DJ EUROPEAN MORNING BRIEFING: Stocks Struggle Continues

US SUMMARY: PPI Hurts Stocks, Helps Treasurys

DJIA 11419.89 loss 8.88 dn 0.1%
NASDAQ 2229.13 loss 9.39 dn 0.4%
S&P 500 1292.08 loss 2.42 dn 0.2%
Dow Future 11447.00 gain 6.00 0.0%
NASDAQ Future 1630.00 gain 1.75 up 0.1%
S&P Future 1295.25 gain 0.25 0.0%
10-Yr US Treasury: 5.10% down 0.05
(Futures values as of 0450 GMT)
Inflation fears pushed stocks modestly lower Tuesday as a surge in headline wholesale prices obscured data showing signs of a moderating economic growth. Prices of Treasurys rallied.

STOCKS: On the earnings front, retailer Home Depot disappointed during the regular session, but computer giant Hewlett-Packard pleased the market after the close.

While the producer price index showed that high energy costs have yet to affect core wholesale prices without food and energy, a stronger-than-forecast jump in overall PPI compounded concerns that soaring oil prices will worsen inflation.

But a drop in new home construction fed hopes that economic growth will slow and could bring an end to the Federal Reserve's campaign to boost interest rates.

Still, a strong reading on industrial activity and a fresh rise in crude oil nonetheless kept investors on edge.

"When you add up all the numbers, the economy is doing well, but there's still a hint of inflation around," said Larry Wachtel, a market analyst for Wachovia Securities. "I can't really say anything today would persuade the Fed to stop raising rates in June."

The mixed economic numbers muddled the outlook for interest rates and countered excitement over solid earnings from Wal-Mart Stores Inc. and a rebound in bonds. Investors were already looking ahead to Wednesday's report on consumer prices for more clarity about the inflation picture.

Crude futures inched upward following two days of selling, and as the market awaited the government's weekly inventory update on Wednesday. A barrel of light crude rose 12 cents to settle at $69.53 on the New York Mercantile Exchange.

Shares of Hewlett-Packard Co. rose 4% in late trade Tuesday after posting a 51% jump in second-quarter profits on continued strength in notebooks

Meanwhile, shares of Applied Materials Inc. rose 1% after it posted second-quarter earnings that beat Wall Street's expectations by 6 cents a share.

Earlier, Home Depot Inc. posted a 19% increase in fiscal first-quarter profit, but many analysts and investors panned its decision to stop giving comparable-store sales numbers -- a key retail-industry benchmark.

BONDS: Treasury prices were higher again Tuesday, continuing their strong start to the week on the back of tame inflation and housing data and investor profit taking.

Meanwhile, core producer prices - excluding food and energy - rose just 0.1% in April, less than the 0.2% increase expected. The headline PPI number increased 0.9%.

Scott Gewirtz, head of Treasurys trading at Lehman Brothers in New York, said the data were among "the first pieces of information that the economy might be slowing a little bit in the second quarter."

Gewirtz said technical factors reinforced the demand for Treasurys, with investors keen to pare back their negative bets against Treasurys after weeks of price declines.

Ian Lyngen, interest rate strategist at RBS Greenwich said that it was "fairly encouraging" to longer-term bond bulls that the 10-year yield was back around 5.10%. Especially positive was market speculation that Asian foreign buyers of Treasurys were returning.

However, Lyngen said he was "reluctant to overreact" to this week's rally until after the April consumer price index data Wednesday.

Headline CPI is seen up 0.6% in April and the core CPI is expected to rise 0.2%.

ASIAN SUMMARY: Stocks Slightly Higher; Commodities Up

USD-Yen 109.45 loss 0.28 dn 0.2%
AUD-USD 0.7686 gain 0.0013 up 0.2%
Nikkei 225 16312.14 gain 153.70 up 1.0%
Hang Seng 16485.97 gain 92.86 up 0.6%
Taiwan Index 7134.11 gain 64.21 up 0.9%
S.Korea Kospi 1397.70 gain 15.59 up 1.1%
JGB Yield 1.9100% down 0.0450
(All values as of 0450 GMT)
STOCKS: Japanese stocks were slightly higher Wednesday, following six days of declines. But the market remained vulnerable to the yen's recent strength against the dollar. Australian shares got a boost from recovering commodity prices.

