US & World Daily Markets Financial Briefing 25-04-2007

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The Dow Jones industrials cross 13,000

NEW YORK - The Dow Jones industrial average shot past 13,000 for the first time Wednesday, powered by better-than-expected corporate earnings that boosted investors' confidence in the U.S. economy.
   
The stock market's best-known indicator surged past its latest milestone shortly after the opening of trading, and continued rising to 13,036.99 before retracing some of its steps and hovering around the 13,000 mark.
   
The Dow climbed to a new record as many of the country's biggest companies surpassed analysts' first-quarter earnings projections. Among those beating forecasts Wednesday: soft drink maker PepsiCo Inc., materials manufacturer Corning Inc., consumer products company Colgate-Palmolive Co. and Dow component Boeing Co.
   
Wall Street got an additional lift from the Commerce Department's report of better-than-expected durable goods orders last month, reassuring investors that demand for U.S. products remains strong, lending support to the economy. The department also reported that sales of new homes rebounded slightly in March, as the market expected.
   
It took the Dow just 129 trading days, since Oct. 18, to make the trek from 12,000 to 13,000, far less than the 7 1/2 years that the blue chips took to go from 11,000 to 12,000. But the swiftness of this latest trip does recall the days of the dot-com boom when the major indexes were soaring and it took the Dow a mere 24 days to barrel from 10,000 to 11,000.
   
In the first hour of trading, the Dow was up 34.70, or 0.27 percent, at 12,988,64.
   
The broader Standard & Poor's 500 index was up 4.00, or 0.27 percent, at 1,484.41, while the technology-dominated Nasdaq composite index was up 4.73, or 0.19, at 2,529.27.
   
Bonds slipped on the positive economic data, with the yield on the benchmark 10-year Treasury note rising to 4.64 percent from 4.62 percent late Tuesday.
   
The Dow was the first of the major indexes to recover from the stock market's prolonged slump in the early part of the decade. The S&P 500 has yet to reach its closing peak of 1,527.46, reached in March 2000, and no one expects the Nasdaq to reach its record of 5,048.62, also reached in March 2000, anytime soon.
   
Still, the Dow's latest achievement did not come without setbacks and volatility -- the index lost 416 points in a single session, on Feb. 27, amid fears that the U.S. economy would fall into recession and that China's economy would slow as well.

And Wall Street has had periodic shudders over signs that inflation might be getting out of hand -- a trend that would lead the Federal Reserve to resume interest rate hikes -- and over data that showed continuing weakness in the housing market.
   
Just two weeks ago, the Dow fell nearly 90 points after minutes from the last Fed meeting showed the central bank's level of concern about inflation.

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Canadian dollar brushes off strong US data to hit near 6-mth high vs usd

The Canadian dollar brushed off strong US durable goods data to hit its highest level in nearly six months against its US counterpart as the market concluded that Canada is well-placed to benefit from a stronger US economy.
   
Figures released this afternoon showed US durable goods surged by 3.4 pct over the month, way above the 2.3 pct rise analysts had expected.
   
Immediately after the data, the US dollar rose to 1.1208 cad from 1.1196 just before the figures were released, only to quickly rebound to a low of 1.1183 cad. This is the Canadian dollar's strongest level since the end of October last year.
   
While other major currencies have fallen against the dollar in the wake of the data, the Canadian dollar has benefited as the market concluded that a stronger US economy may allow the Bank of Canada to raise interest rates.
   
"If the US economy holds its ground, the BoC may be forced to focus on inflation sooner than expected," giving the Canadian dollar "a cushion other currencies may not enjoy," said Thomson IFR Markets analyst Jamie Coleman.
   
He noted that the Bank of Canada has singled out US weakness as its main downside risk. Yesterday, the Bank of Canada left interest rates on hold at 4.25 pct.
 
At 1.50 pm BST, the euro was trading at 1.3633 usd, down from 1.3647 just before the data were released and after earlier hitting a fresh two-year high of 1.3659 usd. The pound meanwhile fell to 2.0019 usd from 2.0044 previously, while the dollar rose to 118.70 yen from 118.60.

Norwegian krone falls sharply after central bank leaves rates on hold

The Norwegian krone fell sharply, reaching five-week lows against the euro, after the Norges Bank surprised the market by opting to leave its deposit rate unchanged at 4 pct.
   
Market players had broadly expected the central bank to hike rates to 4.25 pct given recent stronger-than-expected inflation data.
   
"The Norges bank has surprised the market by leaving the deposit rate unchanged at 4 pct," said Zaki Kada at Thomson IFR Markets. "All the omens were pointing for the need to hike the deposit rate; labour market has tightened, capacity utilisation has shrank, credit expansion accelerated and household debt has increased so the move comes as a surprise to us," he added.
   
At 13.32 pm BST, the dollar was trading at 5.9708 against the Norwegian krone, up from 5.9350 prior to the announcement. The euro meanwhile surged to a five-week high of 8.1906 nkr.The krone had earlier hit a 14-year high against the US dollar of 5.9293.
   
