Rate Hopes Lift Europe

Elena
19 Apr, 2006
Frankfurt

European markets extended earlier gains to close sharply higher, boosted by hopes that the Fed Reserve will stop raising interesrt rates. Construction, household goods and utilities stood out as leading gainers among stocks. The German DAX 30 climbed 1.5%, the French CAC 40 rose 1.2%, while London FTSE 100 advanced 0.7%.

[R]12:30 European markets finished sharply higher.[/R]
European markets closed sharply higher, reflecting investors’ optimism that U.S. interest rates tightening cycle was close to completion. Construction, household goods and utilities were among the leading gainers. In earnings news, Dutch chip-equipment maker ASML Holding rose 3.5% on strong Q2 forecast and a 400 million euro stock buyback. The German DAX 30 climbed 1.5%, the French CAC 40 rose 1.2%, while London FTSE 100 advanced 0.7%.

Crude oil prices soared to historic peaks over $73 a barrel. Light sweet crude May delivery jumped to $71.80 a barrel. London Brent surged to $73.34. European gold traded over 25-year highs as record oil prices led investors to buy gold as a hedge against inflation. In London gold climbed to $627.20 per troy ounce from $616.30. In Zurich the precious metal rose to $627.35 from $618.03. In Hong Kong gold closed at $624. Silver jumped to $14.40 from $13.60. The U.S. dollar traded mixed vs. major currencies. The euro traded at $1.2331, up from $1.2310. The dollar bought 117.78 yen, up from 117.29. The British pound was quoted at $1.7880, up from $1.7793.


[R]11:30AM Stocks moved lower on inflation concerns.[/R]
Following early gains, stocks moved lower as disappointing inflation data overshadowed traders’ optimism over robust corporate results. Markets turned to the downside on renewed concerns about inflation after a report from the Labor Department showed a bigger than expected increase in core consumer prices. The increase reflected higher apparel and transportation prices. Disk drive stocks showed significant weakness on profit taking after climbing 3% in the previous session. The sector dropped 2.3%. Seagate Technology ((STX)) helped to lead the sector lower, with the hard-disk drive maker currently down 8.1% on disappointing Q4 outlook. Seagate''s takeover target Maxtor ((MXO)) also moved sharply lower. Airline stocks were under pressure, as reflected by the 2% loss shown by the Amex Airline Index. ExpressJet ((XJT)) posted a sharp loss after Continental ((CAL)) said it is withdrawing 69 regional jets from its capacity purchase agreement with ExpressJet. At the same time, brokerage stocks stood out as notable gainers, helped by Jefferies ((JEF)). E*Trade ((ET)) advanced ahead of the release of its quarterly results after the close. Among semiconductor stocks, Texas Instruments ((TXN)) rose 2.4% after the chip maker reported Q1 earnings and revenue growth. Among other stocks, Travelzoo ((TZOO)) soared 23% after reporting 140% profit jump in Q1. Panera Bread Company ((PNRA)) rose 6% on positive analyst comment. The energy sector moved to the upside after a report, showing an unexpected decrease in U.S. crude oil inventories and a steep decline in U.S. gasoline inventories.

[R]Crude oil inventories dropped. Gasoline stocks further slipped.
Crude oil inventories ticked down in the latest week, according to government statistics released Wednesday. This came after several consecutive weeks of gains. Meanwhile, stocks of gasoline recorded a sharp slide, adding to recent declines. The Department of Energy''s Energy Information Administration revealed that crude oil inventories fell by 800,000 barrels for the week ended April 14. Specifically, the measure dipped to 345.2 million barrels from the prior week''s level of 346.0 million barrels. The move in the latest period followed a 3 consecutive weeks of gains, including an advance in the previous week of 3.2 million barrels. In the most recent week, oil inventories were 6.6% higher than their levels of the same time last year. Gasoline inventories posted a week-over-week drop of 5.4 million barrels, the government said. This added to losses in the preceding 6 weeks, including a slide of 3.9 million barrels in the previous week. Gasoline stocks were 4.6% below their levels of last year. Inventories of distillate fuel oil declined again, falling by 2.8 million barrels in the most recent week. In the previous period, distillate inventories fell by 4.2 million barrels

[R]10:30AM Cement, metals and sugar stocks led the gainers.[/R]
Sensex in Mumbai rose for the third day in a row to a new record. Sensex advanced 0.6% or 74 points to close at 11,895.98. The daily turnover rose to $1.25 billion from $1.1 billion in previous session. Volatile session saw the index rising more than 190 points before settling at a lower level. Sensex reached close to 12,000 before tracking down in the late afternoon session. Cement stocks led the gainers during the session. Grasim, ACC and Gujarat Ambuja rose to new highs and closed up 4%, 3.8% and 2% respectively. Grasim closed at Rs. 2,331 and Gujarat Ambuja at $118 and ACC at Rs. 971. Cement companies are expected to deliver better earnings in the coming quarter on strong rise in construction industry.

