US & World Daily Markets Financial Briefing 31-08-2006

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Stocks extend advance in early trading

NEW YORK - Wall Street extended its advance in early trading Thursday as investors got some reassuring news -- consumer spending rose in July and core consumer inflation eased, signaling that the current economic slowdown might not be as severe as some have feared.
   
Investors who have digested a series of economic reports in a slow pre-holiday week were pleased by a Commerce Department report that spending rose by 0.8 percent last month, twice the 0.4 percent gain shown in June. Also, the Labor Department released figures showing a drop in the number of recently laid off workers filing for unemployment benefits.
   
Retailers reported solid same-store sales in August, the crucial back-to-school buying period. Wal-Mart Stores Inc., Limited Brands Inc., as well as Macy's and Bloomingdale's parent Federated Departments Stores Inc. posted gains. Meanwhile, J.C. Penney Co. and Gap Inc. turned in disappointing numbers.
   
Also in focus, Ford Motor Co. said it is considering the sale of all or part of its Aston Martin luxury brand as the automaker works to generate cash for its North American turnaround plan.

Goldcorp Inc., a Canadian gold producer, has agreed to buy rival Glamis Gold Ltd. for about $8.6 billion in stock to create one of the world's largest gold producers.

In corporate news, cruise operator Royal Caribbean lifted its earnings outlook but fiber optic equipment company JDS Uniphase had a disappointing quarterly report.
   
In the first hour of trading, the Dow Jones industrial average rose 4.56, or 0.04 percent, to 11,387.47. The Dow showed gains in each of the previous three sessions, and is now at a three-month high.
   
Broader stock indicators were narrowly higher. The Standard & Poor's 500 index gained 0.90, or 0.07 percent, at 1,305.17, while the Nasdaq composite index was up 0.60, or 0.03 percent, at 2,186.33.

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Euro firm as Trichet hints at October rate hike

LONDON - The euro remained firm after the European Central Bank's president Jean-Claude Trichet gave the expected strong hint that borrowing costs will be rising in both October and December.
   
In his press conference following the much-anticipated decision to keep the key refi rate on hold at 3.00 pct, Trichet stressed again that the central bank will maintain "strong vigilance" on inflation risks and reiterated his view that monetary policy in the 12-nation currency zone remains accommodative.
   
At the time of the press conference, Trichet confirmed that the ECB has revised up its forecasts for both inflation and growth.
   
Trichet also said further rate hikes -- the ECB has steadily raised rates from 2.00 pct since last December -- are warranted should the economic recovery continue. The first half of the year was stronger than anticipated by the central bank and that positive tone seems to have continued into the third quarter, he added.
   
Analysts said Trichet's assessment fits in with the market view that rates will rise a quarter point in October and probably December, which would take the refi rate up to 3.50 pct.
   
The next event that could impact on US rate expectations is tomorrow's US jobs report for August. Analysts said yesterday's survey from the private sector employment agency ADP did little to alter the market consensus for payrolls growth of around 100,000, and is unlikely to prompt the Fed into action.
   
Despite the lack of yield support, the dollar has remained relatively firm against the yen after weak Japanese industrial production data for July renewed speculation that the Bank of Japan will keep its benchmark rates on hold this
year.
   
The Japanese currency is set to record its worst month since March as rate hike expectations have diminished.
   
Elsewhere, the pound was steady as the impact of a buoyant housing survey from the Nationwide, the UK's largest building society, was offset by a very weak consumer confidence reading from research company GfK NOP.

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The European Markets at 11.30 GMT

London - Leading shares remained slightly weaker at midday, with indications of a negative start by Wall Street adding to the market's caution over disappointing results from Diageo and a mixed mining sector, dealers said.
   
By 12.20 pm, the FTSE 100 was down 11.4 points at 5,917.9, drifting back from its initial high of 5,937.0.

Frankfurt - At 11.55 am, the DAX 30 index was 14.76 points or 0.25 pct lower at 5,852.77, having moved between 5,841.00 and 5,886.78 so far this session. The MDAX was at 8,161.79, down 6.95 points or 0.09 pct, while the TecDAX was at 645.01, down 2.30 points or 0.36 pct.

Paris - Share prices were lower at midday, reversing modest opening gains as caution ahead of today's ECB rate decision and forthcoming key US data overshadowed gains from L'Oreal and Air France after strong results, dealers said.
   
At 11.20 am the CAC 40 index was down 12.15 at 5,170.64, having earlier climbed to 5,196.90.

Amsterdam - Share prices were slightly lower in early afternoon trade, reversing early gains as futures point to a lower start to trading on US markets, dealers said. At 1.50 pm, the AEX was down 0.7 point or 0.15 pct at 469.44.

Brussels - Shares were lower in midday trade as financial services group KBC fell on mixed second quarter results. At 1.53 pm, the Bel 20 was down 21.82 points or 0.55 pct at 3,923.60.

Milan - Share prices were lower at midday amid caution ahead of several key US data announcements later today, with STMicro leading the decline on a broker downgrade and Lottomatica higher in the wake of the completed merger with GTech, dealers said.
   
At 12.57 pm, the Mibtel index fell 0.14 pct to 29,025 points and the S&P/Mib was off 0.20 pct at 37,917, while volumes were 1.56 bln eur.

Madrid - Share prices were lower midday amid profit taking and in cautious trade ahead of the ECB meeting and the release of key US data later today, with Endesa and Abengoa outperforming, dealers said.
   
At 12.26 pm, the IBEX 35 index was down 59.2 points at 12,112.7, after trading in a range of 12,104-12,195, on volume of 681 mln eur.

