US & World Daily Markets Financial Briefing 06-11-2006

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Stocks move higher

NEW YORK - Stocks opened higher Monday after investors received word of buyout offers for Kos Pharmaceuticals Inc. and Four Seasons Hotels Inc. Investors shrugged off a modest rise in oil prices.
   
The rise in stocks came a day ahead of the U.S. midterm elections, which many polls forecast will result in gains for the Democrats, and following corporate news that pleased investors.
   
In the first hour of trading, the Dow Jones industrial average rose 32.18, or 0.27 percent, to 12,018.22.
   
Broader stock indicators also advanced. The Standard & Poor's 500 index was up 5.71, or 0.42 percent, at 1,370.01, and the Nasdaq composite index advanced 17.28, or 0.74 percent, to 2,348.07. The Russell 2000 index of smaller companies was up 2.44, or 0.32 percent, at 755.17.
   
Bonds fell, with the yield on the benchmark 10-year Treasury note rising to 4.73 percent from 4.71 percent late Friday.    

Stocks in focus

Abbott Laboratories, in a bid to expand its cholesterol drug holdings, agreed to acquire the drugmaker Kos Pharmaceuticals for about $3.7 bln. Kos surged $26.80, or 53.5 percent, to $76.89, while Abbott was off 43 cents at $47.20.
   
Four Seasons rose $19.73, or 31 percent, to $83.60 after the luxury hotel chain received an offer to be taken private for $3.7 bln from the controlling shareholder of Four Seasons and investors including Bill Gates' Cascade Investment LLC.
   
XM Satellite Radio Holdings Inc., rose $1.83, or 16 percent, to $13.22 after the company posted a narrower-than-expected loss for the third quarter and forecast its subscriber base would end the year near the lower end of its forecast.
   
Anadarko said it's selling Gulf of Mexico assets to Statoil for $901 mln.
   
Also on the deal front, Kohlberg Kravis & Roberts and the private-equity arm of Goldman Sachs agreed to pay $4.6 bln for the forklift unit of Germany's Linde.
   
KKR also was in the news after France's Vivendi confirmed it received, and rejected, a takeover approach from the private-equity group said to be worth around $50 bln. Vivendi shares declined in Paris on concerns that tax issues may make it difficult for the entertainment and telecommunications conglomerate to be bought.
   
Also on the private-equity front, The Wall Street Journal reported that Merrill Lynch's arm received an informal inquiry from the U.S. Department of Justice. The companies being probed suggest that the Justice Department may be examining Ford Motor Co.'s sale of its Hertz rental unit to private-equity buyers.
   
Elsewhere, ImClone Systems and Bristol-Myers Squibb reported mixed Phase III trials of Erbitux to treat colorectal cancer. The companies said they will talk to the Food and Drug Administration after the studies.
   
Irish airline Ryanair Holdings led an advance in European stock markets after the low-cost carrier improved its earnings outlook for the year.  

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Euro dips on fall in euro zone services PMI; weak UK data dent sterling

LONDON - The euro dipped against the dollar after a key survey of euro zone services sector activity came in below expectations, while weak data on UK industrial and manufacturing output weighed on the pound.
   
This morning's Purchasing Managers' Index for the euro zone service sector dropped to 56.5 in October from September's 56.7, below analysts' forecasts for a modest pick-up to 57.0.
   
All components of the index showed a slight fall, while on a regional basis all three of the major euro zone countries reported a slight fall in sector activity.
   
Nevertheless, the headline index remains well above the 50 level which indicates expansion in the sector and continues to point to robust economic growth. It will do nothing to alter market expectations that the European Central Bank will raise interest rates again next month, analysts said.
     
Elsewhere, the pound was lower after a set of weak data on UK manufacturing output, dropping to 10-day lows against the dollar.
   
The figures showed manufacturing output unchanged in September from August but rising 2.0 pct year on year, which was below expectations for a month-on-month increase of 0.2 pct and an annual rise of 2.3 pct.
   