BONDS: Pension funds and life insurers bought up long-end government bonds as the strong yen abates fears that the Bank of Japan may raise rates anytime soon.

METALS: Spot gold rallied 2% to $702.10 a troy ounce Wednesday, thanks largely to a stronger-than-expected open on the Tokyo Commodity Exchange. But traders cautioned that gold, copper and other commodities will see more volatility.

OIL: Crude oil futures rose a slight 7 cents to $69.60 on Wednesday as the market remained nervous about the West's nuclear standoff with Iran and persistent supply disruptions in Nigeria. Weekly U.S. supply data due 1430 GMT could trigger selling, however, if stockpiles rise.

OTHER NEWS: Honda Wednesday unveiled plans to build new plants in the U.S., Japan and Canada, a move aimed at expanding production to meet strong demand for its cars worldwide.

EUROPEAN OUTLOOK: Shares To Open Little Changed

Euro-USD 1.2870 gain 0.0012 up 0.08%
Stlg-USD 1.8908 gain 0.0036 up 0.2%
USD-Franc 1.2052 loss 0.0018 dn 0.1%
(All values as of 0450 GMT)
European shares are unlikely to see much positive momentum at the open, while government debt continues to rebound. The euro opens higher.

STOCKS: Hewlett-Packard's results may inspire buying in technology stocks, but otherwise European markets are set to struggle once again.

U.K. spreadbettor IG Index is calling the FTSE down 6 points at 5840, the DAX up 6 at 5858 and the CAC up 1 at 5083.

Morgan Stanley is advising European investors to stay cautious for the rest of the year because it believes that the market will remain volatile.

"In the end, I think that defensives will do better than cyclicals simply because they're cheaper ... pharmaceuticals are our biggest overweight and tobacco is our second biggest overweight," said Teun Draaisma, a European equity strategist at the U.S. investment bank. "We like stocks like GlaxoSmithKline and Sanofi-Aventis and Imperial Tobacco."

European stock markets closed mixed on Tuesday, with shares of defensive healthcare giants leading gainers as investors once again put pressure on mining and other cyclical stocks.

BONDS: Government bonds are likely to see another gain in prices, in line with other markets, while investors assess the latest supportive data.

On Tuesday, a low reading of the May German ZEW economic expectations indicator set up hopes in the bond market for a a weak German Ifo report, which is due May 24.

Looking at the bund future's technical levels, analysts are looking for further gains toward the next barriers pegged at 115.67 and 115.75. The future closed at 115.63.

The focus now turns to inflation, with Wednesday's final April euro-zone reading due at 0900 GMT expected to confirm the flash reading of a 2.4% annual increase, while the U.S. April consumer price inflation report, at 1230 GMT, is expected to show a core increase of 0.2%.

"Inflation data are of upmost importance, with any sign of higher energy costs feeding through into the numbers likely to trigger an immediate reaction from the markets as they try to anticipate by how much both the Fed has left to hike and by how much the ECB will hike in June" one trader noted.

In the U.K., traders are waiting for the Bank of England policy meeting minutes to spot any step closer to raising interest rates. The minutes are released at 0830 GMT Wednesday.

European government bond prices rose Tuesday thanks to weak data from both sides of the Atlantic.

FOREX: The euro opens with support from commentary by European Central bank officials on Tuesday that shored up the expectation that its interest rates are headed higher.

The market now turns to U.S.Treasury Secretary John Snow's testimony due at 1400 GMT, for any comments on China's yuan policy.

