US & World Daily Markets Financial Briefing 29-08-2006

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Wall Street cautious in early trading

NEW YORK - Wall Street turned cautious Tuesday, declining in early trading ahead of a consumer confidence report and the release of Federal Reserve minutes that could give clues on the economy's health.

Wall Street had little corporate news to act on, typical for late August. German chemical and drug maker Bayer AG reported second-quarter profit increased 11.3 percent, but shares slipped after disclosing job cuts.
   
Retailers, who were among the biggest upside movers on Monday, extended their advance. Restoration Hardware Inc. surged after the company said it expects margin improvements. Barnes & Noble Inc. opened slightly weaker after getting another subpoena over its disbursement of stock options to executives.
   
Some on Wall Street contend the Fed might go too far to orchestrate a soft landing of the economy by raising rates 17 straight times. Economic reports due this week could help give Wall Street some more direction on inflation and spending habits.
   
The Conference Board was issuing its monthly consumer confidence survey for August in the first hour of trading, and was expected to signal the economy has continued to slow. The Fed, which this month paused rates for the first time in two years, will release minutes from that meeting in the early afternoon.
   
In the first hour of trading, the Dow Jones industrial average dipped 10.16, or 0.09 percent, to 11,341.85.
   
Broader stock indicators were mixed. The Standard & Poor's 500 index fell 1.27, or 0.10 percent, to 1,300.51, and the Nasdaq composite index fell 1.01 or 0.05 percent to 2,159.69.

Stocks in focus

BP PLC edged lower in London trading after The Wall Street Journal reported that it's being probed by federal regulators on whether it manipulated U.S. crude-oil and unleaded gasoline markets. That's on top of probes into a pipeline leak in Alaska and allegations that BP manipulated the propane market.
   
The Financial Times separately reported BP Chief Executive John Browne will have to testify over last year's explosion at its Texas City, Texas, refinery.  The FT also reported that Vivendi's Universal Music is backing a competitor to Apple Computer Inc's iTunes. The report said that the service, called SpiralFrog, will rely on advertising rather than charging customers to download a song.
   
Coca-Cola Co. said it acquired a controlling holding in Kerry Beverages Ltd., a bottling joint venture it formed in 1993 with Kerry Group, a Hong Kong conglomerate. Terms weren't disclosed.
   
After markets closed on Monday, venture investor John Doerr revealed in Securities and Exchange Commission filings that he's sold around $25 million in Google stake.

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Euro falls against yen on profit-taking, Tanigaki comments

LONDON - The euro fell against the yen as the currency succumbed to profit-taking after earlier edging above the 150 yen level to mark a new record high.
   
Meanwhile, earlier comments by Japanese finance minister Sadakazu Tanigaki, who was reported as saying that Japan is monitoring currency movements closely in the wake of the euro's sharp rise against the yen, also helped support the yen.
   
The euro fell back down towards the 149 yen level after earlier hitting a high of 150.06.
   
Elsewhere, the focus for currency markets remains firmly on tonight's release of the minutes to this month's meeting of the US Federal Reserve Open Market Committee and trading in the dollar has been particularly choppy.
   
Given that recent US economic data have pointed to a slowing economy and only one Federal Reserve Open Market Committee member voted in favour of a rate rise on Aug 8, the minutes are expected to be on the dovish side.
   
However, they are likely to show that inflationary pressures remain a significant concern for some members and, with the market already pricing in a dovish report, the dollar could see more reaction if the minutes turn out to be on the hawkish side, analysts said.
   
For the euro meanwhile, focus this week will centre on Thursday's meeting of the European Central Bank rate-setting board.
   
Euro zone interest rates are fully expected to be left on hold and investors will be looking to the accompanying press conference, where ECB president Jean-Claude Trichet is expected to signal that rates will rise again in October.

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The European Markets at 11.30 GMT

London - UK blue chips continued higher at midday, comfortably above the key 5,900 level, with investors cheered by better-than-expected numbers from copper miner Antofagasta, weaker oil prices and strong gains across the Atlantic overnight, dealers said.
   
