US & World Daily Markets Financial Briefing 28-11-2006

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Stocks slightly lower in early trading

NEW YORK - U.S. stocks fell slightly on Tuesday following the sharp losses to start the week, with trader attention turning to data on durable-goods orders and existing-home sales and a speech from Federal Reserve Chairman Ben Bernanke.
   
In the opening minutes, the S&P 500 dropped 1.42 points to 1,380.48, and the Nasdaq 100 remained unchanged at 2,405.92. The Dow industrials eased 4.37 points to 12,117.34.
   
U.S. stocks finished sharply lower on Monday on continued pressure for the dollar, Wal-Mart Stores Inc. downbeat sales forecast and concerns over Google Inc.'s valuations. The Dow industrials lost 158 points, the S&P 500 dropped 19 points and the Nasdaq Composite lost 54 points.
   
Data may show that November consumer confidence has climbed. Standard & Poor's also will release its measure of house prices, and the Richmond Fed unveils its manufacturing survey.
   
Bernanke is due to speak at 12:30 p.m. Eastern, with Chicago Fed President Michael Moskow speaking four hours later.
   
"Existing home sales and a new home price measure will be in focus, but markets will focus intensely on Bernanke's comments," said currency analysts from Banc of America Securities.
   
U.S. Treasury Secretary Hank Paulson, speaking at a Confederation of British Industry conference in London, gave a renewed push to the Doha trade round, saying the recent election hasn't altered the Bush administration's desire for a deal. A successful deal would be one that generates "meaningful" new trade flows in agriculture, manufacturing and services.
   
Paulson also said he would discuss the need for Chinese currency flexibility on his upcoming visit.
   
Crude oil futures rose 35 cents to $60.67 a barrel. Gold futures slipped $3 an ounce to $637.60.
   
Stocks in focus

Palm Inc. cut its earnings forecast, citing a delay in rolling out its Treo 750 handheld device in the U.S.
   
German low-cost carrier Air Berlin PLC on Tuesday said it plans to order 60 737-800 jets from Boeing Co.
   
Hilton Hotels Corp. said it plans to create a joint venture in India with DLF Ltd. to develop and own up to 75 hotels and serviced apartments over the next seven years. Hilton said it will invest up to $143 million, before the consideration of debt, over the next five to seven years.
   
Scottish Power PLC agreed to take a $22.5 billion cash-and-shares offer from Spain's Iberdrola in what will create Europe's third-largest utility.

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Dollar briefly hits new 20-mth lows vs euro after weak US data

LONDON - The dollar briefly hit fresh 20-month lows against the euro after a poor set of US durable goods orders figures this afternoon raised the chances that the Federal Reserve will cut US interest rates early next year.
   
Durable goods orders fell by 8.3 pct in October, their largest drop in six years and well below the 5 pct decline economists had expected, data showed. Excluding transportation goods, durable goods orders fell 1.7 pct in October, the sharpest decline since July 2005.
     
The euro jumped to a fresh 20-month high of 1.3182 just after the data were released from 1.3141 beforehand, though later came back down to trade just above the 1.3150 usd level. The pound meanwhile jumped to a near two-year high of 1.9490 from 1.9444 before the figures were released.
   
In contrast to the rate outlook in the US, the European Central Bank looks set to continue raising interest rates into next year, reinforced by strong euro zone M3 money supply data this morning.
   
Euro zone M3 money rose by 8.5 pct in October, unchanged from September's rate, while the August to October growth rate rose to 8.4 pct from 8.2 pct in July to September.
     
Market players will now be awaiting existing home sales and consumer confidence figures at 3.00 pm GMT, where further weakness could spell more trouble for the dollar.
   
Meanwhile, European currencies continued to bear the brunt of the dollar's falls, with the US currency holding up against the yen, resulting in the euro reaching fresh record highs against the Japanese currency of just over 153 yen, while the pound rose to a new eight-year high of 226.46 yen.
   
The euro is "once more seemingly at risk of bearing a disproportionate role in absorbing the dollar's downward adjustment," said Neil Mellor at the Bank of New York.
   
This could lead to intensified political pressure on Asian nations, particularly China, to speed up the process of currency policy reform, he noted.

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The European Markets at 13.00 GMT

London - Leading shares turned lower midday, following a bumpy morning trading session, with weakness in utilities offsetting strength in ITV, and looking ahead to Wall Street, spread bettors are tipping US shares to open down, continuing yesterday's slide. At 12.05 pm, the FTSE 100 was down 12.1 points at 6,038.0, off an earlier low of 6,016.2, with the wider market down.

Frankfurt - Shares were lower in midday trade following yesterday's losses in New York and continued concerns on the strong euro weighed down some of the nation's major exporters. At 12.29 pm, the DAX 30 index was down 26.21 points or 0.42 pct to 6,271.96, having moved between a low of 6,250.51 and a high of 6,304.88 so far in today's session.

Paris - Shares were lower at midday, notably on concerns about the dollar's continued weakness amid a light flow of French company news. At 12.31 pm, the CAC-40 index was down 9.86 points of 0.19 pct at 5,298.79 Of the shares in the index, 23 were down, 15 were up and two were unchanged.

Milan - Share prices were slightly lower at midday trade, with Alitalia leading the decline as alliance speculation receded and Seat PG hit by a broker downgrade. At 12.41 pm, the Mibtel index was down 0.24 pct at 30,725 points and the S&P/Mib was off 0.09 pct at 39,986, while volumes stood at 2.66 bln eur.

