US & World Daily Markets Financial Briefing 30-07-2007

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Stocks mixed as jitters remain

NEW YORK - Stocks were narrowly mixed in wobbly trading Monday, as Wall Street, still worried that a credit crunch will crimp U.S. growth, struggled to put together a recovery from last week's steep losses.
   
Although there were strong earnings reports and merger-and-acquisition activity, the market, which is coming off the Dow Jones industrial average's and Standard & Poor's 500 index's biggest weekly drops in five years, was unable to shake its anxiety. The Dow, now more than 5 percent below its record close of 14,000.41 reached July 19, has been caving under growing worries about a shakier lending climate.
   
Health benefits provider Humana Inc. and Tyson Foods Inc., the world's biggest meat producer, both reported second-quarter profit rises that beat analyst forecasts. HSBC Holdings PLC, Europe's largest bank by market value, said that while lending risks remain, its first-half earnings rose by 25 percent.
   
However, not all of Monday's news was positive: RadioShack shares tumbled after the electronics retailer posted a 15 percent decline in sales, and China tightened its credit again by ordering banks to hike their reserves.
   
Industrial equipment manufacturer Ingersoll-Rand's decision to sell its Bobcat earth-moving division and two other units to Korea's Doosan Infracore for $4.9 billion failed to spark a rally.
   
In the first hour of trading, the Dow Jones industrial average fell 1.70, or 0.01 percent, to 13,263.77. On Thursday and Friday, the Dow fell a total of 585 points.
   
Broader stock indicators were mixed. The Standard & Poor's 500 index rose 0.19, 0.01 percent, to 1,459.14, and the Nasdaq composite index fell 0.30, or 0.01 percent, to 2,561.94. The Russell 2000 index of smaller companies was down 4.66, or 0.60 percent, to 773.17.
   
In European trading, Britain's FTSE 100 was up 0.34 percent, Germany's DAX index was up 0.22 percent, and France's CAC-40 was up 0.20 percent.  Bonds held steady, with the 10-year Treasury note's yield at 4.77 percent, the same as late Friday. A week ago, the 10-year note's yield was at 4.95 percent, but it has since sunk as investors sought safe assets during the stock market's plunge.
   
Humana jumped $1.97, or 3 percent, to $66.78 after reporting a rise in profits, and Tyson gained 71 cents, or 3.3 percent, to $22.12. HSBC shares rose 2.2 percent in London trading.
   
In other earnings news, Dow component Verizon Communications Inc. posted a rise in second-quarter profit that met expectations, and said Verizon Wireless, its joint venture with Vodafone Group PLC, will buy Rural Cellular Corp. in a deal valued at about $757 million. Verizon fell $1, or 2.4 percent, to $40.99.
   
RadioShack Corp. said lower costs, better inventory management and a tax-related gain helped it swing to a second-quarter profit from a loss a year ago. However, the electronics retailer's sales fell nearly 15 percent. RadioShack dropped $2.20, or 7.6 percent, to $26.60.
   
High energy prices, which contribute to inflation, remain a concern for investors. On Friday, crude oil finished within a penny of its record close of $77.03 a barrel, reached in July 2006. Oil futures rose 6 cents to $77.08 a barrel on the New York Mercantile Exchange.

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Yen recovers as earlier falls prove short-lived; high-yielders lower

LONDON - The yen recovered against major currencies after an earlier resumption in selling of the low-yielding unit proved short-lived.
   
London trading began with a resumption in yen selling in a brief correction after last week's sharp gains, but the overall theme remains that of market participants continuing to reduce their risk exposure amid fears of a credit crunch.
   
"The dominating theme is that more people are taking risk off the table," said Standard Chartered analyst Marios Maratheftis.
   
The yen rose sharply towards the end of last week as worries over the spill-over effects from US sub-prime lending troubles led to a sudden reversal in risk appetite, with carry trade positions being rapidly unwound.
   
The carry trade is a risky strategy where investors borrow in low-yielding currencies such as the yen in order to invest in higher-yielding assets elsewhere. Its exceptional popularity prior to last week had taken the yen to record lows against the euro and multi-year lows against other major currencies.
   
Maratheftis said the yen has been recovering across the board, though most of the gains have been against the major high-yielding currencies, such as the pound, the Australian dollar and the New Zealand dollar.
   
The market is likely to remain volatile for the time being, with bouts of yen buying being temporarily being broken up from time to time as opportunistic sellers move back in at higher levels.
   
"People are looking for opportunities to get back in (to sell the yen)," he said. He added, however, that although he believes the carry trade will resume, there are no signs as yet of the current bout of risk aversion ending.
   
Nevertheless, analysts pointed to the fact that there are still no fundamental reasons for buying the yen, with weak inflation data tying the Bank of Japan's hands as far as further interest rate rises are concerned.
   
