Finance Markets

June 23, 2006

Bond yields up on interest rate concerns

Filed under: Bonds, Economy, US, Europe, UK, Japan

Yields on government bonds were up this week in the United States, the Eurozone, and in Japan. Investors’ main concerns revolved around the issue of interest rates.

In the United States, rumors began to circulate that the Federal Reserve will raise interest rates by 50 basis points rather than by the usual 25 basis points when it meets next week. Hard data was hard to come by, however, as officials of the Fed were observing a moratorium on comments that might provide hints about what they are planning to do. Some meat for speculation came when Barclays Capital said that it expects interest rates to be at 6 percent by the end of the year, rather than at the 5.5 percent currently expected by most analysts.

Yields on two-year treasury bonds were at 5.257 percent on Friday, a gain of 9 basis points over the week. Ten-year yields hit a four-year high at 5.218 percent, a gain of about 5 basis points.

In the Eurozone, the main talking point was speculation about when the European Central Bank will again raise interest rates. While the head of Bundesbank in Germany made comments implying that another rate hike was “warranted”, most analysts feel that such a move at the July meeting of the ECB is unlikely. The two-year Schatz gained 16 basis points on the week to 3.539 percent, while the ten-year Bund added 13 basis points to 4.074 percent.

Meanwhile, in the UK, ten-year gilts were up to a yield of 4.74 percent, a gain of 13 basis points.

In Japan, the ten-year government bond added 7 basis points during the week to a yield of 1.87 percent.

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June 22, 2006

London markets up, trade volumes still low

Filed under: Equities, Economy, UK

In London on Thursday equities markets were up as the FTSE 100 closed at 5,684.1, a gain of 0.3 percent, while the FTSE 250 added 1.1 percent to 9,192.8. Trade volumes are still lower than average, with 2.85 billion shares traded during the day. So far this week, the 100 has risen 1.5 percent and the 250 is up 1 percent.

Among homebuilders, Persimmon added 4.1 percent to £11.93 amid rumors that it is looking for a new purchase.

PartyGaming was up 3.1 percent to 123p, also on rumors that it is looking to buy. The talk is that the online gaming company wants to purchase a “bricks and mortar” gaming business.

Compass Group gained 3.6 percent to 258p, bringing its rise since last week Wednesday to 12.6 percent on the news that US investors have been buying shares in the contract caterer.

Construction company WS Atkins added 8.7 percent to 840p on full-year earnings that beat expectations, making it the biggest gainer on the 250 for the day.

The best-performing stock on the 100 was pest control group Rentokil Initial, which gained 4.5 percent to 149¾p on an upgrade from “underperform” to “outperform” and a new target share price of 171p from Morgan Stanley.

In the airlines sector, EasyJet added 2.8 percent to 392¾p on comments from Citigroup. British Airways, however, dropped 5.9 percent to 346p after it became known that its offices had been raided by the Office of Fair Trading in the course of a US/UK investigation into price-fixing.

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June 21, 2006

FTSE 100 higher, 250 declines

Filed under: Equities, Economy, UK

London equities markets were mixed on Wednesday as the FTSE 100 added 0.12 percent late in the day to close at 5,665, but the FTSE 250 lost 0.3 percent to 9,093.1. Once again, volumes were low with only 2.5 billion shares changing hands.

Eighteen percent of all the shares traded on the day were from Vodafone, which ended the day up 0.2 percent to 114¼p.

The 100’s gains were helped by the mining sector, where stocks advanced as the prices of metals rose. Vedanta Resources added 2.5 percent to £13.09, while Lonmin gained 2.9 percent to £26.41 and Kazakhmys was up 3.1 percent to £10.95.

Online gamer PartyGaming added 3.25 percent to 119¼p on rumors that one US bank was telling its customers to buy shares because current attempts to make online gambling illegal in the US will not succeed.

In the media sector, ITV added 2.7 percent to 105¼p despite a negative trading update, as the broadcaster announced an increase in its share buyback.

