DJ EUROPEAN MORNING BRIEFING: Markets Await US CPI Data

US SUMMARY: Lower PPI Ignites Stocks, Treasurys Rally

DJIA 11230.76 gain 132.39 up 1.2%
NASDAQ 2115.01 gain 45.97 up 2.2%
S&P 500 1285.58 gain 17.37 up 1.4%
Dow Future 11248.00 0.00 0.0%
NASDAQ Future 1541.00 gain 0.50 0.0%
S&P Future 1288.00 gain 0.25 0.0%
Euro-USD 1.2787 gain 0.0002 up 0.02%
10-Yr US Treasury: 4.93% down 0.07
(Futures values, Treasury, EUR/USD Data as of 0450 GMT)
An unexpected drop in wholesale prices sent stocks soaring Tuesday, easing worries that the Federal Reserve will have to raise rates again to tame inflation. Prices of Treasurys soared, while the dollar and oil fell.

STOCKS: Prices at the wholesale level, with food and fuel prices removed, fell 0.3 percent in July, according to the Labor Department, the best showing for core inflation in nine months. Including energy and food, wholesale prices edged up 0.1 percent, well below the 0.5 percent jump in June.

"I think the feeling here in the market is that the Fed may have actually nailed it," said Bill Groenveld, head trader for vFinance Investments. "Of course, now we have to take a close look at earnings and hope they'll still be OK, but right now, overall you have to feel pretty good. I think this market could get exciting."

The market got additional support from a New York Federal Reserve report showing manufacturing activity in the region declined this month

The consumer price index is due Wednesday, and while the PPI number bodes well for the CPI, there's still a chance that lower prices have yet to work their way through to the average consumer.

In corporate news, chip equipment maker Applied Materials surpassed Wall Street's expectations after it reported a 43% gain in profit. But Mike Splinter, chief executive, cautioned the company was entering into a rough period that could see a decline in orders.

FOREX: The dollar is steady while the market waits for CPI figures to match lower PPI numbers. The lower inflation numbers shoved the dollar lower Tuesday.

"A weaker-than-expected producer price index prompted a bout of dollar selling as players lowered their expectations of a Fed hike in September," Michael Woolfolk, senior currency strategist at the Bank of New York said. "Market players appear to have turned dollar bearish going into (Wednesday's) consumer price index report on expectations of a follow through of similarly soft consumer price data."

BONDS: U.S. Treasury prices chalked up sharp gains Tuesday, buoyed by a very weak July wholesale prices reading and other soft economic data.

George Goncalves, Treasurys trading strategist at Banc of America Securities in New York, said that much of the decline in wholesale prices came from a one-off drop in auto prices connected to incentive schemes. He also noted that the wholesale data give a much lower weight to the single factor most responsible for the recent string of above-consensus core CPI readings - owners' equivalent rent.

"I don't think people can extrapolate too much out of it but the markets are liking it and that makes people a little bit nervous," he said

Even after the PPI data, there was no change in economists' expectations for Wednesday's July CPI data. Consumer prices are seen rising 0.4% on the month, while core inflation is seen gaining 0.3% on the month.

A monthly core level of 0.3% would push the year-over-year rate to 2.8% in July, up from 2.6% in June.

OIL: Crude prices edged lower, with a barrel of light crude settling at $73.05, down 48 cents on the New York Mercantile Exchange.

ASIAN SUMMARY: Stocks Higher On U.S. Inflation Hopes

USD-Yen 116.03 loss 0.10 dn 0.09%
AUD-USD 0.7646 loss 0.0002 dn 0.03%
Nikkei 225 16052.83 gain 236.60 up 1.5%
Hang Seng 17426.77 gain 152.70 up 0.9%
S&P/ASX 200 4941.60 gain 36.90 up 0.8%
Taiwan Index 6684.61 gain 69.48 up 1.1%
S.Korea Kospi 1319.06 gain 23.95 up 1.9%
JGB Yield 1.8350% down 0.0200
(All values as of 0450 GMT)
STOCKS: Japanese stocks rose Wednesday ahead of the U.S. CPI data.

