US & World Daily Markets Financial Briefing 24-05-2006

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U.S. stocks mixed on conflicting signals from latest data

NEW YORK - U.S. stocks were mixed in early trading Wednesday after a weaker-than-expected durable goods report lifted hopes for an early end to interest-rate increases, but also stoked concern about slowing economic growth.
   
General Motors Corp. was a bright spot on the Dow Jones Industrial Average, up around 3%, after broker Merrill Lynch upgraded the auto maker.
   
The Dow industrials were off 6.5 points at 11,091. The Nasdaq Composite Index rose 4 points to 2,163 while the S&P 500 Index dropped 1.5 points to 1,255.
   
For John Hughes, managing director at Epiphany Equity Research, the durable goods report was a mixed blessing.
   
"It's great from a rates standpoint, but if the economy is slowing, that's not good for stocks."
   
Hughes said a broker upgrade for General Motors Corp. was a positive.
   
"The stock has been coming on a little bit of late. It's had a few upgrades and it looks like may be the worst is behind it."
   
On Tuesday, stocks ended lower as session gains melted away in the last hour of trade in a market still unsure of its footing after a two-week pullback in equities sparked by concern over the outlook for interest rates and economic growth.
   
The latest data offered something of a double-edged sword to investors.
   
Orders for new U.S.-made durable goods fell 4.8% in April, the Commerce Department said. The decline was broad based, led by a sharp drop in aircraft orders. Only orders for metals and electrical equipment increased. Economists polled by MarketWatch had been expecting orders to fall 0.6%.
   
The economic report raised expectations among some investors that the Federal Reserve may stop raising interest rates sooner rather than later as the data would suggest the bank has been successful in slowing the economy. Other investors may be concerned that the economy is slowing too much, which could hurt company profits going forward.

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The Fed last raised interest rates in May and left open the possibility of further rate hikes, saying an examination of incoming data would dictate any further moves. Its fed funds rate currently stands at 5%.
   
After the release of the data, the fed fund futures market were pricing in a 44% chance of a 0.25 percentage point rate hike following the Federal Reserve's next policy setting meeting in late June, vs. a 60% chance late Tuesday.
   
The U.S. dollar briefly extended losses on the durable goods data. Earlier, the euro received a boost after a closely tracked measure of German business confidence was stronger than expected, suggesting the euro's recent appreciation hasn't hurt Europe's largest economy as much as some have feared.
   
The euro was last up 0.4% at $1.2844. Against the Japanese yen, the greenback saw early gains fade to trade little changed at 112.08 yen. The British pound was quoted at $1.8757 from $1.8812. The dollar changed hands at 1.2097 Swiss francs from 1.2082 francs late Tuesday.
   
Stocks on the move
   
Shares in General Motors Corp. rose 2.8% to $25.16 after Merrill Lynch upgraded the auto maker to buy from neutral. The broker said the revised rating is based on expectations around 30,000 of the company's workers will accept its buyout program, a number that would represent "a significant acceleration in GM's restructuring plan."
   
Merrill said the estimate is based on comments by the United Auto Workers union that as of May 3rd, 12,400 GM workers had asked to take buyouts and that that the take-up rate would increase as the June 23 deadline for accepting the buyout offer looms.
   
Computer Sciences Corp.'s stock fell in early trading after the computer services company offered up an earnings and revenue forecast that fell short of Wall Street estimates. Its disappointing outlook came as it reported a fourth-quarter profit that more than halved from year-earlier results that had been boosted by disposals, and as charges weighed on the bottom line. The stock fell 4.2% to $52.41.
   
In other news, Sara Lee Corp. said it will spin off its Hanesbrands Inc branded-apparel business as part of its move to refocus on foods, beverages, and household and personal-care products. Hanesbrands includes such prominent apparel brands as Hanes, Champion, Playtex, Bali and Wonderbra. The stock was up 12 cents at $17.19.

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The European Markets at 12.00 BST

London - UK blue chips extended falls by midday, reversing much of yesterday's gains as a weaker mining sector weighed on the index, while investors remained nervous ahead of US durable goods and new home sales data due later, dealers said.
   
At 12.00 pm, the FTSE  100 Index was down 100.7 points at 5,578.0, while the FTSE  250 was 172.1 points weaker at 9,062.2.

Frankfurt - Shares were lower in midday trade following losses across Asia last night and the release of uninspiring German business climate figures, dealers said.
   
At 12.24 pm, the DAX  30 index was down 100.11 points or 1.76 pct at 5,578.38, having moved between 5,578.38 and 5,653.99 so far this session.

Paris - Share prices were down across the board at midsession, retreating from yesterday's rally in the wake of a late downturn on Wall Street overnight as nervous investors remained unsure of the scale of the recent market correction, dealers said.   
   
At 1.19 pm, the CAC- 40 index was 90.01 points or 1.81 pct lower at 4,842.38, off a morning low of 4,822.60, on heavy volume of 2.70 bln eur.

Amsterdam - Shares were traded broadly lower at midday tracking lower US futures which hinted at a lower opening of Wall Street, dealers said.
   
At 12.25 pm, the AEX was 7.40 points or 1.68 pct lower at 432.18 after opening at 436.59 and reaching an earlier low of 430.44.

Madrid - Share prices were sharply lower in line with Europe in brisk midday futures- driven trade, with defensives like the constructors and Inditex lower, as well as the main banks, dealers said. 
   
At 1.09 pm, the IBEX- 35 index was down 178.0 points or 1.59 pct at 10,982.7, after trading in a range of 10,961-11,099, on turnover of 1.801 bln eur.

