US & World Daily Markets Financial Briefing 12-01-2007

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Stocks up despite profit warnings

NEW YORK - Stocks trended slightly higher in early trading Friday as investors brushed off a pair of profit warnings in the technology sector and economic data that could deter the Federal Reserve from lowering interest rates. Bond prices fell on concerns about rates.
   
Warnings from chip maker Advanced Micro Devices Inc. and business software provider SAP AG shook some of the confidence that sent stocks surging Thursday. Lower oil prices and a migration by investors to technology stocks from the energy sector were behind much of the buying.
   
Meanwhile, the Commerce Department reported retail sales rose in December at their strongest pace in five months, and indicated that holiday sales might have turned out better than expected. The report was seen as another signal that the economy remains healthy, and could persuade central bankers to keep rates where they are.

Stock and bond investors have been hoping the Fed might lower rates in the near future.
   
In the first hour of trading, the Dow rose 9.93, or 0.08 percent, to 12,524.91.
   
Broader stock indicators also advanced. The Standard & Poor's 500 index rose 3.16, or 0.22 percent, to 1,426.98, and the Nasdaq composite rose 8.67, or 0.35 percent, to 2,493.52.
   
The bond market, which has been pricing in the potential of a rate cut sometime with the first half of the year, was rattled after the Commerce Department report. The yield on the benchmark 10-year Treasury note rose to 4.77 percent -- the highest it has been since October -- from 4.74 percent late Thursday.
   
Technology stocks, which have been among the markets biggest gainers so far this year, fell after Advanced Micro Devices warned fourth-quarter results will be lower than expected because of sluggish sales in personal computer chips. Shares declined $1.63, or 8.1 percent, to $18.55.
   
Meanwhile, SAP's warning that quarterly profit and revenue would fall short of expectations caused a round of analyst downgrades. However, the stock was able to stay in positive territory, rising $1.77 to $50.27.
  
The Russell 2000 index of smaller companies was up 2.62, or 0.33 percent, at 791.07.

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Dollar steady near 7-week euro highs after US retail sales data

LONDON - The dollar remained steady near seven-week highs against the euro and 13-month highs against the yen on the news that US retail sales in the crucial month of December were stronger than anticipated.
   
The Commerce Department reported that US retail sales in December rose by a monthly five-month high of 0.9 pct. That was higher than the 0.7 pct gain economists had expected.
   
The dollar enjoyed a brief rally on the news but that soon faded when investors factored in the fact that November's increase was revised down to 0.6 pct from the initial 1.0 pct. 
   
Excluding automobile sales, retail sales in December rose 1.0 pct after rising 0.7 pct in the prior month. That's the largest increase since January and double what the market was anticipating.
   
Despite the November revision, analysts said today's data further cements expectations that the US Federal Reserve will keep borrowing costs unchanged for some time to come, in contrast to the situation at the end of 2006 when a raft
of bad economic news stoked fears the world's largest economy was slowing down dramatically and needed rate cuts from the Fed to prevent any recession.
   
That triggered a sharp slide in the dollar to a 21-month low against the euro and to its lowest level against the pound since sterling's ignominious exit from the European exchange rate mechanism in September, 1992.
   
The Fed has kept its benchmark rate unchanged at 5.25 pct for four consecutive meetings after raising it 17 times in a row.      

Elsewhere, the yen was solid after yesterday's sharp falls on speculation that the Bank of Japan may raise interest rates next week, while the pound extended gains against the euro following yesterday's surprise rate hike by the Bank of England.
   
The Bank of Japan is scheduled to announce its next interest rate decision towards the end of next week, where many feel rate-setters will opt for a further quarter point rate rise which may help the yen to recover after reaching 13-month lows against the dollar yesterday.
      
Elsewhere, the pound extended yesterday's gains against the euro to reach fresh 19-month highs against the currency following yesterday's Bank of England rate hike to 5.25 pct, which caught the market totally be surprise.
   
Speculation is now intensifying that the BoE will deliver a further hike in the coming months, possibly as soon as next month.

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The European markets at 13.00 GMT

London - UK blue chips remained under pressure at midday, reversing earlier gains, with a modest recovery in oil prices and a raft of positive comment broker failing to offset losses among mining stocks, while Wall Street is seen opening lower ahead of crucial economic data. At 12.02 pm, the FTSE 100 index was down 9.5 points at 6,222.6, having earlier hit a session high of 6,247.6, while the broader indices were mixed.

Frankfurt - German shares were flat in midday trade with SAP's disappointing sales figures overshadowing Wall Street's overnight strength and low oil prices. At 11.49 am, the DAX 30 index was slightly up, adding 4.71 points, or 0.07 pct at 6,614.00 after moving between 6,659.95 and 6,701.60.

Paris - Share prices edged slightly higher in midday trading as investors caught their breath after the strong gains for European stocks yesterday, while awaiting a series of key US economic data later this afternoon. At 1.05 pm, the CAC-40 index was up 0.03 points at 5,609.83, on volume of 2.4 bln eur.

Milan - Share prices were buoyant at midday, with sentiment boosted by Wall Street's record close yesterday and the rising markets in Asia, with focus on Pirelli and banking shares. At 12.30 pm, the Mibtel index rose 1.27 pct to 32,210 and the S&P/Mib was up 1.41 pct at 41,942, while volumes stood at 2.17 bln eur.
   
