US & World Daily Markets Financial Briefing 27-10-2006

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Stocks open lower after GDP report

NEW YORK - Stocks opened lower Friday after the Commerce Department reported that the economy grew at the slowest pace in more than three years.
   
While investors expected the reading on gross domestic product would show growth to be slowing, the report stirred concern that a cooling in the housing market would spill over into other parts of the economy.
   
Highest-ever profits from Chevron Corp. provided a dose of good news Friday morning, a day after the blue chips again sailed into record territory. The Dow Jones industrials have achieved a new high close every day this week and in 13 of the last 18 sessions.
   
Microsoft Corp. was one of a handful of the 30 stocks that make up the Dow that was advancing in early trading Friday. The software company reported better-than-expected results and raised its forecast.
   
In the first minutes of trading, the Dow Jones industrial average was down 39.30, or 0.32 percent, at 12,124.36.
   
Broader stock indicators were lower. The Standard & Poor's 500 index was down 4.69, or 0.34 percent, at 1,384.39, and the Nasdaq composite index fell 6.32, or 0.27 percent, at 2,372.78.

Attention Friday is on the GDP, which is weaker than the 2.1 percent pace many economists were forecasting. The final reading of the University of Michigan's consumer confidence gauge for October also will be released.
   
Stocks in focus
   
On the corporate front, Microsoft late Thursday reported an 11 percent rise in both profit and revenue in its fiscal first quarter, a quarter investors are largely shrugging off ahead of the release of the Windows Vista operating system and as the Xbox 360 will soon see its first competition from the Sony PlayStation 3.
   
Analysts from Citigroup called the Microsoft figures "clean" and "ho-hum." German-listed Microsoft shares edged 0.3 percent lower.
   
Sun Microsystems also was slightly lower, with the computer server and software maker narrowing its quarterly loss as revenue rose 17%.
       
International news centered on the IPO of the Chinese bank ICBC, which surged in both Shanghai and Hong Kong in its debut.
   
Goldman Sachs has a 5 percent stake in ICBC, and underwriters on the IPO were Merrill Lynch, Deutsche Bank and Credit Suisse.
   
The Hang Seng in Hong Kong hit an intra-day record, while the Nikkei 225 in Tokyo ended 0.9 percent lower.
   
Shares of Europe's top advertising company, WPP, came under pressure in London after reporting a slower-than-forecast comparable sales growth of "above 4 percent."

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Dollar slides as US economic growth slows to three year low

LONDON - The dollar slid on the news that the US economy is growing at its slowest rate in more than three years.
   
The Commerce Department estimated the economy grew at a 1.6 pct annualised rate between July and September, down on the 2.6 pct growth in the prior three months and the heady 5.6 pct recorded in the first quarter of the year.
   
Economists had been expecting third quarter growth to slow to a 2.1 pct annualised pace. The 1.6 pct growth rate in the third quarter is the slowest annualised pace since the first quarter of 2003, when growth was 1.2 pct.
   
The department said the slower estimates were partly because of the slowdown in both housing and business investment.
   
Analysts said the data has reinforced market expectations that the US Federal Reserve will raise borrowing costs again any time soon. The euro climbed to a high of 1.2749 usd, its highest since Oct 3, after the data from 1.2690 before.
   
However, analysts said the prospect of another Fed rate hike hasn't been  completely erased given ongoing inflation worries.
   
Today's GDP report likely eased concerns even though the Fed's preferred measure of inflation rose at its fastest annual rate in more than a decade. The core PCE price index, which excludes volatile food and energy prices, rose 2.3 pct in the quarter, down from the 2.7 pct in the second quarter. The annual rate though increased to 2.4 pct, its highest since the second quarter of 2005.

The euro had been buoyed by the news that M3 money in the 12-nation single currency zone rose by an annual 8.5 pct, up from the 8.2 pct growth rate recorded in August and above analysts' expectations for a slowdown to 8.0 pct.
   
Following the strong German Ifo business expectations survey and CPI inflation data earlier this week, more and more investors now think the European Central Bank will raise its key refi rate further after the expected quarter point hike to 3.50 pct in December.
   
The Swiss franc was dealt a blow after a key indicator of confidence in the country tumbled.

The University of Zurich's Centre for Economic Research (KOF) said its economic barometer, a leading indicator for economic growth, fell to 2.00 points in October from a downwardly revised 2.19 in September, signalling that domestic GDP growth will start slowing down from early next year.

At 12.19 pm BST, one euro bought 1.5920 Swiss francs up from 1.5906 at around 10 am BST while one pound bought 2.3738 Swiss francs, up from 2.3700.

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The European Markets at 13.00 GMT

London - UK blue chips stayed weak midday, just off session lows on expectations for a weak start on Wall Street ahead of key US GDP data, and with further post-results falls from drug giants AstraZeneca and GlaxoSmithKline, although Q3 numbers today from peer Shire provided some relief in the sector.

At 12.28 pm, the FTSE 100 index was down 25.1 points at 6,159.7, just off the day's low of 6,155.8, having dropped back from an opening peak of 6,206.0.

Frankfurt - German shares were firmer late morning, but below the 6,300 level with VW in focus after its 9-month trading update came in above expectations, while earlier signalling its intention to increase its stake in MAN. At 11.10 am, the DAX was up 13.62, or 0.14 pct at 6297.21, with the MDAX down 35.54, or 0.41 pct 8.718.61. The TECDAX was off 1.6 or 0.24 pct at 690.24.
   
