US SUMMARY: GDP Anxiety Hits Shares
DJIA 11100.43 loss 2.08 dn 0.02%
NASDAQ 2054.47 loss 15.99 dn 0.8%
S&P 500 1263.20 loss 5.20 dn 0.4%
Dow Future 11171.00 gain 2.00 0.0%
NASDAQ Future 1494.00 loss 0.50 0.0%
S&P Future 1272.50 gain 0.25 0.0%
Euro-USD 1.2680 loss 0.0008 dn 0.07%
10-Yr US Treasury: 5.04% unchanged
(Futures values, Treasury, EUR/USD Data as of 0450 GMT)
Wall Street fell modestly Thursday as investors took profits amid nervousness about the government's second-quarter gross domestic product report. Concerns over another product delay at Microsoft weighed on the technology sector. Prices of Treasurys and dollar were steady, while oil gained.
STOCKS: Robust earnings growth at major oil companies lifted stocks through most of the session, with Exxon Mobil posting the second-highest profit ever reported by a public U.S. company and Royal Dutch Shell seeing a 40 percent jump in its income.
But the market resumed its recent erratic behavior as traders grew anxious about the Commerce Department's GDP reading on Friday. Stronger-than-expected growth could bring more interest rate hikes, while a number below estimates might be a sign the economy is slowing quicker than expected. The uncertainty prompted investors to play it safe and take money off the table.
"To have leadership come from great earnings in the energy and automotive sectors is not sufficient enough to move the market materially higher," said Joseph Battipaglia, chief investment officer at Ryan Beck & Co. "I think what has investors concerned is what's next for the economy and future rate hikes."
FOREX: The dollar opens mixed after similar moves on Thursday, with strong U.S. durable goods orders overcoming earlier weakness in the greenback.
"You have to wonder if the durable goods orders and initial jobless claims set in motion a trend that ended up... helping the dollar strengthen," said TJ Marta, senior currency strategist at RBC in New York.
Marta said he suspected that people were unwinding dollar negative positions ahead of Friday's key U.S. growth data for the second quarter in case the number surprised on the upside and caused a dollar rally.
"I cannot imagine people putting risk on going into that number" by buying dollars, he said. "It smacks more of position unwinding than anything else."
BONDS: U.S. Treasury prices ended little changed overall, with longer-dated Treasury prices just slightly lower, shorter-dated Treasury prices flat and the yield curve on a steepening bias.
"The curve seems to have quite a bit of steepening momentum going into next week's refunding announcement," said Richard Gilhooly, director of fixed-income strategy for BNP Paribas in New York.
Next week, the Treasury Department is expected to announce refundings of the 10-year and 30-year notes. The announcement of the supply of longer-dated Treasurys is partly what's weighing on the longer end of the curve and driving the steepening trend, Gilhooly said.
But more than that, he added, the yield curve is reacting to expectations that the Federal Reserve will likely pause soon - possibly as soon as August - in its campaign of interest rate hikes. "The main story is the Fed," Gilhooly said.
A pause in short-term interest rate hikes would leave room for shorter-dated Treasurys to rally.
OIL: Futures posted more gains amid caution about the Middle East conflict and pipeline snags at Shell's Nigerian operations. A barrel of light crude gained 60 cents to settle at $74.54 on the New York Mercantile Exchange.
ASIAN SUMMARY: Stocks Mixed; Japan Earnings Strong
USD-Yen 115.52 loss 0.25 dn 0.2%
AUD-USD 0.7624 loss 0.0006 dn 0.08%
Nikkei 225 15349.06 gain 169.20 up 1.1%
Hang Seng 17029.91 gain 113.10 up 0.7%
S&P/ASX 200 4919.50 loss 57.00 dn 1.2%
Taiwan Index 6475.84 gain 16.59 up 0.3%
S.Korea Kospi 1299.56 gain 3.29 up 0.3%
JGB Yield 1.8850% up 0.0150
(All values as of 0450 GMT)
STOCKS: Asian stocks were mixed in early trading Friday, with Japan's leading indexes little changed after better-than-expected earnings from Sony and Canon lifted technology shares while other sectors saw declines in the wake of losses on Wall Street.
Australian shares slipped, as miners fell around 1%.
FOREX: The yen rose as Japan's exporters sold dollars that erased the U.S. currency's earlier gains. Dealers looked to U.S. GDP data at 1230 GMT. A range of 115.30-116.00 is seen until Monday.
BONDS: Prices of Japan's government debt fell slightly on the belief that the economy remains strong. Japanese economy minister Kaoru Yosano said Friday that the rise to 4.2% from 4.0% in the June unemployment rate doesn't mean that the Japanese economy is slumping. "Although the unemployment rate in June has risen compared with previous months, the number of those with jobs has continued to rise. So the economy is in no way in a downward trend."
OIL: Prices continued to rise Friday, up 21 cents at $74.75, after the Venezuelan oil minister said OPEC was powerless to stop price surges caused by geopolitical tensions. Israel would agree to a cease-fire if an international force had the mandate and power to disarm Hezbollah, Australian Prime Minister John Howard said Friday.
