US & World Daily Markets Financial Briefing 28-07-2008

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Stocks trade mixed following quarterly reports

NEW YORK - Stocks fluctuated Monday as investors examined a mix of earnings reports and monitored the price of oil, but found little reason to take the market squarely in any direction.

Among the latest companies to report, Verizon Communications Inc. said its second-quarter profit rose 12 percent, although revenue came in short of Wall Street's forecasts. Kraft Foods Inc. said higher prices helped offset rising commodity costs and listed second-quarter earnings nearly 4 percent.

Beyond corporate news, investors are waiting to see if oil prices' sharp drop of recent weeks has come to an end, or is just pausing. Light, sweet crude rose 24 cents per barrel to $123.50 on the New York Mercantile Exchange.

In midmorning trading, the Dow Jones industrial average fell 39.73, or 0.35 percent, to 11,330.96. Broader stock indicators fell. The Standard & Poor's 500 index fell 0.87, or 0.07 percent, to 1,257.86, and the Nasdaq composite index fell 4.24, or 0.18 percent, to 2,306.29. Stocks mostly fell last week as investors worried about the financial and housing sectors. The tech-heavy Nasdaq advanced following several strong corporate reports in the sector.

Bond prices rose Monday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 4.04 percent from 4.10 percent from late Thursday.

The dollar was mixed against other major currencies, while gold prices rose. Investors will also be looking later in the week to economic reports on employment, gross domestic product and the manufacturing sector. Verizon, one of the 30 stocks that makes up the Dow industrials, made some investors uneasy after customers disconnected their landlines faster than before. Verizon fell 45 to $34.

Kraft, the maker of Velveeta, Oreo cookies and Maxwell House coffee, rose $1.20, or 4.1 percent, to $30.58 aftter raising its forecast for the year. Private equity firm Kohlberg Kravis Roberts & Co. said Sunday it plans to go public on the New York Stock Exchange through a takeover of its Amsterdam-listed affiliate investment fund KKR Private Equity Investors LP.

Fannie Mae and Freddie Mac advanced after Congress over the weekend passed housing legislation to the White House that could benefit as many as 400,000 homeowners. The plan also offers temporary financial assistance to the two government-chartered companies, who together back or hold nearly half of all mortgage debt in the U.S. Fannie Mae rose 25 cents, or 2.2 percent, to $11.80, while Freddie Mac rose 18 cents, or 2.2 percent, to $8.45.

Tyson Foods Inc., the world's largest meat company, fell 97 cents, or 6 percent, to $15.26 after reporting a 90 percent drop in its fiscal third-quarter profits because of rising cost of grain used to feed chicken.

Unilever NV rose 61 cents, or 2.1 percent, to $29.75 after agreeing to sell its North American laundry detergents business, including the All, Snuggle, Wisk and Surf brands, to a private equity group Vestar Capital Partners for $1.45 billion.

Amgen Inc. surged $7.24, or 13 percent, to $61.16 after the company reported positive trial results for its osteoporosis drug candidate denosumab. Late-stage clinical trial results showed denosumab reduced the incidence of fractured vertebrae in post-menopausal women. Amgen jumped $7.60, or 14 percent, to $61.52.

Advancing issues narrowly outnumbered decliners on the New York Stock Exchange, where volume came to 189.8 million shares.

The Russell 2000 index of smaller companies fell 3.26, or 0.46 percent, to 707.08. Overseas, Japan's Nikkei stock average rose 0.14 percent. In afternoon trading, Britain's FTSE 100 fell 0.07 percent, Germany's DAX index fell 0.58 percent, and France's CAC-40 declined 0.61 percent.

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Forex - Dollar softens on ongoing U.S. financial sector jitters

LONDON - The euro was stronger against the dollar despite weaker-than-expected German consumer confidence data as investors continued to remain jittery about the U.S. finance sector. The U.S. government announced after market close on Friday that two more mortgage lenders were to be shut down, with investors fearing there may be more to come.

Earlier today the GfK market research institute said its consumer climate index for Germany is forecast to sink to 2.1 points in August, its lowest level since June 2003 and down from 3.6 points in July. The figure is far lower than the 3.5 point consensus forecast from a Thomson Financial News poll of economists.

Analysts said the figures indicate rising inflation is hitting consumers' willingness to spend, deepening the slowdown in the German economy. "The good times are definitely over and the German economy is on a slide to a recession-like scenario," said Carsten Brzeski at ING.

At 1110 GMT the euro was trading at $1.5758 having, compared to the day-high of $1.5717 hit at 0758 GMT. Looking further ahead analysts expect the dollar to continue to gain on the euro as the European economic data continues to take a turn for the worse, while weak U.S. data no longer comes as a surprise.