The central bank said in its accompanying statement that while consumer price inflation has been "somewhat higher than expected", this had "primarily been fuelled by prices that show wide monthly variations".

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Top Stories in Europe at 11.05 BST

London - Royal Bank of Scotland Group PLC and its consortium partners Banco Santander Central Hispano SA and Fortis NV said they have made an indicative offer for ABN Amro Holding NV at 39 eur per share, some 13 pct higher than the value of the Barclays PLC offer as of the market close yesterday.
 
The offer would comprise 70 pct cash and 30 pct in RBoS shares and the consortium said it believes that the execution risk would be lower than in a transaction with Barclays.

Kohlberg Kravis Roberts (KKR) has promised not to cut jobs or close stores at Alliance Boots after effectively winning the takeover battle for the chemist chain and drug wholesalers yesterday, according to a report in the Financial Times. The paper quoted KKR parter Dominic Murphy saying that current staffing levels were secure, and that the private equity giant might even look to open new stores.

Paris - A strike by Eiffage employees protesting against Sacyr Vallehermoso's hostile takeover attempt has halted work throughout Eiffage, a CGT labour union official told Thomson Financial News."In France, in Europe, the whole group has stopped work today," he said, calling it "a general strike" by the company's 56,400 employees.

PPR-owned retail chain FNAC plans to cut 300 administrative jobs in France by the middle of next year as part of a restructuring, human resources director Philippe Decressac told Agence France-Presse. He added that there will be no forced redundancies as each employee affected will be offered one or more alternative positions.

Madrid - Acciona SA said it refutes claims by former bourse regulator CNMV chairman Manuel Conthe about the legality of its pact with Enel SpA to oppose attempts by EON AG to take over Endesa SA. In a statement, Acciona asserted "the legality of all its actions which were assessed by the highest qualified national and international judicial authorities."

Frankfurt - Private equity firm Blackstone is in talks to buy Kloeckner Pentaplast from Cinven and CCMP for 1.3-1.5 bln eur, Financial Times Deutschland reported, citing sources within the financial industry. Cinven and CCMP bought the German maker of plastic packaging for food and medical devices from Kloeckner-Werke AG for 925 mln eur in 2001, it said.

Merck KGaA said that first quarter operating profit rose 11.4 pct to 321.3 mln eur from 288.4 mln, following its acquisition of biotechnology giant Serono SA. "This major acquisition will have a strong influence on this year's results -- both revenue and profit figures -- and it is clear to see that Merck remains on a solid footing and now has much more potential," said CEO Michael Roemer.

Deutsche Telekom AG does not rule out taking legal steps if its employees go on strike over plans to outsource 50,000 jobs, extend working hours and reduce entry-level wages, chief financial officer Karl-Gerhard Eick told German TV station ZDF. "Looking ahead, we have to think about whether we can take legal steps if there are widespread strikes," Eick said.

Madrid - Banco Bilbao Vizcaya Argentaria SA said net profit grew 92 pct to 1.950 bln eur in the first quarter to March from 1.020 bln a year earlier, boosted by 696 mln eur net capital gains from the sale of a 5.01 pct stake in Iberdrola SA. Net profit without exceptional items rose to 1.254 bln eur from 1.020 bln, at the top end of analysts forecasts for 1.182-1.282 bln.

Munich - Siemens AG said second-quarter net profit rose 36 pct to 1.259 bln eur, beating analysts' expectations of 1.193 bln eur. Revenues rose 10 pct in the three months through March, to 20.626 bln eur from 18.824 bln eur, according to a statement the company published last night.    Orders increased 9 pct to 23.469 bln eur from 21.529 bln eur, while group profit from operations rose 49 pct to 1.964 bln eur from 1.314 bln eur.

Oslo - Aker Kvaerner ASA posted first quarter figures ahead of expectations across the board, boosted by a strong order intake and a continued strength in all markets. For the first quarter, operating profits came in at 772 mln nkr, up from 570 mln last time and ahead of the 726 mln consensus forecast of analysts polled by TDN Finans.

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Asian shares close mostly lower on weak US economic data

HONG KONG - Asian shares closed mostly lower on disappointing housing and consumer confidence data released in the US overnight.
   
Tokyo shares ended down, with sentiment hurt by the weaker-than-expected US economic indicators and as investors turned cautious while they await further earnings reports of leading corporations and economic data.
   
Investors were also hesitant to take large positions before the Golden Week national holidays that begin this weekend. The Nikkei 225 Stock Average closed 215.61 points or 1.24 pct lower at 17,236.16, off a low of 17,221.55. The TOPIX index of all first-section issues finished 18.82 points or 1.1 pct lower at 1,687.34, after touching a low of 1,683.19.
   
"Weak US economic data overnight seems to have given rise to the market view that confidence in the US economy has not recovered much, compared to the Dow Industrial's gains and recent positive earnings reports there,"said Kazuhiro Takahashi, equity general manager at Daiwa Securities SMBC.
   