(MORE TO FOLLOW) Dow Jones Newswires

May 17, 2006 01:45 ET (05:45 GMT)

17 May 2006 05:45 GMT =DJ EUROPEAN MORNING BRIEFING: Stocks Struggle Continues -2-

CALENDAR: Tuesday, May 16: MPC Minutes; US Fed Speakers

GMT Expected Previous
0645 FRA 1Q Non-Farm Payrolls, prelim +0.1%QQ +0.1%QQ
0645 FRA 1Q Wages +0.6%QQ +0.5%QQ
0700 GER Bund Auction
0830 UK April Unemployment 5.1% 5.1%
0830 UK May MPC minutes
0830 UK March Avg Earnings, 3 Mo +4.4% +4.2%
0830 UK May Labour market statistics, including
unemployment figures
0830 UK April Claimant Count +6.5K +12.6K
0900 EU April Euro Zone CPI, final 0.6%MM 0.6%MM
2.4%YY 2.2%YY
0900 GER Lower house of parliament meets, Berlin
0930 UK Chancellor Brown visits Vauxhall
car plant at Ellesmere Port
1000 GER Lower house of parliament's budget
committee meets to discuss 2006 budget,
Berlin
1100 US May 12 MBA Refinancing Index -8.8%
1200 US Atlanta Fed Pres Guynn gives remarks at
Atlanta Fed Financial Markets
Conference in Sea Island, Ga
1230 US April CPI +0.6% +0.4%
1230 US April CPI, ex-food and energy +0.2% +0.3%
1315 US Boston Fed Pres Minehan moderates panel
discussion on "Hedge Funds: An Industry
In Adolescence" at Atlanta Fed
Financial Markets Conference in Sea
Island, Ga
1400 US Tsy Secy Snow testifies on the intl
financial system before U.S. House
Financial Services Committee in
Washington
1430 US May 12 US Energy Dept Gasoline Stocks (in +1.6M +2.4M
barrels)
1430 US May 12 US Energy Dept Crude Oil Stocks (in -400,000 +300,000
barrels)
1430 US May 12 US Energy Dept Distillate Stocks (in +900,000 +200,000
barrels)
1630 US Tsy Asst Secy Henry speaks on hedge
funds, current events in Washington
1800 US Tsy Asst Secy Lowery testifies on
reform of the Committee of Foreign
Investment before U.S. House Financial
Services subcommittee in Washington
2350 JPN Weekly Portfolio Flows
N/A GER Dow Jones, European Commodity
Investment Summit 2006, Frankfurt
-By Dennis Baker; Dow Jones Newswires; [email protected]

(MORE TO FOLLOW) Dow Jones Newswires

May 17, 2006 01:45 ET (05:45 GMT)

17 May 2006 05:45 GMT =DJ EUROPEAN MORNING BRIEFING: Corporate Events

Alpha Bank (ALPHA.AT): 1Q Earnings
Average net profit (DJN, 5 analysts): EUR139.3M (EUR100.8M)
Note: Higher net interest income to drive profitability with continued strong lending growth. Net interest income seen nearly 19% higher at EUR333.2M vs EUR280.4M. Southeast European expansion to also boost overall profitability. However, the same expansion is also seen pushing up costs while local market costs seen stable. Eyes also on spreads given bigger than expected 1Q decline for peers EFG Eurobank (EUROB.AT) and Piraeus Bank (TPEIR.AT).

Alstom (1022047.FR): 1Q Earnings
Average net profit (JCF, 10 analysts): EUR212.4M (EUR865M net loss)
Note: Company is guiding for a net profit of over EUR250M, with a 5% increase in new orders and an over 7% increase in revenue, both on a comparable basis. Alstom also guiding for +5% operating margin under IFRS standards, equivalent to 6% under French GAAP, a target it first set in 1998. Compan reports Wednesday pre-market.

Credit Agricole (4507.FR): 1Q Earnings
Average net profit (DJN, 7 analysts): EUR1.12B (EUR905M)
Average sales: EUR3.72B (EUR3.23B)
Note: Corporate investment banking, asset management and insurance are seen as the bank's main earnings drivers. Improved market conditions have increased chances that consensus forecasts will be beaten, says one analyst.

