US & World Daily Markets Financial Briefing 26-03-2007

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Stocks slip on disappointing data

NEW YORK  - Wall Street slid Monday after an unexpected drop in new home sales for February triggered further concern that economic growth is slowing more than expected.
   
The Commerce Department reported Monday that sales of new single-family homes fell by 3.9 percent last month to a seasonally adjusted annual rate of 848,000. It was the slowest sales pace in nearly seven years and dimmed hopes for a rebound in the troubled housing market.
   
Economists have been watching the housing industry for a hint about where the economy is heading. The disappointing data also comes amid continued concern about the subprime mortgage market, which has been slammed by an increase in delinquencies in recent months.
   
The data took a chunk out of last week's 370 point gain on the Dow Jones industrial average, its best performance in four years. The benchmark index fell 49.03, or 0.39 percent, to 12,431.98.
   
Broader stock indicators also sank. The Standard & Poor's 500 index was down 4.68, or 0.33, at 1,431.43, and the Nasdaq composite index dropped 6.35, or 0.26, at 2,442.58.

In intraday trading, Britain's FTSE 100 rose 0.17 percent, Germany's DAX index rose 0.03 percent, and France's CAC-40 fell 0.18 percent.

Stocks in focus

In corporate news, Citigroup Inc. would lay off 15,000 workers and book a $1 billion restructuring charge under a proposed plan to cut costs, The Wall Street Journal reported Monday. The plan to reduce Citigroup's 327,000-person work force by 5 percent comes as revenue grew 7 percent last year while expenses jumped 15 percent.
   
A Goldman Sachs analyst said Dell Inc. should see benefits from its turnaround efforts later this year.
   
Fiscal fourth-quarter profits at Tiffany & Co. remained essentially flat as the luxury jewelry retailer recorded an impairment charge. Revenue, however, rose 15 percent to $986.4 million. Results came in ahead of Wall Street's expectations.
   
Kimberly-Clark Corp., the maker of consumer brands like Kleenex and Huggies, on Monday said it still expects to meet its full-year profit target.
   
Saudi Basic Industries Corp. is planning a bid worth up to $12 billion for General Electric Co.'s plastics unit, the Financial Times reported Monday.

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Dollar weakens after weak US new home sales data

LONDON - The dollar weakened after US new homes sales dropped to their lowest level in almost seven years during February.
   
Sales of new homes fell by 3.9 pct in February to a seasonally adjusted annual rate of 848,000 units, the lowest level since June 2000, according to figures from the US Commerce Department.
   
The department said new home sales fell a revised 15.8 pct to 882,000 units in January, the sharpest one month decline since January 1994, when sales plunged 23.8 pct.
   
The data contrasts news on Friday that US existing home sales in February were up 3.9 pct.
   
"What's happening now is the market is realising the US housing market isn't so rosy. In order to analyse what's happened you have to look at existing home sales and new sales data together, so we're now seeing a reverse of the gains made after the release of Friday's data," said Steve Pearson, currency strategist at HBOS.
  
Economists expected sales to rebound in February to about 995,000 units.
   
The dollar weakened against on major currencies, pushing the euro up to 1.3331 usd from 1.3292 just before the data was released.   

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Top Stories in Europe at 11.05 GMT

London - Taylor Woodrow PLC and George Wimpey PLC's nil-premium merger announced today will see a new 5 bln stg super-housebuilder in the UK, operating in 34 different regions. Current Wimpey chief executive Peter Redfern, who will lead the new Taylor Wimpey, said the merged company would chase much higher operating margins, in the region of 18 pct, and amend its structure so it was selling the right volume of homes in the right areas.

UK brewer and pub operator Greene King PLC said it is reorganising its managed house operations into two divisions to reflect the different trading styles. The company said the two new divisions will be called Destination Pubs and Local Pubs.

Westbury Property Fund Ltd said its Westlink Holdings Ltd and Westlink Group Ltd units have bought AHC Warehousing Ltd and fixed assets for 33.5 mln stg. This price includes AHC's associated companies together with 100 acres of land and buildings from which AHC operates.

Madrid - Acciona SA and Enel SpA are to make a joint cash offer for Endesa SA of 41 eur per share, El Pais reported on its website, citing unnamed sources. The news comes shortly after EON AG said it raised its offer for the Spanish utility to 40 eur per share from 38.75 eur previously.

