US & World Daily Markets Financial Briefing 05-10-2006

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Stocks slip on profit-taking

NEW YORK - Stocks fell in early trading Thursday as investors took profits after two straight sessions in which the Dow Jones industrial average set new record closes.
   
Sharply higher oil prices dimmed enthusiasm for stocks, trumping more positive news, including better-than-expected retail sales reports for September and lower unemployment claims for last week.
   
On Wednesday, the Dow soared 123 points to 11,850.61. The Standard & Poor's 500 also hit a 5 1/2 year high.
   
But some traders have questioned the depth of the rally. The market's ratio of advancers to decliners in recent sessions has tended to be unimpressive.
   
In the first hour of trading, the Dow fell 18.25, or 0.15 percent, to 11,832.36. Broader stock indicators were higher. The S&P 500 index fell 1.37, or 0.10, to 1,348.85, and the Nasdaq composite index fell 3.34, or 0.15 percent, to 2,287.61.
   
OPEC on Thursday moved to cut production by a million barrels a day, sending crude futures back above the $60-a-barrel market in electronic trade. Crude for November delivery rose 68 cents to $60.09 a barrel.
   
Also on Thursday, cooler weather, falling gasoline prices and a burst of late back-to-school shopping gave a boost to retailers' sales in September.
   
A few companies released earnings Thursday as well, including Marriott International and Constellation Brands.
   
Drugmaker Wyeth lifted its earnings guidance for the year, citing the success of key pharmaceutical products.
   
The Labor Department reported Thursday that 302,000 persons filed claims last week, the smallest number to show up at unemployment offices since the week ending July 22.
   
A gauge of online U.S. employment recruitment slipped in September on reduced demand in the finance and real estate sectors. The Monster employment index fell to 172 in September from a record 173 in August, the online recruiting company said Thursday.
   
Elsewhere, Corus Group, an Anglo-Dutch steelmaker, surged in London trading after India's Tate said it may try to buy the company.
   
Ryanair made an unsolicited $1.9 billion takeover offer for Aer Lingus, a rival Irish airline that flies trans-Atlantic routes. The Irish government, which owns part of Aer Lingus, said it won't be selling its stake.

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Euro dips as ECB fails to surprise; Yen gains on Trichet comments

LONDON - The euro dipped as the European Central Bank raised interest rates as expected, while the accompanying press conference failed to produce any surprises.
   
In a press conference following today's expected decision to raise interest rates by a quarter point to 3.25 pct, ECB president Jean-Claude Trichet said the ECB will "monitor very closely" all developments on inflation risks. These remain "clearly on the upside" despite the recent fall in oil prices, he said.
   
Though Trichet all but confirmed market expectations that the ECB will raise rates again in November, however, he declined to comment on the outlook going into 2007."The euro is suffering a little despite the rate hike," said Mike Berg at 4CAST.
   
Though Trichet is still maintaining that monetary policy remains accomodative, he is not "blasting the market" with suggestions of more hikes than the market is currently pricing in, he said.
   
The lack of any surprises in the speech, however, has kept the euro trading in a very tight range against the dollar, suggesting that investors are looking ahead to tomorrow's key US payrolls release, he said.
   
The biggest move in the wake of Trichet's speech came from the yen, which rose to a six-day high of 149.08 against the euro, after he said he is sticking to the statement he made on the euro/yen rate at the G7 meeting in Singapore. At that time, he said the issue of the euro's recent strength against the yen was discussed.
   
This has led to renewed market speculation that officials in both Europe and Japan are watching the level of the euro against the yen, causing the yen to appreciate, Berg said.
   
Elsewhere, the pound was lower after the Bank of England left interest rates unchanged at 4.75 pct, disappointing those in the market who had been thinking the central bank may surprise with another hike as they did in August.

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The European Markets at 11.30 GMT

London - London shares remained firm at midday as the BoE opted to keep its key repo rate unchanged, with Corus the top gainer on M&A news, and with Wall Street set to open flat ahead of tomorrow's non-farm payrolls data.
   
At 12.05 pm, the FTSE 100 was 33.9 points stronger at 6,000.4, albeit off a midmorning high of 6,016.7, while the broader indices were also positive. Volume was solid with 725 mln shares changing hands in 92,226 deals.

Frankfurt - German shares were higher late morning after the Dow posted its second consecutive record high close, ahead of the ECB rate setting meeting which is expected to raise interest rates by 25 basis points. At 11.25 am, the DAX 30 index was up 36.13 points at 6,080.39. The MDAX was up 42.08 points or 0.49 pct to 8579.04, while the TecDAX was up 4.09 points or 0.62 pct at 662.71.

Paris - Shares were higher at midday, buoyed by news and speculation of mergers and acquisitions in the steel and financial sectors, and a positive reaction to the end of talks between Renault, Nissan and General Motors on a possible tie-up.
   
At 12.01 pm, the CAC-40 index was up 34.50 points or 0.66 pct at 5,291.05. There were 32 stocks higher and eight lower. On the Matif, October CAC-40 futures were 34.5 points or 0.66 pct higher at 5,297.5.

Amsterdam - Share prices were slightly higher in early afternoon trade, with Corus surging after India's Tata Steel confirmed it is considering a possible approach for the Anglo-Dutch steelmaker. At 1.30 pm, the AEX index was up 2.35 or 0.49 pct at 486.75 after reaching a high of 488.31.