Mitchells & Butlers added 0.4 percent to 505¼p. However, analysts said that it could have trouble on Thursday after an after-session announcement that Violet Capital, controlled by financier Robert Tchenguiz, no longer owns a reportable share of the pub operator.

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Bond yields down in US, UK

Filed under: Bonds, Economy, US, Europe, UK

Officials of the US Federal Reserve have stopped making public comments, a customary practice ahead of rate-setting meetings, leaving government bond purchasers without much data on which to base decisions as data from other sources is also lacking at present. With summer beginning, a time of traditionally limited trade, volumes were low in the US Treasury market.

At mid-session in New York, two-year Treasury bonds were yielding 5.203 percent, unchanged from Tuesday’s levels. Meanwhile, ten-year bonds had dropped 0.4 basis points to a yield of 5.153 percent.

In the UK, release of the minutes from the Bank of England’s most recent rate-setting meeting showed that only one member had voted to raise rates. However, the rally caused by the news was limited as speculation continued that rates would rise soon after housing market data was stronger than had been expected.

Yields on two-year gilts dropped 1.9 basis points to 4.817 percent, while ten-year yields were down by only 0.1 basis point to 4.718 percent.

Eurozone yields were up after remarks from the governor of the European Central Bank that interest rates there will be going up again in the effort to control inflation. The comments came in the wake of new data from France that showed household goods purchase there have risen at their fastest rate in 20 years.

The two-year Schatz added 1.4 basis points to yield 3.470 percent, while the ten-year Bund yielded 4.008 percent, a rise of 1.1 basis point.

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June 19, 2006

Insurers lift FTSE 100

Filed under: Equities, Economy, UK

In London on Monday, the FTSE 100 added 0.5 percent to 5,626.1, while the FTSE 250 was up 0.2 percent to 9,114.1. Trade was light, with just barely over 2 billion shares changing hands during the day. Light trade is expected to last throughout the week as investors are distracted by the World Cup.

Among media companies, ITV - down 17 percent since March, when it rejected an offer from a private equity consortium - was up slightly to 105¼p on the possibility that it might announce an increased share buyback and more cost-cutting measures on Wednesday. Elsewhere in the sector, BSkyB gained 2.3 percent to 564p on positive comments from Lehman Brothers. EMI added 2.8 percent to 278¾p when Credit Suisse raised the music group’s target share price from 300p to 310p. In addition, there was talk that EMI might revise its offer for Warner Music.

Hotel operator De Vere added 3 percent to 824p on weekend reports that said four different bidders have expressed interest. The latest possible bidder named is Richard Balfour-Lynn, the head of Marylebone Warwick Balfour, which gained 3.3 percent to 189½p.

In the insurance sector, Royal Sun & Alliance was up 2.8 percent to 126½p on the news that it will eliminate 1,550 jobs as a cost-cutting measure. Prudential added 3.2 percent to 566p. In addition, Friends Provident was up to 174¾p, while Legal & General climbed to 125¾p.

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Scant news sends bond yields higher

Filed under: Bonds, Economy, US, Europe, UK, Japan

Yields on government bonds were up in global economies on Monday as a lack of substantive economic news caused investors to be cautious about their activities in the current climate of higher interest rates.

With August Fed futures indicating a 75 percent probability that the US Federal Reserve will raise interest rates again on August 8 and a near-certainty that rates will be raised this month as well, yields on US Treasury bonds were up. Ten-year issues added 1.8 basis points to a yield of 5.153 percent, while both two-year and thirty-year bonds were yielding 5.194 percent. Two-year paper was up 2.6 basis points, while thirty-year bonds gained 2.1 basis points.

Comments from a European Central Bank official that hinted at another rate hike soon in the Eurozone and a stronger equities market both sent bond yields higher in the region. The two-year Schatz added 4.6 basis points to 3.421 percent, while the ten-year Bund was yielding 3.971 percent, a gain of 2.2 basis points.

