Europe Rallies on Commodities

Elena
23 May, 2006
Frankfurt

European markets recuperated from steep losses yesterday to close sharply higher Tuesday, lifted by mining and energy companies, as well as technology stocks. Miners like BHP Billiton, Rio Tinto and oil giants like BP and Royal Dutch Shell advanced on higher commodities prices. The German DAX 30 surged 2.4%, the French CAC 40 rallied 2.5%, and London FTSE 100 climbed 2.6%.

[R]12:30PM European markets closed sharply higher.[/R]
European markets recuperated from steep losses yesterday to close sharply higher Tuesday, lifted by mining and energy companies, as well as technology stocks. A rebound in commodities prices provided a boost to miners like BHP Billiton, Rio Tinto and oil giants like BP and Royal Dutch Shell. The leading advancer among tech stocks was Dutch chip-equipment maker ASML Holding, which rose 7% on expectations that Q2 orders will be at least 40% higher than the first quarter. The German DAX 30 surged 2.4%, the French CAC 40 rallied 2.5%, and London FTSE 100 climbed 2.6%.

Oil recovered from recent sell-off with rebounding commodities prices and approaching hurricane season. Light crude climbed $1.29 to $71.25 a barrel. London Brent crude rose $1.30 to $70.65. European gold prices reversed from declines to close higher. In London the precious metal rose to $661.70 an ounce from $652.10. In Zurich gold traded at $669.30, up from $651.45. In London silver fell to $12.30 from $12.70. The dollar traded mixed in European trading. The euro traded at $1.2851, down from $1.2870. The dollar bought 111.18 yen, down from 111.28. The British pound stood at $1.8829, down from $1.8872.


[R]11:30AM Stocks traded higher on commodities.[/R]
Stocks posted a strong performance Tuesday morning, boosted by solid gains in commodities stocks. Reversing from recent losses, gold stocks showed a notable upward move in morning trading, benefiting from a significant increase in the price of the precious metal, with gold for June delivery up $12.60 to $670.30 an ounce The Amex Gold Bugs Index rose 4.4%. Other metal prices moved higher along with the price of gold, contributing to strength throughout the metal sector.
Energy stocks showed considerable strength amid a notable increase in the price of oil, up $1.54 to $71.50. The Philadelphia Oil Service Index rose 3.2%, while the Amex Oil Index was up 2.9%.

Housing stocks also posted significant gains, supported by 5.6% gain for Toll Brothers ((TOL)) after the company reported better-than-expected Q2 earnings, although it also lowered its 2006 guidance. Brokerage, networking, and transportation stocks also contributed to the strength in the broader markets. Among transportation stocks, Landstar ((LSTR)) rose 4.3% following a brokerage upgrade. Among other stocks, Goodyear Tire ((GT)), tire maker, advanced 4.4% after Deutsche Bank upgraded its rating on the company''s stock to hold from sell, citing valuations. In late morning trading, the Dow Jones industrial average gained 52.50, or 0.47%. The Standard & Poor''s 500 index was up 8.91, or 0.71%; the Nasdaq composite index rose 20.58, or 0.95%. Bonds pulled back, with the yield on the 10-year Treasury note rising to 5.07% from 5.04% late Monday.


[R]10:30AM Indian market recovers after a three-day streak of losses.[/R]
Indian Sensex closed the trading session up 341.01 points, or 3.25%, at 10,822.78. The turnover on BSE totaled $860 million or Rs 3,808 crore and the market breadth was positive, as 1,424 stocks gained and 985 declined. Steel shares led the gainers. Steel Authority of India was the top advancer, climbing 14% to Rs 76.40 on 4.44 million shares. Bushan Steel & Strips was up16.80% to Rs 206, Lloyds steel jumped 19.95% to Rs 12.03. Tata Steel gained 8.52% to Rs 513.10 on 2 million shares. Reliance Industries advanced 3.40% to Rs 963, as the company released a rise in the price of diesel by Rs 2 per liter. Grasim Industries soared 9.40% to Rs 1,922 and NTPC surged 5.55% to Rs 118. Wipro advanced 9.60% to Rs 482, while Tata Power gained 8.82% to Rs 555.

R Systems International, banking software developer, soared 20% to Rs 173.40, after the company said that it intend to buy a tech support company in the U.S. for $107 million. The company R Sytstems has offices in India and California. SFEI Infrastructure Finance advanced 3.3% to Rs 53.25, supported by a strong quarterly report of 56.2% growth. Sun Pharma advanced 4.40% to Rs 845, following the US FDA approval for its medicine for nausea prevention. Lupin also advanced 4.35% to Rs 1,090. There were few losers. Among them were Dr Reddy’s declining 2% to Rs 1,413 while Hero Honda shed 1.80% to Rs 800.


[R] 9:45AM Stocks opened higher on rebounding commodities prices.[/R]
U.S. stocks advanced at opening, reflecting strong quarterly earnings from luxury homebuilder Toll Brothers ((TOL)) and an increase in commodities prices, which lifted the energy and mining sectors. Rebounding commodities prices also supported stocks in markets in emerging companies. The gold sector advanced in early trading, as an increase by the price of the precious metal led traders to do some bargain hunting. Gold for June delivery rose $9.70 to $667.50 an ounce. The Amex Gold Bugs Index was up 4%. Similarly, an increase in the price of oil sent energy stocks higher. Oil prices crossed over $70 with approaching hurricane season raising worries about another round of devastation of Gulf Coast facilities. The housing sector showed visible strength, helped by Toll Brothers which reported better-than-expected Q2 earnings. The Philadelphia Housing Sector Index rose 1.6%. The brokerage, networking, and transportation sectors also contributed to the general market strength. With no new economic data due out on Tuesday, investors were awaiting congressional testimony from Federal Reserve Chairman Ben Bernanke for clues about the central bank''s plan for interest rates. In the first hour of trading, the Dow Jones industrial average gained 68.83, or 0.62%.The Standard & Poor''s 500 index was up 9.08, or 0.72%, and the Nasdaq composite index rose 23.92, or 1.1%. Bonds pulled back, with the yield on the 10-year Treasury note rising to 5.07% from 5.04% late Monday.


