US & World Daily Markets Financial Briefing 28-03-2006

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U.S. stocks edge higher as market awaits Fed rate move

NEW YORK - U.S. stocks edged higher in early trading Tuesday as investors braced for a Federal Reserve decision on interest rates. General Motors Corp. rose after the carmaker announced the first step in its plan to lay off 7% of its workforce this year.
   
The Dow Jones Industrial Average was up 4 points at 11,254. The Nasdaq Composite Index gained 2.5 points to 2,318 while the S&P 500 Index put in a fractional gain, up 0.32 point at 1,301.93.
   
Stocks in focus
   
General Motors Corp. shares were up 9 cents at $23.02 after the carmaker, in a widely-anticipated move, said it is laying off several hundred U.S. salaried workers as part of a plan to bring its North American operations back to profitability.
   
The news comes amid media reports it is planning to file its delayed annual report, and that its board is expected to meet sometime this week to discuss the potential sale of its GMAC financing arm. On Monday, the stock rose 28 cents to $22.93.
   
Citigroup Inc. and the National Bank of Greece are battling to win control of a Turkish bank, The Wall Street Journal reported. Should Citi secure control of Finansbank in a deal expected to be worth more than $5 billion, it would be the biggest deal since Chuck Prince became chief executive. Citigroup shares were off 16 cents at $47.48.
   
Shares in Lennar Corp. rose 1.4% to $61.16 after the homebuilder posted quarterly results ahead of expectations.
   
Lucent Technologies Inc. and France's Alcatel SA are moving toward a plan to allay potential U.S. security concerns by placing some of Lucent's most sensitive defense-related research under control of a separate board composed only of Americans, The Wall Street Journal reported.
   
Lucent shares were off 4 cents at $3.04. U.S.-listed shares of Alcatel rose 1.6% to $15.67.
   
Eli Lilly shares fell 2.1% to $57.45 after two brokers downgraded the drug maker.
   
Merrill Lynch cut the company to neutral, saying its antidepressant Cymbalta is struggling to gain prescription share despite its promotional efforts.
   
Friedman Billings, meanwhile, cut Eli Lilly to underperform from market perform, saying the business continues to be pressured by four major product franchises with declining growth, a lackluster late-stage pipeline, and new competition in the diabetes and depression markets.
   
Lexar Media Inc. fell 6.7% to $8.70 after the memory chipmaker said it will lose between $22 million and $30 million on revenue between $100 million and $130 million in the first quarter.
   
The company, whose planned merger with Micron Technology has faced shareholder opposition, said it will not be holding a conference call when it reports its quarterly results.

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Dollar mixed as Fed decision looms; euro climbs on Ifo

NEW YORK - The dollar traded higher against Japan's yen but fell against other major rivals early Tuesday, with caution prevailing ahead of an imminent announcement on U.S. interest rates by the Federal Reserve.
   
In early New York trading, the dollar was fetching 116.72 yen, up 0.3%. The euro strengthened 0.7% to $1.2094. The British pound was trading up 0.2% at $1.7512, while the dollar was down 0.7% at 1.2994 Swiss francs.
   
The Federal Open Market Committee will announce its decision on interest rates as well as update monetary policy at 2:15 p.m. Eastern today. Markets are widely expecting the Fed to lift the benchmark federal funds rate by a quarter of a percentage point for a 15th straight time, bringing rates up to 4.75%.
   
With the rate hike all but a foregone conclusion, the real debate is the trajectory beyond the March rate rise, analysts said. Investors will scrutinize the statement accompanying the decision for any hints about the Fed's leanings on future rate increases.
   
Financial markets still put in strong odds of another quarter-percentage point rate hike in May.
   
At 10 a.m. Eastern, investors will pay attention to the report on U.S. consumer confidence for March from the Conference Board.
   
Economists surveyed by MarketWatch expect consumer confidence to edge up to 101.8, compared to 101.7 in the previous months.
   
Euro up on Ifo
   
The euro gained ground after German business sentiment unexpectedly climbed to a 15-year high. Specifically, the Ifo business climate poll rose to 105.4 in March from 103.4 in February, against expectations of a decline.
   
Though German manufacturers have long seen the impact of an improving global economy, the Ifo survey noted that retailers also were reporting an improved current situation, leading to hopes that Europe's largest economy could also be
bolstered by internal demand.
   
The Ifo noted that the current situation subcomponent advanced to 105.1 from 101.9 in February, an indication "that the economic recovery has stabilized further."
   
