US & World Daily Markets Financial Briefing 30-01-2007

The world's most trusted name in professional trader education. Click Here

3M Wall Street fluctuates ahead of Fed

Wall Street fluctuated Tuesday as investors remained cautious about the Federal Reserve's meeting on interest rates and sifted through a slew of earnings reports that included three Dow Jones industrials.

Major indexes bounced around in the first hour of trading as investors awaited the results of the central bank's two-day meeting that ends Wednesday afternoon. The Fed has kept rates unchanged for the past four meetings after 17 straight hikes.
 
Investors also remain focused on corporate earnings, with about half the Standard & Poor's 500 so far issuing reports. Results have so far have been slightly above expectations, though not robust enough to indicate double-digit growth.

Diversified manufacturer 3M Co. fell after it issued disappointing fourth-quarter results. Drugmaker Merck & Co. and Procter & Gamble also were heavily traded after posting results.

The Dow fell 9.93, or 0.08 percent, to 12,480.85.

Broader stock indicators were narrowly mixed. The S&P 500 index was up 1.26, or 0.09 percent, to 1,421.88, and the Nasdaq composite index fell 3.08, or 0.13 percent, to 2,438.01.

The bond market remained mostly unchanged as investors awaited a decision from the Fed, which sets short-term interest rates -- which is what banks charge each other for overnight loans. However, the decision can affect all interest rates.

Bonds were mostly unchanged, with the yield on the benchmark 10-year Treasury note flat at 4.87 percent from late Monday.

Oil rebounded after a sharp drop on Monday on concern OPEC members would increase production. A barrel of light sweet crude rose 38 cents to $54.39 the New York Mercantile Exchange.

The dollar was mixed against other major currencies, while gold prices rose.

Merck fell 23 cents to $45.28 after the drug company posted a 58 percent decline in quarterly profit. The company was hurt by a slew of restructuring charges and increased legal reserves linked to the withdraw of painkiller Vioxx.

3M, which makes products such as Post-It notes and Scotch tape, jumped 58 percent after taking a large gain on the sale of its pharmaceutical business.

However, the company -- often considered a barometer of U.S. business health because of the products it sells -- missed Wall Street expectations after stripping out that gain. Its shares fell $3.79, or 4.8 percent, to $75.11.

Consumer products maker Procter & Gamble said higher sales of Gillette razors and Tide detergent helped fiscal second-quarter profit jump 12 percent.

However, shares fell 89 cents to $63.99.

The Russell 2000 index of smaller companies was down 0.76, or 0.10 percent, at 792.34.

Overseas, Japan's Nikkei stock average rose 0.11 percent. In afternoon trading, Britain's FTSE 100 was down 0.30 percent, Germany's DAX index rose 0.63 percent, and France's CAC-40 gained 0.23 percent.

VantagePoint's market forecasts are nearly 80% accurate.  Take a look at actual  forecasts and see the difference they can make in your trading. Click here to see two recent forecasts now.

Forex - Major currencies hardly changed; yen remains in focus

Major currencies were hardly changed in quiet trading conditions with the yen still stuck at lower levels, despite calls for a halt to its steep recent falls, and the pound a tad lower after some soft UK data.

Today, a chorus of voices from the euro zone was heard calling for the yen to better reflect Japan's fundamentals. Euro group president Jean-Claude Juncker and German finance minister Peer Steinbrueck said pointedly that G7 finance ministers will discuss the yen's sharp falls at next month's pow-wow in Germany.

The yen remained near four-year lows against the dollar, and was depressed against the euro and pound despite calls from Steinbrueck and Juncker.

Bank of Japan recently decided to keep its base rate unchanged at 0.25 pct even though there had been some speculation of a hike.

HBOS chief currency strategist Steve Pearson believes BoJ was correct to err on the side of caution against the backdrop of very low inflation in the country.

Besides, economic news from the world's second biggest economy today justified the yen's weakness.

The government said household spending in December was 1.9 pct lower in real terms than a year before. The decline was the 12th in a row and worse than the consensus of a 1.2 pct drop.

Analysts at BNP Paribas noted that, ahead of tomorrow's US Fed's rate announcement and the lack of significant news releases today, markets will take a cautious approach.

The euro was stuck in the upper region of 1.29 usd and appeared to be unable to mount much of a test of 1.30 usd.

Thin trading conditions are expected to persist until the Fed meeting concludes Wednesday. The Fed is widely expected to keep interest rates unchanged at 5.25 pct, but some sections of the market are predicting hawkish comment from the central bank.