IT and software exporters declined a fraction after rising for two days in a row. TCS reported to have signed a $500 million outsourcing contract with Citigroup. Infosys lost 2% to close at Rs. 3,274 and Satyam lost 1% and settled at Rs. 854. International price of crude oil above $72 affected local auto stocks. Bajaj auto and Tata Motors dropped 2% and 0.6% respectively. Hero Honda, TVS and Ashok Leyland dropped a fraction. Sugar prices have tracked international prices and local sugar companies stocks rose sharply. Sakhti Sugar, Oudh Sugar, Balrampur Chini Mills and Triveni Engineering rose 10% at close. Dhampur Sugar and Rajashree Sugar added 7% and 5% at close.

[R] 9:45AM Stocks opened in the positive.[/R]
Strong quarterly results from major companies helped stocks move higher, but disappointing inflation data limited gains as it raised concerns about the interest rates outlook. The major averages added to the strong gains that they posted in the previous session. The transportation sector was one of the market''s best performances in early trading, benefiting from declining oil prices ahead of U.S. petroleum report. The Dow Jones Transportation Average rose 1.1%, helped by railroad operator CSX ((CSX)), up 5.7% on Q1 earnings that fell year-over-year but came in above analyst estimates. Positive earnings news also contributed to notable strength in the brokerage, defense, and internet sectors. Yahoo ((YHOO)) helped to lead the internet sector higher, with online media giant up 6.9% after reporting Q1 earnings that met analyst estimates. Shares of Johnson Controls ((JCI)), a maker of car seats and environmental control systems for buildings, rose 6.4% on quarterly results, showing Q2 profit decline but lifted outlook. Meanwhile, disk drive stocks moved to the downside in early trading, with Seagate Technology ((STX)) falling sharply down on a disappointing Q4 outlook. Seagate''s takeover target Maxtor ((MXO)) also moved lower. Oil stocks posted weakness due to the decrease in the price of oil.

[R]Consumer prices index rose in line with expectations.[/R]
The Department of Labor released its closely watched report on consumer prices in the month of March on Wednesday, showing that overall prices rose in line with economist estimates while core prices rose slightly more than expected. The Labor Department said that its consumer price index rose 0.4 percent in March following a 0.1 percent increase in February. Economists had been expecting consumer prices to increase by about 0.4 percent. The increase was partly due to a rebound by energy prices, which rose 1.3 percent in March after falling 1.2 percent in February. The Labor Department noted that motor fuel prices rose 3.6 percent while household fuel prices fell 1.0 percent. The report also showed that the core consumer price index, which excludes food and energy prices, rose 0.3 percent in March after rising 0.1 percent in February. This marked the biggest increase in a year and exceeded economist estimates of a 0.2 percent increase. A rebound in apparel prices contributed to the increase in core prices, with apparel prices rising 1.0 percent in March after falling 1.0 percent in February. Transportation prices also showed a notable increase, reflecting an upturn in gasoline prices


[R]9:00 AM Stock futures indicated a positive opening.[/R]
The U.S. stock futures indicated a higher start of the session, following a strong rally yesterday. The sharp advance in stocks came on the heels of economic data and the minutes of the last FOMC meeting which prompted that the Fed Reserve was near the end of its rate hikes. The interest rates outlook is likely to remain in focus, as the Labor Department released its report on consumer prices in the month of March which showed that overall prices rose in line with economist estimates while core prices rose slightly more than expected. The futures gave back some ground following the release of the report, as the slightly bigger than expected increase in core prices raised some concerns about inflation. Earnings reports were also in the spotlight, with several Dow components releasing their quarterly results. Dow components IBM ((IBM)), J.P. Morgan ((JPM)), Coca-Cola ((KO)), United Technologies ((UTX)), and Honeywell ((HON)) moved higher on quarterly results. Yahoo ((YHOO)), online media giant, surged higher in pre-market trading after reporting Q1 earnings decrease but in line with analyst estimates. However, shares of Motorola ((MOT)) were under pressure in pre-market trading after the company reported earnings that below analyst estimates

Crude oil prices retreated but remained close to record highs on fears of U.S. military strike against Iran over its nuclear program. Light sweet crude May delivery declined 35 cents to $71 a barrel. London Brent lost 12 cents to reach $72.39. European gold traded over 25-year highs as record oil prices led investors to buy gold as a hedge against inflation. In London gold climbed to $623.75 per troy ounce from $616.30. In Zurich the precious metal rose to $624.65 from $618.03. In Hong Kong gold closed at $624. Silver jumped to $14 from $13.60. The U.S. dollar traded lower vs. major currencies. The euro traded at $1.2356, up from $1.2310. The dollar bought 116.86 yen, down from 117.29. The British pound was quoted at $1.7861, up from $1.7793.

Sonoco, ((SON)), packaging company, reported Q1 earnings of 44 cents a share, up from 37 cents a share in the year-ago period. If not for non-recurring items, earnings would have been 46 cents a share, beating analyst estimate of 45 cents. Revenue advanced to $818.8 million from last year''s $814.4 million, missing analyst forecasts of $859.5 million, due to week tubes and cores volumes and lower selling prices for recovered paper offset strength in its consumer packaging business.

