US & World Daily Markets Financial Briefing 23-01-2007

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Dow flat, Nasdaq down in early trading

NEW YORK - Wall Street was narrowly mixed Tuesday as investors weighed a dim fourth-quarter outlook from telecommunications equipment maker Alcatel-Lucent against upbeat earnings results from names like Bank of America Corp. and Johnson & Johnson Inc.
   
Alcatel-Lucent warned that a weak performance in the fourth quarter will lead to full-year 2006 revenue coming in at a level similar to its 2005 performance. Rival Tellabs Inc. later said its quarterly profit plunged as consolidation among telecom carriers dented sales.

The tech sector has been hurt by a flood of disappointing outlooks from bellwethers like Intel Corp., Apple Inc., and International Business Machines Corp.
   
This offset more upbeat results released before the opening bell, which also included Texas Instruments Inc. and DuPont. Also putting weight on the market was an advance in oil prices as cold weather settled in on the northeastern United States, which could cause demand for heating oil to rise.
   
Investors also anticipated what might be said during President Bush's first State of the Union speech in front of a Democratic-controlled Congress. In past speeches, the president has talked about fuel cells and taxes.
   
In the first minutes of trading, the Dow Jones industrial average rose 0.41, or just under 0.01 percent, to 12,477.57.
   
Broader stock indicators were mixed. The Standard & Poor's 500 index was up 0.05, or just under 0.01 percent, to 1,423.00, and the Nasdaq composite index fell 2.09, or 0.09 percent, to 2,428.98.

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Dollar falls against euro, pound on strong European newsflow

LONDON - The dollar weakened against the euro and the pound amid a lack of US newsflow but strong economic data in Europe and the UK.
   
The euro broke out of its recent range against the dollar to rise above 1.30, while the pound marked new 15-year highs by briefly pushing through the 1.9900 level.
   
The common European currency was buoyed by robust industrial production figures this morning which suggest economic growth is not letting up in the euro zone. Industrial output in the euro zone in November rose 1.4 pct from October, and 6.2 pct from the year previous.
   
"The underlying strength in euro zone manufacturing, at least until late 2006, and the signs that France is not missing out completely while Germany is surging ahead, project resilient economic growth ahead," said Holger Schmieding at Bank of America.
   
He predicts that the European Central Bank will raise its key rate to 3.75 pct in March and then stay on hold before delivering another hike after the summer to bring the rate to 4.25 pct by early 2008.
   
The pound is likewise supported by interest rate expectations, particularly after an upbeat survey on industrial trends by the Confederation of British Industry this morning.
   
The survey said the number of firms raising their prices is at its highest level in nearly 12 years, adding more pressure on the Bank of England to hike rates to prevent a further spike in the decade-high inflation rate.
   
"The increasing confidence among producers about their ability to impose price increases points to further monetary policy tightening," said Ross Walker at Royal Bank of Scotland.
   
The pound is benefiting from these expectations, with some analysts expecting the Bank of England to raise rates again as soon as next month.
  
More evidence for or against this scenario will come from the BoE governor Mervyn King's speech at 1900 today and from the minutes to the last policy decision, due tomorrow.
   
The gains by the euro and pound were helped by a dearth of data in the US this week, which analysts said has deprived the dollar of any drivers.
   
The housing data will shed more light on whether the US property market is still suffering or whether its slowdown has bottomed out.
   

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The European markets at 13.30 GMT

Amsterdam - At 2.58 pm, the AEX was down 3.19 points or 0.62 pct at 500.37, after reaching an early high of 504.27 and off a low of 498.97.

Heavyweight Unilever was among leading blue-chip fallers, down 2.07 pct at 20.35 as the stock was downgraded to 'underperform' from 'neutral' by Credit Suisse as it believes the stock has gone beyond what the broker regards as a reasonable reflection of the group's turnaround possibilities.

Philips added 0.42 pct at 29.0 in a recovery from yesterday's losses on the back of fourth-quarter results, with Citigroup raising its price target to 34 eur from 30 and UBS upping its target to 36 eur from 32, with both brokers maintaining a 'buy' rating.

