US & World Daily Markets Financial Briefing 01-02-2007

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Stocks Rise Moderately In Early Trading

Stocks rose moderately in early trading Thursday after an already buoyant Wall Street received word that consumer spending rose at a healthy clip in December and as corporate profit reports remained strong.

The increase came a day after Wall Street put on its best performance of the year, rising sharply after the Federal Reserve signaled the economy remained solid and that inflation was largely in check. The central bank's comments, which followed its decision to leave short-term interest rates unchanged, injected a bit of confidence into an uncertain Wall Street. The first month of the year had revealed investor uneasiness about whether stocks were poised to climb higher from sharp gains seen in 2006 or whether the Fed and a drop corporate profits would bring an unceremonious end to the party.

Technology stocks got a boost Thursday from news that Dell Inc. founder Michael Dell would resume his role as chief executive to help the computer maker boost sales and to increase investor confidence. Kevin Rollins was CEO for four years. Dell was up 94 cents, or 3.9 percent, at $25.16.

Google Inc. posted a sharp increase in profits, though investors used to outsize gains weren't wowed. The stock was off $3.10 at $498.40.

Economic data continued to play a big role as it had all week. As expected, consumer spending in December showed its biggest increase in five months, rising 0.7 percent. The Labor Department also reported that the number of newly laid off workers seeking unemployment benefits fell by 20,000 last week to  307,000.

The figure pushed the four-week average for claims to the lowest level in a year. The reading also bolstered investor confidence for the January unemployment report, which is due Friday.

In the first hour of trading, the Dow Jones industrial average was up 40.69, or 0.32 percent, at 12,662.38, moving further into record territory.

Broader stock indicators were higher. The Standard & Poor's 500 index was up 5.07, or 0.35 percent, at 1,443.31, and the Nasdaq composite index was up 15.92, or 0.65 percent, at 2,479.85.

Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.79 percent from 4.82 percent late Wednesday. The dollar was mixed against other major currencies, while gold prices rose.

Light sweet crude fell 29 cents to $57.85 per barrel in premarket electronic trading on the New York Mercantile Exchange.

In corporate news, Comcast Corp. fell $1.35, or 3 percent, to $43 after the nation's largest cable television operator's fourth-quarter profit came up short of Wall Street's forecast. Profits nearly tripled as revenue rose 30 percent.

International Paper Co. rose 38 cents to $34.08 after the paper and packaging maker reported that it swung to a profit from a loss in the fourth quarter, aided in part by the sale of assets.

ON Semiconductor Corp. jumped $1, or 12 percent, to $9.36 after the company posted a hefty increase in fourth-quarter profits.

The Russell 2000 index of smaller companies was up 6.17, or 0.77 percent at 806.51. The average first broke the 800 mark Wednesday.

Overseas, Japan's Nikkei stock average closed up 0.78 percent. In afternoon trading, Britain's FTSE 100 was up 1.44 percent, Germany's DAX index was up  0.98 percent, and France's CAC-40 was up 1.11 percent.

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Dollar remains weak after less hawkish Fed statement; awaiting US ISM

The dollar remained weak after last night's mildly dovish statement by the Federal Open Market Committee following their decision to leave interest rates unchanged.

This afternoon's US data failed to give the currency a lift, with figures on personal income and consumption coming in in line with market expectations, while weekly jobless claims numbers were slightly above forecasts.

The latest US ISM manufacturing data later this afternoon is likely to take centre stage for today, however, particularly as yesterday's weaker-than-expected Chicago PMI number suggested today's figure could be disappointing.

The dollar has been broadly weaker throughout today after the Federal Reserve last night kept its interest rates unchanged and adopted slightly less hawkish rhetoric in its accompanying statement.

Analysts noted that it downgraded its depiction of the inflation outlook, using the words "improved modestly" from the previous use of "elevated".

Elsewhere, the yen and the Swiss franc continued to rise as speculation increased that carry trades -- when investors borrow in low-yielding currencies in order to invest in higher-yielding assets elsewhere -- could begin to unwind.

The Swiss franc has also been gaining on speculation that Swiss National Bank president Jean-Pierre Roth could make further comment on the weakness of the Swiss currency and hint at further interest rate hikes in his speech this afternoon.

The pound was also firm after this morning's stronger-than-expected UK PMI survey on manufacturing activity.

The Chartered Institute of Purchasing and Supply's purchasing managers index rose to 52.8 in January from 52.0 in December, revised up from 51.9 previously.

The reading is above the median forecast of analysts polled by AFX News, who had predicted a small decline to 51.7, and marks the first acceleration in the index since September last year.

Today's data do add to the recent run of very strong figures on the UK economy which have suggested that the Bank of England will raise interest rates again soon, possibly as early as February, particularly as the prices components were all very strong.

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London shares sharply higher midday as AstraZeneca and Shell boost sentiment

Leading shares jumped to session highs at midday, propelled by strength across miners and oils, while reassuring numbers from AstraZeneca also helped the FTSE 100 record a near 1.5 pct gain, dealers said.

At 11.52 am, the FTSE 100 index was up 89.7 points at 6,292.8, while the broader market was also sharply higher.

