US & World Daily Markets Financial Briefing 25-08-2006

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Stocks dip ahead of Bernanke speech

NEW YORK - Investors stayed on the sidelines in early trading Friday ahead of a speech by Federal Reserve Chairman Ben Bernanke that could shed light on the future of interest rates.
   
Stocks have retreated on questions about whether the economy is slowing more than expected, a theory bolstered by housing and durable goods data released this week. Wall Street is looking for any clues that might suggest which route the Fed will take to control inflation yet still keep the economy strong enough for companies to flourish.
   
Bernanke was speaking at the Federal Reserve's annual symposium in Jackson Hole, Wyo., at 10 a.m. EDT about global economic integration. His comments, expected to be closely followed by Wall Street, come ahead of key economic data due next week on consumer confidence, job growth and manufacturing.
   
Recent reports showed sluggish new and previously owned home sales, while durable goods orders dropped further than expected. Investors have been struggling to stage a rebound, with the markets closing higher Thursday by slim margins on light summer volume.
   
In the first hour of trading, the Dow Jones industrial average dropped 38.90, or 0.34 percent, to 11,265.56.
   
Broader stock indicators also retreated. The Standard & Poor's 500 index fell 3.36, or 0.26 percent, to 1,292.70, and the Nasdaq composite index fell 6.96, or 0.33 percent, to 2,130.15.

Stocks in focus
   
Home Depot added $3.5 billion to its stock buyback program. German-listed Home Depot shares rose 1 percent on light volume.
   
J. Crew Group may climb after lifting its fiscal-year earnings forecast. The company reported a widening of its second-quarter loss, but its 17 percent sales rise was better than Wall Street expected.
   
Toyota Motor declined in Japanese trading on reports it will delay new model introductions due to a surge of vehicle recalls and quality problems.
   
Declines for Toyota and Sony helped pull the Nikkei 225 lower for the day, off 0.1 percent, though many technology shares in Asia rose.
   
European markets were a touch higher, with gains for banks on merger speculation and from telecommunications companies after Vodafone Group agreed to sell its 25 percent stake in a Belgian mobile operator to Belgacom for $2.6 billion.

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Yen slides to new record lows against euro after weak Japan CPI data

LONDON - The yen slumped to new record lows against the euro today after weaker-than-expected Japanese inflation data overnight suggested that interest rates are unlikely to rise again this year.
   
The core CPI, which excludes volatile prices of fresh food, rose 0.2 pct year-on-year for the second straight month in July, coming in well below analysts' expectations for a bigger rise of 0.5 pct.
   
An adjustment to the weightings and base year of the CPI index, which is carried out every five years, clipped 0.4 pct off the previous estimate of a 0.6 pct rise.
   
The news pushed the euro to new record highs of 149.90 against the yen, inching ever closer to the key 150 level, while the dollar rose to a one month high against the currency of 117.42 yen.
   
Elsewhere, the dollar was firm against the euro, holding onto yesterday's gains, though trading remained very rangebound in the absence of any notable data out of the US today and ahead of a public holiday in the UK on Monday.
   
The US currency staged moderate gains yesterday after solid core durable goods orders data and on relief that US new home sales were not as bad as many had feared.
   
The pound meanwhile rose slightly after UK second-quarter economic growth was confirmed at 0.8 pct from the first quarter and 2.6 pct year-on-year.
   
The release contained "few, if any, surprises" and suggests that second-quarter growth was "punchy and broadly balanced", with strong levels of household spending, investment and government expenditure, said Nick Verdi at Barclays Capital.
   
Other data out this morning from the British Bankers' Association showed a dip in mortgage approvals during July, which was attributed largely to July being a typically slow summer month.

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The European Markets at 11.30 GMT

London - UK blue chips hovered around the flat-line at midday, reversing earlier good gains, as a mixed mining sector and indications of a weaker opening on Wall Street outweighed firm banking stocks, dealers said.
   
By 12.10 pm, the FTSE 100 was 1.8 points lower at 5,867.3, well below an earlier peak of 5,893.6.

Frankfurt - Shares were slightly higher in midday trade as Commerzbank soared on fresh takeover speculation, which emerged on the back of expectations of a merger between Italy's Banca Intesa and Sanpaolo IMI, though a rise in oil prices limited gains for the blue-chips, dealers said.
   
At 11.58 am, the DAX 30 index was 5.05 points or 0.09 pct higher at 5,819.13, having moved between 5,808.05 and 5,834.07 so far this session.

Paris - Shares were flat at midday, awaiting direction from the US as corporate news in France remained fairly thin, dealers said.
   
At 12.22 pm, the CAC 40 index was up 1.24 points or 0.02 pct at 5,114.09.  Of the 39 stocks currently in the index as it awaits a replacement for Arcelor, 18 were down, 16 were up and five were unchanged.
   
Amsterdam - Share prices were slightly higher in quiet early afternoon trade, with ABN Amro outperforming as the planned merger between Banca Intesa and Sanpaolo IMI fuelled hopes of further sector consolidation, dealers said.
   
At 1.18 pm, the AEX was up 2.01 points or 0.43 pct at 465.75, after opening at 464.72 and trading in a narrow range of 464.14-466.59.
   
Madrid - Share prices were flat in light midday trade as investors awaited US Federal Reserve chairman Ben Bernanke's speech on global economic integration later today, with the banks the main outperformers on merger fever, dealers said.
   