At midday, the FTSE 100 was up 37.3 points at 5,915.9, while the FTSE 250 index added 24.5 points at 9,516.2.

Paris - Share prices were broadly higher at midday as the retreat of oil prices spurred hopes of a brighter economic outlook, with investors also anticipating further strength on Wall Street this afternoon, dealers said.
   
At 12.46 pm, the CAC 40 index was up 31.06 points or 0.6 pct at 5,179.58, on volume of 1.3 bln eur.

Frankfurt - Shares were higher in midday trade, following gains on Wall Street overnight on the back of a more than 3 pct fall in the price of oil, though Bayer shares were lower following mixed second-quarter results, dealers said.
   
At 11.53 am, the DAX 30 index was 22.16 points or 0.38 pct higher at 5,877.15, having moved between 5,840.25 and 5,880.48 so far this session.

Amsterdam - Shares were broadly higher at midday, aided by US futures indicating a higher Wall Street opening, and amid easing oil prices while Crucell fell after reporting second-quarter earnings, dealers said.
   
At 12.35 pm, the AEX was up 2.70 points or 0.58 pct to 470.45 after opening at 468.10.

Madrid - Share prices were higher, and at session highs in thin midday trade ahead of an expected firm opening on Wall street, with selected TMTs like Antena 3, Sogecable and Indra outperforming, dealers said. At 12.12 pm, the IBEX 35 index was up 61.6 points at 12,178.2, after trading in a range of 12,103-12,178, on thin volume of 875 mln eur.

Milan - Share prices were slightly higher at midday, led by STMicroelectronics and Finmeccanica, dealers said. At 11.54 am, the Mibtel index was up 0.36 pct at 28,996 points and the S&P/Mib added 0.33 pct to 37,933.

Zurich - Shares were higher in midday trade tracking overnight gains on Wall Street amid easing oil prices, dealers said. At 12.15 pm, the Swiss Market Index was 58.89 higher at 8177.53, and the Swiss Performance Index was up 45.47 points at 6,356.67.

Stockholm -  Shares moved deeper into positive territory in midday trade, on continued bargain hunting, but with property companies underperforming on news they might be taxed retroactively for capital gains, dealers said. At 12.30 pm, the OMX Stockholm index was up 0.79 pct at 317.44 points, while the OMX Stockholm 30 index was up 0.95 pct at 987.57. Turnover was 6.67 bln skr.

Helsinki - Helsinki shares were higher in midday trade led by Nokia and TietoEnator amid a wave of bargain-hunting, brokers said. At 12.55 pm, the OMX Helsinki 25 index was 0.72 pct higher at 2,577.78 and the OMX Helsinki index was up 0.75 pct at 8,977.07 on 249 mln eur turnover.

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Asian shares close higher on Wall St, lower oil prices

HONG KONG - Share prices across the Asia-Pacific region closed higher after Wall St rose overnight and lower oil prices boosted sentiment, dealers said.
   
Tokyo share prices finished higher after the rebound in US stocks inspired bargain-hunting, with investors also welcoming the retreat in oil prices, dealers said.
   
They said some investors had also been relieved by the Japanese unemployment data for last month, which indicate that the economic recovery continues.
   
The blue-chip Nikkei 225 Stock Average closed 127.97 points or 0.8 pct higher at 15,890.56, after touching a high of 15,946.42.  The broader TOPIX index of all first section issues gained 15.74 points or 1 pct at 1,615.99, off a high of 1,617.72.
   
Australian shares closed higher with investor sentiment buoyed by the overnight rise on Wall St, falling oil prices and takeover rumors and activity, dealers said.
   
The S&P/ASX 200 rose 43.3 points or 0.86 pct to close at 5,067.5.
   
The benchmark indicator closed off the day's high of 5,071.4, with the low at 5,030.6.
   
Hong Kong shares were stronger in afternoon trade, led by property stocks following strong sales of apartments in recent days, dealers said.
   
Wall Street's gains overnight and the drop in crude oil prices also encouraged investors to step into the market, they said. At 3.25 pm the Hang Seng Index was up 167.25 points or 0.99 pct at 17,089.54.
   
