US & World Daily Markets Financial Briefing 04-04-2006

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U.S. stocks dip in opening trade; Citigroup in focus

NEW YORK - U.S. stocks edged lower Tuesday as Citigroup received a green light to pursue big mergers, and as Computer Sciences said it is exploring strategic options, including a potential sale of the company.
   
The Dow Jones Industrial Average was down 14 points at 11,130. The Nasdaq Composite Index was off 2 points at 2,334 while the S&P 500 Index was down 2 points at 1,296.
   
Steve Goldman, chief market strategist at Weeden & Co., predicted overall gains for stocks in the second quarter, as the market builds on its strong first-quarter showing.
   
In the first quarter, which ended on Friday, the Nasdaq Composite rose 6.1%, while the Dow Jones industrials and the S&P 500 both advanced 3.7%.
   
There are no major government economic reports Tuesday, although the Challenger, Gray & Christmas survey showed that U.S. layoffs fell 26% to an 11-month low in March.
   
A speech by Chicago Federal Reserve President Michael Moskow in Germany shed no light on monetary policy, but an upcoming address by Dallas Fed President Richard Fisher on monetary policy is likely to give the market some insight into the Fed's thinking.
   
However, Fisher is not a voting member of the Federal Open Market Committee.
   
Stocks on the go
   
Citigroup Inc. has been given the green light to hit the acquisition trail after New York Federal Reserve Chief William Rutledge lifted a year-old ban on big mergers.
   
An April 3 letter from Rutledge to Chief Executive Chuck Prince said the understanding that Citigroup "will refrain from significant expansion is no longer in operation."
   
The ban came into operation in March 2005 as Citigroup was acquiring up First American Bank. On Monday, the bank's shares rose 18 cents to $47.41.
   
International Paper gained 3.2% to $35.82 after announcing it will it sell about 5.1 million acres of forestlands to two separate groups for a total of $6.1 billion.
   
Computer Sciences Corp. was up 4.6% at $59.95 in early trading.
   
The company confirmed plans to explore its strategic options, including a potential sale, citing expressions of interest from unnamed parties.
   
The El Segundo, Calif., provider of information technology services also outlined a restructuring program involving the elimination of a total of 5,000 jobs, mostly in Europe.

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Dollar slumps on Europe rate-hike expectations

NEW YORK - The dollar weakened sharply against major rivals early Tuesday, hitting a two-month low versus the euro as Europe's shared currency was lifted by talk the European Central Bank will raise interest rates in May.
   
News agency Market News, citing "well-informed central banking sources," reported the majority of ECB council members prefer a rate hike in May.
   
In early New York trading, the euro strengthened 0.8% to $1.2244. The dollar weakened 0.3% to 117.38 yen. The British pound was fetching $1.7533, up 0.8%, while the dollar was down 1% at 1.2910 Swiss francs.
   
The dollar also came under pressure after a Hong Kong-based newspaper suggested that China's central bank may diversify its foreign-exchange reserves, citing Cheng Siwei, vice chairman of the Standing Committee of the National People's Congress.
   
Chen was quoted as saying China can stop buying dollar-denominated bonds and should gradually reduce its holdings of U.S. bonds.
   
The People's Bank of China later clarified that Cheng was speaking independently and was not announcing policy decisions.
   
Separately, officials from Qatar also suggested that the nation may boost its euro holdings.
   
Europe, Asia data in focus
   
In European trading, the euro pushed higher on a better-than-expected unemployment reading and strong inflation data.
   
The euro-zone unemployment rate unexpectedly fell to 8.2% in February from 8.3% in January.
   
In addition, the producer price index rose 0.5%, or 5.4% on year-over-year basis, the biggest jump since 2000.
   
The European Central Bank will meet on Thursday with most economists expecting the central bank to keep rates unchanged at 2.5%. European Central Bank President Jean-Claude Trichet is due to give a speech ahead of Thursday's interest-rate decision.
   
In Asia, Japan's monetary base shrank 1% in March from a year earlier, the first decline in more than five years, the Bank of Japan said. The decline was linked to the ending of the quantitative-easing program, which was scrapped on March 9.
   
The balance of current-account deposits at the central bank plunged 6.5% from a year earlier. The figure is expected to drop further as the central bank plans to gradually lower the balance toward the legally required levels of around 6 trillion yen, probably by mid summer, the central bank said.

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The European Markets at 12.00 BST

London - Leading shares stayed weak, off lows at midday, just hanging on to the 6,000 level amid expectations for a flat to higher restart today on Wall Street, with Tate & Lyle remaining the main casualty on Splenda safety concerns, dealers said.
   
At 12.00 noon, the FTSE 100 index was 20.3 points easier at 6,004.0, holding off the morning low of 5,996.0.
  
Frankfurt - Shares were lower in midday trade following yesterday's sharp gains as the US closed mixed overnight, though Continental AG gained as a raft of brokers upped their price targets on the stock on the back of its planned acquisition of Motorola's automotive electronics operations, dealers said.
   
At 11.35 am, the DAX 30 index was 15.64 points or 0.26 pct lower at 6,008.41, having moved between 5,992.89 and 6,016.26 this session.

Paris - Shares were lower midday as profit-taking sparked by the latest jump in oil prices offset the gains from the ongoing merger activity in the defence electronics sector, dealers said.
   
At 12.36 pm the CAC-40 index was 26.24 points or 0.50 pct lower at 5,229.02, on volume of 1.51 bln eur. Of the CAC-40 shares, 30 were down and 10 were up.
   