METALS: Spot gold was quoted at $631.75/oz, tracking a narrow $630-$640 range as traders react to fluctuations in the dollar and oil. Copper futures were little changed.
EUROPEAN OUTLOOK: Stocks Seen Lower Ahead Of US GDP
Euro-USD 1.2688 loss 0.0010 dn 0.09%
Stlg-USD 1.8586 gain 0.0004 up 0.02%
USD-Franc 1.2386 gain 0.0004 up 0.03%
(All values as of 0450 GMT)
European shares are set to lose ground at the open, with government debt prices little changed. The euro tests support levels.
STOCKS: The recent gains made on European markets could well be erased in the opening session as investors take cover ahead of the U.S. GDP data.
U.K. spreadbettor IG Index is calling the FTSE and CAC down 26 points each at 5903 and 4975 respectively, with the DAX down 39 at 5620.
European stock markets gained ground for the second straight session on Thursday, after earnings and sales updates from some of Europe's largest companies including DaimlerChrysler, Volkswagen and Royal Dutch Shell boosted investor sentiment.
FOREX: The euro opens slightly lower, but with support markers at $1.2680 and $1.2665, where traders reported some buy orders already in place.
Greg Anderson, currency strategist at ABN Amro in Chicago, said that even if Friday's GDP report is in line with analysts' expectations, there is likely to be more risk of a dollar selloff than a dollar rally.
With the European Central Bank meeting on Aug. 3, and widely expected to lift interest rates 25 basis points to 3.0%, the dollar's weakness also reflects a narrowing in the interest rate advantage over the euro.
BONDS: European government debt prices may open little changed, with U.S. GDP in view after the Fed's dovish Beige Book.
"Sentiment has clearly shifted," said Nick Stamenkovic, strategist at RIA Capital Markets in Edinburgh, Scotland. "The Beige Book helped...the market is now pricing in below a 50% chance of a (U.S.) rate hike in August...and that clearly has given the market good support."
The level of U.S. interest rates is key to the outlook for European rates and bond markets as a slowdown in the world's biggest economy would have a knock-on effect on European exports and growth, analysts said.
"We think over the medium term this positive environment has further to run even though for the next two weeks we will stay in the range market," said Daniel Pfaendler, head of interest-rate strategy at Dresdner Kleinwort. "Overall it's shaping up to be a relatively good second half for government bonds," he said.
Looking ahead, euro-zone M3 money supply data is due for release Friday at 0800 GMT, but the market's conviction on the outlook for an ECB rate hike Aug. 3 means U.S. second-quarter gross domestic product figures at 1230 GMT could prove more market moving.
"In the U.S. the data over the next 10 days still have the possibility to switch the Fed's mind in either direction towards another hike or a pause," Pfaendler said. "So the U.S. data is certainly more in the spotlight at the moment because there is more uncertainty with respect to the near-term outlook for monetary policy."
The annual rate of growth of M3, the broadest measure of money available in the euro zone, is expected to have slowed to 8.7% in June from 8.9% in May, according to a Dow Jones Newswires survey.
U.S. second-quarter GDP is expected to have grown 3.2% after expanding 5.6% in the previous three-month period, according to a Dow Jones Newswires survey.
"We look for second-quarter GDP to rise 3.5%, but we think inventories are a potential upside surprise that may take GDP higher, perhaps nearer to 4%," HSBC said in a recent research note.
Prices of European government bonds rose Thursday, with bunds and gilts following U.S. Treasurys higher on growing hopes the Federal Reserve might not need to hike interest rates much further, analysts said.
(MORE TO FOLLOW) Dow Jones Newswires
July 28, 2006 01:45 ET (05:45 GMT)
Copyright (c) 2006 Dow Jones & Company, Inc.
28 Jul 2006 05:46 GMT =DJ EUROPEAN MORNING BRIEFING:Investors Wary Ahead Of Data-2
CALENDAR: Friday, July 28: Euro M3 Supply; US GDP
GMT Expected Previous
0640 FRA July Monthly Consumer Confidence Survey -27 -28
0645 FRA Quarterly Business Survey,
0650 FRA June PPI 0.2%MM 0.2%MM
0800 EU June Euro Zone M3 8.7%YY 8.9%YY
0900 ITA July CPI, prelim 0.3%MM 0.1%MM
1230 US 2Q GDP, advance +3.2% +5.6%
1230 US 2Q Employment Cost Index +0.8% +0.6%
1345 US July University Of Michigan Consumer 82.5 84.9
Sentiment Index, final (mid-July 83.0)
1630 US Pres Bush, UK PM Blair hold press
conference in Washington
N/A UK July Nationwide House Prices +0.4%MM +0.1%MM
N/A GER July CPI, prelim (expected in Week 30) +0.4%MM +0.2%MM
-By Dennis Baker; Dow Jones Newswires; email@example.com
(MORE TO FOLLOW) Dow Jones Newswires
July 28, 2006 01:46 ET (05:46 GMT)
Copyright (c) 2006 Dow Jones & Company, Inc.