A stronger equities market and the lack of economic news in the UK also sent gilt yields higher, as did anticipation of Wednesday’s release of the minutes of the most recent meeting of the Bank of England’s monetary policy committee. Two-year gilts added 1.8 basis points to 4.787 percent and ten-year gilts gained 5.4 basis pints to a yield of 4.665 percent.

In Japan, the 10-year government bond gained 2 basis points to yield 1.825 percent. There is speculation that interest rates will rise above zero when the Bank of Japan meets in July, since equities markets in Japan seem to have stabilized after recent declines.

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June 16, 2006

London markets lower on miners

Filed under: Equities, Economy, UK

London equities markets were lower again on Friday. After gains early in the day, the FTSE 100 ended up 21.9 points lower at 5,597.4 as miners lost value on China’s steps to slow down economic growth. Meanwhile, the FTSE 250 dropped 8 points to end the day at 9,093.8. Over the week, the 100 lost 1 percent, while the 250 actually managed to gain 0.8 percent.

The 100 will lose three stocks beginning Monday, and all three were lower. Ladbrokes dropped 3.4 percent to 372¼p, while Daily Mail and General lost 2p to 600 and Cable & Wireless fell ½p to 109½p.

In the utilities sector, Scottish Power added 3.9 percent to 577½p for the largest gain on the 100. Most analysts put the gain to a positive evaluation of its PPM Energy division, which is the second biggest wind farm operator in the United States. Others said that it was helped by bid talk, as rumor had it that Scottish & Southern Energy is preparing an offer. Scottish & Southern added 0.2 percent to £11.13.

Retailer Marks & Spencer was up 3.3 percent to 573p on a “buy” recommendation from Deutsche Bank after having lost 13 percent in the past month. Also in retail, supermarket chain William Morrison added 2.4 percent to 199¼p and 50 million shares changed hands as bid rumors circulated.

In the mining sector, Rio Tinto dropped 1 percent to £27.17, while BHP Billiton declined by 2.2 percent to 960p.

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June 15, 2006

FTSE 250 gains 3.6 percent

Filed under: Equities, Economy, UK

After three consecutive days of losses, the London equities markets were higher on Thursday. The FTSE 100 gained 2 percent to 5,619.3 on gains in the mining sector. Meanwhile, the FTSE 250 added 3.6 percent to 9,101.8 for its second-largest daily percentage gain so far this year.

The pharmaceuticals sector was mixed based on sales data. Shire Pharmaceuticals added 6.7 percent to 747p after it was revealed that its attention deficit hyperactivity disorder drug, Adderall XR, is selling well in the United States. However, GlaxoSmithKline dropped 1 percent to £14.58 on data showing that sales of its diabetes drug Avandia had fallen 14 percent in May, while sales of Advair, for the treatment of asthma, was down 4.4 percent during the month.

Miners Vedanta and Lonmin were up as metal prices were up and as institutional investors sought to purchase shares before both companies move from the FTSE 250 to the FTSE 100 next week. Vedanta added 13.5 percent to £12.56, while Lonmin gained 7.1 percent to £24.45.

Among miners already included in the 100, Anglo American was up 7.1 percent to £19.89 on an upgrade to “buy” from Merrill Lynch. BHP Billiton gained 7.2 percent to 982p, while Xstrata added 7.9 percent to £19.66.

Supermarket chain William Morrison dropped 1 percent to 194½p on comments from Sanford Bernstein that called its stock overvalued.

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Bond yields up on interest rate expectations

Filed under: Bonds, Economy, US, Europe, UK, Japan

Yields on government bonds were up in most major markets on Thursday as the likelihood increased that the US Federal Reserve would raise interest rates later in the month. In addition to a hike this month, analysts are increasingly convinced that there will also be a rate hike at the Fed’s August meeting.

At mid-day in New York, two-year Treasury bonds added 2.6 basis points to 5.146 percent, nearly a five-year high, while yields on ten-year notes were up 3 basis points to 5.100 percent.

In the Eurozone, inflation concerns affected bond yields. The two-year Schatz was yielding 3.392 percent late in the trading day, a gain of 3.7 basis points. Meanwhile, the ten-year Bund was 4.4 basis points higher to a yield of 3.948 percent.