Amsterdam - Share prices were slightly lower in quiet early afternoon trade, with second-liner Oce tumbling after disappointing first-quarter results, dealers said.
   
At 1.08 pm, the AEX was down 0.35 pct at 469.68 after opening near its highs at 470.28 and just off an intraday low of 469.11.
   
Milan - Share prices were led slightly lower at midday by profit-taking, while Capitalia was sharply higher on renewed speculation the bank could be involved in a merger or a takeover, dealers said.
   
At 12.43 pm, the Mibtel index fell 0.26 pct to 29,527 points and the S&P/Mib was off 0.27 pct at 38,175, while volumes stood at 1.66 bln eur.

Madrid - Share prices were lower in light midsession trade, with energy stocks like Repsol YPF leading the decliners, while selected defensives were strong, dealers said.
   
At 12.19 pm, the IBEX-35 index was up 80.5 points at 11,934.8, after trading in a range of 11,903-11,958, on turnover of 1.993 bln eur.

Stockholm - Shares were slightly lower in midday trade pressured by profit taking, but with mining stocks bucking the negative mood amid recent rises in metal prices, brokers said.
   
At 12.35 pm the OMX Stockholm index was down 0.49 pct at 343.02 and the OMX Stockholm 30 down 0.68 pct at 1,069.14. Turnover was 12.032 bln skr.

Zurich - Share prices were down slightly midafternoon, handing back recent gains and tracking other European markets as investors awaited fresh direction from Wall Street. Novartis was up slightly after securing its takeover of Chiron Corp by sweetening its bid and changing the deal's voting structure.
   
At 1.22 pm, the SMI was down 15.61 points at 8,062.91 and the SPI was down 9.85 at 6,196.49.
 
Helsinki - Shares were lower midday, led down by Nokia on a weaker ADR price in New York last night, with industrials outperforming on bargain-hunting and news of new business, dealers said.
   
At 12.35 pm, the OMX Helsinki 25 index was 0.42 pct lower at 2,717.15. The OMX Helsinki index was 0.50 pct lower at 9,410.68, while the Helsinki CAP portfolio index was down 0.43 pct at 5,054.05.

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Asian shares closed mixed, Tokyo lower on profit-taking

HONG KONG - Share prices across the Asia-Pacific region ended mixed with Tokyo lower after volatile trading as investors opted to pocket gains, dealers said.
   
The Nikkei 225 Stock Average closed down 40.40 points or 0.2 pct at 17,292.91. Yesterday, the blue-chip marker ended at 17,333.31 -- its highest finish since July 2000.
   
The broader TOPIX index of all first-section issues lost 4.99 points or 0.3 pct at 1,749.65. Yesterday, the TOPIX surged to 1,754.64, its highest close since February 2000.
   
Share prices had risen earlier on broadening optimism about the economy, supported by bargain hunters and overseas investors, but caution about the speed of the market's rise gradually emerged to snuff out these gains, dealers said.
   
"The market took a breather ... as investors moved to lock-in profits after the main indices here surged to more-than-five-year highs yesterday," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.
   
Share prices in Australia closed off fresh record highs after a late sell-off in banking stocks saw the index slip into negative territory after holding record levels for most of the day, dealers said.
   
They said the overnight rise on Wall Street failed to support investor sentiment although metal prices continuing to post all-time highs feeding the resources sector's bull-run.
   
Dealers said index leader BHP Billiton, as well as Rio Tinto, closed at fresh record highs after copper prices jumped to new peaks overnight and gold posted fresh 25-year highs.
   
The S&P/ASX 200 fell 18.0 points or 0.35 pct to close at 5,162.5, retreating from Monday's record closing high of 5,180.5.
   
In Hong Kong, share prices were trading slightly up as the market took a breather after yesterday's sharp gains, dealers said.
   
They said there was profit-taking in some blue chips and H-shares but the downside was limited as institutional investors chased some laggard stocks.
   
At 4:25 pm, the Hang Seng Index was up 48.68 points or 0.30 pct at 16,112.43.
   
In mainland China, A-shares in Shanghai and Shenzhen closed higher on strong follow-through interest after recent strong performance with infrastructure listings and power generators snapped up, dealers said.

The Shanghai A-share Index jumped 10.68 points to 1,394.18 on turnover of 19.69 bln yuan and the Shenzhen A-share Index was up 2.96 points at 343.26 on turnover of 12.22 bln yuan.
   
In Seoul, share prices ended higher, extending a run-up for a ninth day, with Samsung Electronics advancing more than one pct on sustained foreign investor interest, dealers said.
   
Foreign investors largely ignored Wall Street's overnight mixed performance and the won's sharp advance against the dollar and instead banked on hopes that many industry leaders will experience a better business environment, they added.
   
The won gained 0.78 pct today, largely due to massive stock purchases by foreign investors.
   
The KOSPI index closed up 5.89 points or 0.43 pct at 1,385.64.

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NEW YORK - Treasury prices ticked higher in the early going, making back just a bit of the strength they have lost in recent sessions amid concerns about rising U.S. and foreign rates.
   
The benchmark 10-year Treasury note was up 3/32 at 97-8/32 with a yield of 4.853%.
   
In the metals market, gold eased below recent highs, after closing Monday at levels not seen for more than two decades.
   
Gold for June delivery was last trading down $2.10 at $592.20 an ounce on the New York Mercantile Exchange.
   
Crude for May delivery last was down 50 cents at $66.24 as traders locked in gains across the commodities markets after a series of recent highs.

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