Milan - Share prices were lower midday in volatile trade, led by a drop in Alitalia after a court blocked the acquisition of low-cost airline Volare, and as US futures pointed to a weak start of Wall Street, dealers said.
   
At 12.46 pm, the Mibtel index fell 1.28 pct to 27,154 points and the S&P/Mib was off 1.17 pct at 35,485, while volumes stood at 3.7 bln eur.

Stockholm - Shares gave up early gains to close sharply lower as investors took fright at the sight of Wall Street's negative futures ahead of a public holiday which will close the Stockholm exchange until Friday, brokers said.
   
The market closed at 1 pm with OMX Stockholm index down 1.85 pct at 300.93 and the OMX Stockholm 30 down 2.38 pct at 933.27. Turnover was 24.081 bln skr.

Zurich - Shares continued to decline in thin afternoon trade led down by a weak tech sector amid growing economic concern, and with Wall Street futures pointing once again to a lower opening, dealers said.
   
At 1.59 pm, the SMI was 118.49 points or 1.6 pct lower at 7,435.98, while the SPI was down 86.70 points at 5,802.55.

Helsinki - Helsinki shares were up across the board in midday trade, reversing initial lows on bargain-hunting and a string of broker upgrades, dealers said.
   
At 12.13 pm, the OMX Helsinki  25 was 0.72 pct higher at 2,442.64, while the OMX Helsinki was up 0.46 pct at 8,716.06.

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Asian shares close mostly higher on bargain hunting, higher metal prices

HONG KONG - Share prices across the Asia-Pacific region ended mostly higher on bargain hunting and stronger metal prices, dealers said.
   
Tokyo share prices rebounded to close sharply higher as bargain hunters, particularly foreigners, emerged after the market's heavy selldown over the past three days, dealers there said.
   
Ahead of the opening bell overseas' investors purchased 20.8 mln shares against sales of 36.1 mln yesterday morning.
   
A pullback in the yen against the dollar also helped entice some buyers back into the market, after the Japanese currency's recent gains had raised fears about the negative impact on earnings of many exporters.
   
The Nikkei 225 Stock Average closed up 308.00 points, or 2.0 pct, at 15,907.20, its high for the day. Yesterday, the blue-chip marker settled down 258.67 points or 1.6 pct at 15,999.20, its weakest finish since Feb 20.
   
The broader-based TOPIX index of all first-section issues gained 26.75 points or 1.7 pct to 1,606.01.
   
Australian share prices ended higher as investors bought resource stocks following the rebound in metal prices overnight, dealers said.
   
They said index-leading resource stocks BHP Billiton and Rio Tinto led the market higher, recovering from heavy selling since a commodities market correction began on May 11.
   
But, dealers said, investor enthusiasm failed to extend to the major banks as caution remained.
   
The S&P/ASX 200 rose 23.9 points or 0.48 pct to close at 5,037.7, recovering some way to the May 11 record high of 5,364.5.
   
The S&P/ASX 200 closed below the day's high of 5,062.1 and above the low of 5,018.8.
   
Hong Kong share prices bucked the regional trend, trading sharply lower during the day, led by China Mobile and a drop in property stocks, dealers said.
   
They said sentiment was hit after Wall Street failed to sustain intra-day gains yesterday and ended lower amid continued worries over interest rates.
   
As stocks rose higher in Tokyo, the Hang Seng Index reversed earlier losses and at 3:26 pm the index was up a modest 9.48 points or 0.06 pct at 15,874.04.
   
In mainland China, A-shares in Shanghai and Shenzhen closed lower on follow-through selling and liquidity concerns over upcoming IPOs with airlines and textile companies under pressure, dealers said.
  
The Shanghai A-share Index lost 14.54 points to 1,670.94 on turnover of 32.67 bln yuan and the Shenzhen A-share Index was down 13.69 points at 399.91 on turnover of 17.11 bln yuan.
   
Seoul share prices finished slightly higher in choppy trade, putting the brakes on a recent steep decline, with the market direction swayed by foreign investor positions in both spots and futures, dealers said.
   
After a brief upturn initially, the market threatened to drop to its long-held support level of 1,300 points as foreign investors dumped IT and bank shares and program selling intensified.
   
But the market recovered all early losses in late trade on a sudden inflow of program buying, sparked by foreign investor interest in futures.
   
The KOSPI index closed up 3.52 points or 0.26 pct at 1,333.38, after moving between 1,335.09 and 1,303.67.

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Gold futures fall more than $20 in morning trading

SAN FRANCISCO - June gold fell $20.20, or 3%, to $653.50 an ounce after touching a low of $649 to wipe out the previous session's $16 gain. Weaker-than-expected durable-goods data for April fueled hopes that further interest rate hikes would no longer be needed.

"Investors ... appear to prefer loading up on more [gold] only if they perceive that the correction has run its full course or if prices are at truly bargain-basement levels (say from $580 to $620)," said Jon Nadler, an analyst at Kitco.com.

July silver was down 51 cents at $12.66 an ounce and July copper lost 18.55 cents, or 4.8%, to $3.70 a pound.

Crude-oil futures moved lower ahead of weekly supply data. Analysts are mixed on whether crude inventories will show a rise or a fall in the latest week, but there is some consensus that gasoline stocks will show a build. Crude for July delivery was last down 93 cents at $70.83 a barrel.

On the bond market, long-term Treasury prices were higher, sending yields lower after the durable goods data boosted hopes on interest rates. The benchmark 10-year note was up 5/32 at 100 29/32, with its yield at 4.99%.

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