US & World Daily Markets Financial Briefing 27-03-2007

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Stocks fall on housing market jitters

NEW YORK - Stocks fell Tuesday as worries mounted that the nation's housing market may be slowing sharply enough to seep into the broader U.S. economy.
   
A housing index released Tuesday by Standard & Poor's showed that prices of single-family homes across the nation fell in January compared to a year ago, the worst results in more than 13 years.
   
Also causing concern among investors, Lennar Corp., one of the nation's largest homebuilders, said its first-quarter profit tumbled 73 percent on continued softness in the housing market, and warned it doesn't expect to meet its 2007 earnings guidance.
   
The market has been nervous lately that a drop in housing values will further weaken the already-sinking subprime mortgage market, as well as cause consumers to feel less wealthy and rein in their spending. Consumers account for two-thirds of economic activity.
   
A reading of consumer sentiment arrives Tuesday with the Conference Board's consumer confidence index for March. Wall Street expects the index, which is due at 10 a.m., will slip to 109.0 from 112.5 in February, which had been its highest level in five-and-a-half years.
   
In the first minutes of trading, the Dow Jones industrial average fell 52.87, or 0.42 percent, to 12,416.20.
   
Broader stock indicators were also lower. The Standard & Poor's 500 index lost 7.03, or 0.49 percent, and the Nasdaq composite index declined 9.10, or 0.37 percent, to 2,446.53.
   
Bonds slipped, with the yield on the benchmark 10-year Treasury note rising to 4.62 percent from 4.61 percent late Monday.

Oil edged lower after touching three-month highs yesterday as the market consolidated after yesterday's strong gains on tensions in Iran, the Middle East's second largest oil producer.
   
But prices are expected to hold on to recent gains as attention turns to tomorrow's US stockpile data, with analysts expecting further sharp reductions in gasoline stocks and draws on crude.
  
At 1.03 pm, London Brent crude for May delivery was down 21 cents at 64.20 usd, having touched an intra-day high of 64.63 yesterday, while New York crude for May delivery was 46 cents lower at 62.45 usd.

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Euro boosted by German data, stays close to 2-year highs against dollar

LONDON - The euro got a boost from a surprise rise in the German Ifo business confidence indicator and from early signs of a pick up in inflation in the euro zone's biggest economy.
   
The key Ifo index rose to 107.7 in March from 107.0 in February, above consensus for a decline to 106.6. Indices for both the assessment of current conditions as well as expectations for the future rose.
   
The unexpected increase suggests that German economic growth will be stronger than predicted by most forecasters, said Stephen Lewis at Insiger De Beaufort. "German growth seems to be running at a faster underlying rate this year than last," he said.
   
Looking ahead, markets are likely to focus on the US Conference Board's consumer confidence figure which reached a six year high last month and beyond that to US Federal Reserve chairman Ben Bernanke's crucial testimony to the Joint Economic Committee.
   
"After mixed US housing data has drawn differing views of the state of the housing sector, the market will be interested in Bernanke's assessment of the subprime situation," said Gavin Friend, currency strategist at Commerzbank Corporates & Markets.
   
"As important will be his remarks on whether the FOMC has ended its explicit tightening bias given the ambiguity in the statement," he added.
   
Though the FOMC kept its key Fed funds rate unchanged at 5.25 pct, it appeared to soften its rhetoric, sparking a dollar retreat.
   
The pound edged lower slightly after mixed comments from members of the rate setting Monetary Policy Committee. Bank of England governor Mervyn King said the housing market is starting to show tentative signs of slowing down and inflation is seen easing back as energy prices fall. At the same time, however, deputy governor Rachel Lomax warned that the economy may be working at nearly full capacity.
   
Michael Saunders at Citigroup said he still expects another quarter point rate hike to 5.50 pct either in April or in May. "As things stand, May seems more likely than April, just because it is an Inflation report month," he added.

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Top Stories in Europe at 11.05 BST

London - A boardroom split has opened up at Sanofi Aventis, France's largest drug company, over a proposed 25 bln stg deal to acquire Bristol-Myers Squibb, of the US, that would create one of the world's largest pharmaceutical groups, according to a report in The Times.
 
The Times said it has learnt that a disagreement over strategy has emerged between Jean-Francois Dehecq, Sanofi's chairman, who favours a transformational deal with Bristol-Myers, and Gerard Le Fur, his younger chief executive, who has emphasised the need to focus on the group's internal drug research and development programme.