In China, A-shares in Shanghai and Shenzhen closed slightly higher with machinery and property plays gaining ground, although early follow-through buying was largely offset by profit-taking, dealers said.
   
The Shanghai A-share Index jumped 0.64 points or 0.04 pct to 1,735.68 and the Shenzhen A-share Index was up 1.72 points or 0.40 pct at 432.57 on turnover of 15.52 bln yuan.
   
Seoul shares ended sharply higher, rising above 1,340 points, as solid gains from Wall Street and lower oil prices offset weak July industrial output data, dealers said.
   
The KOSPI index closed up 16.72 points or 1.26 pct at 1,344.61, the highest level since May 19, after moving between 1,336.40 and 1,345.30.
   
The National Statistical Office said industrial output expanded 4.4 pct year-on-year in July, well off the 10.9 pct growth recorded in June, largely as a result of strikes at major auto companies and a prolonged rainy season.
   
The July figure was also below the market consensus for a gain of 4.98 pct and was the lowest growth figure posted since the 3.7 pct rise recorded in June 2005.

Asian Bourse Round-Up

For a full list of closing figures, click here

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Base metals mixed as nickel nears all time high, copper falls

LONDON - Base metals were mixed in London following yesterday's long weekend, with nickel nearing last week's all time high but with copper edging lower even as the strike at Chile's giant Escondida mine entered its fourth week.
   
At 12.53 pm, LME copper for three-month delivery was at 7,460.00 usd a tonne, down from 7,560.00 usd at the close Friday, while nickel was up at 29,500.00 usd a tonne, nearing last week's record 29,950.00 usd.
   
Other metals were mixed. Zinc was at 3,282.50 usd against 3,360.00 usd, lead was at 1,232.00 usd against 1,220.00 usd, aluminium was at 2,487.50 usd against 2,485.00 usd and tin was at 8,625.00 against 8,545.00 usd.
   
Analysts said nickel was benefiting from extremely low stockpile levels and from very high backwardation - the premium paid for the cash metal over the three month price.
   
They added that for copper, the ongoing strike at Escondida has been largely priced in, with the metal now ranging sideways after having posted strong gains on the dispute.
   
Union workers at Escondida said Sunday they hoped to renew talks with management, but mine officials said they were using non-union workers to get production back up.
   
Talks between the management and strikers ground to a halt early last week after the union rejected an improved pay rise offer of 4 pct for a four-year contract, excluding a one-time bonus to end the conflict.
   
The strike at Escondida, owned by the world's biggest miners BHP Billiton and Rio Tinto, has seen production of copper concentrates halved since workers walked off the job on August 7.
   
Looking ahead, BaseMetals.com analyst Martin Hayes said while the market is expecting a softer economic outlook and thereby lower demand, "supply side issues may still come to the fore even when demand softens".

Oil prices higher on fears about tropical storm Ernesto, Iranian nuclear dispute

LONDON - Oil prices rebounded after yesterday's falls, amid fears that tropical storm Ernesto could regain strength and hit US oil rigs and refineries in the Gulf of Mexico, and as the Iranian nuclear dispute could drag on, dealers said.
   
At 12.25 pm, Brent North Sea crude for October delivery was up 18 cents at 71.00 usd/barrel in electronic trading.
   
New York's main contract, light sweet crude for delivery in October, held above lows in electronic trading; up 18 cents to $70.79 a barrel.
   
Crude futures had fallen yesterday after Hurricane Ernesto was downgraded to a tropical storm.
   
Projections by the National Hurricane Center suggested the tropical storm would slam ashore near Miami late today or early tomorrow, head back out to the Atlantic a few hours later and barrel ashore again in South Carolina.
   
By the time it reaches South Carolina, the storm could have regained the strength it had reached on Sunday.
   
Another factor raising prices were concerns that Iran, the world's fourth biggest producer of crude, could disrupt its oil exports if hit by UN economic sanctions over its nuclear programme.
   
Meanwhile, in Iraq, at least 36 people were killed when an old fuel pipeline caught fire near the southern Iraqi city of Diwaniyah, officials said. A defence ministry official said the pipeline had not been used since 2003 but still contained fuel, which local residents siphoned off.

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