Elsewhere a turn lower in European equity markets meant the yen recovered after falling earlier to a one-month low against the dollar. However signs of long-term pick up in risk appetite begun to materialise last week and that coupled with falling oil prices mean analysts see little scope for a long-term rally in the Japanese currency.

"Altogether the outlook for the yen remains rather poor," said Commerzbank's Leuchtmann. "Because of low domestic interest rates and almost no rate hike speculation for the time being, the yen suffers from good news regarding the international financial sector," he added.

At 1110 GMT the dollar was trading at 107.62 yen compared to 107.77 yen at 0755 GMT. Elsewhere the pound remained under pressure following a a series of gloomy surveys on the UK economy.

Hometrack reported that house prices fell 1.2 percent between July and June, while the Land Registry reported house prices in England and Wales fell 1.0 percent between June and May. Added to this was a report from KPMG reporting that more than half of UK employers expect to lay off workers in the coming months.

Last week official figures showing a slump in retail sales during June and a fall in second quarter GDP growth fuelled talk that the economy is on the brink of a recession. "With the credit crunch, housing downturn and a lack of purchasing power weighing on the economy, a UK recession is starting to look unavoidable," said James Knightley at ING.

There is little top-tier UK data out this week, but the Nationwide house price index and the CBI's retail survey are both expected to add to the ongoing gloom. At 1110 GMT the pound was trading at $1.9885 compared to $1.9843 at 0755GMT. Meanwhile the euro was trading at 0.7922 pence compared to 0.7912 pence at 0755 GMT this morning.

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Euroshares open lower profit taking as Dow closed off highs; Ryanair, TNT weigh

LONDON - Europe's largest exchanges moved lower in opening deals as investors lock in profits ahead of the oncoming earnings deluge and as the DJIA closed well off intra-day lows on Friday, with disappointing updates from Ryanair and TNT.

At 09.35 a.m., the DJ STOXX 50 was down 11.85 points, or 0.43 percent, at 2845.05 and the DJ STOXX 600 was down 0.96 euros, or 0.34 percent, at 280.8.

Shares in budget airline Ryanair plunged 14.18 percent after the group warned it could make a full year loss of up to 60 million euros if oil prices stayed high and fares fell.

The Irish group said adjusted profit after tax for the three months to the end of June had come in at 21 million euros ($33 million). Ryanair said first-quarter revenues grew by 12 percent to 777 million euros. That was well below the 865.4 million average of five forecasts in a Reuters survey and lower than the most cautious of the five analysts, who predicted 836.4 million.

The Dublin-based carrier said consumer confidence was plummeting in an emerging recession in the UK and Ireland, which it planned to respond to by cutting fares more aggressively than competitors.

The shares were also under pressure after Citigroup cut its stance to 'hold' from 'buy' before the warning. Peer Easyjet slumped 7.15 percent and larger airlines were also lower. BA fell 4.96 percent. Shares in Lufthansa fell only 1.62 percent as shares found support from news Citigroup upped its rating to 'buy' and said the German flag carrier is its top pick.

And Holland's TNT NV dropped 8.26 percent after it said it expects full-year 2008 organic growth and operating margins to come in at the low end of its guided range as it reported worse-than-expected second quarter results.

Banks were on the back foot again as Citigroup downgraded the banking sector to 'underweight' from 'neutral', saying there will be more pain in the global economy as unemployment rises, there are more corporate failures, with asset values at risk and bad debt rates set to pick up.

Credit Agricole fell 2.45 percent, Unicredit fell back 2.19 percent. SG Secs cut the Italian bank to 'hold' from 'buy'. Cheuvreux downgraded Banco Popular to 'sell' from 'underperform'  Shares fell 0.99 percent.

But there was some unexpectedly good news in the consumer goods sector. Reckitt Benckiser shares moved up 2.09 percent after the world's biggest household cleaning goods maker, said second-quarter profits rose 11 percent and said it was on track to meet its full year sales and profit targets.

Group adjusted net profit for April-June of 240 million pounds ($476.4 million), in line with forecasts ranging from 229 million to 240 million and averaging 235 million pounds.

And investors cheered news Anglo-Dutch consumer goods company Unilever Plc., up 1.02 percent, said it will sell its North American laundry business to Vestar Capital Partners for $1.075 bln cash, saying the price-tag was in line with market expectations.

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Asian stock market summary

JAPAN

The Nikkei 225 Stock Average finished up 0.1 percent at 13,358.78, after trading listlessly for most of the day, with buying interest fuelled by Wall Street's rebound overnight after better-than-expected U.S. economic data eased concerns about the state of the economy.
   
But the gains were capped by caution ahead of the release of quarterly earnings Tuesday by Sony Corp. and Matsushita Electric Industrial Co., as well as key U.S. economic data. The broader Topix rose 0.2 percent to 1,300.79.

