US & World Daily Markets Financial Briefing 25-07-2007

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Stocks rebound after selloff

NEW YORK - Wall Street rebounded sharply Wednesday after strong quarterly earnings from Amazon.com Inc. and Boeing Co. helped offset fears that the slumping mortgage industry will weaken the economy.
   
The stock market was coming off a tumble Tuesday that drove the Dow Jones industrials down more than 200 points. Investors were rattled by disappointing earnings and renewed concerns about the mortgage lending market.
   
Investors will get a better glimpse of the economy at 10 a.m. when the National Association of Realtors reports on existing home sales for June. The market anticipates that 5.85 million homes were resold in June, down from 5.99 million in May, according to the median estimate of economists surveyed as of Friday by Thomson Financial.
   
The report follows data from the Mortgage Bankers Association that showed mortgage applications fell for the first time in four weeks, hitting a five-month low as demand wanes.
   
The market's drop Tuesday was in part pinned on Countrywide Financial Corp., which missed analysts' expectations for second-quarter profit and warned the struggling industry will keep getting worse this year.
   
Although some market watchers worry that the deteriorating lending climate will cork this year's huge stream of dealmaking, Wall Street did not appear to share that concern Wednesday.

Though Cerberus Capital Management is reportedly having a hard time selling debt to refinance Chrysler Group, which it is buying for $7.4 billion, the acquisitions keep coming. On Wednesday, Siemens AG said it will sell its VDO auto parts unit to Germany's Continental AG in a $15.67 billion deal.
   
In early trading, the Dow Jones industrial average rose 82.27, or 0.60 percent, to 13,799.22.
   
Broader stock indicators were also higher. The Standard & Poor's 500 index was up 12.03, or 0.80 percent, at 1,523.07, and the Nasdaq composite index gained 22.27, or 0.84 percent, to 2,662.13.

The Russell 2000 index of smaller companies was up 7.44, or 0.92 percent, at 819.30.
   
In afternoon trading, Britain's FTSE 100 was up 0.30 percent, Germany's DAX index was down 0.49 percent, and France's CAC-40 was down 0.28 percent.
   
Bonds rose, with the yield on the benchmark 10-year Treasury note at 4.93, down from 4.95 percent late Tuesday.

Stocks in focus
   
Amazon.com Inc. surged $17.55, or 25 percent, to $86.80, after the Web retailer said its second-quarter profit more than tripled on strong sales of books, music and electronics worldwide.
   
Boeing Co., one of the 30 Dow components, rose $3.65, or 3.5 percent, to 107.45. It posted a $1.1 billion profit in the second quarter, compared with a year-ago loss, as it continues to build momentum against European rival Airbus.

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Dollar stronger ahead of key US housing data as risk appetite wanes

LONDON - The dollar was stronger ahead of key US housing data, climbing to its highest level against the euro in two weeks as falls in equity markets prompted a rise in risk aversion.
   
The greenback has firmed as waning risk appetite spreads from credit markets linked to the troubled US subprime sector into other global markets with major equity markets all posting declines. This supports the currency as investors reposition their overseas holdings, reverting back to dollar-denominated assets.
       
But the dollar's rally may prove to be short-lived depending on June existing home sales figures, due out at 1.30 pm.
    
Analysts expect the numbers to show the slowdown in the US housing market isn't over yet, with the median forecast for 5.85 mln existing home sales, down more than 2 pct from May's 5.99 mln.
   
"A soft number is likely to weigh further on yields, pushing out credit spreads and risks causing the dollar to slip," said Gavin Friend, currency strategist at Commerzbank. 
   
Elsewhere, the pound was weaker as profit-taking set in following the currency hitting a fresh 26-year high yesterday.
   
A weak manufacturing survey from the Confederation of British Industry yesterday has unhinged expectations that the Bank of England will definitely raise interest rates again in the coming months, with analysts now suggesting the currency's overpriced.
       
Finally the New Zealand dollar was weaker ahead of the country's interest rate decision later tonight. The Reserve Bank of New Zealand believes its currency's exchange rate is significantly overpriced but may still raise rates in a bid to cool the country's booming economy.

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Euroshares down midday, disappointing chip, auto Q2, Glaxo excels

LONDON - Europe's leading exchanges lost ground for a second day in a row after a raft of disappointing quarterly results in the semiconductor and auto sectors, while pharmaceuticals shined as GlaxoSmithKline rose more than 3 pct after presenting second-quarter figures that exceeded expectations.
   
At 12.19 pm, the Dow Jones STOXX 50 Index was down 4.24 points, or 0.11 pct, at 3,873.20, a day after posting its biggest one-day point decline in over four months, and as the STOXX 600 dropped 0.94 points or 0.24 pct to 388.00.
     
