US & World Daily Markets Financial Briefing 05-02-2007

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Stocks mixed on oil, economy

NEW YORK - Wall Street was narrowly mixed in early trading Monday as lingering concerns about the economy offset better-than-expected sales from Wal-Mart Stores Inc. and a flurry of acquisition activity.
   
Dow Jones industrial Wal-Mart rose after the world's largest retailer said it expected January same-store sales to rise 2.2 percent. Tempering the gain was its projection that sales performance is on track to deliver the lowest growth rate in more than 25 years.
   
Meanwhile, Wall Street absorbed news of a spate of acquisition and private equity deals -- the largest amount since the start of the year. Triad Hospitals Inc. and Herbalife Ltd. received offers from private equity funds, while State Street Corp. agreed to buy Investors Financial Services Corp.
   
Investors also looked for more hints about the economy. The Institute for Supply Management's January non-manufacturing index, which covers the service sector, will be released at 10 a.m. EST. The market was narrowly mixed Friday after a weaker-than-expected employment report curbed investors' bullish sentiment following three days of straight gains.
   
In the first hour of trading, the Dow fell 1.60, or 0.01 percent, to 12,651.89. Broader stock indicators also fell. The Standard & Poor's 500 index was down 0.86, or 0.06 percent, to 1,447.53, and the Nasdaq composite index rose 3.76, or 0.15 percent, to 2,479.64.
   
Bonds rose, with the yield on the benchmark 10-year Treasury note down to 4.81 percent from 4.82 percent late Friday.

The Russell 2000 index of smaller companies was up 0.80, or 0.10 percent, to 810.22.

Stocks in focus

Wal-Mart shares rose 30 cents to $48.08 after it announced same-store sales topped its prior forecast for a 1 percent to 2 percent gain. The retailer said colder temperatures in January drove sales of seasonal items.
   
Triad Hospitals agreed to go private in a $4.7 billion deal from affiliates of CCMP Capital Advisors and Goldman Sachs affiliate GS Capital Partners. Shares surged $6.58, or 15.2 percent, to $43.27.
   
Nutritional supplement maker Herbalife said it received an acquisition proposal from private investment fund Whitney V LP that values the company at about $2.7 billion. The company said it is reviewing the offer, and its shares spiked $6.40, or 19.3 percent, to $39.50.
   
State Street shares fell $3.60, or 5 percent, to $68.15 after the custody bank said it would buy Investors Financial Services for about $4.5 billion in stock. The deal, which comes as rivals Mellon Financial Corp. and Bank of New York Corp. plan to combine, sent shares of IFS up $14.05, or 29.9 percent, to $61.
   

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Yen in focus as market positions for G7 meeting

LONDON - The yen remains in the spotlight as the market's attention moves toward this weekend's G7 meeting of finance ministers in Germany, following last week's raft of economic news around the world.
   
The yen's retreat gathered pace after the Bank of Japan's failure to raise interest rates last month and its slide has fuelled talk that weakness in the Japanese currency will be a key focus at the upcoming G7 meeting.
   
"The upcoming G7 meeting will likely impact some volatility in the yen against the dollar and the euro," said Stephen Jen, currency strategist at Morgan Stanley.
    
European policy-makers in particular have expressed their concerns about the slide in the yen, against which the euro is trading near an all-time high.
   
Analysts said that any further comments this week on the matter are likely to add to market nervousness and lead to some choppy trading.
   
Elsewhere, today's services purchasing mangers index for the euro zone put the market on alert that the European Central Bank may bring its expected quarter point rate hike in March to 3.75 pct forward to this Thursday, though the odds remain against it.
   
The headline PMI unexpectedly rose to a six-month high of 57.9 in January from 57.2 in December. Analysts polled by AFX News had expected the pace of growth to slip slightly with the PMI coming in at 56.7.
   
"Today's news from the euro zone will give the ECB a greater amount of room to increase interest rates this week," said Simon Wallace, analyst at the Centre for Economic and Business Research.
   
"However, with inflation remaining firmly under control at 1.9 pct, a rate rise this month remains unlikely," he added.
   
Similarly, the Bank of England is expected to keep its key repo rate unchanged at 5.25 pct this Thursday.
   
Today's equivalent PMI in the UK reinforced that view. It fell to 59.2 in January from the nine and a half year high of 60.6 in December. Analysts polled by AFX News had expected a more modest decline to 60.0.

