US & World Daily Markets Financial Briefing 16-04-2007

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Dow, Nasdaq post gains in early trading

NEW YORK - Stocks opened higher Monday after Citigroup Inc.'s financial results came in stronger than expected and the government reported an increase in March retail sales.
   
Earnings reports begin arriving at a steady clip this week, giving investors fresh indications about the state of the economy. This week nearly half the 30 Dow Jones industrial average's component companies report results.
   
While investors expect profit growth will slow, they are hoping consumer spending will remain robust. The Commerce Department's data Monday showed that consumers spent strongly last month, sending retail sales up by about 0.7 percent. The figure was close to what analysts predicted, and up from a revised 0.5 percent rise in February.
   
Beyond earnings news, investors appeared pleased by the acquisition of SLM Corp., known as Sallie Mae. The student lender agreed Monday to be sold to two private investment funds and J.P. Morgan Chase & Co. and Bank of America Corp. for $25 billion, or $60 per share.
   
In the first hour of trading, the Dow Jones industrial average rose 55.18, or 0.44 percent, to 12,667.31.
   
Broader stock indicators also rose. The Standard & Poor's 500 index rose 8.44, or 0.58 percent, to 1,461.29, and the Nasdaq composite index 15.81, or 0.63 percent, to 2,507.75.
   
Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.74 percent from 4.77 percent late Friday. The dollar traded near all-time lows versus the euro, but strengthened against the yen after the Group of Seven decided Friday not to urge Japan to raise interest rates to boost its currency.
   
Oil prices slipped Monday, with a barrel of light sweet crude falling 7 cents to $63.56 in premarket electronic trading on the New York Mercantile Exchange. Gold also rose.
   
Profit news drew investors' attention Monday as they were eager to see how well profits would hold up. Wall Street anticipates the reports will indicate that corporate growth slowed in the first three months of 2007 compared with previous quarters. Standard & Poor's recent estimate of first-quarter earnings growth for S&P 500 companies is 3.8 percent.
   
Citigroup, the largest U.S. financial institution, said its first-quarter profit fell by 11 percent, but the results included a charge to cover a massive restructuring. Excluding that charge, the profit was higher than analysts expected, thanks to an increase in revenue.
   
Eli Lilly & Co.'s first-quarter profit fell 39 percent. After adjusting for certain items, the company's profit came in above expectations. The drug maker also reported a rise in revenue, and raised its full-year sales and earnings guidance.
   
The Russell 2000 index of smaller companies rose 6.65, or 0.81 percent, to 826.02.

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Pound buoyed by strong data, yen drops further on lack of G7 comment

LONDON - The pound was stronger, though off an earlier high against the dollar following a strong set of UK economic data.
   
The pound hit an intra-day high of 1.9938 usd after an unexpectedly strong rise in UK factory gate prices this morning which came on the back of news that UK housing market remains buoyant.
   
"Sterling has powered ahead helped by the April Rightmove House Price index and the March PPI, shifting the risk for tomorrow's CPI data to the upside," said analysts at BNP Paribas. "Our once ambitious call for cable to reach and exceed 2 usd is now within sight," they added.
   
Data out tomorrow is predicted to show that inflation, as measured by the CPI annual rate, edging up to 2.9 pct in March from 2.8 pct in February, remaining way above the Bank of England's 2.0 pct target. Analysts believe lower retail gas prices will be offset by the rise in petrol prices over the month.
   
Meanwhile, on Wednesday, the minutes of the BoE's rate setting deliberations are predicted to show a definite slant towards a rate hike, even though the central bank chose to leave interest rates unchanged at the near six-year high of 5.25 pct earlier this month.
   
The pound has not surpassed the 2 usd mark since 1992 when the UK was forced out of the Exchange Rate Mechanism on Black Wednesday.
   
Meanwhile, the yen fell further to new lows against the euro as investors continued to make carry trades following the lack of comment from G7 finance ministers on the weakness of the Japanese currency in their communique from their weekend meeting in Washington.
   
Markets had been looking to see whether the ministers would express concern over carry trades - where investors borrow in low-yielding currencies such as in order to invest in higher-yielding assets elsewhere -- and their association with weakness in the yen.
   
Though the yen wasn't mentioned directly, the G7 once again indicated that the improvements in the Japanese economy will be taken on board by financial markets.
     