Back in Europe, results from a string of blue-chip companies dominated morning trading and GlaxoSmithKline provided a positive surprise as its second-quarter results came in above expectations.
   
The company said EBIT was 1.896 bln stg in the second quarter, while analysts had forecast a fall to 1.85 bln stg from 1.89 bln stg in the same period last year. The company also said it sees 2007 earnings per share rising 8-10 pct compared with the year earlier. Earlier today shares were losing ground after Bear Stearns cut its stance to 'underperform' from 'peer perform'.
  
Meanwhile, peer Merck KgaA fell 0.96 pct as the pharma and chemicals conglomerate released second-quarter figures that showed better-than-expected net profit, but largely came in lower than expected on all other key figures.
   
Fresenius Medical Care gained 6.3 pct, with traders pointing to a report that US Medicare will continue to supplement payments of private patients who suffer from anaemia.
  
Kicking off with the technology sector, shares in STMicroelectronics fell to their lowest level in nearly nine months as analysts gave a lukewarm welcome to the chip maker's second-quarter results and outlook. STMicro said gross margins in the quarter came in at 34.7 pct against consensus estimates of 35.05 pct. The stock was last off 4.67 pct.
   
There was further bad news for the chip sector as shares in UK bluetooth specialist CSR tumbled 11.63 pct after a cautious outlook from the company in the wake of solid second-quarter results.
   
CSR (Cambridge Silicon Radio) said it expects revenues for the fourth quarter will be slightly lower than the previous quarter, due to a normal seasonal slowdown in trading.
   
Infineon shares, meanwhile, rebounded a little - down 0.79 pct at last check, after dropping more than 2 pct earlier as the German chipmaker's US unit Qimonda AG posted much deeper losses than expected and said it will cut its capital spending plans and step up cost savings as a result.
   
This string of disappointing European chip results comes just a day after Texas Instruments, the world's largest maker of mobile phone chips, posted lacklustre results.
   
Business Objects supplied some investor with cheers in the software arena after the company beat its own guidance with a two-fold increase in second quarter earnings per share, prompting it to raise its forecasts for the full year. Shares gained 7.54 pct.
   
Turning to the auto sector, shares in Peugeot fell 1.77 pct amid disappointment with the company's outlook for the second half of 2007.
      
Mercedes' earnings before interests and taxes (EBIT) are expected at around 1.05 bln eur, up from 690 mln, while sales are forecast to average around 13.523 bln compared with 12.497 bln for the same period last year. Peer Volkswagen rose 0.36 pct in a falling market after rumours emerged that Ford has acquired a 11.2 pct stake in the automaker.
  
Traders were unconvinced, and one London-based broker said Ford is not in the financial position to make such a sizeable purchase. Another trader in London agreed. "VW is cheap and there is a lot of switching into it, as Scania and Man upsides are priced in as zero," he added.
    
In Scandinavia, shares in AB Volvo fell 6.55 pct on the back of weaker-than-expected second-quarter results, which highlighted what brokers said could be underlying difficulties in its North American operations.

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Asian stocks mostly down; Tokyo plunges on Wall Street sell-off, rising yen

MUMBAI - Shares across the Asia-Pacific region were mostly down Wednesday, as the overnight plunge in Wall Street weighed on some markets, with stocks in Tokyo and Australia falling on low investor sentiment.
   
The Nikkei 225 Stock Average fell 143.61 points or 0.8 pct to 17,858.42 as investors fretted about a rising yen, although some  bargain-hunting helped the key index recoup some losses.
     
China A-shares closed sharply higher led by financial and energy shares on optimism that the index will soon set a record high. The benchmark Shanghai Composite Index, which covers both A- and B-shares listed on the Shanghai Stock Exchange, closed up 113.64  points or 2.7 pct at 4,323.97.
   
The Shanghai A-share Index was up 118.92 points or 2.7 pct at 4,535.78 and the Shenzhen A-share Index was up 30.45 points or 2.47 pct  at 1,265.61.
       
In Jakarta shares closed lower, with the main index snapping its four-day record-setting streak, as investors pocketed profits across the board. The composite index closed down 6.58 points or 0.3 pct at 2,394.565 on volume of 6.19 billion shares worth 5.37 trillion rupiah. The index's fall was, however, capped by gains in PT Medco Energi and the country's second biggest bank PT Bank Central Asia.
   
In Hong Kong, share prices closed lower on profit-taking triggered by Wall Street's sharp fall overnight, with declines spread across the board, led by financials. The Hang Seng Index closed down 110.7 points or 0.5 pct at 23,362.18, off a low of 23,228.56 and a high of 23,439.83.    
   
