US & World Daily Markets Financial Briefing 13-02-2007

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Stocks rise on Alcoa bid report

NEW YORK - Wall Street jumped Tuesday, after a report that aluminum producer Alcoa Inc. was a takeover target stoked investors' confidence in U.S. corporate strength and hopes for more merger and acquisition activity.
   
The Times of London reported that Australia-based mining companies BHP Billiton Ltd. and Rio Tinto PLC are each considering offering to buy Pittsburgh-based Alcoa for $40 billion. The report came a day after Hindalco Industries Ltd.'s $3.6 billion offer to buy Canadian aluminum maker Novelis Inc.
   
An analyst upgrade of General Motors Corp., and strong earnings reports from insurance brokerage Marsh & McLennan Companies Inc. and Nasdaq Stock Market Inc., also boosted equity markets.
   
Investors largely brushed off a weak earnings report from KB Home, which said it swung to a loss in the last quarter as the recent housing slowdown forced the homebuilder to offer price concessions and sales incentives.
   
In early morning trading, the Dow Jones industrial average rose 74.75, or 0.60 percent, to 12,627.30. Broader stock indicators were also higher. The Standard & Poor's 500 index rose 6.65, or 0.46 percent, to 1,440.02, and the Nasdaq composite index rose 13.69, or 0.56 percent, to 2,464.07.
   
Bonds rose slightly after the Commerce Department reported that the trade deficit grew wider than analysts expected in December to $61.2 billion, pushing the gap to its fifth consecutive annual record in 2006. The yield on the benchmark 10-year Treasury note slipped to 4.80 percent from 4.81 percent late Monday.

The Russell 2000 index of smaller companies rose 4.44, or 0.55 percent, to 810.21.
 
In afternoon trading, Britain's FTSE 100 was up 0.12 percent, Germany's DAX index was up 0.24 percent, and France's CAC-40 was up 0.43 percent.
  
Stocks in focus

The metals and mining sector was boosted by the report that the two foreign companies were eying Alcoa. Alcoa rose $2.88, or 8.7 percent, to $35.78, while rival Alcan rose $2.43, or 4.6 percent, to $54.58.
   
In other signs that merger-and-acquisition activity is still on the rise, casual dining chain Applebee's International Inc. said Tuesday it is looking into a possible sale of the company. Drugstore operator CVS Corp. said Tuesday it increased the value of its proposed acquisition of Caremark Rx Inc. Applebee's rose $2.74, or 11.3 percent, to $26.97.
   
Caremark rose $1.58, or 2.6 percent, to $62.49.
   
Despite a loss in the latest quarter, KB Home rose 48 cents to $52.42, as its revenue came in stronger than analysts expected.

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Euro makes further gains on robust euro zone data, weak US trade figures

LONDON - The euro made further gains against major currencies after data this morning showed economic growth in the euro zone remained robust at the end of last year.
   
Euro zone GDP grew 0.9 pct from the third quarter, above the market consensus for a 0.5 pct rise. On an annual basis, GDP was 3.3 pct higher. The growth was driven mostly by the largest economies in the area, Germany and France.
    
Echoing the strong GDP figures was a rise of the German ZEW expectations index, for the third month in a row, into positive territory. The ZEW rose to 2.9 in February from -3.6 in January.
   
Although the rise was less than the 9.0 expected by the market, "the ZEW added that the index is likely to rise again in March," said Stuart Bennett at Calyon, noting that the index measuring views on the current situation posted a new record high.
         
Meanwhile, weaker-than-expected US trade data allowed the euro to make further gains against the dollar.
   
The US trade deficit widened to 61.2 bln usd in December, figures showed, well above the 59.5 bln usd expected by the market.
   
Besides gaining on the dollar, the euro also posted monthly highs against the pound, rising to about 0.670 from 0.665 earlier today.
   
For its part, the pound weakened across the board after lower-than-expected inflation data this morning.
   
The UK annual CPI rate fell to 2.7 pct from 3.0 pct in December and was below expectations for 2.9 pct. Other inflation measures, such as core CPI, RPI, and RPI-X also fell more than expected. RPI inflation, which is often used in wage deals, slowed to an annual 4.2 pct from 4.4 pct. The latest figure is also below expectations of no change at 4.4 pct.
   