Air Berlin Plc said it acquired 100 pct of LTU yesterday for 140 mln eur from Intro GmbH, including 190-200 mln eur net debt, to boost growth. The airline said it sees annual savings of 70-100 mln eur resulting from the acquisition.

Lisbon - EDP Energias de Portugal said it has signed an agreement to fully acquire Horizon Wind energy LLC from Goldman Sachs Group Inc, in a deal valuing the US wind farm group's equity at 2.150 bln usd.
 
In a statement, EDP said that the final price paid for Horizon will be adjusted for additional investments estimated at 600 mln usd, adding that Horizon's net financial debt at end 2006 stood at 180 mln usd.

Amsterdam - Barclays PLC is in a strong position in its merger talks with ABN Amro Holding NV, but the talks are still at an early stage, according to Bob Diamond, president and head of investment banking at the UK bank. "We are in a strong position," a spokesman confirmed Diamond saying on the sidelines of a Morgan Stanley conference in London.

British hedge funds Polygon and Centaurus are rumoured to have built up a stake in ABN Amro Holding NV and are supporting the demands from activist shareholder TCI (The Children's Investment Fund) for a split up of the Dutch bank, according to Dutch newspaper NRC Handelsblad which cited unnamed sources. Centaurus is one of the activist shareholders that was embroiled in a dispute with Dutch companies Stork NV and Royal Ahold NV last year.

Zurich - Swiss Life Holding AG reported a better-than-forecast full year net profit of 954 mln sfr, up 9 pct on last year, and confirmed its targets for 2008 and also hiked its return to shareholders. Swiss Life said it still aims to generate a net profit of 1 bln sfr next year and achieve a sustainable return on equity of more then 10 pct.

OC Oerlikon Corp AG, formerly Unaxis, reported a sharply higher full year net profit of 302 mln sfr, after 21 mln the year before, citing the group's successful restructuring and reorganisation. The group's positive results were underpinned by a strong performance from its Balzers Coating, Services, Leybold Vacuum and Assembly Equipment units.

Paris - Unibail and Whitehall Funds said they have sold Coeur Defense in Paris, Europe's largest single office block, to Lehman Brothers Real Estate Partners and French property company Atemi for a total of 2.11 bln eur. Unibail and Whitehall respectively owned 51 pct and 49 pct of the building.

Frankfurt - DaimlerChrysler AG may receive by end of this week the preliminary bids for Chrysler by the end of this week, according to Handelsblatt, citing industry sources. It said the Chrysler sale is expected to be concluded by June.

Inflation picked up in September in Europe as both areas show fragile economic growth. Just as in the U.S., rising energy prices are to blame. Read free, daily market reports available only at CMS Forex and open your free demo trading account today. Click here

Source - AFX News/Associated Press

Asian shares close mixed on US housing data, lackluster Wall St

HONG KONG - Shares across the Asia Pacific ended mixed, with some markets falling after a surprise drop in US February new home sales sparked fresh concerns over the state of the housing market.
   
Tokyo shares closed lower following the release of the US data and a lackluster performance on Wall Street overnight. Investors were reluctant to commit to new positions ahead of the release of crucial Japanese and US economic data this week and next.
   
The blue chip Nikkei 225 Stock Average closed 156.91 points or 0.9 pct lower at 17,365.05, off a low of 17, 315.91. The TOPIX index of all first section issues was down 17.51 points or 1.0 pct at 1, 723.86, off a low of 1, 716.72.
   
Hideo Mizutani, chief strategist at Sieg Securities, said: "Investors lacked trading incentives today after the mixed performance on the US stock market." "Concerns over the housing market in the US still lingers including the subprime mortgage market," Mizutani added.
   
Australian shares closed lower with sentiment weighed upon by overnight data showing US new homes sales dropped 3.9 pct last month, increasing concerns the problems in the subprime lending market there could spread to the wider US
economy.
   
Banking stocks were largely lower due to continued expectations of an interest rate hike in Australia over coming months, while resource stocks were mixed and energy stocks rose on the buoyant oil price. The S&P/ASX 200 closed down 26.5 points or 0.44 pct at 5, 964.2 after trading between 5,963.6 and 5,988.6.
   
Hong Kong shares were weaker in afternoon trade on mild profit-taking in blue chips in response to the US home sales data. Recent uptrend in crude oil prices also prompted investors to take a cautious stance. At 3.15 pm the Hang Seng Index was down 68.55 points or 0.35 pct at 19, 697.30.
   
