US & World Daily Markets Financial Briefing 22-09-2006

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Stocks fall amid pessimism about economy

NEW YORK - Stocks fell for a second straight session Friday amid continued pessimism about the health of the economy. Wall Street was caught off guard Thursday by a report from the Federal Reserve Bank of Philadelphia that showed regional manufacturing activity fell to a negative reading for the first time since April 2003.
   
Prior to the report, the Dow Jones industrial average had been within 100 points of its January 2000 high of 11,722.98. In the first hour of trading, the Dow was down 13.77, or 0.12 percent, to 11,519.46, having dropped nearly 80 points on Thursday.
  
Broader stock indicators also fell. The Standard & Poor's 500 index was down 2.57, or 0.19 percent, at 1,315.46 and the Nasdaq composite index fell 10.58, or 0.47 percent, to 2,227.17. Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.62 percent from 4.64 percent late Thursday.
   
Oil was up 26 cents at $61.85 a barrel in pre-opening trading on the New York Mercantile Exchange after falling earlier in the week following a report showing a jump in U.S. distillate supplies.
  
Stocks in focus

In corporate news, medical device maker Boston Scientific Corp. fell $1.82, or 11 percent, to $14.54 after announcing third-quarter results wouldn't meet Wall Street's expectations.
   
Tribune Co.'s board, under pressure from shareholders to boost the company's stock, is indicating it would consider selling, breaking up or taking private the company. The owner of the Los Angeles Times and Chicago Tribune, among other properties, said it plans to undertake substantial changes by the end of the year. Tribune rose $1.44, or 4.5 percent, to $33.49.
   
Palm Inc., the maker of handheld communications devices, said its first-quarter profit fell 9 percent amid increased competition and stock-option expenses. The stock rose 63 cents, or 4.3 percent, to $15.13 as investors were encouraged by the company's growth plan.
   
Detroit's troubles continued, as auto-parts supplier BorgWarner Inc. announced plans to cut about 850 jobs, or 13 percent of its North American work force, because of lower auto production. BorgWarner was off $2.49, or 4.6 percent, at $52.
   
Companies also announced plans to buy back stock. Texas Instruments Inc., the chip maker, rose 50 cents to $31.97 after its board approved a plan to repurchase an additional $5 billion of its stock. Likewise, Halliburton Co. rose 20 cents to $28.30 after the company increased its share-repurchase program by $2 billion. The oil-services contractor said a $1 billion plan was nearly complete.
   
The Russell 2000 index of smaller companies was down 4.17, or 0.57 percent, to 722.96.

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Dollar steadies against euro after falling to 16-day lows

LONDON - The dollar was steady against the euro after earlier falling to 16-day lows as yesterday's very poor Philly Fed survey out of the US cemented market expectations that the next interest rate move will be down.
 
With no US data scheduled this afternoon, however, activity is likely to tail off going into the weekend as market players look ahead to next week's releases, including Chicago PMI, durable goods orders, and housing and confidence data.
     
The euro earlier hit a 16-day high against the dollar of 1.2834 as the weak Philly Fed survey -- showing a contraction in activity for the first time since the spring of 2003 -- sparked talk of the housing market slowdown spreading to other areas of the US economy.
   
"The sharp decline in the Philadelphia Fed's survey of manufacturing conditions in its region has raised the spectre that weakness in the US housing market may already be beginning to weigh on the broader economy," said HBOS currency analyst Steve Pearson.
   
He said markets are now not pricing in even a residual possibility of a US rate hike priced, rather a 28 pct of a rate cut by the end of January and a 54 pct probability that rates will be cut twice over 2007.
   
Elsewhere, the yen gained after the Chinese yuan closed at its highest level yet against the dollar, while the pound pared some of its earlier gains on profit-taking.

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The European Markets at 11.30 GMT

London - Shares remained sharply lower at midday, with SABMiller among the main casualties after weak US beer volumes, while Wall Street is expected to open flat amid an empty economic data calendar.
   
At 11.59 am, the FTSE 100 index was 49.0 points adrift at 5,848.7, but off the midmorning low of 5,825.1, with the broader indices also marked down. Volume was below average, with 840.1 mln shares changing hands in 124,799 deals.

