US & World Daily Markets Financial Briefing 04-12-2006

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Stocks rise despite Pfizer drug halt

NEW YORK - Wall Street rose in early trading Monday as investors put aside Pfizer Inc.'s decision to halt development of a key drugand and focused instead on another series of takeover deals.
   
Pfizer shares fell by about 14 percent after the company halted the development of the cholesterol drug torcetrapib because of deaths and cardio vascular problems among people taking the drug during clinical trials. The stock was also downgraded by several Wall Street analysts on concern that Pfizer's revenue growth will now weaken.
   
The news was offset by a number of merger announcements. Leading them was Bank of New York Corp.'s $16.5 billion deal to buy rival Mellon Financial Corp. to create an asset management powerhouse.
   
With little on tap this week in the way of economic data, Wall Street will likely get direction from corporate news. Stocks stumbled Friday after a manufacturing survey unexpectedly contracted in November, pushing the major indexes to a loss for the week.
   
In the first hour of trading, the Dow Jones industrial average rose 10.65, or 0.09 percent, to 12,204.78.
   
Broader stock indicators were also higher. The Standard & Poor's 500 index was up 1.48, or 0.11 percent, to 1,398.19, and the Nasdaq composite index added 8.83, or 0.37 percent, to 2,422.04.

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Dollar stabilises after recent falls but further losses seen

LONDON - Foreign exchange markets remained quiet Monday as investors took time to consider the recent sell-off in the dollar and to evaluate the week's upcoming data.
   
The dollar stayed rangebound after a small uptick earlier this morning. The small gains came as investors took profits on Friday's sharp fall following data showing a contraction in US manufacturing activity.
   
"This is a very minor breather," said Simon Derrick of the Bank of New York.  "The euro should continue higher. Politicians seem to be accomodative of a higher euro, and the headlines seem to be pointing in that direction," he added.
   
The key drivers will be comments from ECB President Trichet Thursday, when the ECB is widely expected to raise interest rates, as well as US non-farm payrolls Friday.
   
The pound, likewise, did not move much today, sitting just below the 2 usd mark at 1.9768 usd. It does seem more vulnerable to a correction against the dollar than the euro, however, particularly if Tuesday's UK retail data show any signs of weak pre-holiday sales.
   
"Retail sales, while hardly bad, are not suggesting a sparkling time, and there is still only a 50 pct chance of a Bank of England rate hike in early 2007. I'd rather be long the euro than the sterling right now," said Derrick at the Bank of New York.

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The European Markets at 13.00 GMT

London - UK blue chips slipped from highs at midday, weighed down by further weakness across dollar earners, as fresh weakness in the US currency dragged Wall Street futures lower and sent the FTSE 100 back to near its opening levels. By 12.05 pm, the FTSE 100 index was up just 2.6 points at 6,024.1, having reached 6,052.8 in early deals.

Frankfurt - German shares were slightly higher in late morning trade as blue chips were led by ThyssenKrupp as it rose on renewed M&A speculation, and by Lufthansa after it said it is not interested in a tie-up with competitor Alitalia. At 11.45 am, the DAX 30 index was up 4.11 points or 0.07 pct at 6,245.24, having moved between a low of 6,242.37 and a high of 6,274.66 so far this session.

Paris - Share prices were higher in midday trade, bolstered by a raft of positive French corporate news items, but persistent fears about the outlook for the American economy pulled the French market off opening highs. At 12.30 pm, the CAC-40 index was down 3.39 points at 5,250.66, on volume of 1.7 bln eur.

Milan - Share prices were slightly higher at midday with Alitalia up after the government announced plans to halve it 49.9 pct stake in the airliner, while Autostrade was lower on concerns about its merger with Abertis. At 12.45 pm, the Mibtel index was up 0.04 pct at 30,794 points and the S&P/Mib gained 0.1 pct at 39,988.

Amsterdam - Shares in Amsterdam traded broadly lower at midday, closely mirroring lower DJIA futures on a dearth of guiding company news, while Grolsch fell after a rating downgrade. At 12.15 pm, the AEX was down 0.36 pct or 1.72 points to 471.60, after opening at 473.75 and reaching an earlier high of 475.18.

Madrid - Shares were flat in early afternoon trade, off earlier highs, amid extremely low volume, in line with Europe after US futures turned lower. At 1.00 pm, the IBEX-35 index was up 12.0 points at 13,672.2, after trading in a range of 13,769-13,662, on thin volume of about 1 bln eur.

Zurich - Share prices moved lower in thin midday trade, led down by heavyweight Nestle and with last week's weak US economic data still weighing on sentiment. At 12.38 pm, the Swiss Market Index was 17.71 points lower at 8,402.62, and the Swiss Performance Index 8.6 points down at 6,612.47.

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Asian shares close mixed after Wall St fall, economic data

HONG KONG - Shares in the Asia-Pacific markets closed mixed, with investors cautious following Wall Street's fall on Friday and the release of data pointing to economic slowdown within the region.
  