SOUTH KOREA

The KOSPI ended up 0.36 point at 1,598.29, as investors exercised caution ahead of a series of data to be released at home and in the United States, with big technology names such as Samsung Electronics extending their falls on tepid earnings prospects. Key data to watch this week include the U.S. employment report and gross domestic product and South Korea's factory output and inflation numbers.

AUSTRALIA

The benchmark S&P/ASX 200 index fell 48.4 points to 4,922.1, as a profit warning from Australia and New Zealand Banking Group deepened concerns about credit market losses, triggering further selling in the banking sector.
   
ANZ shares slumped 10.9 percent, the steepest one-day percentage fall since October 1987, after it warned of lower profit and predicted bad debt charges of around A$1.2 billion in the second half due to the ongoing credit crisis

CHINA

The benchmark Shanghai Composite Index closed up 1.32 percent at 2,903.01, on signs of a shift in monetary policy weighted towards growth. Airlines and oil refiners led the gains but banks and property stocks came off their highs.
   
The Shanghai A-share Index was up 1.33 percent at 3,045.50, while the Shenzhen A-share Index rose 0.98 percent to 911.83. The Shanghai B-share Index rose 0.32 percent at 214.89, while the Shenzhen
B-share Index gained 0.81 percent to 468.31.

PHILIPPINES

Manila's 30-company composite index closed up 1.1 percent at 2,540.81, buoyed by positive leads overseas such as Wall Street rebounding on Friday and oil futures trading below $124 a barrel. But trading was subdued and turnover thinner as investors continued to worry about inflation and the overall condition of the U.S. economy.

HONG KONG

The Hang Seng index closed down 53.5 points or 0.24 pct at 22,687.21, off a low of 22,619.23 and high of 22,862.03. 

INDIA

India's benchmark 30-share Sensex of the Bombay Stock Exchange closed up 74.17 points or 0.52 percent at 14,349.11 and the broader 50-share S&P CNX Nifty of the National Stock Exchange gained 20.25 points or 0.47 percent to close at 4,332.10.
   
TAIWAN MARKETS CLOSED DUE TO TYPHOON

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Metals - Copper up but summer slowdown, rising stock cap gains

LONDON - Copper rose, continuing its recovery from a five week low hit last week, on bargain hunting, steady oil prices and as demand prospects improved.

The red metal took a battering last week as oil prices tumbled to a seven week low and as equity markets weakened. Lower oil usually reduces investment into commodities as the need to hedge against inflation falls. Falling equity markets meanwhile, often used as a barometer for economic growth, also pushed copper lower.

Basemetals.Com analyst William Adams said that although prices were higher Monday, the recent pull back in the oil price has led to a widespread correction in most of the leading base metals and with the summer slowdown in full swing, consumers and funds seem in no hurry to buy heavily just yet.

At 11:12 a.m., three-month copper on the LME rose to $8,000 per tonne from $7,956 at the close Friday. Meanwhile, rising copper stocks also capped the metal's gains. The LME said Monday copper stocks stored in warehouses across the globe rose by 2,575 tonnes and now stand at 136,050 - the highest level since early 2008.

Elsewhere on the LME, aluminium was higher at $2,978 per tonne from $2,969, nickel rose to $18,499 per tonne from $18,450, zinc was up at $1,860 per tonne from $1,845, tin climbed to $22,500 per tonne from $22,350 and lead jumped to $2,170 per tonne from $2,115 at the close Thursday.

Oil prices rise as pipelines attacked in Nigeria

LONDON - Oil prices rose on Monday as rebels said they had sabotaged two pipelines in Nigeria, which is a major exporter of crude. Brent North Sea crude for September climbed 89 cents to 125.41 dollars a barrel.

New York's main contract, light sweet crude for September delivery, advanced by 92 cents to 124.18 dollars a barrel.

The Movement for the Emancipation of the Niger Delta (MEND) claimed on Monday that it had sabotaged two Shell pipelines in Rivers state in southern Nigeria overnight.

In an email, it said "heavily armed" MEND fighters had attacked the pipelines at Kula and Rumuekpe operated by Shell Petroleum Development.

Two Shell spokesmen said the claim -- and the extent of any damages -- were being verified. Word of the sabotage came after the release on Saturday of eight foreign workers who had been kidnapped near a major oil export terminal in southern Nigeria with no ransom being paid.

The oil-rich Niger Delta has seen numerous kidnappings targeting foreign energy firms, claimed by militants demanding a greater share of oil wealth for the region's inhabitants.

Violence in the southern region has reduced Nigeria's total oil production by a quarter since January 2006. Nigeria was Africa's biggest oil producer until it was overtaken in April by Angola, according to Organization of Petroleum Exporting Countries (OPEC) figures.

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