...expectations the Federal Reserve won't raise interest rates too far, too fast.
U.S. Financial-Services Shares Advance in European Trading Ahead of Report
By Tom Pfeiffer
Paris, Aug. 19 (Bloomberg) -- American Express Co. and other
U.S. financial-services shares rose in Europe on expectations the
Federal Reserve won't raise interest rates too far, too fast. A
report today on the balance of trade in June isn't expected to
change that view.
``The U.S. will only raise rates very gradually, for fear of
damaging economies in Asia and Latin America,' said Marco Blasi,
who manages about 100 million French francs ($16 million) in
global equities at Midland Finance in Paris.
Internet companies America OnLine Inc. and Amazon.com Inc.
extended gains after an analyst recommended investors buy the
shares.
Today's report on the trade balance is expected to show a
deficit of $20.6 billion in June, according to economists
surveyed by Bloomberg News, down from its record-high $21.3
billion in May. Growth in exports accounted for the narrowing of
the deficit, as Asia and Latin American economies recovered from
recession and European growth picked up speed.
That recovery is just getting underway, though -- exports
``may be bottoming out as economic activity abroad firms up,'
economists at Nomura Securities International said -- so analysts
doubt the Fed will raise rates much. A 25-basis-point increase at
next week's policy setting meeting is taken for granted.
Banks benefit from lower interest rates, which mean increase
demand for loans and lower banks' costs. They also raise bond
prices, and most banks and other financial-service companies own
a lot of bonds.
American Express Co. rose 0.2 euro to 130.7 in Frankfurt
after declining 2.1 percent in the U.S. yesterday. J.P. Morgan &
Co. Inc. rose 1.7 euros, or 1.4 percent, to 126.7, reversing a
1.2 percent decline in the U.S. yesterday. Bank of America Corp.
advanced 1.4 euro to 61.8 while Chase Manhattan Corp. climbed 2
euro to 79.
In a separate government report today, the government is
expected to report that first-time claims for state unemployment
benefits rose by 6,000 last week to a seasonally adjusted 290,000
after rising by 4,000 a week earlier, analysts said.
September futures on the Standard & Poor's 500 Index fell
0.5 points to 1334.1, about 0.2 percent below ``fair value,'
taking into account dividends, the cost of money and the number
of days till expiration. Yesterday, the S&P fell 0.8 percent.
Futures on the Dow Jones Industrial Average rose 6 to 11,000.
Futures on the Nasdaq 100 fell 1.5 to 2320.
AOL gained 1/2 to 99 5/8 and Amazon.com rose 3/8 to 113 1/2
in European pre-trading, according to Madoff Securities
International Ltd. Both rose yesterday after Merrill Lynch & Co.
analyst Henry Blodget recommended investors buy a basket of eight
stocks that will benefit from the growth in online commerce
during the Christmas season.
Wal-Mart Stores Inc. fell 0.5 euro to 44.3 in Germany. The
world's largest retailer is reorganizing its international unit
in order to reduce operating costs and position itself for
international expansion, the Wall Street Journal Interactive
reported, citing Wal-Mart spokesman Jay Allen.
The company is combining international and U.S. operations
in areas such as merchandise buying, new store planning and
marketing, and is moving some assignments to foreign countries
where stores are located.
Raytheon Co. gained 0.3 euro to 63.3 in Germany. The world's
No. 3 aerospace and defense company said it cut 200 jobs in its
engineering and construction unit during the second quarter as it
works to reduce costs. Raytheon's Class B shares fell 1/8 to 68
11/16 yesterday.
Sequent Computer Systems Inc. declined 2.2 euros to 14 in
Frankfurt. The computer-server company said reports of improper
revenue recognition in an Aug. 18 Willamette Week story are
``patently false.' Willamette also said the company is under
investigation by the U.S. Securities and Exchange Commission, but
Sequent said it has not been contacted by that agency.
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