Paris - Shares remained lower at midday as fresh concerns about US and Japanese economic growth and an upturn in world oil prices dominated the sentiment amid a fairly light flow of French company news.
   
At 12.25 pm, the CAC 40 index was down 46.45 points or 0.89 pct at 5,161.87. There were 37 stocks down, two up and one unchanged. The SBF 80 index was down 29.96 points or 0.51 pct at 5,863.00, and the SBF 120 was down 31.92 points or 0.85 pct at 3,734.52.
   
Alstom was down 1.90 eur or 2.55 pct at 72.65. Renault was down 1.40 eur or 1.55 pct at 88.70 and Peugeot was down 0.53 eur or 1.23 pct at 42.67. Michelin was down 1.25 eur or 2.21 pct to 55.35.

Frankfurt - Shares were lower in midday trade following losses on Wall Street overnight and as oil prices rose from recent lows, while Altana gained on yesterday's news of the sale of its pharmaceutical operations for 4.5 bln eur.
At 1.51 pm, the DAX 30 index was 52.88 points or 0.89 pct lower at 5,909.15, having moved between 5,889.15 and 5,930.30 so far this session.

Amsterdam - Shares prices were down in midday trade, led by KPN and technology stocks, as US futures pointed to a negative Wall Street open. At 12.21 pm, the AEX was down 3.22 points or 0.67 pct to 474.84, after opening at 474.69 and reaching a low of 473.65. KPN was down 1.69 pct to 9.87.
   
Philips was up 0.04 pct to 27.45 amid rumours that it may sell its 32.9 pct stake in LG Philips to Sharp.

Madrid - Share prices were lower midday on profit taking, and were tracking negative US futures amid renewed concerns of a slowdown in the US economy, with blue chips lower, while Ferrovial outperformed.
   
At 12.45 pm, the IBEX 35 index shed 55.5 points to 12,401.3, after trading in a range of 12,394-12,444, on moderate turnover of 1.2 bln eur. The main blue chips were on offer, with Telefonica slipping 0.15 eur to 13.20, BBVA falling 0.19 to 17.95 and SCH dropping 0.14 to 12.35.

Milan - Share prices were lower in early afternoon trade, tracking overnight losses on Wall Street on concerns over economic growth, and with Pirelli and Telecom Italia leading the decline. At 1.49 pm, the Mibtel index fell 0.46 pct to 29,075 points and the S&P/Mib was off 0.46 pct at 38,068.

Stockholm - Shares were sharply lower in midday trade, although off lows, on profit taking amid concerns over the sustainability of the market's rally since July.
   
At 12.40 pm, the OMX Stockholm index was down 0.95 pct at 332.59, and the
OMX Stockholm 30 down 0.99 pct at 1,030.74. Ericsson B was down 0.79 pct at 25.10 skr bid and Nokia down 0.71 pct at 140.

Helsinki -  Shares were lower in early afternoon trade led down by Nokia amid profit-taking after recent gains.
   
At 1.05 pm, the OMX Helsinki 25 was 1.19 pct lower at 2,539.36 points and the OMX Helsinki was down 0.89 pct to 8,625.88 points, on 270 mln eur turnover. The HEX Tech was down 1.20 pct at 1,059.64 points. Nokia was down 0.79 pct at 15.11 eur.

Athens - Shares continued lower in late afternoon trade, led down by refiners, and tracking losses on the international market, as profit-taking set in after yesterday's solid gains. At 2.20 pm, the ASE general index was down 1 pct to 3,914.4 with decliners outnumbering advancers by 158 to 72. The blue chip index was down 1 pct at 2,139.4. Mid caps were 0.5 pct lower at 4,259.7 and small caps were 0.6 pct lower at 784.3.
   
Refiner Hellenic Petroleum was down 2.1 pct to 9.98 eur and peer Motor Oil was down 1.5 pct to 20.08 eur, after both were downgraded by Morgan Stanley.

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Asian shares close lower on fears of US economic slowdown

HONG KONG - Shares across the Asia-Pacific region closed lower on fears that the US economy is slowing too quickly.
   
Tokyo shares ended broadly lower on revived concern about the pace of the US economic slowdown after the announcement overnight that the Philadelphia Federal Reserve's index of US manufacturing activity was minus 0.4 this month, the first negative reading since April 2003.
   
