US & World Daily Markets Financial Briefing 30-03-2007

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Dow, Nasdaq post gains in early trading

NEW YORK - Stocks opened slightly higher Friday, the last trading day of the first quarter, as investors were encouraged by a report showing consumers spent more as their incomes rose in February but wary about data indicating that core inflation rose that month at the fastest rate since August.
   
The Commerce Department report that both consumer spending and personal incomes rose 0.6 percent last month appeared to lift investor sentiment, which has been dogged by concerns about a slowing economy. The increases were double what Wall Street had expected.
   
A rise in inflation, though, could compel the Federal Reserve to raise interest rates: the report showed that an inflation barometer that excludes energy and food shot up by 0.3 percent in February. That left core inflation rising by 2.4 percent over the past 12 months, significantly higher than the Federal Reserve's 1 percent to 2 percent comfort zone. The year-over-year increase has not been exceeded since a 2.5 percent jump in April 1995.
   
But keeping investors optimistic about the overall economy Friday was the government's spring planting report, which showed farmers expect to plant a greater-than-expected 90.5 million acres of corn this spring. The U.S. Department of Agriculture had expected about 86 million acres.
   
In the first minutes of trading, the Dow Jones industrial average rose 3.92, or 0.03 percent, to 12,352.67.
   
Broader stock indicators were slightly higher. The Standard & Poor's 500 index was up 0.50, or 0.04 percent, at 1,423.03, and the Nasdaq composite index was up 1.83, or 0.08 percent, at 2,419.71.
   
Bonds rose, with the yield on the benchmark 10-year Treasury note fell to 4.62 percent from 4.64 percent late Thursday. The dollar rose against other major currencies, while gold prices also edged higher.
   
Stocks could show volatility Friday, as investors typically engage in a bit of "window dressing," or buying up certain stocks to make their portfolios look stronger, ahead of the next quarter.
   
Technology stocks could come under pressure following an announcement by Dell Inc. that an internal audit committee had uncovered errors and evidence of misconduct after reviewing the company's financials. However, biotechnology stocks could rise as Dendreon Corp. headed for a sharply higher open following a favorable review of a drug candidate.

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Dollar finds support from forecast-beating US data

LONDON - The dollar continued its slow drift higher, finding support from a set of strong US data including a pick-up in a key measure of inflation and consumer spending, signalling that the Fed is right to remain concerned about inflation.
   
Data just out revealed that consumer spending and personal income both rose twice as fast as expected in February, while a key measure of inflation rose at its fastest pace in half a year.
   
"The real surprise was the increase in spending, having risen by twice the median and comparing to a flat reading on retail sales," analysts at Thomson's IFR Markets said.
   
"The US economy and the dollar seem to be telling the market, I'm not dead yet. This is not the sign of an economy getting ready to keel over at any moment," added Jamie Coleman at Thomson IFR.
   
The euro fell to as low as 1.3280 usd, triggering a cluster of stops in the area before steadying. But dealers were also reportedly cautious about possible central bank demand pushing the euro back up again, Coleman said.    
   
The US data in question showed incomes rising 0.6 pct in February after increasing by 1.0 pct in the previous month, while spending rose 0.6 pct following a 0.5 pct rise in January.
   
In Europe, the euro failed to get much of a lift from some strong data, including a pick-up in French business sentiment and a rise in inflation.
   
Preliminary euro zone inflation data showed the headline rate edging up to 1.9 pct in March from 1.8 pct in February, although many expect the headline figure to be revised later when full information for all the economies are out.
   
While the data suggest inflation risks remain subdued in the euro zone, it is still consistent with European Central Bank hiking the refi rate up to 4.0 pct from 3.75 pct by mid year, said David Brown at Bear Stearns.
   
The yen, meanwhile, edged lower after data out of Japan showed February CPI falling in both the headline and core inflation measures. The impact was partly offset by the demand brought on by the repatriation of funds during the last trading day of the Japanese fiscal year.
   
Japan's core CPI fell 0.1 pct in February from a year earlier, posting its first drop in 10 months, after being unchanged in January. On a month-on-month basis, the core CPI marked its fourth consecutive drop in February, down by 0.3 pct after a 0.4 pct drop in January.
   
The pound was a touch lower after news that UK consumer confidence remains depressed.
   
