US & World Daily Markets Financial Briefing 09-11-2006

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Stocks mixed on Cisco earns, trade data

NEW YORK - Wall Street was mixed in early trading Thursday as investors weighed strong quarterly results from Cisco Systems Inc. and an economic report that showed the trade deficit narrowed by its largest amount in five years.
   
Although blue chips pulled back in early trading, broader stock indexes extended their gains for the fourth straight day. Stocks have rallied this week on optimism that political gridlock in Washington will be favorable to businesses.
   
Investors also cheered a series of economic reports released in the morning. The Commerce Department said America's trade deficit showed a sharp improvement in September. Meanwhile, the Labor Department said the number of newly laid off workers had a bigger than expected drop last week.
   
In the first hour of trading, the Dow Jones industrial average fell 9.76, or 0.08 percent, to 12,166.78. The Dow reached a new closing high of 12,176.54 on Wednesday.
   
Broader stock indicators rose Thursday. The Standard & Poor's 500 index was up 1.21, or 0.09 percent, at 1,386.93, and the Nasdaq composite index added 11.37, or 0.48 percent, to 2,396.31.

Looking to Thursday's session, data on U.S. import prices, weekly jobless claims, wholesale inventories and the University of Michigan's consumer confidence measure are all due to be released.
   
Import prices probably fell as it became cheaper to import oil. Oil futures on Thursday rose 38 cents to $60.22 a barrel. Also expected is a rate hike from the Bank of England, which is expected to lift its key rate to 5 percent from 4.75 percent.
    
Cisco Systems pushed technology stocks higher after the world's largest networking equipment maker reported a 28 percent jump in fiscal first-quarter profit. Retail stocks advanced after J.C. Penney Co. said higher sales caused a 22.6 percent gain in third-quarter profit.
   
Also in focus will be media conglomerate News Corp, which returned to profitability on a 4 percent revenue rise driven by its cable networks, satellite-television operations and the Fox network.
   
Rival Viacom is expected to release earnings, with Walt Disney & Co. financials due after the close of trading.
   
American International Group also will release quarterly earnings.
   

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Pound falls after BoE raises rates as expected; dollar up on trade data

LONDON - The pound fell after the Bank of England's fully expected decision to raise interest rates today as the accompanying statement gave little indication that further rate hikes can be expected.
   
The BoE raised its key repo rate by a quarter point to 5.00 pctm, taking UK rates to their highest level since before the September 11, 2001 terrorist attacks on the US in a move widely expected by the market.
   
In the statement given with the release, the BoE said inflation is likely to rise further in the near term and pointed to solid economic growth and "rapid growth" in money supply and credit, but this was not quite as hawkish as some in the market had hoped.
    
At 1.37 pm, the pound was trading at 1.8990 against the dollar, down from 1.9067 just before the rate announcement, while the euro rose to a 20-day high against the UK currency of 0.6730 stg from 0.6705 previously.
   
Elsewhere, the dollar rose following the release of better-than-expected US trade data.
   
The figures showed the trade deficit narrowed 6.8 pct to a 64.3 bln usd in Sept, compared with a 66 bln usd deficit economists had expected, the largest percentage drop since Dec 2004.
   
Meanwhile, the yen continued to fall, with the euro breaking above the record 151 yen mark after resistance barriers were broken earlier today.

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

The European Markets at 13.30 GMT

London - UK blue chips stayed weak at midday, off session lows although there was little real reaction to the widely expected news that the Bank of England has sanctioned another quarter point hike in UK interest rate.
   
At 12.01 pm, the FTSE 100 index was 16.6 points lower at 6,222.4, albeit off the late morning low of 6,212.6, having climbed to a fresh 5-1/2 year high of 6,250.4 in opening trades. The broader FTSE indices were mixed.

Frankfurt - German shares were trading flat in mid-afternoon trade with the distance between the top riser Siemens and top faller Adidas continuing to widen in a reflection of the markets interpretation of their third quarter results, dealers said. While Siemens shares raced ahead after results beat analyst expectations, Adidas shares bore the brunt of lagging US spin-off Reebok.
   
At 2.05 pm the DAX was broadly flat at 6347.11 down 0.03 pct or 2.15 points. The MDAX was up 0.05 pct or 4.13 at 8,835.13,  while the TecDAX was at 701.55, down 0.18 pct or 1.24. The DAX Future contract was trading down 0.13 pct at 6,368.5

Paris - Share prices were flat at midday as investors awaited the opening of the US market following the Democratic wins in US midterm elections, At 12.25 pm the CAC-40 index was down 1.21 points or 0.02 pct at 5,435.95. 

Milan - Share prices were slightly down at midday, with Fiat leading decliners on news its chief executive will leave his role at the group's car unit next year, and Fondiaria-SAI depressed by a broker downgrade.
   
At 12.30 pm, the Mibtel index fell 0.28 pct to 30,971 points and the S&P/Mib was off 0.33 pct at 40,274, while volumes were 2.68 bln eur.

Madrid - Share prices turned lower midday after a firm opening, with Iberdrola in the limelight amid reports that the Basque utility is in talks to acquire Scottish Power. At 12.10 pm, the IBEX-35 index lost 16.89 points to 14,070.0, after trading in a range of 14,055-14,112, on turnover of 2.1 bln eur.