At 12.00 pm, the IBEX 35 index put on 14.8 points to 12,070.8, after trading in a range of 12,057-12,099, on thin volume of 480 mln eur.
 
Milan - Milan shares were flat at midday, underpinned by gains in the banking and insurance sector as Sanpaolo and Banca Intesa are expected to announce plans to merge, dealers said.
   
At 12.04 pm, the Mibtel index was up 0.10 pct at 28,795 points and the S&P/Mib added 0.01 pct at 37,676.

Stockholm - Stockholm shares were slightly higher in midday trade led by Ericsson, but with the forestry, oil and banking sectors also gaining, brokers said.
   
At 12.00 pm, the OMX Stockholm index was up 0.61 pct at 314.88, and the OMX Stockholm 30 up 0.76 pct at 979.19. Turnover was 5.015 bln skr.

Zurich - Share prices were moderately higher in early afternoon trade led by financials in a thin trading session, with investors sidelined ahead of a potentially market-moving speech by US Federal Reserve chairman Ben Bernanke later today, dealers said.
   
At 12.35 pm, the Swiss Market Index was 21.72 points higher at 8,120.69, and the Swiss Performance Index up 16.19 points at 6,311.84.

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Asian shares closed mixed, awaiting Bernanke speech
 
HONG KONG - Shares across the Asia-Pacific region closed mixed with markets awaiting a speech later today by US Federal Reserve chairman, Ben Bernanke, and hoping for guidance on the US economy, dealers said.
   
Tokyo shares closed lower after a late wave of profit-taking erased gains made earlier, with caution setting in later in the day, dealers said.
   
The blue-chip Nikkei 225 Stock Average closed 21.96 points or 0.14 pct lower at 15,938.66. Over the week, the index lost 1.00 pct. The broader TOPIX index of all first section issues closed 3.22 points or 0.2 pct lower at 1,619.81. Over the week, the index fell 1.3 pct
   
Australian shares closed higher with investor sentiment rebounding from yesterday's sharp sell-off as stronger earnings reports continued to support the market, dealers said.
   
They said additional momentum came from speculation that a takeover offer for leading retailer Coles is drawing nearer and could be announced as early as Monday.
   
The S&P/ASX 200 rose 35.8 points or 0.72 pct to close at 5,023.6. The benchmark indicator closed at the day's high of 4,982.7, with the low at 4,983.0. Over the trading week the index lost 28.9 points or 0.57 pct.
   
Hong Kong shares were marginally higher in afternoon trade with some bargain hunting in blue chips such as China Mobile and HSBC following the market's sharp drop yesterday, dealers said.
   
At 3:25 pm the Hang Seng Index was up 29.99 points or 0.18 pct at 16,913.03.
   
In China, A-shares in Shanghai and Shenzhen closed flat with investors cautious ahead of a compensation plan to be issued on Monday by China Petroleum & Chemical Corp covering the restructuring of its state share holdings, dealers said.
   
The Shanghai A-share Index fell 0.02 points to 1,706.20 and the Shenzhen A-share Index was up 1.54 points at 420.88.
   
Seoul shares finished sharply higher with sentiment buoyed by renewed hopes for an end to the US rate hike cycle, dealers said.
   
Large-cap blue chip stocks surged on heavy program buying, helping the index rise through the 120-day moving average of 1,300 points at one stage, they added.
     
The KOSPI index closed up 13.62 points or 1.04 pct at 1,329.35, after trading between 1,333.89 and 1,317.65. For the week, the main board index fell 1.75 points.

Asian Bourse Round-Up

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Oil prices surge on tropical storm, Iran fears

LONDON - World oil prices have jumped on supply concerns caused by the threat of a tropical storm and fears that Iran may disrupt exports if hit by economic sanctions over its disputed nuclear programme, analysts said.
   
In London, Brent North Sea crude for October delivery climbed 1.14 usd to 73.82 usd per barrel in electronic deals.
   
A barrel of light sweet crude for October delivery rose $1.08 to $73.44 in early trading on the New York Mercantile Exchange.
   
Crude futures were higher "amid concerns that a storm in the Caribbean could cause disruption to US Gulf supplies", said Michael Davies, an analyst with the Sucden brokerage firm in London.
   
"Meanwhile the Iranian saga continues to rumble along," he said.
   
According to the National Hurricane Center (NHC) in the United States, a tropical depression is threatening to become a tropical storm later Friday.
   
The depression, which will be known as Ernesto should it turn into a storm, has grabbed the market's attention owing to its flight towards the Gulf of Mexico, where oil platforms produce between 25 and 30 pct of US crude.
   
The NHC said the depression, currently north of Venezuela, was on course to hit the Gulf of Mexico on Wednesday at the latest.
   
Last year, energy facilities on the rig-heavy US Gulf Coast were ravaged by hurricanes, pushing oil prices to then-record high points.
   
Elsewhere, the market continued to focus on Iran, the world's fourth biggest producer of crude. In line with a UN Security Council resolution, the United States and its European allies insist that Iran must stop enriching uranium by Aug 31 or face the threat of sanctions.
   
Analysts argue that sanctions could lead to Iran disrupting its vital oil supplies. Iran pumps about 4.0 mln barrels of oil per day of which around 2.7 mln barrels are exported.

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