Though the wider measure of industrial production showed a modest rise of 0.2 pct from August due to higher oil production, which was also below expectations.
   
Elsewhere, the dollar remained well supported after Friday's strong US employment data.
   
Though there is little in the way of US economic data this week, market players will be watching speeches later today by Chicago Federal Reserve president Michael Moskow and Cleveland Federal Reserve president Sandra Pianalto.

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The European Markets at 12.30 GMT

London - UK leading shares remained higher at midday, led once again by a firm mining sector, while bid talk surrounding Amvescap and indications of a positive opening on Wall Street also helped the FTSE 100 to within a whisker of reclaiming the 6,200 level.
   
By 12.15 pm, the FTSE 100 index was 46.3 points higher at 6,194.5, while the broader indices were also well ahead.

Frankfurt - German shares were up as Adidas led after a report in Barron's said its share price could top 50 eur within 2 yrs and insurer Munich Re gained after peer Allianz profited from lower-than expected claims during the third quarter. At 12.33 pm, the DAX 30 index was 40.37 points or 1.65 pct higher at 6,281.52, having moved between 6,249.92 and 6,293.75.
   
Paris - Share prices remained slightly higher at midday, in line with other European markets, as investors awaited the US elections and a heavier flow of third quarter results later in the week. At 12.37 pm, the CAC-40 index was up 28.83 points or 0.54 pct at 5,365.13. Of the stocks in the index, 33 were higher and seven were lower.

Milan - Share prices were higher at midday trade with Fiat supported by an upbeat broker note, and investors focusing on a raft of domestic quarterly results this week. At 11.50 am, the Mibtel index rose 0.50 pct to 30,776 points and the S&P/Mib was up 0.44 pct at 39,988, while volumes stood at 2.07 bln eur.

Madrid - Share prices were higher midday with Endesa in the limelight after the Spanish government lifted key conditions on E ON AG's bid for it and energy watchdog CNE ruled that Acciona may raise its stake in the utility to 24.9 pct. At 1.20 pm, the IBEX-35 index was up 100.5 points at 13,895.4, on turnover of 1.5 bln eur.

Brussels - Shares were little changed late morning ahead of this week's corporate results, with supermarket Delhaize up ahead of Dutch peer Ahold's 'strategic review,'. At 10.49 am the Bel 20 was up 0.32 points or 0.01 pct at 4181.00.

Amsterdam - Shares in Amsterdam were broadly higher as investors looked to higher US futures indicating a higher opening of Wall Street in the absence of guiding corporate news. At 12.05 pm, the AEX was up 3.92 points or 0.80 pct to 491.86 after trading in a range of 489.52-492.52.

Stockholm -  Shares were firmly higher in midday trade buoyed by lower oil prices and expectations of a positive start to the week on Wall Street. At 12.25 pm, the OMX Stockholm index was up 0.76 pct at 352.07 and the OMX Stockholm 30 up 0.79 pct at 1,093.46. Turnover amounted to 7.893 bln skr.

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Asian shares close mixed with markets cautious after Wall St fall

HONG KONG - Shares across the Asia-Pacific region closed mixed with some markets cautious after a fall on Wall Street on Friday and ahead of the results of tomorrow's mid-term elections in the US.
  
Tokyo shares ended narrowly mixed in response to Wall Street and with investors cautious as they awaited the release later this week of Japanese machinery orders data for September.
   
The blue-chip Nikkei 225 Stock Average closed 14.74 points or 0.09 pct higher at 16,364.76, just off a high of 16,398.51. But the broader TOPIX index of all first section issues dropped 2.31 points or 0.14 pct to 1,601.43.
   
Hideo Mizutani, chief strategist at Sieg Securities, attributed the market's performance to a pull back in US stocks and growing concern about corporate earnings for the fiscal year ending March.
   
