BRIC Markets Rise

123jump.com Staff
17 Mar, 2006
New York City

Emerging markets for the week advanced in Mexico, India and Brazil but Middle Eastern markets corrected sharply. Mexico advanced every day of the week. Brazil rose on 75 basis points interest decline and India rose on steady flow of funds from local and foreign investors. Dubai, Egypt and Saudi Arabia crashed between 20% and 30% for the week from the three-year highs. Egypt and Dubai has scaled more than 1,000% gains since the year 2002.

3:30PM Emerging Markets for the week advance. Middle East faces sharp correction.
Indian market remains a favorite destination of emerging market investors. For the week the index rose 0.9% and industrial, media, banks and software consulting companies rose. The markets in Gulf region suffered worst declines ever in Saudi Arabia, Dubai and Egypt. Indexes in Dubai, Egypt and Saudi Arabia lost between 20% and 30% this week. Since 2002 these markets have gained between 600% and 1,200% before this correction. Markets in Russia and Turkey closed up 2.4% and 0.65% respectively. Brazil faced resistance as broader corruption scandal may impact finance minister and investors are worried that reforms may come to a halt. Ahead of Monday’s option expiry Petrobras and Telemar lost 0.5% and 0.7% respectively. Mexico notched up gains on every single day of this week however several large cap stocks came under pressure including Cemex and American Movil. Cemex reported on Thursday that first quarter will rise 51% from a year ago and revenue will be close to $3.9 billion. India closed 19 points lower but still near record high at 10,860 and this week notched up three new record closes.


2:00PM General Motors raises another flag of worries.
General Motors ((GM)) stock lost 3% on the news that the company has revised its 2005 annual loss from $8.6 billion to $10.6 billion and company is to restate earnings back to 2000 due to accounting errors and liabilities related to Delphi spin-offs. The accounting errors included healthcare expenses in 2002, retiree benefits in 2002, 2003 and 2004 and credit received from Delphi recorded as reduction in stock holder’s equity. The total of additional $2 billion losses resulted from $400 million of restructuring charges for the North American operations, $1.3 billion added to the reserve to cover future liabilities related to Delphi bankruptcy filings and $439 million related to commercial financial business of GMAC. GM has said in the past that its pension and healthcare liability related to Delphi employees is not known and can be anywhere between $5.5 billion and $12 billion.


12:30PM European markets closed off highs.
European markets closed mixed, erasing some of the earlier gains made on the back of strong insurance stocks, including Zurich Financial, surging 12%, followed by Prudential and Royal & Sun, each climbing 5%. London FTSE 100 spearheaded gainers, reaching a five-year high, but eventually closed off intraday highs, up 0.1%.The French CAC 40 rose 0.3%, while the he German DAX 30 shed 0.3%.

Crude oil prices eased back after the OPEC lowered its demand forecast for 2006. Light sweet crude April delivery fell 30 cents to $63.28 a barrel. Gasoline fell 1 cent to $1.8622. Heating oil fell marginally to $1.8094. Natural gas slipped 6 cents to $7.200 per 1,000 cubic feet. London Brent for April delivery lost 18 cents to $64.03 a barrel. European gold gained advanced Friday. In London gold advanced to $554.10 bid per troy ounce, up from $549.70. In Zurich the precious metal rose to $554.70 from $548.60. In Hong Kong gold climbed $3 to $554.30. Silver closed at $10.30, up from $10.10. The U.S. dollar traded mixed against other major currencies. The euro traded at $1.2168, down from $1.2177. The dollar bought 116.15 yen, down from 116.79. The British pound was quoted at $1.7534, down from $1.7570.


11:30AM Stocks traded in a narrow range.
The Dow Jones managed to sustain most of the gains it made at the opening of the session, but has traded in a range for the majority of the morning. The index is now up around 11 points. The Nasdaq has been trading in a tight range, presently up about 1 point.

The Industrial sector was leading the market, adding to gains made during the week. Transportation stocks also built on recent strength. Boeing ((BA)) was the most conspicuous gainer within the Dow, currently up 1.3%, trading at a new high for the year. United Technologies ((UTX)) rose 1.2%, challenging resistance at the highs of the year. Other notable movers to the upside were Merck ((MRK)), Pfizer ((PFE) and General Electric ((GE)), each rising 0.8%. General Motors ((GM)) was the largest decliner among Dow components, currently lower by around 3.2%. The stock dropped on announcement that company would delay the filing of its annual report, due to an accounting issue. American International Group ((AIG)) was another source of weakness. The stock fell 2.4% on disappointing Q4 earnings. Among other gaining stocks, Tektronix Inc. ((TEK)) shares surged 7% after the company reported upbeat fiscal Q3 earnings. SBA Communications Corp. ((SBAC)) stock added 4% after the company agreed to acquire AAT Communications Corp. for nearly $1 billion in cash and stock. Rambus Inc. ((RMBS)) rallied more than 6% on a technology license agreement with IBM. Shares of William Lyon Homes ((WLS)) soared 31% after the company launched an offer to buy all remaining shares of the company at $93 each.


