US SUMMARY: Oil Drop, Retail Sales Ignite Stocks
DJIA 11028.39 gain 136.07 up 1.3%
NASDAQ 2262.17 gain 22.36 up 1.0%
S&P 500 1275.53 gain 12.67 up 1.0%
Dow Future 11030.00 loss 15.00 dn 0.1%
NASDAQ Future 1664.50 loss 1.50 dn 0.1%
S&P Future 1276.75 loss 1.50 dn 0.1%
10-Yr US Treasury: 4.62% up 0.04
(Futures values as of 0550 GMT)
A drop in oil prices below $60 a barrel sent stocks soaring Tuesday, carrying the Dow Jones industrial average 136 points higher and past 11,000 for the first time in a month. A surge in retail sales added to the market's good mood. But Treasurys tumbled on that data.
STOCKS: "Oil below $60 a barrel grabbed folks' attention," said Bob Sitko, who manages more than $500 million as a lead portfolio manager with USAA Private Investment Management. "When the market decides to pay attention to things is a bit of Rubik's cube, but this is a big deal."
Other analysts attributed some of the rise to sheer momentum, as Wall Street initially had a muted reaction to oil's decline and the pickup in retail sales.
The market seemed to shed completely Monday's torpor, when investors sent shares lower as they worried about new Federal Reserve chairman Ben Bernanke's remarks before Congress on Wednesday, his first appearance on Capitol Hill as Fed chairman.
Crude oil futures fell amid expectations that a U.S. supply report Wednesday will show higher crude inventories. A barrel of light crude settled at $59.57 a barrel, down $1.67, in trading on the New York Mercantile Exchange.
Energy prices have been declining steeply. Gasoline futures have fallen roughly 22 percent in the last two weeks, while crude is down roughly 13 percent and natural gas prices are 50-percent lower than their mid-December peak, Sitko said.
The day's other heartening economic news came from the Commerce Department, which said retail sales outside of autos rose by the largest amount in more than six years.
In company news, Deere & Co. and 3M Co rose on results reports. The Coca-Cola Co. rose it said billionaire investor Warren Buffett won't stand for reelection to Coke's board of directors.
BONDS: January retail sales data that soared over economists' expectations wounded Treasury prices Tuesday, a day ahead of the first leg of key testimony on the economy from Bernanke.
The data bolstered the case for more rather than fewer interest rate hikes from the Federal Reserve."It will be hard for Bernanke not to paint a picture that the U.S. economy is in a strong position," said John Roberts, managing director at Barclays Capital in New York.
Futures markets expect a move from a 4.50% federal funds rate to 4.75% in late March, and the major question up for debate now is whether fed funds hits 5% in May.
Also Tuesday, Dallas Federal Reserve President Richard Fisher said the U.S. economy "continues to steam along" and reiterated that the central bank "will remain ever vigilant in pursuing its mandate of providing the monetary policy required for sustainable, non-inflationary growth."
Calling personal consumption expenditures a better inflation measure than the more popular consumer price index, Richmond Federal Reserve President Jeffrey M. Lacker said Tuesday that the indicator is slightly over his preferred target. Lacker said that 1.5% would be the PCE's ideal level, adding that it's currently a touch above that goal. The PCE core index was reported late January to have risen 1.9% in December from a year earlier. Lacker said, however, that he was comfortable with PCE being in a range of between 1% and 2%.
Tony Crescenzi, chief bond strategist at Miller Tabak & Co. in New York, said the strong non-auto retail sales puts GDP on track to grow by "at least 5%" in the first quarter. That means "a strong case for a 5% funds rate, maybe even 5.25% or higher," he said. "In turn, Treasury yields will follow; my credo remains that Treasurys rarely trade below funds except when an interest rate cut is imminent. It's not."
ASIAN SUMMARY: Tokyo Shares Volatile Ahead Of GDP
USD-Yen 117.59 gain 0.14 up 0.1%
AUD-USD 0.7403 loss 0.0016 dn 0.2%
Nikkei 225 15983.87 loss 201.00 dn 1.2%
Hang Seng 15371.26 loss 49.06 dn 0.3%
Taiwan Index 6598.49 loss 14.48 dn 0.2%
S.Korea Kospi 1305.07 loss 23.14 dn 1.7%
JGB Yield 1.5850% down 0.0050
(All values as of 0550 GMT)
STOCKS: Japanese stocks declined amid uncertainty ahead of Japanese quarterly GDP figures due Friday. Trading was volatile.
BONDS: Prices of Japanese government bonds were under pressure in the five-year range, as the market bet on an end soon to the Bank of Japan's liberal monetary policy.
