26/10/07

Before the bell, the government said orders for durable goods fell unexpectedly by 1.7 percent in September. Analysts were looking for a gain of 1.5 percent. August orders were also revised lower. In a separate report, the government said the number of jobless claims last week fell by 8000 to 331000 which was a smaller drop than expected. New home sales came in slightly weaker than expected, although they showed an uptick from an August reading that represented an 11 year low.

Oil prices jumped $3.36 to $90.46 a barrel, a new closing high on NYMEX after Lebanese troops fired on Israeli warplanes and Turkey continued shelling Kurdish positions in Northern Iraq, raising fears of a broader conflict in the Middle East.

After the closing bell, Microsoft reported quarterly earnings that beat analysts estimates, sending shares of the company up 5 percent. The company also said it was making a $240m investment in Facebook, beating out rivals Google and Yahoo and plans to expand its advertising deal with the site.

Vonage Holdings surged 75 percent after the company said it settled a patent lawsuit brought by Verizon Communications for a maximum of $120m.

After the closing bell, Bank of America said it is exiting the wholesale mortgage business and cutting about 700 jobs.

Sony soared closing nearly 7 percent higher after it posted a profit, thanks to strong sales of electronics.

Comcast reported earnings that met forecasts, but the company lowered its free cash flow guidance for the year, sending shares down 11 percent.

Motorola reported a plunge in earnings that was a penny a share worse than forecast.

Raytheon also posted a lower third quarter profit, sending shares of the company down slightly.

Dow Chemical fell nearly 1 percent after the company saw a bigger than forecast drop in earnings, excluding special items.

COMEX gold rose $5.40 to close at $771 an ounce.

The Nikkei average closed at the days high today, up 221.5 points at 16505.8 on a surge in blue chip stocks such as Honda Motor Co after good earnings results the day before. But the market was driven more by short term trading and company specific factors such as earnings results, rather than any specific trends, with trade thin as participants sidelined themselves ahead of the weekend. Both Honda Motor and Sony added nearly 9 percent after earnings results that many participants said were good but not necessarily good enough to provoke such rises, given the uncertainties faced by both companies over the coming months.

Honda posted a forecast beating 63 percent jump in quarterly earnings as strong sales of its new CR-V crossover made up for higher raw materials costs, and raised its full year net profit on a lower tax rate.

Sony reported a swing to a quarterly operating profit on strong sales of personal computers and digital cameras and raised its full year forecast by 2 percent.

Ricoh Co fell 4.2 percent at 2280 yen after reporting a 15 percent jump in first half operating profit to Y85bn but did not revise its forecast of a 12 percent climb for the full year. Some had been looking for the office equipment firm to revise its annual earnings outlook higher, and market participants have said such upward revisions are being keenly watched this year, with good earnings results mainly already factored in.

The FTSE100 closed 94.3 points higher on Thursday at 6576.3, boosted by Vodafone and miners, despite mixed US data. Vodafone gained 6.5 percent on market talk that the company may mount a bid for Carphone Warehouse, which added 3.9 percent. Vodafone and Carphone Warehouse declined to comment, and analysts were sceptical, noting that the European telecoms sector was up on France Telecom's results.

Also on the upside, mining shares recovered from losses in the previous session after metal prices firmed. Kazakmhys was up 3.4 percent and Vedanta Resources rose 2.6 percent. Rio Tinto added 3.6 percent after it said it expects solid growth from its $38.1bn takeover of Alcan Inc, and the Canadian aluminium makers global expansion projects. Lonmin added 2.7 percent despite posting a 16 percent fall in full year platinum sales and warning that unit costs would rise in the coming years and hit margins.

Prudential and Old Mutual rose as traders cited a mixture of vague M&A hopes within the finance sector and positive sentiment after China's biggest lender ICBC announced it was to buy 20 percent of South Africa's Standard Bank. Also in the sector, Standard Life fell 1.3 percent after it confirmed that it was in advanced discussion with the board of rival Resolution over a possible recommended offer valuing the group at £4.9bn. Resolution was 0.4 percent higher.

Northern Rock was up 2.5 percent, while Bradford and Bingley gained 3.4 percent as traders cited an upbeat presentation on the company by Morgan Stanley. The stock also benefited from comments by rating agency Fitch saying that mid sized British mortgage lenders such as Bradford and Bingley and Alliance and Leicester were unlikely to face a funding crisis similar to that of Northern Rock. Alliance and Leicester however fell 3 percent.

InterContinental Hotels added 5.9 percent after ABN AMRO raised its price target on the company to 1510 pence from 1390 pence and kept its buy rating.

But pharmaceuticals were weaker after UBS cut its price target on GlaxoSmithkline to 1350 pence from 1450. Glaxo fell 0.7 percent.

Capita Group dipped 5.5 percent after Transport for London said IBM would take over the job from 2009. Capita generates around £56m in revenue a year from the contract. 

M3 is a bit of a wild card at the moment, as many diverging factors blur the picture. Higher interest rates should theoretically lead to lower M3 readings, but safe haven flows still have the potential to push up the number. HSBC, have as a consequence, opted for a conservative forecast of 11.4 percent. Regarding private sector loans increases in interest rates and tighter lending conditions are expected to lead to easing growth rates in the medium term. In the short run, substitution effects into plain vanilla bank loans are possible on the corporate side, as observed in August. Given that the corporate bond market picked up again in September, the substitution effect might have been a bit lower, putting a lid on corporate loan growth. Together with subdued household loan growth, this should be enough for an overall easing of private sector loan growth to 11 percent.

US University of Michigan confidence (Oct, final) 15,00 bst

The preliminary reading for October fell to 82 from 83.4 in September. Five year and one year median inflation expectations fell to 2.8 percent and 3 percent respectively. The ABC/Washington Post survey has been little changed recently, with last week's small improvement in the state of the economy (-28 from -30) offset by a drop in personal finances (18 from 22 ). The final reading of Michigan sentiment is expected to stay at 82.

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