US & World Daily Markets Financial Briefing 30-11-2006

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Department stores fall

NEW YORK - Some department store shares declined in Thursday morning trade, after weaker than expected sales at several middle-tier chains offset surprisingly strong results from high-end retailers.
   
Federated shares rose 19 cents to $41.05; J.C. Penney Co. shares fell $2.92, or 3.7 percent, to $77.68; Saks Inc. shares dipped 27 cents to $20.12; Nordstrom Inc. shares lost $1.78, or 3.5 percent, to $48.63; Kohl's Corp. shares fell $2.27, or 3.2 percent, to $68.41, and Dillard's Inc. shares trimmed 96 cents, or 2.7 percent, at $34.60.
   
Before Thursday's open, Federated and Saks separately reported November same-store sales above Wall Street targets. Same-store sales measure activity in stores open at least a year and are a key performance gauge for retailers.
   
But Nordstrom, which also caters to a higher-income clientele, reported November sales short of analysts' consensus view. Mid-tier department store chains Kohl's and J.C. Penney also said November sales came in below analysts' average forecast.
   
Same-store sales at department stores were slightly under forecast overall, according to Thomson Financial. November same-store sales rose 4 percent, versus an expected 4.2 percent advance, based on estimates for nine department store chains surveyed.
   
November retail sales appeared "wobbly" and below expectations, Bank of America analyst Dana E. Cohen said. "However, this is likely due in part to warm November weather and in part to the calendar," the analyst wrote in a client note.
   
A full shopping weekend before Christmas and an extra shopping day between Thanksgiving and Christmas this year will likely see more sales occurring later in the holiday, Cohen added. "We therefore think for most companies, December will offset the weak November."

Wal-Mart reported a 0.1 percent dip in same-store sales for November. That's in line with the reduced forecast from analysts surveyed by Thomson Financial, which forecast unchanged growth. Including a drop in gasoline revenues from its Sam's Club division, which Wal-Mart did not include in its calculation, same store-sales fell 0.3 percent.
   
Wal-Mart has struggled in recent months on a mix of problems, including the fact that its lower-income customers were hurt by soaring gas prices. But the company's lackluster sales have persisted even as the cost of gas eased, an indication that there are other factors that are dragging down Wal-Mart's results.
   
Discounter Target said same-store sales rose 5.9 percent, topping forecasts of a 5.7 percent gain, as consumers bought electronics and health care and consumer products.
   
But Costco reported a 5 percent gain in same-store sales, below the 5.7 percent estimate. The retailer, which sells gasoline, was hurt by declining prices at the pump.

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Dollar weak after below-forecast US jobless claims numbers

LONDON - The dollar stayed weak, hovering around the 1.32 mark against the euro and staying at 14-year lows against the pound following disappointing US weekly jobless claims numbers.
   
US jobless claims surged by 34,000 to 357,000 in the week just gone, well below analysts' forecasts for a fall in claims to 314,000, although the figures are likely to have been distorted by the Thanksgiving holiday.
   
The news broadly offset a stronger-than-expected core PCE deflator, the measure of inflation favoured by the Federal Reserve.
  
The PCE measure showed that core inflation rose by 2.4 pct on an annual basis, above expectations for a more moderate 2.3 pct.
   
IDEAglobal strategist Divyang Shah said the market's reaction to the weak jobless claims over the strong PCE number highlights the sensitivity towards concerns over the prospects for US economic growth rather than inflation risks.
   
This comes in contrast to the speech by Federal Reserve chairman Ben Bernanke earlier this week, when he indicated that the most important risk to the economy is the upside risk to inflation, suggesting that US rate-setters will retain their bias to tighten interest rates for the time being.
   
Shah noted that corrections and pull-backs for the dollar "remain elusive" and price action continues to suggest that the euro will move towards 1.35 usd while the pound edges ever closer to the 2 usd mark.
   