Markets have scaled back expectations of near-term rate cuts in the US over the past weeks after some strong US data.

Today, the Conference Board's consumer confidence index is seen rising to 110 in January, an improvement from December's 109.

Elsewhere, the pound was slightly lower after some soft housing market data. According to the latest survey from the UK's largest building society, Nationwide, UK house prices are showing signs of cooling in response to recent rises in interest rates. Monthly growth was at an eight-month low in January at just 0.3 pct.

At the margins, the data was a setback for those predicting another UK rate hike after Bank of England's unexpected quarter point hike to 5.25 pct in January.

Mortgage approval data for December also signalled a cooling housing market. Approvals fell to 113,000 from 129,000 in November. Analysts polled by AFX News were anticipating a far more modest dip to 126,000. December's figure is the lowest since April's 107,000.

Follow the futures and FX markets with our trading experts and read their analysis.  Click here to sign up now!

LONDON - The FTSE 100 index turned higher at midday, recovering from early weakness, as indications of a firm start by Wall Street and a bounce in BA shares helped counter an under-pressure commodity sector, dealers said.

At 12.00 pm, the FTSE 100 index was up 0.9 points at 6,240.8, while the broader indices were mixed.

Volume was below average, with 859.1 mln shares changing hands in 133,717 deals.

FRANKFURT - German shares were flat midday, with investors cautious ahead of the Federal Reserve meeting later today and after a mixed close on Wall Street last night, traders said.

At 12.18 pm, the DAX was flat at 6,725.32, down 0.69 points or 0.01 pct, after trading between 6,711.05 and 6,730.22 this morning.

PARIS  - Share prices were down slightly in late morning trade as investors moved to lock in profits after the CAC-40 exceeded the 5,600 barrier yesterday.

At 12.30 pm the CAC-40 index was down 9.86 points or 0.18 pct at 5,609.84, on volume of 1.7 bln eur.

AMSTERDAM - Share prices were slightly higher in early afternoon trade, recovering from intraday lows, with Getronics the most notable riser, as Wall Street is expected to open higher, dealers said.

At 1.21 pm, the AEX index was 0.21 pct or 1.03 point higher at 501.34, off an intraday low of 499.13.

MILAN - Share prices were lower at midday, dragged down by local utilities and banks, dealers said.

At 12.26 pm, the Mibtel was down 0.50 pct at 32,331, while the S&P/Mib fell 0.44 pct to 42,071.

MADRID - Share prices were slightly higher in early afternoon trade with Iberia and Grupo Ferrovial outperforming, while BBVA was on offer, dealers said.

At 12.55 pm, the IBEX-35 index was up 18.9 points at 14,529.4, on volume of about 2.0 bln eur.

BRUSSELS - Shares were slightly lower in midmorning trading after a mixed session on Wall Street overnight, amid caution ahead of today's Federal Reserve meeting, with telecoms group Belgacom and speciality materials group Umicore heading the blue-chip fallers, traders said.

At 10.35 am, the Bel 20 was down 12.24 points or 0.28 pct at 4,402.00.

STOCKHOLM - Shares remained in slightly negative territory in midday trade, off a touch from morning levels, as Ericsson continued to weaken on uncertainty ahead of its fourth-quarter results, and with SCA showing losses after its worse-than-expected results, dealers said.

At 12.05 pm, the OMX Stockholm index was down 0.42 pct at 383.32, and the OMX Stockholm 30 was down 0.42 pct at 1,173.87.

Trade with RCG fxtrader™, the platform offering instant access to 12 major FX trading pairs with low spreads (2 pips EURUSD, USDJPY) and global news from 3 major sources.  Trade with a registered and regulated company in business for 80 years. Smart money trades here – Get your FREE Trial Today!

Asian shares close mostly higher on positive data, company earnings

Shares across the Asia-Pacific region closed mostly higher, with Tokyo up on positive economic data and Australian shares hitting anew record on company earnings reports, dealers said.

Tokyo shares finished mixed, with the key Nikkei index ending higher although some of the morning's gains were clipped by quick profit-taking particularly in steel makers, dealers said.

They said sentiment was lifted by better-than-expected industrial output data released earlier in the day and expectations of favorable corporate earnings announcements.

But steel makers succumbed to profit-taking after Nippon Steel left its fiscal year to March earnings forecast unchanged, disappointing investors who had been looking for an upward revision, they added.