"While first-half earnings among Japanese companies were strong, their forecasts for the full year are not solid, as they fear the possible strength of the yen and the slowdown in the US economy," Mizutani said.
   
"Also, investors here are keen to see the market reaction to the outcome of the mid-term elections in the US," he said.
   
Australian shares closed at fresh record highs as investors bought resource stocks following the rise in metal prices overnight on Friday. Energy stocks also climbed after oil prices rose but that sentiment was checked by a weak lead from the US on Friday.
   
The S&P/ASX 200 rose 12.1 points or 0.22 pct to close at a record 5,444.1, surpassing Friday's record close of 5,432.0. The key index closed at its high of the day and above the day's low of 5,424.0.
   
Hong Kong shares were higher in afternoon trade on interest in select mainland-related stocks, including China Mobile and Sinopec. At 3.23 pm the Hang Seng Index was up 140.49 points or 0.75 pct at 18,890.18.
   
In mainland China, A-shares in Shanghai and Shenzhen shrugged off a hike in the reserve requirement for banks and closed higher on sustained follow-through interest, with steel makers and banks snapped up.
   
The Shanghai A-share Index added 21.11 points or 1.08 pct to 1,981.94 and the Shenzhen A-share Index was up 1.95 points or 0.42 pct at 469.54.
   
Seoul shares finished lower as investors decided to play it safe after Wall Street's downturn, as well as the expiry of options contracts and the Bank of Korea's rate decision, both on Thursday.
   
The market threatened the 1,360 point level at one stage due to foreign investor sell-offs and program selling but managed to close well off its low for the day as heavy retail buying kicked in toward the close. Large cap IT stocks and car makers led the decline.
   
The KOSPI index closed down 4.69 points or 0.34 pct at 1,379.19, after moving between 1,363.71 and 1,379.37.

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Gold falls off 2 month highs as dollar strengthens, oil dips

LONDON - Gold prices retreated slightly after touching two month highs in Asia earlier as the market came under pressure from a strengthening dollar and weakening crude oil prices.
   
Gold futures, which earlier touched 629.40 usd an ounce,  slipped $1.50 to $627.70.
    
Other precious metals were mixed. Spot silver was down at 12.49 usd an ounce against 12.57 usd, platinum fell to 1,181.00 usd against 1,200.00 usd, while palladium was up at 331.50 usd against 330.00 usd.
   
"It is doubtful whether gold will be able to continue its rally this week. While the demand side looks stable, downward risk could come from a strengthening dollar and falling crude prices," said Dresdner Bank analyst Sara Frederike-Weisser.
   
A stronger dollar usually weighs on gold, which is seen as an alternate investment to the US currency. Weak oil prices also weigh on the metal as they reduce its appeal as a hedge against inflation.
   
Weisser said she sees the dollar - which has remained well supported after Friday's strong US employment data - heading higher this week and limiting gold's upside potential.
   
Looking further ahead, however, she said the outlook remains positive for gold, as demand in Asia is still strong. She noted also that the majority of speculators appear to be betting on rising prices.

Oil edges lower amid scepticism over OPEC production cuts

LONDON - Oil prices edged lower, reversing Friday's rally, amid scepticism over OPEC's ability to cut production and after threats of attacks on key producer Nigeria's oil industry failed to materialise.
   
At 10.37 am, December-dated Brent futures contracts were down 42 cents at 58.73 usd a barrel, after settling up 1.28 usd at 59.15 usd on Friday.
   
Crude oil futures dropped back below $59 a barrel in electronic trading on Monday. December crude declined 45 cents to $58.69 a barrel.
      
Oil prices rallied Friday after US diplomats said Nigerian militants were planning a major new wave of attacks and kidnappings that could include up to 20 simultaneous bombings across the oil-rich Niger delta.
   
The attacks failed to materialise, however, sending prices lower despite news that Qatar is joining Saudi Arabia, the UAE and Iran in cutting output in compliance with the 1.2 mln bpd OPEC cuts agreed last month

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