US & World Daily Markets Financial Briefing 29-01-2007

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Citigroup Dow, Nasdaq post gains in early trading

NEW YORK - Stocks rose moderately in early trading Monday as the market greeted another round of buyout news with hopes that Wall Street is poised to head higher. Investors were looking to place bets a day ahead of the Federal Reserve's first meeting of the year.

After a volatile week in which stocks lost ground, merger and acquisition news helped buoy sentiment. Merrill Lynch & Co. agreed to acquire wealth manager First Republic Bank for $1.8 billion in cash and stock and Citigroup Inc. struck an agreement to acquire British insurer Prudential PLC's Egg Banking PLC online bank for 575 million pounds, or about $1.13 billion.

Many on Wall Street were girding for a busy week of economic and earnings news as they try to determine whether an indecisive market can resume its advance from the second half of 2006. A two-day Fed meeting begins Tuesday, after which investors will receive the central bank's latest thoughts on the economy and interest rates, and a torrent of fourth-quarter earnings reports is due to arrive.

In the first hour of trading, the Dow Jones industrial average was up 37.65, or 0.30 percent, at 12,524.67.

Broader stock indicators also rose. The Standard & Poor's 500 index was up 2.71, or 0.19 percent, at 1,424.89, and the Nasdaq composite index was up 1.17, 0.05 percent, at 2,436.66.

Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.87 percent from 4.88 percent late Friday. The dollar was mixed against other major currencies, while gold prices fell.

Oil down 43 cents at $53.49 a barrel in premarket electronic trading on the New York Mercantile Exchange.

In other buyout news, drug developer MDS Inc. agreed to acquire Molecular Devices Corp., which makes bioanalytical measurement systems, for $615 million.

MDS fell 2 cents to $17.08, while Molecular Devices jumped 11.42, or 48 percent, to $35.50.

Earnings from Verizon Communications Inc. met with mild disappointment although the telecommunication company's per-share earnings came in a penny ahead of Wall Street's forecast. Verizon was down 10 cents at $37.73 after reporting its fourth-quarter profit fell amid taxes and costs related to a spinoff.

Tyson Foods Inc. rose 97 cents, or 5.8 percent, to $17.66 after the company's fiscal first-quarter profit jumped 46 percent in the first quarter as the meat producer saw increased chicken sales and lower costs.

The Russell 2000 index of smaller companies was up 2.01, or 0.26 percent, Overseas, Japan's Nikkei stock average closed up 0.28 percent. In afternoon trading, Britain's FTSE 100 was up 0.05 percent, Germany's DAX index was up .27 percent, and France's CAC-40 was up 0.46 percent.

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Dollar breaks through 122 yen mark for first time in four years

LONDON - The dollar broke through the 122 yen for the first time in more than four years on expectations that Japan would keep its super-low interest rates.

Japan had another dose of bad news as the government said retail sales in December declined 0.3 pct. This second straight year-on-year fall resulted mainly from weak demand for heating appliances and warm clothing.

The yen has suffered after the BoJ's failure to raise interest rates earlier this month. That frailty has fuelled speculation that weakness in the Japanese currency will be a key focus at the upcoming G7 meeting of finance ministers in Germany.

Against the euro, the dollar was steady amid a dearth of data, though upcoming releases this week could well have a major impact on the currency in the way they affect interest rate futures.

Most attention this week will focus on Wednesday's latest meeting of the US Federal Reserve as well as the first estimate of fourth quarter US GDP growth. 
   
Currency watchers will have the ISM survey into the US manufacturing sector to chew over on Thursday, followed by Friday's US jobs report for January.

In terms of the dollar's fortunes, the focus will be on whether the US news flow can rekindle the rate cut speculation, which saw the US currency slump towards the end of 2006.

Last week, the euro dropped from a mid-week high of 1.3040 usd to 1.2880 usd as Fed rate cut expectations were scaled back in the wake of stronger than forecast US data. 

The Fed has kept its benchmark rate unchanged at 5.25 pct for four consecutive meetings after raising it 17 times in a row previously and is not
expected to change it any time soon.

It's not just the US that has key news this week. 

The European Central Bank, which is widely expected to continue raising its key refi rate over the coming months from the current 3.50 pct, will be particularly interested to see what effect the VAT hike is having on German prices, when inflation data are published tomorrow.

