US & World Daily Markets Financial Briefing 23-06-2006

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Stocks are down in early trading

NEW YORK - Stocks are lower in early trading after data showing durable-goods orders declined in May. In the opening minutes, the Dow Jones industrials dropped 22.25 points to 10,996.86, the Nasdaq Composite dipped 4.23 points to 2,118.75 and the S&P 500 eased 1.65 points to 1,243.95.
   
On Thursday, the Dow industrials declined 60.3 points, the Nasdaq Composite lost 18.2 points and the S&P 500 fell 6.6 points, with markets taking their cue from a worse-than-forecast leading indicators figure, which reignited concerns that corporate profits could suffer in the second half of the year.
   
On Friday, the Nikkei 225 drifted to a 0.1 percent weakening in Tokyo following the last session's rally, while markets in Europe edged higher, helped by a bullish Deutsche Bank note on integrated oil majors.

Crude-oil futures eased 9 cents to $70.75 a barrel.
   
Stocks in focus

Oracle Corp. late Thursday said its quarterly profit climbed 27 percent, but the business-software giant highlighted what it was likely to earn last week, making the direction of the stock on Friday uncertain. Rival SAP rose 0.5 percent in Frankfurt.
   
Friday marks the expiration of Merck's patents on Zocor, a cholesterol drug. Shares of Teva Pharmaceutical have been under pressure as Merck talks to health insurance providers to make Zocor available for less than what generic drugmakers will charge.
   
Six Flags may see pressure after the amusement parks operator plans to examine its potential strategic options for six properties. The company noted that options include the possible sale of the parks in a single transaction or series of transactions, and the dismantling of certain rides and attractions in order to sell the underlying land for real estate development purposes.
   
Goldman Sachs led a consortium agreeing to buy Associated British Ports for $5.2 billion, but Macquarie Bank urged AB Ports shareholders not to take any action, leaving the prospect of yet another bid for the British ports company.
   
NYSE Group Chief Executive John Thain said in an interview with the French newspaper La Tribune that the U.S. exchange has the resources to increase its Euronext offer if need be. The NYSE has agreed to buy the Euronext, while Deutsche Boerse is still pursuing its own deal with the Euronext. Thain noted to the newspaper that the NYSE has $650 million in cash and no debt.
   
Merrill Lynch upgraded chipmaker Advanced Micro Devices Inc. to neutral from sell, saying it believes meaningful downside from the current stock level is unlikely after it fell close to 40 percent in five months.
   
J.P. Morgan cut wireless-technology provider Qualcomm Inc. to neutral from overweight, citing its belief that contract negotiations with Nokia over the Finnish handset maker's WCDMA license agreement could very likely end in a stalemate with the companies failing to agree to new terms without the third-party intervention the joint venture with Sanyo Electric would have provided.

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Dollar edges higher, helped by risk aversion and rate hike expectations

LONDON - The dollar drifted higher against the euro and pound, boosted by a fall out in peripheral currencies, notably the Kiwi dollar and on aggressive US rate hike expectations.
    
Market reaction to news that New Zealand's current account deficit has ballooned to 9.3 pct of its GDP was somewhat perverse as it led to flows into the US currency. The US, after all, has a sizeable and growing current account gap of its own.
   
"Markets do appear to be still prone to growth concerns and risk aversion, with a number of emerging market currencies selling off sharply," said Daniel Katzive at UBS.
   
While risk aversion has periodically benefited the dollar, the situation may well change, he said.
   
New Zealand's current account gap has highlighted the problem about global imbalances and will likely be a negative for all current account deficit currencies including the dollar.
   
And, concerns about the structural imbalances facing the global economy are not likely to go away with the likes of the IMF warning about potentially severe effects throughout the world.
   
That aside, there was also some support for the dollar from expectations among more aggressive risk-takers that the Fed may deliver a hefty 50 basis point rate hike next Thursday, instead of the usual 25.
   
This view, however, is only held by a minority. Markets have fully priced in a quarter point rate increase to 5.25 pct and are betting on a follow up hike in August.
   
In the meantime, the dollar hit a 2-month high against the yen.
   
"Yen weakness due to a rising risk that the Bank of Japan may not raise rates by as much or as soon as the market expects," said Steve Pearson, chief currency strategist at HBOS.
   
Yen had risen previously on speculation of rate hikes and was softer across the board.
   
Elsewhere, the pound continued to edge lower, especially against the dollar, reaching its lowest level since early May.
   
The pound's falls are related to a scaling back in UK rate hike expectations after some mixed data and the Bank of England's obviously neutral tone at its last rate setting deliberations.

