Global Sell-Off

123jump.com Staff
15 May, 2006
New York City

Financial markets around the world declined led by a sharp drop in metal prices. Gold, silver, copper, platinum and palladium declined between 1% and 6%. Oil fell 3.5% as traders started locking in profits. Asian sell-off was led by Indonesia, India and Philippines. Major European markets dropped between 1% and 3%. Norway dropped 5%. In South America Argentina and Brazil declined 3% and 2% respectively. Gold closed down $26.80 but fell as much as $49.

[R]4:15PM Thirty-seven largest financial market declined in a global sell-off.[/R]

-Dow closed up 47.78 points, Nasdaq closed down 5.26 and S&P closed up 3.26.
-Crude oil declined $2.63 or 3.5% to close at $69.41 per barrel.
-Yield on 10-year bond closed at 5.15% and 30-year bond closed at 5.26%.
-Gold closed down $26.80 to $685, after dropping whopping $49 in mid-day trading.
-Copper dropped 11 cents, platinum dropped $33 and palladium lost $23.
-Top 37 markets around the world declined.

Markets around the world declined led by a sharp decline in metals prices. Oil price declined too. Thirty seven largest markets around the world fell with the steepest decline in Indonesia, Norway and India. Emerging markets around the world were shaken. India down 4% and Indonesia closed lower 6.3%. Twelve major markets in Asia closed lower between 1% and 4%. Japan lost 0.7%. Markets in Europe sold-off as investors sold stocks in metals and mining companies. Norway lost 5.3% and South Africa lost 3.7%. Major European markets including France, Germany and U.K. lost 1.7%, 1.0% and 1.2% at close. In the Americas six leading markets closed lower led by a decline of 3.2% in Argentina and 2.2% in Brazil and 2% in Mexico.

In New York broader averages recovered most of the losses in the late afternoon trading. Market averages faced third day of weakness accented by a steep sell-off in commodities prices. Oil closed 3.5% lower. Gold closed at its lowest price in the last five days of trading from it’s 26-year high.

Dell ((DELL)) is expected to release earnings on Thursday. The stock is currently down from its 52 week high of $41 on July 20th of 2005 to its current price of $24 or 33% a share. The company has narrowed its profit margin to 8.2% in Q4 from 8.8% the year-earlier period. Dell has missed its quarterly earnings forecasts twice last year.

Hewlett-Packard ((HPQ)) will release its earnings tomorrow. Analysts are looking for earnings of 48 cents to 50 cents a share on sales of $22.6 billion. The company’s stock is currently at $32 up from $21.55 a year ago.


[R]2:45 PM Embraer reports earnings of 37 cents, down from 55 a year ago.[/R]
Embraer ((ERJ)), Brazilian manufacturer of commercial, business, and defense aircrafts reported Q1 earnings of 37 cents, down from 55 cents a year ago. The market had expected earnings of 55 cents. The company’s revenue rose 5.9%. Gross margin for the company came in at 28.7% down from 35.1% in the year-earlier period. Embraer delivered 27 aircrafts, 21 of which were commercial, in the first quarter.

Garmin ((GRMN)), a manufacturer of navigational devices that utilize GPS technology has scheduled a meeting for shareholders on the 21st of next month at its Olathe headquarters to vote on the board recommendation for a two-for-one stock split. On May 3rd the company had announced the planned stock-split and post-split dividend of 50 cents a share. At that time it also reported an 85% increase in Q1 earnings and a 67% increase in quarterly revenue compared with the year-earlier period. The stock has risen from$43 to $94 in 1 year’s time.

Phelps Dodge ((PD)), a miner of copper and producer of molybdenum-based chemicals saw its share drop of 6% in early afternoon trading as the broader commodities market declines. The company’s stock peaked last week at $99 and has since fallen to $88.05, down $7.30.

Bausch & Lomb ((BOL)), a manufacturer of eye health products announced today that it is conducting a permanent world-wide recall of its contact lens solution; ReNu with MoistureLoc due to concerns that it may be triggering a rare type of eye infection. About 2.3 million of the more than 30 million Americans who wear contact lenses use the MoistureLoc formula. The product alone accounted for $100 million in global sales in 2005. The company’s shares rose 10.46% to $49.09 in early afternoon trading. Bausch & Lomb generates more than $2 billion in annual revenues. The company currently employs 12,400 people world-wide.