The blue-chip Nikkei 225 Stock Average closed up 19.73 points or 0.11 pct at 17,490.19, off a high of 17,558.53.

The TOPIX index of all issues listed on the Tokyo Stock Exchange's first section finished marginally lower, down 1.99 points or 0.11 pct at 1,731.60, off a high of 1,744.61.

Hideo Mizutani, chief strategist at Sieg Securities, said profit-taking, particularly in steel makers, trimmed morning gains after Nippon Steel left its earnings forecast unchanged.

Australian shares closed higher as investors bought banking stocks, while stronger earnings reports supported the wider market into record territory, dealers said.

They said the positive sentiment overcame selling in the miners following another fall in base metal prices overnight.

The S&P/ASX 200 rose 52.1 points or 0.90 pct to close at 5,812.5, beating last Thursday's previous record close of 5,769.9.

The key index closed off a fresh intra-day record high of 5,813.0 and above the day's low of 5,756.1.

Hong Kong shares were higher in afternoon trade as rotational buying of property and financial stocks helped the market overcome some early weakness, dealers said.

They said bargain-hunting in select China stocks also provided support. At 3.10 pm the Hang Seng Index was up 160.22 points or 0.79 pct at 20,396.90.

In mainland China, A-shares in Shanghai and Shenzhen closed lower on profit-taking with banks and property developers under pressure, dealers said.

The Shanghai A-share Index was down 15.07 points or 0.49 pct to 3,079.24 and the Shenzhen A-share Index was down 3.69 points or 0.51 pct at 723.55.

Seoul shares closed higher on a technical rebound after three consecutive days of losses, although the upside was capped by weaker-than-expected production data for December, dealers said.

Industrial output growth in December eased to 2.3 pct year-on-year last month from November's 6.5 pct, largely due to fewer working days and the strong year-earlier base number.

This figure was well below the market consensus for growth of 5.3-5.4 pct and the worst monthly level since February 2005.

The KOSPI index closed up 7.62 points or 0.56 pct at 1,370.72, off a low of 1,360.42 and a high of 1,371.59.

Inflation picked up in September in Europe as both areas show fragile economic growth. Just as in the U.S., rising energy prices are to blame. Read free, daily market reports available only at CMS Forex and open your free demo trading account today. Click here

Gold steady as traders await Fed rate decision

Gold steadied after edging lower yesterday, with many players reluctant to take positions ahead of the US Federal Reserve's interest rate decision on Wednesday.

At 11.22 pm, spot gold was quoted at 642.80 usd an ounce, down slightly from the 643.20 usd level seen at the time of the COMEX market close in New York yesterday.

"Gold is biding time ahead of the FOMC decision ... (which) will give a lead to the dollar and then to gold," said Ross Norman, analyst at TheBullionDesk.com.

Gold often moves counter to the dollar because it is seen as an alternate investment to the US currency. Yesterday, the precious metal edged lower after the dollar hit four-year highs against the yen.

The dollar has remained near those highs today and while many players expect the Fed will likely keep rates on hold, some are predicting hawkish comment from the central bank.

Such comment would support the dollar and pressure gold, but many analysts remain upbeat about gold's prospects, saying oil prices might support the precious metal near term.

Gold often moves in line with crude because is it seen as a hedge against oil-led inflation.

"In the very near term you have to watch oil, the dollar is on hold... I would be inclined towards the upside (for gold)," said Norman.

Oil edged up today after dipping lower yesterday, as traders took comfort from the continued cold weather in the US Northeast, which is expected to boost heating oil demand and eat into fuel inventories.

Copper prices on the London Metal Exchange (LME) will not rise above 6,000 usd a ton any time soon unless China makes large bulk purchases of the base metal, commodities analyst Platts said.

"Copper continues to trade in an extremely wide range. Support is viewed at 5,400 usd per ton with overhead resistance at 6,000. It would need some big changes to push copper over the 6,000 mark -- perhaps the return of the Chinese to the physical market or some supply problems," Platts said in a research note.

Copper slipped lower in sluggish trade on the LME yesterday as a chunky net 5,975 tons entered various exchange-registered warehouses, leaving total inventories at 213,675 tons, according to LME data.

The outlook for prices would depend on how much liquidation was still to be done, the note added.

•Perfect for technical day traders
•High leverages allows for more trading flexibility
•Limit risk with Guranteed Stop Losses

Join us today! FOREXYARD | trading made easy. Click Here