Paris - Share prices were slightly lower in midday trading, handing back part of the gains chalked up over the two previous sessions as investors scaled back positions ahead of US GDP and consumer sentiment data this afternoon. At 12.28 pm, the CAC-40 index was down 11.12 points at 5,422.67, on volume of 1.5 bln euro.

Milan - Share prices were slightly higher at midday in cautious trade ahead of the release of US data this afternoon, while Safilo soared on a Goldman Sachs upgrade. At 12.15 pm, the Mibtel was up 0.28 pct at 30,274 points and the S&P/Mib gained 0.32 pct to 39,428.

Madrid - Madrid shares were higher midday in brisk trade, boosted by Iberia ahead of its investors day, Monday, and Repsol YPF, on stake building news. At 12.00 pm, the IBEX-35 index rose 100 points to 13,735.6, after trading in a range of 13,671.2-13,736.0, on turnover of 1.3 bln eur.

Stockholm - Shares were unchanged in midday trade, pressured by profit taking in Ericsson ahead of an uncertain start on the Nasdaq, with engineering stocks also weak, although the index found support from telecom operators, miners and Swedbank. At 12.10 pm, the OMX Stockholm index was down 0.03 pct at 352.69 and the OMX Stockholm 30 had lost 0.05 pct at 1,094.04.

Brussels - Shares were barely changed in mid-morning trade, with Nationale a Portefeuille (CNP) outperforming the index following its acceptance of CDC Capital's bid for Quick. At 10.45 am, the Bel 20 was up 0.82 points or 0.02 pct at 4177.52.

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Asian shares close lower on profit taking, earnings reports

HONG KONG - Shares across the Asia-Pacific region closed lower on profit taking, lower base metals prices and nervousness following company earnings reports, dealers said.
   
Tokyo shares ended lower as investors locked in gains from yesterday's rise, opting to wait for the release of more corporate results and tonight's US GDP data.
   
The market will continue to be driven next week by corporate results as well as economic data both from Japan and the US, they said, with the benchmark Nikkei 225 likely moving between 16,400 and 16,900 points.
   
The Nikkei 225 Stock Average closed down 142.53 points or 0.83 pct at 16,669.07, off a low of 16,643.91. For the week, the index gained 0.11 pct.
   
The broader TOPIX index of all first-section issues dropped 13.86 points or 0.83 pct to 1,650.73, off a low of 1,647.93. The index was up 0.4 pct for the week.
   
Australian shares ended lower as investors sold resource and energy stocks following the overnight fall in base metal and oil prices. Market sentiment failed to be boosted by the Dow Jones Industrial Average closing at its fourth consecutive record high overnight, while profit taking weighed on the local market following yesterday's record highs.
   
The S&P/ASX 200 lost 31.2 points or 0.58 pct to close at 5,358.5, down from yesterday's record close of 5,389.7.
   
The key index ended above the day's low of 5,350.9 and below the high of 5,385.7, while over the trading week the benchmark index gained 23.1 points or 0.43 pct.
   
Hong Kong shares weakened in afternoon trade after the Hang Seng Index ended the morning at a record high of 18,446.46 points. Shares had started firmly on a strong debut in Hong Kong by the Industrial and Commercial Bank of China and Wall Street's record finish but declined as the ICBC share price softened.
   
At 3.30 pm the Hang Seng Index was off 51.17 points or 0.28 pct at 18,302.57.
   
In mainland China, A-shares in Shanghai and Shenzhen closed lower as investors locked in gains in the wake of a weaker-than-expected debut performance by Industrial and Commercial Bank of China.
   
The Shanghai A-share Index lost 3.51 points or 0.18 pct to close at 1,898.64 and the Shenzhen A-share Index was down 5.59 points or 1.20 pct at 458.53.
   
Seoul shares ended lower, losing much of their gains made this week, as Samsung Electronics and Hynix Semiconductor tumbled on worries over the outlook for the memory chip business.
   
The KOSPI closed down 4.56 points or 0.33 pct at 1,369.09, after trading between 1,379.51 and 1,362.44. The main board index ended the week with a gain of 4.85 points.
   
The downside of the broader market was limited as SK Corp rallied after announcing a sizable share buyback program and SK Telecom was boosted by a positive quarterly result.

Asian Bourse Round-Up

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Gold eases on profit-taking

LONDON - Gold gave back some of its recent gains on light profit taking, having failed to rise past the psychologically important 600 usd level.
   
The metal had risen yesterday after the dollar floundered as US rate setters toned down the rhetoric on the outlook for inflation on Wednesday. Recovering oil prices also went some way to restore the metal's status as a hedge against inflation.
   
Today, things changed slightly, however. At the start of the European session oil was a touch lower while the dollar was modestly higher.
   
"Dollar short covering and the metal's failure to clear 600 usd has sparked profit-taking this morning but gold is still well placed to break higher having consolidated for the past three months," said James Moore at theBulliondesk.com.
    
Safe-haven type flows in favour of gold may yet emerge with any hint of fresh political uncertainty in the Middle-east or stemming from North Korea and Iran's nuclear aspirations. Additionally, the spectre of inflation still remains in the background.
   
Crude-oil futures declined 26 cents at $60.10 a barrel. Gold futures dipped $4.20 to $595.60 an ounce. At 10.45 BST, Silver was down 13.5 cents 12.11 usd, also on profit taking.

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