In its monthly survey, GfK/NOP said its main headline consumer confidence index was unchanged at -8 in March, the same as in the previous month and in line with predictions. Four of the five sub-indices that make up the headline measure were unchanged.

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Top Stories in Europe at 11.05 BST

Madrid - EON AG denied that its is considering withdrawing its 42.3 bln eur bid for Endesa SA, after a report in today's Cinco Dias that it will withdraw if it fails to win a stake of less than 30-35 pct. A spokewoman for the German utility said: "At no point have we thought of withdrawing."

Oslo - Telenor ASA has ruled out the possibility of Russian investment group Altimo taking a stake in it, adding that relations between the two companies - which have mobile ventures in Ukraine and and Russia - are now "untenable". Merging its assets in the two countries is also currently "out of the question", a Telenor spokesman added.

Industrial holding company, Aker ASA, is considering the sale of its 40.1 pct stake in engineering group Aker Kvaerner ASA, only weeks after stunning the market by selling out of Aker Yards ASA, Norwegian television network TV2 is reporting.
 
Citing unnamed sources, the privately-owned network said late last night that Aker was working on a deal to dispose of its entire stake in Aker Kvaerner, which, at current prices, would be worth almost 16.5 bln nkr.

Milan - ERG SpA, the Italian oil refiner and energy group, said it will invest 2.567 bln eur in 2007-2010, with 65 pct of the outlay destined to boost the group's electricity production and gas operations as it diversifies to become a "multi-energy" group.
 
The company said it earmarked 1.186 bln eur to develop electricity from renewable sources and aims to increase its market share in the domestic wind power sector to over 20 pct in 2010 from 5 pct in 2005.

Banca Monte dei Paschi di Siena SpA aims at closing by the end of next week negotiations to buy the 7 pct stake that Unipol SpA owns in holding company Hopa, daily Il Sole 24 Ore reported citing rumours. Hopa is an investment vehicle that among other company owns some 3.7 pct of Telecom Italia SpA.

Vienna - Austrian special steel company Boehler-Uddeholm AG has hiked its outlook for 2007, saying if the positive trend of the first two months of 2007 continues, then this year's sales and earnings should at least as high as in the record year 2006. Prospects for 2008 are also good, it added.

Frankfurt - Volkswagen AG said it is still in talks with Malaysia's Proton regarding a strategic partnership, denying a Straits Times newspaper report that it has pulled out of the negotiations. "We are still in talks," a spokeswoman said.

BNP Paribas, Credit Mutuel and General Electric Co's GE Money Bank are the final three bidders for the 200 branches of Unicredito's Polish BPH bank currently up for sale, the Financial Times Deutschland reported without naming its sources. The newspaper also said Unicredito will name the winning bidder next month, and that it expects to receive about 1.5 bln eur for the operations.

Deutsche Postbank AG closed 2,500, or 30 pct, of its branches last year, a company spokesman told Boersen-Zeitung, confirming statistics from Germany's Bundesbank. The spokesman said the bank, which is majority owned by Deutsche Post AG, now has 6,500 branches in Germany.

London - Scandinavian Airlines SAS has been touting its 20 pct, 100 mln stg stake in UK carrier bmi this week, trying to find a buyer among other airlines or private equity, the Times reported. The company is trying to take advantage of interest in bmi, which has been the subject of bid speculation recently.

Lanxess is mulling setting up a greenfield ion exchange resin manufacturing plant in India and is also evaluating some chemical companies for prospective acquisitions, reported the Business Standard citing Dr Jorg StraBburger, country representative, Lanxess.
 
According to the report, the company is currently scouting for locations at chemical manufacturing hubs in Gujarat and West Bengal and has already held discussions with the respective state industries departments.

Inflation picked up in September in Europe as both areas show fragile economic growth. Just as in the U.S., rising energy prices are to blame. Read free, daily market reports available only at CMS Forex and open your free demo trading account today. Click here

Asian shares close mixed; Tokyo flat as financial year ends

HONG KONG - Shares across the Asia-Pacific region closed mixed with Tokyo shares flat as investors remained cautious about the outlook for the US economy in general and Wall Street in particular and its effect on Japan.
   
The main Tokyo indices rose slightly in the morning on gains in US stocks overnight and a softer yen heartened investors, but the gains were eroded as investors locked-in profits in readiness for the books closing at the end of the fiscal year tomorrow.
   