While the headline CPI rate is still far above the Bank of England's 2.0 pct target, analysts said the data reduces the chances of more aggressive rate hikes by the central bank. In addition, inflation is expected to ease further this year.
   
The pound will be sensitive to labour market data tomorrow, with an eye on wage gains, as well as the BoE Inflation Report, which will shed light on the bank's assumptions and expectations for upcoming years.
   

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The European Markets at 11.00 GMT

Zurich - UBS AG said fourth quarter net profit from continuing operations rose to a better-than-forecast 3.145 bln sfr, up 19 pct year-on-year, citing continued strong levels of asset-based revenues, higher bond and equity underwriting fees as well as higher trading revenues. UBS said its financial businesses alone contributed 3.055 bln sfr, a rise of 18 pct year-on-year.

Ciba Spezialitaeten said its full year net loss including discontinued operations, restructuring impairment and other charges narrowed to 41 mln sfr, from a loss of 256 mln sfr last year, driven by improved sales and cost-cutting measures.
 
EBIT from continuing operations rose to a profit of 531 mln sfr, from 509 mln sfr, while sales from continuing operations were up to 6.352 bln sfr, from 6.035 bln sfr in 2005.

Swiss Re said it increased its non-life reinsurance portfolio by 14 pct, or 1.3 bln sfr, in the January renewals season. Total premium volume across its combined portfolio grew to 10.3 bln sfr.

Paris - Sanofi-Aventis unveiled an 11.1 pct jump in full-year net profit, ahead of the consensus of analysts, and said it has 18 new drugs and vaccines in the pipeline that will be submitted for regulatory approval in full years 2007 and 2008.
 
The 18 drugs and vaccines are among 46 the company currently has in Phase II-B and Phase III testing, up from 35 a year ago. The acceleration of pipeline products comes as Sanofi said it expects further difficulties from generic competition to existing drugs in 2007.

China plans to award Areva half of a 5.3 bln eur contract initially awarded to Toshiba Corp unit Westinghouse, L'Agefi daily reported, without naming its sources. The contract with Westinghouse is for the construction of four nuclear power reactors.

Alcatel-Lucent has told its works council that 1,500 jobs will go in France as part of its plan to cut 12,500 posts worldwide, unions announced in a joint statement. "Alcatel-Lucent management has announced.... it wants to lower Alcatel staff numbers in France to 11,000... staff are currently at 12,500," the statement read.

Amsterdam - Dutch biotechnology company Crucell NV posted a pre-exceptional net result below market expectations, while sales also came in below forecasts.
 
The headline figure - skewed by a 33.5 mln eur one-off charge for asset impairment and restructuring - came in at a loss of 24.9 mln eur, or 41 cents a share, compared to a 2.9 mln loss or 8 cents a share in the fourth quarter of 2005.

Euro group president Jean-Claude Juncker said euro zone GDP rose 2.6 pct last year and is expected to grow 2.0-2.3 pct in 2007. In an interview with the newspaper Luxembourg D'Wort, Juncker also said the sharp fall of the yen is a problem.

Frankfurt - ThyssenKrupp AG raised its full-year pretax guidance, stating that pretax profit will be 'significantly' above 2.5 bln eur thanks to strong performances at all of its units.
 
The conglomerate also raised its full-year sales target, saying that revenue would reach 48-49 bln eur. Earlier it said sales would be around 47 bln eur this year.

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Asian shares close higher;  Tokyo up on easing of rate fears

HONG KONG - Shares across the Asia-Pacific region closed higher, with Tokyo rising and Australia hitting new record highs. Tokyo shares, reopening after a holiday yesterday, ended higher on the waning of fears that interest rates will rise soon.
   
But investors generally refrained from chasing prices much higher while they await the release Thursday of the GDP data for the fourth quarter of last year, which may influence the Bank of Japan's policy board when it meets next week to decide on interest rates.
   
