EUROPEAN MORNING BRIEFING: Stocks Turn Lower Before Fed
06:02 am GMT
Dow Jones International News
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DJIA 10609.92 loss 92.59 dn 0.9%
NASDAQ 2116.04 loss 37.79 dn 1.8%
S&P 500 1144.05 loss 11.33 dn 1.0%
Dow Future 10562.00 loss 26.00 dn 0.2%
NASDAQ Future 1516.00 loss 4.00 dn 0.3%
S&P Future 1138.75 loss 3.75 dn 0.3%
FOREX: The euro opens the session a shade
lower than its late
The dollar was already
under selling pressure against the yen after Japanese finance minister Sadakazu Tanigaki indicated that
Dealers are now turning their attention to the Federal Reserve's interest rate decision Wednesday. Most observers expect the Federal Open Market Committee will leave rates on hold at a 46-year low of 1%, with no hint any increases are likely in the near term. The meeting should also see the release of a policy statement much like the one released when the central bank last met in early December.
CALENDAR: Wednesday, Jan 28:
0830 ITA Jan Business Confidence 92.1 (91.2)
0830 ITA Dec Non-EU trade data
0900 FRA Weekly cabinet meeting
0930 ITA Dec Wage Inflation
OECD Economic Survey
1015 GER ECB allocates long-term refi ops bids
1145 EU E.U.'s Solbes gives press conference
1500 EU E.U.'s Monti attends debate
N/A GER German Finance Agency to allocate bids
N/A US Federal Open Market Committee meeting;
Decision expected at 1915 GMT
STOCKS: After the previous session's rally, when the Dow Jones industrial average reached its highest level in 31 months, not even solid results from five blue chip companies could stop the declines. A consumer confidence reading that missed expectations and jitters about the Federal Reserve's expected statement on interest rates Wednesday contributed to the decline. Still, with results from most companies beating Wall Street's forecasts, most observers remain optimistic about the long term.
"We're still in a good environment, we're still in an upward trend," said Todd Leone, managing director of equity trading at SG Cowen Securities. "I like to see us go down a little bit, actually, it's healthy. You don't want to see the market going in a straight line up. "
Amazon.com reported sharply higher profit in its fourth quarter, boosted by robust holiday sales that helped the company post its first annual profit. Kraft plans to shut 20 plants, cut its work force by 6% and use some of the cost savings to build up its brands. The company also posted a 6.7% decline in its net profit.
And in political news,
John Kerry overpowered Howard Dean to win
After trading around unchanged levels early in the session, Treasurys gathered steam after a gauge of consumer confidence failed to meet high expectations, raising questions about the potential for creation of new jobs. Weakness in the dollar had also helped boost Treasurys as traders anticipate further intervention efforts by Asian central banks that are ultimately recycled via the purchase of Treasurys.
The fragile state of the labor market has been a key source of strength for the bond market this month since December payrolls posted a gain of just 1,000. And the FOMC is expected to avoid signaling an end to its easy monetary policy until a sustainable recovery in job creation is well entrenched.
The FOMC began its two-day meeting Tuesday. Analysts expect the Federal Reserve to keep its federal funds target rate unchanged at its historically low 1.0% and to change little in its official statement due for release at 1915 GMT Wednesday.
Dollar Fall Hits
USD-Yen 105.86 gain 0.20 up 0.2%
AUD-USD 0.7776 loss 0.0012 dn 0.1%
Nikkei 225 10851.51 loss 76.52 dn 0.7%
Hang Seng 13561.62 loss 200.26 dn 1.4%
JGB Yield 1.3100% up 0.0100
TOKYO (Dow Jones)--
The dollar's weakness quickly sent stock prices lower, with technology issues such as Advantest and Tokyo Electron, and autos Honda Motor and Nissan slipping Wednesday morning.
Prices of long-term
Japanese government bonds also fell, as profit-taking more than offset demand
prompted by the yen's uptrend against the U.S. dollar and declines in
U.S. Treasury prices
were mostly unchanged Wednesday in very thin
Players remain in a wait-and-see mood before the result of the Federal Open Market Committee meeting later today, although traders expect the Fed to leave policy steady and keep their policy statement unchanged.
