DJ EUROPEAN MORNING BRIEFING:Markets Stable Ahead of Fed

US SUMMARY: Stocks Mixed Ahead Of Fed Meeting

DJIA 10899.92 loss 7.29 dn 0.07%
NASDAQ 2306.78 gain 2.55 up 0.1%
S&P 500 1285.20 gain 1.48 up 0.1%
Dow Future 10918.00 0.00 0.0%
NASDAQ Future 1724.00 gain 0.50 0.1%
S&P Future 1288.75 gain 0.25 0.0%
10-Yr US Treasury: 4.53% up 0.03
(Futures values as of 0550 GMT)
Stocks finished a lackluster session narrowly mixed Monday as investors made few moves ahead of the Federal Reserve's decision on interest rates. Record earnings from Exxon Mobil Corp. and evidence of strong consumer spending gave the market little momentum. Prices of Treasurys ended lower.

STOCKS: Investors welcomed the Commerce Department's latest report on consumer spending, which rose 0.9 percent in December. Though personal incomes rose just 0.4 percent, the strong consumer spending bespoke of continued confidence in the economy despite high energy prices.

Yet the report also showed prices remaining in check - good news for investors concerned about inflation. Despite that, many investors held off on making sharp moves before Tuesday's Fed meeting. The Fed is expected to raise interest rates by a quarter percentage point to 4.5 percent, but Wall Street expects a signal that the central bank will stop hiking rates after that.

Oil prices rose modestly even after a top Saudi Arabian official said his country has no intention of cutting production, and that prices were too high. OPEC meets in Vienna on Tuesday. A barrel of light crude settled at $68.35, up 59 cents, on the New York Mercantile Exchange.

"Certainly, part of the market's worries right now stem from oil," said Stuart Freeman, chief equity strategist for A.G. Edwards & Sons. "You still have instability in the Middle East, and there's a fear that prices will move dramatically higher."

And while higher oil prices failed to dramatically harm economic growth last year, there's a concern that more price hikes could either slow the economy or spark inflation - which makes Tuesday's Fed decision all the more important.

High oil prices remain good news for Exxon Mobil, which set a record for quarterly profits by any U.S. company with $10.71 billion.

Kraft Foods Inc said it would eliminate 8,000 jobs, or about 8 percent of its work force, and close up to 20 factories as it broadens an ongoing restructuring effort. Earnings for the October-December period totaled $773 million, or 46 cents a share, up from $628 million, or 37 cents a share, a year earlier.

BONDS: Braced for a full slate of key events to come, Treasury prices moved lower on Monday as investors positioned themselves for yet another Federal Reserve rate hike.

On Monday, the market was "trying to get a little risk premium built in" because "we've got a lot of high-profile events coming" that will probably go against the bond market, said Bill Hornbarger, market strategist with A.G. Edwards in St. Louis.

The immediate focus, though, is Tuesday's Federal Open Market Committee meeting that is almost certain to result in a hike in the fed funds target rate to 4.50% from 4.25%.

The meeting will be the last for the retiring Alan Greenspan, who is expected to hand over the reins to former Fed Governor Ben Bernanke.

More importantly for investors will be the release of the policy statement, which investors will scour for clues about futures Fed moves on interest rates.

That may be tough to gauge, though, as the Fed has already said that what happens next will be driven by upcoming economic data.

Even more worrisome for bond investors: the core personal consumption expenditure price index excluding food and energy costs rose 1.9% on the year to December. The central bank sees anything above 2% as an inflationary risk.

"We cannot take solace from these figures as the upward revision to core PCE deflator takes the year-over-year rate to 1.9%, up against the Fed's outer boundary at a time when slack is decidedly less that it was," said Ian Lyngen, bond strategist at RBS Greenwich Capital.

A politically weakened President Bush addresses the nation Tuesday night facing two clear demands from the American public: solve problems in the health care system and bring U.S. troops home from Iraq. A new Wall Street Journal/NBC News poll shows that Americans identify troop reductions and action on health care as their top two priorities for the nation.

ASIAN SUMMARY: Tokyo Stocks Rally Again; 9% In 6 Days

USD-Yen 117.58 loss 0.01 dn 0.01%
AUD-USD 0.7512 gain 0.0027 up 0.4%
Nikkei 225 16640.77 gain 89.54 up 0.5%
Hang Seng Closed
Taiwan Index Closed
S.Korea Kospi 1397.40 gain 12.84 up 0.9%
JGB Yield 1.5550% unchanged
(All values as of 0550 GMT)
STOCKS: Japanese stocks rose for a sixth straight day, almost 9% in that time, again buoyed by strong earnings and led by banks and oil companies.