The blue-chip Nikkei 225 Stock Average closed 199.56 points or 1.26 pct lower at 15,634.67 -- its lowest closing level since Aug 11. Over the week, the index fell 1.5 pct.
   
The broader TOPIX index of all first-section issues closed 16.48 points or 1.04 pct lower at 1,563.60 -- its lowest closing level since Aug 8. Over the week, the index lost 1.9 pct.
   
Japanese investors were also discouraged by the results of their government's quarterly survey of business sentiment, which the market took to mean that corporate activity is peaking, dealers said. The business sentiment index, which is derived from the survey, rallied to 10.5 in the July-September quarter from 1.8 in the previous quarter, but the respondents forecast that it would decline to 7.9 in the January-March quarter.
   
Australian shares ended lower as selling of bank shares outweighed bargain hunting in resource stocks following the overnight jump in metal prices.
   
The S&P/ASX 200 shed 12.7 points or 0.25 pct to close at 4,983.2, above the day's low of 4,964.2 and below a high of 4,994.3. Over the trading week the key index lost 53.2 points or 1.06 pct.
   
Hong Kong shares were weaker in afternoon trade on the US manufacturing data and concerns about the impact of a US economic slowdown on Asian trading partners such as China and Japan, dealers said.
   
At 3.27 pm the Hang Seng Index was down 19.39 points or 0.11 pct at 17,600.58.
   
In mainland China, A-shares in Shanghai and Shenzhen closed lower on profit-taking ahead of the one week National Day holiday in October, with airlines and steel makers under pressure, dealers said.
   
The Shanghai A-share Index fell 16.72 points or 0.91 pct to 1,812.69 and the Shenzhen A-share Index was down 3.32 points or 0.74 pct at 446.55.
   
Seoul shares closed sharply lower on heavy foreign investor selling, with sentiment undermined by Wall Street's overnight pullback following downbeat economic data, dealers said.
   
Samsung Electronics and other major IT stocks and exporters tumbled, extending heavy losses for a second day due to fears their sales may be hurt by the won's recent sharp appreciation.
   
The KOSPI index closed down 18.41 points or 1.35 pct at 1,348.38, after moving between 1,343.27 and 1,360.18. The main board index ended the week with a loss of 12.72 points.

Asian Bourse Round-Up

For a full list of closing figures, click here

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Gold rises for 3rd day but analysts warn mkt sentiment still weak

Gold prices rose for a third day, benefiting from the modest correction in oil and declines in the US dollar, but analysts warned overall sentiment remains weak and should limit gains going forward.
   
"Despite the latest recovery, the environment for gold does not look bullish. The support from a weakening dollar for gold seems to be limited," said Dresdner Kleinwort analyst David Holmes.
   
He added fundamentals are pointing to a "faster than expected slowdown of the US economy", which does not bode well for bullion as it implies a further decline in oil prices.
    
At 12.01 pm, spot gold, which earlier hit a high of 592.25 usd, was quoted at 591.75 usd, up from 582.70 usd at the time of the COMEX market close in New York yesterday.
   
Other precious metals were also up. Spot silver was at 11.30 usd against 11.14 usd, platinum was at 1,151.50 usd against 1,136.00 usd, while palladium was at 317.50 usd against 306.00 usd.
   
Gold has lost about 20 pct of its value since touching 730 usd in May -- the highest level in a quarter of a century -- on concerns about geopolitical tensions and inflation.

Copper gains on declining stocks but US slowdown fears still pose risk

Copper prices rose as the market found support from declining stocks and from gains in oil and gold, but analysts warned the red metal could run into selling pressure again next week if US data continues to point to decelerating growth.
   
At 12.53 pm, LME copper for three-month delivery edged up to 7,640.00 usd against 7,560.00 usd at the close yesterday. Other metals were also higher.   

Zinc climbed to 3,465.00 usd against 3,445.00 usd, nickel rose to 27,800.00 usd against 27,400.00 usd, lead edged up to 1,390.00 usd against 1,378.00.
   
Aluminium and tin bucked the trend, however. Aluminium fell to 2,532.50 usd against 2,555.00 while tin was flat at 8,975.00 usd.

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