US & World Daily Markets Financial Briefing 07-12-2006

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Yahoo Stocks up in early trading

NEW YORK - U.S. stocks are up Thursday with Hershey in focus after the chocolate maker cut its earnings forecast.
   
In the opening minutes, the Dow Jones industrials gained 28.44 points to 12,337.69, the S&P 500 rose 2.71 points to 1,415.61, and the Nasdaq climbed 5.27 points to 2,450.69.
   
U.S. stocks slipped after two days of gains, with Merck & Co. closing lower after a lukewarm forecast and Yahoo Inc. down after a management shake-up. The Dow industrials closed 22 points lower, the S&P 500 slipped nearly 2 points and the Nasdaq Composite lost over 6 points.
   
The economic calendar will be more focused on Europe than the U.S. on Thursday. The ECB lifted its key interest rate to 3.5 percent from 3.25 percent. The Bank of England held its key interest rate steady at 5 percent on Thursday, a decision that was widely expected.
   
The number of newly laid off workers filing claims for unemployment benefits dropped last week by the largest amount in six months, relieving worries about a big jump in claims in the previous week.
   
Stocks in focus

Hershey late Wednesday cut its 2006 sales and profit forecasts, citing a recent product recall and related plant closure in Canada, as well as slower-than expected improvement in marketplace trends in the U.S.
   
Rupert Murdoch and John Malone are close to reaching a deal in which News Corp. would buy back Liberty Media's $11-billion stake. In return, according to reports in The Wall Street Journal and The New York Times, Liberty will get a 39 percent stake in DirecTV, cash and other assets.
   
Home Depot late Wednesday said it finished its stock-option granting review and found previously unrecorded expenses of about $200 million from 1981 through the present.
   
Altria Group may get attention on speculation that its Philip Morris unit may decide to launch a counter-bid for Britain's Gallaher Group if Japan Tobacco bids for Gallaher. Gallaher Wednesday afternoon disclosed it received a takeover bid, though it didn't say from whom.

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Euro holds steady as ECB delivers expected rate hike
 
LONDON - The euro held steady even as the European Central Bank delivered the quarter point rate hike to 3.50 pct expected by markets.
   
Focus is now firmly on ECB president Jean-Claude Trichet's accompanying press conference for any signal on the outlook for interest rates in 2007.
   
Most in the market expect that the ECB will indicate that interest rates are likely to rise further in 2007, though without any urgent need for a follow-up hike, given recent solid business sentiment surveys and continued strong money supply growth.
   
But Trichet may also have to say something about the euro's 3.9 pct rise against the dollar in the space of just over a month.
   
Weak US non-farm payrolls for November on Friday would put the dollar under further pressure, although yesterday's ADP data on US private sector employment showed solid jobs growth of 158,000. The ADP figures are seen as an indicator, albeit sometimes an unreliable one, of how the headline payrolls reading will turn out.
   
Giving further clues on the US jobs front meanwhile will be weekly jobs claims data this afternoon.
   
Elsewhere, the pound held steady after the Bank of England kept interest rates unchanged at the 5-year high of 5.00 pct much as expected. Analysts remain at odds whether UK rates will rise further.   

Separately, the latest house price survey from the Halifax continued to suggest that the housing market remains very buoyant despite the recent interest rate hikes, with house prices rising by 1.7 pct in November for a 9.6 pct annual gain.
   
Meanwhile, the Australian and Kiwi dollars notched good gains. The Australian unit was boosted by strong jobs data overnight while the New Zealand currency was buoyed a hawkish from the Reserve Bank of New Zealand.

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The European Markets at 13.00 GMT

London - Leading shares climbed higher in midmorning trade, firmly above the key 6,100 level, with tobacco issues leading the gainers higher on news of a bid approach for tobacco group Gallaher, and ahead of the Bank of England's interest rate decision later today. At 10.11 am, the FTSE 100 was up 33.6 points at 6,124.0, with the broader indices mixed. Volume was fair with 603.4 mln shares changing hands in 97,423 deals.

Frankfurt - German shares were slightly higher in midday trade ahead of the ECB's interest rate decision, and led by Fresenius Medical Care on hopes of a boost in Medicare funding for diabetes treatment, while ThyssenKrupp extended gains after a positive broker note.
   
At 12.37 pm, the DAX 30 index was up 15.62 points or 0.25 pct at 6,385.13 having moved between a low of 6,356.38 and a high of 6,394.82 so far this session. The MDAX was 41.57 points or 0.47 pct higher at 8,960.40, while the TecDAX fell 0.56 points or 0.08 pct at 699.98.

Paris - Share prices were higher midday in line with other European markets, reversing initial losses as US futures pointed to a modest gain and with investors resigned to a hike in interest rates by the ECB today. At 11.50 am the CAC-40 index was up 8.02 at 5,358.64. Volume was 1.4 bln eur.

Milan - Share prices were slightly higher at midday trade, with Generali leading the advance on stake-building speculation, while Autostrade fell amid continued uncertainty about its merger with Abertis.
   
At 12.41 pm, the Mibtel index rose 0.24 pct to 31,229 points and the S&P/Mib was up 0.43 pct at 40,658, while volumes stood at 2.3 bln eur. Dealers said activity was low due to a public holiday today and tomorrow.

Madrid - Shares were higher in quiet midday trade, in line with European peer markets, with Altadis soaring on sector bid speculation and BBVA lower on refreshed rumours it is looking to buy Barclays. At 12.20 pm, the IBEX-35 index was up 63.5 points at 14,069.5 after trading in a range of 13,956-14,087, on volume of 1.5 bln eur.