The blue-chip Nikkei 225 Stock Average finished 23.71 points or 0.14 pct higher at 17,287.65, off a high of 17,380.80. Over the week, the Nikkei 225 gained 192.96 points or 1.1 pct. The TOPIX index of all first-section issues closed 2.93 points or 0.17 pct higher at 1,713.61, off a high of 1,726.35.
   
Dealers said trading was thin as the weekend and the end of the fiscal year approached, especially in view of the uncertainty about the outlook for the US economy.
   
Australian shares closed higher with investor sentiment buoyed by M&A activity within the media and energy sectors, while quarter-end squaring within the futures market added extra upside momentum.
   
Media stocks gained additional support after the federal government announced overnight that its relaxation of cross-ownership and foreign restrictions rules within the sector would be bought forward to early April from the middle of the year.
   
The S&P/ASX 200 closed up 34.1 points or 0.57 pct at 5,995.0 after trading between 5,998.9 and 5,968.1.
   
Hong Kong shares were lower in afternoon trade on profit-taking following yesterday's strong technical rebound. At 3.30 pm the Hang Seng Index was down 57.64 points or 0.29 pct at 19,764.14.
   
In mainland China, A-shares in Shanghai and Shenzhen closed mixed with the Shanghai market weighed down by profit-taking in banks while Shenzhen rose on interest in steelmakers.
   
The Shanghai A-share Index was down 14.47 points or 0.43 pct at 3,346.35 and the Shenzhen A-share Index was up 5.46 points or 0.64 pct at 861.78.
   
Seoul shares closed slightly higher but off their high for the day, with institutional investors playing it safe and selling ahead of the weekend and upcoming corporate earnings releases. The market, mirroring Wall Street's gains, got off to a firm start, with the index approaching 1,460 points at one stage, but the early interest weakened in late trade.
   
The KOSPI index closed up 1.60 points or 0.11 pct at 1,452.55, after moving between 1,447.85 and 1,459.69. It ended the week with a gain of 5.17 points or 0.36 pct. The market is expected to move sideways next week as investors await earnings releases by major local firms due in the second week of April.

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Gold rises amid strong crude, political tensions, steady dollar

LONDON - Gold rebounded amid strong oil prices, escalating geopolitical tensions over Iran and a flat dollar.
   
The precious metal was steadier this morning, having lost nearly 1 pct yesterday, after strong US data lifted the dollar -- and pressured gold prices lower. A stronger dollar makes gold more expensive for buyers with other currencies, so weakened demand.
   
This morning's lift was "largely due to firmer oil prices," noted TheBullionDesk.Com analyst, James Moore.
       
At 11.01 am, gold was at 663 usd per ounce, up from 661.70 usd in late New York trades yesterday.

Among other metals, silver edged up to 13.30 usd an ounce against 13.27 usd in late New York trade yesterday. Platinum was up at 1,241 usd against 1,259 usd while palladium was up at 352 usd from 350 usd.

Copper leads metals higher on positive US GDP data; nickel bucks trend

LONDON - Copper was higher, leading across-the-board gains in the base metals, as better-than-expected fourth-quarter US GDP data yesterday allayed fears of an economic slowdown in the world's largest economy.
   
Ongoing gains in crude prices, which rose to a six-year closing high yesterday on continued tensions in the Middle East, and reports of rising demand from China also underpinned gains, analysts said.
   
Nickel was the only metal to buck the trend, paring some of the steep gains it recorded this week.
   
At 12.36 pm, copper was up 104 usd to 6,870 usd per tonne, boosted by US data that showed fourth-quarter GDP in the world's second largest consumer of the metal rose 2.5 pct, against initial estimates of a 2.2 pct increase.
   
Unemployment claims in the US fell further than anticipated, to 308,000.     

Nickel was the only faller amongst the base metals, posting losses of 325 usd per tonne to 43,750 usd.
   
The metal gained strongly this week, with concerns over low inventory levels continuing to boost prices even though supplies are picking up.
   
Tin, recovering from losses sustained over the last few days on profit-taking after recent strong gains, was 340 usd higher at 13,600 usd.    

Aluminium was 15 usd per tonne higher at 2,795.50 usd, while lead put on 14 usd per tonne to 1,935 usd, approaching its all-time high. Zinc added 35 usd per tonne to 3,285 usd.

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