10:30AM Upbeat economic data sent stocks in the positive.
Stocks advanced slightly as a rebound in industrial production offset disappointing earnings news from General Motors Corp. and American International Group Inc. The Fed Reserve’s report showed that February industrial output rebounded from last-month decline of 0.3% to rise by 0.7%, slightly below the expected 0.9% rise. The market weighed a mixed consumer report, showing March consumer-sentiment index at 86.7, unchanged from the prior month but below economists'' prediction of 88. Among stocks, GM ((GM)) further rattled auto investors with news that its exposure to Delphi Corp.''s bankruptcy could be 56% more than originally estimated, and that costs to cover plant closings would be $500 million more. Google Inc. ((GOOG)) expects its 2006 capital expenditures to exceed significantly the $838.2 million it spent last year. In midmorning trading, the Dow Jones gained 24.09, or 0.21%. The S&P’s 500 index was up 1.97, or 0.15%, at 1,307.30, hitting a five-year high, and the Nasdaq rose 0.35, or 0.02%. Bonds retreated from a recent rally, with the yield on the 10-year Treasury note edging up to 4.67% from 4.64% late Thursday. Volume was sharply higher as options and futures contracts expired.


9:45AM Stocks opened higher ahead of economic data.
U.S. stocks opened higher with investors awaiting consumer sentiment data. Market largely ignored disappointing news from insurer AIG which reported sharp profit decline and automaker General Motors which said that its 2005 loss was steeper than expected. However, trading activity is expected to be volatile because of the expiration of key options contracts. The Dow Jones was up 20.49 points, or 0.18%. The Standard & Poor''s 500 Index was up 2.52 points, or 0.19%. The Nasdaq was up 4.60 points, or 0.20%. In early trading the housing sector stood out as the most notable mover to the upside, rising 1.3%, building on gains posted throughout the week.

Industrial output rose 0.7% compared with expectations of 0.9% increase.
The Federal Reserve released its report on industrial production and capacity utilization in the month of February on Friday, showing that industrial production rebounded after falling in the previous month. The report showed that industrial production rose by 0.7 percent compared to a revised decrease of 0.3 percent in January. Economists had been expecting industrial production to grow by 0.9 percent compared to the 0.2 percent decrease originally reported for January. The increase in industrial production reflected a rebound in utilities output, which rose 7.9 percent in February after falling 11.5 percent in January. The Fed said that the rebound came as the weather moved closer to seasonal norms after January''s warm temperatures. The report also showed that mining output fell 0.5 percent in February after increasing by 2.3 percent in January, while manufacturing production was unchanged in February after a gain of 0.8 percent in January. The Fed also said that the capacity utilization rate rose to 81.2 percent in February from 80.8 percent in January. The increase came in below economist estimates of an increase to 81.5 percent.


9:00AM Stock futures pointed to a lackluster start ahead of data release.
U.S. stock futures were sitting near the flat line, predicting a lackluster start of Friday session as investors were cautious ahead of key consumer sentiment data release, likely to prompt the direction of interest rates. On Thursday the Dow and S&P 500 extended their multi-year highs, but the Nasdaq posted modest losses. On Friday morning, Standard & Poor''s 500 futures were down 1.2 points, but above fair value. Dow Jones industrial average futures were down 19 points, and Nasdaq 100 futures were down 0.5 point. Among companies, General Motors Corp. ((GM)) and American International Group Inc. ((AIG)) weighed on the Dow. GM shares fell 4% before the bell on report that its 2005 loss was $2 billion deeper than previously reported. AIG fell 1.4% on 72% drop in Q4 profit, citing a legal settlement charge and hurricane losses. Nasdaq futures received some support from Google ((GOOG)), rising 0.7%, after a lawsuit, accusing the Web search systems of publisher''s copyright infringement, was dismissed.