Stockholm -  Shares remained in slightly positive territory in midday trade, off a touch from morning levels as bargain hunting eased. At 12.30 pm, the OMX Stockholm index was up 0.38 pct at 357.76 points, while the OMX Stockholm 30 index was up 0.30 pct at 1,110.90.

Switzerland - Share prices were slightly higher in quiet afternoon trade with the market taking a breather following recent steep gains and a raft of earnings news out earlier this week. At 1.15 pm, the Swiss Market Index was 3.30 points higher at 8,780.02, while the Swiss Performance Index was up 7.05 points at 6,863.52.

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Asian shares close mixed as caution outweighs Wall St rise

HONG KONG - Shares across the Asia-Pacific region closed mixed, with local factors in some markets outweighing Wall Street's record close.
   
Tokyo shares ended lower with the market remaining in a cautious mood ahead of the release tomorrow of September machinery orders. Data will be closely watched as it could give investors an insight to the state of the Japanese economy following a raft of soft data releases recently.
   
Investors were also worried about arbitrage-related selling ahead of the settlement of futures and options contracts tomorrow.
   
The blue-chip Nikkei 225 Stock Average closed 17.17 points or 0.11 pct lower at 16,198.57, off a low of 16,094.49. The broader TOPIX index of all first-section issues declined 8.44 points or 0.53 pct to 1,589.06, off a low of 1,579.84.
   
Yutaka Miura, a senior strategist at Shinko Securities, said investors were poised to unwind their positions ahead of key economic data and the special quotation (SQ) for settling futures and options contracts.
      
Australian shares finished down as investors continued yesterday's profit taking following recent record highs. Data showing a drop in employment for October added to the negative sentiment.
      
Dealers said major banking stocks led the market lower following the Reserve Bank of Australia's decision yesterday to raise interest rates by 25 basis points to 6.25 pct. The S&P/ASX 200 lost 30.2 points or 0.55 pct to close at 5,429.0, retreating further from Tuesday's record close of 5,491.6.
   
The key index closed above the day's low of 5,406.3 and below the high of 5,450.2.
   
Hong Kong shares were higher in afternoon trade as the market rebounded from yesterday's falls, with strong interest in China-related stocks and generally positive sentiment after Wall Street's record close overnight. At 3.26 pm the Hang Seng Index was up 153.29 points or 0.81 pct at 18,964.53.
   
In mainland China, A-shares in Shanghai and Shenzhen closed sharply higher on new money inflows, partly due to a rising yuan, with banks and real estate developers snapped up.
   
The Shanghai A-share Index added 31.41 points or 1.60 pct to 1,992.68 and the Shenzhen A-share Index was up 5.58 points or 1.20 pct at 470.84.
   
Seoul shares closed sharply higher, with the index at its highest level since May, as investors cheered the Bank of Korea's decision to maintain its call rate target for November at 4.5 pct on persistent concerns over a slowing economy.
   
Continued gains on Wall Street, coupled with strong program buying, pushed the index near 1,400 points. Following the rate decision, domestic demand-linked stocks such as builders and banks turned sharply higher.
   
The KOSPI index closed up 19.37 points or 1.40 pct at the session high of 1,399.44, the strongest level since May 17 when it finished at 1,401.47. The low was 1,382.11.

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Oil rises above 60 usd on larger than expected decline in US fuel stocks

LONDON - Oil prices rose above 60 usd, extending yesterday's strong gains, as the market continued to benefit from a larger than expected decline in US fuel inventories and from concern over whether OPEC will cut output again next month.
   
At 10.41 am, December-dated Brent futures contracts were up 60 cents at 60.19 usd a barrel, after gaining 1.11 usd yesterday to settle at 59.59 usd.
   
Meanwhile, December-dated US light crude futures were up 41 cents at 60.25 usd.
   
Oil prices rallied yesterday after US inventory data showed that distillate stocks, which include the key winter heating oil fuel, declined by a much greater than expected 2.7 mln barrels last week.
   
The data also showed that gasoline stocks fell by a larger than expected 600,000 barrels while crude stocks rose by a smaller than expected 400,000 barrels, due to a dip in refining activity and imports.
   
Bache Financial analyst Christopher Bellew said that, while the prospect of another OPEC production cut is supporting the market, forecasts for milder than usual weather could pressure oil prices near term.
  
He noted also that distillate stocks remain healthy overall, notwithstanding yesterday's larger than expected decline. Distillates are currently about 11 pct higher than year ago levels.
   
Oil prices have tumbled since striking record highs in July of above 78 usd a barrel. They have stabilised over the past month, however, trading in a range of around 57-61 usd a barrel.
   
Analysts say the market is waiting to see what impact the Democrats' victory in the US mid-term elections yesterday will have on the oil market, although most expect the victory will have little impact near term.
 
Gold gains as crude oil rallies

Gold prices were higher as the precious metal found support from a crude oil price rally and from the potentially negative impact on the dollar from the Democrats' victory in yesterday's mid-term elections in the US.
   
At 12.52 pm, spot gold, which earlier touched an intra-day high of 622.00 usd, was quoted at 621.90 usd, up from 616.10 usd at the time of the COMEX market close in New York on yesterday.
   
Other precious metals were also higher; spot silver was up at 12.63 usd an ounce against 12.46 usd, platinum rose to 1,182.50 usd against 1,163.00 usd, while palladium was up at 330.00 usd against 324.00 usd.
   
Gold touched a one-week low yesterday as the precious metal was hit by profit taking and by weakening base metal prices, but analysts said the outlook for gold is still positive.

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