US & World Daily Markets Financial Briefing 17-04-2007

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Stocks Open mixed after inflation data

Wall Street was little changed early Tuesday, after a rise in home construction and a mild reading on consumer inflation encouraged investors, but a falling dollar and industrial output limited buying.

Investors were also cautious about surging higher ahead of a new batch of first-quarter earnings data, and after a more than 100-point advance in the Dow Jones industrial average Monday.

The Federal Reserve reported Tuesday that industrial output dropped 0.2 percent in March as utility production dropped by 7 percent, offsetting a rise in factory production.

But investors were heartened by the Commerce Department's report that housing starts for March rose 0.8 percent, a feeble rise compared to February's 7.6 percent advance, but much better than the drop that investors had been bracing for. Building permits also rose. The stock market has experienced several tumultuous weeks this year due to worries about the financial troubles of the subprime lending sector spilling into the already sluggish housing market.

Giving investors some additional relief, the Labor Department reported that its core consumer price index rose 0.1 percent in March, less than expected and alleviating some anxiety about the Federal Reserve's need to raising interest rates to curb rising costs. The overall consumer price index, which takes into account energy and food costs, rose 0.6 percent in March -- its largest rise in 11 months, but in line with expectations.

Along with economic data, investors were watching for first-quarter results from various companies, notably technology heavyweights Intel Corp. and International Business Machines Corp.

In the first hour of trading, the Dow was up 13.16, or 0.10 percent, at 12,733.62. The blue chip index has risen 12 out of the last 13 sessions.

Broader stock indicators were mixed. The Standard & Poor's 500 index was up 1.26, or 0.09 percent, at 1,469.73, and the Nasdaq composite index was down 2.12, or 0.08 percent, at 2,516.21.

Bonds rose after the economic data was released, with the yield on the benchmark 10-year Treasury note falling to 4.69 percent from 4.74 percent.

Gold prices slipped. The dollar neared all-time lows versus the euro, and dropped to a 15-year low against the British pound. The dollar's weakness has been raising concerns about U.S. assets losing their allure to investors abroad.

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Nearly half the component companies of the Dow Jones industrial average release earnings this week. Analysts expect the reports to show corporate growth is slowing, but on Monday, many companies' financial results surpassed forecasts.

Early Tuesday, the Coca-Cola Co., the world's largest beverage maker and one of the 30 Dow components, said its first-quarter profit jumped 14 percent. The rise beat analyst expectations, thanks to a double-digit increase in worldwide sales despite its troubled North America segment.

Coca Cola rose 90 cents to $51.17.

Another Dow component, health care products maker Johnson & Johnson, reported a profit drop of 22 percent due to a charge for an acquisition that more than offset record sales. But the results beat forecasts and the company rose $1.59, or 2.6 percent, to $64.61.

Meanwhile, the financial sector posted mixed earnings. Mellon Financial Corp's profits rose and exceeded expectations, as did those of Wells Fargo & Co. But TD Ameritrade Holding Corp's profits dropped and missed predictions, and so did U.S. Bancorp's.

Oil prices rose Monday, with a barrel of light sweet crude rising 78 cents to $64.39 in premarket trading on the New York Mercantile Exchange.

Overseas, Japan's Nikkei stock average fell 0.57 percent. In afternoon trading, Britain's FTSE 100 was down 0.30 percent, Germany's DAX index was up 0.25 percent, and France's CAC-40 was down 0.09 percent.

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Top Stories in Europe at 12.05 GMT

London - Tesco PLC, Britain's biggest supermarket chain, reported full-year profits which were ahead of the consensus market expectation, and committed to returning 3 bln stg to shareholders this year. Underlying pretax profit for the year to Feb 24 rose 13.2 pct to 2.55 bln stg, from 2.25 bln stg the year before.

Debenhams PLC, the UK's second largest department store retailer, has warned that it now expects profit for its year to end-August 2007 to be below current market expectations.
 
The group, which rejoined the stock market last May after two-and-a-half years in private hands, said its sales from March 4 (the beginning of its second half) to April 15 increased 2.9 pct versus the prior year but fell 6.9 pct on a like-for-like basis, which strips out the impact of new and closed space.

Paris - Areva will not participate in any tenders launched by Iran for the construction of new nuclear power plants, French daily Les Echos reported citing comments from a company spokesman. The spokesman told the paper "Areva works with clients and governments that fully comply with international regulations on nuclear energy. It's a general principle that applies to all our clients. That excludes de facto any cooperation with Iran."

Milan - Unicredito Italiano SpA is interested in buying the French bank Societe Generale and its Italian peer Capitalia SpA, the daily Finanza & Mercati said without giving a source. However, the daily said that Unicredito may wait to see the outcome of the takeover battle for ABN Amro Holding NV to decide whether to move on Capitalia.

Pirelli & C SpA said that America Movil and Telefonos de Mexico are still considering the possibility of buying a stake in Olimpia SpA, which controls 18 pct of Telecom Italia SpA. America Movil continues, in conjunction with Telmex, to consider "different alternatives for a potential investment in Olimpia" despite AT&T Inc's decision to withdraw from the bid, it said.

