US & World Daily Markets Financial Briefing 25-07-2006

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NEW YORK - Stocks are pointing to a pause after Monday's rally, with traders awaiting figures on the health of the economy and a wave of earnings
from corporate giants.

In the opening minutes, the Dow Jones industrials dropped 16.49 points to 11,034.56, the Nasdaq eased .57 of a point to 2,061.27, and the S&P 500 inched up .06 of a point to 1,260.97.

On Monday, the Dow industrials surged 182 points, and the Nasdaq Composite and S&P 500 also climbed, helped by a wave of mergers-and-acquisitions activity, strong Merck and Schering-Plough results and Middle Eastern diplomacy.

September-dated oil futures, often a proxy for concerns on whether Israeli-Lebanese fighting will escalate into a broader Middle Eastern war, rose 44 cents to $75.49 a barrel.

The euro edged higher on the U.S. dollar after better-than-forecast French business confidence.

On the U.S. data calendar, June existing home sales and the Conference Board's July consumer confidence poll figures are due.

Depending on the degree to which they demonstrate a slowing economy - both figures are expected to show declines from the previous month - the data may re-ignite talk that the Federal Reserve won't raise interest rates at its next meeting.

Another busy earnings calendar includes results from chemicals giant DuPont, cigarette maker Altria and telecoms group AT&T.

McDonald's Corp. and 3M Co., both of which have recently provided guidance on how they'll do this quarter, also will report results.

Texas Instruments rose 5 percent in Frankfurt after reporting a four-fold improvement in quarterly profit and saying next quarter's earnings and sales could top analyst forecasts. STMicroelectronics, a European peer of TI's that will report its own quarterly results after the close, rose nearly 2 percent in Paris.

SanDisk is expected to jump after reporting a 37 percent profit improvement on demand for memory cards used in mobile phones. Netflix is expected to tumble after its third-quarter outlook wasn't as strong as the market expected. Oil giant BP reported a stronger-than-forecast 30 percent profit rise on surging oil prices and refinery operations.

Overseas, the Nikkei 225 surged 1.4 percent, helped by Monday's rise and stronger-than-forecast Nintendo results.

European stock markets edged upward, with the FTSE 100 up 0.3 percent in London.

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Forex - Dollar stays steady ahead of US consumer confidence, housing data

LONDON - The dollar remained steady against major currencies as market
players awaited the released of US consumer confidence and existing home sales
data later this afternoon.

Both sets of data are expected to come in on the weak side, confirming
market expectations that US interest rates are close to peaking.

"Slowing data will further increase uncertainty about the Fed's next meeting
on August 8," said Mansoor Mohi-uddin, currency analyst at UBS.

Though most in the market still expect that US rate-setters will implement
one more quarter point rate hike to 5.5 pct next month, they are much less sure
about it than they were following stronger-than-expected US core CPI data
earlier this month.

Key for the dollar will be where interest rates go after that, with an
increasing number believing that a slowing economy will mean rates peak at 5.5
pct.

Trading remained quiet, however, as the summer holidays got into full swing.

Tomorrow, attention will turn to the key Ifo survey of German business
confidence, which is expected to fall from its recent 15-year highs.

Yesterday's Belgian business confidence indicator -- often seen as a good
pointer to the Ifo index -- fell below expectations, while today Italian
business confidence also came in weak though French confidence strengthened.

Weaker confidence data, however, is unlikely to be sufficient to prevent the
European Central Bank from raising interest rates on Aug 3, particularly as
money supply and credit growth data on Friday are of greater importance to the
ECB, said Mitul Kotecha at CALYON.

"The (M3) data will be sufficiently strong to keep the pressure on the ECB
to hike rates in early August whilst a further hike at the end of the month
should not be ruled out," he said.

London 1330 GMT London 0913 GMT
      
US dollar
    yen 116.69 down from 116.74
    sfr 1.2454 up from 1.2452
   
Euro
    usd 1.2643 up from 1.2642
    stg 0.6831 down from 0.6833
    yen 147.51 down from 147.61
    sfr 1.5747 up from 1.5741
   
Sterling
    usd 1.8509 up from 1.8503
    yen 215.95 down from 216.03
    sfr 2.3051 up from 2.3040
   
Australian dollar
    usd 0.7555 unchanged
    stg 0.4081 down from 0.4084
    yen 88.13 down from 88.23

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The European Markets at 11.30 GMT

London - Leading shares pushed ahead at midday, encouraged by
expectations of further gains on Wall Street, while strength in Shire and BA and
a firmer tone to the mining sector also helped push the FTSE 100 to two-week
highs, dealers said.

By 12.20 pm, the FTSE 100 index was up 30.7 points at 5,864.6, while the
broader indices were also in demand.

