US & World Daily Markets Financial Briefing 29-09-2006

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Stocks little-changed a day after record

NEW YORK - Stocks were little changed in early trading Friday, a day after the Dow Jones industrial average briefly bested its all-time high close of 11,722.98 set on Jan. 14, 2000.
   
The day's economic news was gloomy, as consumer spending dropped in August by the largest amount in nearly a year and inflation for August was up a worrisome 2.5 percent compared to a year ago, the biggest year-over-year increase in more than a decade.
   
Inflation's increase was far above what the Federal Reserve has set as its "comfort zone" and the concern on Wall Street is that it could portend additional Fed hikes in its benchmark short-term interest rate.
   
The Commerce Department said consumer spending, after adjusting for inflation, dropped by 0.1 percent last month, the first decline since a 0.3 percent fall in September 2005, a month when business activity was disrupted by Hurricane Katrina.
   
In the first hour of trading, the Dow Jones industrial average rose 4.16, or 0.04 percent, to 11,722.61.
   
Broader stock indicators also advanced. The Standard & Poor's 500 index rose 0.50, or 0.04 to 1,339.65, and the Nasdaq composite index rose 0.67, or 0.03 percent, to 2,270.69.
   
Bonds rose, with the yield on the 10-year Treasury note at 4.60 percent, down from 4.61 percent Thursday. The dollar was higher against other major currencies in European trading. Gold prices fell.
   
Crude oil futures fell. A barrel of light crude was quoted at $62.38, down 38 cents, in electronic pre-opening trading on the New York Mercantile Exchange.    

The Russell 2000 index of smaller companies rose 0.56, or 0.08 percent, to 733.12.

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Dollar buoyed by quarter-end technical flows

LONDON - The dollar remained firm as the quarter-end prompts buying of the US currency.
   
Neil Mackinnon, chief economist at ECU Group, said the dollar has been solid this week on portfolio adjustments, stemming primarily from Asia, related to the end of the month and the end of the quarter.
   
"It's not been a decisive breakout but the dollar has held up pretty well all things considered," he said."I treat this rally as technical and pretty flow driven," he added.
   
The market's underlying expectation of a soft landing in the US has also helped support the US currency. At present the market thinks the Fed will keep its benchmark rate on hold at 5.25 pct for a few months yet.
   
Analysts though said the prevailing view may be challenged as soon as this afternoon's Chicago PMI survey or Monday's manufacturing ISM report.
      
While the dollar has enjoyed this technical rally, other currencies have suffered problems of their own, not least the Japanese yen, which is suffering from the portfolio changes.
   
The euro meanwhile is on the backfoot after inflation in the 12-nation single currency zone dropped to an annual rate of 1.8 pct from 2.3 pct in August, while the pound has suffered from a reining back of UK rate hike expectations. 
   
Though euro zone inflation fell sharply in September, coming into line with the European Central Bank's target for the first time since Jan 2005, analysts said the European Central Bank is still on course to raise its key refi rate another quarter point to 3.25 pct next Thursday, especially after a surprising rise in economic sentiment in the euro zone.

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The European Markets at 11.30 GMT

London - The FTSE 100 retreated from highs at midday as investors found the air too thin above the 6,000 level, with weakness across mining stocks and concerns about this afternoon's US economic data encouraging profit-taking.

By 12.20 pm, the FTSE 100 index was down 7.7 points at 5,963.6, after climbing to 6,002.9 in early deals, its highest levels since May. The broader indices were also firmer, while volume was moderate, with 1.14 bln shares changing hands in 143,920 deals.

Frankfurt - German shares were higher midday as the DAX continued to defend the psychologically important 6,000 point mark, helped by a rebound in Infineon shares and as MAN gained amid new speculation of an impending merger with Volkswagen.
   
At 12.59pm, the DAX up 22.10 points or 0.37 pct at 6,011.26, the MDAX was at 8,539.70, up 35.60 or 0.42 pct, and the TecDAX had gained 4.42 points or 0.67 pct at 662.02.

Paris - Share prices were higher midday, boosted by end-of quarter window dressing and after the US bellwether DJIA index hit record levels not seen since January 2000. At 12.00 pm, the CAC-40 index was up 27.03 or 0.51 pct at 5,277.04. Volume was 1.1 bln eur. On the Matif, October CAC-40 futures were trading up 26 points at 5,285.5.