Stockholm - Shares remained in positive territory in midday trade, marginally extending the morning's gains on continued bargain hunting, with Swedish Match outperforming on tobacco industry merger speculation. At 12.20 pm, the OMX Stockholm index was up 0.46 pct at 353.68 points, while the OMX Stockholm 30 index was up 0.46 pct at 1,091.47.

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Asian shares close mixed on currency movements, profit taking

HONG KONG - Shares across the Asia-Pacific region closed mixed as investors reacted to currency movements and took profits.
   
Tokyo shares ended higher on foreign investor buying, with the yen's fall against the US dollar reviving interest in exporters.
   
Investor anxiety over over tomorrow's triple witching -- when index futures, index options and stock options expire -- has lessened to some extent, but caution is still evident ahead of the release of key economic indicators tomorrow, including Japan's October private sector machinery orders and the revised July-September GDP data.
   
The Nikkei 225 Stock Average closed up 102.08 points or 0.62 pct to 16,473.36, after touching a high of 16,550.73. The broader TOPIX index of all first-section issues rose 7.60 points or 0.47 pct to 1,622.77, off a high of 1,629.30.
   
Australian shares closed slightly lower with investor sentiment weighed down by the fall in US shares overnight, while lower base metal prices in London trading led to selling in the resource sector.
   
Support was derived from banking stocks after a stronger-than-expected labor report for November showed a more resilient economy than that depicted by yesterday's release of GDP growth for the September quarter.
   
The S&P/ASX 200 eased 1.5 points or just 0.03 pct to close at 5,465.2 off the day's low of 5,450.7. The high was 5,471.6.
   
Hong Kong shares had fallen by 1 pct in afternoon trade on profit-taking in select blue chips and China-related stocks after gains over the last two days.  At 3.24 pm the Hang Seng Index had fallen 191.40 points or 1.01 pct at 18,634.96.
   
In mainland China, A-shares in Shanghai and Shenzhen closed flat to lower on profit-taking after the key index reached a new 65-month high, with property developers and metal stocks under pressure. The Shanghai A-share Index added  0.42 points or 0.02 pct to 2,266.73 and the Shenzhen A-share Index was down 2.58 points or 0.49 pct at 523.92.
   
Seoul shares closed lower for a fourth day, with exporters booking further losses on the won's continued strength. The downside, however, was supported by the Bank of Korea's decision to keep interest rates on hold at 4.5 pct.
   
The won has risen against the dollar for a seventh day, approaching the 910/usd level. The KOSPI index closed down 3.43 points or 0.24 pct at 1,410.30, off a low of 1,407.66 and a high of 1,416.13. The won finished up 0.28 pct at 913.80.

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Copper dips after strong gains, aluminium falls after options expiry; oil up

LONDON - Copper fell, extending yesterday's declines, as participants worried demand for the metal might slow next year as the slowdown in US economic growth starts to impact other economies, specifically in Europe.
   
Falls were limited, however, by the prospect of impending strike action at Xstrata, the world's fourth largest copper producer, and by ongoing labour negotiations at Chile's Codelco, the largest.
   
At 1.20 pm, LME copper for three month delivery edged down to 6,875.50 usd a tonne against 6,990.00 usd at the close yesterday.
 
Copper fell almost 3 pct yesterday after a lacklustre options declaration and on the back of a slight pick-up in the dollar. Copper is traded in dollars so a stronger US currency makes the metal more expensive.
   
BNP Paribas analyst David Thurtell noted the strong fall in copper came despite worries over reports that a union leader at Xstrata's Altonorte smelter in Chile said workers will vote to strike on Dec 8-9 amid a wage dispute.
   
Copper has been under pressure recently from worries over slowing US economic growth and rising inventories, which have increased about 40 pct since mid-October.
   
Elsewhere, aluminium remained under pressure after closing nearly 2 pct lower yesterday as hopes that the December options expiry would be accompanied by volatile prices were dashed, said UBS Investment Bank analyst Robin Bhar.
   
Aluminium for three month delivery fell to 2,776.50 usd from 2,780.00 usd at the close yesterday. The metal rose to a six month high on Tuesday as traders noted a large amount of option contracts to buy aluminium at 3,000 usd a tonne -- significantly above the metal's recent trading range -- were still outstanding.
   
Oil edged up on concerns over falling US energy inventories, the possibility of further OPEC output cuts and news of yet another attack against oil workers in top producer Nigeria.
   
Gains were limited, however, by expectations warmer than average temperatures in the US Northeast over the next week will reduce demand for heating oil in the world's top energy consumer.
   
At 10.57 am in London, front-month Brent North Sea crude contracts for January delivery were up 30 cents at 63.37 usd a barrel, after losing 25 cents to close at 63.07 usd yesterday.
   
Meanwhile, front-month New York light sweet crude contracts for January delivery were up 16 cents at 62.35 usd a barrel, after falling 24 cents to close at 62.19 usd yesterday.
   
Prices closed lower yesterday even after US data showed crude stocks fell by an unexpected 1.1 mln barrels last week while distillates declined by 400,000 barrels, in line with expectations.
   
Analysts said forecasts from the US National Weather Service for above average temperatures in the US Northeast from Dec 12-16 had more than offset worries over declining energy inventories in the US.
   
However, those worries resurfaced today as news that three Italians were kidnapped earlier during an attack on an Agip oil installation in southern Nigeria re ignited worries over the security of supplies.

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