The Swiss franc meanwhile, which had also been under pressure from the rise in carry trades, recovered somewhat following comments from Swiss National Bank chairman Jean-Pierre Roth. Roth said the SNB has to be vigilant "as the weak Swiss franc and falling unemployment could pose a risk to price stability".

The dollar was little changed against the euro as solid US retail sales data were offset by a weak Empire manufacturing survey. Data released this afternoon showed US retail sales hit a three month high in March, rising by 0.7 pct. Though this is a touch lower than the 0.8 pct gain economists had expected, the rise marked the fastest monthly pace since December.
   
Offsetting this, however, the Empire survey on manufacturing activity in the New York region showed only a small rise after a massive slump the previous month. The headline index rose to 3.80 points in April after dropping 22 points to 1.85 in March, coming in well below forecasts for a much bigger increase to around 8.1.
   
At 2.27 pm BST, the euro was trading at 1.3543 against the dollar, virtually unchanged from before the data were released.

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Top Stories in Europe at 12.05 GMT

Zurich - Migros Genossenschaftsbund plans to cut 800 to 1,600 jobs this year, equalling 1-2 pct of its total workforce, amid growing competition in the Swiss retail sector, Swiss daily TagesAnzeiger said, citing Migros chief executive Herbert Bolliger. Additionally, the retailer is currently reviewing operational procedures at its outlets in order to improve efficiency.

Frankfurt - Some 12,000 employees of Deutsche Telekom AG are expected to take part in strike action today to protest plans to outsource 50,000 workers, extend working hours and lower entry-level wages, a spokesman for trade union verdi said. The German telecommunications giant and the union will resume negotiations today after three previous rounds of talks failed.

Consumer prices in Germany rose 0.3 pct in March from February and were up 1.9 pct from a year earlier, according to final figures from the Federal Statistics Office. The figures confirmed the preliminary estimates given by the Statistics Office on March 28.

Tracinda's offer to buy Chrysler could collapse unless the investment vehicle controlled by Nevada billionaire Kirk Kerkorian makes concessions over its existing offer to seller DaimlerChrysler AG, the Financial Times reported.
 
Tracinda, which offered 4.5 bln usd for the struggling US carmaker, is under pressure to drop its request for exclusivity, but even doing that may not be sufficient to gain it a seat at the negotiating table, people close to the auction told the newspaper.

Amsterdam - ABN Amro Holding NV said it is well on the way to beating its 2007 earnings per share target as it reported first quarter net attributable profit of 1.31 bln eur compared with 1.003 bln in the year earlier period. In an unscheduled earnings release, ABN Amro reported Q1 earnings per share from continuing operations of 0.65 eur from 0.50 eur.

Philips repeats FY targets after Q1 net beats forecasts Royal Philips Electronics NV repeated its full-year sales and EBITA margin targets and said all divisions are on track to achieve their objectives, as the company reported first-quarter results showing a higher-than-expected net profit.
 
Net profit surged to 875 mln eur, including a one-off gain on the sale of shares in Taiwan Semiconductor Manufacturing Co, from 160 mln in the first quarter of 2006, above analysts' forecasts of 773-869 mln.

Madrid - Imperial Tobacco Group PLC is mulling a third offer for Altadis SA without prior consultation with the Franco-Spanish group's board, La Gaceta de los Negocios reported citing sources close to the operation. The newspaper quoted its unnamed sources saying that Altadis' board is likely to continue to push for higher offers unless Imperial formalises a bid through bourse regulator the CNMV.

London - Siemens has asked companies and investors interested in VDO, the car-parts unit it wants to spin off, to hand in concrete offers within the next ten days, Financial Times Deutschland reported  

Europe's largest engineering group wants to present the offers at the next meeting of its supervisory board on April 25, sources familiar with the matter told the newspaper.

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HONG KONG - Shares across the Asia-Pacific region closed higher, with Tokyo rising on a weaker yen and markets responding to the rally on Wall Street on Friday, dealers said.
   
Tokyo shares ended broadly higher with investors heartened by the continuing weakness of the yen today after the G7 finance ministers and central bankers met at the weekend, dealers said.
   
Investors generally expect the yen to remain at low levels in the near term because the G7 meeting had nothing new to say about the recent weakness of the currency, they said.
   
