U.S. Indexes Steady; China Rate Hike, Metals Edge Lower

Bikram Pandey
08 Feb, 2011
New York City

U.S. indexes inched higher in early trading but international news dominated the sentiment. China lifted rates ahead of inflation report next week and European miners report sharply higher earnings. UBS AG reported first annual profit since 2006. The euro gained 0.5% to $1.365.

[R]9:40 AM New York – U.S. indexes inched higher in early trading but international news dominated the sentiment. China lifted rates ahead of inflation report next week and European miners report sharply higher earnings. UBS AG reported first annual profit since 2006. The euro gained 0.5% to $1.365.[/R]

Stocks indexes traded fractionally higher after commodities prices fell, European markets traded lower and China lifted rates. Sara Lee Corp said second quarter net declined 64%. Emerging markets so far have seen outflow of $7 billion compared to $95 billion in 2010.

People’s Bank of China lifted its rate by 25 basis points on the last of holiday period and ahead of important inflation report next week.

The benchmark one-year lending rate will increase to 6.06% from 5.81% and one year deposit rate was raised to 3% from 2.75%.

European markets struggled after Germany reported a decline in industrial output and construction activities plunged 24% on bad weather conditions.

Industrial production in German declined 1.5% in December compared to revised 0.6% increase in November.

The difficult weather conditions played part in weak data as construction plunged in the month 24% according to data released by the Economy Ministry. Manufacturing output declined 0.1%.

Volkswagen agreed to increase base pay of its employees by 3.2% and one-time bonus of 1% or 500 euros. The wage increase is not expected to spill over in the broader market as other auto makers are scheduled for wage negotiations till next year.

On the earnings front, ArcelorMittal reported a net loss in the final quarter of 2010 but guided higher net in the current quarter and Xstrata annual net soared on 38% increase in higher coal prices. Sara Lee net plunged after raw ingredients costs rose.

ArcelorMittal gained as much as 4.5% in European trading after it reported a net loss of $780 million in the fourth quarter. Profit in the year rose to $2.92 billion from $157 million a year ago on revenues of $78 billion compared to $61.02 billion.

Higher raw materials cost and sluggish demand curtailed company’s ability to pass on the costs to consumers.

Xstrata Plc, Switzerland based largest steel exporter said 2010 net soared 86% to $5.15 billion from $2.77 billion in the prior year.

The company benefited from the 38% increase in coal prices in 2010 to $99 a ton. The debt declined 38% to $7.6 billion and earnings per share increased to $1.77.

UBS AG increased in Swiss trading after the private wealth manager reported first annual profit since 2006. For the quarter net rose 7% and attracted net new asset of Sfr 6.1 billion.

Sara Lee Corp fiscal second quarter net plunged 64% to $107 million or 24 cents a share as sales from the continuing operations declined 1% to $2.35 billion.

The company last month guided annual earnings of 89 cents and decided to split the company to fend off an offer from a leverage buyout firm JBS SA and a group led by Apollo Global Management LLC.

Earnings Review

ArcelorMittal, the steel producer company reported fourth quarter sales surged 18.7% to $20.7 billion from $17.4 billion last year. Net loss in the quarter was $780 million or 51 cents per diluted share compared to net income of $1,350 million or 89 cents per share in the prior year.

The Swatch Group Ltd., the Switzerland-based watches and jewelry maker said fourth quarter gross sales increased 18.8% to Sfr6.44 billion from Sfr5.42 billion last year. Net income in the quarter soared 41.5% to Sfr1.08 billion compared to Sfr763 million in the prior year.

UBS AG, the financial services company reported fourth quarter net interest income fell 3% to Sfr1,703 million from Sfr1,749 million a prior year. Net profit in the quarter increased 7% to Sfr1,290 million or Sfr0.33 per diluted share compared to Sfr1,205 million or Sfr0.31 cents per share a year ago.

Xstrata PLC, the diversified mining company fourth quarter revenue increased 34% to $30.5 billion from $22.7 billion a prior year. Net profit in the quarter soared 86% to $4.95 billion or $1.58 per diluted share compared to $0.86 billion or $0.25 cents per share a year ago.