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Hitt og þetta 11. júlí 2006

DJ EUROPEAN MORNING BRIEFING: Rate Hike Fears Remain

US SUMMARY: Earnings Warnings Spook Tech Investors

DJIA 11103.55 gain 12.88 up 0.1%
NASDAQ 2116.93 loss 13.13 dn 0.6%
S&P 500 1267.34 gain 1.86 up 0.2%
Dow Future 11160.00 loss 16.00 dn 0.1%
NASDAQ Future 1537.75 loss 0.75 dn 0.1%
S&P Future 1275.25 loss 1.75 dn 0.1%
Euro-USD 1.2738 gain 0.0001 up 0.01%
10-Yr US Treasury: 5.13% unchanged
(Futures values, Treasury, EUR/USD Data as of 0450 GMT)
Stocks finished an uneasy session mixed Monday as investors grew nervous ahead of the second-quarter earnings season. Profit-warnings in the technology sector dragged on the Nasdaq composite index.

STOCKS: Expectations for solid quarterly results helped the market to an early advance, but the enthusiasm waned throughout the session, prompting some traders to lock in profits. Dow Jones industrial Alcoa sagged after releasing its results after the close.

While analysts forecast another round of double-digit profit growth from companies in the Standard & Poor's 500 index, some said strong results may have already been priced into the market and that lingering confusion about interest rates and economic growth were keeping stocks from gaining.

"The nice thing about earnings is that they're probably going to be higher," said Ed Peters, chief investment officer for PanAgora Asset Management. "Unfortunately, that's old news. Good earnings have already been discounted. People are looking at what's going to happen next."

Wall Street's persistent concerns about the economy squelched excitement over earnings. Although companies were largely expected to show upbeat results, recent profit warnings from Advanced Micro Devices, 3M and EMC sparked fears that higher interest rates have contained inflation but are hurting economic growth.

Lucent Technologies said that its income and revenue for the quarter ended in June will be lower than analysts expected as the telecom gear maker was hurt by weak sales in the U.S. and China.

FOREX: The dollar is lower against the yen and steady against the euro, after it gained Monday. Investors speculated on a possible increase in interest rates by the Bank of Japan. The dollar rode the coattails of a selloff of the euro against the yen, with the single currency falling to Y145.07 from Y146.06 before evening out near Y145.40.

BONDS: Treasury prices edged higher Monday, adding modestly to the strong gains registered Friday after a tepid U.S. non-farm payrolls report.

Kevin Flanagan, fixed income strategist at Morgan Stanley in Purchase, NY, said, "I think we're really dealing with the calm before the storm. The storm begins later this week with retail sales, and then we go right into the inflation report and (Fed) Chairman Ben Bernanke" testimony to Congress next week.

"Everyone's taking a collective breather right now after Friday's employment report," he said, as the "market needs some clarity on which way" the economy is heading.

OIL: Futures fell as energy traders took profits from the recent surge in prices, but worries about Iran and motor fuel demand were expected to support the market. A barrel of light crude lost 48 cents to $73.61 on the New York Mercantile Exchange.

ASIAN SUMMARY: Stocks Lower; Investors Await BoJ Meeting

USD-Yen 114.14 loss 0.09 dn 0.07%
AUD-USD 0.7490 gain 0.0027 up 0.4%
Nikkei 225 15353.53 loss 199.20 dn 1.3%
Hang Seng 16505.83 loss 97.98 dn 0.6%
S&P/ASX 200 5070.10 loss 32.80 dn 0.6%
Taiwan Index 6671.94 loss 10.52 dn 0.2%
S.Korea Kospi 1298.65 loss 0.64 dn 0.1%
JGB Yield 1.9700% unchanged
(All values as of 0450 GMT)
STOCKS: Asian shares were lower Tuesday, as investors moved to the sidelines after a mixed session in New York and growing apprehension on the interest rate front ahead of the Bank of Japan's two-day policy meeting which gets underway Thursday.

FOREX: The yen gained on the dollar and euro but traders said players are reluctant to hold long-yen positions because a BoJ rate hike is priced in.

BONDS: Prices of Japan's government debt were mixed. The Bank of Japan is due to announce its interest rate decision Friday, with the market expecting a 25-basis-point rate hike. "Given that an interest rate decision has already been priced in, the accompanying statement will be in focus," with possible hints on the bank's future monetary policy, said Sarah Luetgert, fixed-income strategist at WestLB.

OIL: Prices fell for a fourth day Tuesday as concerns about North Korea's missile tests and Iran's nuclear program eased. Futures dipped 15 cents to $73.46. The Organization of Petroleum Exporting Countries is unable to do much about high oil prices for now, as demand for crude oil hasn't been as strong as prices may suggest, according to Mohammed Barkindo, OPEC's acting secretary general.

METALS: Prices of basic metals were mixed, while gold edged about $2.65 higher to $627.65.

EUROPEAN OUTLOOK: Stocks Set For Early Losses

Euro-USD 1.2738 gain 0.0001 up 0.01%
Stlg-USD 1.8432 gain 0.0022 up 0.1%
USD-Franc 1.2298 loss 0.0005 dn 0.06%
(All values as of 0450 GMT)
European stocks are likely to suffer opening falls, with government debt and the euro little changed.

STOCKS: European markets are headed lower to start as investors weigh the likelihood of higher interest rates.

U.K. spreadbettor IG Index is calling the FTSE down 16 points at 5881, the DAX down 22 at 5684 and the CAC down 15 at 4967.

"I think what we've seen is partly traditional summer volatility but also a reaction to the expectation of higher interest rates," said Oliver Russ, who manages the Argonaut European Income Fund. He said the market appears to have got used to super-low interest rates for a long time and is having a few problems coming to terms with long-term-rate normalization.

