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Hitt og þetta 12. apríl 2006

DJ EUROPEAN MORNING BRIEFING: Inflation Fears Resurface

US SUMMARY: Commodities Prices Spook Share Markets

DJIA 11089.63 loss 51.70 dn 0.5%
NASDAQ 2310.35 loss 22.92 dn 1.0%
S&P 500 1286.57 loss 10.05 dn 0.8%
Dow Future 11147.00 gain 3.00 0.0%
NASDAQ Future 1720.25 loss 0.50 0.0%
S&P Future 1294.50 gain 0.50 0.0%
10-Yr US Treasury: 4.93% down 0.04
(Futures values as of 0450 GMT)
Stocks tumbled Tuesday as strength in the commodities market fed inflation fears and stifled investors' enthusiasm over upbeat first-quarter earnings from Dow Jones industrial Alcoa Inc. Treasurys gained in price.

STOCKS: Traders worried that higher energy and commodities prices would cut into corporate profits and drive up material costs and lead to more Fed rate hikes to curb inflation.

Jay Suskind, head trader for Ryan, Beck & Co., said that while energy prices have been steadily climbing over the past few weeks, political turmoil in Iran and Nigeria and forecasts for greater gasoline demand this summer are weighing on the market.

And as other commodities rise along with energy futures, the risk of higher prices being passed to consumers has investors again worried about more interest rates increases from the Federal Reserve, he said.

Crude futures pushed higher as traders awaited news about the controversy over Iran's nuclear arms program and violence in Nigeria. A barrel of light crude gained 24 cents to $68.98 on the New York Mercantile Exchange.

Boston Scientific Corp said Tuesday it has won antitrust clearance from the European Commission for its $27 billion acquisition of medical devices rival Guidant Corp, but is still awaiting final approval from the Federal Trade Commission in the U.S.

A jury awarded $9 million in punitive damages to a man who had a heart attack while taking Merck's Vioxx. Merck said it will appeal the verdict and last week's $4.5 million compensatory-damages award

BONDS: U.S. Treasury prices posted slender gains Tuesday amid placid trading and a modest bout of short-covering that helped nudge yields lower and the 10-year to 4.93%.

"There are far too many people waiting to buy at 5%," said Michael Cheah, portfolio manager at AIG SunAmerica Asset Management. "That bus stop is pretty full."

Some strategists said firmer tone was at least partly tied to a safe-haven play by investors unnerved by claims from Iranian leaders that they have successfully enriched uranium, a possible step toward building a nuclear arsenal.

The prevailing outlook in the bond market remains a bearish one, and many strategists think it's just a matter of time before the 5% level on the 10-year yield is finally breached.

ASIAN SUMMARY: Japan Shares Follow Wall Street Lower

USD-Yen 118.08 loss 0.15 dn 0.1%
AUD-USD 0.7330 loss 0.0010 dn 0.1%
Nikkei 225 17223.35 loss 194.70 dn 1.1%
Hang Seng 16327.05 loss 148.70 dn 0.9%
Taiwan Index 6775.94 gain 18.77 up 0.3%
S.Korea Kospi 1381.69 loss 4.39 dn 0.3%
JGB Yield 1.8800% unchanged
(All values as of 0450 GMT)
STOCKS: Japanese stocks fell Wednesday following declines in New York and a rise in oil prices.

BONDS: Prices of Japanese government bonds were higher on the weak Nikkei.

Bank of Japan Governor Toshihiko Fukui said Wednesday that the nation's long-term interest rates are largely being affected by U.S. and European long-term rates and said he would closely watch the Japanese government bond market."When to end the zero-rate policy and the time to finish repatriating this excess liquidity aren't related," Fukui said.

Fukui also said the latest BOJ tankan corporate sentiment survey indicated the economic recovery will be long lived.

OIL: Crude oil futures eased 11 cents lower to $68.87 as Asian traders took some profit after prices surpassed $69 a barrel on Tuesday. Traders awaited the weekly U.S. supplies report for further developments.

METALS: Precious metals were a bit higher while copper was lower.

EUROPEAN OUTLOOK: Markets Seen Opening Mixed

Euro-USD 1.2160 gain 0.0010 up 0.08%
Stlg-USD 1.7505 gain 0.0015 up 0.07%
USD-Franc 1.2964 loss 0.0011 dn 0.09%
(All values as of 0450 GMT)
European assets are likely to start little changed Wednesday.

