U.S., Europe Indexes Drop, Athens Riots

Arthi Gupta, Mayank Mehta and Sanjay Barot
05 May, 2010
New York City

U.S. stocks trade lower as Portugal face debt downgrade and demonstrations in Athens turn violent. Job cuts decline across the U.S. Dollar Thrifty reviews the offer from Avis. Time Warner quarterly profit better than expected. XL Capital first quarter profit declines.

[R]9:30 AM New York – U.S. stocks trade lower as Portugal face debt downgrade and demonstrations in Athens turn violent. Job cuts decline across the U.S. Dollar Thrifty reviews the offer from Avis. Time Warner quarterly profit better than expected. XL Capital first quarter profit declines.[/R]

U.S. stocks trade lower after European markets fall and demonstrators roam Athens, Greece. Moody’s placed Portugal debt on review today with a possibility of a downgrade.

European market indexes accelerated the slide in the last hour of trading with market indexes in Spain and leading the decline of more than 1.5%. IBEX 35 index in Madrid dropped 2.5%.

Athens airport is closed today and other businesses are closed in Greece as public workers demonstrate in a general strike. Today’s strike, the third this year turned violent after a building was set ablaze in Athens that housed Marfin Egnatia Bank SA. Three other buildings were set on fire and at least three people are dead according to the fire department in Athens.

The euro hit a one-year low on the growing consensus that Spain, Portugal and Ireland may need as much as 600 billion euros if private investors demand sharply higher interest rates for government bonds.

ECB council member Axel Weber today said there is a threat of “grave contagion effects” from the Greek fiscal crisis, justifying Germany’s contribution to a 110 billion euro or $143 billion aid package.

Chancellor Angela Merkel has appealed to parliament to back Germany’s 22.4 billion-euro contribution to the joint European Union-International Monetary Fund bailout amid public opposition.

Proposed job cuts by U.S. employers slumped in April to the lowest level since July 2006. Planned firings dropped 71% to 38,326 from 132,590 in April 2009, according to figures released today by Chicago- based Challenger, Gray & Christmas Inc. The reading was the second-lowest since June 2000.

Hiring plans increased in April by 15,654 positions, led by financial firms and transportation companies, the report showed. The number of planned job cuts declined 43% in April from 67,611 in March, today’s report showed.

The Dollar Thrifty Automotive Group is reconsidering an offer from the Avis Budget Group that was substantially higher than the Hertz bid.

Hertz, made the cash-and-stock bid for Dollar Thrifty at $41 a share last week in an effort to beef up its business among vacationers.

Dollar Thrifty received a formal written bid from Avis on May 3rd and said that Avis has misunderstood the Hertz offer and interactions between them and Hertz. Dollar Thrifty also claimed that Avis had miscalculated fees attached to the Hertz deal.

However, the group did acknowledge that shareholders have indicated that the Hertz offer was too low, and the company is considering a proposal from Avis, setting up a potential bidding war. Hertz offer values the company at $1.27 billion.

Time Warner Inc. reported a 10% profit rise in the first quarter, helped by an advertising recovery and home video sales of ""The Blind Side"" and ""Sherlock Holmes.

XL Capital Ltd. reported a decline in profit for the first quarter mainly due to the impact of the Chilean earthquake and Windstorm Xynthia.

Commodities, Currencies and Yields

Dollar edged higher against euro to $1.2934 and increased against the Japanese yen to 94.76.

Crude oil decreased $1.15 to $81.59 a barrel for a front month contract, natural gas edged higher $0.02 cent to $4.01 per mBtu and gasoline decreased 2.020 cents to 230.20 cents.

Gold decreased $2.40 in New York trading to close at $1,166.80 per ounce, silver closed lower $0.117 to $17.72 per ounce and copper for the front month delivery decreased 2.100 cents to $3.16 per pound.

Yields on 10-year U.S. bonds increased to 3.59% and on 30-year U.S. bonds traded at 4.42%.

Stock Movers

Cray Inc., the maker of supercomputers decreased 8.6%.

InterMune, Inc., the biotech company plunged 76.1%.

Myriad Genetics, Inc., the healthcare company plunged 22.3%.

News Corporation, the diversified media company fell 3.9%. Total revenue increased $1.4 billion or 19% over the prior year’s third quarter to $8.8 billion, with growth reported in all major business segments.

XL Capital Ltd. increased 3.9% after the insurance group said first quarter revenues rose 7% to $1.64 billion from $1.53 billion a year ago.

Earnings Review

Chesapeake Energy Corporation ((CHK)), the natural gas company said first quarter revenues rose 40% to $2.80 billion from $2.00 billion a year ago. Net income in the quarter was $590.0 million or 92 cents per diluted share compared to net loss of $5.74 billion or $9.63 per share a year ago.

Time Warner Inc. ((TWX)), the media and entertainment company reported first quarter sales rose 5.3% to $6.32 billion from $6 billion a year ago. Net income in the quarter rose 10% to $725 million or 62 cents per diluted share compared to net income of $660 million or 55 cents per share a year ago.

XL Capital Ltd. ((XL)), the insurance group said first quarter revenues rose 7% to $1.64 billion from $1.53 billion a year ago. Net income in the quarter fell 28% to $128.0 million or 37 cents per diluted share compared to net income of $178.4 million or 53 cents per share a year ago.

Asian Markets Review

Hang Seng index in Hong Kong decreased 435.51 or 2.10% to 20,327.54 and CSI 300 index in China higher 16.94 or 0.56% to 3,036.39. ASX 200 index in Australia decreased 63.10 or 1.33% to 4,674.00. The FTSE Bursa KL Composite index in Malaysia closed lower 7.24 or 0.54% to 1,335.65. The markets in Japan were closed today.

JSE Index in Indonesia decreased 112.78 or 3.81% to 2,846.24. The Sensex index in India decreased 49.18 or 0.29% to 17,087.96. The markets in South Korea and Thailand were closed today.

Europe Markets Review

In London FTSE 100 Index declined 11.55 or 0.21% to 5,399.56, in Paris CAC 40 Index decreased 13.46 or 0.36% to close at 3,675.83, in Frankfurt DAX index lower 11.46 or 0.19% to close at 5,995.40. In Zurich trading SMI decreased 30.66 or 0.47% to close at 6,457.76.