US & World Daily Markets Financial Briefing 30-08-2006

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Stocks edge higher after GDP report

NEW YORK - Stocks edged higher Wednesday after the government's latest gross domestic product report showed that the economy might be slightly stronger than previously thought.
   
The Commerce Department said the economy as measured by the GDP grew at a 2.9 percent annual rate in the second quarter, better than first estimated last month but still a decline from the first quarter.
   
Stocks have bobbled in recent sessions amid a growing feeling on Wall Street that the economy might be slowing too much. So a slight improvement in the GDP was a welcome sign to investors concerned about corporate profits.

In the first hour of trading, the Dow Jones industrial average rose 9.29, or 0.08 percent, to 11,379.23.
   
Broader stock indicators were also narrowly higher. The Standard & Poor's 500 index advanced 1.07, or 0.08 percent, to 1,305.35, and the Nasdaq composite index rose 3.07, or 0.14 percent, to 2,175.37. The S&P 500 is trading at its highest point in three months, while the Nasdaq is at a seven-week high.
   
Stocks in focus

Costco Wholesale warned it wouldn't meet earnings estimates in the quarter ending Sept. 3, due to thinner-than-forecast profit margins and an income tax charge.
   
Novell Inc. may decline after beginning an internal review of its stock-option grants that could result in not filing its quarterly results on time. Novell estimated that revenue fell a weaker-than-forecast 4 percent during its fiscal third quarter.
   
Euronext, the European stock exchange operator that agreed to merge with the NYSE Group Inc., reported a 63 percent profit rise. It also for the first time set a date for a vote on the merger, in December.
   
AnorMed Inc., a Vancouver-based biopharmaceutical company, said it rejected an unsolicited $8.55 a share in cash takeover bid from Genzyme Corp. AnorMed said it hired Goldman Sachs as a financial adviser and formed a special advisory committee to review, consider and evaluate strategic alternatives.
    
AnorMed closed Tuesday at $5.03 a share.

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Dollar unmoved by US GDP revision

LONDON - The dollar barely budged on the news that the US economy grew by more than was first estimated during the second quarter of the year.
   
The US government revised its estimate of second-quarter economic growth up to 2.9 pct from the initial 2.5 pct. The revision was largely in line with Wall Street's 3.0 pct consensus forecast.
   
Analysts said the upward revision will do little to expectations about the third quarter and the interest rate outlook, as most of the improvement has  come from inventories.
   
There are very few Fed watchers who think the US central bank will raise interest rates again any time soon.
   
That view was cemented by the publication yesterday of the minutes to the August 8 meeting, which showed that the Federal Open Market Committee expecting below-trend growth to rein in domestic inflation pressures in the months ahead. At that meeting, the FOMC held its key Fed funds rate at 5.25 pct following 17 consecutive quarter-point increases.
   
The next event that could impact on US rate expectations is Friday's US jobs report for August.
   
Before then the market has tomorrow's European Central Bank rate-setting meeting and ensuing press conference to digest. Though the central bank is not expected to lift its key refi rate from the current 3.00 pct, the market will be keen to hear what ECB president Jean-Claude Trichet says in the briefing.
   
Most market participants think Trichet will continue to promise "strong vigilance" and indicate that there is still scope for the removal of monetary accommodation. As a result, most think the refi rate will be lifted by a quarter point in both October and December to end the year at 3.50 pct.
   
Elsewhere, the pound remained supported by the news that UK mortgage lending surged to its highest level in nearly three years in July and a survey's findings that high street sales in the UK rose at their fastest rate in over a year and a half year during August.
   
The Bank of England said net mortgage lending surged by 9.8 bln stg in July, the highest level since September 2003 and well above analysts' forecasts for a more moderate increase of 9.0 bln stg.
   
In its monthly distributive trades survey, the Confederation of British Industry said 45 pct of retailers polled said sales were up on a year ago during August, while 33 pct said they were down. The ensuing balance of +12 pct is the strongest since December 2004's +33 pct.

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The European Markets at 11.30 GMT

London - UK blue chips continued to extend gains at midday, with renewed M&A hopes in the financial sector overshadowing poorly-received numbers from Corus and ahead of an expected positive start to US trading, dealers said.
   
At 11.50 am, the FTSE 100 had moved further above the 5,900 level, 27.6 points stronger at 5,915.9, while the broader indices were also higher.

Frankfurt - At 2.07 pm, the DAX 30 index was 15.84 points or 0.27 pct higher at 5,862.86, having moved between 5,852.19 and 5,874.54 so far this session. The MDAX was at 8,158.97, up 56.72 points or 0.70 pct, while the TecDAX was at 645.81, up 2.46 points or 0.38 pct.

Paris - At 12.54 pm, the CAC 40 index was up 19.22 points or 0.4 pct at 5,179.54, on volume of 1.3 bln eur.

Amsterdam - Shares were higher at midday amid a rise in US futures pointing to a higher opening of Wall Street, while Corus fell after reporting disappointing first-half earnings, dealers said.
   
At 12.37 pm, the AEX was up 1.36 points or 0.29 pct to 469.13, after opening at 470.06.

Brussels - Shares were higher in midday trade as overnight Wall Street gains and lower oil prices contributed to positive investor sentiment ahead of tomorrow and Friday's corporate results, traders said.
   