STOCKS: European stocks are unlikely to make much ground at the open as soaring commodities fuel fears of higher inflation.

U.K. spreadbettor CMC Markets forecasts a 7 point rise on the FTSE to 6024, with the DAX up 1 at 5909 and the CAC unchanged at 5113.

In corporate news, Roche unit Genentech Inc., propelled again by the strong performance of its cancer drugs, reported a 48% jump in first-quarter profit and raised its earnings projection for the rest of the year. Even so, Genentech shares fell in late U.S. trade.

European stocks closed lower Tuesday, with Italian equities hit by the diminished prospect for economic reforms after a razor-thin election margin by Romano Prodi's opposition. But technology stocks lifted off lows after Nokia said its handset prices rose in the first quarter.

BONDS: Government debt markets may open mixed, as investors track bund futures for clues.

"The market needs to break the 116.81 barrier for a change in the technical picture," said WestLB's fixed-income strategist Sarah Luetgert. It closed at 116.42.

It seems more likely that the market will consolidate more going in to the long Easter holiday weekend.

In the Italian elections, given the narrow victory for Prodi, a stable majority of the center-left coalition is unlikely, said WestLB's Gianluca Ziglio in a research note. "The center-left coalition is very fragmented and little discussion has taken place on the differences in the programs of its member parties," Ziglio said.

As a result, WestLB expects Italian bonds to underperform other euro-zone sovereign debt further. "We retain a negative bias on BTPs in the medium-term and we see scope for a further underperformance versus core paper by at least another three to four basis points," especially as a downgrade now looks likely, Ziglio said. He expects the spread between 10-year German bunds and Italian BTPs to reach 35 basis points.

As for gilts, "After outperforming other markets for quite a while, investors are now switching out of gilts into both Treasurys and bunds," said Monument Securities' fixed-income strategist Mark Ostwald. "There's no reason you would want to chase the gilt market given that spreads have reached levels which more than justified moves out of gilts and into other bonds," Ostwald. "There's easier money to be made."

European government bonds were mixed for most of Tuesday's session, with bunds getting a lift from a below-consensus German ZEW sentiment index, while gilts suffered from better investment opportunities elsewhere, analysts said.

FOREX: The euro remains locked in a narrow range against the dollar as the market settles into the view that interest rate differentials are unlikely to favor either currency for now.

Most analysts suspect that the release Wednesday of U.S. international trade figures for February, expected to show a $68.0 billion trade deficit, will have little impact unless substantially wide of the forecast.

Meanwhile, the euro is likely to weather any lingering political uncertainty in Italy, although other asset classes in the country might suffer some short-run pressure.

Former U.S. central bank chief Alan Greenspan says global imbalances might improve if high-growth economies allow currencies to strengthen.

CALENDAR: Wednesday, April 12: UK Jobless; EU GDP

GMT Expected Previous
0600 GER Mar CPI, final +0.1%MM +0.4%MM
+1.9%YY +2.1%YY
0600 GER Mar WPI
0800 ITA Feb Indus Production +0.4%MM -0.3%MM
+2.0%YY +4.1%YY
0830 UK Feb Unemployment Rate +3.0% +2.9%
0830 UK Mar Claimant Unemployment +7K +14.6K
0830 UK Feb Avg Earnings +3.6%3M +3.5%3M
0900 EU 1Q-3Q Euro Zone GDP growth projection
0900 EU 4Q Euro Zone GDP, final +0.3%QQ +0.7%QQ
+1.7%YY +1.6%YY
1100 US Apr 7 MBA Refinancing Index +5.3%
1230 US Feb Trade Deficit $67.5B $68.51B
1400 GER IFO Institute for Economic Research
Quarterly Euro-Zone economic outlook
1430 US Apr 7 US Energy Dept Gasoline Stocks (in -2.1M -4.4M
barrels)
1430 US Apr 7 US Energy Dept Crude Oil Stocks (in +1.2M +2.1M
barrels)
1430 US Apr 7 US Energy Dept Distillate Stocks (in -1.4M -2.6M
barrels)
1800 US Mar Tsy Budget Statement $119.2B