But he said he is generally positive on the European equity markets. "While there might be some short term volatility, we think the medium to long term is obviously very good," he said.

"Valuations are very, very reasonable. Until we start seeing downgrades to corporate Europe, we think that situation is likely to continue," Russ added.

European equity strategists at Standard & Poor's said defensive plays, particularly healthcare and consumer staples, are still likely to outperform cyclical sectors, such as autos, technology and mining stocks, in the current market environment.

"This trend is likely to continue until we see signs of a strong recovery in the fourth quarter," said the strategists.

In corporate news, Lafarge unit Lafarge North America said Monday that U.S. federal agents searched the company's offices in western New York, issuing warrants in an investigation into the company's government contracts.

European shares edged into positive territory on Monday after early strength on Wall Street, with L'Oreal and Novartis among companies on the upswing.

FOREX: The euro opens little changed against the dollar, and is likely to hold in narrow ranges.

BONDS: Prices of government debt are likely to edge higher, but with fundamental input scarce this week, trading is likely to be muted ahead of Friday's U.S. retail sales data and the Bank of Japan's interest rate verdict, analysts agreed.

"Bonds are likely to remain range-bound as momentum is lacking...the market is currently nursing its hangover after last week's thrilling events, and waiting for further impulses," said Christoph Rieger, fixed-income strategist at Dresdner Kleinwort. "Technical factors might drive the market in the absence of any data," Rieger added.

In the U.K., gilts edged modestly lower Monday on data showing June factory gate prices grew at their fastest annual rate since November 2004. "However, as the significance of these data is modest, "the litmus test" will come Wednesday when May average earnings are to be released," said Richard McGuire, fixed-income strategist at RBC Capital Markets.

On the supply front, Dresdner Kleinwort said around EUR10.5 billion are to be issued in the euro zone this week. Greece will reopen its 3-year bond Tuesday, the same day the new 10-year Dutch bond is expected to be auctioned, while Italian 5-year and 30-year bonds are expected to follow Thursday. Given that redemption and coupon payments of around EUR18.5 billion are also due this week, the market is likely to receive some support, said Dresdner Kleinwort's Rieger.

In the U.K., an auction of GBP1.2 billion of index-linked 1.25% 2017 papers is scheduled for Tuesday. RBC Capital Markets' McGuire expects the auction to draw reasonable demand due to positive seasonal factors. In addition, "the back up in linker yields since the beginning of this year and a pending extension of the All-Stock Index augur well," according to McGuire.

Prices of government debt fell Monday without any significant data to guide the market.

CALENDAR: Tuesday, July 11: Bank Of Canada Rate Decision

0645 FRA May Foreign Trade -1.3B -2.3B
0645 FRA 1Q Cost-of-Construction Index
0800 ITA May Indus Production 1.0%MM -1.0%MM
+2.1%YY -2.6%YY
0830 UK May Trade Balance -GBP5.7B -GBP5.7B
0830 UK May Trade Non-EU -GBP3.3B -GBP3.4B
1000 UK Jun British Retail Consortium Survey +2.0%LFL +3.6%LFL
1145 US Jul 8 ICSC Store Sales Index -0.7%
1255 US Jul 8 Redbook Retail Sales Index +1.8%
1330 EU European Central Bank's Trichet speaks
at event on short-term paper programs
1400 US Tsy Undersecy Levey testifies before US
House Financial Services panel on
terror financing tracking program in
Washington
2100 US Jul 9 ABC/Washington Post Consumer Confidence -9
Index
2350 JPN Jun Corp Goods Price Index +3.4%YY +3.3%YY
N/A GER Jul DIW's Econ Barometer
N/A GER Jun Producer Prices (earliest on this date) +0.2%MM +0.1%MM
+5.9%YY +6.2%YY

Alstom (1022047.FR): 1Q Revenue
Average revenue (DJ, 3 analysts): EUR3.4B (N/A)
Average order intake: EUR4.1B (N/A)
Note: Marine division won't be consolidated, making comparision with year-earlier published figures difficult, analysts say. Last year Alstom reported revenue for the April-June quarter of EUR3.6B on orders received of EUR4B. On a comparable basis, revenue see up about 5%, while orders seen up 11%, driven by power equipment business. Company reports pre-market.


Safran (7327.FR): 1H Revenue
Average revenue (DJ, 4 analysts): EUR5.5B (EUR4.9B)
Note: Revenue growth is expected to be due to high earnings in the aeronautics divisions, especially the propulsion division which should show a healthy rise in orders. Defense security division expected to report robust growth. Analysts look to get more clarity on impact of Airbus's delayed A380 on Safran's airplane wiring business, and any news on the ailing mobile phones division and a possible sell off of it.


OTHER SCHEDULED EVENTS:

Air Music & Media (AMU.LN): FY Earnings

Avanza (AZA.SK): 1H Earnings

BAA (BAA.LN): June Traffic Data

Business Post Group (BPG.LN): AGM

Emme (415500.FR): FY Earnings

Halladale Group (HDG.LN): FY Earnings

Inter Link Foods (ITF.LN): FY Earnings

Investor (INVE-B.SK): Analyst Meeting

Itera Consulting Group (ITE.YY): 2Q Earnings

Lufthansa (LHA.XE): June Traffic Data

Man Group (EMG.LN): AGM

Manutan International (3230.FR): 3Q Revenue

Marks & Spencer Group (MKS.LN): AGM

nCipher (NCH.LN): AGM

Norman (Norman.OS): 2Q Earnings

Schaffner Holding (SAHN.EB): 3Q Revenue

SIG (SHI.LN): Trading Update

SVM UK Active Fund (SVU.LN): AGM

Tandberg Television (TAT.OS): 2Q Earnings