At 2:05 pm, the Bel 20 was up 11.53 points or 0.29 pct at 3,941.25

Milan - Share prices were higher at midday, boosted by gains in banking shares and Mediaset, dealers said. At 12.13 pm, the Mibtel was up 0.44 pct at 29,041 points and the S&P/Mib added 0.38 pct to 37,945.

Madrid - Share prices were higher in thin midday trade amid continued easing oil prices, and in line with European markets, with Abengoa sharply higher on robust first half results, dealers said.
   
At 12.25 pm, the IBEX 35 index was up 21.8 points at 12,168.7, after trading in a range of 12,164-12,197, on thin volume of 901 mln eur.

Stockholm - Shares remained in positive territory in midday trade, but were off morning highs with Ericsson holding onto its strong gains in the wake of a rating outlook upgrade from S&P, dealers said.
   
At 12.15 pm, the OMX Stockholm index was up 0.48 pct at 318.39 points, while the OMX Stockholm 30 index was up 0.60 pct at 991.38. Turnover was 8.84 bln skr.
   
Helsinki - Helsinki shares were higher in fairly brisk midday trade, led by Nokia, with Fortum falling back a touch after Deutsche Bank downgraded the stock to 'hold' from 'buy' on valuation grounds, dealers said.
   
At 1.00 pm,the OMX Helsinki 25 index was 0.50 pct higher at 2,574.66 and the OMX Helsinki index was up 0.67 pct at 8,954.41 on a turnover of 343 mln eur.

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Asian shares close mostly lower ahead of economic data releases

HONG KONG - Share prices across the Asia-Pacific region closed mostly lower ahead of the release of economic data and on a lack of positive news, dealers said.
   
Tokyo share prices finished lower, with investors awaiting the release of Japanese industrial output figures tomorrow, the revised second-quarter US GDP figures later today and the US non-farm payroll numbers for this month on Friday, dealers said.
   
Analysts said a weaker tone in energy and commodity-related stocks caused by a pullback in oil prices overnight had also weighed on the main indices.  The blue-chip Nikkei 225 Stock Average closed 18.54 points or 0.1 pct lower at 15,872.02, after moving between 15,769.16 and 15,962.93.
   
The broader TOPIX index of all first-section issues shed 3.33 points or 0.2 pct at 1,612.66. The index traded between 1,603.30 and 1,622.31.
   
Australian shares closed slightly lower with investor sentiment flat due to a slowdown in the merger news and earnings reports which have recently driven the market, dealers said.
   
The S&P/ASX 200 slipped 0.3 points or 0.01 pct to close at 5,067.3. The benchmark indicator closed off the day's low of 5,063.3, with the high at 5,082.6.
   
Hong Kong shares were higher in afternoon trade after weak consumer confidence figures in the US bolstered hopes that the Federal Reserve will keep interest rates unchanged at its next meeting, dealers said.
   
They said a drop in oil prices overnight to below 70 usd a barrel also encouraged investors.
   
Data released last night showed US consumer confidence falling to a nine-month low in August, reinforcing the case against an interest rate increase, dealers said.
   
At 3:44 pm the Hang Seng Index was up 151.79 points or 0.89 pct at 17,234.72.
   
In China, A-shares in Shanghai and Shenzhen closed slightly higher, bolstered by the strong yuan, with property and tourism stocks in favor, dealers said.
   
The Shanghai A-share Index added 4.39 points or 0.25 pct to 1,740.07 and the Shenzhen A-share Index was up 3.24 points or 0.75 pct at 435.80.
   
Seoul shares ended mixed as foreign investors unloaded blue chips to lock in yesterday's profits, dealers said.
   
South Korea's July current account deficit dampened sentiment, swinging to a 212.1 mln usd deficit in July after posting surpluses in the preceding two months, they said.
   
The KOSPI index closed down 3.26 points or 0.24 pct at 1,341.35, off a high of 1,346.99 and a low of 1,337.96.

Asian Bourse Round-Up

For a full list of closing figures, click here

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Base metals edge higher as Escondida strike expected to continue

LONDON - Base metals edged higher as the market consolidated after yesterday's weak close and as the strike at Chile's giant Escondida mine, which looks set to continue, provided ongoing support for copper.
   
Nickel bucked the trend, however, as traders took profits from near record high price levels and as the LME said nickel stocks, which are at critically low levels, gained 84 tonnes to 5,892 tonnes.
   
At 2.18 pm, LME copper for three-month delivery was at 7,490.00 usd a tonne, up from 7,400.00 usd at the close yesterday, while nickel was down at 27,950.00 usd a tonne against 28,500.00 usd.
   
Other metals edged higher, although lead dipped slightly.
   
Zinc was at 3,355.00 usd against 3,295.00 usd, lead was at 1,223.50 usd against 1,225.00 usd, aluminium was at 2,492.50 usd against 2,470.00 usd and tin was at 8,850.00 against 8,700.00 usd.
   
Metals closed lower yesterday, with copper under pressure amid rumours, later denied, of a settlement at Escondida and amid much weaker than expected US consumer confidence data.
   
They recovered slightly today as the market consolidated and as traders responded to comments from Escondida's management denying reports of informal talks with union representatives.
   
Oil prices, which dropped to three month lows this week, moved slightly higher as traders awaited the weekly U.S. inventories report. Crude prices, still below $70 per barrel, were also influenced by an upcoming United Nations deadline for Iran to end its uranium enrichment.

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