Tokyo shares closed mixed as investors fretted over data showing slower growth in capital spending by Japanese companies in the three months to September and Wall Street's losses on Friday, although mild bargain-hunting helped the Nikkei index recover from the day's lows.
   
The Nikkei 225 Stock Average finished down 18.19 points or 0.11 pct at 16,303.59, off the day's low of 16,185.92. The broader TOPIX index of all first section issues rose 2.84 points or 0.18 pct to 1,607.74, off a high of 1,609.96. 

Australian shares closed lower with sentiment hurt by weaker-than-expected economic data, which points to downside risks for third quarter GDP due on Wednesday.
   
The softer data include gross company profits for the September quarter, building approvals for September and job advertisements for November. Buying of resource stocks after the rise of base metal prices on Friday supported the market.
   
The S&P/ASX 200 slipped 3.0 points or just 0.06 pct to close at 5,424.9, off the day's low of 5,411.0 and below the high of 5,439.8.
   
Hong Kong shares were higher in afternoon trade as buying of select blue chips offset morning selling on Wall Street's fall. At 3.24 pm the Hang Seng Index was up 53.21 points or 0.28 pct at 18,744.03.
   
In mainland China, A-shares in Shanghai and Shenzhen closed sharply higher on strong fund inflows with banks, power and auto stocks snapped up. The Shanghai A-share Index added 62.88 points or 2.85 pct to 2,271.80 and the Shenzhen A-share Index was up 11.34 points or 2.19 pct at 529.84, a 52-month high.
   
Seoul shares closed lower on profit taking, with sentiment undercut by Wall Street and the won's rally to a nine-year high. Market jitters over the Bank of Korea's rate decision and economic outlook for next year and the expiry of options this week also added to the downward pressure.
   
The KOSPI index closed down 7.9 points or 0.55 pct at 1,426.46, after trading between 1,427.59 and 1,433.28. The won finished up 0.11 pct at 927.60 after hitting a nine-year high of 926.50, with the US dollar weakening against major international currencies on downbeat manufacturing data last week.

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Copper dips below 7,000 usd level on concerns over US economic slowdown; oil retreats

LONDON - Copper fell below the key 7,000 usd a tonne level after London Metal Exchange (LME) stocks rose again and as the market remained pressured by concerns about contracting demand in the US following Friday's much weaker than expected manufacturing data.
   
At 12.57 pm, LME copper for three month delivery edged down to 6,987.50 usd a tonne against 7,000.00 usd at the close Friday.
     
US data out Friday showed the Institute for Supply Management's index of manufacturing fell to 49.50 in November from 51.2 in October, falling below the 50 mark to indicate contraction in the sector.
   
A contracting manufacturing sector does not bode well for metals demand, especially as it comes amid an already contracting housing sector in the US, another key driver of demand, analysts noted.
   
Copper was also under pressure from yet another gain in LME stockpiles. Data out earlier showed LME copper stocks rose by 4,500 tonnes to total 161,225 tonnes. Stocks have now risen around 40 pct since mid-October.
   
Elsewhere, nickel edged lower after hitting a new all-time high of 34,300 usd on Friday, with analysts saying the fall in nickel prices was just a correction.    

Aluminium edged lower after spiking more than 1 pct on Friday ahead of the December options expiry this Wednesday. An options expiry refers to the date when options holders can buy or sell a futures contract at a specific price. 
   
LME nickel for three month delivery edged down to 33,650.00 usd from 33,900.00 usd at the close Friday, while aluminium fell to 2,809.50 usd from 2,818.00 usd.
   
Other metals were up. Three month zinc was up at 4,440.00 usd against 4,400.00 usd, tin was down at 10,675.00 usd against 10,700.00 usd, while lead rose to 1,732.50 usd from 1,695.00 usd.

Oil prices retreated but remained more than 3 usd per barrel above last week's opening levels, on worries over cold temperatures in the US and weekend comments from OPEC that the cartel might agree to further output cuts at its next meeting.
   
At 10.33 am in London, front-month Brent North Sea crude contracts for January delivery were down 45 cents at 64.17 usd a barrel, after adding 36 cents to settle at 64.62 usd on Friday.
   
Meanwhile, front-month New York light sweet crude contracts for January delivery fell 36 cents to 63.08 usd a barrel, after rising 30 cents to close at 63.43 usd on Friday.
   
Oil prices opened last week below 60 usd a barrel but climbed higher for five days running on worries OPEC will cut output further, amid cold temperatures in the US and steadily declining energy inventories.
   
A snowstorm hit the US midwest Friday, with the heaviest falls striking Illinois. Meanwhile, weather forecasters expect colder temperatures in the US this week, which should boost demand for heating fuels.
   
Saudi Arabia's Oil Minister Ali al-Naimi said in Cairo Friday that oil markets are significantly oversupplied and that 100 mln barrels of oil would need to be taken out of the market to achieve balance.

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