US & World Daily Markets Financial Briefing 29-03-2007

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Wall Street advances after GDP report

NEW YORK - Wall Street advanced Thursday after a government report showed the economy grew in the fourth quarter at a faster clip than had been estimated.
   
The Commerce Department's final measure of fourth-quarter gross domestic product, which showed growth of 2.5 percent, could help quell concerns that economic growth is slowing too quickly. At the same time, strong economic growth could make it harder for the inflation-wary Federal Reserve to cut short-term interest rates.
   
Investors also bought stocks as they dressed up their portfolios ahead of Saturday's end of the first quarter. Another acquisition announcement helped boost stocks. U.S. Steel Corp. struck a deal to buy Lone Star Technologies Inc. for about $2.1 billion.
   
In morning trading, the Dow Jones industrial average rose 45.02, or 0.37 percent, at 12,345.38.
   
Broader stock indicators also moved higher. The Standard & Poor's 500 index was up 6.15, or 0.43 percent, at 1,423.38, and the Nasdaq composite index added 7.85, or 0.32 percent, at 2,424.95. The Russell 2000 index of smaller companies was up 4.20, or 0.53 percent, at 801.60.
   
In afternoon trading, Britain's FTSE 100 was up 0.68 percent, Germany's DAX index added 0.45 percent, and France's CAC-40 was rose 1.22 percent.
   
Bonds weakened, with the yield on the benchmark 10-year Treasury note rose to 4.63 percent from 4.62 percent late Wednesday. The dollar fell against other major currencies, while gold prices tumbled.
   
Oil settled at its highest level since mid-September on Wednesday amid continued political tensions in the Middle East and as weekly government inventory data showed a decline in stores of crude oil, gasoline and distillates. Light, sweet crude rose 67 cents to $64.75 per barrel in premarket trading on the New York Mercantile Exchange.
   
The recent rise in oil prices generally poses a concern as increased energy costs could curb consumer spending and add to inflationary pressures. Wall Street might get more feedback from policymakers this afternoon as a number of Fed officials are slated to speak.
   
Fed Vice Chairman Donald Kohn plans to testify before the House Financial Services Committee. Minneapolis Fed President Gary Stern is expected to speak at an investment forum at the University of Dayton in Ohio.
   
After the closing bell, Richmond Fed President Jeffrey Lacker is scheduled to speak before economists in Richmond on inflation and unemployment. His speech comes after a report showed the number of newly laid-off workers signing up for unemployment benefits last week declined, suggesting the job market is still in good shape even as the economy goes through a sluggish spell.

Stocks in focus
   
In corporate news, U.S. Steel announced it will acquire Lone Star Technologies for $67.50 per share price, which represents a 39 percent. U.S. Steel rose 39 cents to $98, while Lone Star surged $17.86, or 36.9 percent, to $66.31.
   
RF Micro Devices Inc., which makes radio frequency components, warned weaker demand from a major customer would hurt its first-quarter results. Shares fell 48 cents, or 6.8 percent, to $6.59.
   
Circuit board maker Multi-Fineline Electronix Inc. said its second-quarter sales and profit could decline from the first quarter. The stock fell 58 cents, or 3.3 percent, to $16.92.

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Dollar rises after US Q4 GDP revised higher

LONDON - The dollar strengthened after data showed the US economy grew at a slightly faster pace in the last three months of 2006 than thought previously.
   
The Commerce Department estimated the US economy grew at a 2.5 pct annualised rate between October and December, faster than the 2.2 pct estimated earlier. Economists had expected no revision.
   
"On the face of it the revision seems positive and the market's reacting accordingly, " said Mitul Kotecha, head of forex strategy at Caylon.
   
"However if you look at the detail I think the reaction will be pretty short-lived. Residential investment was down 19.8 pct, equipment and software was down 3.4 pct while a lot of the gains came from inventories," he added.
   
The dollar gained on major currencies, pushing the euro down to 1.3319 usd from 1.3345 shortly before the data was released.

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Top Stories in Europe at 11.05 BST

London - 3i Group PLC, the UK private equity group, said it will return 800 mln stg to shareholders, reflecting strong returns from sales. The company said new investments for the first eleven months of 2006 to end-February rose to 1.598 bln stg, compared with 1.184 bln stg a year earlier.