That will be followed on Wednesday by the euro zone January snap CPI estimate, which is likely to show inflation above 2 pct for the first time since August 2006. The VAT hike is also likely to impact German retail sales data published on the same day.

In addition, there's German unemployment and French unemployment data this week, both of which are expected to decline further and give a boost to spending.

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European summary - midday

LONDON - Leading shares were little changed by midday, with investors uncertain over the market's next move following last week's bout of profit taking, with US futures pointing to a mixed open on Wall Street ahead tomorrow's interest rate decision, dealers said.

At 12.00 pm, the FTSE 100 index was up 4.7 points at 6,234.2, having fluctuated  ithin a 30-point range during the morning session. The broader indices were  mixed.

FRANKFURT - German shares were higher in midday trade, led by SAP amid rumours of a takeover bid from Oracle.

At 12.08 pm, the DAX was up 15.57 points or 0.23 pct to 6,705.91, while trading between 6,683.38 and 6,715.33, as the MDAX added 28.51 points or 0.30 pct to 9,671.28.

The TecDAX climbed 1.96 points or 0.24 pct to 804.93 with DAX futures retreating 9.00 points or 0.13 pct to 6,737.00.

PARIS - Share prices moved higher in morning trade, led by Pernod-Ricard and Saint-Gobain, as investors looked for bargains in the absence of any major corporate news, dealers said.

At 12.18 pm the CAC-40 index was up 22.31 points or 0.40 pct at 5,604.61 on volume of 1.4 bln.

AMSTERDAM - Share prices were off earlier highs in early afternoon trade as oils fell, US futures pointed to a negative Wall Street opening and investors acted cautiously, awaiting more earnings reports this week, dealers said.

At 1.03 pm, the AEX was up 0.65 point or 0.13 pct at 500.45, after opening at 499.69, and reaching a high of 501.41.

MILAN - Shares were higher midday in modest volumes as solid gains for Fiat and positive sentiment in the banking and luxury sectors offset a weak telecom sector and losses for Lottomatica after the lukewarm reception to its business plan, dealers said.

At 12.35 pm the Mibtel index was up 0.26 pct at 32,461, and the S&P/Mib was up 0.38 pct at 42,344.

MADRID - Share prices were higher in early afternoon trade, in line with Europe, with Telefonica and Repsol YPF underperforming the broader market, dealers said.

At 12.45 pm, the IBEX-35 index was up 53.9 points at 14,469.1, on volume of about 1.3 bln eur.

BRUSSELS - Shares were slightly higher in midmorning trading helped by a resilient performance by Wall Street at the end of last week, with holding company GBL the leading gainer on the blue-chip index, analysts said.

At 10.32 am, the Bel 20 was up 9.65 points or 0.22 pct at 4,409.52.

STOCKHOLM - Shares remained in marginally positive territory in midday trade, off just a touch from morning levels, with the engineers performing strongly on hopes of high dividend payouts, dealers said.

At 12.35 pm, the OMX Stockholm index was up 0.10 pct at 384.75, and the OMX Stockholm 30 was up 0.09 pct at 1,178.40.

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Asian shares close mixed with investors awaiting company results, economic data

HONG KONG - Shares across the Asia-Pacific region closed mixed, with thin trade in some markets, as investors awaited the release of corporate earnings and economic data, dealers said.

Tokyo shares finished slightly higher in cautious trade, after moving within a narrow band just above Friday's close for most of the day, with investors mostly taking to the sidelines as they await more corporate earnings announcements in the coming weeks, dealers said.

The blue-chip Nikkei 225 Stock Average closed up 48.53 points or 0.28 pct at 17,470.46, off a high of 17,489.59.

The TOPIX index of all issues listed on the Tokyo Stock Exchange's first section finished up 5.57 points or 0.32 pct at 1,733.59, off a high of 1,738.53.

Dealers said the Nikkei opened lower as tech stocks were sold off following Advantest's profit warning late Friday, citing weaker-than-expected demand for semiconductor-related equipment.

The warning followed similarly bearish statements earlier last week by Elpida Memory and NEC Electronics, they noted.

But bargain-hunting lifted shares onto positive territory later in the day, buoyed by optimism that more companies will announce improved results as the quarterly earnings reporting season continues, they said.

