US & World Daily Markets Financial Briefing 23-08-2006

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Wall Street opens moderately higher

NEW YORK - Wall Street shook off National Semiconductor Corp.'s lowered sales guidance Wednesday, with stocks managing a moderate gain in early trading.
   
The Santa Clara, Calif.-based company, which makes chips that control power consumption in electronics, cut its revenue outlook for fiscal 2007 on lower-than-expected shipments of wireless handsets. National Semi also pinned the lowered forecast on fewer overall shipments and reduced foundry revenue from divested businesses.
   
Despite the warning, chip makers and other tech stocks rose in early trading, helping the major indexes regain ground after two days of losses.
   
Investors who have refrained from trading amid a lack of economic data were waiting for the National Association of Realtors' July sales data, due to be released later in the morning.
   
In the first hour of trading, the Dow Jones industrial average rose 20.82, or 0.18 percent to 11,360.66.
   
Broader stock indicators also advanced. The Standard & Poor's 500 index edged up 2.10, or 0.16 percent, to 1,300.92, and the Nasdaq composite index rose 8.03, or 0.37 percent, to 2,158.05.

The Russell 2000 index of smaller companies was up 2.81, or 0.40 percent, to 710.57.
   
Bonds were unchanged, with the yield on the benchmark 10-year Treasury note flat from Tuesday's 4.82 percent. The dollar was little changed against other major currencies, while gold prices edged higher.

Stocks in focus
   
Despite National Semi's sales warning, the company rose 97 cents, or 4.3 percent, to $23.55. Intel Corp., the world's largest chip maker for personal computers, rose 10 cents to $18.44. Advanced Micro Devices Inc., whose shares led the market higher on Tuesday, continued its advanced by rising 56 cents, or 2.2 percent, to $25.44.
   
Gateway Inc. rose 32 cents, or 19 percent, to $2.04 after the company received an unsolicited offer from eMachines founder Lap Shun Hui to acquire its retail operations for $450 million. Hui, Gateway's second largest shareholder, sold his business to Gateway in 2004.
   
IBM Corp. rose 47 cents to $79.42 higher after it announced the $1.3 billion acquisition of Security Systems for $28 per share. Internet Security Systems rose $1.76, or 6.8 percent, to $27.76.

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Strong Canadian inflation pushes currency to near 7-week highs vs usd

LONDON - The Canadian dollar soared to near seven-week highs against its US counterpart in the wake of strong CPI inflation data yesterday, though analysts expect the gains to be short-lived as interest rates still look set to be left on hold.
   
At 9.30 am GMT, the Canadian dollar was trading at 1.1123 per dollar, just off an earlier high of 1.1116, its highest level since early July.
   
Data out yesterday showed Canadian annual CPI inflation at 2.4 pct in July, a slight drop from June's 2.5 pct reading but well above expectations for a much more sizeable fall to 2.0 pct.
   
"The Canadian dollar did get a boost from the data ... and after showing resilience in the face of soft data releases such as the surprise drop in June retail sales, usd/cad fell through the bottom of its recent 1.1150-1.1350 range," said Mitul Kotecha at CALYON.
   
Perhaps a more worrying aspect of the data for Canadian rate-setters, however, was the annual core CPI measure, which excludes volatile items as well as indirect taxes jumped sharply to 2.0 pct from 1.7 pct in June.
   
Also providing support for the Canadian dollar was a report in the Financial Times today that Canada's Arctic frontier is seeing increased commercial interest as the region becomes more attractive to the diamond market, they noted.
   
Despite today's sharp gains, however, analysts do not expect the Canadian unit to continue gaining.
   
The strong CPI reading is unlikely to be sufficient to deter the Bank of Canada from keeping interest rates on hold after recently signalling that it has paused in hiking rates, particularly after recent soft data elsewhere, including poor retail sales numbers on Monday.
   
"The mixed batch of recent releases still suggests the BoC is likely to remain on hold over coming months, with core inflation set to remain around the middle of its target range at 2.0 pct," CALYON's Kotecha said.
   

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The European Markets at 11.00 GMT

London - UK blue chips slipped further at midday, weighed down by mining issues after unexciting results from BHP Billiton, and ahead of a likely negative start on Wall Street, dealers said.
   
At 11.45 am, the FTSE 100 index traded near intraday lows, 14.9 points lighter at 5,887.7, having retreated from an opening peak of 5,906.3. And the broader FTSE indices were also weaker.
   
Volume was seasonally-light, with just 506.2 mln shares changing hands in 85,487 deals.

Frankfurt - Shares were lower in midday trade, amid a dearth of news, and following Wall Street losses overnight after comments by Chicago Fed President Michael Moskow raised concerns that further rate hikes might be necessary, with US futures pointing to further losses there this afternoon, dealers said.
   
At 11.55 am, the DAX 30 index was 10.75 points or 0.18 pct lower at 5,807.66, having moved between 5,798.06 and 5,819.29 so far this session.

Paris - Shares remained slightly lower at midday as prospects of US inflationary pressures dominated the sentiment in the relative absence of French corporate news, dealers said.
   