Zurich - At 2.30 pm, the Swiss Market Index was 15.61 points lower at 9,086.54, and the Swiss Performance Index was down 14.37 points at 7,185.80.

Focus today is on Richemont, last down 3 sfr or 4.1 pct at 69.60, after the luxury-goods group reported slightly lower-than-expected third-quarter sales growth, prompting Merrill Lynch to downgrade its stance to 'neutral'. Peer Swatch was at the other end of the spectrum, up another 4.25 sfr or 1.5 pct at 291.75, after reporting better-than-expected sales figures.

London -  At 10.45 am, the FTSE 100 was 28.0 points lower at 6,190.5, nearing session lows of 6,189.2, and reversing an earlier high of 6240.7.

Tate & Lyle fell more than 15 pct, or 111 pence, to 609 pence after the food processor warned it expects full-year pretax profits to be below market expectations, prompting Citigroup to downgrade its rating to 'hold'.

Smith & Nephew shares gained 8 pence to 561-1/4, helped by bullish comment from Goldman Sachs, which raised its target on the medical devices group to 580 pence, from 470.

Madrid -  At 1.35 pm, the IBEX-35 index was off 9.9 points at 14.349.8, on volume of about 2.5 bln eur.

Telefonica shed 0.10 eur to 16.58, in line with other leading telecoms, hit by the slide in its CANTV affiliate late yesterday on news that Venezuelan President Hugo Chavez will not pay the market price for the telecoms company.

Endesa rose 0.20 eur to 38.24, not immediately responding to news that a Spanish court has formally lifted the conditions on Gas Natural's proposed takeover of the utility.

Athens - At 2.25 pm the ASE general index was down 1.2 pct at 4,621.6 points, with decliners outnumbering advancers 218 to 38. The blue-chip index was 1 pct lower to 2,525.6 points. Mid caps were 1 pct lower at 5,430.2 points, and small caps were dipping 1.2 pct at 898.5 points.

Betting technology company Intralot was up 5.3 pct to 25.66 eur after UBS said that the reaction to a Turkish court's interim decision in a tender dispute was exaggerated yesterday, with the stock falling some 14 pct.

Refiner Motor Oil was up 1 pct to 19.34 eur, tracking crude-oil prices which were edging up. Mobile operator Cosmote was falling 3.2 pct to 23.22 eur and bottler Coca-Cola HBC was dipping 3.6 pct to 29 eur, both on profit-taking.

Frankfurt - At 3.16 pm, the DAX was down 32.46 points or 0.49 pct at 6,654.85 after trading between 6,627.96 and 6,704.36 so far today, with the MDAX dropping 39.69 points or 0.41 pct to 9,594.90. The TecDAX was also lower, down 3.95 points or 0.50 pct to 792.79, and the DAX futures contract decreased by 31.50 points or 0.47 pct to 6,688.50.

ThyssenKrupp led the DAX lower, losing 0.79 eur or 2.26 pct to 34.22 as a Dutch court ruled in favour of Arcelor/Mittal in the Dofasco case, dealers said.

On the upside, SAP was a clear winner after Morgan Stanley upgraded its shares to 'overweight' from 'equal-weight' and increased the target to 48 eur from 41.75. Shares were changing hands at 38.40 eur, up 0.80 eur or 2.13 pct.

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Asian shares close mixed, sentiment negative after Wall St fall

HONG KONG - Shares across the Asia-Pacific region closed mixed, with some profit-taking after the record highs set yesterday and negative sentiment after Wall Street fell overnight.
   
Tokyo shares closed flat in volatile trade, with the Nikkei index ending slightly lower following losses on Wall Street, as investors alternately engaged in profit-taking and buying on dips.
   
Sentiment was underpinned, however, by expectations that Japanese corporations will release healthy results when the earnings reporting season gets into full swing, they added.
   