Amsterdam - Amsterdam shares were up in midday trade on higher US futures, with investors awaiting key US economic data. At 12.50 pm, the AEX was up 1.58 points or 0.33 pct to 484.13, after opening at 482.75 and trading in a range of 482.53-485.80.

Madrid - Share prices were higher midday, but off earlier highs, ahead of key US data, with the main blue chips seeing end-of-quarter buying interest, while recent strong gainers on M&A speculation ran out of steam.

At 1.16 pm, the IBEX-35 index put on 35.2 points to 12,965.2, after trading in a range of 12,925-13,001, on turnover of 2.3 bln eur.

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Milan - Share prices were slightly higher at midday, led by Mediolanum, in cautious trade ahead of the release of US data. At 12.22 pm, the Mibtel index was up 0.16 pct at 29,414 points and the S&P/Mib up 0.17 pct at 38,494.
   
Stockholm - Shares remained in slightly positive territory in midday trade, marginally up from morning levels, with Atlas Copco sharply outperforming on rumours of an imminent sale of its rental ervice business. At 12.35 pm, the OMX Stockholm index was up 0.31 pct at 335.32 points, while the OMX Stockholm 30 index was up 0.50 pct at 1,043.94.

Helsinki - Helsinki shares were broadly flat in midday trade, although mobile phone component maker Perlos plunged after it said it could suffer heavily from the insolvency of the German unit of Taiwanese mobile phone group BenQ.
   
At 1.23 pm, the OMX Helsinki 25 was 0.03 pct lower at 2,588.20 and OMX Helsinki was 0.12 pct down to 8,835.35 on 290 mln eur turnover.

Asia at a Glance

Asian stocks close mostly higher on Wall St;  Tokyo at day's high

HONG KONG  - Shares across the Asia-Pacific region closed mostly higher on Wall Street's gains but on thin trade in some markets ahead of public holidays in the region next week.
   
Tokyo shares ended at their best levels for the day due to sustained gains on Wall Street overnight and positive Japanese data helping ease worries about the economy. But investors appeared to have exercised some restraint ahead of the release Monday of the closely-watched Tankan business sentiment survey, they added.
   
The results of the quarterly Tankan will help steer the market's direction next week but Tokyo shares will probably continue to track the movement in US stocks, dealers said, adding the benchmark Nikkei 225 index will likely move between 15,700 and 16,300 points.
   
The Nikkei 225 Stock Average closed up 102.73 points or 0.64 pct at 16,127.58, the high for the day. For the week, the index gained 3.1 pct. The TOPIX index of all first-section issues was up 8.16 points or 0.51 pct at 1,610.73, just off the intraday peak of 1,611.27. For the week, the index added 3.0 pct. 

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Australian shares closed higher as gains in US stocks once again supported Australian investor sentiment. Investors bought major bank and resource stocks, which capped off a solid week for the market.
   
The S&P/ASX 200 rose 40.2 points or 0.79 pct to close at 5,154.1, below the day's high of 5,155.3 and above a low of 5,114.9. Over the trading week the benchmark index jumped 170.9 points or 3.43 pct.
   
Hong Kong shares were lower in afternoon trade, reversing opening gains, as investors took a cautious stance ahead of the holidays next week in Hong Kong and China. At 3.25 pm the Hang Seng Index was down 91.83 points or 0.52 pct at 17,438.74.
   
In mainland China, A-shares in Shanghai and Shenzhen closed higher on window-dressing activity with heavyweight banks and property developers gaining ground.
   
The Shanghai A-share Index jumped 15.85 points or 0.87 pct to 1,840.31 and the Shenzhen A-share Index was up 4.41 points or 0.98 pct at 455.45.
   
Seoul shares closed little changed in thin trade, with investors taking to the sidelines ahead of the weekend and next week's long holiday.
   
The market was firm initially in line with the advance on Wall Street but it soon turned sideways to close almost flat against the previous session, they noted.
   
The KOSPI index closed down 0.02 points at 1,371.41, after moving between
1,367.78 and 1,377.37. The index ended the week with a gain of 23.03 points.  The market is expected to move in a narrow range next week.
   
The Korean market will be closed Tuesday, Thursday and Friday next week and markets in mainland China will be closed all week. The Hong Kong stock market will be closed Monday.

Asian Bourse Round-Up

For a full list of closing figures, click here

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