4/09/07

In Japan the Nikkei average fell 104.46 points to close at 16420.47 on caution ahead of a wave of US economic data, while clothing company Fast Retailing Co extended its slide after announcing acquisition plans despite its failed bid for Barneys New York. Overall trade was subdued ahead of US indicators such as nonfarm payrolls and ISM non manufacturing data.

The FTSE100 closed 11.9 points higher at 6315.2 on Monday in thin volumes as comments by Barclays eased concerns over its financial health, helping to underpin financial stocks. Barclays rose 4 percent, topping gainers, after its President Bob Diamond denied in newspaper interviews at the weekend the bank might be forced into a profit warning and repeated it does not expect material losses from highly leveraged vehicles known as SIV lites.

Oil stocks struggled even as oil prices firmed. Net profit of Russia's third largest oil producer TNK-BP half owned by BP fell 30 percent in the first half of 2007. BP was down 1.3 percent, Royal Dutch fell 0.2 percent and BG Group fell 1.6 percent.

British Energy gained 1 percent with traders citing market talk the British government might sell its remaining stake in the company.

British Airways closed 1.7 percent and Ryanair climbed 0.8 percent after upbeat analyst notes. Analysts said August traffic figures due from BA tomorrow were likely to be strong, compared with year ago numbers that were hurt by security alerts in the UK.

Carphone Warehouse jumped 4.8 percent on market talk that US based electrical goods retailer Best Buy, with which it has a joint venture, was building a stake in the UK company. Carphone Warehouse and Best Buy were not available to comment.

Economics
EMU PPI (Jul) 10.00bst

Euro denominated oil price inflation rose to 4.5 percent month on month in July, but the yearly rate is still negative (-6.1 percent). Selected country's evidence so far speaks in favour of another benign PPI outcome in July. Therefore expect a rise of just 0.1 percent month on month, which would drag down the yearly rate to 1.7 percent.

EMU Retail sales (Q2, prelim) 10.00 bst

Retail sales in the Eurozone could manage a monthly increase, but the yearly rate of growth should ease to 0.9 percent. The retail sales PMI was down to 46.2 in July, but rebounded up to 51 in August.

EMU GDP (Q2 prelim) 10.00

EMU GDP for the second quarter disappointed slightly, expanding by just 0.3 percent quarter on quarter. The downside surprise came out of Germany (0.3 percent quarter on quarter). Although we know now that negative stock contribution played a role along with weak construction. Italy, growing by just 0.13 percent quarter on quarter, was weak as well, while France cooled to 0.3 percent quarter on quarter on the back of negative net exports and weak business investment. Spain held up at 0.9 percent quarter on quarter. For the pan European breakdown, private consumption should have recovered from the subdued reading in Q1, while business investment is likely to have cooled. Stocks could have been a drag as well, while net exports probably contributed positively on the quarter.

US ISM manufacturing (Aug) 15.00 bst

The ISM manufacturing index is seen falling to 52.5. Early in August, the Empire Index stayed strong at 25. The headline Philly Fed dropped to 0, but the details were better as the ISM weighted-average of the components suggests around 54 for ISM. Meanwhile, the recent consumer confidence report reflected less optimism on both current and future business conditions.

US Construction spending (15.00 bst)

Residential construction spending continues to drop as housing starts and completions slow to new cycle lows. A 0.7 percent drop for residential spending in July is expected. Total construction spending could fall 0.2 percent, assuming increases in non residential and public construction.

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