US & World Daily Markets Financial Briefing 13-12-2006

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Stocks move higher in early trading
 
NEW YORK  - U.S. stocks edged higher Wednesday as investors mulled retail sales data. In the opening minutes, the Dow Jones industrials gained 31.4 points to 12,346.98, the S&P 500 rose 3.03 points to 1,414.59, and the  Nasdaq added 12.09 points to 2,443.69.

U.S. stocks closed lower Tuesday after the Federal Reserve noted a "substantial cooling" in the housing market, but kept its emphasis on  combating inflation as it kept interest rates unchanged, as expected. The Dow industrials ended down 12.90 points, the Nasdaq Composite  dropped 11.26 points and the S&P 500 lost 1.48 points.

Attention on Wednesday will focus on U.S. retail sales and business inventories.  The nation's retailers saw sales rise by 1 percent in November, following three straight months of lackluster performance.

Analysts are expecting the business-inventories data to show growth continued at the same 0.4 percent pace in October as it did in September.

Stocks in focus

Prudential Equity Group cut electronics retailer Circuit City Stores Inc. to underweight from neutral weight, saying it is concerned that prices for  flat-panel televisions have started to erode at retail. The broker told clients it had always assumed that one day discount retailers would commoditize  the excess profits out of the flat-panel TV business, but it said it didn't expect it to happen this holiday season.

Prudential also lowered its rating on Best Buy, cutting it to neutral weight from overweight after the company reported third-quarter profit margins well  below expectations.

Among other companies in focus, shares in Cooper Cos. are expected to fall after the company late Tuesday cut its forecast for 2007 revenue to a range  of $920 million to $960 million. The company had previously forecast revenue in a range of $948 million to $1 billion. The firm also reported fourth-quarter  results below its own expectations.

Also after Tuesday's close, ADC Telecommunications said it expects first-quarter sales to be 15 percent lower than fourth-quarter sales. For fiscal 2007,  sales of $1.26 billion to $1.29 billion are expected, with per-share earnings from continuing operations of 53 cents to 63 cents.

Poultry producer Tyson Foods Inc. was cut to underweight from neutral at J.P. Morgan, which cited concerns about valuation, the likelihood of a miss in fiscal  2007 and unwarranted investor optimism about chicken market trends.

Martek Biosciences Corp. reported pro-forma earnings that were 12 cents a share, higher than Wall Street's estimate of 10 cents. Revenue rose 20 percent to  $67.2 million, topping the $65 million that was anticipated by analysts.

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Dollar recovers after solid US retail sales data

LONDON - The dollar recovered some ground after better than expected US retail sales data for November eased concerns that the housing market slowdown is hitting consumption.
   
Retail sales rose 1.0 pct in November, following three weak months. That is the largest increase since July. Analysts had expected a far more modest rise of 0.2 pct. Following the data's release, the euro fell back towards the 1.32 usd mark from 1.3260 usd just before.
   
"It underpins the US Federal Reserve's belief that the US economy is expanding at a moderate pace, and it looks like Christmas has started off on a firm footing," said Neil Mackinnon, chief economist at ECU Group.
   
Earlier the dollar had held steady after the Fed gave few indications that it is in a hurry to cut interest rates, even though it acknowledged the raft of soft economic news lately.
   
Alongside its decision to keep its key Fed funds rate on hold at 5.25 pct for the fourth meeting running, the Federal Open Market committee conceded that the growth outlook in the US is less encouraging than it was when it last met six weeks ago.
   
Though it continued to fret about inflation, the FOMC warned that the housing downturn in the US could now be described as "substantial".
      
The dollar has been ravaged in recent weeks after a wave of bad US economic news. It 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.
   
Earlier the pound had got a lift from a stronger than expected UK labour market report, where jobless levels fell alongside a pick-up in wages.
   
Coming on the heels of a rise in inflation, the data strengthens the case for a Bank of England rate hike in February and in turn boosted the pound.

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The European Markets at 13.30 GMT

London - UK blue chips were firmer near session highs at midday, rallying after early weakness amid expectations for a recovery today on Wall Street although much will depend on the latest US retail sales numbers due at 1.30 pm. At 12.13 pm, the FTSE 100 index was 14.6 points higher at 6,171.0, not far from the morning peak of 6,177.1 having rallied from an opening low of 6,149.4.
   
Frankfurt - German shares were higher in midday trade with Dow futures pointing to a higher opening to trade on Wall Street and oil prices easing slightly ahead of US inventories this afternoon. At 1.07 pm, the DAX 30 index was up 18.34 points at 6,494.51, after moving between a low of 6,470.86 and a high of 6,502.71 this session.

Paris - Shares turned broadly higher at midday, buoyed by scattered sharp gains despite stronger than expected French inflation in November and continued concerns about the US economy. At 12.44 pm, the CAC-40 index was up 24.14 points or 0.44 pct at 5,450.96, with 30 stocks higher and 10 lower.
 
