US & World Daily Markets Financial Briefing 03-07-2006

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There will be no World Daily Markets Bulletin tomorrow, 4th July 2006, owing to the Independence Day holiday in the US.

U.S. Stocks at a Glance

Stocks up on possible GM-Nissan alliance

NEW YORK - Stocks rose moderately in early trading Monday, with news of a possible alliance between General Motors Corp. and Nissan Motor Co. energizing investors ahead of a key manufacturing report.
    
Nissan said it would begin discussions of GM joining an existing partnership between the Japanese automaker and Renault SA. The news boosted shares of Dow Jones industrial GM, which also releases its June sales results later in the
session.
   
Wall Street awaited the June reading of the Institute for Supply Management's manufacturing index, hoping the report would provide clues about the economy's health and whether the Federal Reserve might be done raising interest rates.
   
But with many traders out of the office ahead of Independence Day, light volume was expected to keep stocks from making a sharp move in either direction. The markets close at 1 p.m. Eastern Time and will be closed on July 4.
   
In the first hour of trading, the Dow Jones industrial average advanced 59.88, or 0.54 percent, to 11,210.10.
   
Broader stock indicators were also higher. The Standard & Poor's 500 index was up 5.59, or 0.44 percent, at 1,275.79, and the Nasdaq composite index gained 7.89, or 0.36 percent, to 2,179.98.
   
Bonds ticked lower after last week's rally, with the yield on the 10-year Treasury note rising to 5.17 percent from 5.14 percent late Friday. 

The Russell 2000 index of smaller companies advanced 1.29, or 0.18 percent, to 725.19.
   
Media reports have said Nissan and Renault could buy as much as 20 percent of GM's stock after major shareholder Kirk Kerkorian proposed the struggling automaker join the Nissan-Renault alliance. GM added 47 cents to $30.26 and Nissan inched up 2 cents to $22.
   
Nortel Networks Corp. surged after Jefferies & Co. upgraded the troubled telecommunications equipment company, citing a low share price and changes being implemented following an accounting scandal two years ago. Nortel rose 6 cents to $2.30.

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Dollar remains on defensive ahead of ISM survey

LONDON - The dollar remained on the defensive as last week's relatively dovish policy statement from the US Federal Reserve and a recovery in risk assets, such as equities, continued to weigh on sentiment.
   
Though the quarter point hike in the Fed funds rate to 5.25 pct was expected, the rate-setting Federal Open Market Committee cautioned about the outlook for growth. In response to the statement, the Fed funds futures now attach a 65 pct of another rate hike in August, down on 80 pct predicted before.
   
A number of currency watchers think the dollar's move lower since the Fed statement last week has been overdone, or at least unlikely to accelerate.
   
"Last week's Fed statement and subsequent paring of Fed rate hike expectations have clearly reduced the dollar's upside prospects but we think the US currency is unlikely to weaken decisively until markets become more convinced that the Fed has completed its tightening cycle," said UBS currency strategist Daniel Katzive.
   
Today's closely-watched manufacturing survey from the Institute for Supply Management will be assessed in that light, though this Friday's non-farm payrolls report will carry more weight when the FOMC next meets on August 8. Analysts expect the main ISM index to rise to 54.9 in June from May's 54.4.
   
The focus on the Fed over recent days has masked a further ratcheting up in European interest rate forecasts following strong euro zone economic news, particularly in Germany, and hawkish commentary from ECB officials, most notably from Yves Mersch, Luxembourg's central bank governor.
   
This morning's release of the euro zone manufacturing PMI survey further reinforced expectations of more aggressive tightening from the ECB.
   
The main PMI expanded at its fastest pace in nearly six years during June, rising to a seasonally adjusted 57.7 in June from May's unrevised 57.0. The rise was slightly higher than anticipated. Analysts polled by AFX News had predicted a more modest increase to 57.5.
   
Meanwhile, the yen was buoyed by a robust economic survey in Japan, which lifted expectations that the Bank of Japan itself will raise interest rates this month.
   
The Tankan survey's headline diffusion index for large manufacturers rose to 21 in June from 20 in March and the index for large non-manufacturers increased to 20 from 18.

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The European Markets at 12.00 BST

London - Leading shares remained firmer at midday, with a scattering of M&A news, a solid trading update from BP and further gains across commodity prices pushing the FTSE 100 to its highest levels since the middle of May, dealers said.
  
By 12.10 pm, the FTSE 100 index was 29.7 points firmer at 5,863.1, while the broader indices were also higher.

Frankfurt - Shares were slightly higher in midday trade following gains across Asia this morning and as Wall Street looks set for a positive opening this afternoon, with RWE rising on the back of a report stating that interest in its Thames Water division is solid, dealers said.
   
At 11.40 am, the DAX 30 index was 9.29 points or 0.16 pct higher at 5,692.60, having moved between 5,675.50 and 5,708.81 so far this session.

Paris - Shares were slightly lower in midday trade as investors took profits in the wake of the rally seen towards the end of last week, and digested the weekend news from EADS and Renault, dealers said.
   
At 12.28 pm, the main CAC-40 index was 10.68 points or 0.22 pct lower at 4,955.28, off a high of 4,976.34, on light trading volume of 1.05 bln eur.

Amsterdam - Shares were off their highs in midday trade as the morning's exuberant trade quietened ahead of tomorrow's July 4 public holiday in the US, dealers said.
   
At 12.04 pm, the AEX was up 0.95 point or 0.22 pct to 441.20, after opening at 440.79 and reaching a high of 443.16.

Milan - Share prices were little changed in thin midday trade, with Popolare Italiana sharply up on press speculation it has attracted the interest of three foreign banks, and Pirelli lower after it dropped the IPO of its tyre unit, dealers said.
   