Australian shares closed lower as investors returned from a long weekend as sellers, taking profits after the market recorded four consecutive record closes last week, dealers said.

They said negative sentiment also arose from the fall in US shares on Friday, while lower base metal prices in London trading last week weighed on the resource sector.

The S&P/ASX 200 fell 9.5 points or 0.16 pct to close at 5,760.4, off Thursday's record closing level of 5,769.9.

The key index's low was 5,752.6 and the high was 5,777.3.

Hong Kong shares were up in afternoon trade, with continuing pressure on China stocks on concerns that mainland authorities may implement more macro-economic tightening measures to cool the country's economy and stock markets, dealers said.

At 3.15 pm the Hang Seng Index was up 23.45 points or 0.12 pct at 20,304.58.

In mainland China, A-shares in Shanghai and Shenzhen closed higher on the back of renewed capital inflows with telecom companies and steel makers in favor, dealers said.

The Shanghai A-share Index rose 65.95 points or 2.18 pct to 3,094.31 and the Shenzhen A-share Index was up 17.44 points or 2.46 pct at 727.23.

Seoul shares closed lower, reversing an early rebound, with Samsung Electronics and other IT stocks falling sharply on concerns over the outlook for the chip industry, dealers said.

Telecom stocks accelerated the pullback in the wake of KT's disappointing quarterly results, while POSCO rallied on the news that a senior executive from leading global steel maker Arcelor Mittal will visit this week for talks on cooperation with the company, they added.

Investors were largely cautious ahead of the US FOMC and key economic data both at home and abroad, they said.

The KOSPI index closed down 8.23 points or 0.6 pct at 1,363.10, off a low of 1,361.23 and a high of 1,378.28.

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Copper prices sank after the LME reported yet another large rise in inventories, which have more than doubled since the start of last year.

Falls were limited, however, by continued speculation Chinese buyers will return to the market this year after heavy destocking kept them at bay in 2006.

At 11.15 am, LME copper for three-month delivery was down at 5,670 usd a tonne against 5,810 usd at the close yesterday.

The LME said in a daily report earlier that copper stocks held in its warehouses rose by 5,975 tonnes to total 213,675 tonnes.

Copper stocks are heading comfortably above the crucial 200,000 tonne level, above which they are no longer considered critical.

However, Standard Bank analyst Michael Skinner noted that while stocks are piling into warehouses in Europe, they are steadily leaving Asian warehouses.

Chinese copper imports rose by an annual 59.4 pct in December. Traders speculate the sharp rise came as a result of consumer restocking.

Chinese copper stocks were run down through most of last year as buyers stayed out of the market on account of the high copper prices.

By the end of 2006, Chinese destocking helped knock copper some 30 pct off an all time high of 8,800 usd a tonne, reached in mid-May.

Oil was a touch softer, with falls limited by expectations of more freezing temperatures in the US Northeast and as political tensions in Iran re-emerged.

At 11.56 am in London, front-month Brent North Sea crude contracts for March delivery were down 37 cents at 54.92 usd a barrel, after rising 1.17 usd to settle at 55.29 usd on Friday.

Meanwhile, front-month New York light sweet crude contracts for March delivery dropped 32 cents to 55.09 usd a barrel, after rising 1.19 usd to close at 55.42 usd on Friday.

Global Insight senior energy analyst Simon Wardell said while the supportive factors continue to prop up prices, further gains may be hard to come by.

Private weather forecaster AccuWeather has forecast temperatures in the US Northeast, the world's largest heating oil consumer, to stay below normal for the next 5 days, lifting demand and limiting price slumps.

Most analysts are expecting the report to show lower heating oil stocks this week as a result of the recent cold snap.

Fresh geopolitical tensions from oil-rich nations Iran and Nigeria are also supporting prices.

On Saturday an Iranian parliamentarian said the country had begun increasing its capacity to make nuclear bombs. Though this was later denied by an Iranian nuclear official, the statement will have no doubt brought the Iran nuclear issue back to the foreground, said Michael Davies, Sucden analyst.

Further supply woes are feared from Nigeria. On Sunday militants from the Movement for the Emancipation of the Niger Delta torched a police headquarters
in Port Harcourt in the Niger Delta in an attempt to free one of their leaders, added Davies.

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