US & World Daily Markets Financial Briefing 20-10-2006

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Stocks mixed on Caterpillar earnings

NEW YORK - Stocks were mixed in early trading Friday as a lackluster profit report and forecast from Caterpillar Inc. curtailed investor enthusiasm a day after the Dow Jones industrial average closed above 12,000 for the first time.
   
Caterpillar, one of the 30 blue chip stocks that make up the Dow, unnerved investors who have betting the slowing economy will pull off a soft landing rather than tip into recession.
   
In the first hour of trading, the Dow fell 30.25, or 0.25 percent, to 11,981.48. Broader stock indicators were mixed. The Standard & Poor's 500 index was down 0.97, or 0.07 percent, to 1,365.99, and the Nasdaq composite index rose 3.91, or 0.17 percent, to 2,344.85, helped by a strong showing from Google Inc.
   
Caterpillar posted a 15 percent increase in its third-quarter profit as it sold more construction and mining equipment. However, the maker of heavy equipment warned increased operating costs and weaker-than-expected sales would cut into its full-year profits.
   
Google said its profit nearly doubled and revenue surged 70 percent during the third quarter, which is traditionally slower as people generally spend less time in front of a computer during the summer months.
   
Citigroup followed by raising its price target on the stock to $600 from $550, Goldman Sachs lifted its target to $595, Stifel Nicolaus upped its target to $554 and UBS raised its target to $500.
  
Shares of rival Yahoo edged up 2 cents to $23.15, although it was downgraded by Stifel Nicolaus to hold from buy, citing concerns over competition.
   
Shares of chip makers Xilinx and Broadcom are expected to rise after their earnings reports, while SanDisk, a maker of memory chips, is expected to fall after saying the average price per megabyte sold declined compared to the previous quarter and year-ago period.
   
Xilinx was up 6.4 percent in pre-open trading at $25.42, Broadcom edged up 16 cents to $29.12 and SanDisk dropped 14 percent to $53.30.
   
Elsewhere, Corus Group accepted an $8 billion takeover from India's Tata Steel as steel sector consolidation continues.
   
European billionaires Bernard Arnault and Albert Frere are considering making a bid for Ford Motor Co.'s Aston Martin division, which makes luxury sports cars, according to a report in the Financial Times. Ford has put Aston Martin up for sales as part of its restructuring and any bid for the division would likely be worth more than 1 billion euros ($1.25 billion), the report said.
   
Warren Buffett's Berkshire Hathaway has agreed in principle to provide another $7 billion in reinsurance cover to Equitas, a company set up to run off liabilities from the Lloyd's of London underwriters from 1992 and prior years.

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Dollar still on back foot in quiet end to week

LONDON - The dollar recouped some earlier losses but generally remained on the back foot, with the euro above the 1.26 usd mark, in light trade after weak US manufacturing data and a jump in oil prices following the OPEC production cut.
   
The Philly Fed business activity index, which measures manufacturing activity in the Philadelphia region, slumped further in to -0.7 in October from -0.4 in September, confounding analysts' expectations for a solid improvement to +7.8.
   
Meanwhile, sharp rises in oil prices also weighed on the dollar. There is nothing of note on the US economic calendar today and attention is likely to turn to next week's data, which include new and existing home sales, durable goods orders and third quarter GDP numbers. Also firmly in focus will be next week's meeting of US rate-setters for further clues on when US interest rates could be heading down.
   
A number of investors are concerned that softer US economic data may prompt the the US Federal Reserve to cut the cost of borrowing some time soon.
   
The major mover among currencies this morning was the pound, which rose to two-week highs against the dollar after strong third-quarter GDP figures firmly cemented expectations that the Bank of England will raise interest rates on November 9.
   
Data showed UK GDP grew by 0.7 pct in the third quarter from the second, in line with analysts' forecasts, and by 2.8 pct from a year earlier, the highest annual rate since the third quarter of 2004.
   
This marks the fourth consecutive quarter of above-trend growth, estimated by most commentators at a quarterly 0.6 pct.

