US & World Daily Markets Financial Briefing 28-06-2007

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Stocks open mixed ahead of rate decision

Stock prices opened mixed Thursday as investors awaited the Federal Reserve's decision on interest rates and remained on guard for comments policymakers might make about the economy.
   
Investors seemed unmoved as light, sweet crude hit $70 per barrel for the first time since August in early trading on the New York Mercantile Exchange.
   
Wall Street will likely remain skittish before the Fed announces its decision during the afternoon, especially after all three major indexes rallied in the previous session. Stocks have been turbulent during the past few weeks because of soaring bond yields and concern about the broader effect of faltering subprime loans.
   
The Fed -- widely expected to keep the benchmark rate steady at 5.25 percent after its two-day meeting ends -- has stated recently the economy is on track to recover from a weak first quarter despite difficulties in the housing market. Investors want to get any clues on the pace of inflation, which central bankers have believe remains a paramount concern.
   
In the first few minutes of trading, the Dow Jones industrial average fell 19.35, or 0.14 percent, to 13,408.38.
   
Broader stock indicators were mixed. The Standard & Poor's 500 index slipped 0.99, or 0.07 percent, to 1,505.35, and the Nasdaq composite index rose 0.09, or less than 0.01 percent, to 2,605.44.

Shares of General Mills Inc. slipped in premarket trading

Wednesday after the maker of Cheerios, Pillsbury doughs, Green Giant vegetables and Yoplait yogurt posted a fiscal fourth-quarter profit gain of one percent, but missed analysts' projections by a penny.
   
Sales also fell short of Wall Street forecasts, as did the company's guidance for its fiscal year 2008, which ends in May.
   
Shares of Minneapolis-based General Mills gave up 80 cents to $58.65 in premarket trading, from their close at $59.45.
   
Premarket indicators pointed to a mixed opening as the markets await interest-rate
   
Posting a big jump in the early session were shares of the tiny medical technology company CryoCor Inc.. Late Wednesday, the San Diego company said an advisory panel recommended the Food and Drug Administration approve the company's application for a device for the treatment of atrial flutter, a condition involving an abnormal heart beat.
   
Shares more than doubled in premarket trading, added $2.72, to $5.26, from their Wednesday close at $2.54.
   
Also on the positive side, shares of Monsanto Co. gained in early trading after the St. Louis based agricultural chemicals and seeds company posted a 71 percent profit gain, handily beating Wall Street expectations.
   
Monsanto said sales of corn seeds in the U.S. and herbicide sales in both North America and its Europe-Africa regions were strong.
   
Shares added $1.20, or 2 percent, to $67.20 in premarket trading, from their close at $66 Wednesday.

Stock futures were little changed Thursday ahead of the Federal Reserve's interest rate decision, and investors were on guard for whatever comments policymakers might make about the economy.
   
Wall Street will likely remain skittish before the Fed announces its decision during the afternoon, especially after all three major indexes rallied in the previous session. Stocks have been turbulent during the past few weeks because of soaring bond yields and concern about the broader impact of faltering subprime loans.
   
The Fed -- widely expected to keep the benchmark rate steady at 5.25 percent after its two-day meeting ends -- has stated recently the economy is on track to recover from a weak first quarter despite difficulties in the housing market. Investors want to get any clues on the pace of inflation, which central bankers have believe remains a paramount concern.
   
Investors will also get some more economic data to mull over. The Commerce Department releases its final reading on first-quarter gross domestic product, which the market expects to come in at 0.6 percent, the same as the estimate made in May.
   
The report comes after the Commerce Department disappointed Wall Street on Wednesday. reporting that orders for durable goods plunged 2.8 percent in May following three months of increases.
   
In corporate news, Apple Inc. will be in focus as the technology powerhouse debuts its iPhone to consumers on Friday. Trading for mobile phone makers like Motorola Inc. and Nokia may be erratic as investors determine how much of an impact the iPhone will have on their business.
   
Dow futures expiring in September were down 4.00, or less than 0.01 percent, at 13516, while S&P 500 futures fell 1.20, or 0.08 percent, to 1,517.70. Nasdaq 100 index futures added 2.00, or 0.10 percent, to 1,957.50.
   
