US & World Daily Markets Financial Briefing 27-04-2007

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Stocks fall after weak GDP report

NEW YORK - Wall Street traded mixed Friday after the government's estimate of first-quarter economic growth was weaker than investors expected, but earnings kept coming in strong.
   
The Commerce Department reported that the U.S. gross domestic product grew 1.3 percent in the first quarter, its lowest level in four years. The figure was below the average economist forecast and down sharply from 2.5 percent in the previous quarter. The government data also showed that pricing pressures were rising -- raising the concern that U.S. consumers may slow spending.
  
After the data, the dollar fell to an all-time low against the 13-nation euro, which rose as high as $1.3682.
   
Keeping stocks afloat, however, were more robust earnings reports -- notably from Microsoft Corp., one of the 30 companies that make up the Dow. The software maker late Thursday reported a 65 percent surge in profit on strong sales of Windows Vista and Office 2007. So far, 22 of the 30 Dow components have reported earnings, and 16 have exceeded expectations.
   
The Dow Jones industrial average fell 5.37, or 0.04 percent, to 13,099.81. The Dow surpassed 13,000 for the first time Wednesday and eked out another gain Thursday that nudged it to its 36th record close since October.
   
Broader indexes were mixed. The Standard & Poor's 500 index fell 3.73, or 0.25 percent, to 1,490.52, while the technology-dominated Nasdaq composite index rose 0.92, or 0.04 percent, to 2,555.38.
   
The S&P 500 is about 2 percent below its all-time high, reached in March 2000. The Nasdaq is slightly above the halfway point to its record high, also reached in March 2000.
   
The Dow Jones industrials has picked up more than 800 points over the past 20 trading sessions, and is now up more than 5 percent on the year. Investors are now struggling to figure out where the economy is headed and how policy makers and corporate America will react: slowing economic growth typically compels the Federal Reserve to lower interest rates, but rising inflation could prevent such a cut. Meanwhile, a weak dollar helps exporters, but hurts importers.
   
Though the U.S. economy has been cooling, market participants have been buying up stocks largely because corporate profits are still rising. A big reason behind the profit gains has been robust sales out of countries with stronger economies and currencies.
   
Furthermore, corporate takeover activity continues to surge. On Friday, Citigroup Inc. said it successfully took over Japanese brokerage Nikko Cordial Corp. for $7.7 billion in cash. The buy was the largest ever by a foreign company in Japan.
   
Bonds were little changed, with the 10-year yield slipping to 4.69 percent from 4.70 percent late Thursday.
   
In addition to the GDP data, investors on Friday will focus on the University of Michigan's revised index of consumer sentiment in April.
   
A barrel of light sweet crude fell 18 cents to $64.88 a barrel on the New York Mercantile Exchange.
   
Britain's FTSE 100 was down 0.69 percent, Germany's DAX index was down 0.46 percent, and France's CAC-40 was down 0.41 percent.

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Euro hits all time high against dollar after weak US GDP data

LONDON - The euro has hit its all time record high against the dollar after US first quarter GDP figures came in well below expectations.
   
The euro pushed through its previous high of 1.3666 usd, achieved at the end of December 2004, to a new record of 1.3682.
   
Figures out from the US Commerce Department estimated the economy grew at a 1.3 pct annualised rate between January and March, slower than the 1.9 pct economists had expected for the quarter and the slowest annualised pace since the first quarter of 2003.
   
The US Employment Confidence Index also weighed on the dollar, posting a 0.8 pct increase in the first quarter, slightly below analyst expectations for a 0.9 pct increase.

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Top Stories in Europe at 11.05 BST

London - A consortium of Royal Bank of Scotland Group PLC, Banco Santander Central Hispano and Fortis NV has said that it intends to make a public offer for 100 pct of ABN Amro Hldgs NV.
 