BONDS: Prices of Japanese government bonds held little changed after a successful two-year auction.

OIL: Crude oil prices retreated 13 cents to $68.22 after making a 3.2 percent gain over the previous two sessions and ahead of an OPEC meeting at which the cartel is expected to keep output steady.

Saudi Arabia's influential oil minister says oil prices stabilizing at $50-$60 a barrel would be "satisfactory" to producers, consumers and investors, in an interview published Monday.

OTHER NEWS: Japan's unemployment rate fell to 4.4% in December from 4.6% in November, the Ministry of Internal Affairs and Communications said Tuesday, better than the 4.5% expected.

EUROPEAN OUTLOOK: Fed Hems In Markets For Now

Euro-USD 1.2096 gain 0.0006 up 0.04%
Stlg-USD 1.7693 gain 0.0005 up 0.03%
USD-Franc 1.2851 loss 0.0018 dn 0.1%
(All values as of 0550 GMT)
European markets are expected to open little changed.

STOCKS: European shares are likely to nudge higher to start but markets will remain fairly subdued ahead of the Fed meeting.

U.K. spreadbettor Cantor Index is calling the FTSE up 7 points at 5787, the DAX up 12 at 5672 and the CAC up 20 at 4957.

Mergers and acquisitions are set to continue to be an investment theme in Europe this year, according to one equity strategist.

"A lot of companies have cash on their balance sheets and debt financing is very cheap, so there will be scope for more M&A. This year will be the year of more hostile deals and bigger deals because the easier, smaller stuff has happened," said Teun Draaisma, part of the European equity strategy team at Morgan Stanley.

"We don't think that markets have peaked yet for the year - they can do a little bit better in the short term - but we just recommend our clients to sell into strength and go a little bit defensive," he said.

"We've been selling technology and will continue to sell into strength if it occurs...we recommend people to take profits in the more risky equities," he said. Morgan Stanley cut its European equity allocation to neutral.

European markets traded narrowly mixed Monday, as earnings updates from two of France's biggest companies and a higher start to Wall Street trading failed to inspire investors.

BONDS: Prices of European government debt may open little changed Tuesday ahead of the Fed meeting.

"Event risk appears to be the watchword for this week," said Marc Ostwald, fixed-income strategist at Monument Securities, "with Tuesday's FOMC statement the initial point of focus."

But the markets will want to know if there'll be a 15th consecutive hike once Ben Bernanke takes over.

"While we expect so, further rate hikes will be far more data dependent than earlier in the tightening cycle," said analysts at Bank of America.

Thoughts were also turning to Thursday's ECB meeting, traders said.

Economists at Societe Generale believe the ECB will maintain its "wait-and-see" stance on rates for the time being. Key points to watch will be whether the phrase "vigilant on price stability" is back in the ECB's statement, and whether the central bank continues to stress that there are downside risks to growth, SG added.

The UK domestic focus will be on the CBI's distributive trades survey, and what this says about the strength of post-Christmas retail sales. Analysts expect the sales balance to tick up to +1 in January from December's zero reading, according to a Dow Jones Newswires survey.

FOREX: The euro opens little changed against the dollar as investors weight the potential fallout from the Fed.

Alan Ruskin, Head of International Strategy at RBS Greenwich Capital, said that since the Fed tightening cycle began in June 2004, the dollar has gained versus the euro on only four of 13 occasions on the day of the rate hike. He said this is "classic sell on the news response."

This time, the "risks are that the changes in FOMC language err on the dovish side, but any negative impact on the dollar again looks likely to be short-lived," Ruskin said in an e-mail note.

The dollar was slightly higher versus most major currencies Monday ahead of the Fed.

