Final World Summary: US EQUITIES RECOVER ON BETTER GROWTH 08:19, Friday, 26 May 2006
Sydney - Friday - May 26: (RWE Aust Business News)- US equities have continued to regain ground after a good growth rate in the first quarter and interest rate uncertainty slipped into the background.
One jarring note was another rise in energy costs and lower first quarter corporate profits after tax showing a rise of 8.8 per cent against 13.8 per cent in the fourth quarter.
However, investors were encouraged by the US economy which has been which was revised to 5.3 per cent, better than expected for the first quarter.
It was the fastest growth in 2-1/2 years, as companies built up inventories and exports strengthened, according to a Commerce Department report.
First-quarter growth in gross domestic product was more than triple the 1.7 per cent annual rate recorded in last year's fourth quarter, though still slightly below Wall Street predictions for a 5.7 per cent rate.
Prices remained in check, with the core personal consumption expenditures (PCE) price index rising at a 2 per cent rate compared with 2.4 per cent in the fourth quarter.
This is the most watch inflation indicator by the Fed and should contribute to a possible pause in interest rate rises.
On Wall Street the Dow settled 94 points higher, the S&P 500 up a solid 14, the Nasdaq composite 29 and the 100 index gaining 20 on the close.
Treasuries weakened despite a successful $14 billion 5 year note auction.
It produced a yield of yield of 4.945 per cent, the lowest in two months.
But the yield was higher than the 4.934 per cent traders forecast.
Energy costs increased after the July crude contract gained $1.46 to $71.32 barrel on the New York Mercantile Exchange overnight.
Distillate stocks also rose more than expected, though crude inventories fell more than expected.
In other economic data the pace of existing home sales in the United States fell 2.0 per cent in April, roughly in line with expectations, as higher mortgage interest rates ate into buyers' ability to purchase homes.
Sales of existing US homes fell to a seasonally adjusted annual rate of 6.76 million units in April from a downwardly revised level of 6.90 million in March, according to the National Association of Realtors.
April's rate was down 5.7 per cent compared with the 7.17-million-unit pace a year earlier.
In market news, Enron chief Lay has been found guilty on all counts, and Skilling on most counts in the fraud and conspiracy trial of the former Enron executives.
The verdict climaxes a landmark case that grew out of Enron's December 2001 collapse into bankruptcy and sparked corporate and governmental reforms. Sentencing is set for Sept. 11.
In another development Yahoo and Ebay unveiled a multiyear Web-search and advertising partnership, teaming up to take on the growing power of search-giant Google. Yahoo and eBay shares rallied.
The Australian dollar climbed more than three quarters of a cent to US76.07c in New York trading overnight as the gold price recovers $11.40 to $648.40 oz on the COMEX spot month.
WALL STREET ... The Dow Jones industrial average index settled 93.73 points higher at 11,211.05, the Standard and Poor's 500 index ended 14.31 better at 1272.88 while the Nasdaq Composite index finished 29.07 higher at 2198.24 and the Nasdaq 100 index rose 19.50 to 1599.68 on the close.
Treasuries failed to react to the better 5 year note auction. The 10 year cash paper fell 9/32 ticks to 100 12/32, lifting the yield 4 points to 5.08 per cent, 30-year bond yield also rose 4 points to 5.18 per cent while the 2year note yield gained 2 points to 4.97 per cent.
US DOLLAR ... has been weaker against major currencies, trading at 111.79 yen from around 112.87 yen previously in New York. The euro was $US1.2797 against 1.2759 while sterling was $US1.8720 compared with 1.8689 previously. The US dollar on the Swiss franc was steady at 1.2178 against 1.2178.
AUSTRALIAN DOLLAR ... rose strongly on the greenback as gold rallied. The dollar is currently US76.07c in New York trading. This compared with yesterday's local close of US75.21c. Overnight, it has traded as high as US76.09c and as low as US75.21c. The Aussie is worth 85.01 yen (pre 84.99), 0.5941 euros (pre 0.5901) and 40.64 pence on sterling (pre 40.29).