FirstGroup (FGP.LN): FY Earnings
Average pre-items pretax profit (Co, 14 analysts): GBP169M (GBP166.5M)
Note: The dividend is expected to rise to 14.4p from 12.82p. Rail operations at the transport interest have been performing well, say analysts, but price fuel rises have been affecting bus operations in both the US and UK. The market will be seeking information on whether the company has been able to better cope with the fuel price rises and how the company's recently-won rail franchises are faring.

J Sainsbury (SBRY.LN): FY Earnings
Average underlying profit (Co, 30 analysts): GBP263.4M (GBP238M)
Note: The rise comes amid a slowdown in consumer spending, and rising competition that has triggered sharp price cuts. Analysts are also eager to hear if J Sainsbury's strong 4Q sales momentum has continued into the new fiscal year as the company and its two-bigger rivals, Tesco (TSCO.LN) and Asda Group (AGP.YY), cut prices on products to lure customers to their respective cash registers.

Land Securities (LAND.LN): FY Earnings
Average adjusted net asset value (Co, 10 analysts): 1853p (1488p)
Note: Dividend is seen rising 5.2% to 45.5p from 43.25p. Analysts look for positive momentum in office rental growth in London and upturn in retail to support capital appreciation. Analysts also anticipate confirmation of plan to adopt REIT status from early 2007, as the business fits well into newly- revised structure for REITs. One analyst says relatively low gearing level even leaves scope for acquisitions or a share buyback.

Technip (13170.FR): 1Q Earnings
Average net profit (DJ, 4 analysts): EUR13.6M (EUR29.1M)
Note: Operating profit seen -24% to EUR38.2M, from EUR50.4M in 1Q 05 on declining margins of turnkey contracts, analysts say. Operating profit estimates range from EUR32.2M to EUR42M. Backlog seen flat at EUR11B. Main focus will be the risks associated with onshore contracts, Credit Suisse analyst Katherine Tonks says. Any comment on earnings prospects expected now that company's credibility has been hit by two successive profit warnings, Societe Generale's Thierry Baudin says.

Telekom Austria (TKA): 1Q Earnings
Average net profit (DJN, 7 analysts): EUR144.8M (EUR115.7M)
Average sales: EUR1.14B (EUR1B)
Note: Earnings are primarily driven by strong sales in Bulgaria, Croatia and Slovenia, while Austria itself is going through a weaker revenue trend, says Goldman Sachs. EBIT is forecast at EUR212.6M, up from EUR173.5M, and EBITDA at EUR499.8M, up from EUR436.3M.

Vivendi (V): 1Q Earnings
Average net profit (DJN, 5 analysts): EUR561M (EUR502M)
Note: Earnings from operations should reached EUR962M, compared with EUR877M a year earlier, boosted by good sales growth, notably in the music division Universal Music Group. Analysts will be looking for an update on the PTC legal battle.

(MORE TO FOLLOW) Dow Jones Newswires

May 17, 2006 01:45 ET (05:45 GMT)

17 May 2006 05:45 GMT =DJ EUROPEAN MORNING BRIEFING: Corporate Events -2-

OTHER SCHEDULED EVENTS:

AGFA (AGFB.BT): 1Q Earnings

AMEC (AMEC.LN): AGM

Arcadis (ARCAF): AGM

AS Roma (ASR.MI): 3Q Earnings

Audi (NSU.XE): AGM

Baggeridge Brick (BGBK.LN): 1H Earnings

Baumgartner Papiers Holding (BAP.EB): AGM

BBA Group (BBA.LN): AGM

Beiersdorf (BEI.XE): AGM

BETandWIN (BWIN.VI): AGM

Bizspace (BIZ.LN): FY Earnings

Bull (1026660.FR): AGM

Bunzl (BNL): AGM

Camaieu (400820.FR): AGM

Canaccord Capital (CCI.LN): FY Earnings

Client Center Alliance (7833.FR): 1Q Earnings

Cofidur (5462.FR): FY Earnings

Commerzbank (CBK.XE): AGM

Day Software Holding (DAYN.EB): AGM

De Vere Group (DVR.LN): 1H Earnings

Deutsche Lufthansa (LHA.XE): AGM

E.ON Ruhrgas (RUH.YY): Annual Press Conference

Fluxx.com (FXX.XE): AGM

Foseco (FOSE.LN): AGM

GlaxoSmithKline (GSK): AGM

Holidaybreak (HBR.LN): 1H Earnings

Inmarsat (ISAT.LN): 1Q Earnings

International Power (IPR): AGM

Interserve (IRV.LN): AGM

Intuit Inc (INTU): 3Q Earnings

Ioltech (6693.FR): FY 2005 Earnings

Iomart (IOM.LN): FY Earnings

Jessops (JSP.LN): 1H Earnings

LogicaCMG (LOG.LN): AGM

London Merchant Securities (LMSO.LN): EGM

Marzotto & Figli (MZ.MI): AGM

Mice Group (MEG.LN): FY Earnings

MorphoSys (MOR.XE): AGM

Next (NXT.LN): AGM

Peab (PEAB-B.SK): 1Q Earnings & AGM

Petrolia Drilling (PDR.OS): AGM

Piscines Jean Desjoyaux (6160.FR): 1H Earnings

Premiere (PRE.XE): AGM

Provident Financial (PFG.LN): AGM

Rational (RAA.XE): 1Q Earnings & AGM

Rensburg Sheppards (RBG.LN): FY Earnings

Risc Group (7806.FR): 4Q Sales

Schuitema (38304.AE): 1Q Earnings

Schweiter Technologies (SWTQ.EB): 1Q Earnings

Sogeclair (6586.FR): AGM

Spectris (SXS.LN): AGM

Swisslog Holding (SLOG.EB): AGM

Telspec (TSP.LN): AGM

Tie Holding (38698.AE): 2Q Earnings

TT Electronics (TTG.LN): AGM

Umbro (UMB.LN): AGM

Valeo (13033.FR): AGM

Warteck Invest (WARN.EB): AGM

Wavecom (WCVM): AGM

(MORE TO FOLLOW) Dow Jones Newswires

May 17, 2006 01:45 ET (05:45 GMT)

17 May 2006 05:45 GMT =DJ EUROPEAN MORNING BRIEFING: Div Payments & Ex Div Dates

Abertis Infraestructuras (ABE.MC): FY 2005 Dividend Payment Date

Anglo Irish Bank Corporation (ANGL.DB): 1H 2006 Ex-Dividend Date

Batenburg Beheer (33765.AE): FY 2005 Dividend Payment Date

Carter & Carter (CART.LN): 1H 2006 Ex-Dividend Date

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

Heba Fastighets (HEBA-B.SK): FY 2005 Dividend Payment Date

HSBC Holdings (HBC): 1Q 2006 Ex-Dividend Date

IBS (IBS-B.SK): Special Dividend Payment Date

Imerys (12085.FR): FY 2005 Dividend Payment Date

KAS Bank (36264.AE): FY 2005 Dividend Payment Date

Orell Fuessli Holding (OFN.EB): FY 2005 Dividend Payment Date

Orell Fuessli Holding (OFN.EB): FY 2005 Ex-Dividend Date

Resolution (RSL.LN): FY 2005 Ex-Dividend Date

Richmond Foods (RFD.LN): 1H 2006 Ex-Dividend Date

Sage Group (SGE.LN): 1H 2006 Ex-Dividend Date

Smith (WH) (SMWH.LN): 1H 2006 Ex-Dividend Date

Ted Baker (TBK.LN): FY 2005 Ex-Dividend Date

TT Electronics (TTG.LN): FY 2005 Ex-Dividend Date

Van Lanschot (30263.AE): FY 2005 Dividend Payment Date

(END) Dow Jones Newswires

May 17, 2006 01:45 ET (05:45 GMT)