Volume was above average, with 1.3 bln shares changing hands in 186,986 deals.

Looking ahead to Wall Street, US stocks are expected to open higher this afternoon, with investors seen still applauding the Fed's decision to leave rates unchanged, dealers said.

On the economic front, January ISM data, due at 3 pm GMT should be closely
eyed, with investors cautious of a low reading.

Weekly jobless figures and pending home sales for December are also due this afternoon.

According to spread-betting firm IG Index, the DJIA is seen opening around 30 points higher, after closing at 12,621.70 yesterday.

In London, shares in AstraZeneca jumped over 2-1/2 pct higher as the group's solid full-year results and 2007 outlook provided some reassurance to a concerned market.

AstraZeneca shares were up 76 pence at 2,916 by midday, having traded 48 pence higher at 2,888 just before the results announcement at 11 am GMT.

AstraZeneca shares have fallen over 20 pct in the last three months amid concerns over the group's earnings momentum going forward and its drugs pipeline.

Europe's third largest drugs maker said 2006 earnings rose to 3.86 usd per share, compared to 2.91 usd in 2005, while revenues increased 11 pct to 26.475 bln usd, buoyed by strong sales of its five top-selling drugs and cost cutting.

Looking ahead, AstraZeneca said it expects earnings in a range of 3.80-4.05 usd per share, versus the 4.08 usd per share consensus.

Goldman Sachs reiterated its 'neutral' stance and described the outlook as "positive".

Elsewhere, shares in Royal Dutch Shell were also higher, after the oil and gas giant reported a better than expected set of fourth quarter numbers.

Earlier, the Anglo-Dutch group said clean earnings on a current cost of supply (CCS) basis rose to 5.5 bln usd from 5.36 bln in the three months to December, compared to a consensus figure of 5.225 bln usd.

Shell added 49 pence to trade at 1,755, with peers BG up 12-1/2 at 681-1/4, BP 6 higher at 541-3/4 and Cairn 25 better at 1,701.

Oil prices edged back slightly, easing after reaching up to 58 usd per barrel on US trade overnight, after the Department of Energy showed lower US heating oil reserves.

New York front-month light, sweet crude for delivery in March shed 8 cents at 57.76 usd per barrel.

Remaining with commodities, Rio Tinto added 49 pence to 2,802, despite a mixed bag of full-year results from the Anglo-Australian miner.

Rio Tinto said its net profit for the year to December 2006, rose 43 pct to a record 7.438 bln usd, but shy of some analysts' expectations.

In reaction, Cazenove said Rio reported a decent set of earnings, albeit 1.5 pct below consensus estimates of 7.3 bln usd, as it stuck to its 'outperform' stance.

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Asian shares close mostly higher on US rate decision, Wall St

Shares across the Asia-Pacific region closed mostly higher after the US Federal Reserve decided overnight to hold interest rates, spurring a rally on Wall Street, dealers said.

Tokyo shares ended firmer after the market was buoyed by Wall Street and easing worries about the health of the US economy, dealers said.

Investors picked up shares in companies that posted healthy earnings, but further gains were hindered by caution as they waited for more earnings reports, by an uptick in the yen and by a rise in oil prices overnight, dealers said.

The blue-chip Nikkei 225 Stock Average closed 136.08 points or 0.78 pct higher at 17,519.50, off a low of 17,361.01.

The broader TOPIX index of all first-section issues finished 16.62 points or 0.97 pct higher at 1,738.58, off a low of 1,720.82.

Yutaka Miura, senior strategist at Shinko Securities, said the market had kept its firm tone, but investors had been cautious about stocks of companies that had yet to report their earnings.

Australian shares closed at new record highs as investor sentiment was boosted by the Federal Reserve's rate decision and its statement, which painted a brighter outlook for US economic growth and inflation, dealers said.

They added that the overnight rise of base metal prices supported the resources sector while leading banks also gained.

The S&P/ASX 200 advanced 40.7 points or 0.70 pct to a record close of of 5,814.1, just beating Tuesday's record close of 5,812.5. The key index closed off the day's high of 5,816.2 and above the day's low of 5,781.3.

Hong Kong shares were sharply higher in afternoon trade led by the property sector after the US Federal Reserve's comments, dealers said.

At 3.25 pm the Hang Seng Index was up 375.09 points or 1.87 pct at 20,481.51.

In mainland China, A-shares in Shanghai and Shenzhen closed mixed with some bargain-hunting interest seen in the afternoon session, even as banks and steelmakers came under pressure, dealers said.

The Shanghai A-share Index was down 1.05 points or 0.04 pct to 2,926.77 and the Shenzhen A-share Index was up 4.42 points or 0.65 pct at 685.98.

Analysts said there could be further corrections ahead.

Seoul shares also closed sharply higher, with sentiment lifted by Wall Street's overnight rally, dealers said.

Most blue chips rebounded on program buying sparked by foreign investors buying futures, sending the benchmark index above 1,380 points, they added.

The KOSPI index closed up 22.67 points or 1.67 pct at the day's high of 1,382.90. The index hit a low of 1,362.34.

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

Source - AFX News/Associated Press

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