OIL: Crude oil futures were 5 cents lower at $59.52 as traders awaited the release of a weekly U.S. fuel supply snapshot expected to show higher crude stocks."The market is focused on the fact that the market is well supplied - both in products and in crude - while the Iranian situation stays in the background," said energy analyst Victor Shum with Purvin & Gertz in Singapore.
OTHER NEWS: BHP shares rose 0.8% in Australia on the global miner's record $4.36 billion interim profit and bullish outcome comments and its A$1.5 billion share buyback.
EUROPEAN OUTLOOK: Stocks Seen Higher; Bernanke Awaited
Euro-USD 1.1918 gain 0.0001 up 0.01%
Stlg-USD 1.7355 loss 0.0005 dn 0.03%
USD-Franc 1.3074 loss 0.0003 dn 0.02%
(All values as of 0550 GMT)
European shares are likely to open higher, with government debt and the euro little changed.
STOCKS: In a busy session for earnings reports, European markets are set to open in positive territory, with investors buoyed by Wall Street's overnight strength.
U.K. spreadbettor CMC Markets is calling the London FTSE up 12 points to 5804, the Frankfurt DAX up 16 to 5779 and the Paris CAC up 14 to 4975.
European stock markets ended mixed on Tuesday, with gains for telecommunications firms such as France Telecom on the company's job-cut and dividend payout plan but losses for automakers after a recent mini-rally. Mixed economic data also gave investors concern.
Commerzbank said Tuesday that net profit for full year more than tripled to EUR1.165 billion and that it would double the dividend for 2005 to EUR0.50 a share.
In other news, Italy's health minister said Tuesday that the H5 bird flu subtype was detected in two more dead swans in southern Italy. Germany and Austria also reported cases.
Credit Suisse Group's Japanese unit said Wednesday that it was unable to confirm a report that it is under investigation by Japan's Securities and Exchange Surveillance Commission for suspected involvement in the alleged money laundering dealings of Livedoor Co.
BONDS: More supply may keep European government debt little changed to start Wednesday.
Italy is due to offer EUR4.5 billion in medium- and long-term bonds and Germany is set to auction EUR7.0 billion in 10-year bunds Wednesday. France plans to sell between EUR4.80 billion and EUR5.30 billion of BTANs Thursday.
There is no significant euro-zone data due Wednesday, but gilt market participants will have plenty to digest with U.K. unemployment numbers and average earnings at 0930 GMT and then the BoE's inflation report at 1030 GMT. "Overall we expect the tone of the report to be more cautious and slightly more dovish than in November," HSBC said in a recent research note.
European government bonds were mixed Tuesday, with gilts outperforming while euro-zone bonds were pressured by strong U.S. retail sales data and the prospect of large supply.Gilts were higher after a larger-than-expected drop in U.K. consumer prices in January suggested the Bank of England might be more inclined to lower its benchmark lending rate in the coming months, analysts said.
FOREX: The euro opens fairly steady against the dollar, surprising in view of expectations for a tough-talking Bernanke.
"(Wednesday) is the (Bernanke) meeting ... The smart thing to do is probably to say let's wait and see what happens," said Tim O'Sullivan, chief trader at Gain Capital in Bedminster, New Jersey.
In a research note Tuesday, Bob Lynch, senior currency strategist at HSBC in New York, said that if Bernanke suggests further rate hikes are still on the agenda, "the dollar should be able to move higher versus the European currencies in the coming days."
The dollar moved modestly lower versus the euro and yen Tuesday after shedding gains it made in the wake of the strong U.S. retail sales report.
(MORE TO FOLLOW) Dow Jones Newswires
February 15, 2006 01:46 ET (06:46 GMT)
Copyright (c) 2006 Dow Jones & Company, Inc.
15 Feb 2006 06:46 GMT =DJ EUROPEAN MORNING BRIEFING: Dip In Oil Spurs Stocks -2-
CALENDAR: Wednesday, Feb 15: BoE Report; Fed's Bernanke
GMT Expected Previous
0930 UK Jan Unemployment 2.9% 2.9%
0930 UK Jan Claimant Unemployment +7.5K +7.2K
0930 UK Dec Average Earnings 3M/Y 3M/Y
1030 UK 1Q Bank of England Inflation Report
1200 US Feb 10 MBA Refinancing Index +0.2%
1330 US Feb NY Fed Mfg Index 18.0 20.12
1400 US Dec Treasury Intl Capital Flows $89.1B
1415 US Jan Indus Production +0.3% +0.6%
1415 US Jan Capacity Utilization 80.8% 80.7%
1500 US Fed Chmn Bernanke testifies on the
Fed's semi-annual monetary policy
report before the US House Financial
1530 US Feb 10 US Energy Dept Gasoline Stocks (in +1.5M +4.3M
1530 US Feb 10 US Energy Dept Crude Oil Stocks (in +1M -300,000
1530 US Feb 10 US Energy Dept Distillate Stocks (in -500,000 -300,000
1530 US Tsy Secy Snow testifies before US House
Ways & Means panel on FY07 budget in
1715 US Pres Bush speaks on health care in Dublin,
1800 US Feb NAHB Housing Index 57
-By Dennis Baker; Dow Jones Newswires; email@example.com
(MORE TO FOLLOW) Dow Jones Newswires
February 15, 2006 01:46 ET (06:46 GMT)
Copyright (c) 2006 Dow Jones & Company, Inc.