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The European Markets at 12.30 GMT

London - The FTSE 100 remained in positive territory, although off early 5-1/2 year highs, at midday, with commodity stocks continuing to provide support, although Corus missed out after confirming an agreed 455 pence per share offer from Tata Steel. By 12.10 pm, the FTSE 100 index was up 16.6 points at 6,172.6, while the broader indices were mixed, with the FTSE Small Caps slipping back.

Frankfurt - German shares were higher midday, trading at a new 5-year highs with sentiment buoyed by yesterday's record on Wall Street, news that Deutsche Boerse merger chances have improved and by chart technical advances for Adidas and Siemens. At 1.38 pm the DAX was up 33.63 eur or 0.54 pct at 6,211.05, the MDAX was up 35.99 points or 0.43 pct at 8,659.73.

Paris - Share prices were broadly higher at midday, buoyed by Wall Street's new highs as the pace of French corporate news thinned ahead of the weekend. At 11.47 am, the CAC-40 index was up 27.90 points or 0.52 pct at 5,387.64, with 32 gainers, seven decliners and one stock unchanged.

Milan - Share prices were higher at midday, underpinned by gains in oil stocks after OPEC decided to cut production by a greater-than-expected 1.2 mln barrels a day. At 11.57 am, the Mibtel rose 0.42 pct to 30,333 points and S&P/Mib added 0.46 pct to 39,620.

Brussels  - Shares were up in late morning trade as overnight gains on Wall Street pushed stocks higher. At 11.38 am, the Bel 20 was up 13.12 or 0.32 pct at 4,172.71.

Madrid - Madrid shares were higher midday in line with Europe after a strong close on Wall Street, with Iberia leading gainers on vague rumours of a bid by British Airways. At 12.42 pm the IBEX-35 index gained 66.1 points to 13,530.8, after trading in a range of 13,488-13,565 on turnover of 2.6 bln eur.

Stockholm - Shares remained in slightly positive territory in midday trade, a touch off morning levels, with Ericsson posting solid gains on follow-through buying after yesterday's Q3 report, and with defence group Saab jumping after its far better-than-expected Q3 results. At 1.40 pm, the OMX Stockholm index was up 0.46 pct at 351.52 points, while the OMX Stockholm 30 index was up 0.39 pct at 1,094.13.

Brussels - Shares were up in late morning trade as overnight gains on Wall Street pushed stocks higher. At 11.38 am, the Bel 20 was up 13.12 or 0.32 pct at 4,172.71. Telecoms group Belgacom was up 0.25 eur or 0.82 pct at 30.80, whilst metals group Umicore rose 0.80 eur or 0.65 pct to 124.10.

Copenhagen - Share prices were higher in midmorning trade, led up by Novozymes, still rising on recent positive broker comments, and by financial stocks. At 11.05 am, the OMXC20 index was 2.30 points higher at 419.35 and the OMXCB Benchmark index was up 2.23 points at 395.42.

Helsinki - Shares were higher in midday trade, with Elisa gaining sharply on a solid third quarter report, while TietoEnator fell on consensus-missing numbers. At 12.01 pm, the OMX Helsinki 25 was 0.35 pct higher at 2,747.31 and the OMX Helsinki added 0.46 pct to 9,173.04, with volumes reaching 428 mln eur.

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Asian shares close mostly higher on Wall St record, earnings reports

HONG KONG - Shares across the Asia-Pacific region closed mostly higher as Wall Street continued its record-setting rally to close above 12,000 points for the first time and on corporate earnings announcements.
   
Tokyo shares ended higher following Wall Street's lead, but some pre-weekend profit-taking set in and investors were exercising restraint ahead of the US Federal Open Market Committee meeting next week.
   
Market watchers say the Japanese market will likely continue to track Wall Street's direction next week with some possible weak bias if the Federal Reserve signals that US inflation remains a concern. The benchmark Nikkei 225 index is expected to move between 16,200 and 16,800 points.
   
The Nikkei 225 Stock Average closed up 100.27 points or 0.61 pct at 16,651.63, off a high of 16,663.61. For the week, the index gained 0.69 pct.
   
