24/09/07

Oracle reported higher quarterly earnings and revenues that topped estimates late Thursday. The company also reported a large jump in sales of new software licenses, that topped forecasts. That gave a boost to technology stocks on Friday, enabling investors to extend the recent rally, despite oil prices hovering above $81 a barrel.

Nike reported higher quarterly earnings and revenue that beat expectations late Thursday, thanks to a tax benefit and a boost from the weak US dollar.

Bear Stearns reported a big drop in third quarter profit due to the impact of the financial market turmoil, as did Morgan Stanley, but other major banks were more optimistic. Goldman Sachs acknowledged the tough environment, but still reported a rise in earnings and revenue Lehman Brothers also reported stronger than expected earnings.

In other news, Mattel apologized to China about the recall of Chinese made toys, saying it was responsible for design flaws and that it had recalled more lead tainted toys than necessary.

Shares of Harman International Industries slumped 24 percent in active trade after the company said two private equity companies have abandoned their proposed $8bn buyout of the audio gear maker.

Volume was heavy due to the quadruple options expiration and individual stock futures and options, all expire simultaneously.

A number of central bank officials spoke Friday, including Federal Reserve Vice Chairman Donald Kohn and Fed Governors Frederic Mishkin and Kevin Warsh, all of whom are voting members of the 2007 FOMC. Speaking at a conference in Germany, Fed governor Mishkin said that economic downturns have always been connected to instability in financial markets, and that policy makers should keep that in mind. He also discussed inflation targeting. Fed Vice Chairman Kohn, also speaking at the conference, indicated he is now less opposed to inflation targeting, having specific set goals for price gains, than he has been in the past. Kohn also spoke to recent questions whether last week's Fed rate cut went too far and essentially bailed out investors who made bad decisions, saying that the focus of the central bank is always the macro economy. In the afternoon, Fed governor Kevin Warsg, speaking at SUNT-Albany's school of business, discussed the recent volatility in financial markets, the drying up of liquidity this summer and the subprime mortgage market fallout.

Treasury prices rose, bouncing back after several down days. The gain lowered the yield on the 10 year note to 4.62 percent and 4.70 percent.

In currency trading, the dollar fell to a new record low against the euro and slipped against the yen.

US light crude for November delivery fell 16 cents to settle at $81.62 a barrel on NYMEX. The October contract settled the previous day at $83.32, ending at a record high for the fourth session in a row.

COMEX gold for December delivery fell $1 to settle at £738.90 an ounce.

The Tokyo SE is closed today.

UK stocks closed 27.7 points higher on Friday as high precious metal prices pushed mining stocks up, while Northern Rock buoyed financial on bid speculation. Gold hit a 28 year high as the dollars continued slide to record lows versus the euro raised the metals appeal to speculative investors. Other precious metals also advanced, with silver rising to its highest in more than three months, platinum hitting its highest since early May and palladium touching a five week peak. Vedanta added 3.4 percent, BHP Billiton gained 1.5 percent and Xstrata was up 1.9 percent. Northern Rock gained 4.9 percent after falling about 71 percent over the past week because of a funding and customer confidence crisis. Dealers said investors were bargain hunting. RAB Special Situations, which takes opportunistic positions over a long term, bought a stake of just over 6 percent last week. Traders said this showed some of the gloom surrounding the stock was lifting.

British Energy topped the FTSE100 leaderboard, adding 6.6 percent as traders said investors were switching from Drax Group into the nuclear power firm. Drax ended 0.5 percent lower.

Kingfisher fell 3.5 percent after brokers cut their price targets and earnings estimates. UBS cut its price target to 200p from 235p, while Lehman Brothers trimmed its target price to 248 pence from 275p. Traders also said Merrill Lynch had cut its earnings estimates.

This morning Segro, Kelda and Drax will be replaced by Carphone Warehouse, Tullow Oil and Taylor Wimpey in the FTSE100's quarterly rejig.

Wolseley lost 2.1 percent following weakness in US housebuilder stocks overnight and on negative expectations ahead of its results today.

LSE gained 6.7 percent, underlining the return of merger and acquisitions activity, with traders saying that JP Morgan and UBS were placing shares in the group, the subject of stake building attention from both Dubai and Qatar.

Economics
UK Public Finances (Aug) 09.30bst

Net borrowing is expected to be roughly £6bn in August, which would take borrowing so far this year to £16.1bn, broadly similar to the £16bn seen at this time last year. The Chancellor estimates he will borrow £34bn this tax year.

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