US & World Daily Markets Financial Briefing 26-09-2006

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Stock prices mixed in early trading

NEW YORK - Stocks showed little movement early Tuesday as investors chewed on further evidence of weakness in the housing sector a day after Wall Street rallied on enthusiasm about the overall health of the economy. In early trading, the Dow Jones industrial average rose 8.65, or 0.07 percent, to 11,584.46.
   
Broader stock indicators were down. The Standard & Poor's 500 index was down 0.73, or 0.06 percent, and the Nasdaq composite index fell 3.55, or 0.16 percent, to 2,245.52.
   
On Monday, comments from Dallas Federal Reserve President Richard Fisher buoyed investor sentiment with comments that inflation will likely remain in check and that the U.S. economy, with the exception of the housing and automotive sectors, is performing "extremely well." As if to prove his point, a home-improvement retailer and a homebuilder later said they have struggled with cooling businesses.
      
Investors concerned about a weakening housing market received disappointing news from two companies. Lowe's Cos. reduced its full-year profit forecast, warning that a slowdown in the sector was hurting sales of its home improvement products.

Lennar Corp. said its third-quarter profit fell 39 percent amid sluggishness in the sector and the company, one of the country's biggest homebuilders, trimmed its fourth-quarter forecast.
   
In the technology arena, PMC-Sierra Inc., a maker of communications and storage chips, fell after cutting its third-quarter sales forecast to $114 million to $116 million from $122 million to $124 million.

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Euro continues lower as investors rethink ECB rate hike prospects

LONDON - The euro continued to drift lower amid a scaling-back in European Central Bank rate hike expectations, offsetting a fleeting rise after stronger-than-expected German data.
   
Jamie Coleman at Thomson IFR Markets said the euro has been on the defensive as dealers questioned whether the ECB will be able to match its hawkish rhetoric with as much tightening as the market has priced in.
   
Most analysts predict only two more rate hikes in the 12-nation single currency area, taking the benchmark refi rate to 3.50 pct from 3.00 pct at present. Previously there had been talk that the base rate will go up as high at 4.00 pct.
     
The single currency got a modest boost early on when the key German Ifo business climate index eased only a touch, to 104.9 in September from 105 in August. AFX News had predicted a steeper fall to 104.3. The headline index has been easing since it hit a 15-year high of 106.8 in June.
      
At the same time, talk that Germany has been trying to dissuade the Chinese from diversifying its foreign exchange reserves into euros, also weighed on the single currency.
   
Looking ahead, the dollar faces a minor test when the Conference Board's consumer confidence index is released. The headline index is seen rebounding to 104 in September from August's 99.6. Falling energy prices have given extra cash to consumers, but the index is still expected to remain below the average level of the first half of the year.
   
Markets will also be keeping a wary eye on US Treasury Secretary Henry Paulson's meeting with Charles Schumer and Lindsey Graham, the key sponsors of legislation that would impose penalty tariffs of 27.5 pct on all Chinese products coming into the US unless China goes further to revalue its currency.
   
The pound held steady despite a survey showing that wage deals in the UK remain at subdued levels. Markets are holding steady to predictions that the Bank of England will put up interest rates again in November, to 5.00 pct from 4.75 pct. The central bank hiked the benchmark rate by quarter of a point to 4.75 pct in August.

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The European Markets at 11.30 GMT

London - Leading shares remained higher at midday, lifted by recovering commodity stocks, while Hanson remained in demand as bid talk intensified.
   
By 12.10 pm, the FTSE 100 was 41.3 points firmer at 5,839.6, just off session highs, while the broader indices were also firmer.

Frankfurt - German shares were higher early afternoon, led by Linde and ThyssenKrupp on positive broker comments that supported the share prices of both companies. At 1.30 pm, the DAX30 was up 47.22 points or 0.80 pct at 5,948.88.

Paris - Share prices were higher in midday trade after overnight gains on Wall Street and as investors took heart from a better-than-expected September IFO business climate reading in Germany. At 1.31 pm the CAC-40 index was up 62.24 or 1.21 pct at 5,208.73.

Amsterdam - Shares in Amsterdam were broadly up at midday, aided by US futures pointing to a higher opening of Wall Street, while Crucell benefited from a flurry of news related to some of its mainstay products. At 12.11 pm, the AEX was up 3.37 points or 0.71 pct to 477.19, after trading in a range of 475.85-477.92.

Madrid - Share prices were higher midday after strong gains on Wall Street, with blue chips higher across the board, fuelled by M&A talk after Acciona acquired a 10 pct stake in Endesa, currently the target of two competing bids.
   
At 12.30 pm, the IBEX-35 index gained 60.1 points to 12,449.5, after trading in a range of 12,421-12,485, on moderate turnover of 940 mln eur.

Milan - Share prices were higher at midday, boosted by Wall Street's overnight gains, with oil stocks among the leaders on a flatter oil price trend, and STMicro on chip sector news, brokers said.
   
At 12.25 pm, the Mibtel was up 0.66 pct to 29,092 points and the S&P/Mib up 0.64 pct at 38,124.

Stockholm - Shares were little changed in midday trade, as light bargain-hunting throughout the telecom and engineering sectors was offset by weakness among the banks, and by a sharp fall for Scania. At 12.35 pm, the OMX Stockholm index was up 0.07 pct at 329.42, and the OMX Stockholm 30 up 0.60 pct at 1,023.48.

Helsinki - Helsinki shares were higher in midday trade in a rebound after yesterday's sharp falls, led by energy stocks and Nokia tracking gains in tech bellwethers in New York overnight.
   