In mainland China, A shares in Shanghai and Shenzhen closed higher in heavy trade, led by second tier blue chips. The Shanghai A share Index was up 16.90 points or 0.51 pct at 3, 298.34 and the Shenzhen A share Index was up 8.20 points or 0.94 pct at 878.99, a new record, on turnover of 60.90 bln yuan.
   
Seoul shares finished slightly higher, with strong program buying offsetting profit taking by retail and foreign investors.
   
The market reversed its earlier losses, prompted by a mixed close on Wall Street, to reclaim the 1, 450 point mark, but the upside momentum was not very strong ahead of key economic data due both domestically and overseas this week and with the corporate earnings season starting next month, they noted.
   
A downturn in Tokyo shares also kept investors from buying aggressively. The KOSPI index closed up 3.46 points or 0.24 pct at 1, 453.23, after moving between 1, 442.49 and 1, 456.39.

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Copper and gold steady amid falling stocks but weak US data caps gains

LONDON - Copper steadied as stocks of the metal stored in LME warehouses dropped for the thirteenth consecutive day but weak housing data weighed on prices.
   
Inventories of the metal in LME-monitored warehouses across the globe fell by a hefty 1,050 tonnes to 180,500 tonnes since yesterday.
   
Copper has gained around 3 pct since last week amid depleting stocks.  At 11.22 am, LME copper for 3 month delivery was down at 6,840 usd a tonne against 6,852 usd at the close yesterday.
   
A new report by the International Copper Study Group (ICSG) which said global refined copper capacity is expected to reach 24.4 tonnes by 2011, up 18 pct from 2006, limited falls. "China and Chile will be the main contributors to the total refinery capacity rise," noted the ICSG.
   
Weaker US housing data was likely to cap metals' prices, said UBS analyst Robin Bhar. However, while copper was hit the hardest, most other metals were resilient to the data, released yesterday, which showed new home sales drop by 3.9 pct in February to their lowest levels since 2000.
   
Base metals across the board were relatively steady in line with falling inventories and renewed confidence that Chinese demand was not easing.
   
"Falling inventories reinforced confidence that Chinese demand was recovering to a degree sufficient to offset lingering weakness in the US housing sector," said Deutsche Bank analyst Peter Richardson.
   
Tin stayed close to its fresh all time high of 14,575 usd struck yesterday amid depleting stocks and continued supply-side fears from Indonesia. Tin was down at 14,450 usd against 14,530 usd at the close yesterday.
   
"The ongoing supply side problems from Indonesia's Bangka island in an environment of positive demand and low inventories should support tin prices higher through 2007," said Barclays in a recent report. Barclays and Deutsche Bank both revised their forecast for tin, and indeed most other base metals, upward yesterday.
   
In other metals, nickel was up at 42,550 usd against 42,500 usd, lead edged higher to 1,895 usd against 1,891 usd while zinc was up at 3,260 usd at 3,250 usd. Aluminium was up at 2,739 usd against 2,725 usd yesterday.

At 11.15 am, spot gold was quoted at 663.80 usd per ounce, up slightly from 663.40 usd in late New York trade yesterday.
   
"Resistance has proved strong around 664 - 666 usd although the weak dollar/high oil scenario remains supportive for further gains," said TheBullionDesk.com analyst James Moore.
   
Gold rallied yesterday as escalating tensions between the west and Iran sparked safe haven buying in the precious metal and lifted oil prices to their highest levels this year.
   
Although oil has edged lower today, it remains near 2007 highs as tensions between Iran and Britain continue to escalate, with the Islamic Republic still holding 15 British sailors and marines captive.
   
Iran captured the sailors in the Persian Gulf on Friday, just a day before the UN Security Council slapped further sanctions on the Islamic republic for failing to halt its disputed nuclear programme.
   
Separately, gold is also benefiting from weakness in the dollar, which has held near lows hit yesterday against most major currencies following the release of weaker than expected US data on new home sales.
   
Looking ahead, the gold market is also awaiting the release on US consumer confidence data, scheduled for release at 3 pm, which might set the dollar under further pressure if it comes in weaker than expected.
      
In other precious metals, silver edged down to 13.30 usd an ounce against 13.33 usd in late New York trades yesterday, platinum was flat at 1,234.00 usd, and palladium edged down to 349 usd against 350 usd.

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