Zurich - Shares were lower in early afternoon trade as heavyweights Novartis and Roche were hit by profit-taking and with investors cautious ahead of the European Central Bank's interest rate decision and key US macroeconomic data later today, dealers said.
   
At 1.47 pm, the Swiss Market Index was 21.36 points lower at 8,162.07, and the Swiss Performance Index was down 16.13 sfr points at 6,351.07.  

Stockholm - Shares remained in negative territory in midday trade, but were off a touch from morning lows, with TeliaSonera holding onto its strong gains sparked by reports of stake-building in the company by private equity firms, dealers said.
   
At 1.05 pm, the OMX Stockholm index was down 0.22 pct at 318.47 points, while the OMX Stockholm 30 index was down 0.08 pct at 993.14. Turnover was 11.49 bln skr.   

Helsinki - Helsinki shares were lower in midday trade, led by Nokia, with TeliaSonera advancing on speculation that a number of private equity funds are building stakes in the telecom operator and a broker upgrade, traders said.
   
At 12.06 pm, the OMX Helsinki 25 index was 0.58 pct lower at 2,563.40 and the OMX Helsinki index was down 0.51 pct at 8,897.71 on a turnover of 201 mln eur.

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Asian shares close higher on lower oil prices

HONG KONG - Shares across the Asia-Pacific region closed higher as US GDP figures eased fears that the US economic slowdown was too strong, dealers said.
   
Tokyo shares finished sharply higher, with the Nikkei 225 index reclaiming the key 16,000 mark, as exporters rose amid a weaker yen and investor worries about the US economy eased following revised GDP data, dealers said.
   
The Nikkei 225 Stock Average closed up 268.74 points or 1.7 pct at 16,140.76, off a high of 16,207.41. This was its highest closing level since Aug 23, when it ended at 16,163.03
   
The broader TOPIX index of all first-section issues gained 21.80 points or 1.3 pct to settle at 1,634.46, off an intraday peak of 1,639.59.
   
Australian shares ended higher as investors bought major bank and resource stocks on month-end portfolio adjustments, while continuing merger activity added to the positive sentiment, dealers said.
   
The S&P/ASX 200 rose 48.1 points or 0.95 pct to close at 5,115.4. The benchmark indicator closed at the day's high, with the low at 5,072.5.
   
Hong Kong shares were stronger in afternoon trade, as property stocks extended yesterday's gains on continued hopes that the US Federal Reserve will hold interest rates steady at its next policy meeting, dealers said.
   
At 3:28 pm the Hang Seng Index was up 117.14 points or 0.68 pct at 17,401.85.
   
In China, A-shares in Shanghai and Shenzhen closed higher on a strong yuan with metal stocks and banks snapped up, dealers said.
   
The Shanghai A-share Index added 3.64 points or 0.21 pct to 1,743.71 and the Shenzhen A-share Index was up 2.76 points or 0.63 pct at 438.56.
   
Seoul shares closed sharply higher, rising above 1,350 points, as continued gains on Wall Street and Asian markets offset weak service sector output data, dealers said.
   
The National Statistical Office said South Korea's service sector output expanded 2.1 pct year-on-year in July, easing from a 4.3 pct rise in the preceding month, as output growth in most sectors slowed due to heavy rains and strikes at major automakers.
   
Foreign investor activity in futures triggered heavy program buying and institutional investors also built positions, dealers noted.
   
The KOSPI index closed up 11.39 points or 0.85 pct at 1,352.74, after moving between 1,344.57 and 1,361.48.

Asian Bourse Round-Up

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Gold up on safe haven buying as UN nuclear deadline for Iran falls due

LONDON - Gold rose on safe haven buying as Iran remained defiant in
the face of today's UN deadline for it to suspend sensitive nuclear enrichment
work or face sanctions.
   
At 2.41 pm, spot gold, which earlier hit a high of 626.45 usd an ounce, was quoted at 624.08 usd, up from 617.25 usd at the time of the COMEX market close in New York yesterday. Other precious metals were also stronger.
   
Spot silver was at 12.67 usd against 12.49 usd at yesterday's close, platinum was at 1,245.50 usd against 1,222.00 usd while palladium was at 342.50 usd against 334.00 usd.
   
David Holmes, precious metals analyst at DKW, said gold is moving in line with other commodities like base metals and oil, which has posted strong gains on the Iranian nuclear standoff.
   
He added that gold was also benefiting from a weaker US dollar, but said as far as today's trade is concerned, geopolitical tensions are eclipsing the dollar in determining price movements for gold.

Copper gains; mkt waits for confirmation of Escondida stike end

LONDON - Base metals rose, lead by copper, as the market waited for
confirmation that the four-week long strike at Chile's Escondida mine is indeed
over with workers prepared to vote on management's new pay offer.
   
At 11.20 am, LME copper for three-month delivery was at 7,615.00 usd a
tonne, up from 7,450.00 usd at the close yesterday, while nickel was up at
27,950.00 usd a tonne against 27,500.00 usd.
   
Other metals also gained.
   
Zinc was at 3,420.00 usd against 3,340.00 usd, lead was at 1,238.00 usd against 1,215.00 usd, aluminium was at 2,505.00 usd against 2,485.00 usd and tin was at 8,970.00 usd against 8,850.00 usd.
   
Copper fell yesterday on reports a preliminary agreement had been reached to
end the strike at Escondida, the world's largest copper mine. But prices later
rebounded as follow through selling ebbed.
   
Nickel, which lost almost 3 pct yesterday after a drop in the level of cancelled warrants resulted in more stock becoming available, has likewise recovered today on yet another fall in LME inventories.
   
The LME said today inventories, already at critically low levels, fell by another 720 tonnes. The metal touched a record 29,950 usd last week amid falling inventories and an ongoing strike at Voisey's Bay since July.

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