15 Feb 2006 06:46 GMT =DJ EUROPEAN MORNING BRIEFING: Corporate Events
Coca-Cola HBC (CCH): FY Earnings
Average net profit (DJ, 8 analysts): EUR308.9M (EUR112.4M)
Average revenue: EUR4.70B (EUR4.25B)
Average EBITDA: EUR806.8M (EUR684.3M)
Average 4Q net profit: EUR8.9M (EUR65.7M loss)
Average 4Q EBITDA: EUR127.8M (EUR71.3M)
Average 4Q revenue: EUR1.03B (EUR984.2M)
Note: Emerging markets, especially Russia, is expected to drive revenue, while volumes in their developing markets are expected to improve. Net profit figure in '05 to be helped by slightly lower tax rate than in '04. Year ago net profit also hurt by EUR40M restructuring charge. Report due 0630 GMT.
Credit Suisse (CSR) 4Q Earnings
Average net profit (DJ, 11 analysts): CHF1.62B (N/A)
Note: Net profit seen up 69% over the year-ago period, when a hefty provision for the bank's insurance business hurt earnings. Credit Suisse's revenue is likely to rise sharply, says Lombard Odier Darier Hentsch, helped by more commissions from wealthy private clients as well as income from trading debt and equities and for investment banking services such as M&A advice.
Analysts say Credit Suisse's result will be "clean," meaning free of exceptional charges like ones taken in recent quarters for its insurance unit, Winterthur, or for litigation for issues such as Enron's collapse.
While Credit Suisse is expected to reiterate its plans for an initial public offering for Winterthur later this year, little additional detail on the offering is likely, say analysts, who put the company's worth at upwards of CHF10B.
Gaz de France (1020848.FR): FY Sales
Average IFRS sales (First Call, 15 analysts): EUR21.14B (EUR17.74B)
Note: "The main contributor to this growth should be the energy supply and services division with revenue expected to increase 31% due to higher commodity prices and higher retail gas prices in France," says Deutsche Bank. Adds the main growth driver for its infrastructure division should come from the international transmission and storage business. Report due premarket.
Groupe Danone (12064.FR): FY Earnings
Average net profit (JCF, 13 analysts): EUR1.33B (EUR317M)
Average operating profit: EUR1.74B (N/A)
Average revenue: EUR12.93B (N/A)
Note: In 2004 Danone took a hefty charge against its U.S. and European home-and-office delivery water businesses. "We expect Danone to report solid underlying EPS growth for full-year 2005, but focus at the results will be on the outlook for full-year 2006," analysts at Morgan Stanley said.
Danone is expected to be "cautiously optimistic" with its guidance for this year, said analysts at Exane BNP Paribas, who are forecasting a 5%-7% rise in revenue and at least a 10% rise in earnings per share in 2006.
Meanwhile, speculation of a takeover bid by PepsiCo "could flare up again at any time," analysts at SG Securities added, said this as one reason they upgraded Danone shares to buy from hold Monday.
Hennes & Mauritz (HM-B.SK): January Sales
Note: Hennes & Mauritz expected to report a 16% rise in on-year January sales, according to a SME Direkt survey of 19 analysts. Estimates range between 12%-19%. Sales at stores that have been open longer than one year are seen +5.2%, boosted by stronger retail market demand in Germany and Sweden, favorable weather and a positive calendar effect. In December, sales rose 14%, with same-store sales +4%. Sales grew only 5% in January '05. H&M gives no actual monthly sales figures, only the percentage change.
Liberty International (LII.LN): FY Earnings
Average net asset value (DJ, 5 analysts): 1094p (1025p)
Note: One analyst sees strong result after a good 3Q performance Tuesday from British Land's (BLND.LN) out-of-town retail shopping centers. Estimates yield shift of around 30bps to put NAV around 4% to 5% above expectations.
