US & World Daily Markets Financial Briefing 23-05-2006

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U.S. stocks open higher on strength in overseas markets

NEW YORK - U.S. stocks gained ground in early trading Tuesday, buoyed by gains in overseas markets and a rebound in oil and metals prices that boosted commodity-based shares.
   
The Dow Jones Industrial Average was up 61 points at 11,186. The Nasdaq Composite Index rose 23 points to 2,196 while the S&P 500 Index gained 9 points to 1,271.
   
"The overseas markets have calmed down a little and rallied. Emerging markets, which are the ones that are really tied to oil and metals have bounced after being pummeled for the last two weeks," said Paul Nolte, director of investments at Hinsdale Associates.
 
Stocks on the move
   
Toll Brothers Inc. rose 4.8% to $28.20. The luxury house builder reported quarterly earnings that exceeded Wall Street estimates, but cut its 2006 earnings outlook, citing increased material and labor costs and higher write-downs, mainly from continuing weakness in the metro Detroit market.
   
Shares of Nokia Corp. rose more than 3% after UBS analyst Maynard Um listed several "good reasons" to buy the Finnish mobile phone giant's stock. Um said Nokia's competitive position and fundamentals in the mobile device industry are improving, earnings expectations "are still too low," the company was returning
a significant amount of cash to shareholders and opportunities existed for more operating efficiency gains.
   
Fannie Mae was an early focus on a Wall Street Journal report that the mortgage giant has agreed to pay a $400 million fine to Federal regulators to settle allegations that it manipulated accounting rules in ways that helped increase bonuses for its executives.
   
Euronext , the pan-European stock exchange being courted by two rivals, urged its shareholders to support a takeover bid from the NYSE Group Inc. over one by Germany's Deutsche Boerse.

In a slide presentation prepared for the company's annual meeting today in Amsterdam, the company argued that the NYSE bid offers the best price, the greatest synergies and the most deliverable option. NYSE shares were up 0.9% at $63.40.

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Dollar mixed ahead of Bernanke's Senate testimony

NEW YORK - The dollar weakened against the yen, but traded modestly higher versus other major currencies early Tuesday ahead of Federal Reserve Chairman Ben Bernanke and Treasury Secretary John Snow's testimony on financial literacy at the Senate Banking Committee.
   
The yen saw gains after Bank of Japan Governor Toshihiko Fukui said the central bank will adopt a gradual course towards raising interest rates and following news that Standard & Poor's upgraded its outlook for Japan to positive from stable.
   
"A consolidative, but nervous tone is permeating the market today and attempts to extend yesterday's dollar sell-off have had limited success," said Marc Chandler, currency strategist at Brown Brothers Harriman, in a morning note.
   
In early New York trading, the euro was at $1.2834 from $1.2867 late Monday. The dollar was fetching 111.31 yen, compared with 111.46 yen. The British pound was quoted at $1.8813 from $1.8863. The dollar changed hands at 1.2094 Swiss francs from 1.2038 francs late Monday.
   
There's little economic data out Tuesday to lend direction to trading.
   
"With uncertainty continuing to prevail as to where the Fed will take interest rates next, volatility looks set to continue for the dollar in the medium term," said Stuart Scrase, a foreign-exchange trader at CMC Markets.
   
Yen up on S&P upgrade, rate outlook
   
The Bank of Japan "will slowly adjust interest rates while guarding against the risks of excessive monetary easing," Fukui said Monday in an interview with The Nihon Keizai Shimbun.
   
Fukui said that Japan's economy "has emerged from a protracted slump, but some areas are not healthy" and that the BOJ can't afford to "fall behind the curve," according to Nikkei Report.
   
The U.S. "remains an attractive capital market" and the growth potential of U.S. economy is "currently higher than that of Japan or Europe," Fukui said. "Factors such as differing potential economic growth will be reflected in the rate gap."
   
The yen advanced sharply after the news on heightened speculation the BOJ will start raising interest rates from zero in July.
   