Oil futures rose 44 cents to $69.41 a barrel in premarket trading on the New York Mercantile Exchange. A U.S. government report showed an unexpected drop in gasoline stocks amid peak summer driving season demand.
   
Overseas, Japan's Nikkei stock average fell 0.46 percent. Britain's FTSE 100 fell 0.57 percent, Germany's DAX index fell 1.16 percent, and France's CAC-40 fell 0.90.

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Pound firm as dovish MPC comments fail to sway rate hike expectations

The pound stayed firm above the 2 usd level,boosted by a pair of strong house price surveys and shrugging off dovish comments from members of the Monetary Policy Committee.
   
Speaking before the influential Treasury Select Committee, three of the five Bank of England policy-makers who voted to keep rates on hold at their June meeting said they hadn't seen enough data to convince them that a rate hike was necessary.
   
Committee member Rachel Lomax said there was big uncertainty about the outlook for the economy in the months ahead, in light of the previous rate rises.
   
The BoE has increased interest rates four times since August, bringing the benchmark repo rate to 5.50 pct.
   
Earlier, the Nationwide building society said UK house prices rose in June by 1.1 pct, far more than the 0.4 pct expected, while the Land Registry reported house prices in England and Wales grew by 0.7 pct in May, slightly up on April's 0.6 pct.
   
The data, which indicated that the housing market remains resilient in spite of recent signs of a slowdown, boosted market expectations that the MPC will hike rates next week. The pound jumped above the 2 usd level after the Nationwide release and looked set to hold there for the first time since May.
   
Elsewhere, the euro continued to strengthen after stronger-than-expected euro zone money supply and German unemployment figures.
   
The Eurozone money supply grew 10.7 pct year-on-year in May, up from April's 10.4 pct rise and above expectations for a 10.5 pct rise.   
   
The data is likely to reinforce expectations that the European Central Bank will raise interest rates to 4.25 pct in the coming months, with some analysts expecting rates to peak at 4.50 pct.
       
Also supporting the euro were unemployment figures from Germany, showing that the number of jobless people dropped by a seasonally adjusted 37,000 in June from May, beating expectations for a smaller decline.
   
Later today, attention will turn to the US and the upshot of the Federal Reserve rate setting meeting. Though the Fed is expected to keep its benchmark funds rate unchanged at 5.25 pct, the focus will be on the accompanying statement to see if there is any change in the Fed's assessment of the risks to inflation in the economy.
   
Finally, the yen weakened further and high-yielding currencies like the Australian dollar strengthened as the high-risk carry trade resumed, fuelled by a recovery in investors' appetite for risk.
   
The carry trade, where investors borrow low-yielding currencies like the yen and the Swiss franc to invest in higher-yielding assets elsewhere, had faltered in recent days amid hawkish comments from the Bank of Japan.

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Euroshares up tracing Wall St gains ahead of tonight's FOMC rate setting

European stock exchanges were tracing gains on Wall Street at midday, with oil stocks lending support in the absence of major news ahead of tonight's FOMC rate-setting meeting.
   
At 12.17 pm, the STOXX 50 gained 28.53 points or 0.73 pct to 3,915.68, while the STOXX 600 added 3.23 points or 0.83 pct to 390.92.
   
Looking ahead, Wall Street is looking at a flat to lower open ahead of a first-quarter GDP report and a Federal Reserve decision on interest rates, but Intel is likely to outperform after broker Lehman Bros upgraded the chip maker to 'buy.'
   
According to spread bettors IG Index, the Dow Jones Industrial Average is expected to open around 4 points lower at 13,425. Separately, S&P 500 futures dipped 0.50 points to 1,518.40 while Nasdaq 100 futures were unchanged at 1,955.50.
   
Back in Europe, market were steaming ahead, tracing overnight gains in the US.
   
The oil industry was lending support throughout the morning on rising oil prices, with SBM Offshore up 3.69 pct, Total up 2.26 pct and ENI up 1.72 pct.
   
