US & World Daily Markets Financial Briefing 22-08-2006

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Stocks advance despite Iran worries

NEW YORK - Stocks regained their upward track Tuesday as better-than-expected profit from luxury homebuilder Toll Brothers Inc. outweighed fresh political worries over Iran's nuclear ambitions.
   
Wall Street could take a volatile turn in afternoon trading as Iran is set to respond to a European Union-led offer of incentives to persuade it to halt uranium enrichment activities. Further, the nation's seizure of a Romanian oil rig in the Persian Gulf over a commercial dispute fanned further Middle East tension.
   
Iran controls the world's second-largest oil and gas reserves, and is expected to balk at the West's proposals.
   
In the first hour of trading, the Dow Jones industrial average rose 25.37, or 0.22 percent, to 11,370.42.
   
Broader stock indicators also were higher. The Standard & Poor's 500 index rose 2.06, or 0.16 percent, to 1,299.58, and the Nasdaq composite index rose 5.55, or 0.26 percent, to 2,153.30.

Stocks in focus
   
Home builder Toll Brothers cut its earnings guidance for the fourth quarter, alongside a 19 percent fiscal third quarter profit decline. The revision is due to reduced deliveries and a third-quarter write down of $23.9 million.
   
Toll Brothers also forecast fiscal 2007's deliveries between 7,000 and 8,000, below the 8,600 to 8,900 homes it's looking to deliver this year.
   
Sprint Nextel Corp. late Monday said Len Lauer, chief operating officer, is leaving the company, effective immediately. The mobile phone operator has seen nearly a 30 percent share price fall since May and isn't growing its subscriber base as fast as rivals.
   
Also on the personnel front, Lehman Brothers has hired long-time Street veteran Felix Rohatyn as a senior adviser, The Wall Street Journal reported Tuesday.
   
International Paper continued its asset sale program, agreeing to sell its Brazilian coated papers business to Stora Enso for approximately $415 million, subject to post-closing adjustments.
   
XM Satellite Radio rose in German trading after Bear Stearns upgraded the company to outperform from underperform, saying the wave of negative catalysts that have plagued the company have subsided.
   
InterContinental Hotels reported a 75 percent rise in first-half profit, but shares declined in London after it didn't announce a further return of cash to shareholders.

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Euro dented by weak German survey

LONDON - The euro continued to drift lower after sentiment was dented by a steep fall in a key indicator of business confidence in the area's largest economy, Germany.
   
The closely watched ZEW expectations index slumped to 5.6 in August from +15.1 in July. The latest figure was well below the consensus forecast and the lowest in over 5 years.
   
Neil Mellor at Bank of New York said the sharp slump in the headline index was something of a shock. He noted however, that the report contained elements of positive news that served to soften the blow.
   
Indeed, while expectations for the next six-months may be softening -- due in part to concerns over the proposed VAT increase in Germany -- the current conditions index picked up sharply.
   
Mellor said the latter is "arguably of greater intrinsic worth than unrealised, sentiment-based conjecture."
   
Still, there was no arguing that the euro suffered after the news, retreating back to levels just above 1.28 usd.
   
Despite today's setback, however, the European Central Bank is expected to hike interest rates over the coming months. And, the euro has further hurdles to clear this week, including the crucial IFO confidence survey this Thursday.
   
In other data out this morning, the euro zone current account returned to a surplus in June of 4.0 bln eur after a deficit of 7.6 bln eur in May and well above analysts' forecasts for another deficit of around 5.0 bln eur. The May deficit was also revised down from the previous estimate of 8.2 bln eur.
   
Elsewhere, the yen pared some of its losses against the European currency after falling to record lows yesterday, though the euro remained comfortably above the 149 yen mark.
   
The dollar also staged a minor recovery after sharp losses yesterday following a weak of soft last week which suggested US interest rates may not go any higher.
   
With little in the way of US data today, attention will turn later to speeches this evening by Federal Reserve officials Jack Guynn and Michael Moskow.

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The European Markets at 11.00 GMT

London - At 12.20 BST, the FTSE 100 index was 25.6 points weaker at 5,889.7, above the session low of 5,878.4 but having fallen from an opening peak of 5,939.2.
   
News that a Romanian oil rig off the coast of Iran came under fire today from an Iranian military warship and was later occupied by Iranian troops just exacerbated the market's worries.

Frankfurt - Shares were slightly higher in midday trade after gains across Asia this morning, but off earlier highs after the ZEW August economic expectations index for Germany came in well below consensus expectations, dealers said.
   
At 11.31 am, the DAX 30 index was 7.39 points or 0.13 pct higher at 5,802.22, having moved between 5,799.56 and 5,831.86 so far this session. The MDAX was at 8,085.62, up 6.99 points or 0.09 pct, while the TecDAX was at 654.13, up 0.67 point or 0.10 pct.

