US SUMMARY: Stocks Falter On Weaker Economic Data
DJIA 11115.32 loss 5.36 dn 0.1%
NASDAQ 2282.36 loss 12.27 dn 0.5%
S&P 500 1287.24 loss 2.14 dn 0.2%
NASDAQ Future 1678.50 gain 1.00 up 0.1%
S&P Future 1289.00 0.00 0.0%
10-Yr US Treasury: 4.54% down 0.06
(Futures values as of 0550 GMT)
A late-day selloff left stocks slightly lower Friday as weakening consumer confidence and a rise in the producer price index prompted investors to take profits and pause from Wall Street's recent rebound. Yet Treasurys rallied as investors dissected the PPI to find a positive trend. The U.S. markets are closed Monday for a holiday.
STOCKS: "The PPI number is one data point that suggests the Fed is going to go further," said Russ Koesterich, senior portfolio manager at Barclays Global Investments. With six weeks before the next Fed policy meeting, "the market is going to pay increasing attention to the implication of (economic) data for inflation."
Investors digested a 0.3 percent rise in January's PPI, which grew faster than economists' 0.2 percent target. Core PPI - excluding volatile energy and food prices _ added 0.4 percent, the Labor Department said.
Crude futures rallied on threats of political unrest in the oil-rich nation of Nigeria, sending a barrel of light crude up $1.42 to settle $59.88 on the New York Mercantile Exchange.
More stock gains depend on the Fed's opinion of the economy and inflation, Koesterich said, adding that he's monitoring Wall Street's reaction to lower oil prices and the effect of last month's unseasonable weather. Next week brings data on consumer price inflation and unemployment claims.
"Things have been very distorted by how warm the weather was in January," Koesterich said. "We're trying to get a handle on how it impacted the economy. It helped retail spending and housing starts, but has hurt energy prices."
More dampening economic news came from the University of Michigan, which said its consumer-sentiment index for February tumbled 3.8 points to 87.4, well below the consensus estimate of 91.
BONDS: Led by longer-dated maturities, U.S. Treasurys posted solid gains Friday on strong buying ahead of the Monday holiday in the U.S.
Bonds prices began climbing in early trade in what initially seemed a surprising reaction to a bigger-than-expected 0.4% gain in the core measure of January wholesale prices, which strips out food and energy costs. The overall producer price index climbed by 0.3%.
But market participants said the report was seen as a correction from a string of downward-distorted core producer price index readings and is unlikely to have much effect on the Federal Reserve's inflation outlook.
Also, year-over-year readings on the core producer price index have continued to exhibit a downward trend over the past several months, suggesting price pressures remain benign, said Michael Cheah, portfolio manager at AIG SunAmerica Asset Management.
"PPI is the so-called pipeline for inflation into the broader economy, and we see that inflation not really filtering in," he said. "This could make some people sitting on the fence turn more bullish" on Treasurys.
Bill Hornbarger, strategist with A.G. Edwards in St. Louis, said "it looks like passenger cars are a big chunk of the gain" in the core PPI. And because of that, the number looks less scary, he said. As for the reaction in the Treasurys market, "I'm not reading a whole lot into it," and yields are at some point still going to need to rise to match the likely course of monetary policy, he said.
ASIAN SUMMARY: Stocks Fall On foreign Selling; Oil Up
USD-Yen 118.12 gain 0.01 up 0.01%
AUD-USD 0.7415 gain 0.0030 up 0.2%
Nikkei 225 15428.29 loss 285.10 dn 1.8%
Hang Seng 15606.97 gain 131.20 up 0.9%
Taiwan Index 6686.55 gain 12.80 up 0.2%
S.Korea Kospi 1346.97 gain 14.24 up 1.1%
JGB Yield 1.5050% down 0.0100
(All values as of 0550 GMT)
STOCKS: Japanese stocks fell Monday breaching the 15500 resistance level as players remain spooked about continued selling of shares by foreign investors.
The market's slump seemed to be driven by foreigner investors, who have been unloading technology and real estate stocks that surged last year. Foreign brokerages have been net sellers of Japanese stocks for nine straight sessions. But traders doubt a big drop in the market will occur as Japan's economic fundamentals remain sound.
OIL: Brent crude at London's ICE Futures exchange rose on worries over weekend disruptions to Nigeria's oil output, also on technical strength. The April contract was up $1.01 at $60.90/bbl. Trading was somewhat limited by the holiday closure of Nymex.
EUROPEAN OUTLOOK: Shares Set For Lower Start
Euro-USD 1.1970 gain 0.0030 up 0.2%
Stlg-USD 1.7446 gain 0.0031 up 0.2%
USD-Franc 1.3068 loss 0.0034 dn 0.3%
(All values as of 0550 GMT)
European shares are set to open lower, with prices of government debt and the euro on the rise.
STOCKS: Investors are likely to open the week in cautious mood, with profit-taking hindering progress in this session, at least until Trichet speaks at 1600 GMT.
U.K. spreadbettor CMC Markets is calling for the London FTSE down 4 points to 5842, the Frankfurt DAX down 11 to 5784, and the Paris CAC down 6 to 4994.
European stocks ended at a new four-and-a-half year high Friday on gains for miners and automakers, while the U.K.'s Daily Mail & General Trust tumbled after backtracking on selloff plans.
In other news, German authorities on Sunday sent troops and ordered a cull of poultry on a Baltic Sea island in an attempt to prevent the spread of deadly H5N1 bird flu to farm stocks. Chancellor Angela Merkel said the situation was "serious" and offered more federal aid to stretched local authorities, as the first cases in wild birds were reported on the German mainland.
BONDS: Prices of European government bonds are likely to start higher after gains in Treasurys and on favorable technicals.
This week, the market expects Germany's closely watched Ifo business climate index to slip to 101.5 from 102.0 in January when it comes out Thursday, according to a Dow Jones Newswires survey.
Hints on the outlook for euro-zone interest rates may come earlier Monday when Trichet makes his quarterly appearance before the European Union's Economic and Monetary Affairs Committee.
"In his testimony on Monday, ECB president Trichet is likely to set the stage for further ECB tightening, and probably to signal that a March rate increase will not necessarily be the last this year given signs of stronger expansion," Barclays Capital said in a research note.
Barclays Capital said it had raised its forecast for year-end ECB interest rates to 3% from 2.75% based on signs of more sustainable growth in Europe, the inability of the euro to appreciate and continuing rapid bank lending.
In the U.K., the gilts market will be keen to see if Wednesday's release of the minutes of the Bank of England's Feb. 8-9 Monetary Policy Committee meeting shows that more members wanted a cut in interest rates.
"We expect a 7-2 vote, with Kate Barker joining Stephen Nickell in voting for a cut," HSBC said in a research note.
FOREX: The euro opens higher against the dollar, extending gains from last weak on the weaker-than-expected U.S. data. The sluggish data took some of the air out of hopes for several more Fed hikes in interest rates that would support a higher dollar.
CALENDAR: Monday, Feb 20: German PPI, ECB Chief Speaks
GMT Expected Previous
0700 GER Jan PPI +0.4%MM +0.3%MM
0930 UK Jan British Bankers Assn's Major British
Banking Groups monthly statement
with details of total sterling lending,
including mortgage lending and deposits
1000 ITA Dec Indus Orders +0.9%MM +1.8%MM
1600 EU ECB Chief testifies before European
Parliament Monetary Committee in
N/A US Presidents Day holiday; All businesses,
mkts and govt offices closed.
N/A UK Rightmove Monthly House Price Index
Mittel (MIT.MI): FY 2005 Ex-Dividend Date
(END) Dow Jones Newswires