Amsterdam - Shares in Amsterdam were higher at midday, aided by DJIA futures pointing to a higher opening of Wall Street and high volume trade in surging ABN Amro shares. At 12.08 pm, the AEX was up 0.69 pct or 3.34 points at 486, after opening at 483.46 and reaching an earlier high of 486.63.

Milan - Share prices were slightly higher at midday, with the advance led by RCS and other media plays, which were supported by sector rotation trade, while Autostrade was lower after it and Abertis dropped plans to merge. At 1.00 pm, the Mibtel index rose 0.15 pct to 31,437 points and the S&P/Mib was up 0.19 pct at 40,943, while volumes stood at 2.08 bln eur.

Madrid - Share prices were higher in midday trade, tracking US futures, with Inditex leading gainers while Prisa moved lower. At 1.03 pm, the IBEX-35 index was up 68.6 points at 14,267.1, after trading in a range of 14,187-14,280, on volume of 1.9 bln eur.
   
Zurich - Share prices were modestly higher midday, rebounding from opening losses, helped by positive Wall Street futures, although trading is generally volatile ahead of Friday's Eurex expiry. At 12.35 pm, the Swiss Market Index was 11.20 points higher at 8,681.27, and the Swiss Performance Index up 10.26 points at 6,829.16.

Stockholm - Shares were marginally lower in midday trade, off earlier lows on indications of a positive start on the Nasdaq, with Skanska, Electrolux and Hennes & Mauritz leading the market. At 12.05 pm the OMX Stockholm index was down 0.16 pct at 364.62, and the OMX Stockholm 30 was down 0.17 pct at 1,128.07. Turnover was 14.050 bln skr.

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Asian shares close higher after Federal Reserve holds interest rates

HONG KONG - Shares across the Asia-Pacific region closed higher after the widely-expected overnight decision by the US Federal Reserve to hold interest rates steady, although there was caution because of the Fed's comments signalling that rates might rise if inflation accelerates.
   
Tokyo shares ended slightly higher, spurred by gains in steel makers and technology stocks, helping the benchmark Nikkei index settle at its best level in seven weeks. But trading was choppy and lackluster throughout the day after the Federal Reserve's policy meeting and ahead of the Bank of Japan's quarterly Tankan survey on Friday.
   
The Nikkei 225 Stock Average closed up 55.15 points or 0.33 pct at 16,692.93, the high for the day and its best closing level since Oct 26 when the tech-rich index finished at 16,811.60. The broader TOPIX index of all first-section issues rose 2.47 points or 0.15 pct to 1,639.19, after touching a low of 1,629.57.
 
Australian shares closed higher as investor sentiment rose on continued merger and restructuring activity, while profit upgrades also boosted the wider market. However, resource stocks were mixed, following trading in metals overnight and investors took a cautious approach after the Federal Reserve noted a cooling US economy.
   
The S&P/ASX 200 rose 14.6 points or 0.27 pct to close at 5,488.2, edging closer to the previous record closing high of 5,491.6 set on Nov 7. The key index closed off a fresh record intra-day high of 5,505.1, beating Tuesday's record of 5,502.3. The low was 5,467.1.
   
Hong Kong shares were sharply lower in afternoon trade following Wall Street's slight pullback overnight after the US Federal Reserve report. At 3.27 pm the Hang Seng Index had fallen 209.30 points or 1.11 pct to 18,697.87.
   
In mainland China, A shares in Shanghai and Shenzhen closed slightly higher on buying interest in some blue chips while banks and telecom stocks lost ground on profit-taking. The Shanghai A share Index rose 4.82 points or 0.21 pct to 2,337.55 and the Shenzhen A share Index was up 1.49 points or 0.28 pct at 528.01.

Seoul shares closed higher with foreign and retail investors on the lookout for bargains after a steep decline in the previous session. Brokerages, car makers and builders posted strong gains. The KOSPI index closed up 6.30 points or 0.46 pct at 1,383.28, after moving between 1,373.52 and 1,386.69.

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Oil falls as traders bet OPEC might hold back on output cuts

LONDON - Oil prices fell for a fourth day running as traders bet OPEC might concentrate on implementing its existing output cuts rather than introducing a new one at tomorrow's meeting.
   
The view was supported by the International Energy Agency, which said earlier that Opec output, excluding Iraq, fell by 610,000 barrels per day in November against a proposed cut of 1.2 mln bpd agreed at the cartel's last meeting.
   
Traders were also awaiting US inventory data that are expected to show distillates, which include the key winter heating oil fuel, fell by 100,000 barrels last week while crude stocks dipped by 600,000 barrels.  The data are scheduled for release at 3.30 pm.
   
At 10.27 am in London, front-month Brent North Sea crude contracts for January delivery were down 32 cents at 61.20 usd a barrel, after settling down 32 cents at 61.52 usd yesterday.
   
Meanwhile, front-month New York light sweet crude contracts for January delivery were down 15 cents at 60.87 usd a barrel, after dipping 20 cents to close at 61.02 usd yesterday.

The Organization of the Petroleum Exporting Countries is also due to make a decision on oil output on Thursday.

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