US & World Daily Markets Financial Briefing 30-04-2007

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Stocks Open Flat After Inflation Data

NEW YORK - Stocks fell slightly Monday as investors sifted through another batch of earnings and economic data, looking for signs of where interest rates are headed.
   
The Commerce Department said that in March, personal income rose 0.7 percent, slightly more than anticipated, while personal spending increased 0.3 percent, less than the forecast. Core personal consumption expenditures inflation -- a gauge of cost of living -- rose 0.4 percent, as expected. Year-over-year, core PCE inflation rose 2.1 percent.
   
The core PCE inflation figure is the Federal Reserve's preferred measure of inflation. The central bank has said it remains concerned about rising prices even as the economy slows, and it has left open the possibility that interest rates, which have been stable since last summer, could move higher.
   
Meanwhile, more stronger-than-expected earnings from companies including Verizon Communications, Kellogg Co. and RadioShack Corp. failed to encourage investors to drive stocks higher. The stock market has soared over the last two weeks as first-quarter financial results beat analyst forecasts; now that investors have priced in a strong earnings season, they are searching for new reasons to either keep buying or sell off.
   
In the first hour of trading, the Dow Jones industrial average fell 13.17, or 0.10 percent, to 13,107.77.
   
Broader stock indicators also fell. The Standard & Poor's 500 index was down 1.65, or 0.11 percent, to 1,492.42, and the Nasdaq composite index was down 7.73, or 0.30 percent, to 2,549.48.
   
Light, sweet crude fell 62 cents to $65.84 per barrel on the New York Mercantile Exchange.
   
Overseas, Britain's FTSE 100 rose 0.64 percent, Germany's DAX index rose 0.39 percent, and France's CAC-40 rose 0.45 percent.

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Canadian dollar rises to 7-month high against US dollar on firm GDP data

LONDON - Strong GDP data from Canada pushed the dollar to its lowest level against the Canadian dollar in seven months as speculation mounted that the central bank could raise interest rates.
   
Economic growth in Canada accelerated in February, growing by 0.4 pct month-on-month after 0.1 pct growth in January, while economists had forecast a more modest rise of 0.2 pct.
   
"The Canada market has pulled back on today's GDP data, and for good reason," said James Vola at Thomson's IFR Markets. "The domestic data continue to be strong, which will push the Bank of Canada to begin raising rates," he added.
   
The Bank of Canada left interest rates unchanged last week at 4.25 pct.  The news pushed the US dollar down to a low of 1.1097 cad. At 1.55 pm it had recovered slightly, trading at 1.1112 cad, although still well off the 1.1158 it was at before the data was released.

A dip in a key measure of US core inflation pushed the US dollar lower on speculation that the US Federal Reserve may soon be in a position to cut interest rates as inflationary pressures ease.
   
Figures released this afternoon showed core inflation, as measured by the core personal consumption expenditures price index, was unchanged in March on a monthly basis after rising by 0.3 pct in February.
   
On a year-on-year basis, the core PCE deflator slowed to 2.1 pct from 2.4 pct in the year to February.
   
"Easier core inflation is helping raise hopes that the Fed can begin to focus more on flagging growth than on stubborn inflation," said Jamie Coleman at Thomson IFR Markets. He noted, however, that US rate-setters will want to see more than one month's inflation moderation "before declaring the battle won".   
   
At 13.58 pm BST, the euro was trading at 1.3625 usd, up from 1.3616 just before the data were released, while the pound rose to 1.9952 usd from 1.9935 previously.

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FTSE 100 risers

Cable & Wireless 188.5 up 7.3 Break-up plans - Observer; Citigroup ups target to 240p from 190p, 'buy'

Antofagasta 537 up 5-1/4 Mining sector strength following recent base metals price rise

Punch Taverns 1,304 up 34 Interim results due tomorrow

Xstrata 2,655 up 49  Mining sector strength following recent base metals price rise

Man Group 565-1/2 up 9-1/2 Hedge fund groups in demand after continuing strength in US markets

Next 2,353 up 50 Morgan Stanley 'overweight' vs 'equal-weight', tgt upped to 2,600p vs 2,000

International Power 437-1/2 up 11-3/4 Lehman ups tgt to 505p vs 415p, 'overweight'; Collins Stewart 'buy'

Home Retail Group 451 up 5 Full-year results due Wednesday

FTSE 100 fallers

Scottish & Newcastle 615-1/2 down 9-1/2 Profit-taking after gains last week on takeover talk

BAE Systems 457 down 3  Credit Suisse cuts US dollar assumption across defence sector

Barclays 730-1/2 down 6 Ongoing battle for ABN Amro; rival consortium has funds lined up

Drax Group 797 down 4-1/2 Trades ex-dividend

Intercontinental Hotels Group 1,217 down 6 Credit Suisse 'neutral' from 'outperform', with reduced estimates

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Asian shares close mixed, China up despite bank rate rise

HONG KONG - Shares across the Asia-Pacific region closed mixed with China-A shares continuing to rise despite an increase in the bank reserve requirement ratio announced yesterday.
   