Meanwhile, the pound recovered against the euro from earlier falls following this morning's weaker-than-expected UK retail sales and consumer confidence surveys, and hit new 14-year highs against the dollar of 1.9590 usd.
   
The Confederation of British Industry's distributive trades survey showed retail sales volumes fell to their lowest level in eight months during November, confounding expectations for a sizeable pick-up. GfK NOP's November consumer confidence barometer also slipped unexpectedly by two points, reflecting increased pessimism about the UK economy.
   
These were offset, however, by the earlier very strong Nationwide house price survey, with many in the market still looking for the Bank of England to raise interest rates further in 2007.

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The European Markets at 13.30 GMT

London - UK blue chips remained higher in midday deals, after a choppy start, with strength in commodity plays and a handful of M&A rumours helping to bolster sentiment while across the Atlantic, Wall Street is seen opening higher continuing yesterday's rally. By lunchtime, the FTSE 100 index was up 5.4 points at 6,089.8, although the broader indices were mixed.

Frankfurt - German shares were higher midday clocking up gains following a firmer session overnight on Wall Street as GDP data eased concerns that US growth was slowing too quickly, while Metro led on a positive outlook on German Christmas sales from a key retailing organization. At 12.28 pm, the DAX 30 index was up 22.39 points or 0.35 pct at 6,386.19 having moved between a low of 6,353.37 and a high of 6,394.23 so far this session.

Paris - Shares were slightly higher at midday, buoyed by Wall Street's overnight gain and continued speculation about French companies being caught up in merger and acquisition activity, although the dollar's further weakness was keeping the market's gains limited. At 12.12 pm, the CAC-40 index was up 8.95 points or 0.17 pct at 5,390.20. Of stocks in the index, 22 were higher, 17 were lower and one was unchanged.

Milan - Share prices were slightly higher midday after GDP data for the Euro zone and ahead of key US data, with Fastweb outshining the market on rumours, denied by the company, of an interest from Rupert Murdoch's News Corp. At 12.03 pm, the Mibtel index was up 0.11 pct at 31,246 points and the S&P/Mib was up 0.1 pct at 40,580, on volume of 1.88 bln eur.

Amsterdam - Shares in Amsterdam were almost flat at midday amid relatively low trading volumes as index heavyweight stocks weighed while Numico rose following positive comments from a brokerage. At 12.41 pm, the AEX was down 0.03 pct or 0.14 points at 481.85.

Madrid - Share prices were moderately higher midday, following a solid overnight performance on Wall Street, while Sacyr Vallehermoso continued its volatile outperformance. At 12.00 pm, the IBEX-35 index was up 32.1 points at 14,008.1, after trading in a range of 13,960-14,031, on turnover of 2.5 bln eur.

Stockholm - Shares were slightly lower in midday trade, led by profit taking in telecoms  after the bourse's strong session yesterday, and amid continued jitters over the index level. At 12.35 pm the OMX Stockholm index was down 0.24 pct at 349.33, and the OMX Stockholm 30 down 0.35 pct at 1,081.39. Turnover amounted to 9.500 bln skr.

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Asian shares close higher on Wall St rally

HONG KONG - Shares across the Asia-Pacific region closed higher, with markets boosted by a rise on Wall Street in response to a revision to US third quarter growth that was higher than expected.
   
Tokyo shares gained as investors, led by foreign funds, cheered the US GDP figures and robust industrial output figures in Japan released yesterday, with the data helping ease worries about the global economy.
   
The Nikkei 225 Stock Average closed up 198.13 points or 1.23 pct at 16,274.33, its high for the day. The broader TOPIX index of all first-section issues rose 22.93 points or 1.45 pct to settle at 1,603.03.
   
Australian shares finished higher as investors were buoyed by the US rally, with limited news in the domestic market. Shares were mainly driven by gains in resource stocks while the banking sector experienced modest buying.
   
The S&P/ASX 200 rose 29.5 points or 0.54 pct to close of 5,482.1, drawing nearer to the record close of 5,491.6 set on Nov 7. The benchmark index closed off the day's high of 5,488.9 and above the low of 5,455.1.
   