Also in Europe, money supply in the euro zone rose 8% in February compared to a year ago, above the January annualized growth of 7.6%.
   
The European Central Bank considers 4.5% annual growth in line with achieving price stability.
   
Yen, yuan
   
Overnight in Asian trading, the yen gave back some of the gains from the prior session as some investors voiced the opinion that talk of Japanese repatriation ahead of the fiscal year end was probably overhyped.
   
Also of note, Sens. Chuck Schumer, D-N.Y., and Lindsey Graham, R-S.C., will hold a press conference later Tuesday after meeting with Treasury Secretary John Snow.
   
Schumer and Graham are proposing the imposition of 27.5% tariffs on Chinese goods if Beijing doesn't aggressively unwind its support for the yuan.
   
Schumer said last week that he's more optimistic about the yuan issue and expects the yuan to fall to below 8 to the dollar this week.
   
Elsewhere, the New Zealand and Australian dollars staged a bit of a recovery after recent steep losses, partly fueled by rallying prices for such commodities like gold, copper and zinc.
  
At last check, the Aussie dollar was up 0.1% at $0.7086, while the kiwi dollar reversed early gains to trade down 0.1% at $0.6066.

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The European Markets at 12.00 BST

London - UK blue chips were weaker at midday, falling further back below the 6,000 level in nervous trade ahead of tonight's US interest rate decision, discounting expectations for an early rally today on Wall Street, and amid fading hopes of M&A activity in Standard Chartered, ITV and GUS, dealers said.
   
At 12.08 pm, the FTSE 100 index was 4.6 points easier at 5,967.6, off a late morning low of 5,962.4, having fallen back after reclaiming the 6,000 level in early deals with a gain of 32.1 points to 6,004.3. All the broader FTSE indices were lower, aside from the small caps.

Frankfurt - Shares were higher in midday trade as the Ifo index for March beat expectations to reach its highest level in 15 years, pointing to a very solid German economic recovery according to economists, dealers said.
   
At 11.47 am, the DAX 30 index was 17.36 points or 0.29 pct higher at 5,929.62, having moved between 5,909.35 and 5,940.59 so far this session. The MDAX was at 8,666.45, up 9.62 points or 0.11 pct, while the TecDAX was at 731.59, down 0.54 point or 0.07 pct.
   
Paris - Shares were higher midday as better-than-expected data on German business confidence and gains among insurers outweighed cautious sentiment ahead of the US Federal Reserve interest rate decision later today, dealers said.
   
At 1.11 pm the CAC-40 index was 10.49 points higher at 5,173.93. There were 20 stocks higher and 20 lower.
   
Milan - Share prices were slightly higher at midday, boosted by gains in Banca Intesa shares after the company decided to sell its stake in Olimpia to Pirelli, dealers said.
   
At 12.13 pm, the Mibtel was up 0.10 pct at 29,207 points and the S&P/Mib rose 0.18 pct to 37,779.

Madrid - Share prices were slightly higher in cautious midday trade ahead of today's FOMC meeting, with Telefonica underperforming on Brazil concerns, while Endesa and BBVA gained, dealers said.
   
At 11.51 am, the IBEX-35 index added 6.2 points to 11,845.8, after trading in a range of 11,831-11,870, on turnover of 623 mln eur.

Zurich - Share prices were slightly higher in quiet midday trade ahead of tonight's FOMC interest rate meeting, with Swiss Life lower mainly on profit-taking after initially well-received results, traders said.
   
At 12.10 pm, the Swiss Market Index was 28.33 points higher at 8,009.27, and the Swiss Performance Index up 17.96 points at 6,147.70.

Stockholm - Share prices remained in slightly positive territory in midday trade, slightly extending earlier gains on continued bargain-hunting, with clothing retailer Lindex keeping most of its gains after its stellar second quarter report, dealers said.
   
At 12.05 pm, the OMX Stockholm index was up 0.29 pct at 338.00, while the OMX Stockholm 30 index was up 0.30 pct at 1,060.07. Turnover was 7.13 bln skr.

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Asian shares close mixed on caution ahead of US Fed meeting

HONG KONG - Share prices across the Asia-Pacific region ended mixed with investors showing caution ahead of a US Federal Open Market Committee (FOMC) meeting on interest rates scheduled for tonight, dealers said.
   
In Japan, share prices finished mixed with some bargain hunting emerging after early losses to support the main Nikkei index, dealers added.
   