AUSTRALIAN SHAREMARKET ... traders are expecting a strong performance today in line with early futures up 69 points already. Goldman Sach JB Were market analyst Richard Coppleson is looking for big rises in resources stocks after some wild trading in the past few days. Oil stocks should rise after another big jump in the price of crude overnight. The general market should benefit from recovery on Wall Street which saw the Dow up 94 points overnight while the S&P 500 and the Nasdaqs also posted solid gains. Today GlobalNet Asia Pacific will commence trading on the ASX.
EUROPEAN SHAREMARKETS ... finished higher after Wall started well and traders were impressed with some corporate results. Key markets saw London up 91 points, Paris 80, Frankfurt 119 but Zurich was closed along with Finland and Sweden.
In London traders were helped by good company results from Tate & Lyle and Barclays. Equities improved as trading progressed led by miners Anglo American and Kazakhmys.
Groupe Bruxelles Lambert closed higher in Brussels after agreeing to sell its 25 per cent stake in German media conglomerate Bertelsmann back to the company for 4.5 billion euros.
Tate & Lyle shares rose after the sugar producer disclosed profit before taxes, amortization and exceptional items rose 16 per cent, which was above predictions. U.K. bank Barclays reversed early losses, to close up after reporting revenue was growing more quickly than forecast. U.K. telecommunications provider Cable & Wireless ended lower after its 3 per cent fall in profit before taxes. Morrison Supermarkets finished the day higher after it reported a 3.7 per cent same-store sales rise, excluding fuel sales.
BAA, the operator of London's Gatwick and Heathrow airports, fell as much as 6 per cent at one stage after the Office of Fair Trade said it would examine the U.K. airports market, a move the company called a "surprise." The London Stock Exchange fell sharply despite announcing a 9 per cent profit rise. LSE shares have come under pressure following the NYSE Group's moves to acquire Euronext. Rival bourses retreated with the Euronext down around 1.9 per cent and Deutsche Boerse losing more than 3 per cent.
Mining stocks boosted market confidence with BHP Billiton up 3 per cent and Rio Tinto 3.1 per cent higher as stronger copper prices Anglo American, the world's third-largest miner, gained 2.9 per cent.
Energy stocks rose, with Total adding 2.1 per cent a nd BP up 2.3 per cent as crude moved above $70 a barrel. Britain's BG Group added 4.9 per cent.
At the close London's FTSE 100 rebounded 90.6 points to 5677.70, Paris CAC-40 regained 79.51 points to 4949.53 while the Frankfurt DAX 30 climbed 118.83 to 5706.06 but Zurich was closed. In other markets Amsterdam rose 4 points, Brussels up 44, Madrid General 18, while Milan retrieved 353 and Oslo was closed.
METALS ...rebound. May gold rose $11.40 to $648.40 oz on the COMEX spot month while the June contract regained $11.00 to $648.50 oz. May silver rose 9c to to $12.54 oz, July platinum improved $9.90 to $1295.00 oz, Spot copper (May) recovered 6.85c to 390.15c lb in New York.
Three months closing LME bid prices were copper $8050 tonne, tin $8000, lead $1085 zinc $3515, aluminium $2753 and nickel $22,100 tonne.
On the three months official bid prices, copper rose $119 to $8099 tonne but tin fell $245 to $8125 while lead was steady at $1110. Zinc rose $120 to $3530, while aluminium slipped $9.50 to $2759.50 and nickel ended $100 higher at $22,095 tonne.
OIL ... settled $1.46 higher on the spot July contract at $71.32 barrel on the New York Mercantile Exchange with a high of $71.38 and low $69.90 barrel. The August contract gained $1.48 to $72.09 barrel with the high of $72.20 and low $70.75. The Brent ICE June crude futures regained $1.49 to $70.71 barrel with a high of $70.79 and low $69.05 barrel.