The blue-chip Nikkei 225 Stock Average closed 117.12 points or 0.67 pct higher at 17,621.45, off a high of 17,628.03. The TOPIX index of all first-section issues ended 10.81 points or 0.62 pct higher at 1,755.90, off a high of 1,757.99.
   
Australian shares closed up, with key indices hitting new records, as investors switched to bank stocks after some metal prices slipped in overnight London trade, weighing on resource counters.
   
Continued strong earnings releases are also underpinning investor sentiment and should keep pushing indices to further highs over the remainder of the reporting season.
   
The S&P/ASX 200 ended up 12.5 points or 0.21 pct at a new record close of 5,936.6, beating Friday's previous record close of 5,927.2. The key index also set a fresh intra-day record high of 5,947.1.
   
The broader All Ordinaries index gained 12.3 points to close at a record 5,907.3, also surpassing Friday's record close of 5,899.3 while setting a new intra-day record of 5,916.3.
   
Hong Kong shares had plunged more than 2 pct in afternoon trade as investors took profits ahead of Chinese New Year holidays next week and with Wall Street's continued weakness weighing on sentiment.
   
Hutchison Telecom fell sharply as investors fretted over the company's future following a deal to sell its entire Indian mobile telecom assets.  At 3.25 pm the Hang Seng Index had fallen 441.81 points or 2.15 pct to 20,151.60.
   
In mainland China, A-shares in Shanghai and Shenzhen closed higher on easing interest rate concerns, with airlines and property developers rising. The Shanghai A-share Index was up 25.93 points or 0.88 pct to 2,973.43 and the Shenzhen A-share Index was up 12.27 points or 1.69 pct at 738.37.
   
Seoul shares closed higher but off their intraday highs, with hopes for a breakthrough on the North Korean nuclear talks dampened by fears over the outlook for the semiconductor industry.
   
The market rose through 1,420 points in early trade on expectations that North Korea may move to dismantle its nuclear weapons in the wake of the latest round of six-party talks.
   
According to an ABC News report, a deal likely to be announced soon will include supplying 1 mln metric tons of fuel oil plus electricity for Pyongyang in return for its agreement to shut down its nuclear program.
   
The market lost much of its early steam, however, as foreign investors continued to cut positions on Samsung Electronics amid concerns over further declines in chip prices. The KOSPI index closed up 4.15 points or 0.29 pct at 1,418.44, off a low of 1,410.81 and a high of 1,424.66.

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Copper rallies as traders focus on rising Chinese demand

LONDON - Copper prices rallied as traders focused on signs of improved demand from China and after the LME reported a sharp drop in stockpile levels. At 1.54 pm, LME copper for three-month delivery was up at 5,620 usd a tonne against 5,470 usd at the close Friday.
      
Yesterday, data showed Chinese imports of unwrought copper and semi-finished copper products rose 44 pct in January over December.
   
Separately, copper is benefiting from a hefty decline in LME stocks. The LME said in a daily report earlier that copper stocks fell by 2,800 tonnes to total 213,250 tonnes.
   
Although copper stocks held in LME warehouses have more than doubled since the start of last year, Salaria said overall global supply is still below historical averages.
   
Aluminium prices also rallied as the metal continued to benefit from the general strike in Guinea, which has affected bauxite exports. Bauxite is a raw material used in the production of alumina, the raw material used to make aluminium.
   
Nine people have been killed to date in the west African country since the strikes began, while President Lansana Conte has declared martial law.
   
Aluminium was up at 2,770 usd a tonne against 2,707 usd at the close yesterday.
   
Tin climbed higher but held below a new record high of 12,475 usd a tonne hit yesterday.
   
Indonesian miner PT Koba Tin, which is being investigated on counts of illegal mining, has suspended shipments from the island of Bangka.
   
Tin was up at 12,600 usd a tonne against 12,475 usd at the close yesterday.
   
Lead extended yesterday's gains, still benefiting from Xstrata's declaration of force majeur on deliveries from its Mt Isa complex in Australia. Lead was up at 1,690 usd a tonne against 1,660 usd at the close yesterday.
   
In other metals, zinc was up at 3,165 usd against 3,110 usd while nickel rose to 36,100 usd against 34,875 usd.

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