Madrid - Madrid shares were higher in brisk, range-bound early afternoon trade tracking broadly positive US futures, with banks such as BBVA in focus on M&A speculation while constructors such as Acciona also outperformed. At 12.55 pm, the IBEX-35 index gained 79.8 points to 13,062.4, after trading in a range of 13,044-13.076, on turnover of 2.1 bln eur.

Milan  - Share prices were higher at midday, led by BPM after the bank failed to be shortlisted as a potential merger partner for Popolare Italiana. At 11.47 am, the Mibtel gained 0.55 pct at 29,684 and the S&P/Mib rose 0.61 pct to 38,943.
   
Stockholm - Shares were sharply higher in midday trade led by Electrolux, Holmen and mining stocks but with gains extending throughout the market after comments by Fed chairman Ben Bernanke raised hopes of US rates cuts ahead. At 12.15 pm, the OMX Stockholm index was up 1.05 pct at 339.95 and the OMX Stockholm 30 was up 1.09 pct at 1,058.33.

Helsinki - Helsinki shares were firmer in midday trade, led by Nokia and supported by solid gains on Wall Street overnight. At 12.41 pm, the OMX Helsinki 25 was 1.18 pct higher at 2,602.27 and the OMX Helsinki was up 1.03 pct to 8,848.18 on 301 mln eur turnover.

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Asian stocks close higher on record Wall St close; Tokyo at 5-month high

HONG KONG - Share prices across the Asia-Pacific region closed higher on another record Wall Street close, with the Tokyo market hitting a five-month high, as major holidays shut markets in China and South Korea.
   
Tokyo shares were sharply higher, with the benchmark Nikkei index at its best closing level in nearly five months, after investors were heartened by the new record close on the Dow Jones Industrial Average.
   
The blue-chip Nikkei 225 Stock Average closed 366.78 points or 2.28 pct higher at 16,449.33. This was its best closing level since May 15, when it index finished at 16,486.91.
   
The broader TOPIX index of all first-section issues closed 31.21 points or 1.95 pct higher at 1,633.20, its best closing level since Sept 6, when it finished at 1,642,82.
   
Gainers swamped losers 1,409 to 217, with 70 issues flat. Volume was 1.88 bln shares, down slightly from 1.91 bln yesterday.
   
"The Dow's rally was attributed to growing speculation that the Fed may cut rates soon," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management. "A slowdown in the US economy is supporting this view."
   
However, dealers said the relatively low trading volume was a source for concern.
   
"The fact that trading volume has not jumped despite the major advances in the key indices suggests that foreign investors have not returned to the Japanese market as active buyers," Igarashi said.
   
"The accelerated gains in the afternoon session were largely due to technically-driven, futures-related buying, with the relatively light trading having made it easier for the market to make a sharper-than-expected rally," he said.
   
Australian shares closed higher with the US gains buoying investor sentiment. Dovish overnight comments from Federal Reserve chairman Ben Bernanke eased interest rate concerns which in turn boosted local banking stocks and aided bargain hunting in mining stocks.
   
The S&P/ASX 200 advanced 76.6 points or 1.49 pct to close at the day's high of 5,219.3, well above the day's low of 5,149.6. The All Ordinaries Index rose 73.3 points or 1.44 pct to close at 5,174.8.

New Zealand shares closed little changed.  The NZX-50 gross index rose 2.31 points to 3,595.70 on turnover worth 110.4 mln nzd. Market leader Telecom, which fell five cents on Wednesday, was steady at 4.27 nzd after a downbeat annual meeting.

Fletcher Building fell nine cents to 8.51 nzds while second-ranked Contact Energy rose two cents to 7.03.

Hong Kong shares were sharply higher in afternoon trade led by HSBC and other selected blue chips after the highs posted by the DJIA amid hopes the US Federal Reserve may begin lowering interest rates soon.
   
At 3:30 pm the Hang Seng Index was up 288.04 points or 1.63 pct at 17,917.25.
   
Asian Bourse Round-Up

For a full list of closing figures, click here

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Gold edges up from 3.5 month lows but outlook remains shaky

Gold prices edged up as the market recovered slightly from three and a half month low points touched yesterday, but analysts warned the outlook for the metal remains shaky as funds exit commodities in favour of soaring equities.
   
At 10.32 am, spot gold, which earlier hit a high of 570.10 usd, was quoted at 566.85 usd, up from 562.00 usd at the time of the COMEX market close in New York yesterday. Other precious metals were also higher.
   
Spot silver rose to 10.83 usd against 10.71 usd, platinum was up at 1,077.50 usd against 1,072.00 usd, while palladium edged up to 297.50 usd against 292.00 usd.
   
Gold fell as low as 559.25 usd yesterday, the lowest point since mid-June, before recovering slightly to close down 2.5 pct on the day, as the precious metal came under pressure from weak oil prices and a strong dollar.
   
It has recovered slightly today, in line with a modest rebound in oil, which has found support from a report OPEC members are ready to cut production in a bid to defend prices.
   
However, UBS Investment Bank analyst John Reade said "gold hasn't actually moved very much when you consider oil is up almost 2 usd off its lows", adding the metal could move to test its June low of 543 usd.
   
Gold has lost over 20 pct of its value since touching 730 usd in May -- the highest level in a quarter of a century -- on concerns about geopolitical tensions and inflation.

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