But they noted there was weakness in the broad market as investors unloaded stocks following the end of the dividend rights period yesterday.
   
Caution ahead of the statement tonight from the FOMC was also a feature of trade today, they said.
   
The FOMC is widely expected to lift its key short-term interest rate by a quarter percentage point to 4.75 pct but there is uncertainty on what, if any, signals it will provide on future rate movements when it issues its statement after the meeting.
   
The Nikkei 225 Stock Average closed up 40.14 points or 0.2 pct at 16,690.24, its high for the day. It was the index's highest close since Feb 7 when it ended at 16,720.99.
   
But the broader TOPIX index of all first-section issues fell 1.15 points or 0.07 pct to 1,692.69.
   
Dealers noted that the broad market came under pressure after the rights period for stockholders to avail themselves of dividends for the current fiscal year ended yesterday, prompting a selldown this morning.
   
However they noted that in the afternoon session some bargain hunting emerged to reduce the losses and help the Nikkei end in positive territory.
   
Share prices in Australia closed slightly lower, taking the market off record highs reached during the session on support for resources stocks, dealers said.
   
They said an end-of-session sell-off meant the market was flat on the day despite enthusiasm for resources stocks being fuelled by commodity prices remaining strong in Asian trading following copper and zinc prices reaching record highs overnight on supply concerns.
   
The S&P/ASX 200 ended down a modest 2.3 points or 0.05 pct to close at 5,085.8.
   
In Hong Kong, share prices were trading slightly higher in the afternoon on strong gains in China Mobile caused by news it will complete the acquisition of China Resources Peoples Telephone today, dealers said.
   
However, the overall mood was cautious ahead of the FOMC meeting tonight, they added.
   
At 3:28 pm, the Hang Seng Index was up 9.28 points or 0.06 pct at 15,825.15.
   
In mainland China, A-shares in Shanghai and Shenzhen closed higher on some follow-through buying with real estate developers and metal listings in favor, dealers said.
   
The Shanghai A-share Index added 3.04 points to 1,362.0 on turnover of 11.70 bln yuan and the Shenzhen A-share Index was up 2.20 points at 332.80 on turnover of 8.20 bln yuan.
   
Share prices in Seoul finished little changed with investors remaining cautious ahead of the FOMC meeting, dealers said.
   
The market remained weak for most of the session but strong program buying in late trade helped the index to post a small gain, they added.
   
The KOSPI index closed up 0.97 points or 0.07 pct at 1,331.31.

Asian Bourse Round-Up

For a full list of closing prices, click here

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Gold, silver tread water ahead of Fed decision

NEW YORK - Gold and silver futures were flat early Tuesday as traders took a pause from the strong gains of the previous session and awaited the outcome of a Federal Reserve policymaking meeting.
   
Gold for April delivery was last trading up 10 cents at $566.30 an ounce on the New York Mercantile Exchange. Silver was down 1 cent at $10.88 an ounce.
   
On Monday, gold closed at a three-week high, while silver struck a fresh 22-year high on continued excitement about the expected launch of a Barclays exchange-traded fund that would sharply increase physical demand for the metal.
    
"The outcome of the meeting and the ensuing statement will have a significant influence on the financial markets, including gold and other commodities, as analysts and investors alike are desperately searching for signs of a pause or end to the current interest rate policy campaign, of which a break would be highly supportive," said analysts at Standard Bank.
   
Any hint that the rate cycle is approaching an end would hurt the dollar, which in turn would support gold, analysts said. The dollar was higher against the yen but lower against the euro in early trade.
   
On the supply side, inventories of copper fell 630 short tons to 27,474 short tons as of late Monday, according to Nymex.
   
Gold stocks were unchanged at 7.53 million troy ounces, while silver supplies rose 276,197 troy ounces to 125.3 million troy ounces.

On the bond market, long-term Treasury prices were lower, sending yields higher ahead of the Fed's rate decision. The benchmark 10-year note was down 4/32 at 98 8/32, with its yield at 4.73% versus 4.70% at Monday's close.
   
On the data front, consumer confidence data are slated for release at 10 a.m. Eastern time.
   
Crude-oil futures rose with traders gearing up for the release of weekly supply data while keeping an eye on potential supply disruptions in some of the world's trouble spots, including Nigeria, Iran and Iraq.
   
The benchmark May contract was last up 49 cents at $64.84 in electronic trading.

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