28 Jul 2006 05:46 GMT =DJ EUROPEAN MORNING BRIEFING: Corporate Events
Alliance & Leicester (AL.LN): 1H Earnings
Average core operating profit (Co, 6 analysts): GBP263M (GBP263M)
Forecast range: GBP257M - GBP271M
Average EPS: 45.6p (47.3p)
Note: Analysts expect healthy growth in mortgage lending, but worry about rising margin pressure and trouble from bad debts in retail banking.
Bekaert (BEKB.BT): 1H Earnings
Average net profit (DJ, 5 analysts): EUR73M (EUR130M)
Average sales: EUR1.01B (EUR971M)
Note: 05 results were boosted by a one off EUR52M capital gains from the European fencing unit. This year's performance will be hurt by rising raw material prices which could not be passed on to the consumer as in the past," says Wouter Vanderhaeghen of KBC Securities. Analysts looking for details of when Bekaert's China operations will become profitable and details on any possible move into Russia.
British Sky Broadcasting (BSY): FY Earnings
Average revenue (Co, 11 analysts): GBP4.16B (GBP4.05B)
Average operating profit: GBP859M (GBP805M)
Average EPS: 30.5p (29p)
Note: BSkyB seen reporting the addition of 61,000 net new subscribers in 4Q 06, down from 83,000 in 4Q 05. Churn - rate of subscriber cancellations - seen at 11%, up from 10.5% in 4Q 05. Analysts will be focused on the recent launch of a BSkyb consumer broadband service, given strong competition from rivals such as Carphone Warehouse and BT, which are seen overshadowing BSkyB's finals.
De Beers: 1H Earnings
Average EBIT (Co, 8 analysts): $307M (N/A)
Note: Earnings are seen up on slightly higher prices and volumes, held back by the rand's impact on costs. Analysts are watching for any update on the diamond market. De Beers is a 45% owned unit of Anglo American (AAUK).
Deutsche Postbank (DPB.XE): 2Q Earnings
Average net profit (DJ, 6 analysts): EUR135M (2Q 05: EUR120M; 1Q 06: EUR134M)
Average net interest income: EUR531M (EUR426M)
Average net commission income: EUR355M (EUR176M)
Average pretax profit: EUR209M (EUR184M)
Note: Profit growth helped by further growth in retail banking following BHW (BSK.XE) takeover, according to a Dow Jones Newswires poll of 6 analysts' forecasts. Net profit seen unchanged from the previous quarter, a stagnation, which may lead to a negative market reaction, one trader says.
Eni (E): 2Q Earnings
Average EBIT (DJ, 8 analysts): EUR4.97B (EUR3.83B)
Average adjusted net income, excluding inventory gains and special charges:
Note: Analysts expect a robust performance from Eni's exploration and production business, whose EBIT should rise 45% to EUR4.2B, up from EUR2.90B from the same quarter in 2005. Production expected to grow 1.3% to 1.748 million barrels of oil equivalent a day compared with 2Q 2005, when it stood at 1.725 million boe/d. The expected production would make it "the third best growth rate" among European oil companies, according to Lehman Brothers. On a quarterly basis, oil production in 2Q fell 4% from 1.827 million boe/d in 1Q after Eni suffered disruptions to its Nigerian operations, in addition to the loss of production from the Dacion field in Venezuela.
"Nigeria's disruptions are one-off items, the real problem is Venezuela, as Eni lost the field permanently," said a Milan-based analyst. "Without these effects, production would have stood at a new record of 1.830 million boe/d," he added. Analysts will look closely at the company's comments on future strategy regarding the use of cash-flow, which stood at EUR5.9B in 1Q, and its relationship with the government. Analysts will also look for an update on Eni's negotiations with Russian gas monopoly OAO Gazprom (GSPBEX.RS) and on the Kashagan oil field situation in Kazakstan, where the startup of the its offshore oil field has been delayed until 2009-2010 from 2008. Eni will report before the market opens.
Julius Baer Holding AG's (BAER.VX): 1H Earnings
Average net profit (DJ, 8 analysts): CHF273.9M (N/A)
Note: Julius Baer says it won't make availableyear-ago figures - adjusted for the acquisition of three private banks and asset manager GAM from UBS AG (UBS) late last year - until the earnings report Friday. Forecasts vary widely because of different estimates of how much in restructuring charges, goodwill and amortization of intangible assets from the deal the bank will book in the period.
Linde (LIN.XE): 2Q Earnings
Average net profit (DJ, 7 analysts): EUR139M (EUR115M)
Average EBIT: EUR249M (EUR208M)
Average sales: EUR2.52B (EUR2.39B)
Note: Analysts say 2Q earnings and sales growth is due to a favorable economic situation, cost cutting and restructuring. Still, 2Q results are likely to be overshadowed by the EUR12B bid for BOC Group (BOX), say analysts, adding they expect an update on the takeover and details on the divestment of its non-core assets which will fund the offer.