The Canadian dollar continued to weaken on realisations that the ongoing troubles in the US subprime mortgage market are likely to spread to Canada and hurt its economic growth. The Canadian dollar, or Loonie, lost ground mainly to the US dollar, which rose to 1.0690 cad today from 1.0640 cad overnight and a low of 1.0337 cad on June 25.

The US dollar was helped against most currencies by safety bids on risk-aversion due to worries over a global credit crunch.

Elsewhere, ongoing risk aversion continued to put pressure on high-yielding currencies, with the pound, the Australian dollar and the New Zealand dollar all resuming a downward trend after a brief respite earlier today.

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Euroshares lower midday as Dow seen lower again; M&A, earnings offer support

LONDON - Leading European exchanges were lower again midday as M&A hopes and some bargain hunting failed to offset early signs that the Dow is set for yet to add to last week's losses.
   
At 12.50, the STOXX 50 was down 12.69 points at 3707.64 and the STOXX 600 was 1.35 points higher at 371.35.
       
In Europe, ICI added 5.98 pct as it said it has rejected an increased offer of 650 pence per share from Akzo Nobel for the UK chemicals group, as analysts expect either Akzo to lift its offer or to go hostile.

Meanwhile, Akzo Nobel said the offer was increased after Henkel agreed to buy ICI's adhesive operations and said it is now evaluating its options. ICI said it had met with Akzo to try and secure an even higher offer but has so far been unsuccessful.
   
Collins Stewart said the move would be a great achievement for Henkel and would be accretive -- with or without success from Akzo. Akzo shares slipped 0.35 pct and Henkel shares rose 2.11 pct. Rabo Securities upgraded Akzo Nobel to 'buy' from 'hold', saying it doesn't think even a higher bid would succeed.
   
Shares in Linde were 3.36 pct higher after the specialist gas business posted better-than-expected second-quarter figures boosted by its acquisition of BOC. BASF moved up 1.56 pct and Air Liquide added 1.03 pct on the read across and as the price of crude fell in London trade.
   
Statoil shares added 0.74 pct as the Norwegian group reported second quarter pretax profits at the top end of analyst expectations, boosted by slightly higher-than-expected oil and gas production.
   
ABN Amro meanwhile added 0.46 pct as it said it was not currently in a position to recommend either the Barclays or the Royal Bank of Scotland-led takeover offer to the bank's shareholders. The Dutch banking group said it will hold talks with both parties.
    
HSBC stormed 2.73 pct higher as analysts say the banking group's interims came in much higher than consensus forecasts. An analyst at a European brokerage said the pre-tax figure was 5 pct ahead of consensus.
   
But CS Group shares slipped 1.21 pct lower as S&P said the Swiss banking group is particularly vulnerable to any downturn in the volume private equity deals. The ratings group said the Swiss group's revenues could fall by 3.8 pct were leveraged buyout fees to fall by half.
   
And Deutsche Postbank was 5.04 pct lower after Germany's largest retail bank announced second-quarter figures slightly below expectations.
   
"Commission income was below expectations -- the majority of the other figures were more or less in line, with the exception of trading profit, which was above expectations," said a local trader in a first response to the numbers.
   
Shares in IKB Industriebank plunged 17.97 pct after the banking group slashed its full-year earnings forecast and replaced its chief executive after weakness in the US sub-prime market led investors to pull money out of a fund it managed.
     
Among tech stocks, Getronics stormed 20.2 pct higher on news of a takeover offer from Dutch telecoms provider KPN -- down 0.35 pct. SNS cut Getronics to 'hold' from 'buy', though saying a better offer looks unlikely. And shares in Xansa added 20.67 pct as analysts said French IT services company Steria's 130 pence a share offer is on the high side.
   
GPC Biotech stormed 8.9 pct higher after weekend reports investor Dietmar Hopp raised his stake in the company to 14.5 pct from 10.13 pct. This month, GPC Biotech's shares slipped from about 23 eur per share to their current 8.20 eur level after the US Food and Drug Administration said it would not at present approve its Satraplatin cancer drug.
      
ASM International added 1.82 pct after its interim net profit and bookings came in well ahead of expectations. Shares in Seat Pagine Gialle SpA added 0.62 pct boosted by press speculation that Merrill Lynch is interested in acquiring the company.

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Asian stocks close mostly higher; China A-shares hit another record

MUMBAI - Shares across the Asia-Pacific region ended mostly higher, with China A-shares closing at another record high after investors regained confidence from the limited impact of last week's global market decline on the domestic market.
   
Hong Kong shares closed higher led by property stocks on expectations that a government land auction tomorrow will attract strong bids from major property developers. The Hang Seng Index rose 169.49 points or 0.75 pct to 22,739.90.
    
South Korean shares closed higher, rebounding from two consecutive days of steep slides, as solid domestic production data for June offset the negative impact of Wall Street's losses on Friday. The KOSPI index closed up 23.49 points or 1.3 pct at the day's high of 1,906.71.
   