Madrid - Share prices were higher midday, continuing their recovery from recent setbacks, with Acerinox underperforming, however, on concerns for European steel prices. At 12.15 pm, the IBEX-35 index put on 15.9 points to 14,344.7, after trading in a range of 14,292-14,373, on turnover of 2.3 bln eur.

Amsterdam - Shares in Amsterdam were up slightly at midday, aided in part by index heavyweight Unilever after its chairman said he will resign. At 12.03 pm, the AEX was up 1.78 points or 0.36 pct at 501.94, after opening at 499.44.

Stockholm - Shares continued to hover around the unchanged level in early afternoon trade, little changed from morning levels, with profit-taking and bargain hunting being largely balanced among the blue chips. At 1.55 pm, the OMX Stockholm index was flat at 377.47 points, while the OMX Stockholm 30 index was down 0.06 pct at 1,159.34.

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Asian shares close mostly higher on Wall St record finish

HONG KONG - Shares across the Asia-Pacific region closed mostly higher after the Dow Jones Industrial Average hit a record high overnight.
   
Tokyo shares closed broadly higher led by blue-chip exporters, with investors inspired by Wall Street and a further weakening of the yen. Analysts believe the bourse will maintain its firm undertone next week, with the Nikkei 225 index seen moving within the 17,000-17,400 range.
   
But investors will likely take a wait-and-see stance next week until the Bank of Japan's two-day policy board meeting ends on Thursday.
   
The blue-chip Nikkei 225 Stock Average closed up 218.84 points or 1.30 pct at 17,057.01, off a high of 17,160.77. For the week, the Nikkei index gave up 0.2 pct.
   
The TOPIX index of all issues listed on the Tokyo Stock Exchange's first section closed up 28.55 points or 1.72 pct at 1,685.27, off a high of 1,692.03. For the week, the TOPIX gained 0.6 pct.
   
Australian shares finished higher for a second consecutive day, with sentiment boosted by Wall Street. A recovery in base metal prices in London overnight also supported resource stocks. Nickel closed the London session up 4.2 pct, just under record levels.
   
The S&P/ASX 200 closed up 73.9 points or 1.33 pct, its high for the day of 5,638.8, and well off the low of 5,578.2. Over the trading week the key index gained 66.8 points or 1.2 pct. The broader All Ordinaries index finished up 69.2 points or 1.25 pct at 5,611.9.
   
Hong Kong shares bounced back from four days of losses and were sharply higher in afternoon trade, spurred by the record close on Wall Street.
   
China-related financials led the rebound as they are expected to benefit from the mainland's approval for issue of yuan-denominated bonds in Hong Kong, while the property sector also regained ground.
   
In mainland China A-shares in Shanghai and Shenzhen closed sharply lower on profit-taking, with power generators and steel makers losing ground. The Shanghai A-share Index tumbled 108.95 points or 3.74 pct to 2,803.06 and the Shenzhen A-share Index ended down 13.39 points or 2.12 pct at 619.65.
   
Seoul shares ended sharply higher, fully making up their massive sell-offs earlier this week, as investors shrugged off Samsung Electronics' downbeat fourth-quarter results and instead cheered its sizable share buyback plan and robust outlook for 2007.
   
Initial sentiment was lifted by Wall Street's overnight rally on falling oil prices and positive corporate news and the market gained further momentum from Samsung's announcement of a 1.8 trln won share repurchase program starting next Tuesday.
   
The KOSPI index closed up 23.06 points or 1.69 pct at 1,388.37, off a low of 1,372.87 and a high of 1,389.00. The index ended the week with a gain of 2.61 points.

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Copper falls as mkt retreats after 3 days of gains

LONDON - Copper prices fell amid another gain in LME stockpiles and as the market retreated from three days of increases.
   
At 2.33 pm, LME copper for three-month delivery, which earlier hit a low of 5,775 usd a tonne, was down at 5,815 usd, against 5,895 usd at close yesterday.  Copper prices closed slightly higher yesterday, but gains were limited by huge losses in crude oil prices.
   
LME said in a daily report earlier copper stocks in its warehouses put on another 1,400 tonnes to total 196,850 tonnes.
   
Stocks are now nearly double what they were at the start of last year, capping gains in copper.
   
Copper lost around 12 pct of its value in the first week of the year as other commodities like oil plummeted and fund money exited the complex.
   
However, it has staged a modest recovery this week. "This week's recovery from the lows in base metals continues with dips new well supported by trade and investor buying," said UBS Investment Bank analyst Robin Bhar.
   
Elsewhere, nickel was up at 34,250 usd a tonne against 33,500 usd at close yesterday amid further declines in LME stockpiles. Nickel gained nearly 8 pct yesterday on the back of declining stocks.
   
"Zinc and nickel remain our preferred plays in the base metals complex as low stocks and supply constraints mean that only higher prices can achieve equilibrium on the demand side," Bhar said.
   
In other metals, zinc edged down to 3,855 usd a tonne against 3,874 usd, aluminium fell to 2,727 usd a tonne against 2,735 usd, tin dropped to 10,360 usd against 10,690 usd, while lead was flat at 1,629 usd.

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