Paris - Shares turned lower at midday on reports that Iran attacked a Romanian oil rig and as analysts assessed French GDP growth as being more fragile than suggested by the headline numbers alone, dealers said.
   
At 12.25 pm, the CAC-40 index was down 19.37 points or 0.38 pct at 5,085.48. Of the 39 stocks in the index as it awaits a replacement for Arcelor, 20 were lower, 18 were higher and one was unchanged.

Amsterdam - Share prices turned slightly lower in quiet early afternoon trade, depressed by an unexpected sharp fall in Germany's ZEW economic expectations index for August, dealers said.
   
At 1.18 pm, the AEX was down 1.53 points or 0.33 pct at 461.43, after opening at 464.75, reaching an early high of 465.38 and falling to a low of 459.99.
   
Madrid - Share prices were higher in thin midday trade, with Sogecable outperforming media issues and NH Hoteles down on profit taking after yesterday's sharp gains, dealers said.
   
At 12.08 pm, the IBEX-35 index was up 24.5 points at 12,077.5, after trading in a range of 12,121-12,074, on thin turnover of about 789 mln eur.
 
Milan - Share prices were slightly higher at midday in cautious trade amid concern about an economic slowdown in the US and a lower-than-expected German ZEW index, dealers said.
   
At 11.35 am, Mibtel was up 0.36 pct at 28,634 points, but off a high of 28,677, and the S&P/Mib rose 0.21 pct to 37,516.

Stockholm - Shares remained in positive territory in midday trade, but were off morning levels as bargain hunting eased, with the oil and metal companies continuing to outperform, dealers said.
   
At 12.05 pm, the OMX Stockholm index was up 0.19 pct at 315.30, while the OMX Stockholm 30 index was up 0.09 pct at 978.57. Turnover was 7.96 bln skr. The main sub-indices moving at midday were industrials, up 0.55 pct; energy, 0.64 pct higher; and materials, up 0.67 pct.

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Asian shares close higher on technical rebounds, commodity prices

HONG KONG - Shares across the Asia-Pacific region closed mostly higher, with technical rebounds from falls yesterday and some markets getting a boost from higher commodity prices.
   
Tokyo shares finished higher on technically-driven short-covering after yesterday's fall, amid broader expectations that Japan's economic fundamentals justify higher stock prices, dealers said.
   
Dealers also said that some investors overseas - notably investors in the Middle East who benefit from higher oil prices - have scooped up equities, and with bargain-hunters also at work.
   
But trading was still listless as the market awaited important economic events in the US, they added.
   
The blue-chip Nikkei 225 Stock Average ended 212.13 points or 1.3 pct higher at 16,181.17, after touching a high of 16,244.84. The broader TOPIX index of all first section issues added 17.56 points or 1.1 pct at 1,641.77, off a high of 1,644.70.
   
Australian shares ended higher as commodity and energy price rises overnight fuelled the market, dealers said. They added that sentiment was also boosted by takeover activity.
   
The S&P/ASX 200 closed up 12.6 points or 0.25 pct at 5,076.2, after trading between 5.068.9 and 5,085.0
   
Hong Kong shares were stronger in afternoon trade, on a technical rebound after a sharp drop yesterday on concerns over China's interest rate hike, dealers said.
   
But trade remained cautious following a downturn on Wall Street overnight and ahead of Cheung Kong and Hutchison's results announcements on Thursday, they said. At 3:26 pm the Hang Seng Index was up 118.71 points or 0.70 pct at 17,126.59.
   
In China, A-shares in Shanghai and Shenzhen closed higher on bargain-hunting and a rising yuan, with banks and metals stocks snapped up, dealers said.
   
The Shanghai A-share Index jumped 12.87 points or 0.76 pct to 1,696.03 and the Shenzhen A-share Index was up 4.35 points or 1.05 pct at 417.51.
   
Seoul shares ended higher on program buying, recovering more than their losses from yesterday's correction, with investors quickly getting over China's interest rate hike and shrugging off higher oil prices, dealers said.
   
The heavy program buying was triggered by foreign investors aggressively purchasing futures, fuelling a solid rebound in large-cap stocks, they added.
   
The KOSPI index closed up 13.29 points or 1.01 pct at 1,334.96, off a high of 1,336.11 and a low of 1,321.76.

Asian Bourse Round-Up

For a full list of closing figures, click here

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Oil prices held steady after Monday's gains, with a barrel of light, sweet crude quoted at $72.34, down 11 cents, in electronic premarket trading on the New York Mercantile Exchange. However, Iran's nuclear stance could still cause oil prices to fluctuate.

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