Royal Dutch Shell rose 2.25 pct after Morgan Stanley raised its rating for the oil giant to 'equal weight' from 'underweight' and its target to 2,300 pence from 2,025, according to traders.
   
Morgan Stanley said it has become progressively more positive on the "supermajors", although historically it has been negative.
   
Elsewhere, M&A chatter was dominating trading floors, and Cap Gemini led the CAC higher -- up 3.58 -- after rumours emerged India's Infosys is mulling a bid for the consultancy. 
   
Shares in Deutsche Postbank AG were 4.45 pct higher after comments made by Commerzbank AG management board member Wolfgang Hartmann Germany's largest retail bank would make an "excellent addition" to his bank re-ignited rumours of a possible takeover according to dealers.
   
In British retail, J Sainsbury PLC shares were 0.95 pct higher on speculation of another takeover approach after a newspaper reported property entrepreneur Robert Tchenguiz has doubled his stake in the UK's third-largest supermarket group.
   
The Daily Telegraph said Tchenguiz has lifted his holding to 11 pct from 5 pct amid mounting speculation Delta Two, the Qatari royal family's investment  vehicle that recently raised its stake to 25 pct, could launch a bid for the retailer.
   
Meanwhile, shares in LogicaCMG PLC were 2.86 pct higher amid reports Morgan Stanley is placing 18 mln shares and after an upgrade at Theodoor Gilissen.
   
A London-based trader said Morgan Stanley had begun placing 18 mln LogicaCMG shares at 150-151 pence per share, while Theodoor Gilissen this morning upgraded the stock to 'buy' from 'sell', with a price target of 2.60 eur.
   
On automotive, Fiat SpA shares gained 0.84 pct, supported ahead of next week's launch of the 500 model and today's announcement of two joint ventures in Russia, brokers said.
   
Reports today citing Fiat officials said orders in Italy for the 500 model have already hit 25,000, above a 23,000 figure last week, and against the 55,000 target for this year.
   
Michelin gained 1.94 pct while Continental AG climbed 1.89 pct after rival Bridgestone Corp upgraded its earnings forecast for the current year to December, as a result of a weaker-than-expected yen and strong sales in the US.
   
The staffing sector was in focus after Credit Suisse shuffled its ratings on two key players.
   
Randstad shares rose 1.25 pct after the broker raised its recommendation on the Dutch recruitment company to 'outperform' from 'neutral' and lifted its price target to 65 eur from 58.
   
"Growth rates in the Dutch temping market re-accelerated (to 16 pct from 12 pct previously in weeks 17-20) and we believe that underlying wage inflation (mix-adjusted) is more than compensating for any modest candidate shortages," the brokerage said.
   
The report also highlighted Randstad's relatively high exposure level to the German market, noting the German staffing sector is currently the
fastest-growing staffing market in Europe, and pointed to a resurgent Dutch staffing market as well.
   
Credit Suisse was less upbeat on Vedior, which dropped 0.63 pct.
   
The broker downgraded the company to 'neutral' from 'outperform' and said the temping market in France could stall as "customers grow slightly more cautious post the French presidential elections, awaiting the impact of a potential introduction of a single labour market contract".
   
In other broker action, shares in ABB rose 1.11 pct after Deutsche Bank lifted its price target to 30 sfr from 26 sfr on a "bullish industry outlook".
   
The FOMC, the Fed's monetary policy body, is widely expected to leave its key interest rate unchanged at 5.25 pct but investors will scrutinise the statement that accompanies the decision for clues on the future direction of rates.

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Shares higher on Wall Street cues

Asian shares were higher today, with sentiment boosted by the overnight rebound on Wall Street.

Tokyo share prices were supported by a softer yen while Jakarta opened higher on a firmer rupiah.

Seoul shares were higher in early trade, recovering from a four session pullback. Singapore was also higher, but investors were cautious ahead of the Fed interest rate decision today.

Hong Kong shares opened sharply higher benefiting from some portfolio sprucing-up  activity as fund managers prepare to close their books for the first half of the year while Manila benefited from bargain-hunting.

Australian share prices were higher as investors took the view that a sell-off extending over the previous five trading sessions has been overdone.