Sony said it will help support Dell in its recall of more than four million laptop computer batteries. Sony shares were down 1.2% at Y5,150.

FOREX: The dollar is holding above Y116.00, but hedge funds may like the dollar to test Y115.50, especially should U.S. CPI figures later undershoot forecasts. Traders report little interest in buying dollars ahead of the CPI.

BONDS: Prices of Japan's government debt issues rose in response to the U.S. inflation data and the rally in Treasurys. But prospects for more Bank of Japan tightening capped buying. The BoJ's latest minutes are due at 0500 GMT.

OIL: Prices continued to fall Wednesday, losing 10 cents to $72.95 a barrel, as a cease-fire took hold in Lebanon and concerns eased about BP's supply disruptions in Alaska.

METALS: Spot gold was up $1.80 at $624.80 an ounce, and its relatively modest response to the Mideast cease-fire and tame U.S. PPI suggests the market has a wait-and-see approach to geopolitical and inflationary risk, says Westpac chief FX strategist Robert Rennie.

Copper futures were lower as investors expected labor strife to wind down at the Chile Escondida mine.

EUROPEAN OUTLOOK: Stocks To Open Largely Unchanged

Euro-USD 1.2787 gain 0.0002 up 0.02%
Stlg-USD 1.8936 loss 0.0002 dn 0.01%
USD-Franc 1.2372 0.0000 0.00%
(All values as of 0450 GMT)
European stocks are set for a benign opening, while government debt and the euro start fairly steady.

STOCKS: European markets are unlikely to make much ground at the open despite positive sentiment in the U.S. following the weaker-than-expected PPI data.

U.K. spreadbettor Cantor Index is calling the DAX up 14 at 5790 but the FTSE and CAC unchanged at 5897 and 5115 respectively.

"We look to be at either the peak, or very close to the peak, in the U.S. interest-rate cycle," noted Robert Parkes, an equity strategist at HSBC.

If interest rates have peaked in the U.S., then that's probably significant for the growth outlook, Parkes added.

"If growth slows to trend, then that's a good environment for equity markets globally, but if you get a hard landing in the U.S. then that's a different situation altogether," he said.

European stock markets turned around on Tuesday, as data suggesting a tepid U.S. inflation outlook brought investors back into the market.

FOREX: The euro opens little changed, although small but persistent euro sell orders above $1.2790 are capping its progress, and it may of 1.2775 later in the session, says a Singapore trader.

BONDS: European government bond prices continue with good support, after having rallied Tuesday on benign producer price data from the U.S., with investors now wondering whether this a harbinger for Wednesday's consumer price data.

"The recent decline in producer prices isn't broadly based, thus market participants will wait for Wednesday's figures to get confirmation whether inflation is coming off its highs," said WestLB's fixed-income strategist Sarah Luetgert.

German's auction of 10-year bunds may take a back seat to the U.S. CPI.

In the U.K., Wednesday will bring the release of the Bank of England's minutes. "This will provide even more color behind the rise in interest rates to 4.75%," said HSBC in a research note. It forecasts an unanimous vote as "there was little in the tone of the BoE's statement or the inflation report that suggested any dissenters."