Australian share prices ended sharply lower as investor sentiment dropped in line with the US equity markets sell-off. The S&P/ASX 200 closed down 81.8 points or 1.3 pct at 6,340.5, retreating from Tuesday's record close of 6,422.3. The key index moved between 6,334.5 points and 6,396.1.  The All Ordinaries Index dropped 77.5 points or 1.2 pct to settle at 6,378.0.
   
South Korean shares closed higher, supported by a Moody's sovereign rating upgrade, with the main KOSPI index closing above the 2,000 points  mark for the first time. Stronger-than-expected second quarter GDP data also helped erode early losses, sparked by Wall Street's Tuesday slump.  The KOSPI index closed up 11.96 points or 0.6 pct at 2,004.22, after moving between 1,962.16 and 2,011.17 points.
   
Taipei share prices closed mixed as bargain-hunting emerged to trim early losses in the wake of Wall Street's overnight downturn, dealers  said. The weighted index closed down 3.93 points or 0.04 pct at 9,740.13, off a low of 9,656.04 and a high of 9,763.26.
       
Singapore shares closed lower after US markets' tumble overnight gave investors a reason to take profits. The Straits Times Index  closed down 31.59 points or 1 pct at 3,633.54.
   
Philippine share prices closed sharply lower, sending the benchmark index to its weakest finish in four weeks. The 29-company composite index lost 60.73 points or 1.6 pct to close at 3,645.51. The broader all-share index fell 38.05 points or 1.6 pct  to 2,368.52.
   
In Malaysia, the Kuala Lumpur Composite Index closed down 12.45 points or 1 pct at 1,379.73, as investors took profits.
 
Indian shares ended lower, taking cues from weak Asian markets, and as investors locked in some gains after the recent steep rise in prices. The Bombay Stock Exchange's 30-share Sensex closed provisionally at 15,699.33 points, down 95.59 points or 0.61 pct. The National Stock Exchange's 50-issue S&P CNX Nifty ended provisionally at 4,592.70, also down 0.61 pct.

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Copper falls as the threat from labour disputes ease
 
LONDON - Copper fell as workers at Xstrata's CCR refinery in Montreal prepared to return to work today following the end of their strike.
   
The red metal has rallied on supply fears in recent weeks, influenced by labour disputes in North and South America, the majority of which now appear to be close to resolution.
   
"Copper's mainly coming off because of the strikes," said Calyon analyst, Michael Widmer. "They were the driving prices and now with them seeming to come to an end they're starting to come off."   
   
At 1.48 pm, LME copper for three-month delivery was trading down at 7,845 usd, against 7,960 usd at the close yesterday.
   
In other strike news, Chile's state copper miner Codelco said on Monday it had reached agreement with just under half of its subcontracting workers who have been on strike for the last 29 days, while Southern Copper Corp said it too has reached preliminary agreements with four workers' unions in Peru.
   
However, work at Codelco's El Salvador mine was again halted due to protesters blocking trucks and oil supplies from entering the area.    

Sub-prime concerns in the US are also weighing on copper prices, dragged lower by nervous equity markets, and concerns over the outlook for new housing builds in the US reducing demand for the red metal in the states.
   
Copper inventories fell 2,100 tonnes to 99,025 tonnes, said the LME in a daily report.
  
Other metal prices were largely down across the complex, with lead giving up around 4 pct early in the session following last week's rally, which saw the heavy metal gain over 10 pct.
        
Lead fell to 3,260 usd against 3,380 usd at the close yesterday, hitting an intraday low of 3,215 usd. Nickel slipped further to 31,795 usd from 32,250 usd, after losing nearly 4 pct yesterday.
 
Aluminium edged lower to 2,780 usd against 2,828 usd yesterday, while zinc fell to 3,665 usd from 3,730 usd. Tin was up slightly to 15,395 usd from 15,360 usd.

Gold extended losses into afternoon trade as the dollar firmed and on a rise in global risk aversion after the equity markets dipped overnight, spooking investors out of commodities and into lower-risk assets such as cash and bonds.
       
At 12.55 pm, spot gold was trading at 677.43 usd an ounce, against 684.50 usd in late New York trade yesterday. Yesterday, prices hit an intraday high of 687.38 usd, the highest since early May.
       
Investors' confidence has been knocked by the fall-out from the US sub-prime mortgage crunch, leading to a dip in equity prices yesterday and this morning.
   
In other precious metals, platinum eased to 1,314 usd per ounce from 1,318 usd yesterday, while its sister metal palladium dipped to 364 usd against 366 usd.
   
Both platinum group metals were pressured by news a wildcat strike at two mines in South Africa owned by Aquarius Platinum has ended, although Aquarius and Anglo Platinum said strikes have cost them a combined 9,400 ounces in lost output. Silver slipped in sympathy to 13.17 usd against 13.37 usd.

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