US & World Daily Markets Financial Briefing 24-03-2006

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Wall Street - U.S. stocks open mixed; Google up on S&P 500 inclusion

NEW YORK - U.S. stocks traded mixed Friday, with the technology sector in focus as Google rallied on its inclusion in the S&P 500, and Lucent Technologies surged on merger talks with France's Alcatel.
   
The Dow Jones Industrial Average was down 6.5 points to 11,263.
   
The Nasdaq Composite Index gained nearly 4 points to 2,303 while the S&P 500 Index dipped 1 point to 1,300.27.
   
"There was good news from Google, some bad news out of biotech with Cephalon but there's not much else to drive stocks. We're looking ahead next week to the FOMC meeting which will probably mean a quiet day," said John Hughes, managing director of Epiphany Equity Research.
   
The Federal Open Market Committee, the Fed's interest-rate setting body, meets next Tuesday. The FOMC is widely expected to raise its Fed funds rate by a quarter percentage point to 4.75%.
   
The latest durable goods report offered a mixed picture on the economy. 

Stocks in focus
   
Shares in Google Inc. surged 7.5% to $367.65 after Standard & Poor's said it would add the leader in Internet search to its benchmark S&P 500 Index at the close of trading on March 31.
   
The decision instantly puts Google - less than two years after going public - on the shopping list of hundreds of mutual fund managers who run portfolios that track the components of the S&P 500.
   
Lucent Technologies Inc. and Alcatel SA are in advanced discussions about a $33 billion merger that could signal the start of a new wave of consolidation in the telecommunications-equipment industry.
   
The companies, which broke off previous tie-up talks in 2001, said Thursday night they're discussing a "merger of equals" that would be priced at market -- meaning no stock-price premium. A tie-up would give Alcatel, Europe's second-largest telecom-gear maker, better access to U.S. telecom operators.
   
Lucent shares shot up 10.6% to $3.12 while U.S.-listed shares of Alcatel climbed 3.4% to $15.97.
   
Rival U.S. gear maker, Nortel Networks Corp. was up 4.6% at $2.94 in early trading.
   
Other stock standouts
   
Also on the merger and acquisition front, Germany's Bayer AG said it would top the offer from Merck KgaA for drug company Schering AG with a $19.5 billion white-knight bid for the German drug maker.
   
U.S.-listed shares of Bayer rose 63 cents to $42.32. Schering shares climbed 3.7% to $103.29. Merck, which is not connected to the U.S. company of the same name, does not trade in the U.S. but its shares were down 2% in Europe.
   
Shares in Palm Inc. rose 5.5% to $21.24 after the company posted forecast-beating quarterly results on the back of strong demand for its Treo handheld communications devices. Palm also offered a profit outlook ahead of current Wall Street estimates.
   
Cephalon shares tumbled 14% to $63.02 after a U.S. Food and Drug Administration panel rejected Sparlon, its attention deficit disorder drug over safety concerns. Cephalon cut its 2006 sales forecast as result of the FDA decision.
   
J.P. Morgan downgraded the drug company to neutral from overweight. "The product continues to look approvable in our view, but is likely to be significantly delayed since the panel recommended FDA ask for more data about its safety." On Thursday, Cephalon shares were halted ahead of the FDA panel recommendation.

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Dolllar stretches gains against yen, flat vs. euro

NEW YORK - The dollar extended gains against the yen, rising to an almost two-week high early Friday, with traders cautiously awaiting the Federal Reserve policy meeting early next week.
   
The U.S. currency initially dipped after a report showed that excluding transportation, durable goods orders fell in February, the first decline in four months. But the dollar quickly recovered as investors shifted attention to the Fed policy meeting.
   
"We're not that anxious in terms of punishing the dollar ahead of the meeting," said Kathy Lien, chief fundamental analyst at Forex Capital Markets.
   
The U.S. dollar remained mixed. The euro was up 0.1% at $1.1977. Against the Japanese yen, the greenback climbed 0.5% to 118.42.
   
Spurred by civilian aircraft and defense goods, durable goods orders placed with U.S. factories rebounded in February, the Commerce Department said. 

Total durable goods orders rose 2.6% in February. It was the fourth increase in the last five months and the largest gain since November.
   
The increase was larger than Wall Street economists had predicted. Economists were expecting durable goods orders to rise 1.5% in February.
   
Excluding transportation, durable goods orders fell 1.3% in February, for the first decline in the last four months and the largest drop since last July.
   