The blue-chip Nikkei 225 Stock Average closed down 15.61 points or 0.09 pct at 17,408.57, off a low of 17,321.29. The TOPIX index of all issues listed on the Tokyo Stock Exchange's first section ended the session up 0.43 points or 0.02 pct at 1,730.76, off a high of 1,733.12
   
Technology shares were sold down, in line with their US counterparts amid concerns over the earnings outlook of major US tech firms, Takahashi said.
   
Australian shares closed at fresh record highs for the second consecutive trading session as investor sentiment turned positive after earlier profit taking.
   
Buying was limited on investor caution ahead of tomorrow's consumer inflation data for the December quarter which is seen as the last key data before the Reserve Bank of Australia's first meeting for 2007 in early February.
   
The S&P/ASX 200 gained 8.4 points or 0.15 pct to a record close at 5,735.0, surpassing yesterday's record close of 5,726.6. The key index closed off a high of 5,738.3 which was below yesterday's fresh intra-day record of 5,739.8. The low for today's session was 5,702.7.
   
The broader All Ordinaries index added 10.1 points to a fresh record close of 5,714.1, also beating the previous record close of 5,703.9 set on Monday and setting a fresh intra-day record of 5,716.1.
   
Hong Kong shares were flat in afternoon trade as investors locked in profits in China stocks and property plays after the market surged to a record high yesterday. At 3.25 pm the Hang Seng Index was down 11.78 points, or 0.06 pct, at 20.760.44.
   
In mainland China, A-shares in Shanghai and Shenzhen shrugged off early weakness and closed higher amid sustained capital inflows with banks and steel makers snapped up. Over 50 companies closed up their daily limits of 10 pct.
   
The Shanghai A-share Index climbed 16.82 points or 0.55 pct to 3,097.57 and the Shenzhen A-share Index was up 2.40 points or 0.33 pct at 728.19, a new all time high.
   
Seoul shares closed little changed in choppy trade, as profit-taking by institutions and retail investors was offset by late-minute heavy program buying and foreign investors' interest.
   
With Wall Street's weaker close weighing on sentiment, the market threatened the 1,350 point level at one stage before recovering most of its losses toward the close.
   
The KOSPI index closed down 0.32 points or 0.02 pct at 1,363.09, after moving between 1,352.50 and 1,367.03. Telecoms and brokerages turned sharply lower while lenders and large cap IT stocks closed firmer.

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Oil prices edge up amid colder US weather; US inventory data eyed

LONDON - Oil prices continued to edge up amid colder US weather but there was also some reluctance to take on new positions ahead of US inventory data, due to be released tomorrow.
   
At 10.59 am in London, front-month Brent North Sea crude contracts for March delivery were up 63 cents at 53.33 usd, after dropping 48 cents to close at 52.70 usd yesterday.
   
Meanwhile, front-month New York light sweet crude contracts for March delivery were up 60 cents at 53.19 usd, after rising 95 cents to close at 52.58 usd yesterday.
   
New York's February contracts expired yesterday at 51.53 usd.
   
A recent burst of freezing temperatures in the region has raised speculation that US inventories may fall slightly, but the drop must be significant to lift prices, said Richard Griffith, analyst with brokerage Williams de Broe.
   
Oil prices have shed just under 20 pct since the beginning of this year as a milder than usual winter in the US Northeast, the world's largest heating oil consumer, has reduced demand.
   
Focus is also on US inventory data, due out tomorrow. Market participants expect an 800,000-barrel drop in distillate stocks, which include heating oil and predict another gain in crude stocks of 700,000 barrels.
   
In the background, however, concerns about OPEC's planned output cut continued to rumble on.
   
Griffith added that "the most important issue" however, is whether OPEC sticks to its promised production cuts.
   
OPEC has committed to a total cut in output of 1.7 mln bpd, including a 500,000 bpd reduction set to begin Feb 1.
   
"Saudi Arabia appears to be against any further cuts and the general group consensus is that the existing 1.7 mln bpd of production must be delivered before additional cuts are considered," said Sucden analysts.

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