Frankfurt - Porsche AG said it exercised an option to acquire a 3.6 pct stake in Volkswagen AG and expects its total stake in Europe's biggest carmaker to increase to 30.9 pct by March 28 once the option deal is completed. Porsche announced on Saturday that it intends to increase its stake in VW to up to 31 pct, above the 30 pct threshold which would trigger a mandatory offer for VW, in a move to thwart any hostile bids for VW.

Bayer AG unit Bayer Schering Pharma AG said it bought from Novartis AG a biologics plant in the US currently used to make multiple sclerosis drug Betaseron, in a deal worth around 110 mln usd. Under the deal, Bayer will stop paying Novartis current royalties on Betaseron (interferon beta-lb) from October 2008.

Milan - Unicredito Italiano SpA said it has set, along with Bank Austria Creditanstalt AG's management board, a price of 129.4 eur per share to buy out minorities in the Austrian bank. The Italian bank plans to buy an outstanding 3.65 pct stake in Bank Austria for about 950 mln eur in cash.

Madrid - Altadis SA has been approached by at least three private equity firms after it rejected the around 11.5 bln eur offer by Imperial Tobacco PLC, The Financial Times reported, without citing sources. CVC Capital and Cinven have both expressed interest in the Franco-Spanish tobacco group, the newspaper said, without revealing the name of the third firm.

Telefonica SA still holds a buyback fund of 1.540 bln eur to complete its renewed share buyback commitment for 2006-2007, Cinco Dias reported, citing a document to investors. The telecoms giant has spent some 1.160 bln eur to date, much less than expected, in completing close to 43 pct of the buyback programme, the newspaper said.

Bankinter SA said that Mapfre SA's life insurance unit will acquire 50 pct of the bank's own life insurance unit for 197.2 mln eur. Bankinter said the Mapfre Vida unit will pay two additional payments of up to 20 mln eur each on the fifth and 10th year of the agreement, "depending on how the business plan is going."

Amsterdam - ABN Amro Holdings NV may be taken to court by The Children's Investment Fund (TCI) -- which holds about 1 pct of its shares -- if the Dutch bank does not look at other possible merger or takeover offers, Het Financieele Dagblad reported.
 
TCI could ask a Dutch Enterprise Court to start an investigation into the policy making-process at ABN Amro if TCI finds out that the Dutch bank never seriously looked at other merger or takeover bids.

Publishing group Wolters Kluwer NV said it will sell its Education division to UK investment fund Bridgepoint Capital for 774 mln eur. The sale is expected to be closed in June and Wolters Kluwer will use 475 mln eur to finance a share buyback, while using the rest of the proceeds to reduce debt and invest in the company.

Lisbon - Banco Comercial Portugues submitted an updated version of its 5.7 eur per share bid for Banco BPI with stock market regulator CMVM, including a pledge to raise the offer to 5.86 eur if BPI's 0.16 eur per share 2006 dividend is not paid before the offer period concludes.
 
In a statement with stockmarket regulator CMVM on Friday, BCP said it is still entitled to revise its offer up to ten days before the end of the offer period, which initially runs for 25 days.

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Asian shares close higher on Wall St, US housing figures

HONG KONG - Shares across the Asia-Pacific region closed higher on Wall Street's gains on Friday after the release of positive housing data in the US, although trade was rangebound in some markets as investors sought more leads.
   
Tokyo shares closed little changed after a lackluster session during which most investors stayed on the sidelines, awaiting the release of important economic data here and in the US. Investors were cautious about pushing share prices any higher after the benchmark index closed in positive territory after four straight sessions until Friday of last week.
   
The blue-chip Nikkei 225 Stock Average closed 41.35 points or 0.24 pct higher at 17,521.96, off a high of 17,558.04. The TOPIX index of all first-section issues was down 0.57 point at 1,741.37, off a low of 1,732.07.
   
A trader at a European asset management firm said: "The Nikkei has now recovered half of the loss it incurred during a tumble from the February 26 high of 18,300 to the March 5 low of 16,532, and investors are looking for convincing signs that the market is heading for a sustainable advance."
   
The trader said he expected investors to stay focused on corporate earnings announcements, which begin in the middle of next month, if the results of the Bank of Japan's latest quarterly Tankan survey of business sentiment, due out next week, failed to give them new leads.
   
Australian shares ended higher with investor sentiment buoyed by Wall Street's gains on the housing data, dealers said. Local stocks were also boosted by M&A activity and a rise in leading miners.
   
The S&P/ASX 200 closed up 38.4 points or 0.65 pct at 5,990.7 after trading between 5,992.0 and 5,957.9.
   