CALENDAR: Wednesday, Aug 16: US CPI, Energy Data

GMT Expected Previous
0500 JPN July 13-14 BOJ Minutes
0830 UK Jul Unemployment +3.0% +3.0%
0830 UK Aug MPC vote outcome 7 - 0 7 - 0
0830 UK Jul Claimant Count +5K +5.9K
0830 UK Jun Avg Earnings +4.1%3M +4.1%3M
1000 UK 1Q Regional Trade Statistics
1000 GER 3Q Ifo Econ Climate for the Euro Area
1100 US Aug 11 MBA Refinancing Index +7.1%
1230 US Jul CPI +0.4% +0.2%
1230 US Jul CPI, ex-food and energy +0.3% +0.3%
1230 US Jul Housing Starts -2.2% -5.3%
1315 US Jul Indus Production +0.6% +0.8%
1315 US Jul Capacity Utilization 82.7% 82.4%
1430 US Aug 11 US Energy Dept Gasoline Stocks -1.96M -3.2M
1430 US Aug 11 US Energy Dept Crude Oil Stocks -1.18M -1.1M
1430 US Aug 11 US Energy Dept Distillate Stocks +390,000 -200,000
1700 US Dallas Fed Pres Fisher speaks in Dallas

-By Dennis Baker; Dow Jones Newswires; [email protected]

(MORE TO FOLLOW) Dow Jones Newswires

August 16, 2006 01:45 ET (05:45 GMT)

16 Aug 2006 05:45 GMT =DJ EUROPEAN MORNING BRIEFING: Corporate Events

Balfour Beatty (BBY.LN): 1H Earnings
Average pretax profit (DJN, 3 analysts): GBP57.7M (GBP52M)
Note: Continuing difficulties in rail are expected but analysts will be looking to see if the company is replacing lost revenues. News on future PFI investment strategy is also expected following formation of Balfour Beatty Capital.

British Energy Group (BGY.LN): 1Q Earnings
Average EBITDA (Citigroup analysts): GBP249M - GBP264M (N/A)
Note: As its EBITDA achieved price becomes more reflective of a healthy electricity price environment. EBITDA is seen in the region of more than 100% higher for the period 1Q 2005-2006, by utility analysts at Citigroup and JP Morgan. Analysts will await outlook comments on an update on the likely timing of the UK government's sell down of a proportion of its British Energy stake, as well as clarity on the Eggborough coal-fired plant option sale process.

Bucher Industries (BUCN.EB): 1H Earnings
Average net profit (DJ, 3 analysts): CHF44.4M (CHF38.7M)
Average EBIT: CHF68M (CHF55M)
Average sales: CHF1.08B (CHF985M)
Note: Improvement helped by good cost control, but some analysts caution the company may book restructuring charges in 1H. The company's outlook and the impact of the Johnston Sweeper acquisition will be eyed. Data due Wednesday at 0500 GMT.

Lanxess (LXS.XE): 2Q Earnings
Average net profit (DJ, 8 analysts): EUR64M (EUR24M)
Average EBITDA before exceptionals: EUR194M (EUR163M)
Average sales: EUR1.8B (EUR1.86B)
Note: The jump in net profit is expected to have been driven by a "substantially improved financial result," says an analyst at HVB. EBITDA before exceptionals seen up 19%. Sales seen falling as the company decreased it's participation in loss-making segments like paper chemicals and textile fiber. Full-year guidance is for EBITDA pre-exceptionals of between EUR640M and EUR680M. Analysts will particularly watch out for news on further restructuring and on the impact of high oil prices.

Lundbeck (LUN.KO): 2Q Earnings
Average operating profit (DJ, 3 analysts): DKK389.7M (DKK509M)
Average sales: DKK2.227B (DKK2.285B)
Note: Profit fall due mainly to lower US royalties related to partner Forest Lab's (FRX) previously announced inventory reduction of escitalopram. Analysts are watching sales growth development for antidepressant Cipralex and Alzheimer's treatment Ebixa in Europe, as well as Lexapro guidance and any pipeline news. Report due before market opening.

Synthes (SYST.VX): 1H Earnings
Average net profit (DJ, 5 analysts): $257.3M ($224.5M)
Average EBIT: $394M ($357.1M)
Average sales: $1.16B ($1.03B)
Note: The rise in net profit is driven by a 13% increase in 1H sales from last year's $1.03B, due to further product rollouts, expansion of its sales force and solid underlying growth of the spine and trauma markets. Analysts will eye gross profit margin development, any update on the pending FDA approval for its artificial disc ProDisc and comments about the royalty deal with the AO foundation.

