US & World Daily Markets Financial Briefing 19-06-2006

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Stocks rise on Nokia-Siemens venture

NEW YORK - Stocks advanced in early trading Monday as news of a joint venture between Nokia Corp. and Siemens AG gave Wall Street momentum to extend last week's recovery.
   
With no new economic data to feed speculation over the Federal Reserve's next interest rate move, investors focused on the Nokia-Siemens deal and solid earnings from electronics retailer Circuit City Stores Inc. Brokers' upgrades of Intel Corp. and Procter & Gamble Co. also brightened the market's mood.
   
The major indexes ended mixed last week after a two-day bounce helped Wall Street find its footing following nearly six weeks of intense selling on fears of rising inflation and a slowing economy. Investors seemed to be coming to terms with increased certainty that the Fed will boost interest rates again at its June 28-29 meeting.
   
In the first hour of trading, the Dow Jones industrial average added 37.54, or 0.34 percent, to 11,052.09.
   
Broader stock indicators also gained ground. The Standard & Poor's 500 index was up 3.78, or 0.3 percent, at 1,255.32, and the Nasdaq composite index rose 7.36, or 0.35 percent, to 2,137.31.
   
Bonds extended last week's decline, with the yield on the 10-year Treasury note rising to 5.14 percent from 5.13 percent late Friday. Short-term bond yields remained above long-term rates, signaling greater expectations of an economic slowdown.

Stocks in focus

European markets were mostly higher after the Nokia-Siemens deal, with Siemens rallying 8 percent and Nokia, the world's leading mobile phone maker, rising over 4 percent.
   
The companies said the deal was done to compete against the merged Alcatel-Lucent Technologies and Ericsson in supplying telecom equipment to phone companies such as AT&T and Vodafone Group. The deal also is expected to rekindle takeover speculation throughout the industry, with Nortel Networks and Juniper Networks considered possible targets.
  
Also in the telecoms field, AT&T in July will launch a service combining EchoStar Communications satellite television with video and movies from the Internet, according to a report in The Wall Street Journal.
   
Goldman Sachs last night promoted Gary Cohn and Jon Winkelried to the co-chief operating officer position, with John Weinberg to become vice chairman.
   
Intel Corp., the world's largest chipmaker, was upgraded to buy from neutral at UBS, with the broker also lifting its price target to $23 from $21. Lower operational spending and increased competitiveness drove the ratings change, UBS said.
   
Capital One could be in focus after Barron's magazine said investors aren't giving enough credit to the firm, saying it now has a platform to cross-sell credit cards, auto loans and mortgages to bank customers with its acquisition of North Fork.
   
Circuit City Stores and CarMax are among the firms expected to unveil quarterly results Monday.

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Dollar steady near recent yen highs as North Korea concerns mount

LONDON - The dollar remained steady at recent highs against the yen amid mounting speculation that North Korea is readying itself to test-launch a long-range missile.
   
An unnamed US official told the New York Times on Sunday that North Korea had completed fuelling its Taepodong 2 missile, which is seen as a critical step in the preparations for a test launch.
   
That has prompted a flurry of diplomatic action, with Japan's Prime Minister Junichiro Koizumi indicating that said Tokyo would take "stern measures" against any launch, while the US said it would consider new sanctions on Pyongyang.
   
"This has created an element of geopolitical risk, which is ostensibly bad for the yen," said Neil Mackinnon, chief economist at ECU Group.
   
The dollar was already being supported against its major competitors by mounting expectations that the US Federal Reserve has at least two more rate hikes to deliver before it brings its tightening cycle to a halt.
   
There is now a greater than 60 pct chance that the Fed will raise its Fed funds rate a quarter point at its meetings in June and August, which would take it up to 5.50 pt.
 
Elsewhere, the pound will be in focus, at least in the first half of the week ahead Wednesday's release of the Bank of England's most recent rate- setting meeting.
   
Though most analysts expect the Monetary Policy Committee to have voted 7-1 in favour of keeping the key repo rate unchanged at 4.50 pct for the tenth month running, they anticipate the commentary to be more hawkish.

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The European Markets at 12.00 BST

London - Share prices remained higher midday, with Royal & Sun Alliance gaining after announcing cost cutting measures, and hopes of a firmer opening to Wall Street were helping to underpin the positive start to the week, dealers said.
   
At 12.00 noon, the FTSE 100 index was up 49.4 points at 5,644.8, off an earlier high of 5,665.7, while the broader indices were also higher. Volume was light with only 665.6 mln shares traded in 115,315 deals.

Frankfurt - Shares were up sharply at midday as oil prices fell and as Siemens, which has a weighting of more than 9 pct on the DAX, soared on news it is merging its networks unit with that of Nokia, dealers said.
   