However Manila shares were mixed as optimism after the Wall Street rebound was met with caution ahead of the Fed decision.

A-shares in Shanghai and Shenzhen were lower in early trade on liquidity fears after the government approved the issue of special bonds to buy foreign exchange.
   
Japanese government bond prices ended the morning session slightly lower, with investors cautiously awaiting the outcome of the FOMC meeting in the US later today and Japanese consumer inflation data tomorrow.
   
Analysts said weaker-than-expected May industrial output data initially prompted buying in bonds but this was short-lived and quickly replaced by a wave of selling, mostly by investors who had made losses on the recent rally in  yields.

Earlier in the day, the Ministry of Economy, Trade and Industry said Japan's industrial output in May was down 0.4 pct from April on a seasonally adjusted basis, falling for the third straight month. Economists had forecast a sequential increase of 0.8 pct.  

EVENTS:

• Australia 3 months to May job vacancies
     
• Japan May industrial production 
  
• Japan June auto production
     
• Japan weekly capital flows
     
• SKorea May industrial output
     
• Hong Kong's Sa Sa International FY results
     
• Taiwan May bad check ratios
     
• Indonesia's Semen Gresik AGM & EGM
     
• Indonesia's Bank Panin AGM & EGM
     
• Indonesia's Gajah Tunggal AGM
     
• Euro zone May M3 (0800 GMT)

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Copper extends gains as strike action boosts supply fears

Copper prices extended gains in afternoon trade as threats of supply disruption intensified in Latin America and as stockpiles of the metal continued to decline.
   
But gains were capped by uncertainty surrounding demand after weaker-than-expected durable goods order from the US and as concerns lingered over weakening call for the metal from China, the world's largest consumer of copper.
   
At 2.06 pm, LME copper for three-month delivery had risen to 7,560 usd per tonne against 7,370 usd yesterday.
   
Copper continued to take support from news workers at Collahuasi, Chile's third largest copper mine, had voted in favour of strike action after rejecting a pay offer from management.
   
The mine workers' existing contract expires at the end of June. Following the vote, a strike could begin from July 3.
   
Meanwhile, industrial action elsewhere continues. Workers at Xstrata's CCR refinery in Montreal are continuing a strike that has been in place since June 11, with no further talks currently scheduled, analysts said.
   
Separately, staff at Southern Copper Corp's Toquepala and Cuajone mines and Ilo smelter have agreed to a temporary return to work to allow talks with mediators, although it is uncertain that production will return to normal.
   
Protests also continue at Chilean national copper company Codelco, although the company claims the impact on production so far has been negligible.
   
Chilean President Michelle Bachelet yesterday ordered government officials to help mediate a strike by contract workers at the state-owned company.
   
Nearly 28,000 contract workers went on strike at the Codelco mines on Monday demanding their salaries and benefits match those of payroll employees at the mining concern.
   
Codelco executive president Jose Pablo Arellano said this morning that 90 pct of those workers were back on the job. But strike leaders deny this, insisting there is full support for the strike.
   
Elsewhere, LME-monitored stockpiles of the metal also continued to decline, down a further 1,075 tonnes this morning to 116,375 tonnes, the exchange said.
   
But supply-related gains were capped by uncertainty over demand, after the US posted lower-than-expected factory orders data late yesterday.
   
The US Commerce Department said orders to US factories for manufactured goods dipped 2.8 pct in May, the largest drop in four months, as demand for aircraft, heavy machinery and metals all declined.
   
The market is now awaiting the scheduled rates announcement of the US Federal Open Markets Committee later today and US first-quarter GDP numbers and jobless data for clues as to the health of the US economy, a major seat of demand for the metal.
   
Among other metals, tin for delivery in three months edged up to 14,050 usd per tonne against 13,975 usd, lead climbed to 2,700 usd against 2,590 usd and aluminium rallied to 2,735 usd against 2,705 usd.
   
The three-month zinc price, meanwhile, increased to 3,393 usd against 3,350 usd, while nickel rose to 37,800 usd against 37,600 usd, reversing earlier losses.

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