"Overall, the headline figure is solid," said Lien. "January inventory figures are still on the path for solid growth in the first quarter."
   
Lien pointed out although ex-transportation durable goods declined in February, the number for January was revised higher by 1%. The figures "are not that horrendous," she said.
   
Looking ahead, traders will closely watch the 10 a.m. Eastern release of February new home sales, said Wayne Roworth, a senior FX dealer at CMC Markets.

New home sales are expected to edge lower to 1.21 million from 1.23 million in the previous month, according to a MarketWatch survey.

The Fed officials will meet on Monday and Tuesday, where policy-makers are widely expected to raise overnight interest rates to 4.75%, from 4.5% currently.
   
The market is pricing in strong odds of a hike in May, interest rate futures show.
   
Meanwhile, focus for the yen and other Asian currencies continued to center on whether U.S. Senators Chuck Schumer and Lindsey Graham will go ahead with a vote on their proposed bill to impose trade tariffs on China following their visit to Beijing this week, analysts said.
   
Schumer and Graham are proposing to impose 27.5% tariffs on Chinese goods if the Chinese government doesn't aggressively unwind its support for the yuan.
   
As the yen often serves as a proxy for the yuan, which is restricted to trade in a 0.3% daily band against the dollar, the comments from the U.S. senators dampened expectations of a sharp yuan appreciation, analysts have said.
   
Schumer said he's more optimistic about the yuan issue and he expects the yuan to fall to below 8 to the dollar next week. The yuan closed at 8.0276 to the dollar on Friday.
   
Matthew Foster-Smith, an analyst at Thomson IFR Forex Watch, said he's not so sure Schumer will be proved correct.
   
"People's Bank of China window dressing to the Schumer visit continues to reflect the increasing global pressure," he said. "However, central parity rates do not reflect the belief that dollar/yuan will drop below 8.00 in the short term," he said.

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The European Markets at 12.00 GMT

London - UK blue chips remained firm at midday, staying above the key 6,000 level buoyed by strong gains in caterer Compass after news of the appointment of a new CEO, and in supermarket group Tesco on REIT possibilities, dealers said.
   
At 12.07 pm, the FTSE 100 index was 31.2 points higher at 6,021.3, just below an earlier peak of 6,030.8.
   
All the broader FTSE indices were also higher. Volume was fair, with 1,271.3 mln shares changing hands in 123,139 deals.

Frankfurt - German stocks rose in midday trading propelled by a jump in pharmaceuticals after Bayer offered 16.3 bln eur in cash for Schering, topping a hostile bid by Merck KGaA, dealers said.
   
At 12.20 pm, the DAX 30 index was 11.22 pts or 0.19 pct higher at 5,958.33, having moved between 5,947.31 and 5,965.54 so far this session.

Paris - Paris shares were higher at midday as news that Alcatel was in merger talks with Lucent Technologies generated the optimism to offset the effects of last night's declines on Wall Street, dealers said.
   
At 12.35 pm the CAC-40 index was 16.52 points or 0.32 pct higher at 5,211.44, on volume of 1.86 bln eur. Among CAC-40 shares 26 were higher and 14 were lower.

Madrid - Share prices were higher in quiet midday trading, tracking gains across most of Europe amid ongoing M&A activity, with Sacyr Vallehermoso firm, while Popular extended yesterday's profit-taking, dealer said.
   
At 11.41 am, the IBEX-35 index gained 39.9 points to 11,946.1 after trading in a range of 11,895-11,951.

Amsterdam - Share prices were slightly higher in early afternoon trade led by Versatel, dealers said.
   
At 1.35 pm, the AEX was up 1.09 point or 0.23 pct at 471.84, after opening at 471.24 and trading in a narrow range of 471.06-472.66.

Milan - Share prices were little changed at midday, with losses in the banking sector after a recent run on merger talk pared by gains among oil plays and FastWeb ahead of its results next week, dealers said.
   
At 12.35 pm, the Mibtel index was down 0.06 pct at 29,491 points and the S&P/Mib was off 0.19 pct at 38,170, while volumes stood at 2.02 bln eur.

Stockholm - Share prices remained in slightly positive territory in midday trade, virtually unchanged from earlier levels, with metal-related issues performing strongly on the back of hopes of continued high metal prices, dealers said.
   
At 12.10 pm, the OMX Stockholm index was up 0.45 pct at 337.88, while the OMX Stockholm 30 index was up 0.54 pct at 1,060.23. Turnover was 8.65 bln skr.