UK gilts saw yields rise, as well. Two-year yields were up 4.2 basis points to 4.733 percent, while the yield on ten-year gilds were at 4.622 percent, a rise of 8.9 basis points. New data showed that retail sales there is up more than had been expected and prices on new houses are rising faster than they have in two years.

In Japan, yields on the ten-year government bond stood firm at 1.770 percent as there was essentially no reaction to the Bank of Japan’s expected decision to keep interest rates at zero for the time being.

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June 14, 2006

Weak oil sector takes FTSE 100 lower

Filed under: Equities, Economy, UK

London equities markets were mixed on Wednesday. The FTSE 100 dropped 0.2 percent to 5,506.8, mostly on declines in the oil sector, while the FTSE 250 added 0.7 percent to 8,782.2. 3.3 billion shares were traded on the day.

Homebuilders were mixed on bids rumors. Crest Nicholson was up 3.6 percent to 505p on speculation that one of its rivals would purchase the 23.4 percent of its shares now held by Heron International. Bovis Homes was the most mentioned possible buyer, sending its shares 2.2 percent lower to 779½p. However, some analysts see either George Wimpey or Barratt Developments as more likely bidders for the shares. Wimpey added 2.7 percent on the day to 428½p, while Barratt gained 1.1 percent to 868p.

In the banking sector, Lloyds TSB added 2.4 percent to 515p on an upgrade to “overweight” and an increase to 611p in its target share price by Morgan Stanley.

Bid rumors in the pharmaceuticals sector sent AstraZeneca 2. 5 percent higher to £30.16 on a revival of talk that Novartis will make an offer. The feeling of some analysts is that these rumors have gained new currency due to the bidding war over German drug maker Schering.

In the oil sector, BP lost 1.3 percent to 586p. Royal Dutch Shell declined by 1.8 percent to £17.35, while BG Group was down 3.3 percent to 635p. Meanwhile, Tullow Oil dropped 2.3 percent to 300¾p even though rumor had it that Royal Dutch Shell might be planning a bid.

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June 13, 2006

London markets continue declines

Filed under: Equities, Economy, UK

The London equities markets had another losing day on Tuesday as it reacted to falling Asian markets and sell-offs of commodities. Some investors were also busy shedding risky shares ahead of new data on US consumer prices, due on Wednesday. The FTSE 100 dropped 1.8 percent on the day to 5,519.6, while the FTSE 250 ended the session at 8,721.7, 2.9 percent lower. Activity was heavy, with 4 billion shares traded on the day.

Miners fell as prices for gold and copper dropped substantially. Kazakhmys was down 7.1 percent to 948½p, while Antofagasta dropped 5.4 percent to £18.08, BHP Billiton lost 4.7 percent to 910p, and Xstrata declined by 4 percent to £18.19.

The oil sector also saw losses as crude oil prices fell as low as they have been in two months. BP fell 2.2 percent to 594-, BG Group was down 3.2 percent to 657p, and Cairn Energy was down by 4.7 percent to £18.91.

In the banking sector, Alliance & Leicester dropped 5.5 percent to £10.90 after Credit Agricole bid for Greek bank Emporiki even though analysts expressed the opinion that this new bid did not mean that Agricole had lost interest in bidding for A&L. Additionally, a spokesman for Agricole said that one deal had nothing to do with inclination or not to pursue the other.

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June 12, 2006

London markets lower on quiet day

Filed under: Equities, Economy, UK

The London equities markets were lower on Monday, as the FTSE 100 ended the day down 0.6 percent to 4,620.9 and the FTSE 250 closed at 8.981.2, a decline of 0.5 percent.

Worry over a vote in the US House of Representatives coming up this week on a bill that would make gambling on the internet illegal in the United States sent shares in internet gaming companies lower on the day. PartyGaming dropped 1.95 percent to 113p and 888 Holdings lost 3 percent to 191p. Even with a “buy” recommendation from Canaccord, Empire Online lost 10.1 percent to 82p.