Hong Hong shares were stronger in afternoon trade on buying activity linked to the expiry of March futures contracts later this week. Wall Street's significant gains last week supported sentiment, while property stocks were lifted by news of strong apartment sales over the weekend. At 3.25 pm the Hang Seng Index was up 21.47 points or 0.11 pct at 19,714.11.
   
In mainland China, A-shares in Shanghai and Shenzhen closed broadly higher on continued money inflows with telecom issues, tourism stocks and automakers leading the gains. The Shanghai A-share Index was up 51.17 points or 1.58 pct at 3,281.44 and the Shenzhen A-share Index was up 17.63 points or 2.07 pct at 870.79, a new record.
   
Seoul shares finished slightly higher, with investors waiting for key economic data due both at home and abroad this week and the corporate earnings season starting next week.
   
Initial sentiment was lifted by easing concerns over a US housing market slump after a surprise surge in home sales but the market soon lost direction and traded amid a lack of fresh momentum. The KOSPI index closed up 2.39 points or 0.17 pct at 1,449.77, off a low of 1,444.25 and a high of 1,455.51.

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Gold edges higher on strength in crude price, copper up

At 11.11 BST, gold was trading at 658.75 usd per ounce, up slightly from 656.80 usd in late New York trade on Friday.
   
Analysts said the precious metal took support from gains in crude oil prices, which moved higher on escalating tensions in the oil rich Middle East.
   
Gold benefits from high oil prices as the metal is seen as as a hedge against oil-led inflation. The metal is also seen as a safe haven asset or store of value, so it usually trends higher on geo-political tensions.
   
"This (gain in oil) is probably the biggest supporting factor for the gold price. If we had seen oil moving below 60 usd a barrel I doubt we'd be seeing gold above 650 usd," said Leon Esterhuisen at Investec Securities.
   
Gold saw a brief spike Friday on the news Iran had captured fifteen British Royal Navy personnel in the Persian Gulf, although gains were capped by a firm US dollar and fund selling.
   
Continuing tensions in the region are seen supporting gold prices going forward. The United Nations voted this weekend to impose new sanctions against Iran over its continued refusal to suspend its nuclear enrichment programme.
   
"Players will be keeping a very close eye on the current situation between the UK and Iran, with signs of a breakdown in talks or an escalation in the current impasse potentially leading the metal to higher levels," said The BullionDesk.com analyst James Moore.
   
Looking ahead, analysts are also focusing on this week's economic data and its potential influence on the dollar, with US new home sales data due out later today.
   
Analysts said while a resurgence in the dollar late last week and profit- taking after last week's gains could impact negatively on gold sentiment in the short-term, longer term the metal is still seen trending higher.
   
Among other metals, platinum firmed slightly to 1,231 usd against 1,228 usd in late New York trade Friday, while palladium stood at 360 usd, up from 352 usd. Silver edged up to 13.20 usd against 13.13 usd in late trades Friday.

At 11.07 BST, LME copper for 3 month delivery was up at 6,780 usd a tonne against 6,720 usd at the close yesterday.
   
"We remain friendly to the copper market short-term and note that while uptrends in other metals ... are looking vulnerable, the correction in copper on Friday was off a 3 month high and is likely indicative of a market pausing rather than turning lower," said JP Morgan analyst Michael Jansen.
   
Copper closed flat on Friday although the metal posted gains of nearly 2 pct on the week, underpinned by declining LME stocks and data out from China showing copper imports in February nearly doubled from a year ago.
   
Jansen noted the past 2 weeks have seen the LME's available or on-warrant copper stocks decline for 4 out of 5 trading sessions, leaving available stocks at under 170,000 tonnes or less than one week's consumption.
   
The trend to falling stocks has continued today, underpinning copper. The LME said in a daily report copper stocks in its warehouses declined by 2,100 tonnes to 181,550 tonnes, leaving only 167,550 tonnes available to the market.
   
Numis said strong Chinese imports, firm global GDP growth, a recovery in US housing starts and a more neutral Fed monetary policy have led it to raise its 2007 forecasts for copper, as well as for aluminium and nickel.
   
Nickel was up at 42,800 usd a tonne against 42,200 usd, recovering from a near 11.5 pct decline last week that erased the previous week's rally to an all time high of 48,500 usd a tonne.
      
Aluminium was down at 2,755 usd a tonne against 2,763 usd amid yet another build in LME inventories. Lead was down at 1,898 usd a tonne against 1,900 usd, tin was up at 14,400 usd against 14,325 usd while zinc was down at 3,230 usd against 3,115 usd.

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