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The European Markets at 12.00 BST

London - Leading UK shares remained positive at midday, albeit off morning highs, with bullish comments from Deutsche Bank lifting oil issues while Wall Street is expected to open higher, dealers said.
   
At 11.33 am, the FTSE 100 was 9.1 points firmer at 5,693.6, while the FTSE 250 dipped 9.1 points to 94,692.

Frankfurt - Shares were modestly higher in midday trade as US stock futures pointed to gains on Wall Street this afternoon, with Fresenius Medical Care leading large-caps higher on the back of upbeat broker comments, dealers said.
   
At 11.39 am, the DAX 30 index was 16.52 points or 0.30 pct higher at 5,549.94, having moved between 5,528.75 and 5,559.87 so far this session.

Paris - Shares were higher midsession in thin trade, as investor sentiment remained cautiously upbeat while US futures indicated a positive opening on Wall Street this afternoon, dealers said.
   
At 12.45 pm, the main CAC 40 index was up 20.53 points or 0.43 pct at 4,823.82, on volume of 1.17 bln eur.

Amsterdam - Share prices were up midday as US futures pointed to a higher Wall Street opening and with positive local news pushing stocks into positive territory, dealers said.
   
At 12.46 pm, the AEX index was up 0.94 point or 0.22 pct at 430.20, after opening at 430.14 and trading in a range of 429.60-431.68.

Milan - Share prices were slightly higher at midday trade, shrugging off a negative close at Wall Street, with oil sector shares leading the advance following an upbeat broker note, dealers said.
   
At 12.55 pm, the Mibtel index was up 0.32 pct to 27,219 points and the S&P/Mib up 0.32 pct to 35,728.

Madrid - Share prices were slightly higher in quiet midday trading, shrugging off Wall Street's overnight losses, with SCH leading gainers after positive broker notes, while BBVA and Telefonica underperformed, dealers said.
   
At 11.30 am, the IBEX 35 index was up 23.5 points at 11,269.8, after trading in a range of 11,224-11,302, on turnover of 578 mln eur.

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Asian shares close mostly lower on Wall St, profit taking

HONG KONG - Share prices across the Asia-Pacific region closed mostly lower after a fall on Wall Street overnight and profit taking, dealers said.
   
They expect markets to remain cautious early next week ahead of a meeting of the US FOMC next Wednesday.
   
Tokyo share prices ended lower, tracking Wall Street, although a late flurry of bargain-hunting by domestic players helped the market finish well off its intraday lows, dealers said.
   
The blue-chip Nikkei 225 Stock Average closed down 11.65 points or 0.08 pct at 15,124.04, off an intra-session low of 14,865.57. For the week, the tech-rich index was up 1.6 pct.
   
The broader TOPIX index of all first-section issues finished down 3.55 points or 0.23 pct at 1,545.57, off an intra-session low of 1,520.76. For the week, the index added 0.7 pct.
   
In early trade prices slumped on concerns that central banks, led by the US Federal Reserve, are intent on raising interest rates, with many analysts fearing the Fed may continue rate hikes after an expected 25 basis points increase at its policy meeting next week.
   
Australian shares closed lower on profit taking and concerns about the direction of commodity prices, dealers said.
   
The S&P/ASX 200 finished down 45.9 points or 0.92 pct to close at 4,964.9.
   
The benchmark indicator closed off the day's high of 5,003.8 but above a low of 4,954.6.

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Hong Kong shares were lower in afternoon trade after Wall Street's decline prompted investors to lock in profits, dealers said.
   
They said trading tracked overseas markets and was generally cautious ahead of the weekend and the US Federal Reserve policy meeting next week.
   
At 3.28 pm, the Hang Seng Index was down by 29.22 points, or 0.18 pct, at 15,797.48.
   
In mainland China, A-shares in Shanghai and Shenzhen closed slightly higher, with bargain-hunting in telecom counters, dealers said.
   
They said the effect on the market was partially offset by liquidity pressure before the debut of the Bank of China, the country's second largest lender, next month.
   
The Shanghai A-share Index added 9.97 points or 0.59 pct to 1,688.01 and the Shenzhen A-share Index was up 4.27 points or 1.00 pct at 432.76.
   
Seoul shares ended lower on pressure from foreign investors, with the market losing all the gains posted in the previous session, dealers said.
   
The index neared 1,210 points at one stage as foreign investors unloaded both spots and futures, triggering program selling.
   
The KOSPI index closed down 10.21 points or 0.82 pct at 1,228.62, after moving between 1,228.96 and 1,210.99.

Asian Bourse Round-Up

For a full list of closing figures, click here

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