Piper Jaffray Cos, ((PJC)), security brokerage and investment firm, reported Q1 earnings of $1.25 a share, up from 38 cents a share a year earlier. Q1 includes a gain of 35 cents a share from the company''s ownership of two seats on the New York Stock Exchange, Inc. which were exchanged for cash and shares of the NYSE Group, Inc. in its initial public offering in March. The company posted revenue of $227.5 million, up vs. $179.1 million a year ago.

J.P. Morgan Chase & Co., ((JPM)), bank, reported Q1 net income of 86 cents a share, up 35% from 63 cents a share in the year-earlier period. The bank added that revenue came to $15.2 billion, up from $13.7 billion. J.P. Morgan beat analysts’ forecast for earnings of 84 cents a share and revenue of $14.9 billion.

Honeywell International Inc, ((HON)), aerospace products manufacturer, reported Q1 net income of 52 cents a share, up vs. 42 cents a share in the year-ago period on 12% sales growth, topping analyst estimate of 49 cents a share. Honeywell added that it was confident of 25% to 30% earnings growth in 2006.

American Standard, ((ASD)), manufacturer, reported a 33% decline in Q1 earnings to 40 cents a share despite 9% revenue growth. If not for operational consolidation expenses, it would have earned 43 cents a share, still down from a year earlier as higher commodity costs, costs to reduce inventory and improve manufacturing efficiency, unfavorable foreign exchange transaction effects and investments related to product launches hurt its bath and kitchen division. The company missed analysts’ forecasts for earnings of 40 cents a share. For the year, the company lifted its guidance of 6% to 7% sales growth to a new range of 7% to 8%, and improved the low end of its earnings guidance of $2.70 to $2.80 from an earlier view of $2.65 to $2.80.

St. Jude Medical, ((STJ)), medical device maker, reported Q1 earnings of 36 cents a share, up from 32 cents a share in the year-ago period on 18% revenue growth. If not for non-recurring items, earnings would have been 39 cents a share, topping analyst estimate of 36 cents a share.

First Cash Financial Services Inc., ((FCFS)), operator of pawnshops and consumer-credit stores, reported that Q1 earnings advanced 26% to 23 cents a share, from 18 cents in the year-ago period on 19% higher revenue. The latest figure reflects a penny a share of costs for stock-option expense. The company topped analysts’ estimate of 21 cents a share. Same-store sales for Q1 rose 13%.

CIT Group Inc, ((CIT)), consumer finance company, reported that Q1 net income advanced to $1.12 a share, up from $1.06 a share in the year-earlier period, topping analysts’ estimate for earnings of 12 cents a share. The group added that profitability improved across its businesses in commercial finance and specialty finance.

Pfizer, ((PFE)), drug maker, reported Q1 earnings of 56 cents a share, up from 4 cents a share in the year-ago period. If not for non-recurring items, earnings would have been 61 cents a share. Revenue dropped to $12.66 billion from last year''s $13.09 billion. The company topped analysts’ expectations for earnings of 53 cents a share. Global Lipitor sales advanced a less-than-expected 3% to $3.11 billion. The company added that it continues to expect to earn $2 a share in 2006.

Wolverine World Wide Inc., ((WWW)), shoe maker, reported that Q1 net income advanced 21.7% to 34 cents a share on 7.2% revenue growth, beating analysts’ views of earnings of 30 cents a share. Wolverine added that its Merrell brand was the leading driver behind the improved sales and profit, with the brand''s revenue showing growth in the high teens. The company also announced that it expects 2006 earnings per share to be in the upper half of its previously announced range of $1.34 to $1.40.

Knight Capital Group Inc, ((NITE)), equities trade execution firm, reported Q1 net income soared to $49.1 million, or 47 cents a share, from $5.8 million in the year-ago period on more than a double revenue growth. The company added that its profit was after charges of 5 cents a share related to real estate costs. The company beat analysts’ expectations for earnings of 30 cents a share.

[R]8:15AM European average rallied at mid-day.[/R]
European markets gained ground at mid-day dealings, following the best one-day performance on Wall Street Tuesday. Stocks shrugged of rising crude oil prices and posted solid ground on speculations the Fed Reserve will stop raising interest rates. The German DAX 30 climbed 1.4%, the French CAC 40 rose 1.1%, while London FTSE 100 advanced 0.6%.


[R]7:45AM Asian markets closed sharply higher.[/R]
Asian-Pacific benchmarks sharply advanced across the region, reflecting a strong U.S. markets rally overnight and speculations that the Fed’s cycle of rate increases was coming to an end. As a result regional technology and property stocks gained strength. Retreating oil prices also provided a boost to the market sentiment. The Nikkei rose 0.7% to 17,350.12, lifted by financial, tech and consumer shares. Among leading gainers, Fujitsu climbed 1.3%, Sony rose 2.1%, and Kyocera surged to 3.1%. South Korea’s Kospi soared 1.3%, boosted by a 2.3% advance for Samsung Electronics and 2% rise in LG Electronics. Hong Kong’s Hang Seng climbed 1.2% on support from property and energy stocks. Taiwan Weighted index gained 1.1%, Singapore Straits Times rose 0.9%, and Australia’s All Ordinaries was up 0.6%.