OTHER SCHEDULED EVENTS:

Anoto Group (ANOT.SK): 1H Earnings

Apptix (APP.OS): 2Q Earnings

Austrian Airlines (AUA.VI): July Traffic Data

Ballingslov International (BALL.SK): 2Q Earnings

Boras Wafveri (WAFV-B.SK): 1H Earnings

GN Store Nord (GN.KO): 2Q Earnings

Grammer (GMM.XE): 2Q Earnings

Groupe Flo (407689.FR): 1H Earnings

International Maritime (IMAREX.OS): 2Q Earnings

Petrolia Drilling (PDR.OS): 2Q Earnings

Rieter Holding (RIEN.EB): 1H Analyst Meeting

Rocksource (RGT.OS): 2Q 2006 Presentation

Tandberg Storage (TST.OS): 2Q Earnings

Unibet Group (UNIB-SDB.SK): 2Q Presentation

Valiant (VATN.EB): 1H 2006 Analyst Meeting

Zodiak Television (ZODI-B.SK): 1H Earnings

(MORE TO FOLLOW) Dow Jones Newswires

August 16, 2006 01:45 ET (05:45 GMT)

16 Aug 2006 05:45 GMT =DJ EUROPEAN MORNING BRIEFING: Div Payments & Ex Div Dates

Aviva (AV.LN): 1H 2006 Ex-Dividend Date

AXA Property Trust (APT.LN): 1Q 2006 Ex-Dividend Date

Barclays (BARC.LN): 1H 2006 Ex-Dividend Date

DTZ Holdings (DTZ.LN): FY 2005 Ex-Dividend Date

Ems-Chemie Holding (EMSN.VX): FY 2005 Ex-Dividend Date

Ems-Chemie Holding (EMSN.VX): FY 2006 Dividend payment Date

Ems-Chemie Holding (EMSN.VX): Special Dividend payment Date

Ems-Chemie Holding (EMSN.VX): Special Ex-Dividend Date

GKN (GKN.LN): 1H 2006 Ex-Dividend Date

HSBC Holdings (HSBA.LN): 2Q 2006 Ex-Dividend Date

ING UK Real Estate Income (IRET.LN): 1H 2007 Ex-Dividend Date

iSoft Group (IOT.LN): FY 2005 Ex-Dividend Date

Liberty International (LII.LN): 1H 2006 Ex-Dividend Date

Millennium & Copthorne Hotels (MLC.LN): 1H 2006 Ex-Dividend Date

Northumbrian Water (NWG.LN): FY 2005 Ex-Dividend Date

Porvair (PRV.LN): 1H 2006 Ex-Dividend Date

Premier Foods (PFD.LN): 1H 2006 Ex-Dividend Date

Prodesse Investment (PRD.LN): 2Q 2006 Ex-Dividend Date

Prudential (PRU.LN): 1H 2006 Ex-Dividend Date

Royal & SunAlliance (): 1H 2006 Ex-Dividend Date

Royal Bank of Scotland Group (RBS.LN): 1H 2006 Ex-Dividend Date

Smith (DS) (SMDS.LN): FY 2005 Ex-Dividend Date

Spring Group (SRG.LN): 1H 2006 Ex-Dividend Date

Standard Chartered (STAN.LN): 1H 2006 Ex-Dividend Date

Standard Life Investments (SLI.LN): 1H 2006 Ex-Dividend Date

Stanley Leisure (SLY.LN): FY 2005 Ex-Dividend Date

Vega Group (VEG.LN): FY 2006 Ex-Dividend Date

Warner Estate Holdings (WNER.LN): FY 2005 Ex-Dividend Date

Witan Investment Trust (WTAN.LN): 1H 2006 Ex-Dividend Date

Zetex (ZTX.LN): 1H 2006 Ex-Dividend Date

(END) Dow Jones Newswires

August 16, 2006 01:45 ET (05:45 GMT)