.
       
Elsewhere, the pound was steady against the dollar but rose against the euro as market players began to look ahead to tomorrow's release of the minutes to the Bank of England's rate-setting meeting earlier this month.
   
At the meeting, interest rates were raised to a six-year high of 5.50 pct and the market will be keeping a close eye on whether the Monetary Policy Committee's arch dove David Blanchflower also opted for a hike and whether there
were any votes for a bigger half point move.
   
Meanwhile, the yen remained little changed after the Bank of Japan's monetary policy meeting minutes showed members shared optimistic views on the Japanese economy and put the risks to inflation towards the upside, though they gave away little on the outlook for interest rates.
   
"With the BoJ providing no decisive info with regards to near-term policy, the yen should stay broadly pressured as risk sentiment stays intact," analysts at BNP Paribas said.

Inflation picked up in September in Europe as both areas show fragile economic growth. Just as in the U.S., rising energy prices are to blame. Read free, daily market reports available only at CMS Forex and open your free demo trading account today. Click here

Euroshares higher midday; Dow seen flat, telcos gain, offset weak pharma sector

LONDON - Euroshares ticked higher midday but remained within a tight range ahead of a flat opening to Wall Street with gains in the European telecom sector on consolidation news while a strong reading of the latest ZEW indicator helped offset a weak pharmas, dealers said.
   
At 11.55 am, the STOXX 50 was up 2.23 points at 3,908.68, with the broader STOXX 600 up 0.48 at 393.84.
   
In the telecoms sector, news of yesterday's 24.8 bln usd Alltel deal spurred some short trades among heavyweight telecom stocks. In reaction, Deutsche Telekom rose 2.8 pct to 12.98 and France Telecom moved up 1.6 to 22.15.
   
In reaction, one Frankfurt-based trader pointed to a report in the Financial Times, which said the 24.8 bln usd buyout would imply Deutsche Telekom's US T-mobile unit would be worth around double the amount, as it has more than twice the market share in the US.
   
Remaining in the sector, Tele2 gained 4.48 pct after its stock was upgraded to 'overweight' from 'equal-weight' at Morgan Stanley. The telecommunications company successfully performed its restructuring efforts to focus on its infrastructure-based assets, the broker said.
   
In telephone directory companies, Yell's 2.25 pct rise gave a push to the publishing sector, lifting Italian peer Seat Pagine Giall up 2.87 pct and boosting TF1 2.98 pct, ahead of results. Yell gained after the group said rapid growth in its online businesses fuelled a rise in its full-year pretax profit.
   
Pharmaceuticals were among losers this morning with GlaxoSmithKline sliding 3.4 pct to 1,343 after a downgrade to 'hold' from 'buy' at ABN Amro following news yesterday US research, to be published this week, suggests the group's diabetes drug, Avandia, may increase the risk of heart attacks.
   
Glaxo said in a statement it "strongly disagrees" with the conclusions reached in the article. ABN Amro broker cut EPS forecasts for 2007-11 by around 5 pct, and lowered the price target on the stock to 1,460. Cazenove also lowered its recommendation to 'in-line' from 'outperform' and lowered its EPS estimates.
   
Novartis fell 1.01 pct to 68.3 after the Swiss pharma group said it is reviewing the potential impact on 2007 results of Teva Pharmaceutical Industries's battle to launch a generic version of Novartis blood pressure drug Lotrel, traders said.
       
Spanish construction group Acciona also fell 2 pct to 185 on news its planned sale of its airport services division could be held up by restrictions on the transfer of concessions signed with Spanish airport authority Aena, Cinco Dias reported, citing sector regulation.
   
Back among the gainers, the banking sector stocks were making up yesterday's losses amid continuing M&A talk in the industry.
   
Deutsche Bank upgraded Capitalia to 'buy' from 'hold' and lifted the target to 7.50 eur from 7.00 eur. he upgrade follows the announced merger of Capitalia and Unicredito last night, and Deutsche Bank anticipates pre-tax synergy effects of around 1.2 bln eur, which implies further upside potential for the stock in Capitalia, it said. The share gained 0.93 pct this morning.
   
Elsewhere, Societe Generale ticked up 2.49 pct at 148.99 after Unicredito's chief executive told an Italian newspaper its planned merger with Capitalia does not necessarily mean it will not pursue SocGen as well.
   
Shares in Alliance & Leicester rose 3.84 pct after being started as 'buy' at UBS with a target of 1,440 pence, with the broker believing the company's strong brand, extensive distribution base and 3.5 pct UK market share make it an attractive asset.
      
Meanwhile, Areva and EADS were both outperforming, up 1.60 pct at 761.99 and 0.81 pct at 23.69 respectively on speculation the new French government may sell shares it holds in both companies.
   
Over on the technology sector, Infineon Technologies lost 0.7 pct to 10.94 after Exane BNP Paribas cut its rating in the chip maker to 'underperform' from 'neutral' and cut its target to 10.3 eur on weaker DRAM prices.
     