Hong Kong shares had risen strongly by mid-afternoon, on Wall Street's lead. At 3.30 pm the Hang Seng Index was up 218.10 points or 1.16 pct at 18,999.03.
   
In mainland China, A-shares in Shanghai and Shenzhen closed broadly higher on the back of strong fund inflows that have been attracted by a strengthening yuan.
      
The Shanghai A-share Index jumped 47.66 points or 2.21 pct to 2,206.09 and the Shenzhen A-share Index was up 12.79 points or 2.55 pct at 514.07, a 50-month high.
   
Seoul shares closed at a more than six-month high, as foreign investors turned net buyers for the first time since Nov 16. Wall Street's overnight gains and program buying also provided a boost along with stronger Asian markets.
   
Brokerages, builders, retailers and large cap IT stocks posted strong gains.
   
The KOSPI index closed up 9.66 points or 0.68 pct at 1,432.21, the highest since May 12 when it hit 1,445.20. The index moved between 1,427.67 and 1,434.85.

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LONDON - Copper steadied above 7,000.00 usd per tonne, having posted gains yesterday on a stronger than expected revision to US third quarter GDP data and on rising oil prices, but analysts said with volumes thin they see choppy trading conditions ahead.
   
At 1.05 pm, LME (London Metal Exchange) copper for three month delivery was unchanged from yesterday's close at 7,020.00 usd.
       
Codelco, the world's largest copper producer, is negotiating a new labour contract with workers, as the old one expires on Dec 31, but the talks have dragged and there has been little news about their progress.
   
Analysts said while the Codelco talks are limiting the downside today, copper remains under pressure fron concerns over slowing US growth, notwithstanding yesterday's slightly stronger numbers.
  
Specifically, traders are concerned about the US housing sector, which has seen its biggest decline in over 15 years. They are also eyeing a near 40 pct rise in LME stockpile levels since mid-October.
      
Nickel has been benefiting from critically low stocks and an array of supply problems, with today's announcement from BHP Billiton lifting the metal once again, he said.
   
BHP said earlier the start-up of its Ravensthorp project in Western Australia has been delayed until the first quarter of 2008 from an original schedule of mid-2007.
   
LME nickel for three month delivery edged up to 33,500.00 usd against 32,750.00 usd at the close yesterday.
   
Other metals, except for aluminium, were also up. Three month zinc was up at 4,375.00 usd against 4,340.00 usd, tin was up at 10,550.00 usd against 10,350.00 usd, aluminium was down at 2,699.50 usd against 2,701.00 usd, while lead was up at 1,650.00 usd against 1,640.00 usd.

Oil prices rallied, with Brent crude rising above 64 usd in London to its highest point since mid-September as traders fretted over falling US energy inventories and forecasts for colder weather in the key US Northeast region.
   
Other factors driving the market were the possibility of further output cuts from OPEC next month, heavy falls in the US dollar and some solid economic data out in the US yesterday.
   
At 2.30 pm in London, front-month Brent North Sea crude contracts for January delivery were up 75 cents at 63.82 usd a barrel. At one point, the contracts hit 64.04 usd, the highest point since Sept 19.
   
Meanwhile, front-month New York light sweet crude contracts for January delivery rose 43 cents to 62.87 usd a barrel, near an intra-day high of 63.07 -- the highest point since Oct 2.
   
That cut was met with scepticism by traders who bet most OPEC members would not comply, however, those bets were put in question yesterday after PIRA energy said OPEC oil exports fell 1.28 mln bpd in the four weeks to Nov 19.
   
Man Financial analyst Ed Meir said while the report seems to differ from previous estimates of OPEC's exports, if it is true, the cartel's decision to cut output next month may not be as clear-cut as it seemed previously.
   
Oil prices have been trading in a range roughly at 58-62 for the past two months and although they have now broken out of that range, Meir said the apparent uptrend in prices could yet stall.

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