The Hong Kong market fell sharply in reaction to the tightening but other markets were in pre-holiday mode, with Tokyo closed, China's markets closing tomorrow for the rest of the week and Seoul and Taipei closed tomorrow for May 1, Labor Day.
   
Australian shares closed higher with local investors buoyed by a further record set by the Dow Jones industrials average on Friday. Investors bought the large banks ahead of the release of some of their annual reports this week, while support was also seen in the resource stocks after the rise of base metal prices in London trading on Friday.
   
The S&P/ASX 200 ended up 14.4 points or 0.23 pct at 6,166. The benchmark index closed off a high of 6,205.9 and above a low of 6,157.3. Dealers said uranium stocks rose after the opposition Australian Labor Party reversed its long-held "three-mines" policy which could expand uranium mining given state government approval.
   
Hong Kong shares were sharply lower in afternoon trade on profit taking after China's latest hike in bank reserve requirements. China's central bank announced yesterday that it will raise the reserve requirement for commercial banks by another 50 basis points, effective May 15.
   
There are fears of more measures, including an interest rate hike, in the coming days as the government tries to cool the economy after higher-than-expected GDP growth in the first quarter.
   
The latest reserve requirement hike is the seventh such move since the middle of last year and the second in little over a month. At 3.20 pm the Hang Seng Index was down 218.72 points or 1.07 pct at 20,307.78.
   
In mainland China, however, A-shares in Shanghai and Shenzhen closed sharply higher in the last trading day before the one-week long Labor Day holidays, with property developers and retailers snapped up. Nearly 90 companies closed up their daily limits of 10 pct.
   
The Shanghai A-share Index was up 84.24 points or 2.13 pct to 4,035.09 and the Shenzhen A-share Index was up 15.74 points or 1.43 pct at 1,114.14, a record.

Seoul shares closed lower but well off their intraday lows with investors taking to the sidelines ahead of a holiday tomorrow and concerns about higher interest rates in China.
   
Sentiment was also weighed down by South Korea's downbeat service sector output data for March, which raised fears over a rapid slowdown in private consumption. The KOSPI index closed down 0.28 points or 0.02 pct 1,542.24, off a low of 1,530.67 and a high of 1,542.25.
   
Taipei shares closed lower after the bank reserve rise in mainland China aggravated fears of further macroeconomic control measures by Beijing.
   
They said sentiment was also weighed down by a report from Taipei-based China Times that Taiwan believes it will be difficult to encourage more Chinese tourists to visit the island as China regards the matter of direct travel by its citizens to Taiwan for sightseeing purposes as a sovereignty issue.
   
Caution ahead of a market holiday tomorrow also trimmed the volume of the day's trade. The weighted index closed down 74.00 points or 0.93 pct at 7,875.42, off a high of 7,956.03 and a low of 7,843.05.

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Gold weaker but off lows as dollar dips on US consumer confidence data

LONDON - Gold remained weaker in early afternoon trade but came off earlier lows as the US dollar softened slightly on weaker-than-expected consumer spending data from the US and as crude oil prices continued to languish.
   
At 2.42 pm, spot gold was quoted at 677.90 usd per ounce, down from 679.10 usd seen in late New York trade Friday. The metal dipped as low as 675.65 in intraday trade.
   
Poor sentiment in the market following the precious metal's failure to breach convincingly resistance levels in the early 690s last week is continuing to weigh on prices, analysts said.
   
"At this point, gold needs to regain some of the composure it lost during last week's four declining sessions and attempt a return to 682-685 usd," said Jon Nadler, an analyst at Kitco Bullion Dealers, advising caution. "The jury remains very much out on this recovery in prices."
   
The precious metal rose slightly on Friday after the dollar hit historic lows after the release of weaker-than-expected first-quarter US GDP data, but gold gave up those gains this morning as the US currency rallied slightly.
   
However, the metal came off lows after today's decline in a key measure of US core inflation pushed the dollar lower once more, with the market speculating the US Federal Reserve may soon cut interest rates as inflationary pressures ease.
   
Figures released this afternoon showed core inflation as measured by the core personal consumption expenditures (PCE) price index was flat in March from the previous month after rising by 0.3 pct in February.
   
On a year-on-year basis, the core PCE deflator slowed to 2.1 pct from 2.4 pct in the year to February.
   
Among other metals, platinum eased to 1,283 usd per ounce from 1,286 usd in late New York trade Friday, while sister metal palladium dipped to 368 usd from 369 usd. Silver, meanwhile, softened to 13.43 usd per ounce against 13.48 usd in late trade Friday.

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