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FTSE 100 risers

Johnson Matthey 1,571 up 79 'Buy' from 'neutral' with 1,800 pence target - UBS

BT Group 314 up 5 Dresdner Kleinwort 'buy' from 'hold' with target upped to 340 pence from 245

Cable & Wireless 175-1/2 up 4 Credit Suisse reiterates 'outperform', ups target to 200 pence from 124

Man Group 568 up 21-1/4 Credit Suisse 'outperform', tgt upped to 630p; Daniel Stewart targets 570p

BP 543-1/2 up 8-1/2 Goldman Sachs 'buy' from 'neutral' with 615p target; Q4 results tomorrow

BHP Billiton 986-1/2 up 10-1/2 SG Securities 'buy' with 1,150 pence target; Interims due Wednesday

William Morrison Supermarkets 302-1/4 up 1-1/5 Seymour Pierce 'outperform'

FTSE 100 fallers

Capita Group 645-1/2 down 1-1/2 Package reportedly explodes at co's London premises

GlaxoSmithKline 1,398 down 22 Q4 results due Thursday

Yell Group 622 down 2 Profit-taking

British Sky Broadcasting 556 down 2-1/2 Hundreds of bookmakers pull plug on BSkyB after subscription charges hiked

J Sainsbury 506-1/4 down 3/4 SG/Seymour Pierce 'sell'

Aviva 834-1/2 down 5 FY new business figures due tomorrow

Standard Chartered 1,514 down 7 FY new business figures due Wednesday

 
Frankfurt

At 3.35 pm, the DAX was down 8.10 points or 0.12 pct at 6,877.66, after trading between 6,864.19 and 6,885.37. The MDAX lost 45.57 points or 0.46 pct to 9,872.70 and the TecDax added 20.06 points or 2.14 pct to 851.67. DAX futures fell 16.50 points or 0.24 pct to 6,905.50, with Bund futures up 0.23 points or 0.20 pct to 115.51.
   
Deutsche Boerse, as the fastest decliner in afternoon trade, shed 2.21 eur or 1.35 pct at 161,73 eur after a report said the exchange plans to lower transactions costs for users of its Xetra Best equity trading system.
   
A Frankfurt-based dealer said that the reported lower prices "could lead to share price pressure in the short-term as this will lead to lower sales and earnings in the profit and loss account of Deutsche Boerse."
   
Infineon shed 0.08 eur or 0.72 pct at 10.99 eur, after Dresdner Kleinwort downgraded its stance on the German computer chip maker to 'reduce' from 'hold' while maintaining its price target of 9.50 eur per share.
   
Bucking the trend, Adidas was up 0.88 eur or 2.36 pct at 38.21 eur, as it benefited from Credit Suisse upgrading the sports equipment manufacturer to 'outperform' from 'neutral', dealers said.
   
Continental was the second best performer, adding 1.23 eur or 1.29 pct at 96.90 eur, after Michelin said it will raise the prices of winter car and truck tyres in Japan from April 2, in response to raw material costs "which continue to climb."

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Asian shares close mixed, cautious ahead of corporate earnings

HONG KONG - Shares across the Asia-Pacific region closed mixed on profit-taking and with markets awaiting the release of more corporate earnings this week.
   
Tokyo shares closed lower, extending their losses as investors continued to lock-in profits on recent rallies while remaining cautious about buying as they await the meeting at the weekend of the G7's finance ministers and central bank governors.
    
The blue-chip Nikkei 225 Stock Average closed 202.31 points or 1.15 pct lower at 17,344.80, off a low of 17,294.98. The broader TOPIX index of all first-section issues ended 26.12 points or 1.5 pct lower at 1,716.28, off a low of 1,713.06.
      
Dealers said investors were less aggressive about buying shares in exporters because of concern that the yen's weakness might be a subject for discussion at the G7 meeting.
   
Australian shares closed down as investors sold resource stocks following a large drop in base metal prices in London trading on Friday. Reports of heavy losses at a hedge fund sparked the metal sell-off, which weighed directly on the stock prices of leading miners but they noted that a rotational switch into selected banks helped limit the day's fall.
   
The S&P/ASX 200 ended down 9.4 points or 0.16 pct at 5,822.1, retreating from Friday's record of 5,831.5. The key index closed off the day's low of 5,801.4 and a high of 5,828.2.
   
Hong Kong shares were weaker in afternoon trade, with investors awaiting US data this week, and a forthcoming review of the Hang Seng Index constituents adding to caution. At 3.30 pm the Hang Seng Index was down 99.89 points or 0.49 pct at 20,463.79.
   