Paris - Shares were slightly higher in midsession trade led by
auto-related stocks, as investors digested first-half corporate reports while
they waited for US consumer confidence and home sales data out later this
afternoon, dealers said.

At 1.24 pm, the main CAC-40 index was trading 31.88 points or 0.65 pct
higher at 4,948.19, on volume of 1.57 bln eur.

Amsterdam - Shares were slightly lower in early afternoon trade, with
TomTom a notable exception on the upside after reporting good second-quarter
results and reiterating its full-year outlook, dealers said.

At 1.22 pm, the AEX was down 0.39 point or 0.09 pct to 445.53, after
reaching an early high of 447.59 and off a low of 443.74.

FRANKFURT - Shares were lower in midafternoon trade as US stock
futures pointed to an uninspiring opening on Wall Street ahead of today's US
consumer confidence and existing home sales data, and as selected stocks fell on
profit-taking following yesterday's rally, dealers said.

At 3.01 pm, the DAX 30 index was 8.26 points or 0.15 pct lower at 5,569.79,
having moved between 5,548.95 and 5,599.25 so far this session.

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HONG KONG - Shares across the Asia-Pacific region ended sharply higher following the bounce on Wall Street overnight although many analysts are wondering if the momentum will last, dealers said.

Tokyo shares finished sharply higher, helping the benchmark Nikkei index breach 15,000 points for the first time in nearly two weeks, as investors took their cue from Wall Street's rally, dealers said.

The Nikkei 225 Stock Average closed up 210.74 points or 1.4 pct at 15,005.24, off a high of 15,078.36. This was the index's highest closing level since July 13, when it settled at 15,097.95.

The broader TOPIX index of all first-section issues rose 20.60 points or 1.4 pct to 1,534.82, off an intraday peak of 1,539.73.

"Share prices surged on the back of sharp gains in US markets overnight," said Kenichi Hirano, senior strategist at Tachibana Securities.

But analysts say the Nikkei 225 could struggle to sustain gains above 15,000 points, with momentum also hinging on the series of quarterly results due this week including those of heavyweights Sony and Matsushita Electric.

"Many investors are still taking a wait-and-see stance, awaiting quarterly results," said SMBC Friend Securities chief strategist Fumiyuki Nakanishi, noting that trading volumes are generally thin and could have exaggerated share price movements.

Australian share prices finished higher following Wall Street's lead and gains in oil and base metal prices, leading to buying of resources stocks, dealers aid.

They said major banking stocks climbed as a result of the turnaround in investor sentiment, but this could be short-lived ahead of tomorrow's release of consumer inflation data.

The indicator is expected to show a jump in both headline and core CPI for the June quarter which will strengthen the case for the Reserve Bank of Australia to hike its official cash rate 25 basis points next week to 6.00 pct, directly impacting on banks' earnings.

The S&P/ASX 200 advanced 58.0 points or 1.18 pct to close at 4,992.4.

The benchmark indicator closed off the day's high of 5,015.9 and above a low of 4,942.0.

Hong Kong shares were up in afternoon trade after Wall Street's gain boosted sentiment and prompted investors to add blue chips and select H-shares to their portfolios, dealers said.

HSBC led the gains on expectations that it will report strong first-half earnings next week, and this interest spilled over into other banking stocks, they said.

At 3.28 pm the Hang Seng Index was up 158.79 points or 0.96 pct at 16,639.38.

In mainland China, A-shares in Shanghai and Shenzhen closed higher thanks to the strength in the yuan with metal stocks, oil refiners and automakers snapped up, dealers said.

The Shanghai A-share Index added 20.46 points or 1.17 pct to 1,771.81 and the Shenzhen A-share Index was up 5.20 points or 1.16 pct at 452.0.

Seoul shares ended sharply higher, recouping much of the heavy losses made over the past two days, as Samsung Electronics and other blue chips advanced on massive program buying, dealers said.

Wall Street's overnight rally offset South Korea's weaker-than-expected second-quarter GDP data, they added.

The KOSPI index closed up 16.42 points or 1.3 pct at 1,279.77, off a high of 1,287.45 and a low of 1.276.59.

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Metals - Gold bounces off lows amid firmer oil, ongoing Mideast violence

LONDON - Gold prices were higher after strong support emerged yesterday when the metal tested lows around the 600 usd level, and as firmer oil and ongoing violence in the Middle East provided support.

At 1.24 pm, spot gold, which earlier hit a high of 623.80 usd an ounce, was quoted at 621.05 usd against 612.20 usd at the time of the COMEX market close in New York yesterday.

Other precious metals traded mixed. Spot silver edged up to 11.02 usd against 10.90 usd, platinum was down at 1,226.00 usd against 1,195.00 usd while palladium edged up to 313.50 usd against 308.00 usd.

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