[R]12:30PM European markets finished deeply in the red.[/R]
European markets closed deeply in the red, with a flat start on Wall Street pulling them off earlier lows. Markets were weak Monday largely due to continuous inflation concerns and weaker U.S. dollar which weighed on export-related issues like auto and luxury stocks. Metals companies were also under pressure with BHP and Anglo American down 5% each. Xstrata dropped 8.4% on mews that it might bid for Falconbridge. However, telecommunication stocks made a strong performance with Vodafone rising 1.2% on report that Verizon may buy a stake in the companies’ joint venture for $48 billion. The German DAX 30 lost 1%, the French CAC 40 dropped 1.7%, and London FTSE 100 falling 1.2%.

Oil dropped below $70 on weakening demand and rising inflation. Light crude fell $2.49 to $69.55 a barrel. Gasoline lost 9 cents to $2.08 a gallon. Natural gas dropped 15 cents to $6.13 per 1,000 cubic feet. London Brent crude shed $1.97 to $70.35. Precious metals also fell, with gold losing $21.80 to $692.50 an ounce. In Hong Kong gold slipped $27.20 to $695.90. In London silver fell to $13.40 from $14.50. The dollar traded mixed in European trading. The euro traded at $1.2842, down from $1.2914. The dollar bought 110.10, down yen from 110.31. The British pound stood at $$1.8842, down from $1.8932.


[R]11:30AM Oil and gold stocks moved notably lower.[/R]
Stocks lost direction in morning trading, following a steep decline in oil and gold prices as well as a disappointing quarterly report from Target Corp. ((TGT)). The gold sector turned in one of the market's worst performances as the price of the precious metal moved sharply lower amid some strength in the value of the U.S. dollar. Gold for June delivery declined $17.80 to $694 an ounce, sending the Amex Gold Bugs Index down 4.8%. Other metal prices also came under pressure, contributing to weakness throughout the metal sector. Among metal stocks, Inco ((N)) posted a notable loss after it raised its offer to acquire Falconbridge ((FAL)). A sharp drop in the price of oil drove energy stocks notably lower. The oil service sector dropped 1.9%, while the oil and natural gas sectors both fell more than 1%. Crude for June delivery slipped $1.89 to $70.15 a barrel on news that the IEA cut its forecast for oil demand growth in 2006.

At the same time, airline stocks advanced, benefiting from the decrease by the price of oil, as reflected by the 1.5% gain shown by the Amex Airline Index. JetBlue ((JBLU)) helped to lead the sector higher following a brokerage upgrade. Health care stocks posted strength, with some pharmaceutical and biotechnology stocks posting notable gains. Some strength was also visible in the health insurance sector. Shares of Cambridge Antibody Technology ((CATG)), bio-pharmaceutical company, surged 64.2% after the company agreed to be acquired by AstraZeneca ((AZN)). In late morning trading, the Dow added 25.67, or 0.23%. The Standard & Poor's 500 index was up 1.99, or 0.15%, and the Nasdaq lost 4.46, or 0.2%. Bonds rose on the weak manufacturing data, with the yield on the 10-year Treasury note slipping to 5.17% from 5.2%.


[R]10:30 AM Indian Sensex plunges 500 points on heavy selling.[/R]
The Sensex in India lost 462.91 points, or 3.77% to close at 11,822.20. The turnover on BSE was $0.7 billion or Rs 3,182 crores. The market breadth was weak, as 684 stocks rose and 1,899 declined. Stock exchange’s metal index fell close to 11%. In three trading session the market index Sensex has lost 6.2%. Recent victory of Socialist parties in the states of West Bengal and in Kerala, expected sharp decline in metals prices in Europe and rising petrol prices in local markets have kept investors on the edge. It was the fall in metals prices that led the sharp sell-off in the market today.