Crude oil prices hovered over $63 on concerns about gasoline supplies. Light sweet crude April delivery fell 18 cents to $63.40 a barrel. Gasoline fell 1 cent to $1.8600. London Brent for April delivery lost 22 cents to $63.99 a barrel. European gold gained ground Friday. In London gold advanced to $555.50 bid per troy ounce, up from $549.70. In Zurich the precious metal rose to $555.10 from $548.60. In Hong Kong gold climbed $3 to $554.30. Silver opened at $10, down from $10.10. The U.S. dollar traded mixed against other major currencies. The euro traded at $1.2176, down from $1.2177. The dollar bought 116.31 yen, down from 116.79. The British pound was quoted at $1.7553, down from $1.7570.

Tektronix and Petco top estimates on items.
Tektronix Inc, ((TEK)), provider of technology measurement, solutions reported Q3 net earnings of 32 cents a share, up from. 30 cents a share in the year-earlier period on revenue growth,. If not for certain items, the company earned 37 cents a share up vs. 31 cents a share a year earlier, topping on that basis analyst estimate of 33 cents a share.

Petco Animal Supplies Inc ((PETC)), pet food and supplies retailer, reported Q4 net income of 46 cents a share, up a penny a share compared with the same period a year ago on sales growth. If not for one-time charges, the company would have gained earnings per share of 49 cents, beating analysts’ forecasts of 45 cents a share.

Vector Group Ltd, ((VGR)), cigarette maker, reported that Q4 net income advanced to 40 cents a share, from 24 cents in the year-ago period on revenue growth. Earnings from continuing operations amounted to 82 cents a share.

Tom Online Inc, ((TOMO)), Chinese Internet services group, reported that Q4 net income advanced 55% to 23.85 cents a U.S.-listed share on 39.5% revenue growth, almost in line with analysts’ estimates of 24 cents a share.. The company sees Q1 revenue between $47.7 million and $48.5 million.

American International Group, ((AIG)), insurance company, reported that Q4 net income dropped to 17 cents a share, from 62 cents a share a year earlier. Q4 results included a charge of $1.15 billion from previously announced regulatory settlements, as well as a $1.19 billion after tax charge for increased reserves for losses and loss expenses. The company missed analyst estimate of 24 cents a share.

Cray Inc, ((CRAY)), supercomputer maker, reported that it expects to lose 10 cents a share in Q4, and 73 cents a share in 2005. The company‘s 2004 loss could amount to $3.3 million, and its revenue reduced, if it is determined that revenue from one of the product development contracts was recognized incorrectly. The prior results may be responsible for the company’s delay of the filing of its 2005 annual report.


8:30AM European averages gained on insurance stocks at mid-day.
European markets sharply advanced at mid-day trading, boosted by solid gains in insurance stocks, including Zurich Financial, rising 10%, followed by Prudential and Royal & Sun, each climbing 5%. London FTSE 100 spearheaded gainers, reaching a five-year high of 0.8% to 6,041. The French CAC 40 rose 0.8% and the he German DAX 30 advanced 0.7%.


8:00AM Asian markets closed mostly higher. The Nikkei surged 1.5%.
Asian-Pacific benchmarks finished mostly in the positive. The Nikkei recovered from yesterday’s deep plunge, helped by brokerages and banks to lead gainers with an advance of 1.5% to 16339.73. The Japanese index surged after Softbank announced a $15.6 billion bid for the Japanese assets of Vodafone Group. Telecom and construction stocks also provided support. Hong Kong’s Hang Seng rose 0.5%, led by China Mobile. South Korea’s Kospi rebounded from earlier losses to close up 0.4%, followed by Taiwan Weighted index, also up 0.4%, while Shanghai Composite declined 0.4%.

India’s Sensex rose 0.9% for the week on solid gains in industrial stocks.
Indian market closed lower 19 point 10,860.40 on Friday after a volatile session and for the week closed up 88 points as the index rose to new highs three times during this week. Market has witnessed steady inflows of funds from domestic and foreign investors. Reliance Mutual Fund raised $1.3 billion for a domestic mutual fund Reliance Equity Fund. Large blocks of trade were conducted in State Bank of India at a premium to the market price and in Tata Steel. Bajaj auto rose after the company announced a plan to increase its annual motorcycle production capacity to 3.5 million by 2007 and then to 5.5 million capacity to produce scooters and other vehicles by the year 2009. Zee Telefilms rose again on the news that the company is planning to raise between 20% and 40% advertising rates in the coming months. Software consultant TCS rose on the news that the company is likely to get a significant outsourcing contract from Citigroup in New York.