At 1.19 pm, the OMX Helsinki 25 was 0.43 pct higher at 2,512.72 points and the OMX Helsinki was up 0.63 pct to 8,606.19 points. Turnover was a fairly light 317 mln eur, amid a lack of corporate news.

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Asian shares close mixed, with Tokyo lower ahead of cabinet appointments

HONG KONG - Shares across the Asia-Pacific region closed mostly lower, with Tokyo falling on doubts over new government appointments and doubts about the global economic outlook, dealers said.
   
Tokyo share prices closed lower because of uncertainty about the composition of new Prime Minister Shinzo Abe's cabinet and its economic policy.
   
Abe, who was elected prime minister by parliament today, replacing Junichiro Koizumi, is expected to name his cabinet this evening. Market players are particularly interested in who will be picked as economic minister.
   
The blue-chip Nikkei 225 Stock Average closed 76.36 points or 0.49 pct lower at 15,557.45, off a low of 15,517.90. The broader TOPIX index of all first-section issues closed 10.37 points or 0.66 pct lower at 1,549.41, off a low of 1,546.42.
   
Australian shares finished slightly higher as investor sentiment was boosted by the overnight rise on Wall Street.
   
Gains were reduced by index-leading resource stocks BHP Billiton and Rio Tinto, which followed the overnight losses in their London-listed shares due to uncertainty over the direction of metal prices.
   
The S&P/ASX 200 added 3.3 points or 0.07 pct to close at 4,989.6, below the day's high of 5,005.0 and above a low of 4,977.0.
   
Hong Kong shares fell in afternoon trade as early gains gave way to caution ahead of the expiry of September futures contracts on Thursday and holidays in Hong Kong and China next week. The Hong Kong market will be closed next Monday for a public holiday while the mainland China bourses will be shut the entire next week for the National Day holiday.

At 3.26 pm the Hang Seng Index was down 209.65 points or 1.19 pct at 17,336.39.
   
Shanghai-related stocks came under pressure and dampened sentiment for many other China-related stocks following news of the sacking of Shanghai's communist party secretary Chen Liangyu over a widening pension fund scandal.
   
In mainland China, A-shares in Shanghai and Shenzhen closed lower on investor caution ahead of the October holiday, with property developers and banks losing ground, dealers said.
   
The Shanghai A-share Index fell 9.88 points or 0.55 pct to 1,798.87 and the Shenzhen A-share Index was down 2.81 points or 0.63 pct at 443.62.
   
Seoul shares closed lower, wiping out all gains from the previous session, with large cap IT stocks, lenders and car makers posting steep losses.
   
The market was firm initially in line with overnight gains on Wall Street but it soon slipped into negative territory as foreign investors' positions in futures triggered heavy program selling amid a lack of follow-through buying.  The KOSPI index closed down 11.24 points or 0.83 pct at 1,343.97, after moving between 1,338.98 and 1,361.56.

Asian Bourse Round-Up

For a full list of closing figures, click here

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Gold edges lower as oil prices resume downtrend, dollar gains

LONDON - Gold prices edged lower as oil prices reversed yesterday's marginal rebound to trend lower again and as the dollar strengthened against the euro ahead of some key US data.
   
At 12.39 pm, spot gold, which earlier hit a low of 587.50 usd, was quoted at 588.50 usd, down from 590.20 usd at the time of the COMEX market close in New York yesterday. Other precious metals were mixed.
   
Spot silver was down at 11.14 usd against 11.22 usd, platinum was largely unchanged at 1,129.50 usd against 1,129.00 usd, while palladium rose to 317.00 usd against 312.00 usd.
   
Dresdner Kleinwort analyst Sara-Frederike Weisser said while the technical picture for both gold and silver has improved, gold is having to contend today with two negative influences - oil and the dollar.
   
Weisser said gold is underpinned by buying interest in Asia, "especially in India ahead of the buying season", but questioned whether Asian demand is strong enough to push the metal higher.
   
"The yellow metal could still be pressured by falling energy prices," she said, adding that as the weak fundamentals for crude have not changed, she believes "the 'black gold' will see lower levels".
   
Further, gains in the dollar ahead of the release of consumer confidence data in the US later today are weighing on gold. The data is expected to show a slight rebound in the consumer confidence index for September versus August.
   
This could benefit the dollar as it improves the outlook for the US economy and decreases the chances that the US Federal Reserve will start cutting interest rates early next year.

Oil falls on forecasts for rising US winter fuels stocks, receding Iran tensions

LONDON - Oil fell on expectations US data will show tomorrow that already bulging US fuel stocks rose again last week, and as geopolitical tensions eased after the Washington Times reported Iran is close to a deal that would include suspending uranium enrichment.
   
At 2.08 pm, November dated Brent futures contracts lost 65 cents at 60.15 usd, after gaining 39 cents to settle at 60.80 usd yesterday. Meanwhile, November dated US light crude futures lost 48 cents at 60.97 usd.
   
Brent touched a 6 month low of 59.32 usd yesterday while US crude hit 59.52 usd, but prices recovered by the close on concerns OPEC, producer of more than a third of the world's crude oil, could cut output if oil slumps further.
   
They have resumed their downtrend today, however, on expectations US inventory data to be released tomorrow will show distillates, which include heating oil, rose by 2.2 mln barrels last week ahead of peak winter demand.
   
"If, like the last few reports, the build in distillates is larger than expected, we could see oil prices head south again," said Sucden analyst Michael Davies.
   
Meanwhile, an article in the Washington Times saying Iran is close to a secret deal that would include a suspension of uranium enrichment for 90 days and clear the way for nuclear talks is also weighing on prices, analysts said.
   
Tehran wants to keep the agreement secret for now, according to the article, which was quickly denied by the deputy head of the Atomic Energy Organization, Mohammad Saeedi.

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