31/07/07

The Dow Jones gained 92.8 points to close at 13,358.3, the S&P 500 rose 14.95 points to end at 1,473.9. The Nasdaq added 21.04 points to finish at 2,583.28.

GMAC Financial Services, the auto maker's 49%-owned financing arm, helped ease investors concerns after it reported a 63% drop in second quarter profit as its home-lending unit continued to weigh on results, but the losses from that operation were 72% smaller than the first quarter.

American Express helped to lift the Dow as investors appeared to believe losses last week were excessive. The credit card company advanced 2.7% to close at $60.14.

Verizon Communications lost $0.49 to $41.51 after reporting second-quarter net income that rose 4.5% amid strong wireless results, but margins for the wireline business were a concern for analysts. The company's wireless division also announced it would buy Rural Cellular for $757 million - Rural surged 34% to $42.76 on the news.

Dow Jones dropped $2.89 to $51.56 after News Corp. said it is "highly unlikely" to proceed with its offer for the publisher of 'Dow Jones Newswires' and 'The Wall Street Journal' if it doesn't get more support from the Bancroft family than has currently emerged. News Corp. added $0.18 to $22.84.

US light crude oil for September delivery fell $0.22 to $76.80 a barrel. COMEX gold for December delivery rose $4.30 to $676.60 an ounce.

Treasury prices went lower, raising the yield on the 10 year note to 4.80% from 4.77%.

The Nikkei slipped 40.4 points to close at 17,248.9 this morning. Steelmakers slumped after Japan's Fair Trade Commission said it is investigating Nippon Steel Corp, JFE Holdings Inc and Sumitomo Metal Industries Ltd on suspicion of price fixing. The market also suffered after a number of companies, including Kyocera Corp, lagged behind investor expectations. Limiting losses, Olympus Corp and Shinsei Bank Ltd gained after they doubled first quarter profit.

The Hang Seng is currently 271.3 points higher at 23,011.2 this morning. HSBC Holdings and Hang Seng Bank Ltd led the way after reporting higher first quarter profits. Sun Hung Kai Properties led developers up on speculation that today's land auction by the Hong Kong government will underpin real-estate valuations.

Better-than-expected results from HSBC and Pearson failed to lift confidence on the London market yesterday following last week's turmoil. The FTSE 100 Index furthered last week's 370-point loss, closing down 9.1 points at 6206.1, despite a strong performance from the mining sector, with continued concerns over the economic outlook in the US continuing to weigh on the market.

Dulux paint maker ICI led the Footsie risers board with a gain of more than 7% after the company said it had rejected a new approach from Dutch rival Akzo Nobel worth £7.8bn. Despite the snub, ICI's shares were 41.5p ahead at 618.5p, after the company said it remained in discussions with Akzo and investors bet on the Dutch firm coming back with a higher offer.

Heavily-weighted mining stocks were also on the front foot after an upgrade for Vedanta Resources from Merrill Lynch highlighted strong growth prospects. Vedanta moved 83p higher to 1701p, while Rio Tinto advanced 113p to 3451p and Antofagasta rose 28p to 702p.

Meanwhile, banking giant HSBC posted forecast-beating interim profits of almost £7bn, despite an increase in its bad debt charges. HSBC, the first of the "big five" banks to report this week, rose more than 1%, or 12p to 892.5p, on the back of the update. Rival Barclays, meanwhile, slipped back 1p to 681p after it failed to gain a recommendation for its latest ABN Amro bid from the Dutch bank's board.

Strong first half results boosted Pearson. The stock climbed 8p to 778p after the group reported adjusted pre-tax interim profits of £54m, compared with £31m a year earlier. Drinks and confectionery firm Cadbury Schweppes fell 8.5p to 595p. Analysts expect the firm's sales to have been knocked by the weaker US dollar when it posts interims later this week, while the company has also postponed the sale of its US drinks business due to the current weakness in credit markets.

Economics
UK Gfk Consumer Confidence (Jul) 1030 BST

Analysts expect consumer confidence to tick back down this month after a gain in May, on the back of further interest rate hikes and increase in petrol prices. But it is worth stressing the BoE have argued this survey doesn't fit well with the pattern of consumer spending and so has little implications for interest rates.

UK CBI Distributive Trades Report (Jul) 1100 BST

The BoE appear frustrated that as yet there has been very little reaction of consumer spending to higher interest rates. Analysts have argued that to be sure of a peak in rates we need to see a dramatic drop in retail spending. Analysts expect retailers to now start seeing sales disappoint as a large volume of people are now facing higher rates. However, with the wet weather seen in July, certain Committee members have dismissed any possible weakness over the coming months as due to the weather. So retail spending may have to be weak for some time to be sure rate shave peaked.

US Personal Income & Spending (Jun) 1330 BST/0830 EDT

Analysts look for a 0.5% rise in personal income as higher hours worked (+0.5%) and hourly earnings should rise by about 0.2%, as auto sales were quite weak (unit sales fell 3.4%). Assuming a 0.15% rise in the PCE deflator, real PCE should be about flat. Analysts expect the core PCE deflator to rise 0.17%, keeping the year on year rate at 1.9%. This is a bit lower than the 0.22% rise in core CPI, due to the smaller weight of hotel prices, which rose 2.5%.

US Employment Cost Index (Q2) 1330 BST/0830 EDT

Analysts look for the Q2 employment cost index to rise 0.9%. Wage & salaries are expected to rise 0.9% matching the quarterly rise in hourly earnings. The key swing factor may be benefit costs. In Q1, private industry benefit costs declined 0.3% (+0.1% including government workers), as employers made reduced contributions to defined benefit retirement plans. A spike in contributions could be an upside risk to the ECI, but solid equity performance in Q2 should have reduced the need for a big step-up. Meanwhile, slower medical inflation (+1 in Q2) should also help keep a lid on costs. Analysts have assumed a 0.6% rise in private benefits (0.8% for total benefits).

US Chicago PMI (Jul) 1445 BST/0945 EDT

The Chicago PMI Has been above 60 for the past two months. The latest Beige Book said that manufacturers of machine tools and equipments parts reported the best results, with strong sales to defence, electronics, and medical customers. Demand for construction machinery from domestic customers was weak, while machinery and heavy truck demand was helped by foreign demand. Analysts expect Chicago PMI to decline to 58 in July, consistent with about 55 for ISM manufacturing.

US Consumer Confidence (Jul) 1500 BST/1000 EDT

The data from the BBA, which covers around 60% of all banks and building societies, shows that higher interest rates are starting to have the desired affect on credit. Analysts expect consumer credit of £0.6bn in June. Mortgage approvals rose unexpectedly in May which mat be a result of a flurry of activity in May, in the build up to the Home Information Pack (HIP). Analysts expect a retreat this month, suggesting a roughly 10% yoy decline in new mortgage approvals.

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