Tokyo shares closed flat as bargain hunters stepped in following sharp early losses on the back of Wall Street slump Friday and the defeat of prime minister Shinzo Abe's ruling Liberal Democratic Party in Upper House elections at the weekend. The blue-chip Nikkei 225 Stock Average closed up 5.49 points or 0.03 pct at 17,289.30. The broader TOPIX index ended up six points or 0.4 pct at 1,705.71   
   
In mainland China, The benchmark Shanghai Composite Index, which covers both A- and B-shares listed on the Shanghai Stock Exchange, closed 95.41 points or 2.2 pct higher at a record 4,440.77. The Shanghai A-share Index rose 100.42 points or 2.2 pct to 4,657.85. The Shenzhen A-share Index was up 30.70 points or 2.4 pct at 1,332.50.
       
Australian shares closed firmer as investors snapped up big miners, helping reverse the selling sparked earlier in the session by the slide in US stocks.  The S&P/ASX 200 closed up 25.9 points or 0.4 pct at 6,108.8. The All Ordinaries index rose 19.2 points or 0.3 pct to 6,146.5.
   
Singapore share prices closed higher on late bargain-hunting, particularly among property developers, following last week's sharp falls, but investors remained cautious on concerns that the correction in US markets may not be over.  The Straits Times Index closed up 33.59 points or 1 pct at 3,526.29.
   
In Malaysia, shares closed mixed as the government's unveiling of the Northern Corridor Economic Region project helped lift the market off its lows and encouraged buying. Thematic plays related to the water sector also helped support the market. The Kuala Lumpur Composite Index (KLCI) lost 2.97 points or 0.2 pct to 1,352.41.
   
Indonesian shares closed higher, with the main index recovering from its heavy losses in the morning after a number of big-cap stocks managed a rebound in late trade. The composite index closed up 3.14 points or 0.1 pct at 2,301.55.
   
Taiwan stocks closed lower as the market took its lead from Wall Street. Adding to the pressure on the market was cautious selling ahead of the settlement of Singapore futures contracts, which is due after the local bourse closes today. The weighted index fell 89.71 points or almost 1 pct to 9,072.57.
   
Philippine shares closed lower for the second straight session Monday, as investors cut their positions further, following the Wall Street slide.  The composite index fell 51.30 points or 1.5 pct to 3,467.46, its weakest closing level in two months. The all-share index fell 31.18 points or 1.4 pct to 2,252.05.

Indian shares closed flat, after the Sensex recovered 200 points by afternoon, as sentiment turned cautious ahead of the central bank's first-quarter review of India's annual monetary policy tomorrow.
   
The Bombay Stock Exchange's benchmark Sensex, which had by afternoon recovered 200 points of Friday's 500-point fall, closed  up 0.17 pct or 26.34 points, at 15,260.91. The National Stock Exchange's S&P CNX Nifty was down 0.12 pct at 4,440.05 points. Among the BSE 30, 17 shares gained and 13 lost. In the broader market, 1,342 shares advanced, 1,256 declined and 61 were unchanged.

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Cocoa steadies after Friday's sell-off as industry players step in

LONDON - Cocoa steadies as trade and industry players took advantage of last week's sell-off to buy into stocks of the bean, and as other commodities recovered from a bout of risk aversion that weighed on prices
late last week.
   
Analysts warned, however, that with an improved outlook for this year's cocoa crop, the fundamental picture is not as supportive for the bean as it was previously.
   
At 12.35 pm on the Euronext Liffe, cocoa for September delivery edged up to 1,023 stg a tonne against 1,022 stg at the close Friday, when the bean hit 992 stg in intra-day trades - the lowest level in nearly four months.
   
"What's happened this morning is people saw that low of 992 stg and they've used that as a base for support. Industry have looked to take purchases on board," said Jeff Cooper, a trader at Ambrian Commodities.
   
He added that funds were also stepping back into commodities after a bout of risk aversion late last week, which was driven by weakness in global equities, led to heavy selling pressure across the asset class.
   
The selling led cocoa to close some 80 stg lower on the week, although by the close Friday, there was a bounce off the lows as industry and physical players stepped in.
   
Cooper at Ambrian said he expects industry will continue to buy at these lower levels, although on a longer term view, he says the fundamental outlook is not so favourable.
   
Recent reports of improving crop conditions in the Ivory Coast, the world's largest cocoa producer, have prompted aggressive fund selling which could continue longer term, analysts say.
   
"The improving outlook for Ivory Coast's main 2007/08 crop is certainly undermining the market's bullish posture," said analysts at Hightower Research.
   
"Ivory Coast farmers are expecting a bumper main crop for the 2007/08 season due to good rains and growing conditions over the last few months there seems to a consensus view that the harvest will start early in mid-August".
   
In other softs traded on Liffe, Robusta coffee for September delivery was up at 1,801 usd a tonne against 1,785 usd, while No 5 white sugar for October delivery edged up to 309.20 usd a tonne against 308.90 usd.

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