(MORE TO FOLLOW) Dow Jones Newswires

January 31, 2006 01:45 ET (06:45 GMT)

31 Jan 2006 06:45 GMT =DJ EUROPEAN MORNING BRIEFING:Markets Stable Ahead of Fed-2-

(This repeats an item published at 0600 GMT)

CALENDAR: Tuesday, Jan 31: Germany Jobless; Fed Meeting

GMT Expected Previous
0700 UK Jan Nationwide House Prices +0.5%MM +0.5%MM
+3.3%YY +3.0%YY
0700 GER Dec Retail Sales
0750 FRA Dec Producer Prices 0.2%MM -0.4%MM
+3.3%YY +2.8%YY
0750 FRA Dec Unemployment & Jobs
0750 FRA Dec Housing Starts
0750 FRA Dec PPI
0855 GER Jan Employment +10K -4K
0855 GER Jan Unemployment 11.2% 11.2%
-5K -110K
0900 ITA Producer Prices +0.2%MM -0.3%MM
+4.0%YY +3.7%YY
0930 ITA Dec Hourly Wages +0.2%MM 0.0%MM
+2.5%YY +3.0%YY
0930 UK Dec BoE Net Lending 9.5B 9.614B
0930 UK Dec Mortgage Lending 8.5B 8.687B
0930 UK Dec Consumer Credit 1.0B 0.927B
1000 EU Jan Euro zone Consumer Confidence -10 -11
1000 EU Jan Euro zone Business Climate 0.35
1000 EU Jan Euro zone Econ Sentiment 101.1 100.5
1000 EU Jan Euro zone Indus Confidence -4 -5
1030 UK Jan GfK Consumer Confidence -7 -9
1030 UK UK Monthly Consumer Confidence Survey
1100 UK Jan CBI Disttributive Trades +1.0 0
1245 US Jan 28 ICSC Store Sales Index +0.3%
1330 US 4Q Employment Cost Index +0.9% +0.8%
1330 CAN Nov GDP +0.2% +0.2%
1355 US Jan 28 Redbook Retail Sales Index -0.4%
1400 US Federal Open Market Committee meeting
begins; interest rate decision expected
around 1915 GMT
1500 US Jan Conference Board Consumer Confidence 105.0 103.6
Index
1500 US Jan Chicago PMI 60.0 60.8
2200 US Jan 29 ABC/Washington Post Consumer Confidence -9
Index
-By Dennis Baker; Dow Jones Newswires; [email protected]

(MORE TO FOLLOW) Dow Jones Newswires

January 31, 2006 01:45 ET (06:45 GMT)

31 Jan 2006 06:46 GMT =DJ EUROPEAN MORNING BRIEFING: Corporate Events

(This repeats an item published at 0600 GMT)

ABN Amro Holding (ABN): 4Q Earnings
Average net profit (DJ, 7 analysts): EUR938M (EUR1.3B)
Note: 4Q results in 2004 were inflated by gains on asset sales. This past quarter's results will also be scarred by a EUR66.5M charge related to regulatory problems in the US, said Simon Maughan, analyst at Dresdner Kleinwort Wasserstein. He has a buy rating and EUR28 price on ABN Amro shares.

Dresdner Kleinwort Wasserstein estimates that net profit should be up 17%, when stripping out exceptional items, a sign 4Q was a good one. "ABN's recent results have been distorted by the staggered transition to IFRS, by disposal gains and by restructuring charges and regulatory penalties," Maughan said. As a consequence Maughan doubts that 4Q results on Jan. 31 will be a catalyst for the stock to outperform.

Many analysts are eyeing news on the earlier already announced EUR600M share buyback in 2006, the sale of ABN's property development unit Bouwfonds, an update on what ABN will do with its 7.7% stake in Rome-based Capitalia (CAP.MI) and when the mandatory offer for Banca Antonveneta (NTV.MI) will be launched.

Bart van der Feen de Lille, analyst at Rabo Securities, said ABN Amro's profit is broad-based, but he is cautious about the growth that comes from new markets. "The broad range of activities is making the results of ABN Amro more stable, but only 28% of the activities is coming from high growth markets like Brazil and private banking and new growth markets like India, Saudi Hollandi Bank and Asia," van der Feen de Lille said. He has a hold and EUR21.50 price target on the shares.

David van der Zande, analyst at Theodoor Gilissen, is interested in "ABN Amro's view on credit quality, the progress in the sale of Bouwfonds, WCS's (wholesale) profitability and progress in the mandatory offer for Banca Antonveneta." He has a buy rating and EUR23.50 price target.

Atos Origin (5173.FR): FY Revenue
Average revenue (First Call, 23 analysts): EUR5.44B (EUR5.3B)
Note: Eyes on outlook, yet expectations low. "We expect Atos Origin to issue fairly cautious guidance on stand-alone performances in 06, setting targets for organic growth of at least 5% and operating margin of between 7.5% and 8%," says Ixis. Ixis and other brokerages see few triggers, save mergers. "Atos Origin could announce the acquisition of a part of SBS in the coming months," Ixis predicts.