At 11.56 am, the DAX 30 index was 96.65 points or 1.80 pct higher at 5,472.66, having moved between 5,388.83 and 5,478.56 so far this session. The MDAX was at 7,563.58, up 165.87 points or 2.24 pct, while the TecDAX was at 631.60, up 16.53 points or 2.69 pct.

Paris - Shares were higher midsession supported by falling oil prices and a late rally on Wall Street at the end of last week, dealers said.
   
At 12.58 pm, the main CAC-40 index was 55.62 points or 1.18 pct higher at 4,750.04, on trading volume of 1.63 bln eur. Of the CAC-40 shares, 37 were higher and 3 were lower.

Amsterdam - Shares were up at midday in line with other European markets as investors regained some lost confidence following a better showing on Wall Street at the end of last week, dealers said.
   
At 11.57 am, the AEX was up 4.62 points or 1.10 pct to 425.14, after opening at 422.01 and reaching an earlier high of 424.63.

Helsinki - Share prices were higher at midday, led by Nokia as the market viewed its networks tie-up with Siemens as a broadly positive step in the ongoing consolidation of the industry, dealers said.
   
At 12.34 pm, the OMX Helsinki 25 was 1.66 pct firmer at 2,344.42 and the OMX Helsinki was up 2.59 pct at 8,454.75. Turnover was 476 mln eur. Nokia was up 4.66 pct to 16.38 eur

Milan - Share prices were higher at midday as equity markets continue to rebound after recent losses, but the Italian market is underperforming after ex-dividend stocks knocked about 1 percentage point off the S&P/Mib, dealers said.
   
At 12.34 pm, the Mibtel index was up 0.30 pct at 26,968 points and the S&P/Mib gained 0.16 pct to 35,285.
   
Recordati shares were suspended limit down, after falling 10.08 pct to 5.72 eur, amid reports that senior managers of the company were arrested by Italy's finance police.

Madrid - Share prices were higher in decent midsession trading, lifted by positive US futures, with SCH leading blue chips gainers, while constructors and telecoms were also firm, dealers said.
   
At 12.42 pm, the IBEX-35 index was up 82.0 points at 11,044.5, after trading in a range of 11,000-11,064 on volume of 935 mln eur.

Stockholm - Shares were higher in midday trade on continued bargain hunting, with Ericsson adding to earlier gains on news that Nokia and Siemens are to merge their network units, dealers said.
   
At 1.00 pm, the OMX Stockholm index was up 1.58 pct at 298.89, while the OMX Stockholm 30 index was up 1.69 pct at 925.21. Turnover was 7.91 bln skr.

Athens - Shares were higher in early afternoon trade, led by mid-caps, as sentiment was boosted by advancing European markets and falling oil prices, brokers said.
   
At 12.55 pm, the ASE general index was up 1.3 pct at 3,614.9 and blue chips were 0.9 pct higher at 1,982.3. Mid caps were up 2.6 pct at 3,990.9 and small caps were up 2.3 pct at 676.7.

Zurich - Share prices were slightly higher at midday, with the SMI up 1.35 pct or 98.57 points at 7,393.12 and the SPI 1.21 pct or 68.98 higher at 5,760.78.

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Asian shares close mostly lower on US rate fears, local factors

HONG KONG - Shares across the Asia-Pacific region closed mostly lower on concerns about higher US interest rates and local factors such as a tightening of China's banking requirements and fears of a North Korean missile test, dealers said.
   
Tokyo shares ended lower, tracking a sluggish performance on Wall St last Friday, with investors cashing in gains after the Nikkei's solid performance last week, dealers said.
   
After plunging to a seven-month low last Tuesday, the benchmark Nikkei rebounded 660 points, or 4.6 pct, in the following three days.
   
Dealers noted that with concerns about interest rates and global growth continuing to hang over sentiment, investors seemed to want to pocket quick gains, or exit the market to cut their recent losses.
   
The blue-chip Nikkei 225 Stock Average finished down 18.99 points or 0.1 pct at 14,860.35.
   
The broader TOPIX index of all first-section issues fell 7.05 points or 0.5 pct to 1,527.66, off a low of 1,520.40.
   
"The market fell, tracking a slump in US shares (Friday). But I believe the kind of panic selling that the market saw (early) last week is over now," said Hideyuki Suzuki, a strategist at SBI Securities.
   
"Given the country's sound economic fundamentals, investors are now interested again in selected companies with strong financial performances," Suzuki added.
   