However, he said there was no need for investors to fret too much about the health of the US economy as more economic indicators are due out today, including March new home sales and durable goods orders, which should provide further clues about the US economy.
      
Australian and New Zealand share markets were closed for public holidays today.
   
Hong Kong shares were weaker in afternoon trade as investors turned cautious ahead of the expiry of April futures contracts and the release of further US economic data.
   
China-related stocks were hit due to weak A-share markets on the mainland and worries that the Chinese government will soon announce further measures to rein in its economy.
   
At 3.15 pm the Hang Seng Index was down 92.85 points or 0.45 pct at 20,479.95.
   
In mainland China, A-shares in Shanghai and Shenzhen closed mixed amid profit-taking with metal stocks and machinery manufacturers under pressure. The Shanghai A-share Index ended up 24.57 points or 0.63 pct at 3,934.96 while the Shenzhen A-share Index finished down 4.48 points or 0.41 pct at 1,093.04.
   
Seoul shares closed lower, with investment trust firms opting to sell after recent record-breaking rallies led to a rise in fund redemptions.The market had closed at new records in the previous two sessions.
   
After touching a new intraday record in early trade, the main index soon lost momentum, in tandem with declines in other key Asian markets.  Declines were broad, with retailers, car makers and telecoms posting the steepest losses.
   
The KOSPI index closed down 11.16 points or 0.72 pct at 1,545.55, after moving between 1,536.12 and 1,558.72.
   
Taipei shares finished at the day's low as losses across regional markets weakened any follow-through interest and drove investors to take profits. Sectors that still had profits to offer following a previous rally, particularly select technology firms, came under heavy pressure.
   
The weighted index closed down 60.36 points or 0.75 pct at 7,984.65, slipping off the 8,000-point benchmark. It traded between 8,041.27 and 7,984.65, on turnover of 93.78 bln twd.

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Platinum market seen rallying further in 2007

LONDON - Platinum is expected to rally further in 2007 on positive investor sentiment and strong fundamentals, according to precious metal consultancy GFMS.
   
Launching its Platinum and Palladium Survey 2007, GFMS said the outlook for palladium is also bright, even though heavy Russian stock sales are again expected to tip the metal into a sizeable surplus.
   
GFMS expects platinum prices to reach a high of 1,450 usd an ounce this year, but warned that the estimate may prove conservative as its survey went to press before this week's new ETF launches were made public.
   
"We don't see a reason to change our forecast range (on account of the ETF launches) but we do expect platinum to trend towards the high end of that range at 1,450 usd," said Peter Ryan, who presented the survey's findings in London.
   
ETF Securities launched five new physically-backed exchange-traded commodities (ETCs) based on platinum, palladium, gold and silver on the London Stock Exchange yesterday.
   
Meanwhile, Swiss bank ZKB is planning to launch an ETF in platinum, palladium and silver on May 10.
   
ETCs, like ETFs, trade commodity futures, backing up every ounce of stock bought on paper with actual physical stock. As a result, the launch of an ETF often squeezes the market as it eats up the amount of physical stock available.
   
For the platinum market in particular, the availability of above ground stocks are limited and GFMS said its positive outlook on platinum is partly based on this.
   
It is also based on the increasingly inelastic nature of platinum demand. However, GFMS is unsure these two factors alone will drive prices higher, as the platinum market is projected to remain in surplus this year, with mine production expected to grow by 300,000 ounces to 7.3 mln ounces. Added to this, jewellery making is expected to contract further.
   
But GFMS said while risks abound, its overall view is that investor sentiment will stay supportive for platinum due to longer term, background factors such as dollar weakness, inflation concerns and geopolitical tensions.
   
For palladium, the consultancy's 2007 outlook is more cautious, but it still sees the metal hitting a high of 420 usd an ounce due to continued investor support.
    
For this year, GFMS expects palladium mine output to rise by only 2 pct, with gains in South African output forecast to be partly offset by lower production from the world's number one producer Norilsk Nickel.
   
On the other hand, demand from the auto-catalyst sector is seen extending last year's 8 pct rise - the first in 6 years - while demand for palladium jewellery should improve in China and gain even greater acceptance in the US.
   
Last year, fabrication of palladium jewellery was weaker even than that of platinum fabrication, which was 39 pct below levels seen in 1999. Unlike palladium, however, platinum fabrication is not expected to recover this year.
   
As survey presenter Peter Ryan noted: "Given that we are forecasting platinum prices to break through 1,400 usd this year we would not be surprised to see further losses in platinum jewellery".
   
Losses in platinum jewellery demand last year were so severe they restrained the 6.5 pct rise in demand from the key auto-catalyst sector and helped leave overall demand for the year up only 2 pct.
   
This 2 pct rise in demand was not enough to offset the 6 pct rise in global mine supply. As a result, the platinum market moved into a surplus for the first time since GFMS began its survey in 1999.

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