The banks said that under Dutch regulations they cannot disclose full terms of the offer for seven days, but on Wednesday the consortium indicated that it may offer 39 eur per share for the Dutch bank, providing that the sale of LaSalle to Bank of America Corporation does not go through.

National Express Group PLC said it has agreed to buy Spanish bus group Continental Auto SL for 449.7 mln stg cash from Grupo ACS, and that it expects the acquisition to add to its earnings in its first full year. The company also said it made a strong start to the year and is trading in line with its expectations, but added that its North American business may be hit by the weakening dollar.

Frankfurt - Merck KGaA said it is on the right track for reaching 1 bln eur annual sales for its Liquid Crystals division, despite a first-quarter drop in sales. In the first quarter, sales in the company's liquid crystal operations were down 12 pct to 206 mln eur.

Oslo - Statoil ASA said it has an agreed an all-cash offer to acquire Canada's North American Oil Sands Corporation (NAOSC), in a deal worth 2 bln usd, or 20 cad per share. Calgary-based NAOSC, was formed in 2001, and operates more than 257,000 acres of oil sands leases located in the Athabasca region of Alberta, north-east of Edmonton.

Lisbon - Banco BPI non-executive chairman Artur Santos Silva said the bank's board has unanimously rejected Banco Comercial Portugues' improved 7 eur per share bid. "The revised 7 eur price offered by BCP is still totally unacceptable," Santos Silva told journalists late Thursday at a press conference.

Sonaecom SGPS said it swung to a net loss of 6 mln eur in the first quarter from a 300,000 eur profit a year earlier due to a rise in depreciation and amortization charges.
 
Sonae SGPS' telecom unit said depreciation and amortization charges increased by 13 pct year-on-year to 36.6 mln eur in 2007 from 32.4 mln eur due the expansion of the asset base, including the extension of its UMTS/HSDPA network and improvements to its fixed-line network.

Paris - Renault SA said first-quarter sales fell 2.7 pct to 10.256 bln eur, from a restated 10.541 bln eur a year earlier, as a sharp decline in European sales led to a 3.8 pct fall in the group's worldwide car sales. Cheuvreux analysts were expecting total first-quarter sales of 10.293 bln eur, while Exane BNP Paribas had forecast 10.600 bln.

Munich - Infineon Technologies AG said its second quarter EBIT rose to 49 mln eur from 28 mln in the year-earlier period, but 54 mln eur in charges from a plant closure and other matters pushed the result far below analysts expectations. A consensus of analysts estimates compiled by Thomson Financial called for the German chipmaker to achieve a second quarter EBIT of 103 mln eur.

Zurich - Sulzer AG said it has raised its offer for UK competitor Bodycote International to 344.5 pence per share from a previous 332.0 pence, but no agreement has been reached. The Swiss engineering group said this is a final offer and represents a 49 pct premium over the Bodycote closing share price on January 25.

EFG International said assets under management and administration rose to 86.4 bln sfr, from 77.2 bln sfr in the previous quarter. The international private bank's client assets under management (AuM) were at approximately 79.0 bln sfr, up from 69.8 bln on December 31.

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Asian shares close lower on profit taking ahead of holidays

HONG KONG - Shares across the Asia-Pacific region closed lower on profit taking ahead of holidays in Japan and China next week.
   
Tokyo shares finished lower as investors squared positions before Japan enters the Golden Week break beginning this weekend. Weak economic data released this morning also weighed on sentiment.
   
Japanese financial markets are open for only two trading days next week, so market watchers expect trade to be thin, with the Nikkei 225 seen moving within a narrow range of from 17,300 to 17,500 points.
   
The Nikkei 225 Stock Average closed down 28.76 points or 0.17 pct at 17,400.41, off a low of 17,299.37. For the week, the index dropped 0.3 pct. The TOPIX index of all first-section issues fell 2.41 points or 0.14 pct to 1,701.00, off a low of 1,694.04. For the week, the index fell 0.53 pct.
   
