US & World Daily Markets Financial Briefing 12-09-2006

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Stocks open modestly higher as oil falls

NEW YORK - Stocks rose modestly in early trading Tuesday after oil prices showed little reaction to news of an attack on the U.S. embassy in Damascus and Goldman Sachs Inc. reported better-than-expected results.
   
Shortly after the opening bell, Wall Street was still parsing through news that Bristol-Myers Squibb Co.'s Chief Executive Peter Dolan and the company's general counsel would both be leaving the company.

Dolan was sharply criticized for the company's conduct related to a failed agreement with Canadian drug maker Apotex to keep a generic version of Bristol's Plavix off the market. The company said Tuesday it did not find that it had done anything wrong, which appeared to put investors at ease.
   
Also, Hewlett Packard Co. announced that Patricia Dunn was stepping aside as CEO, and would remain chairman until Jan. 18. She apologized for inappropriate techniques employed in an investigation of leaks to the media. The inquiry delved into phone records of board members and reporters.
   
Wall Street was pleased with results from Goldman Sachs although the investment bank reported that its fiscal third-quarter profit fell as its trading business slowed. Results were better than Wall Street expected, however.
   
In the first hour of trading, the Dow Jones industrial average rose 21.37, or 0.19 percent, to 11,418.21. Broader stock indicators were also up. The Standard & Poor's 500 index was up 2.87, or 0.22 percent, at 1,302.41, and the Nasdaq composite index rose 7.65, or 0.35 percent, to 2,180.90.
   
U.S. stocks ended slightly higher Monday as a commodities sell-off led by oil eased inflation concerns, but also raised questions about the outlook for economic growth.
   
The dollar softened across the board early Tuesday amid reports that the U.S. embassy in Damascus came under attack by several armed men, who reportedly were foiled in an attempt to explode a car bomb outside the compound.
       
Crude advanced on the news, topping $66 a barrel in electronic trading.

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Krispy Kreme Doughnuts Inc. warned on revenue late Monday, and then Tuesday said it won't be able to file its 10-Q form in a timely manner.
   
In addition to its 10-Q filing troubles, Krispy Kreme said it expects second-quarter revenue to fall 21 percent to $110 million from $140 million in the same period last year. The doughnut retailer said the lower revenue is due to a decline in the number of company stores, as well as lower sales to franchisees by the company's manufacturing and distribution segment.
   
Texas Instruments was in focus after the world's largest provider of mobile phone chips narrowed its third-quarter financial targets after Monday's closing bell.
   
Texas Instruments forecast sales in the range of $3.71 billion to $3.87 billion, compared with its previous estimate of $3.63 billion to $3.95 billion. It pegged earnings per share between 44 cents to 46 cents versus its previous outlook of 42 cents to 48 cents.
   
Blue Coat Systems Inc. after Monday's closing bell said it will take additional and material non-cash stock-based compensation expenses relating to stock-option award dates.
   
Franklin Resources, parent of the Franklin and Templeton mutual funds, late Monday reported preliminary assets under management of $505.6 billion as of Aug. 31, compared with $494.4 billion at July 31 and $444.7 billion in the same month a year ago.

Forex

Dollar survives knee-jerk selling after record US trade deficit

LONDON - The dollar survived a knee-jerk sell off after news that the US trade deficit widened to a record deficit in August to move back into established ranges against the euro.
   
The US trade deficit widened to a record 68 bln usd in July as oil imports continued to rise to record levels, up 5 pct from June, prompting a dollar sell-off. Economists had expected a narrower gap of 65.5 bln usd deficit in the month.
   
Matthew Foster Smith at Thomson IFR Markets noted that while the dollar was immediately sold down, the move lower has been just as quickly corrected.
   
The euro rose 0.1 percent against the greenback at $1.2709.

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The European Markets at 11.30 GMT

London - Leading blue chips were roughly flat at midday, with mixed mining stocks and a nervy oil sector providing little direction, while this morning's foiled terror attack on the US embassy in Syria also kept buyers on the sidelines.
   
At midday, the FTSE 100 was up 2 points at 5,852.8, while the FTSE 250 was up 27.6 points at 9,550.7.

Frankfurt - Shares were slightly higher in midday trade following a late recovery on Wall Street overnight and as Infineon sparkled amid a rise in DRAM prices, though rebounding oil prices limited the advance.
   
At 11.30 am, the DAX 30 index was 7.14 points or 0.12 pct higher at 5,805.60, having moved between 5,775.03 and 5,819.62 so far this session.

Paris - Share prices were slightly higher in early afternoon trade, in thin trade with GDF's strong results and gains for Total and certain tech stocks providing bright spots in a largely negative market.
   
At 1.01 pm the CAC-40 index was up 7.39 point sat 5,065.70.

Amsterdam - Shares in Amsterdam were higher at midday, buoyed by US Futures which pointed to a higher opening on Wall Street today and amid relatively low trading volumes.
   
At 12.17 pm, the AEX was up 1.15 points or 0.25 pct to 463.70 after opening at 463.63 and trading in a range of 460.74-464.59.

Milan - Milan shares were slightly lower at midday following a disappointing strategy review by Telecom Italia, while STMicroelectronics rose on speculation of mergers and acquisitions in the semiconductor industry.
   
At 12.16 pm, the Mibtel index was down 0.18 pct at 28,847 points and the S&P/Mib lost 0.23 pct to 37,599.

