US & World Daily Markets Financial Briefing 29-11-2006

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Stocks rise on robust GDP report

NEW YORK - Wall Street opened higher Wednesday after a report showed the economy is in better shape than expected during the third quarter, easing concerns that growth was moderating too sharply.
   
The Commerce Department's report that gross domestic product expanded at a 2.2 percent annual rate soothed the market's concerns that the economy might not achieve a soft landing after more than two years of interest rate increases.
Wednesday's reading surpassed the previous estimate of 1.6 percent and topped economists' projections for a 1.8 percent gain.
   
The report was an encouraging sign that the housing slump hasn't been too much of a drag on the economy, and helped reverse a slide in the dollar and pushed major stock indexes higher. Stocks began to rebound Tuesday after the markets sustained their biggest losses since June on Monday.
   
In the first hour of trading, the Dow Jones industrial average rose 35.17, or 0.29 percent, to 12,171.62. Broader stock indicators also advanced. The Standard & Poor's 500 index was up 5.12, or 0.37 percent, at 1,391.84, and the Nasdaq composite index added 15.29, or 0.63 percent, to 2,427.90.
   
Crude-oil futures rose 32 cents to $61.31 a barrel ahead of the weekly energy statistics, which may show inventory building up.
   
Stocks in focus

Jewelry retailer Tiffany & Co. moved sharply higher after it reported third-quarter profit ahead of projections. Apple Computer Inc. gained on a report of increasing demand for its Macintosh computers and iPod music players.
   
Pfizer Inc., the world's largest drugmaker, edged higher after it announced plans to cut 2,200 U.S. sales jobs in a major restructuring.
   
Pengrowth Energy Trust said it agreed to buy Canadian oil and natural gas producing properties and undeveloped lands from ConocoPhillips for $1.04 billion.
   
3Com Corp. agreed to buy Huawei Technologies' 49 percent stake in a joint venture for $882 million, in an unusual auction where each bid for the other's side.
   
Wolseley PLC, a building materials supplier, rose in London trading after saying it's cut around 2,000 jobs in response to the declining U.S. housing market.
   
Former AIG CEO Maurice "Hank" Greenberg is buying "huge blocks" of New York Times Co. shares in a bid to break the Sulzberger family's control, according to a report in the New York Post.
   
Dynavax Technologies shares are expected to jump after it reported statistically significant results of a Phase III trial comparing hepatitus B vaccine Heplisav to Glaxo's Energix-B vaccine.
   
Dress Barn Inc. may rise after upping its earnings outlook after a 12 percent rise in quarterly sales.
   
Chico's FAS Inc. may see pressure after the large-sized women's clothing retailer reported a 21 percent profit fall and a 1.2 percent same-store sales decline.

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Dollar gains briefly on stronger-than-expected US GDP data

LONDON - The dollar staged short-lived gains after US data released this afternoon revealed a much bigger-than-expected upward revision to third quarter economic growth.
   
US third quarter GDP growth has now been revised up to 2.2 pct from the previous estimate of just 1.6 pct. Analysts had forecast a much smaller upward revision to 1.8 pct.
   
The upward revision reflected stronger inventory building and a smaller impact from the trade deficit than previously thought, though the news was tempered slightly as a key measure of inflation was revised down. The core PCE price index, the Federal Reserve's preferred measure of inflation rose by 2.2 pct in the quarter, down from the 2.3 pct estimated a month ago.
   
The euro briefly fell to day lows of 1.3133 usd after the data, while sterling dropped to below 1.95 usd, though the dollar was unable to sustain the gains as market players awaited the release of new home sales data at 1500 GMT.
   
The dollar has been on a downward path since Friday last week and this morning touched fresh 20-month lows against the euro of 1.3220 and two-year lows against the pound of 1.9547, and firmer data is unlikely to stem negative sentiment towards the currency too much, analysts said.
 
Overnight too, the dollar failed to make any headway following hawkish comments from Fed Chairman Ben Bernanke, who pointed to the "uncomfortably high" level of inflation.

Elsewhere, the yen continued to gain, coming off earlier record lows against the euro, on the back of strong Japanese industrial output data overnight as well as a higher Chinese yuan against the dollar.

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London -  By 12.30 pm, the FTSE 100 index was 28.9 points ahead at 6,054.8, though off its high of 6,075.1. The broader indices were also higher, with the FTSE 250 index up 136.6 points at 10,633.5. Volume was slightly above average, with 1.1 bln shares changing hands in 172,087 deals.

Sage Group topped the blue-chip risers with a gain of 13-1/4 pence to 254-1/4 after the UK accounting software supplier reported a reassuringly in-line 14 pct rise in full-year pretax profit and said it was confident about its prospects for future growth.
   
The only technology company in the FTSE 100 share index said pretax profit after an amortisation charge was 221.2 mln stg for the year to Sept 30 on revenue up 22 pct to 935.6 mln stg.

And strong results also brought buyers to Wolseley, 33 pence higher at 1,168, after the building materials company issued an upbeat trading statement. Wolseley said that revenues had grown by 15 pct and that it had seen high rates of organic growth in its US heating and plumbing business.
   
Elsewhere, shares in drug majors GlaxoSmithKline and AstraZeneca were also in demand on news that US rival Pfizer Inc plans to cut its sales force by 20 pct, raising the prospect that others may also be about to cut labour costs.
   
GlaxoSmithkline shares were up 35 pence at 1,366, while AstraZeneca added 59 pence to 2,989.

On the downside, a handful of shares going ex-dividend featured among the fallers, with National Grid, down 7 pence at 698, AB Foods, 8-1/2 pence weaker at 859-1/2, and SABMiller, 4 pence lighter at 1,073 all paying out today.