Soft data released this morning, including March consumer inflation data and production data, weighed on stocks in early trade, with the index moving within a tight range in the afternoon as investors generally stayed on the sidelines.
   
"Investors adjusted their positions ahead of a long holiday," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Securities.
   
The market will be closed next Monday, Thursday and Friday for public holidays.
   
"Trade is expected to be thin and share prices are seen staying rangebound next week," he said.
   
Australian shares closed down as investors took profits, with little local direction available and caution ahead of tonight's US March quarter gross domestic product data. The focus will rest on Wednesday's interest rate announcement from the Reserve Bank of Australia, as well as some of the nation's leading banks releasing their annual reports over the coming week.
   
The S&P/ASX 200 ended down 60.6 points or 0.98 pct at 6,151.6. The benchmark index closed off a low of 6,144.2 and below a high of 6,201.8. The key index retreated 55.9 points or 0.90 pct over the trading week.
   
Hong Kong shares were weaker in afternoon trade as investors locked in profits amid worries that China may announce further tightening measures during the long Labor Day holiday next week. At 3.20 pm the Hang Seng Index was down 77.26 points or 0.37 pct at 20,590.03.
   
In mainland China, A-shares in Shanghai and Shenzhen closed lower on profit-taking ahead of the May 1 holidays with property and steel stocks losing ground.
   
The markets will only be open on Monday next week.
   
The Shanghai A-share Index was down 24.84 points or 0.62 pct to 3,950.84 and the Shenzhen A-share Index was down 9.63 points or 0.87 pct at 1,098.40.
   
Seoul shares closed lower on profit taking by institutions, retreating from yesterday's record high, with sentiment undercut by weak output data and investors turning cautious ahead of the weekend.
   
According to official data, South Korea's production expanded 3.1 pct year-on-year in March, largely due to stronger production of semiconductor chips, machinery, display panels and parts. The figure missed the market consensus estimate of a 5.5 pct rise.
   
The KOSPI index closed down 10.61 points or 0.68 pct at 1,542.52, after moving between 1,537.37 and 1,553.23, The benchmark index gained 9.34 points for this week.

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Gold climbs as weak US GDP data sends dollar to all-time low vs euro

LONDON - Gold reversed losses in the early afternoon to trade higher as US GDP data came in weaker than expected, pushing the dollar to an all-time low against the euro.
   
"The growth reading should reinforce what has been quite negative sentiment towards the dollar at the moment," said James Moore, an analyst at TheBullionDesk.com.
   
"With the dollar under pressure, we should be looking at a close closer to 680 usd than 670 usd," he added.
   
At 2.12 pm, spot gold was quoted at 676.45 usd per ounce, up from the 674.80 usd level seen in late New York trade last night. The precious metal lost more than 10 usd per ounce in value over the course of yesterday.
   
The dollar slid to an all-time low against the euro this afternoon on sluggish US GDP figures. The single currency pushed through its previous high of 1.3666 usd at the end of December 2004 to a new record of 1.3682.
   
Data released by the US Commerce Department estimated the economy grew at a 1.3 pct annualised rate in the first quarter, slower than the 1.9 pct economists
had expected and at the slowest annualised pace since the first quarter of 2003.
   
The US Employment Confidence Index, which posted a smaller-than-expected 0.8 pct rise in the first quarter, also weighed on the currency.
   
Gold prices dropped this morning, extending yesterday's decline, as disappointed investors liquidated long trades after the metal failed to rally to 700 usd, and after a pick-up in the US dollar against the major currencies.
   
And traders were sceptical that the post-data rally in gold prices would translate into longer-term strength.
   
"We are seeing a bit of immediate reaction to the (US GDP) news but I am not convinced it will continue," said Simon Weeks, an analyst at Scotia Mocatta.
   
Elsewhere, silver rose in sympathy to 13.41 usd, up from 13.34 usd. Platinum fell to 1,277 usd against 1,294 usd, while palladium was relatively flat at 370 against 369 usd.

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