Comments from Fukui "predicting an increase in domestic demand have underlined the fact that Japanese yields will be rising -- albeit slowly -- to manage inflation. This has provided some support for the yen," said CMC's Scrase, in a note.
   
The yen also received a boost after S & P upgraded its long-term sovereign ratings on Japan and noted improved economic prospects underpinned by "restructuring in the private sector," "turnaround in the banking sector" and "elimination of deflationary pressure."
   
"The news adds to widespread consensus that the country is well into its recovery after a long period of economic stagnation," said Boris Schlossberg, senior currency strategist at FXCM.

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The European Markets at 12.00 BST

London - UK blue chips held firm albeit off highs at midday, bouncing back from yesterday's five-month lows thanks to a rebound by mining issues and on expectations for a modest rally today on Wall Street, dealers said.
   
At 12.01 pm, the FTSE 100 index was 68.5 points higher at 5,601.2, having reached a peak of 5,621.5 in early morning deals.
   
All the broader FTSE indices also bounced back today, with the FTSE 250 index recapturing a big chunk of yesterday's 364 point decline, up 244.6 points to 9,073.2.
   
Volume was solid, with 1.423 bln shares changing hands in 216,368 deals.

Frankfurt - Shares were higher in midday trade, bouncing back from yesterday's slump, as bargain-hunters moved in and as US stock futures pointed to gains on Wall Street this afternoon, dealers said.
   
At 11.55 am, the DAX 30 index was 46.62 points or 0.84 pct higher at 5,592.86, having moved between 5,556.82 and 5,625.54 so far this session.
   
The MDAX was at 7,870.78, up 147.70 points or 1.91 pct, while the TecDAX was at 637.69, up 9.59 points or 1.53 pct.

Paris - Shares were higher as investors cautiously returned to the market to hunt for bargains from yesterday's late-session sell-off, dealers said.
   
At 12.40 pm, the CAC-40 index was 63.03 points or 1.32 pct higher at 4,877.09, having initially reached 4,904.93, on heavy volume of 2.61 bln eur. Of the CAC-40 stocks, 35 were lower and 5 were higher.

Amsterdam - Share prices were slightly higher in early afternoon trade, rebounding from recent sharp falls, with ASML outperforming after the chip equipment maker raised its second-quarter order book guidance, dealers said.
   
At 1.35 pm, the AEX index was up 7.55 points or 1.76 pct at 436.33.

Madrid - Share prices were off highs in brisk midday trading as main banks SCH and BBVA turned lower, while Arcelor and Repsol YPF led a broad market rebound, dealers said.
   
At 12.22 pm, the IBEX-35 index was up 78.7 points to 11,028.9, after trading in a range of 10,993-11,119, on heavy turnover of 2.061 bln eur.

Milan - Share prices were higher in midday trade, rebounding from yesterday's sell-off and led by Saipem, Tenaris and other oil sector shares, dealers said.
   
At 12.20 pm, the Mibtel index rose 0.52 pct to 27,117 and the S&P/Mib was up 0.38 pct at 35,399, while volumes stood at 2.4 bln eur.

Stockholm - Shares remained in positive territory across the board in midday trade, marginally extending morning gains, with oil and mining leading the market higher after slumping yesterday, dealers said.
   
At 12.10 pm, the OMX Stockholm index was up 2.70 pct at 298.45, while the OMX Stockholm 30 index was up 2.61 pct at 929.93. Turnover was 15.77 bln skr.

Helsinki - Helsinki shares were up across the board in afternoon trade on bargain-hunting and a string of broker upgrades following yesterday's sell-off, though were off a touch from midmorning highs, dealers said.
   
At 1.35 pm, the OMX Helsinki 25 was 2.45 pct higher at 2,386.90, while the OMX Helsinki was up 2.37 pct at 8,531.57.

Zurich - Share prices were higher on a rebound helped by Wall Street's overnight gains, although trading volumes were still small reflecting a dearth of market moving news, dealers said.
   