Metal stocks led the decliners with Hindalco the losing the most, down 13% to Rs 210.15. Sterlite Industries diving 15% to Rs 514, Hindustan Zinc down 12.71% to Rs 900 and Sesa Goa declining 12% to Rs 1,290. Tata Steel and Kalyani Steel came under pressure as well. Reliance Industries was the most-traded stock having more than Rs 385 crore changing hands, followed by Tata Steel, Rs 277 crore. Reliance Industries continued its downward trend, shedding 4.3% to Rs 1,021.25. ONGC declined 3.54% to Rs 1.3670.10. Reliance Petroleum dropped 5.7% to Rs. 79.15 and ITC fell 4.82% to Rs 191.40.

[R]10:00AM Stocks opened in the negative on commodities and Target’s Q1 report.[/R]
At the start of Monday trading session, stock markets moved to the downside, reflecting heavy losses by commodity stocks which came under pressure due to a steep decline in commodity prices. Weaker-than-anticipated quarterly earnings from Target Corp. ((TGT)) also helped stocks move lower. Target posted a 12% jump in Q1 profit, but the results came below estimates by a penny per share. Company's shares lost 7%. Gold stocks moved sharply lower, as gold for June delivery slipped $23.80 to $688 an ounce. The Amex Gold Bugs Index dropped 5.8%. Energy stocks were also under pressure, as the price of oil extended the downward move, falling down $2.19 to $69.85 a barrel. At the same time, airline stocks moved notably higher, as the sharp drop by the price of oil offset concerns about higher fuel costs. The Amex Airline Index climbed 1.6%. Some semiconductor stocks also posted early strength. In the first hour of trading, the Dow added 5.60, or 0.05%. The Standard & Poor''s 500 index was down 0.75, or 0.06%, and the Nasdaq lost 2.31, or 0.1%. Bonds recovered slightly from Friday''s selloff, with the yield on the 10-year Treasury note slipping to 5.19% from 5.2%.

In corporate news, AstraZeneca PLC agreed to acquire development partner Cambridge Antibody Technology Group PLC for $1.07 billion. The $25.02-per-share is a hefty 69% premium to Cambridge's closing price Friday. Boeing Co. agreed to pay $615 million to end a three-year Justice Department probe into alleged defense contracting scandals.


[R] 9:00AM Stock futures were set to open lower on inflation worries[/R]
U.S. stock futures indicated a weak opening with continued interest rate concerns and inflation worries weighing on pre-market sentiment ahead of government report on producer prices due out on Tuesday. The report is expected to give an indication of the pace of inflation in the domestic economy. Energy and mining stocks also contributed to the downward move, pressured by sharp declines in commodities markets. On Monday gold fell sharply, following a 26-year high last week. Gold producer Newmont Mining Corp. fell almost 1% to $55.80 on the Inet electronic brokerage system. Oil prices also dropped steeply, sending shares of oil firm ConocoPhillips down 0.8% to $64.68. S&P 500 futures were down 3.1 points, below fair value. Dow Jones industrial average futures fell 20 points, and Nasdaq 100 futures were down 9.5 points.

In corporate news, discount retail chain Target Corp. ((TGT)) is expectedt to report earnings before the opening bell. New York City-based Verizon Communications Inc. ((VZ)) is reportedly close to a merger deal with the UK''s largest mobile operator Vodafone Group PLC''s ((VOD)) 45% stake in Verizon Wireless for about $48 billion. The total deal value will be $56 billion, including $8 billion debt.

Target Corp, ((TGT)), merchandise discount stores operators, reported its Q1 profit advanced to 63 cents a share, from 55 cents a share on 12.1% revenue growth and same-store sales advancing 5.1%. The company missed analysts’ expectations by a penny

HealthSouth Corp, ((HLSH)), health-care-services provider, reported Q1 net loss broadened to $1.09 a share, against 65 cents a share in the year-ago period on 6.7% lower revenue. The net loss broadened to $435.1 million from $258.2 million. The loss from continuing operations came to $1.06 against 61 cents. Revenue dropped to $792 million from $848.6 million.