In mainland China, A-shares in Shanghai and Shenzhen closed mixed with banks and steel makers continuing to struggle on follow-through selling while energy stocks rose due to higher crude prices.
   
Debut counter, Industrial Bank Co Ltd, bucked the weak trend in the financial sector, to rise 22.18 yuan on the Shanghai Stock Exchange, up 38.80 pct from its initial public offering price of 15.98 yuan. It opened at 24.80 yuan, up 55.19 pct.
   
The Shanghai A-share Index was down 64.30 points or 2.29 pct at 2,744.04 and the Shenzhen A-share Index was up 1.56 points or 0.23 pct at 667.84.
   
Seoul shares closed slightly higher as foreign investors rushed to pick up financial stocks, effectively absorbing heavy program selling and retail profit-taking.
   
The market was listless in initial trade due to mixed Friday close on Wall Street and a sense of fatigue after a nearly four pct gain in the past two sessions, but it soon gained momentum to hit 1,420 points at one stage.
   
The KOSPI index closed up 4.81 points or 0.34 pct at 1,417.95, after moving between 1,409.71 and 1,420.42. Brokerages, insurers and utilities had strong gains.

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Source - AFX News/Associated Press

Oil near 60 usd as US looks to more freezing temperatures; Gold and copper recover

LONDON - Oil edged lower but held near its one-month high as new forecasts predicted more cold weather in the US Northeast, the world's largest consumer of heating oil.
   
Prices were under slight pressure, however, as fears of a supply glitch in Nigeria, the world's eighth largest exporter, eased following reports Sunday that a Nigerian oil workers' union strike had been cancelled.
   
At 11.38 am, front-month Brent North Sea crude contracts for March delivery were down 21 cents at 58.20 usd a barrel, after hitting 58.67 usd on Friday, its highest point since Jan 4.
   
A barrel of light sweet crude rose 81 cents to 59.83 in premarket trading on the New York Mercantile Exchange.  Demand for heating fuels is expected to remain strong this week as cold weather in the US Northeast looks set to continue.
  
Private forecaster Accuweather said strong winds "will make the already frigid temperatures feel even colder".
   
At 10.39 am, spot gold was quoted at 647.50 usd an ounce, up from the 645.90 usd level seen in late New York trades Friday.
   
TheBullionDesk.com analyst James Moore said gold should trend higher in the coming sessions as the gradual rise in oil is stoking concerns about inflation. Gold is usually bought as a hedge against oil-led inflation.
   
Moore noted, however, that gold has struggled to hold above 650 usd recently. "Technically gold looks strong, although further failure to clear the 655 usd chart congestion and a breech of the September trend line, which currently stands at 639 usd, could generate further weakness," he said.
   
Gold tumbled 10 usd Friday as the dollar rallied against the euro on speculation the European Central Bank may delay its expected interest rate hikes.

At 12.36 pm, LME copper for three-month delivery was up at 5360.00 usd a tonne against 5,345 usd at close yesterday.
   
"Metals are oversold and are due a corrective bounce," said UBS Investment Bank analyst Robin Bhar. He added, however, that he remains wary of recent increases in LME copper stocks, which have more than doubled since the start of the year.
   
The LME said earlier in a daily report that copper stocks held in its warehouses fell by 1,225 tonnes to total 214,025 tonnes, reversing the recent rising trend.
   
While this boosted sentiment in copper, news that workers at Cerro Colorado accepted a contract offer from management Sunday kept gains in check.
   
Copper prices plunged Friday as fund money exited the metals complex following reports of heavy losses at hedge fund Red Kite.
      
Elsewhere, zinc was up at 3,150 usd a tonne against 3,080 usd, recovering from Friday's 9 pct slump. "Both copper and zinc were unnerved (Friday) by talk of looming surpluses in 2007 and easing tightness," said Bhar.
   
He added the premium for cash zinc over the benchmark 3 month futures prices has narrowed sharply in recent weeks, indicating supply of the metal has improved.
   
Nickel was up at 37,900 usd a tonne against 37,400 usd, still supported by critically low stocks and robust demand. Nickel was the only metal to close higher on Friday as the selloff in copper and zinc pressure the rest of the base metals complex.
   
LME stocks of nickel are at 3,222 tonnes, with only around 2,000 tonnes available to the market -- equivalent to less than half a day of global consumption. Nickel stocks are at their lowest levels since 1991.
   
In other metals, aluminium was up at 2,725 usd a tonne against 2,720 usd; lead was down at 1,620 usd against 1,630 usd while tin was up at 12,050 usd against 11,700 usd.

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