The broader TOPIX index of all first-section issues was up 8.38 points or 0.51 pct at 1,644.15, just a tad off its intraday best of 1,645.90. The index added 0.99 pct for the week.
   
Australian shares closed higher as rising metal prices overnight boosted resource stocks, while continued takeover activity within the media sector raised investor sentiment in the wider market.
   
The S&P/ASX 200 advanced 50.1 points or 0.95 pct to close at the day's high of 5,335.4, well above the day's low of 5,297.9. Over the trading week, the key index gained 45.4 points or 0.86 pct.
   
Hong Kong shares had risen strongly in afternoon trade led by blue chips, notably China Mobile and Sun Hung Kai Properties, in response to Wall Street.
   
Sentiment was supported by a view that the US economic and interest rate outlook is positive for the short-term and that the local market's prospects remain sound as reflected by the frenzied response to Industrial and Commercial Bank of China's initial public offering.
   
At 3.28 pm the Hang Seng Index was up 143.65 points or 0.80 pct at 18,130.62.
   
In mainland China, A-shares in Shanghai and Shenzhen closed lower with airlines and property developers losing ground. The Shanghai A-share Index fell 1.89 points or 0.10 pct to 1,880.67 and the Shenzhen A-share Index was down 1.68 points or 0.36 pct at 466.80.
   
Seoul shares closed higher, reclaiming the 1,360-point level, with broad sentiment buoyed by a firmer Wall Street and fears over North Korea receding.
   
The KOSPI index closed up 10.18 points or 0.75 pct at 1,364.24, after moving between 1,357.14 and 1,366.94. The index finished the week with a gain of 15.64 points.

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LONDON - Gold came off a two week high above 600 usd hit earlier as the precious metal, which has been strongly correlated with oil recently, lacked upward impetus after US crude prices failed to break above 60 usd.
   
At 11.09 pm, spot gold, which earlier hit a high of 602.00 usd an ounce, was quoted at 598.35 usd, down slightly below the 598.60 usd level touched when the COMEX market closed in New York yesterday.
   
Other precious metals edged lower. Spot silver was down at 12.02 usd an ounce against 12.08 usd, platinum fell to 1,083.50 usd against 1,087.00 usd, while palladium was lower at 324.50 against 333.00 usd.
   
Gold rallied earlier as strong physical demand emerged in Asia again and as more sabre rattling from North Korea over its nuclear ambitions sparked safe haven buying. The metal also found support from a modest gain in oil.   

Copper edged up as gains in other metals, specifically nickel, supported the metal and helped offset concerns over the economic slowdown in the US following weak data yesterday.
   
Nickel rose to a new record peak today above 32,000 usd a tonne. The metal "remains plagued by an acute stock shortage," The LME reported another decline in nickel stocks today, saying they fell 96 tonnes to 4,836 tonnes.
   
Nickel stocks are equivalent to less than one day of global consumption. Further, the metal was plagued earlier this month by a strike at Inco's Goro nickel project in New Caledonia.
   
The strike has since been resolved but Adams said "even if production recovers in New Caledonia, the market will still remain tight ... which means all eyes will no doubt remain on LME stocks".
   
Turning to copper, which has become the laggard of the base metals complex recently, Adams said in spite of its modest gain at present, he believes the metal is holding back the complex.
   
The LME said today copper stocks in its warehouses jumped by 2,550 tonnes to 112,275 tonnes, but analysts noted stocks remain extremely tight overall. They are equivalent to less than three days of global consumption.
   
Copper's problem, they said, is more that it has fallen behind the other metals in the complex recently in part because it is the most sensitive to the economic statistics coming out of the US.
   
At 2.05 pm, LME copper for 3-month delivery climbed to 7,685.00 usd a tonne against 7,660.00 usd at the close yesterday, while nickel surged to 32,250.00 against 31,700.00 usd.
   
Zinc climbed to 3,980.00 usd against 3,945.00 usd, aluminium was flat at 2,741.50 usd, tin edged down to 9,925.00 usd against 9,950.00 usd, while lead was up at 1,507.50 usd usd against 1,500.00 usd.

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