Helsinki - Helsinki shares were slightly higher midday, led by Nokia and Fortum on bargain hunting, and partially offset by Rautaruukki which went ex-dividend, dealers said.
   
At 11.59 am, the OMX Helsinki 25 index was 0.32 pct higher at 2,697.46. The OMX Helsinki index was up 0.36 pct at 9,348.71, while the Helsinki CAP portfolio index was 0.23 pct firmer at 5,011.06.

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Asian shares close mixed, Tokyo higher on land price rise

HONG KONG - Share prices across the Asia-Pacific region ended mixed with Tokyo slightly higher after a government survey showed average land prices in Tokyo rose for the first time in 15 years last year, dealers said.
   
They added the survey result gave investors further evidence that Japan is emerging from years of deflation.
   
The blue-chip Nikkei 225 Stock Average closed up 71.50 points or 0.4 pct at 16,560.87 while the broader TOPIX index of all first-section issues rose 9.25 points or 0.4 pct to 1,689.34.
   
For the week, the Nikkei 225 index gained 1.35 pct while the TOPIX index rose 1.5 pct.
   
The latest annual government land survey, released late yesterday, showed that the average price of residential property in Tokyo rose 0.8 pct in 2005 while the average price of commercial land increased 2.9 pct from the year earlier.
   
"A rise in land prices is one of the significant signs that Japan is emerging from deflation," said Hideo Mizutani, chief strategist at Sieg Securities.
   
That pushed up real estate and railroad shares as both industries benefit from higher land prices. Japanese rail companies own large tracts of land near stations across Japan, Mizutani said.
   
Share prices in Australia finished at fresh record highs as investors added mining stocks to their portfolios following an overnight rise in metal prices, dealers said.
   
They said the market index remained fairly flat for the majority of the trading session but ended in positive territory.
   
Dealers said most sectors were mixed which curtailed solid gains but the advances in mining stocks avoided an offshore-induced sell-off following the fall on Wall Street overnight.
   
The S&P/ASX 200 gained 4.8 points or 0.10 pct to close at a fresh record high of 5,040.1, overtaking yesterday's record close of 5,035.3.
   
Share prices in Hong Kong were trading lower in the afternoon on caution ahead of the US Federal Reserve policy meeting next week, dealers said.
   
Hutchison Whampoa and Cheung Kong turned lower after early gains following their results announcements as investors began to doubt if Hutchison's 3G business can really break even at the EBIT level next year as predicted by company officials yesterday.
   
At 3:29pm, the Hang Seng Index was down 25.57 points or 0.16 pct at 15,745.6.
   
In mainland China, A-shares in Shanghai and Shenzhen closed lower in a correction after gains over the last four trading days, with petrochemical firms and auto makers losing ground, dealers said.
   
The Shanghai A-share Index lost 8.11 points, or 0.59 pct, to 1,357.70 on turnover of 12.26 bln yuan and the Shenzhen A-share Index was down 1.21 points at 326.88 on turnover of 7.93 bln yuan.
   
In Seoul, share prices ended higher, reversing the previous session's mixed performance, as banks, POSCO and LG Philips LCD posted solid gains, dealers said.
   
After a weak start, triggered by Wall Street's overnight setback and higher oil prices, the market moved sideways for much of the session.
   
But intensified program buying in late trade, amounting to 206.6 bln won, helped offset profit-taking by retail investors ahead of the weekend, leading the index to close at its best level for the day.
   
Banks remained in the spotlight, following Lone Star's announcement yesterday that it picked Kookmin Bank as a preferred bidder for its controlling stake in Korea Exchange Bank (KEB).
   
The KOSPI index closed up 8.97 points or 0.68 pct at its best level 1,321.23.

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Gold futures rose in early trading after logging a three-session loss on Thursday. The benchmark April contract was last up $4 at $554.80 an ounce.
   
On the bond market, long-term Treasury prices edged higher, sending yields lower. The benchmark 10-year note was up 2/32 at 98 6/32, with its yield at 4.727%.
   
Also on the data front, a report on new home sales in February is slated for release at 10 a.m. Eastern time. Economists polled by MarketWatch are forecasting a dip in sales to 1.21 million from 1.23 million in the prior month. Stronger-than-expected existing home sales data on Thursday, however, may have some investors thinking Friday's housing data may surprise on the upside.
  
Crude-oil futures edged higher, finding support in data showing the first drawdown in U.S. supplies in six weeks and continued concerns about supplies from Nigeria, Iran and Iraq.
   
Crude for May delivery was last up 24 cents at $64.15 a barrel.

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