Bulgari (BUL.MI): FY Revenue
Average IFRS revenue (DJ, 9 analysts): EUR917.1M (EUR832M)
Note: Company watchers say they expect strong performances in sales of core jewelry and watches segments of the luxury business. the numbers - revenue only - are to be released around market closing time.

Ciba Specialty Chemicals (CSB): 4Q Earnings
Average "clean" net profit (DJ, 5 analysts): CHF44.4M (CHF22M loss)
Average sales: CHF1.88B (CHF1.77B)
Note: Analysts note that because of triple-digit impairment on its textile unit that market has been told to expect this quarter, company may well post a loss for the quarter. Lombard Odier Darier Hentsch estimates amount of impairment at CHF530M. Analysts eye company's plan for textile division, guidance. Earnings expected at 0545 GMT.

Elan Corporation (ELA.LN): 4Q Earnings
Average adjusted loss per share (DJ, 5 analysts): $0.22 ($0.37 Loss)
Note: As the FDA's advisory panel meeting regarding MS drug Tysabri is due March 7, and Elan's Alzheimer's pipeline drugs are midway through long-term trials, there is likely to be little news on the pipeline, says Goodbody Stockbrokers. Maintains buy rating. The market will also focus on crucial revenue trends and cash burn, analysts add.

Ericsson (ERICY): 4Q Earnings
Average net profit (SME Direkt, 39 analysts): SEK7.15B (SEK5.62B)
Average dividend: SEK0.25 (N/A)
Average sales: SEK43.9B (SEK39.4B)
Note: Net seen boosted by record operating margins and increased sales in emerging markets. Sales are seen climbing 11% representing a slowdown from the 15% growth in the first nine months.

"We expect strong fourth-quarter results but foresee abating organic growth and falling margins in 2006," said Greger Johansson, an analyst at independent research firm Redeye. Johansson has a sell rating on Ericsson's stock.

In focus will be margins, revenue growth, comments on 2006 prospects, including further information regarding the integration of the Marconi Corp. (MONI.LN) assets it bought last year, and the 2005 dividend.

At an expected 23.2% operating margin for 4Q, Ericsson would hit a record, beating the 22.7% it achieved in the same period a year earlier. Gross margin is however seen down to 45.5% from its peak of 48.5% in 1Q of 2005 and 45.6% a year earlier. Operating margin is being supported by better performance at Sony Ericsson, the mobile phone joint venture between Ericsson and Sony Corp. (SNE), and disciplined cost control.

In 2006 revenue growth, according to SME Direkt, is seen at 21% driven in part by Ericsson's acquisition of the Marconi assets. Excluding the acquisition, growth is projected at just over 10%. Analysts at Lehman Brothers have trimmed their forecast for 2006 ahead of the 4Q report, citing weakness in Europe and China, particularly in the first half of the year. "We continue to see some compelling drivers of revenue growth on a medium to long term view," Lehman said. It has an overweight rating on the stock. The company report is due at 0630 GMT.

Luxottica (LUX): 4Q Earnings
Average net profit (DJ, 7 analysts): EUR82M (EUR60M)
Average EBIT: EUR152M (EUR105M)
Average net sales: EUR1.07B (EUR942M)
Note: Analysts cite improving margins at its US Cole National brand, which the company consolidated for the first time in 4Q04. Eyes on recovery of retail and wholesale margins, and 2006 guidance.

M6 Metropole TV (5322.FR): 4Q/FY Revenue
Average 4Q sales (DJ, 7 analysts): EUR340.5M (EUR312.2M)
Average FY sales: EUR1.25B (EUR1.19B)
Note: Analysts say M6 will benefit from the same trend as TF1 (5490.FR) and is likely to show 4Q ad revenue improving compared with the first 9 months, thanks to the deregulation of telephone directory enquiries and the Christmas boost. Report due after market closes.

Svenska Cellulosa (SCA-B.SK): 4Q Earnings
Average net profit (SME Direkt, 16 analysts): SEK1.07B (SEK1.08B)
Note: The previous net profit figure was boosted by a positive tax gain. Company seen raising dividend to SEK10.63 from SEK10.50. SCA not seen posting non-recurring items in 4Q after taking restructuring charge of SEK4.9B in 3Q. After containerboard prices started rising in 4Q, eyes are on price development for corrugated board which should start rising in 1Q, says Credit Suisse.