Frankfurt - KarstadtQuelle AG said it swung to full-year net profit of 345.6 mln eur from a year-earlier loss of 316.5 mln eur, after the company sold real estate worth 3.7 bln eur and limited losses at its department stores.
 
The department stores, which generate about a third of group sales, posted a loss before interest and tax that narrowed to 12.5 mln eur from 126.7 mln eur a year earlier, helped by lower staff costs, the company said in its annual report published today.

Merck KGaA expects binding offers for its generics unit by the end of April, sources within the financial industry said. The German pharmaceutical company will then likely continue talks with two or three bidders, the sources told dpa-AFX news agency.

Madrid  - Caja Madrid's deal with EON AG to sell its 9.9 pct stake in Endesa SA while retaining voting rights for two years includes the possibility of extending the agreement a further two years to 2011 if both parties agree, according to a statement with the CNMV. The agreement, announced Monday, includes EON's entitlement to dividends on the stake for the up to four-year period.

Paris - Bernard Arnault, the head of LVMH, reiterated that his stake in Carrefour alongside Colony Capital is "a long-term investment" motivated by the "strong potential" of the group.
 
Speaking on Europe 1 radio, Arnault said the 9.1 pct stake acquired by his holding company Groupe Arnault and real-estate investor Colony Capital represents a "a long-term investment in a group with considerable potential, whose value seems significantly underestimated and which has a enormous potential to improve its results."

Air France-KLM is considering a plan to save 1.0-1.5 bln eur over three years and may announce the move at its full-year results presentation in May, weekly magazine Challenge reported. The magazine did not name it source or say how these savings would be made beyond citing improved productivity and a reduction in the number of leased aircraft.

Brussels - Financial services company KBC Group NV is interested in buying a minority stake in Czech insurance group Ceska Pojistovna, financial dailies L'Echo and De Tijd reported. France's Axa, Dutch banking group ING NV and Germany's Allianz SE are also candidates for a stake, the reports added.

Vienna - European private equity fund CVC Capital Partners said it is "completely stunned" that its takeover bid for Boehler-Uddeholm has been rejected by the board of the speciality steel company.

Oslo - Telenor ASA has been offered 2.6 bln nkr by Bangladesh's Grameen Telecom to give up control of the pair's joint-venture, GrameenPhone, Norwegian daily Dagbladet is reporting. Nobel Peace Prize winner Muhammad Yunus, who represents Grameen Telecom, is quoted by the newspaper as saying: "We don't demand that Telenor sells down its stake to under 35 pct - we will be content if we have 51 pct of the shares."

Lisbon - Stock market regulator CMVM has extended the deadline for registration of Banco Comercial Portugues' 4.33 bln eur bid for smaller rival Banco BPI, Jornal de Negocios reported citing a source at CMVM.
 
The CMVM asked BCP for additional information regarding its planned prospectus. BCP has already provided the requested information, which the CMVM has accepted. However, the CMVM now has eight days again - the same as at the beginning of the process - to register BCP's bid.

Zurich - Syngenta AG announced the acquisition of German flowers company Fischer group for approximately 67 mln usd. Fischer, a privately held company specializing in the breeding and marketing of flower crops, reported sales of 86 mln usd for the financial year 2005-2006.

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Asian shares close mostly higher despite Bernanke comments

HONG KONG - Shares across the Asia-Pacific region closed mostly higher as other factors overtook bearish comments by Federal Reserve chairman Ben Bernanke overnight.
   
Tokyo shares were flat after gains in the Shanghai market helped Japanese stocks recover from a morning sell-off sparked by fears about inflation in the US and the firmer yen.
   
The blue-chip Nikkei 225 stock average dropped more than 200 points to as low as 17,036.22 in morning trading, after Bernanke said overnight that core inflation in the US remained "uncomfortably high."
   
But the Nikkei closed 9.21 points or 0.05 pct higher at 17,263.94, off a high of 17,350.88. The TOPIX index of all first-section issues finished down 0.38 point or 0.02 pct at 1,710.68, off a low of 1,687.83.
   
In China, the benchmark Shanghai Composite Index, which covers both A- and B-shares listed on the Shanghai Stock Exchange, closed at a new record high.
   