Finally food producer Numico dipped 3 pct to 36.66 after Morgan Stanley cut its rating to 'equalweight' and cut its sector stance to 'cautious'. Peer Groupe Danone eased 0.7 pct to 117.35 and Nestle fell 0.1 pct to 471.0.

Get your free futures starter kit metals, energies, grains, currencies, stock indexes, tropical softs, plus more! Click Here.

Asian shares close mixed; China stocks rise on fund inflows

HONG KONG - Shares across the Asia-Pacific region closed mixed, with the China markets continuing to ignore the government's tightening measures and finishing higher on fund inflows.
   
Tokyo shares closed broadly firmer, with gains led by active buying in the banking and technology sectors and the softening of the yen helping exporters. The Nikkei 225 Stock Average closed 123.18 points or 0.7 pct higher at 17,680.05, off a high of 17,730.84. The TOPIX index of all first-section issues gained 20.87 points or 1.22 pct at 1,731.54, off a high of 1,734.70.
   
Ryuta Otsuka, a strategist at Toyo Securities, said prices had been supported by the shares of leading banking groups and by technology stocks such Sony. Domestic-demand-linked shares such as property stocks were also higher, he said. "Market uncertainty about bank earnings dissipated after some banking groups released their earnings reports. Even banks that have not reported their earnings were higher," Otsuka said.
   
Australian shares ended down as investors locked in profits following yesterday's run into record territory. Selling was focused on the banks while resource and energy stocks gained after metal and oil prices rose in overnight trading, cushioning the market from a greater retreat. The S&P/ASX 200 closed down 30.2 points or 0.47 pct at 6,338.8, falling from yesterday's record finish of 6,369.0.
   
Hong Kong shares were softer in afternoon trade as caution ahead of a top-level US-China strategic economic dialogue in Washington today prompted investors to step back and consolidate recent gains. At 3.20 pm the Hang Seng Index had fallen 72.18 points or 0.34 pct at 20,855.57.
   
In mainland China, A-shares in Shanghai and Shenzhen closed higher on continued fund inflows due partly to a strong yuan, with property developers and energy firms in demand. The Shanghai A-share Index was up 43.42 points or 1.02 pct to 4,306.12 and the Shenzhen A-share Index was up 18.98 points or 1.54 pct at 1,252.04, a record high.
   
Seoul shares closed higher, with foreign investors actively picking up shares, particularly large cap IT stocks, effectively offsetting heavy program selling and pushing the main index to a fresh record. Investors were also relieved that key markets are not showing much reaction to China's move last week to hike interest rates further and widen the yuan's trading band.
   
The KOSPI index closed up 14.68 points or 0.90 pct at a record 1,642.88. The low for the day was 1,627.01 and the high was 1,643.11.

Trade with RCG fxtrader ™, the platform offering instant access to 12 major FX trading pairs with low spreads (2 pips EURUSD, USDJPY) and global news from 3 major sources.  Trade with a registered and regulated company in business for 80 years. Smart money trades here. Get your FREE Trial Today!

Gold steady as high oil prices lend support

LONDON - Gold held steady, supported by firm crude oil prices and a relatively weak US currency. Elevated oil prices, which are currently hovering close to yesterday's eight-month high, prompted investors to hedge against inflationary pressures.
  
A generally soft dollar, which has been weakening steadily since the start of 2006, also lent support. While the greenback has been rebounding modestly since the start of this month, most expect it will weaken in the future.
   
At 1.43 pm, spot gold edged slightly higher to 663.18 usd per ounce against 663 usd in late New York trades yesterday.
   
"Crude oil, which was neglected as a fundamental driver for gold over several weeks, came to the rescue," said Dresdner Kleinwort analyst Peter Fertig.
   
Gold's relationship with oil has decoupled somewhat in the past few weeks, but traders started to take note as crude prices struck a high of 70.83 usd per barrel yesterday -- about 40 pct higher than mid-January prices. Brent crude oil prices are still around 70 usd.
   
Market players generally expect the gold price to hover at current levels, as there is "no reason for prices to suddenly take off", in the near term, said Meyer at Numis.
   
Analysts at Standard Bank said while it is encouraging gold managed to recover from earlier weakness -- prices dropped as low as 656 usd per ounce yesterday -- the precious metal could "still be subject to pressure as it stays below the 665 usd level, where substantial resistance is expected to cap any
near-term rally".
   
Elsewhere, StreetTRACKS gold shares, the world's biggest gold exchange-traded fund, sold off a large amount of gold over the past week, exaggerating recent weakness, according to reports.
   
In the background, however, an announcement by Novartis' pension fund it plans to invest in precious metals is "bullish", said James Steel, analyst at HSBC. The fund will invest 4 pct of its 11.37 bln usd pension fund in precious metals.
   
In other precious metals, silver edged down to 13.02 usd per ounce from 13.06 usd, platinum was lower at 1,293 usd per ounce versus 1,312 usd and palladium slipped to 371 usd per ounce from 374 usd.

Increase the odds for Forex Trading success with this free online course. Learn to build a solid Forex Trading foundation and discover proven strategies for continued success.  Access this wealth of knowledge here absolutely free.

Online Trading Academy - Learn more to earn more.