At 11.22 am, the Swiss Market Index was 39.86 points higher at 7,470.07, and the Swiss Performance Index up 32.64 points at 5,811.22.

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Asian shares close mostly weaker as global stock markets slump

HONG KONG - Share prices across the Asia Pacific region ended mostly lower on the continued weakness in major markets, dealers said.
   
Tokyo's Nikkei 225 index ended at a three-month low, as a slump in global equities, sparked by US interest rate fears, continued to weigh on investor sentiment, they added.
   
Markets around the world have been spooked by concerns that higher US interest rates will dampen the US economy.
   
These fears have sent hedge funds and institutional investors around the world scrambling to cut equities holdings.
   
Japanese dealers noted the selling has been led by foreigners whose sell orders tripled in the morning.
   
The heavy selling overwhelmed upbeat news such as Standard & Poor's upgrade of its outlook on Japan's long-term sovereign rating to positive from stable and last week's release of stronger-than-expected first quarter GDP data.
   
The blue-chip Nikkei 225 Stock Average closed down 258.67 points or 1.6 pct at 15,599.20, above a low of 15,582.86. It was the index's weakest close since Feb 20 when it settled at 15,437.93
   
The broader TOPIX index of all first-section issues closed down 36.60 points or 2.3 pct at 1,579.26, its low of the day.
   
Australian share prices finished in negative territory with investor sentiment yet to recover from the commodities-led sell-off which began on May 12, dealers said.
   
The S&P/ASX 200 fell 17.0 points or 0.34 pct to close at 5,013.8, well off the May 11 record high of 5,364.5 prior to the sell-off in commodity markets.
   
The S&P/ASX 200 closed above a low for the day of 5,003.3 and below the day's high of 5,038.6.
   
Hong Kong share prices recovered slightly, with a rebound in commodity stocks helping the market recoup early losses, dealers said.
   
They said bargain-hunting and short-covering activity provided support but the overall mood was still cautious following yesterday's sell-off.
   
At 3.31 pm the Hang Seng Index was trading up 17.15 points, or 0.11 pct, at 15,822.67.
   
In mainland China, A-shares in Shanghai and Shenzhen closed broadly lower on profit-taking and weakness in global markets, with real estate developers and steelmakers leading the declines, dealers said.
   
The Shanghai A-share Index lost 55.76 points to 1,685.48 on turnover of 38.67 bln yuan and the Shenzhen A-share Index was down 17.16 points at 413.60 on turnover of 21.61 bln yuan.
   
Seoul share prices ended lower, falling for a second trading session, with banks, steelmakers and retailers losing ground, dealers said.
   
The market managed to close above its lows for the day on intensified program buying, sparked by foreign investor interest in futures.
   
Program buying amounted to 537.4 bln won.
   
The KOSPI index closed down 8.73 points or 0.65 pct at 1,329.86.

Asian Bourse Round-Up

For a full list of closing figures, click here

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Gold futures rise more than $10 in morning trading

SAN FRANCISCO -- June gold climbed $10.30 to $668 an ounce in morning trading. "The combination of physical buying and a calmer currency market gave gold its best chance at another positive day in more than one week," said Jon Nadler, an investment products analyst at bullion dealers Kitco.com.

July silver was up 60 cents, or 4.8%, at $13.03 an ounce and July tacked on 20 cents, or 5.8%, to stand at $3.6615 a pound.

Crude-oil futures rallied to their highest level in a week, with a forecast of an active 2006 hurricane season acting as a tailwind. Crude for July delivery was last up 92 cents at $70.88 a barrel in electronic trading. The price reached a high of $70.96 earlier in the session, the highest price seen since May 16.
   
Long-term Treasury prices fell, sending yields higher. A rebound in commodity prices and the likelihood of a higher open for the stock market was siphoning funds out of the fixed-income market.

The benchmark 10-year note was down 7/32 at 100 14/32, with its yield at 5.07%.

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