EUROPEAN OUTLOOK: Shares Seen Opening Lower
Euro-USD 1.2620 loss 0.0018 dn 0.2%
Stlg-USD 1.8272 loss 0.0003 dn 0.01%
USD-Franc 1.2421 gain 0.0019 up 0.2%
STOCKS: European shares are likely to open lower after the dollar
fell overnight and Wall Street tumbled. Some European dealers have expected
such a correction after a month-long advance in the markets. IG Index of
advanced Tuesday, with the telecommunications sector racking up impressive
gains after strong
received a fillip from German data showing business sentiment in
"Overall, this month's rise in the Ifo index is a positive sign. After an unchanged assessment of current conditions last month, a rise was important as it confirms expectations for a modest recovery," said economists at Dresdner Kleinwort Wasserstein. Meanwhile, Heineken was expected to acquire a 21% stake in Guangdong Brewery Holdings Ltd., whose shares were suspended from trading pending a press conference at 0800 GMT.
Elsewhere, Aventis signaled it may seek a merger partner to counter Sanofi's hostile bid. Novartis and Glaxo are likely candidates. Sanofi fired the first shot in the public-opinion battle with newspaper ads.
BONDS: Euro-zone government bond prices are likely to open
higher, helped by strength in the euro and Treasurys,
ahead of the Fed's policy announcement. Euro-zone government bond prices ticked
higher Tuesday tracking U.S. Treasurys and euro
gains. The fall in Treasurys' yields was also a
correction after strong rises last week, said Kornelius
Purps, bond analyst with HVB. "Yields had been
going up without any fundamental reasons," he said. On the agenda
-By Dennis Baker; Dow Jones Newswires; 41-1-212-2181; email@example.com
Accor (12040.FR): FY Revenue
Consensus sales: (DJ, 4 analysts): EUR6.838B (EUR7.139B)
Note: Analysts expect strong growth for 4Q, building off 3Q turnaround, although all decline to give forecasts. Analysts cite effect of weak dollar effect, but also that this is offset by resistance to tough travel market in European budget hotel sector.
Air Liquide (12007.FR): 4Q/FY Revenue
Consensus sales: (JCF, 29 analysts): EUR2.119B (EUR2.068B)
Note: FY revenue at EUR8.357B, +5.8% from (EUR7.9B in '02) Higher prices, recovery in sales to semiconductors industry seen already in first 9-months, expected to have continued. Strong euro seen to have continued to weigh on sales in 4Q.
Northern Rock (NRK.LN): FY Earnings
Consensus pretax profit (Company, 23 analysts): GBP376M (GBP326.2M)
Note: Market to focus on sustainability of high rate of lending growth, net interest margin pressure, decline in popularity of Together product, say analysts. "Bears' concerns about net interest margins rather than total income margin have been unjust," says Hugh Pye of BNP Paribas. Rates stock outperform. Management's mortgage market outlook also seen important.
Vodafone (VOD): 3Q Key Performance Indicators
Note: Company is
expected to show subscriber momentum continues to build, but the figures will
take a back seat to any comments Vodafone Chief Executive Arun
Sarin makes about its
Ryanair (RYAAY): 3Q Earnings
Note: Ryanair (RY4.EI) seen reporting 3Q net profit of EUR47.5 million,
up 10% from a year ago, according to a consensus of 3 analysts. Smith Barney's
Andrew Light says average fares expected to be -10% but operating costs per
passenger should also fall. Outcome of EU investigation into
OTHER SCHEDULED EVENTS:
Lafarge (12053.FR): FY Revenue
Spir Communication (13173.FR): FY Revenue
NRJ Group (12169.FR): 1Q Revenue
MVV Energie (MVV.XE): FY03 Earnings press conference
Halladale Group (HDG.LN): 1H Earnings
ML Laboratories (MLB.LN): FY Earnings
Tandberg (TAA.OS): 4Q/03 Earnings
Zeltia (ZEL.MC): Investor conference
RM Group (RM.LN): AGM
Thirdforce (THF.DB): AGM
Hagemeyer (35547.AE): Announcement on rights issue takeup
OTP Bank (IRB.BS): Mortgage arm on public issue