Frankfurt - Deutsche Telekom AG said it offered job guarantees until 2010 for workers at its new T-Service unit, in exchange for a 12 pct reduction in pay in the coming two and a half years, to end a lengthy battle with trade union verdi. Deutsche Telekom also said it may create new jobs, without being more specific.

Zurich - Converium Holdings said it has filed a lawsuit against French rival Scor SA and investment vehicle Patinex alleging violations of US securities law. Converium said Scor -- which is currently bidding for Converium -- excluded Converium's shareholders in the United States from its bid.

Amsterdam - The Dutch shareholders association VEB said ABN Amro Holding NV management should enter "exploratory talks" with the Royal Bank of Scotland Group consortium following its takeover approach to the Dutch bank last week.
 
Amid news reports indicating ABN Amro does not intend to open its books to the RBoS consortium, the VEB stressed in a letter to ABN Amro management that the approach from the consortium involves well-established financial companies and a strengthening of market positions.

Madrid - UK risk capital firm Apax Partners is eyeing a bid for Iberia Lineas Aereas de Espana SA through a consortium with Spain's Gestair, Expansion reported, citing unnamed sources close to the negotiations.
 
According to the newspaper, Apax can make a friendly bid through the alliance, as Gestair is a strategic partner with Iberia to which it wet leases aircrafts through its Audeli unit.

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Asian shares close mostly lower on profit taking
 
HONG KONG - Shares across the Asia-Pacific region closed mostly lower on profit taking, although China A-shares continued to rise on strong fund inflows.
   
Tokyo shares finished lower as investors turned cautious ahead of the start next week of the corporate reporting season for the fiscal year to March.
   
They said many investors took to the sidelines on the view that trading will be range bound until the results season kicks off in earnest next week, with Wall Street's gains overnight and the yen's continued weakness failing to brighten the market's careful mood.
   
The blue-chip Nikkei 225 Stock Average closed down 100.85 points or 0.57 pct at 17,527.45, off a low of 17,452.12, reversing the positive trend this morning which saw the index touching a high of 17,782.08.
   
The TOPIX index of all issues listed on the Tokyo Stock Exchange's first section finished down 9.49 points or 0.55 pct at 1,716.11, off a low of 1,705.91.
   
The key Nikkei index opened higher, quickly rising to the day's high in the first few minutes of trade in reaction to Wall Street's rise overnight following better-than-expected profits at Citigroup Inc and improved US consumer spending.
   
But the momentum was not strong and when shares hit firm resistance at just below 17,800 points, profit-taking sent the Nikkei index to close in negative territory, they added.
 
Australian shares retreated from yesterday's record highs to close lower as investors took profits in a number of blue-chip stocks. Little economic data due in Australia until next week's key first quarter consumer and producer inflation reports, the direction over the rest of the week is likely to come from the US with the key CPI report for the month of March due tonight.
   
The S&P/ASX 200 closed down 11.2 points or 0.18 pct at 6,186.5, falling from yesterday's record close of 6,197.7 but posting a new intra-day record of 6,237.7.
   
Hong Kong shares were stronger in afternoon trade, with dealers reporting some early profit taking after gains of over 400 points yesterday.
   
China Mobile and some mainland financials saw selling pressure but HSBC helped limit the market's losses after news that a Saudi investor has bought a 3.1 pct stake in the bank.
   
At 3.25 pm the Hang Seng Index had risen 19.09 points or 0.09 pct at 20,776.62.
   
In mainland China, A-shares in Shanghai and Shenzhen shrugged off early weakness and closed higher on strong fund inflows with property and metal stocks gaining ground. About 90 companies rose by their daily limits of 10 pct.
   
The Shanghai A-share Index was up 15.76 points or 0.42 pct at 3,796.37 and the Shenzhen A-share Index was up 17.01 points or 1.67 pct at a record 1,036.99.
   
Seoul shares closed lower, retreating from a record high set in early trade, with investors turning cautious ahead of China's quarterly GDP data and earnings announcements by Intel and other key IT companies. The market opened firmer on Wall Street's overnight advance but lost ground later on institutions' profit-taking, they added.
   
The KOSPI index closed down 3.38 points or 0.22 pct at 1,528.66, after hitting another record high of 1,538.89. Today's low was 1,524.33.

Inflation picked up in September in Europe as both areas show fragile economic growth. Just as in the U.S., rising energy prices are to blame. Read free, daily market reports available only at CMS Forex and open your free demo trading account today. Click here

Copper rallies as industrial action at Grasberg mine confirmed

LONDON - Copper rallied in early afternoon trade as the market digested news that a protest at Freeport-McMoran Copper & Gold Inc's Grasberg mine in Indonesia will go ahead as planned tomorrow, despite hopes it would be averted.
   
Workers at the mine, which the company said contains the world's largest single copper reserve, called off talks planned for today and said they will go ahead with tomorrow's protest over wages.
   
At 1.40 pm, copper for three-month delivery stood at 7,810 usd per tonne, against 7,730 usd at the close yesterday.
   
Copper futures opened weaker this morning as investors took profits and on hopes any supply disruptions from the Grasberg action would be minimal, but moved higher soon after on news the protest would go ahead.
   
"The markets are still a little nervous over what will happen next," said Man Financial analyst Ed Meir. "There are concerns (workers) may up the ante and possibly look at a strike. This is still a bit of a moving target."

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