Paris - At 3.33 pm, the CAC-40 index was up 47.43 points or 0.89 pct at 5,353.67. Of stocks in the index, 34 were higher, five were lower and one was unchanged. Volume was 3.1 bln euro. On the Matif, December CAC-40 futures were trading up 48.5 points or 0.91 pct at 5,364.0.

Alstom remained the leading percentage gainer among blue chips amid speculation that Bouygues could raise its 24.4 pct stake after making positive comments about Alstom during a road show. Bouygues bought its Alstom stake earlier this year.
   
Alstom shares were up 3.70 eur or 4.54 pct at 85.25, while Bouygues was up 0.84 eur or 1.89 pct at 45.20.
   
Other substantial gainers included Schneider Electric, up 1.75 eur or 2.22 pct at 80.70, and Credit Agricole, up 0.58 eur or 1.85 pct at 32.00.
   
EADS was up 0.18 eur or 0.80 pct at 22.64, slightly paring earlier gains that came after Les Echos reported the company's shareholders are close to agreeing on a 4 bln eur bond issue that would be used to finance the Airbus A350 project. The EADS board is due to meet on Friday about the matter. Meanwhile, the company was holding a meeting with shareholders in Brussels today.
   
Electricite de France slipped after earlier gains and was down 0.08 eur or 0.16 pct at 48.72. Its EDF Energies Nouvelles unit surged on its first day of trading, following an IPO that attracted very strong demand from institutional investors.

Publicis underperformed, falling 0.17 or 0.6 pct to 28.53. The company will be removed from the CAC-40 benchmark from Dec 18, in favour of Vallourec, whose shares gained 5.20 to 202.50.

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Source: AFX News/Associated Press

Asian shares close higher on bargain hunting, Wall St rise

HONG KONG - Shares across the Asia-Pacific region closed higher after bargain hunters moved into markets after yesterday's sharp falls and Wall Street recorded a modest rise overnight.
   
Tokyo shares finished sharply higher after the release of industrial production figures for last month that were much stronger than expected, which soothed worries about the economy, dealers said.
   
But investors were not prepared to chase share prices much higher because they are waiting for the release of other economic data, they noted.
   
The blue-chip Nikkei 225 Stock Average closed 220.94 points or 1.39 pct higher at 16,076.20, off a high of 16,126.35. The broader TOPIX index of all first-section issues closed 24.99 points or 1.61 pct higher at 1,580.10, off a high of 1,582.43.
   
Australian shares closed higher, regaining yesterday's heavy sell-off and more as investors sought bargains in a market viewed as oversold.
   
Major banking stocks benefited the most from buying after a long run of sell-downs in the sector from record highs reached earlier this month. The S&P/ASX 200 jumped 68.3 points or 1.27 pct to 5,452.6, closing at the day's high and well above the low of 5,368.3.
   
Hong Kong shares were higher in afternoon trade, recovering some of yesterday's plunge on Wall Street's rise. At 3.23 pm the Hang Seng Index was up 125.83 points or 0.68 pct at 18,675.36.
   
In mainland China, A-shares in Shanghai and Shenzhen closed higher on bargain-hunting after recent corrections, with steel makers and financial issues boosted. The Shanghai A-share Index added 16.12 points or 0.75 pct to 2,158.43 and the Shenzhen A-share Index was up 7.86 points or 1.59 pct at 501.27, a 50-month high.
   
Seoul shares closed higher, recovering most of their losses from the previous session, with strong program buying sending large cap stocks higher.
   
With Wall Street's overnight rebound adding to the positive tone, investors also shrugged off lower-than-expected industrial output data and focused on the continued rise in the index of leading indicators, which measures future economic trends.
   
The KOSPI index closed up 11.08 points or 0.78 pct at 1,422.55, after moving between 1,413.54 and 1,424.91.

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Gold prices to rise in 2007 on US rate cuts, more demand from jewellers

SYDNEY - Gold prices are likely to head higher in 2007, benefiting from US  interest rate cuts and increased demand for the metal from jewellers, National Australia Bank minerals and energy economist Gerard Burg said in a report.
   
The report forecasts gold to average 675 usd an ounce next year, up 11 pct  over the expected average price of 606 usd for 2006.
   
"In 2007, gold prices are expected to rise further, particularly as the US Federal Reserve begins to cut interest rates in the second half of the year," Burg said.
   
He said such cuts should provide increased incentives for gold investment, as gold's relative return improves in comparison with fixed interest assets, such as bonds.
   
But, Burg said,  the path of prices over 2007 may be dependent on consumer demand, noting that the high volatility in gold prices in 2006 deterred jewellery consumers, particularly in price sensitive regions such as India and the Middle East.
   
Burg said perceptions about global political stability, particularly in the Middle East, inflation and economic growth prospects will also have an influence on gold markets, adding some uncertainty, but also potentially boosting investment demand.
   
NAB contends that an upward trend in gold prices will return following the weaker-than-expected performance of the metal over the past four months.
   
Burge noted the volume of speculative interest in gold markets, as represented by non-commercial positions on the COMEX, has fallen in recent months, in line with weaker price movements.
   
But, he said, speculative positions have resumed an upward trend since the start of November, supporting a price recovery.
   
For the first 10 months of 2006, gold prices averaged 600 usd an ounce, a year-on- year increase of 38 pct. Since peaking in May, at over 720 usd an ounce, the metal fell back to 563 usd in early October before recovering to trade around 637 usd
   
For the first three quarters of 2006, end-user gold consumption decreased by around 13 pct to total 2455 metric tons. Burg said the fall reflected a sharp decrease in jewellery consumption, which fell by 18 pct over the period.
   
Jewellery is the largest end-use sector for gold, accounting for over two-thirds of total consumption in the first three quarters of 2006. Burg said despite strong gold prices, output has been slow to increase.
   

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