UPM-Kymmene (UPM1V.HE): 4Q Earnings
Average net loss (SME Direkt, 19 analysts): EUR103M (EUR415M net profit)
Note: Company has pre-announced non-recurring costs of EUR261M. Dividend seen remaining at EUR0.75. Eyes on production volumes, after Finnish companies for the first time were allowed to run production in Finland over Christmas holiday, as well as comments on price negotiations for publication papers, Handelsbanken Capital Markets says.

Vinci (12548.FR): FY Revenue
Average revenue (JCF, 19 analysts): EUR21.73B (EUR19.52B)
Note: Figures should hold no surprises, analyts say, so market "likely to pay more attention to the group's expectations for 06 and leading indicators such as the order book and order intake." Company has brought forward release to Tuesday pre-market from Thursday after market with no explanation given.

(MORE TO FOLLOW) Dow Jones Newswires

January 31, 2006 01:46 ET (06:46 GMT)

31 Jan 2006 06:46 GMT =DJ EUROPEAN MORNING BRIEFING: Corporate Events -2-

(This repeats an item published at 0600 GMT)

OTHER SCHEDULED EVENTS:

Areva Societe Participations (427583.FR): FY Earnings

ARM Holdings (ARMHY): 4Q Earnings

Benefon (BNFSV.HE): EGM

Cairo Communication (CAI.MI): AGM

Cargotec (CGCBV.HE): FY Earnings

Carpetright (CPR.LN): Trading Update

CAST (7289.FR): FY Earnings

Elior (12127.FR): 1Q Earnings

Exmar (EXM.BT): FY Earnings

F&C Capital & Income Investment Trust (FCI.LN): AGM

Galenica (GALN.EB): FY Earnings

Groupe Silicomp (6379.FR): FY Earnings

Hiestand Holding (HIEN.EB): 4Q Earnings

Huntsworth (HNT.LN): Trading Update

Ignis (IGNIS.OS): EGM

Imerys (12085.FR): FY Earnings

Imperial Tobacco Group (ITY): AGM

Jyske Bank (JYSK.KO): FY Earnings

Kaitech (KAI.MI): EGM

Kensington Group (KGN.LN): FY Earnings

KGHM (KGH.WA): EGM

London Stock Exchange (LSE.LN): UK Deadline for Macquarie Bank (MBL.AU) Offer

Memscap (415545.FR): FY Earnings

Modul 1 Data (MOD1.SK): FY Earnings

Norddeutsche Affinerie (NDA.XE): 1Q Earnings

Ocean Rig (OCR.OS): 4Q Earnings

Peter Hambro (POG.LN): Projects Update

PKN Orlen (PKN.WA): EGM

Sardus (SARD.SK): FY Earnings

Skiens Aktiemolle (SKI.OS): 4Q Earnings

Sodexho Alliance (12122.FR): AGM

SoluCom (403603.FR): 3Q Earnings

St Ives (SIV.LN): IFRS Statement

SurfCONTROL (SRF.LN): 2Q Earnings

Tod's Group (TOD.MI): FY Earnings

Tullow Oil (TLW.LN): Trading Update

Whatman (WHM.LN): R&D/Business Update

Wyeth (WYE): 4Q Earnings

(MORE TO FOLLOW) Dow Jones Newswires

January 31, 2006 01:46 ET (06:46 GMT)

31 Jan 2006 06:46 GMT =DJ EUROPEAN MORNING BRIEFING: Div Payment & Ex-Div Dates

(This repeats an item published at 0600 GMT)

Autoliv Inc (ALIV-SDB.SK): 1Q 2006 Ex-Dividend Date

Bristol Water Group (BWG.LN): 1H 2005 Dividend Payment Date

Christian Salvesen (SVC.LN): 1H 2005 Dividend Payment Date

Glasgow Income Trust (GLS.LN): 1Q 2006 Dividend Payment Date

Inmobiliaria Urbis (URB.MC): 1H 2005 Dividend Payment Date

Metrovacesa (MVC.MC): 1H 2005 Dividend Payment Date

Micro Focus International (MCRO.LN): 1H 2005 Dividend Payment Date

Schroder Asia Pacific Fund (SDP.LN): FY 2005 Dividend Payment Date

Schroder Income Growth Fund (SCF.LN): 1Q 2006 Dividend Payment Date

Schroder UK Growth Fund (SDU.LN): 1H 2005 Dividend Payment Date

Topps Tiles (TPT.LN): FY 2005 Dividend Payment Date

Wolverhampton & Dudley Breweries (WOLV.LN): FY 2005 Dividend Payment Date

(END) Dow Jones Newswires