Madrid - Share prices were higher midday in lacklustre trade as an attack on the US embassy in Damascus dampened overall sentiment, with most energy issues rising and Metrovacesa recovering.
   
At 12.50 pm, the IBEX-35 index rose 19.2 points to 12,075.0, after trading in a range of 12,029-12,096, on thin turnover of 1.1 bln eur.

Stockholm - Shares were slightly higher in early afternoon trade, led by telecoms and by Electrolux on merger speculation, brokers said.
   
At 1.35 pm, the OMX Stockholm index was up 0.51 pct at 321.82 points, while the OMX Stockholm 30 index was up 0.68 pct at 999.82.

Helsinki - Helsinki shares were higher in midday trade, pulling back after yesterday's falls, led by Nokia following Texas Instruments' mid-quarter update overnight and after the Finnish group said it has won network and handset orders from two Chinese firms worth over 2 bln eur this year.
   
At 12.43 pm, the OMX Helsinki 25 was 0.53 pct firmer at 2,511.83 and the OMX Helsinki was up 0.91 pct at 8,612.83, with volume at 482 mln eur.

Brussels - Shares were higher in midday trading, boosted by overnight gains on Wall Street and in Asia, with KBC Group rising after Degroof lifted its rating on the financial services group, analysts said.
   
At 12.03 pm, the Bel 20 was up 17.06 points or 0.44 pct at 3,891.07.

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Asian shares close mostly lower on commodity price falls

HONG KONG - Shares across the Asia-Pacific region closed mostly lower on continuing falls in commodity prices.
   
Tokyo share prices finished lower as the market continued to digest the impact of yesterday's weaker-than-expected machinery orders data for July, with the recent sustained fall in commodity prices further hurting sentiment.
   
The blue-chip Nikkei 225 index closed down 75.04 points or 0.48 pct at 15,719.34, off a low of 15,675.37. The broader TOPIX index of all first-section issues was down 10.52 points or 0.66 pct at 1,585.98, after touching a low of 1,584.99.
   
Core private sector machinery orders, viewed as a leading indicator of corporate capital spending, dropped a seasonally adjusted 16.7 pct in July from June, against a much narrower 5.5 pct fall that the market had been expecting.
   
However, the downside was firmly supported by buying in domestic demand-linked shares such as pharmaceuticals and food companies.
   
"The market appears to still be suffering from the effects of yesterday's weak machinery orders," said Hideyuki Suzuki, a strategist at SBI Securities.  "Investors have yet to digest the significance of the data," he said. "They are puzzled with the figures and are having difficulty ascertaining whether or not the drop is one-time or whether the data suggests capex is peaking out."
   
Australian shares closed sharply lower, dragged down by continuing falls in commodity prices, which traders blamed on hedge funds liquidating positions.
   
Overseas' investors sold down major blue chip resource stocks after being rattled by a series of brokers' reports suggesting a significant correction was underway in commodity markets because of a slowing US economy.
   
The S&P/ASX 200 closed down 51.6 points or 1.03 pct at 4,974.4, off a low of 4,961.3 and off a high of 5,006.3.
   
Hong Kong shares were firmer in afternoon trade on a rebound from yesterday's sharp drop, with investors chasing select blue chips and property stocks, dealers said.
    
At 3.25 pm the Hang Seng Index was up 159.29 points or 0.94 pct at 17,107.88.
   
In mainland China, A-shares in Shanghai and Shenzhen closed higher on expectations of further yuan strength, with oil refiners and airlines gaining ground, dealers said.
   
The Shanghai A-share Index rose 22.21 points or 1.26 pct to 1,783.40 and the Shenzhen A-share Index was up 2.50 points or 0.57 pct at 439.66.
   
Seoul shares closed lower amid widespread caution ahead of the expiry of futures and options contracts this Thursday.
   
Investors' disappointment that Korean stocks failed to obtain an upgraded developed market status from the FTSE index also weighed on sentiment.
   
Index compiler FTSE kept its classification for South Korea and Taiwan at advanced emerging status, demanding further efforts for them to fully meet the entry criteria for a status change.
   
The KOSPI index closed down 6.04 points or 0.45 pct at 1,328.04, after moving between 1,323.90 and 1,339.31.

Asian Bourse Round-Up

For a full list of closing figures, click here

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Gold recovers as dollar dips ahead of US trade data

LONDON - Gold prices recovered from falls of over 20 usd yesterday as bargain hunters and physical players took advantage of recent weakness, and as the dollar came under pressure ahead of the release of US trade data later today.
   
At 12.36 pm, spot gold, which earlier hit a high of 599.40 usd, was quoted at 596.25 usd, up from 590.25 usd at the time of the COMEX market close in New York yesterday. Other precious metals were also higher.
   
Spot silver was at 11.32 usd an ounce against 11.07 usd yesterday, platinum was at 1,209.50 usd against 1,191.00 usd, while palladium was at 319.50 usd against 312.00 usd.
   
Gold came under heavy pressure yesterday, falling below 600 usd for the first time since June 30 as concerns over Iran's nuclear drive receded, sending oil prices to their lowest levels in more than five months.
   
Oil prices have recovered slightly today, with US crude trading above 65 usd, and this, coupled with bargain hunting and physical buying, has taken gold higher.
   
Gold is still down almost 45 usd from last week's high of 640.25 usd and the precious metal is a long way off a 25-year high of 730 usd an ounce touched in May.

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