At 1.00 pm, the Mibtel index was up 0.18 pct at 27,936 points and the S&P/Mib added 0.05 pct at 36,464, while volumes were 1.14 bln eur.

Madrid - Share prices were slightly lower midsession, with heavy put through-related trade in BBVA and losses in SCH and Iberdrola, while constructors outperformed across the board, dealers said.
   
At 1.14 pm, the IBEX-35 index was down 11.7 points at 11,536.4, after trading in a range of 11,500-11,548, on turnover of 4.443 bln eur.

Stockholm - Shares were marginally higher in early afternoon trade amid early signs that the Nasdaq will open in positive territory later today, brokers said.
   
At 1.45 pm, the OMX Stockholm index was up 0.31 pct at 310.43 points and the OMX Stockholm 30 up 0.23 pct at 958.70 points. Turnover was 6.447 bln skr. 

Helsinki - Shares were flat in thin midday trade, with UPM-Kymmene off a touch after warning that second quarter earnings per share will be negative after including charges related to its ongoing cost-cutting programme and write-downs, dealers said.
   
At 11.49 am, the OMX Helsinki 25 was 0.26 pct higher at 2,447.44 and the OMX Helsinki was up 0.17 pct to 8,588.31. Turnover was a below-average 105 mln eur.

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Asian shares close mostly higher, Tokyo up on business optimism

HONG KONG - Shares across the Asia-Pacific region closed mostly higher as positive economic news encouraged buying, dealers said.
   
Tokyo share prices ended higher, as the Bank of Japan's Tankan survey of business sentiment gave the market some cheer, dealers said.
   
However the gains were capped in the afternoon by some late profit taking as investors sought to take advantage of the Nikkei's sharp run-up, with the key index having risen 2.5 pct last week.
   
The June Tankan survey results showed the headline diffusion index for large manufacturers rising to 21 from 20 in March, while combined capital investment by all industries rose 6.2 pct in the current financial year, against a fall of 1.3 pct in the March poll.
   
The data showing that firms plan to increase capital spending was especially welcomed by the market even though the survey has strengthened expectations for the Bank of Japan to end its zero interest rate stance and raise its overnight call rate, possibly as early as next week.
   
The Nikkei 225 Stock Average closed up 66.44 points or 0.4 pct to 15,571.62, after touching a high of 15,617.22.
   
The broader TOPIX index of all first-section issues gained 6.26 pct or 0.4 pct to 1,593.22, off a high of 1,599.31.
   
"The Tankan survey was not a surprise but was as good as expected and investors reacted favorably," said Hideo Mizutani, a chief strategist at Sieg Securities.
   
Australian shares finished higher as investors bought bank and resource stocks to open Australia's equity market in positive territory for the start of a new June financial year in Australia, dealers said.
   
They said sentiment ignored the dip on Wall Street on Friday, while the jump in gold back over 600 usd an ounce supported gold miners higher.
   
The S&P/ASX 200 ended up 18.317 points or 0.36 pct to 5,092.2.
   
The benchmark indicator closed just off the high of 5,093.2 and above the low of 5,062.5.
   
Hong Kong shares were higher in afternoon trade with buying in particular blue chip and China stocks on expectations that their weighting in the Hang Seng Index will rise under a new formula to be used for calculating the benchmark index, dealers said.
   
At 3.29 pm the Hang Seng Index was up 22.67 points, or 0.14 pct, at 16,290.29.
   
In mainland China, A-shares in Shanghai and Shenzhen ended sharply higher on increasing optimism about the Bank of China's A-share debut Wednesday, with banks and real estate developers in particular driven up by speculative play, dealers said.
   
The Shanghai A-share Index added 26.39 points or 1.50 pct to 1,784.46 and the Shenzhen A-share Index was up 7.21 points or 1.60 pct at 458.41.
   
Seoul share prices closed slightly lower, retreating from a two-day sharp rebound, as investors took profits, dealers said.
   
They said there was little market reaction to the appointment of Kwon Oh-Kyu as the deputy premier for the economy and finance minister, and trading was range bound with light volume.
   
The latest CPI data released today provided relief over price stability, putting investors into a waiting mode ahead of the corporate earnings season, they added.
   
The KOSPI index closed down 0.54 points or 0.04 pct at 1,294.61, off a high of 1,297.86 and a low of 1,284.06.

Asian Bourse Round-Up

For a full list of closing fugures, click here

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Gold climbs higher on improved economic outlook

LONDON - Gold prices climbed higher, further extending Friday's more than 4 pct gains, with the precious metal still benefiting from the view the US Federal Reserve is near the end of its rate hike cycle.
  
At 11.35 am, spot gold was quoted at 622.75 usd against 613.60 usd at the time of the COMEX market close Friday. Other precious metals were also higher.    

Spot silver was at 11.27 usd against 10.93 usd, platinum was at 1,243.50 usd from 1,225.00 usd and palladium was at 325.50 usd against 312.00 usd.

Base metals turn lower amid thin, volatile trade as US mkts closed

LONDON - Base metals reversed Friday's strong gains with all but nickel turning lower amid thin, volatile trade, with the US markets closed today ahead of the Independence Day Holiday tomorrow.
   
UBS Investment Bank analyst Robin Bhar said Friday's gain's were probably over-extended and that this has attracted some profit-taking, which has been exaggerated by the thin trading volumes.
   
At 2.07 pm, LME copper for 3-month delivery was at 7,220.00 usd a tonne against 7,320.00 usd at the close Friday, while nickel traded at 21,575.00 usd from 21,350.00 usd and zinc at 3,215.00 usd against 3,220.00.

Meanwhile, crude futures approached $74 amid concerns about heightened gasoline demand during the busy summer driving season. A barrel of light crude rose 43 cents to $73.94 on the New York Mercantile Exchange.

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