Valor Communications Group Inc, ((VCG)), telecommunications services company, reversed to a Q1 net profit of 23 cents a share, up from a net loss of 28 cents a share a year ago. Sales declined to $125.6 million from $125.9 million a year ago. The company said it's on track to complete its merger with Alltel Wireline in July.

Proliance International Inc, ((PLI)), maker of heat exchange and temperature control products, reported that it lost 33 cents a share in Q1, down from a profit of 35 cents a share a year ago. Net sales came to of $91.34 million, up from $48.31 million in the comparable period last year. A year ago, the company reported a $3.9 million advance on the sale of discontinued operations.

PFSweb Inc, ((PFSW)), business software and services firm, reported that Q1 net loss broadened to 5 cents a share, from a penny a share in the year-earlier period. The company added that revenue rose to $110.7 million from $81.9 million. If not for items, the company would have earned 2 cents a share.


[R]8:00 AM Ernst & Young withdrew a report on China’s banks’ loans.[/R]
Ernst & Young, international accounting company, declared a report on China’s banks’ loans invalid as upon further research, the firm found that the data provided were factually erroneous.

Ernst & Young had earlier issued a report suggesting that China’s banks had accumulated bad loans for up to $911 billion, but having revised the figures, the firm stated that this number cannot be supported. The Ernst & Young report put the amount of nonperforming loans held by the ‘Big Four’ state banks at $385 billion. Two of those banks, the Bank of China and the Industrial and Commercial Bank of China are planning to sell shares to international investors in massive initial public offerings in Hong Kong. China's official estimate of the amount of nonperforming loans held by its four big state banks is $133 billion. The figure is much lower than in past years due to massive write-offs of bad loans left over from years of lending to insolvent state industries and economically unsound construction projects.

The yuan's official rate was set at 7.9982 yuan per dollar Monday morning, breaking through the psychologically important level of 8.0 yuan for the first time in more than a decade. Traders consider that this move might signal Beijing's willingness to allow its currency to appreciate faster.

[R]7:30 AM Asian shares closed down led by Nikkei.[/R]
Asian benchmarks finished lower Monday with Japan’s Nikkei down for the fifth consecutive session, losing 199.52 points down, or 1.2% to close at 16,402.26 with significant drops in brokerage and export shares. Automakers led the decliners with Honda Motor down 2.6% and Toyota Motor slipping 2.2%. Shares of Softbank rose 3.9% on the news that the internet company was developing new products together with Apple. South Korea's Kospi index was the biggest loser, dropping as much as 2.6%. Hong Kong's Hang Seng Index slipped as much as 1.8% to 16,595.58. The Shanghai Composite Index beat the trend, advancing 2.6% to a two-year high after the yuan passed the eight-per-dollar mark on Monday. On Friday, the benchmark which tracks both A and B shares, rallied 4.2%, totaling a weekly advance of 11.3%.


[R]6:30AM Europe tumbles in early trading on inflation and interest rates.[/R]
European markets extended their losses in early trading, following worrisome news about the continuing rise of commodity prices and their impact on equity stocks. London’s FTSE 100 shed 1% in early trading, Frankfurt’s Xetra Dax slid 0.9 %, the French CAC 40 declined 1.1%. Oil stocks dropped in Europe following the fall in crude prices due to reports that the surging energy costs would affect global demand and consumer sentiment. Norway’s Statoil fell 2.9 %, Total in France edged 1% down, and Repsol in Spain lost 1%. Financial stocks were also hit on fears of rising interest rates. France’s CNP Insurances fell 3.6% and Allied Irish Bank declined 2.8%.

Oil continued its decline as IEA on Friday outlined the risk of soaring energy costs hitting consumption. Light crude fell $1.19 to $70.85 a barrel by 3:34 a.m. EST, London Brent crude shed $1.48 to $70.84. Precious metals also fell, with gold losing $21.80 to $692.50 an ounce. The dollar reversed the losing streak of few days in the early trading on Monday, gaining ground on the euro and the yen due to the declining commodity futures such as gold and oil. The euro bought $1.2842, down from $1.2898 late Friday. The dollar edged up against the yen, standing at 110.21 yen from 109.95 yen in late Friday trading.