Australian shares finished lower after stronger US economic data on Friday again raised interest rate concerns while China's move to increase the reserve requirements of its lending banks also caused investors to worry about the pace of global economic growth, dealers said.
   
They said the US data raised expectations of a near certain interest rate hike by the Federal Reserve on June 29, which weighed on local banking stocks, while major resource companies fell on fears the booming commodity market could be impacted by China's attempt to slow growth.
   
The S&P/ASX 200 lost 67.8 points or 1.36 pct to close at 4,901.2.
   
Hong Kong shares were lower in afternoon trade featuring profit-taking and sharp falls in Chinese financial stocks in response to China's credit-tightening measures, dealers said.
   
At 3.29 pm the Hang Seng Index was trading down 98.12 points or 0.62 pct at 15,744.53, dealers said.
   
In mainland China, A-shares in Shanghai and Shenzhen defied the bearish trend across the region to close higher on renewed bargain hunting, with metal companies and automakers in favor, dealers said.
   
The Shanghai A-share Index jumped 12.63 points or 0.76 pct to 1,667.39 on turnover of 20.52 bln yuan and the Shenzhen A-share Index was up 5.83 points or 1.38 pct at 429.24 on turnover of 14.86 bln yuan.
   
Seoul shares ended lower, wiping out much of Friday's strong gains, as investors struggled with fears of further US interest rate tightening and a possible North Korean missile test, dealers said.
   
Major exporters fell on concerns over their US sales outlook if US interest rates were raised.
   
The KOSPI index closed down 10.52 points or 0.83 pct at 1,251.67, off a high of 1,256.78 and a low of 1,242.20.
   
Asian Bourse Round-Up

For a full list of closing figures, click here

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Gold drifts lower, under pressure from strong US dollar.

LONDON - Gold drifted lower, putting an end to the modest recovery seen last Thursday and Friday, as a strong US dollar lessened the appeal of precious metals and as lower oil prices weighed.
   
At 1.10 pm in London, spot gold was quoted at 568.30-569.10 usd an ounce, down from 578.20 usd at the time of the COMEX market close on Friday. Other precious metals were trading flat to lower.
   
Spot silver was at 9.87-9.97 usd per ounce, down from 10.21 usd at the close
on Friday, platinum was flat at 1,139.40-1,144.00 usd compared with 1,140.00 usd and palladium was down at 295.50-301.50 usd per ounce from 302 usd.
   
"The market, short-term, is still looking to test the downside. I think we are going to see a slip back to 550 usd this week," said TheBullionDesk analyst James Moore.
   
He quoted renewed strength in the US dollar and lower oil prices as reasons for today's falls and said that "short-term, the dollar will lead gold a bit lower".
   
The dollar, which hit an 8-week high against the yen in Asian trade, is being boosted by expectations the Federal Reserve will raise interest rates again at its June 29 meeting.
   
A stronger dollar makes precious metals like gold, which is traded in dollars, costlier. As the currency has been on the backfoot for much of this year it has, until recently, helped boost gold prices.
   
Moore said that longer term, he sees this trend continuing. "Long term, I remain bullish. I think we will see prices recover towards the end of the fourth quarter.
   
"Demand is on the increase and while inflation is a risk, gold is seen as an
anti-inflation hedge that, coupled with potential central bank purchases, should support prices," he said.

Oil prices seen rising from Q3 amid increased refinery demand

LONDON - Crude oil prices are expected to rise from the third quarter, on rising demand from refineries resulting from the conclusion of maintenance closures, according to the Centre for Global Energy Studies (CGES).
   
In its latest monthly report, the CGES said the current abundance of crude oil is likely to be temporary, with demand expected to increase as more than 2 mln bpd of refining capacity returns from maintenance.
   
The CGES said maintenance works at western refineries have taken longer than normal this year. Instead of being concentrated in the first quarter, they have continued into the second, while Asian refineries have also seen maintenance closures.
   
The downturn in demand as a result of the refinery outtages resulted in a sharp increase in stocks, but demand should pick up again in the third quarter and will increase further in the fourth, it said.
   
The centre said it expects prices to rise by an average 2.3 usd by the fourth quarter, with Brent crude seen reaching an average 71.10 usd in the third quarter and 71.30 usd in the fourth, from 69 usd in the second quarter.
   
The price of Brent is forecast to fall back to 68.20 usd in the first quarter of 2007, as a result of increased supplies from non-OPEC members. However an active hurricane season in the Atlantic this year could see prices rise to new records of up to 80 usd a barrel, it said.

Crude futures dipped despite persistent worries about a potential supply cutoff amid rising tension over Iran's nuclear arms program. A barrel of light crude slid 43 cents to $69.45 on the New York Mercantile Exchange.
   

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