Homebuilders were mixed on the day. McCarthy & Stone was up 0.9 percent to 869p on rumors that it has had inquiries from two sets of private equity groups. However Crest Nicholson dropped 0.4 percent to 498p even though there have been indications that the 23.3 percent of the builder currently owned by Heron International might soon be sold.

Bid rumors were also circulating in the tobacco sector, as there was talk that Imperial Tobacco could be readying a bid for Franco-Spanish tobacco company Altadis. Imperial lost 0.5 percent to £16.36.

Telecommunications company Vodafone lost 2.5 percent to 117½p as an attempt by shareholders to unseat the company’s chief executive seemed destined to fail.

British Airways, however, added 1.5 percent to 346½p as crude oil prices were down substantially when the first tropical storm of the season looked as if it would miss Gulf of Mexico oil production facilities.

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Bond yields up in US, Japan

Filed under: Bonds, Economy, US, Europe, UK, Japan

Government bond yields were up in the US and in Japan on Monday, but fell in the Eurozone and in the UK.

In the United States, yields on two-year and ten-year Treasury notes continued the inversion that began last week, signaling that investors are worried that more interest rate hikes, now widely expected, will hurt economic growth and possibly even send the US economy into a recession. By late morning in New York, two-year Treasuries had added 1.3 basis points to a yield of 5.018 percent, while ten-year notes were up 1 basis point to 4.989 percent.

Japanese government bonds saw yields climb on news that economic growth there in the first quarter had been revised significantly higher. This heightened expectations that the Bank of Japan will abandon its zero interest rate policy during meetings this week. All of this sent yields on the ten-year government bond to 1.865 percent, 1.5 basis points higher.

Trade in government bonds was light in the Eurozone as investors waited for the release of new consumer price inflation data, ,due on Thursday. The buying that did take place was largely due to investors seeking safe places for their money as European equity markets saw declines. The two-year Schatz yielded 3.323 percent, a decline of 2.4 basis points, while the ten-year Bund dropped 1.8 basis points to 3.911 percent..

Yields dropped in the UK as well in answer to mixed data on producer prices and in anticipation of new consumer price data to be delivered on Thursday. The two-year gilt was down 1.3 basis points to 4.644 percent and the ten-year gilt yielded 4.536 percent, a decline of 3.1 basis points.

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June 9, 2006

Banks, miners help London markets

Filed under: Equities, Economy, UK

In London on Friday, the FTSE 100 closed up 1.7 percent to 5,655.2, while the FTSE 250 added 2.4 percent to 9,024.7 on a volume of 2.6 billion shares traded. Despite the gains, the 100 closed out the week 1.9 percent lower overall, while the 250 lost 4.5 percent during the week.

Banks contributed to Friday’s gains, with an upgrade from “underweight” to “neutral” from Merrill Lynch, which said that with global economies growing and inflation under control, banks continued to be in a growth phase. HSBC added 1.2 percent to 934p, Royal Bank of Scotland was up 2.6 percent to £17.86, HBOS gained 3.1 percent to 965p on positive comments from Credit Suisse, and Northern Rock advanced by 3.8 percent to £10.05.

Miners also did well. Among the blue chips, Xstrata added 4.3 percent to £18.93 and Anglo American was up 4.9 percent to £19.36. Mid-caps also saw advances, as Lonmin gained 6.4 percent to £23.90, while Vedanta advanced by 7.2 percent to £12.05.

In the insurance sector, Aviva added 2.3 percent to 729½p on rumors that hedge funds were looking at the company’s shares. Meanwhile, fund manager Man Group advanced by 2.7 percent to £23.42 on an upgrade from “overweight” to “buy” from Bridgewell Securities.

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June 8, 2006

Miners, oil send London markets into decline

Filed under: Equities, Economy, UK

Only six stocks on the FTSE 100 in London managed to end the session on a positive note on Thursday as the 100 dropped 2.5 percent to close at 5,562.9. This took the blue-chip index to 9.4 percent below the 5 ½ year high it reached in April. The FTSE 250 did even worse on the day, closing down 2.5 percent to 8,813.7, it’s lowest close since December. Miners and oil were major factors in the declines.

