Energy Costs Boost CPI 0.4%

Elena
16 Aug, 2006
New York City

The consumer inflation index jumped as a considerable rise in energy prices of 2.9% offset the biggest decline in clothing costs in nearly two decades. Core inflation, excluding food and energy, slowed in July, rising by just 0.2% after four straight months of 0.3% gains.

[R]9:00AM Stock futures pointed to a higher start on CPI.[/R]
U.S. stock futures recovered from earlier weakness after government report on July consumer prices was released. The Labor Department said the Consumer Price Index for July rose 0.4% from a 0.2% increase in June, coming in inline with expectations. Core inflation slowed down with an increase of 0.2%, compared with a 0.3% increase in June. The CPI core rate was expected to rise 0.3%.

Of companies in focus, cosmetics firm Estee Lauder ((EL)) largely met expectations with a 33% profit decline on a 5% revenue rise, hurt by a recent stock price pullback in the wake of tighter security rules in U.S. and U.K. airports. Applied Materials ((AMAT)) reported a stronger-than-forecast 39% profit jump, benefiting from a wave of factories coming online and the proliferation of consumer electronic devices. Abercrombie & Fitch ((ANF)) posted a better-than-forecast 14% increase in the second quarter. After the close, Hewlett-Packard ((HP)) is due to report results. Standard & Poor's 500 futures were up 5.30 points, above fair value. Dow Jones industrial average futures rose 42 points, and Nasdaq 100 futures were up 8.50 points.

[R]Consumer prices index rose 0.4%, core inflation gained 0.2%.[/R]
The Department of Labor released its report on consumer prices in the month of July on Wednesday, showing that consumer prices rose in line with economist estimates. At the same time, core consumer prices rose a little less than expected. The report showed that the consumer price index rose 0.4 percent in July following an unrevised 0.2 percent increase in June. Economists had been expecting prices to increase by about 0.4 percent. The increase in consumer prices was largely due to a rebound by energy prices, which rose 2.9 percent in July after falling 0.9 percent in June. Higher energy prices also contributed to a 1.6 percent increase in transportation costs. The core consumer price index, which excludes food and energy costs, rose 0.2 percent in July after rising 0.3 percent in each of the four previous months. The increase came in slightly below economist estimates of an increase of 0.3 percent. A significant decline in apparel costs helped to keep the price growth subdued, with apparel prices falling 1.2 percent in July after coming in unchanged in June. This marked the first drop in apparel prices since February.


[R]7:30AM Japanese and Hong Kong markets finished higher Wednesday.[/R]
Asian markets ended higher on Wednesday. The Nikkei 225 Index ended up 1.61% to 16,071.36. It had not finished above 16,000 since May 19. Electronics conglomerate Hitachi Ltd jumped 3.81% and top PC-maker NEC Corp advanced 4.75%. Nissan Motor led the carmaker gainers, advancing 2.59%. Toyota Motor and Honda Motor also advanced mre than 2%. Sonu was off 1.15%, after Dell Inc. Announced it was recalling more than 4 million laptops made by Sony.

Hong Kong''s Hang Seng Index advanced 1.02% to close 17,451.03, its best finish since September 2000. Property stocks led advancers, with New World Development and Hang Lung Properties making the largest gains on hopes a continued pause in U.S. interest rate hikes would help real-estate sales in Hong Kong''s dollar-pegged economy. South Korea''s Kospi index moved up 1.58%. Key exporters Samsung Electronics and Hyundai Motors gained both more than 2%. In Australia, the S&P/ASX 200 rose 0.52%. Leading insurer QBE Insurance Group advanced on strong first-half earnings and miner BHP Billiton gained despite an ongoing strike at its Escondida copper mine in Chile.


[R]6:30AM European markets can''t hold on to earlier gains.[/R]
Europe was lower by mid-morning. The U.K. FTSE 100 index lost 0.1% at 5,892, while the German Dax lost 5.3 points, or 0.1%, at 5,770.98 and the French CAC 40 was almost flat, 0.8 points lower at 5,114.18. European corporate movers included German chemicals group Lanxess advancing 1.4% after posting a forecast-beating second-quarter profit rise. On the downside, U.K. nuclear energy group British Energy lost 3.7% after posting sharply higher profit figures but lower output.

Also, Swiss medical device maker Synthes shed 2.1% following its statement that its half-year net profit increased 8.3% to $243.3 million, while sales rose 13.8% to $1.17 billion. Also Dutch bank ABN Amro advanced 0.8% after rival Dutch bank ING upgraded it to buy from hold, on expectations of more restructuring at its wholesale arm.

Light sweet crude oil for September delivery dropped 7 cents to $72.98 a barrel in electronic trading on the NYME. October Brent at London''s ICE Futures exchange, which moves to the front month from Thursday, lost 18 cents to $73.59 a barrel. The euro rose slightly against the U.S. dollar Wednesday, trading in a narrow range as market participants awaited U.S. consumer price data later in the day. The dollar advanced slightly against the British pound, which slipped to $1.8922 from $1.8936 the evening before, and fell against the Japanese yen, to 116.09 yen from 116.12 the day before.