At 12.04 pm, the CAC 40 index was down 10.29 points or 0.20 pct at 5,118.04. Of the 39 stocks in the index as it awaits a replacement for Arcelor, 29 were lower and 10 were higher.
   
Amsterdam - Shares were lower at midday as US futures suggested Wall Street's negative run yesterday will likely continue today, with tech stocks the morning's main decliners, dealers said.
   
At 12.55 pm, the AEX was 1.0 points, or 0.22 pct, lower at 462.82..
   
Brussels - The Bel 20 was trading down slightly after midday, with utility Suez leading the index lower while the retail and financial sectors were also down.
   
At 13.24, the Bel 20 was off 21.57 points, or 0.55 pct, at 3,886.56.

Madrid - Share prices were lower in thin midday trade, in line with European markets, with blue chips slumping, while Prisa extended yesterday's gains, dealers said.
   
At 12.08 pm, the IBEX 35 index was down 32.9 points at 12,048.4, after trading in a range of 12,033-12,098, on very low volume of about 284 mln eur.
 
Milan - Share prices were slightly lower at midday on concern that the US may not have ended tightening its monetary policy as previously speculated by some investors, dealers said.
   
At 12.09 pm, the Mibtel index was down 0.26 pct at 28,599 points and the S&P/Mib dropped 0.32 pct at 37,462 .

Stockholm - Shares remained in negative territory in midday trade, slightly below morning levels on deepening profit-taking, with small biotech company Diamyd Medical retaining its sharp gains on positive drug news, dealers said.
   
At 12.05 pm, the OMX Stockholm index was down 0.54 pct at 314.67 points, while the OMX Stockholm 30 index was down 0.62 pct at 976.78 points. Turnover was 5.64 bln skr.

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Asian shares close mostly lower on fears of higher US interest rates

HONG KONG - Shares across the Asia-Pacific region closed mostly lower as markets reacted to fears of higher US interest rates, dealers said.
   
Tokyo share prices closed lower after comments by Chicago Federal Reserve president Michael Moskow that additional firming of policy may be necessary to bring inflation back into the comfort zone, dealers said.
   
The blue-chip Nikkei 225 Stock Average closed 18.14 points or 0.11 pct lower at 16,163.03, off a low of 16,118.12 and a high of 16,226.59.
   
The broader TOPIX index of all first-section issues shed 1.49 points or 0.09 pct at 1,640.28, after moving within a range of only 10 points.
   
"Moskow's comments revived worries about the near-term prospects for US interest rates, as well as anxiety about future strategy for asset allocation by global investors," said Mita Securities president Kunihiro Mita.
   
"And due to renewed uncertainty over the prospects for US interest rates, domestic investors are becoming reluctant to take fresh positions, as they want to see a slew of US economic data for any implications for US monetary policy," he said.
   
Australian shares finished higher as investors awaited the full-year profit report of index-leading resource stock BHP Billiton, which was due after the market close, dealers said.
   
They said investor sentiment remained muted despite stronger earnings reports.
   
The S&P/ASX 200 rose 6.1 points or 0.12 pct to close at 5,082.3. The benchmark indicator closed off the day's high of 5,107.8, with the low at 5,068.2.
   
Hong Kong shares were lower in afternoon trade after the US interest rate comments were reported, although the market's fall was cushioned by bargain-hunting in selected blue chips, including Hutchison Whampoa, dealers said.
   
At 3.27 pm the Hang Seng Index was down 68.33 points or 0.40 pct at 17,081.42.
   
In China, A-shares in Shanghai and Shenzhen closed lower on profit-taking, with metals and telecom stocks under pressure, dealers said.
   
The Shanghai A-share Index slipped 1.0 points or 0.06 pct to 1,695.04 and the Shenzhen A-share Index was down 0.58 points or 0.14 pct at 416.93.
   
Seoul share prices ended lower, giving up much of yesterday's rise, as investor sentiment weakened on renewed concerns about the trend in US interest rates, dealers said.
   
Foreign investor-led program selling weighed on most blue chips, dragging the KOSPI index below the 120-day moving average of 1,330 points.
   
The KOSPI index closed down 10.01 points or 0.75 pct at 1,324.95, off a high of 1,333.13 and a low of 1,319.95.

Asian Bourse Round-Up

For a full list of closing figures, click here

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Oil down after Iran agrees to dialogue, ahead of US inventories

LONDON - Oil prices dropped this morning ahead of the release of US energy inventory data and as the market was reassured by Iran agreeing to negotiate further over its nuclear programme and in anticipation that the slowdown in demand would be maintained by raised oil stocks in the US.
   
In London, a barrel of Brent North sea oil was down 51 cents to 72.73 usd for October deliveries at 1000 GMT.
   
On the New York Mercantile Exchange (Nymex) a barrel of light sweet crude for October delivery lost 55 cents, dropping to 72.55 usd in electronic trading. LSW for September, which expired yesterday, closed at 72.63 usd.
   
The weekly update on US oil reserves by the Department of Energy later Wednesday will be watched closely by traders as the American driving season winds down.

Precious Metals Summary - London, 1100 GMT

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