In the mining sector, share values fell as metals prices declined. BHP Billiton decline by 6.5 percent to 935½p, while Anglo American lost 6.8 percent to £18.45 and Rio Tinto dropped 7 percent to £25.80.

Crude oil prices dropped on the news that al-Queda leader Abu Musab al-Zarqawi had been killed in an air raid in Iraq. The price declines came on the theory that the terrorist’s death would lead to a decline in disruptions to oil production there. Lower oil prices led to declines share value for oil companies. BG Group dropped 2 percent to 676p, while BP lost 3.4 percent to 603p.

Among gainers on the day were Centrica, the owner of British Gas, which added 1.4 percent to 279p. The gain came as rumors spread that Gazprom is looking to take a 10 percent stake in British Gas. Some analysts, however, pointed out that a similar rumor in February did not lead to an actual purchase by Gazprom.

William Morrison also was up, by 0.2 percent to 195½p, also on bid rumors. Talk had it that Icelandic investment group Baugur and Allan Leighton were thinking about taking over the supermarket operator.

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ECB raises interest rates; BofE holds rates firm

Filed under: Economy, Europe, UK

As expected, the European Central Bank raised interest rates in the Eurozone on Thursday. The rate rise was by 25 basis points ti 2.75 percent. Some analysts had speculated earlier in the week that it would hike rates by 50 basis points, but sentiment had turned to an expectation of the smaller rise in rates as the Bank’s meeting drew nearer.

Data contributing to the decision to raise rates included consumer price inflation that was up 2.5 percent in May, above the ECB’s target of below 2 percent. Consumer price inflation had been up by 2.4 percent in May and by 2.2 percent in March. In addition, producer price inflation was up to 5.4 percent in April, with core inflation up by 2.2 percent.

The circumstances that kept the Bank from issuing a 50 bp increase included fears that the recovery in the Eurozone’s economy could be too dependent on growth in export-focused sectors and that domestic growth could stall if money is tightened too much or too quickly. In addition, a 50 bp hike could have strengthened the euro, which would have sent the dollar-cost of exports up. Also, the International Monetary Fund said that the region’s economy could not support too high a rate hike.

Meanwhile, in the UK, the Bank of England voted for the tenth consecutive month to hold interest rates at the current level of 4.5 percent. This decision, too, was expected. Factors playing into the Bank’s decision included April manufacturing output measured at only 0.5 percent higher than it had been a year ago. Industrial output was in worse shape, dropping 1 percent in April over output in the same month last year. In addition, new data shows that the industrial sector in the UK has underperformed the US by 16 percent and Germany by 11 percent since 2002.

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June 6, 2006

Miners send London markets lower

Filed under: Equities, Economy, UK

In London on Tuesday, equities markets saw substantial declines as a result of sell-offs that have been blamed directly on comments by the chairman of the US Federal Reserve on Monday. Ben Bernanke’s comments were widely interpreted as indicating that there is a high likelihood that US interest rates will go higher soon.

The FTSE 100 dropped 1.6 percent on the day to 5,669.8, while the FTSE 250 declined by 3 percent to 9,075.2. Volume was at 3.1 billion shares traded on the day.

Only six stocks on the 100 managed to end the day in positive territory. These included BAA, which added 2.1 percent to 948p, with 260 million shares traded, after Spanish construction group Ferrovial bought up 13.9 percent of the company’s shares.

Both indexes were hurt by declines in mining stocks as investors worried that commodity demand will slow if the Fed raises US interest rates further. On the 100, Xstrata dropped 5.8 percent to £19.39, BHP Billiton was down 4.5 percent to 992½p, and Antofagasta lost 4.4 percent to £19.59. Among the mid-cap miners, Vedanta declined by 8.9 percent to £12.85, while Lonmin fell 5.9 percent to £24.13. Despite these declines, both Vedanta and Lonmin are expected to be placed on the 100 soon.