Despite the encouraging performance of Shanghai shares, investors mainly kept to the sidelines, remaining wary of the outlook for the US economy.
    
Australian shares ended up as investors followed the lead of large funds who were seen as squaring positions in the futures market ahead of the March quarter-end tomorrow. Investor sentiment ignored the mixed overnight commentary from Ben Bernanke which led to a sell-off on Wall Street. The S&P/ASX 200 closed up 37.7 points or 0.64 pct at the day's high of 5,960.9.
   
Hong Kong stocks were sharply higher in afternoon trade on a technical rebound after falls over the last two days. Trade was volatile ahead of the settlement of March futures contracts later in the day. At 3.30 pm the Hang Seng Index had risen 278.27 points or 1.42 pct to 19,832.14.
   
In mainland China, A-shares in Shanghai and Shenzhen closed mixed with the Shanghai market boosted by institutional buying of heavyweight banks, while Shenzhen fell on profit-taking. The Shanghai A-share Index was up 26.25 points or 0.79 pct at 3,360.82 while the Shenzhen A-share Index was down 16.41 points or 1.88 pct at 856.32.
   
Seoul shares finished higher, reclaiming the 1,450 point mark, with sentiment boosted by strong program buying combined with firmer Asian markets. A weaker Wall Street and caution ahead of corporate earnings releases due next month initially weighed on the market but it recouped its losses toward the close.
   
Investors also shrugged off lackluster industrial output data for February, with the fewer working days in the month due to the Lunar New Year blamed for the results. Industrial output contracted 0.4 pct year-on-year in February, a sharp reverse from the 7.5 pct growth posted in January and the market consensus of a 2.8-3.2 pct rise.
   
The KOSPI index closed up 11.21 points or 0.78 pct at 1,450.95, after moving between 1,432.80 and 1,453.11.

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Gold lower after US data strengthens dollar

LONDON - Gold fell within minutes of the release of some strong data from the US which lifted the dollar.
   
The precious metal, which is seen as an alternative asset to the US currency, softened after the data showed the US economy grew at a slightly faster pace in the last three months of 2006 than thought previously -- pulling the dollar higher.
   
The Commerce Department estimated the US economy grew at a 2.5 pct annualised rate between October and December, faster than the 2.2 pct estimated before.
   
At 2.17 pm, gold was at 661.20 usd per ounce, down from 666.50 usd in late New York trades yesterday. It had lost 1.2 pct earlier in the session to touch 658.38 usd.
   
Gold has eased since hitting four-week highs of around 669 usd yesterday. The precious metal retreated after Federal Reserve chairman Ben Bernanke diminished expectations of an imminent interest rate cut yesterday -- news which lifted the dollar.
   
In the longer term, most analysts are still upbeat about gold's prospects with most calling for the 700 usd level to be tested before this year ends. Steel at HSBC forecasts gold to average 680 usd for 2007.
   
Among other metals, silver edged down to 13.23 usd an ounce against 13.38 usd in late New York trade yesterday. Platinum was down at 1,237 usd against 1,242 while palladium was unchanged at 351 usd.

At 12.03 pm, LME copper for three month delivery was up at 6,705 usd a tonne against 6,660 usd at the close yesterday.
   
Copper closed down yesterday on renewed worries over the health of the US economy after Federal Reserve chairman Ben Bernanke told congress that uncertainties over the US economic outlook have ticked up in recent weeks.
   
He also told congress that the central bank has not changed its official "bias" toward inflation.
   
However, BNP Paribas analyst David Thurtel noted the metal had staged a rally before the Bernanke testimony yesterday and that its performance overall was pretty solid considering the economic woes.
   
Copper has been underpinned recently by a 15 pct decline in LME inventories this month and by signs of increasing demand from China, the world's largest consumer of the metal.
   
Tin fell to 13,300 usd a tonne after touching a month low of 13,100 usd earlier, as traders continued to take profits from the metal which has surged to ever higher records over the past week on concern over Indonesia supplies.
    
In other metals, zinc was up at 3,203 usd a tonne against 3,200 usd at the close yesterday, lead was up at 1,910 usd against 1,900 usd, nickel was up at 44,100 usd against 43,400 usd while aluminium was up at 2,757 usd against 2,745 usd.

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