Amsterdam - Shares in Amsterdam were flat at midday, with financial stocks leading trading volumes, as worries over the dollar's weakness continued. At 12.49 pm, the AEX was 0.07 pct or 0.34 points higher at 478.67 after opening at 477.50 and reaching an earlier high of 480.35.

Madrid - Share prices remained lower in early afternoon trade as oil remained firm, with attention dominated by the launch of Iberdrola's 11.6 bln eur agreed bid for Scottish Power. At 12.51 pm, the IBEX-35 index was down 100.90 points at 13,686.60, after trading in a range of 13,660-13,802, on turnover of 2.6 bln eur.

Stockholm - Shares hovered around the unchanged level in midday trade, off morning lows as bargain hunters entered the market after recent sharp losses. At 12.05 pm, the OMX Stockholm index was up 0.07 pct at 343.89 points, while the OMX Stockholm 30 index was up 0.52 pct at 1,063.58.

Zurich - Swiss shares were slightly lower in thin late morning trade reflecting a lack of market moving news and still hampered by Wall Street's sharp losses overnight. At 11.20 am, the Swiss Market Index was down 15.82 points at 8,501.53, and the Swiss Performance Index down 15.52 points at 6,663.21.

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Asian shares close mostly lower after Wall St fall

HONG KONG - Shares across the Asia-Pacific region closed mostly lower after Wall Street had its worst day in more than four months overnight on a weaker dollar and concerns about the strength of the retail industry.
   
Tokyo shares closed mixed after bargain-hunters stepped in, the market having plunged in the morning following the falls on Wall Street. Investors were cautious while they awaited the release of industrial production data for last month for clues about the health of the economy.
   
The blue-chip Nikkei 225 Stock Average closed 30.12 points or 0.19 pct lower at 15,855.26, after touching a low of 15,653.69. The broader TOPIX index of all first section issues closed 2.10 points or 0.14 pct higher at 1,555.11.
   
Hiroaki Hiwada, a strategist at Toyo Securities, said: "Thanks to some bargain-hunters, the market recovered some of its losses. Investors have already started pricing-in the negative factors such as concerns about Japan's economy due to soft data and a firmer yen."
   
He added: "But the market also lacks decisive factors to chase prices higher."
   
Australian shares ended sharply lower, with investor sentiment dampened by the the large sell-off in US shares overnight when the Dow Jones Industrial Average fell 158.46 points, or 1.29 pct, to 12,121.71. Bank shares continued their correction while selling of leading resource stocks added to the day's significant fall.
   
The S&P/ASX 200 lost 67.9 points or 1.25 pct to close at 5,384.3. The benchmark index closed off the day's low of 5,368.6 and below the high of 5,435.4.
   
Hong Kong shares had dropped by over 2 pct in afternoon trade on profit taking and Wall Street's fall. At 3.27 pm the Hang Seng Index was down by 416.71 points or 2.17 pct to 18,787.30,
   
In mainland China, A-shares in Shanghai and Shenzhen closed mixed amid profit taking in the wake of the weak performance by the Hong Kong market, with banks and steel makers hit. The Shanghai A-share Index shed 8.85 points or 0.41 pct to 2,142.30 and the Shenzhen A-share Index was up 0.43 points or 0.09 pct at 493.41.
   
Seoul shares closed lower following Wall Street's sharp decline, with continued profit-taking by foreign investors dampening overall sentiment.
   
The market threatened to breach the 1,400 point-level but recovered its losses in late trade as program buying picked up and retail investors followed. Large cap IT, financial and telecom stocks led the decline.
   
The KOSPI index closed down 13.66 points or 0.96 pct at 1,411.47, after moving between 1,404.67 and 1,413.71.

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Copper falls on concerns over US economic slowdown

LONDON - Copper prices fell, extending yesterday's declines, as the market was nervous ahead of the release later today of some key US data expected to show further weakness in the world's largest economy.
  
At 12.47 pm, LME copper for three month delivery was down at 7,035.00 usd a tonne against 7,095.00 usd at the close yesterday.
   
"The market is deservedly focusing on the possibility of further weakness (in the US). If you look at US housing starts they've just plummeted," said BNP Paribas analyst David Thurtell.
   
He added that while the fall has not yet impacted on employment in the construction sector, it is bound to at some point. Added to this is the slowdown in vehicle sales, which is set to affect the manufacturing sector, Thurtell said.
   
Elsewhere, nickel remained steady, having hit a fresh all-time record of 34,150.00 usd a tonne yesterday on concerns over critically low inventory levels and news of supply glitches at key nickel projects.
   
Bhar said metals like nickel and zinc, which hit a record 4,575.00 usd a tonne yesterday, also on concerns over critically low inventories, should show more resilience in the face of worries over economic growth prospects.
   
LME nickel for three month delivery edged up to 33,550.00 usd against 33,500.00 usd at the close yesterday, while three month zinc fell to 4,420.00 usd against 4,480.00 usd yesterday.
   
Brazilian iron ore miner CVRD, which has taken control of the Goro nickel project in New Caledonia following its recent takeover of Inco Ltd, has confirmed construction work at the project is continuing as normal.
   
The company received a court ruling from Paris last week ordering it to stop clearing land in one area. However it has subsequently received approval from local authorities to work to secure the land ahead of the rainy season.
   
Yesterday, news that the Goro nickel project is expected to come on stream later than scheduled, in 2008, with costs rising to 3 bln usd, helped nickel forge new highs.

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