Mittal Steel (MT): 4Q Earnings
Note: Mittal Steel expected at 0700 GMT to report a 20% rise in 4Q '05 operating profit versus $765M in the 3Q, on increased volumes and prices, which have been eroded by growing costs, an average estimate of 11 analysts shows.
Analysts watch a quarter on quarter comparison rather than year on year because the company's structure has altered significantly over the last year. Mittal is also expected to have underperform Arcelor on (5786.FR) profits, since Mittal has more exposure to spot steel prices, while Arcelor has more annual and long-term contracts.
Market watching for "any newsflow whatsoever," on Mittal's bid for Arcelor, says an analyst. Also watching for Mittal's outlook statement, particularly the company's view on the European market and price increases.
MLP (MLP.XE): 4Q Earnings
Average net profit from continuing operations (DJ, 8 analysts): EUR19.8M
Average revenues: EUR210.4M (-18%)
Average pretax profit: EUR31.5M (-16%)
Average FY net profit from continuing operations: EUR35.4M (-18%)
Average FY revenues: EUR556.7M (-11%)
Note: The results are expected to reflect sluggish life insurance policy sales in Germany, negative contributions from foreign operations. 05 dividend, 06 forecast, strategy for turning around foreign operations will all be factors in focus.
Saab (SAAB-B.SK): 4Q Earnings
Average pretax profit (SME Direkt, 4 analysts): SEK637M (SEK747M)
Average revenue for the quarter is seen rising 17% to SEK6.76B from SEK5.76B
Note: Increased costs for comparable projects are seen as the reason for the expected decline, an analyst says. Focus will be on the 06 outlook.
Sampo (SAMAS.HE): 4Q Earnings
Average pretax profit (SME Direkt, 14 analysts): EUR272M (EUR280M)
Note: The drop is seen coming from slightly lower investment revenues in life insurance and in If - compared with 4Q '04. "Both a good dividend and a share buyback is expected," an analyst says. Eyes are on the outlook for '06.
Swedbank (FSPA-A.SK): 4Q Earnings
Average operating profit (SME Direkt, 23 analysts): SEK3.085B (SEK2.922B)
Note: The results are seen boosted by higher commission income from card payments as well as fund management. Hansabank, First Securities seen adding to bottom-line numbers. Margin pressure is also expected to have eased on continued rising volumes. Report due at 0700 GMT.
Storebrand (STB.OS): 4Q Earnings
Average net profit (SME Direkt, 11 analysts): NOK294M (NOK581M)
Note: The company is expected to benefit from a strong Norwegian stock market, increased profit in capital management, while margins are seen pressured in its banking unit. Shares trade flat at NOK67. Report due at 0700 GMT.
Swedish Match (SWMA.SK): 4Q Earnings
Average pretax profit (SME Direkt, 12 analysts): SEK548M (SEK433M)
Forecast range: SEK431M - SEK603M
Note: Earnings seen lifted by higher sales volumes and positive currency effects. The closely-watched profit margin on Swedish Match's key product, snuff, is expected to rise to 48.2% from 39.5%. The margin on cigars is seen rising to 20.7% from 13.7%. The market will keep be particularly alert for any comments on competition and market share in Scandinavia and the US.
Total (TOT): FY Earnings
Average net profit (IBES, 23 analysts): EUR12.34B (EUR9.97B)
Forecast range: EUR10.12B (EUR13.34B)
Note: Total will also give update of its strategic review for the next five years. The company will probably confirm "strong profitability" and demonstrate again "the excellent visibility of its production profile," Oddo Securities analyst Laurent Paris said in a preview note.
Paris anticipates that Total's fourth-quarter net profit will come in at EUR3.09B, stripping out one-time amortization charges and the impact of a shift to a new stock-accounting method. This would be a 17.5% jump from the previous year and in line with the EUR3.13B reported in the third quarter of 2005, Total's highest-ever quarterly profit.
Total's exploration and production division is expected to have benefited from rising hydrocarbon prices and a stronger dollar, analysts say. However, "output should be down in the fourth quarter, as milder temperature in October and November have affected Total's gas sales," said Societe Generale analyst Aymeric de Villaret. Oddo and Societe Generale estimate a 5% drop in output in the fourth quarter, leading to a 3.5% drop for the full year.
Chemical operations are expected to have suffered from high raw-material costs, with results slightly improving from the third quarter, Oddo said. Guidance on hydrocarbons output for the coming years, the reserves renewal rate and capital expenditure will be closely watched indicators when the company updates its guidance for the next five years, analysts say.
"We anticipate Total to raise its capital expenditures by EUR1 billion a year in the next five years, due to the combined effects of higher costs and new projects," Villaret says.
Analysts are also awaiting more details on the spin-off of Arkema, Total's chemical operations, which is planned for the first half of 2006.