The blue-chip Nikkei 225 Stock Average closed 264.35 points or 1.52 pct higher at 17,628.30, off a high of 17,696.87. The TOPIX index of all first-section issues finished 20.10 points or 1.18 pct higher at 1,725.60, off a high of 1,730.62.
   
Yasunari Ueno, an economist at Mizuho Securities said: "Summing up remarks from participants, I think it can be said that the latest G7 gathering in Washington accepted a weak yen, overall."
   
Kazuhiro Takahashi, an equities manager at Daiwa Securities SMBC, said: "Buying today was mostly to cover the sizeable short trades built last week. The Nikkei is likely to stay below 17,800 this week, as investors fear that upcoming earnings announcements by US companies may have an adverse impact on Wall Street."
   
Australian shares closed up at fresh record highs with investors buoyed by the rally in US shares on Friday which rose on better-than-expected producer inflation data and a positive outlook for US company earnings reports which kick off this week.
   
The S&P/ASX 200 closed up 61.9 points or 1.01 pct at a record 6,197.7, surpassing Thursday's record close of 6,158.2. The key index closed off a new intra-day record of 6,206.3.
   
The All Ordinaries index advanced 59.8 points or 0.98 pct to close at a record 6,183.6, also beating Thursday's record close of 6,142.8 while the broader index set a fresh intra-day high of 6,190.4.
   
Hong Kong shares were sharply higher in afternoon trade, tracking gains on Wall Street and in Tokyo after tame US wholesale inflation data. Blue chips and property stocks saw firm buying interest amid fresh fund inflows. At 3.30 pm the Hang Seng Index was up 379.71 points or 1.87 pct at 20,720.68.
   
In mainland China, A-shares in Shanghai and Shenzhen closed higher on strong fund inflows, due partly to a rising yuan, with banks and power generators favored. Nearly 60 companies closed up their daily limits of 10 pct.
   
The Shanghai A-share Index was up 82.15 points or 2.22 pct at 3,780.61 and the Shenzhen A-share Index was up 27.04 points or 2.72 pct at 1,019.98, a new record.
   
Seoul shares closed higher at a new record as foreign investors continued heavy buying of local shares, outpacing profit-taking and ignoring uncertainty over key economic data such as China's GDP, due out this week.
   
Shipbuilders, construction stocks and brokerages led the rally, with Samsung Electronics' disappointing quarterly results released last Friday doing little harm to broad sentiment.
   
The KOSPI index closed up 11.26 points or 0.74 pct at 1,532.04, off a high of 1,533.09 and a low of 1,519.30.

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Copper leads base metals higher as supply fears add to strong demand

LONDON - Copper rose in early trade, leading across-the-board gains in the base metals, as confirmation of strong demand from China, the world's biggest importer of the red metal, and supply fears from Indonesia and Argentina lifted prices.
   
Meanwhile both tin and lead remained near all-time highs as positive sentiment spilled over into the remainder of the base metals complex.
   
"The market is solidly higher this morning with the base metals responding to supply disruptions in the copper market as well as quite strong import numbers into China in the March month," said Michael Jansen of JP Morgan in a note.
   
At 11.39 am, copper for three-month delivery stood at 7,900 usd per tonne, against 7,705 usd at the close on Friday.
   
Investor sentiment in the copper market has remained broadly positive, analysts said, with speculative longs rising in recent weeks, while speculative shorts have fallen steadily since peaking at the end of last year.
   
Demand remains strong, with customs data from China showing the Asian giant imported a record 219,359 tonnes of refined copper and copper alloy in March, while imports in the first quarter hit 541,103 tonnes, more than double the level seen a year earlier.
   
Prices have also been boosted by supply disruptions at the Grasberg copper and gold mine in Indonesia, operated by PT-Freeport Indonesia, a subsidiary of US mining giant Freeport-McMoran Copper & Gold Inc.
   
PT-Freeport Indonesia mined 545,000 tonnes of copper in 2006, the company said in its full-year report earlier this year.
      
Among other metals, aluminium rose to 2,852 usd from 2,812 usd at the close on Friday, while zinc edged up to 3,560 usd from 3,540 usd. Nickel rose to 47,518 usd from 46,500 usd, while lead rose to 2,035 against 1,995 usd and tin reached 14,425 usd from 14,350 usd.

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