Wall Street Declines; Refiner Petroplus Seeks Insolvency

Bikram Pandey
24 Jan, 2012
New York City

The U.S. indexes declined after rallying for five days in a row. Global companies are beginning to feel the impact of weak euro and fast food retailer McDonalds lowered earnings outlook. The oil refiner Petroplus based in Switzerland defaulted on bond payment as refineries in South Korea and India.

[R]4:00 PM New York – The broader indexes traded lower after rallying for five days in a row. Global companies are beginning to feel the impact of weak euro and fast food retailer McDonalds lowered earnings expectations. The oil refiner Petroplus based in Switzerland defaulted on bond payment as refineries in South Korea and India knock off margins.[/R]

The U.S. indexes declined as the deadlock between Greece and its bondholders continues and McDonald’s issued a cautious outlook.

Wall Street has been rallying for five days in a row as earnings were ahead of expectations in the last two weeks. U.S. based global companies like McDonald’s reported 11% increase in earnings and 10% rise in sales. However, the company issued a cautious outlook and said that the ongoing turmoil in the euro zone and the strength of the dollar will drag earnings 18% in the current quarter.

In corporate news, SPX agreed to sell its Service Solutions business to Robert Bosch for $1.15 billion. Air Products and Chemicals first quarter net fell to $248 million and Baker Hughes fourth quarter net slipped to $314 million.

EI DuPont fourth quarter net fell to $373 million. McDonald’s fourth quarter net increased 11% to $1.38 billion and Verizon fourth quarter net loss swung to $0.21 billion.

Across the Atlantic, the European markets edged lower after weaker than anticipated corporate earnings. Spain sold €2.51 billion of short-term debt today at lower yields and Greek talks stalled.

Switzerland based Petroplus planned to file for insolvency as the company defaulted on the $1.75 bond payment today. The Swiss company that was acquired in a leveraged buyout operates five refineries in France, Belgium, Germany and England that process 667,000 barrels a day and its UK unit appointed an administrator today. The company is likely to shut at least three of its refineries and sell one in a difficult market.

Only a week ago Hess Corp and Venezuela controlled Petroleos de Venezuela SA controlled refinery in the U.S. Virgin Island was slated to close in February on the rising losses and persistent weak operating margins. The largest and one of the oldest refineries in the Caribbean processed as much as 500,000 barrels a day.

Activity in the euro area private sector increased in January with growth in Germany and France. Euro area industrial orders fell, German leading index slid and Spanish mortgage lending declined in November. Finnish jobless rate dropped in December.

The UK indexes fell and public sector borrowing decreased more than anticipated and Irish home prices fell in December. HSBC agreed to sell its Latin American businesses to Colombia''s Davidienda for $801 million.

Stocks in Japan traded higher and the benchmark index Nikkei traded at a 3-month high. Sony is expected to announce a stake in Olympus as early as next week that may lead to business alliance between the two companies. Elpida is expected to be a part of a three way merger with the U.S based Micron Technology.

India held its key lending rate at 8.5% but lowered cash reserve requirements for bank by 50 bais points. The Reserve Bank of India also lowered its growth outlook to 7% from its previous estimate of 7.6% and cited weakening global scenario rooted in the euro zone turmoil.

Australian market indexes closed flat and resources stocks led the losers. Rare earth miner and processor arranged $225 million in financing for its Malaysia based refinery. The IMF urged Australian banks to increase capital reserves.

Commodities, Bonds and Currencies

The yield on 10-year U.S. bond decreased to 2.05% and 30-year bond closed down at 3.15%.

The U.S. dollar edged down 0.08% to $1.302 to one euro and traded lower against the Japanese yen to 76.77.

Immediate delivery futures of Texas crude oil decreased $0.48 to $99.10 a barrel and futures of natural gas fell 2 cents to $2.55 per mbtu and gasoline price increased 3.1 cents to 280.95 cents a gallon.

In metals trading, copper increased 1.2 cents to $3.81 per pound, gold decreased $12.30 to $1,666.00 per ounce and silver decreased $0.27 to $32.