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June 2, 2006

Government bond yields fall in largest global markets

Filed under: Bonds, Economy, US, Europe, UK, Japan

Yields on US Treasury bonds were down Friday after the release of new data on employment cut the chances that the Federal Reserve will raise interest rates at their June meeting. Only 75,000 non-farms jobs were created in May, many fewer than the 170,000 jobs analysts expected would be created. In addition, the number of jobs created in March and April were revised downward. Even so, the unemployment rate declined to 4.6 percent in May, from 4.7 percent in April. While the general rule is that 150,000 jobs must be created each month to employ new workers entering the labor market, the unemployment rate is figured independently from job creation numbers.

After the new data was released, yields on ten-year Treasury notes dropped 5 basis points to 5.054 percent, while two-year bonds were yielding 4.975 percent, a decline of 5.4 basis points.

Activity in the US bond markets sent yields on Eurozone bonds down as well. The two-year Schatz dropped 2.3 basis points to 3.362 percent, while the ten-year Bund lost 1.5 basis points to 3.976 percent. UK gilts, meanwhile, were less active. Two-year yields were unchanged at 4.720 percent, while the yields on ten-year gilts dropped 1.2 basis points to a yield of 4.621 percent.

In Japan, ten-year government bonds were down 4 basis points to a yield of 1.905 percent. The drop in yields came after a large rise on Thursday as investors looked for bargains.

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June 1, 2006

London markets advance on banks

Filed under: Equities, Economy, UK

Banks helped the London equities markets higher on Thursday as the FTSE 100 added 0.45 percent to 5,749.7 and the FTSE 250 was up 0.1 percent to 9,310.4. The market was quiet on the day, with only 2.8 billion shares traded.

The mining sector was down on the day, providing the three biggest losers on the 100 as metals prices dropped. Rio Tinto lost 3.1 percent to £28.71, while Kazakhmys was down 3.3 percent to £10.98 and Xstrata closed 3.4 percent lower at £20.57.

Corus was up 1.8 percent to 398p on rumors out of Russia that the owner of Chelsea football club is seeking a minority stake in the steel company.

In the homebuilding sector, McCarthy & Stone added 2.8 percent to 787½p on rumors that the retirement home builder has received a bid worth 900p per share.

In the banking sector, Alliance & Leicester added 2.1 percent to £12.05 after Credit Agricole sold part of its stake in Greek bank Emporiki. CA said recently that it is thinking about bidding for A&L. Lloyds TSB was up 2.4 percent to 515½p on rumors that it might raise its dividend as soon as next year. Royal Bank of Scotland also added 2.4 percent on the day, to £17.65.

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May 31, 2006

FTSE 100 loses 5 percent in May

Filed under: Equities, Economy, UK

After another sharp fall on Tuesday, the London equities markets saw significant gains on Wednesday as the FTSE 100 added 1.3 percent to 5,723.8, getting back almost half of yesterday’s decline. The FTSE 250 was up 0.7 percent to 8,298.2. Despite the day’s gains, however, the 100 dropped 5 percent in May, while the 250 lost 5.9 percent on the month. It was the largest monthly loss for both indexes since January 2003.

In the mining sector, Xstrata added 5.4 percent to £21.30 in heavy trading, as £272 million worth of its stock was traded during the final auction period of the day. The miner will be joining the MSCI index beginning on Thursday.

MyTravel also traded at a higher volume than usual as rumors circulated that it could be targeted for takeover by a European company. The tour operator’s shares were up 3.5 percent to 238p. MyTravel’s half-year earnings report is due June 15, and talk that it may have incurred tax losses in the UK helped fuel the rumors.

In the insurance sector, life assurer Friends Provident added 2.4 percent to 177½p on an upgrade from “underperform” to “outperform” from Credit Suisse.

William Morrison gained 0.26 percent to 195¾p on rumors that an Icelandic investment group had been buying up shares in the supermarket operator.

PartyGaming added 3.2 percent to 130p on the day. Like Xstrata, it will also be joining the MSCI index on Thursday.

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