[R]9:00AM Toll Brothers cut its full-year outlook.[/R]
U.S. stock futures indicated a lower opening, affected by homebuilder Toll Brothers which cut its full-year earnings guidance. Dow industrials futures were up 39 points, Nasdaq futures added 6.5 points and S&P 500 futures gained 5.3 points. Luxury homebuilder Toll Brothers ((TOL)) cut its 2006 earnings guidance, while reporting a 3% rise in Q2 net income to $174.9 million, or $1.06 a share, beating estimates of $1.03. Revenue rose 17% and the company''s quarter-end backlog rose 3%. Toll Brothers said due to higher material and labor costs, it would report 2006 earnings per share in a range of $4.69 to $5.16, down from previously expected earnings in a range of $4.77 to $5.26 a share. Perry Ellis International ((PERY)) reported Q1 net income of $5.91 million, or 59 cents a share, compared with net income of $8.89 million, or 89 cents a share a year ago. The quarterly results exceeded expectations of 75 cents a share. The clothing design company reported quarterly revenue of $214 million, down from $225.6 million. In broker news, Deutsche Bank upgraded Goodyear Tire & Rubber to hold from sell, citing valuation.

Sycamore Networks, ((SCMR)), optical networking company, reported Q3 earnings of 4 cents a share, up from a loss of 4 cents a share a year-ago. On a non-GAAP or operating basis, the company earned 4 cents a share in Q3. Revenue advanced in Q1 to $22.9 million from $17.8 million in the same period a year ago. The company beat analysts’ estimate by a penny. Sycamore Networks announced that its profit in Q3 improved margins and lowered expenses. The company also said it has been informed that the Securities and Exchange Commission has started a formal investigation related to company stock option grants in the calendar years 1999 through 2001 and noted that it has completed an independent probe of this matter, resulting in a restatement of its financial results for the fiscal years 2000 through 2004, and said it plans to cooperate fully with the SEC on the matter.

Monro Muffler Brake Inc., ((MNRO)), provider of automotive undercar repair, reported Q4 earnings of 21 cents a share, up from a profit of 19 cents a share a year-ago. If not for a charge from stock-based compensation, the company posted a profit of 23 cents a share. Sales advanced 8.8% in Q4 to $88.3 million from $81.1 million in the same period a year ago and same-store sales slid 0.4%. The company met analysts’ estimate for a profit of 23 cents a share.

CBRL Group Inc., ((CBRL)), operator of restaurants, reported that Q3 income dropped to 47 cents a share, from 52 cents a year earlier. If not for charges for stock-option expense, asset impairment and other items, earnings would have been 59 cents a share. Revenue advanced to $644.2 million from $628 million a year ago. Excluding items the company topped analysts’ forecasts for earnings of 50 cents a share.

Tech Data Corp, ((TECD)), distributor of information technology products, reported Q1 earnings of 23 cents a share, down from a profit of 56 cents a share a year-ago. On a non-GAAP basis, aside from restructuring charges and consulting costs, the company earned 39 cents a share. On a non-GAAP continuing operations basis, aside from a $3.8 million gain from the sale of its training business for the Europe, Middle East and Africa region as well as $100,000 in income from the business, the company earned 32 cents a share in Q1. Sales shed 2.4% in Q1. The company topped analyst estimate of analysts for a profit of 32 cents a share on a non-GAAP basis.

Toll Brothers Inc, ((TOL)), luxury home builder, reported that Q2 earnings advanced to $1.06 per share, up from $1.00 per share a year ago on higher pricing, beating analysts’ expectations for a profit of $1.03 per share. The company lowered its earnings forecast for the fiscal year, a further sign of the slowing U.S. housing market.


[R]8:00AM Euronext declined an $11 billion bid from Deutsche Boerse.[/R] Euronext declined an $11 billion takeover offer from Deutsche Boerse. The European stock-exchange operator said that the new details of the bid were misleading and said that the $10.2 billion offer by the New York Stock Exchange remained more attractive. Euronext said that was ‘misleading, because the proposal is based on the three-month, volume-weighted moving average prior to the signing of a (merger) agreement. ‘The company said Monday that the NYSE Group Inc.''s cash-and-share bid was the ’most attractive combination’ on the table. Chairman Jan-Michael Hessels confirmed at the meeting Tuesday that after a brief review of the offers, the boards consider that the NYSE offers the most attractive option.

The plan from Deutsche Boerse, operating the Frankfurt stock exchange, would include 870 million euros ($1.11 billion) in cash for Euronext shareholders, lower than the 2.4 billion euros ($3 billion) cash element of the NYSE offer. Deutsche Boerse''s overall offer was worth 76.60 euros ($97.84) per Euronext share at Monday''s closing prices, or 10.2% above NYSE''s bid. Deutsche Boerse has proposed folding itself and Euronext into a new company based in Frankfurt. ‘Deutsche Boerse strongly believes that this transaction represents the most attractive combination for shareholders, customers and the financial centers involved,’ the German exchange said in a statement. Deutsche Boerse also said it had identified savings, including in information technology, and revenue gains of about 300 million euros ($383 million) for the merged company and would pass on about 60 million euros ($77 million) of that to customers.

But the NYSE won Euronext''s support for its 8 billion euro ($10.2 billion) offer that the U.S.-based exchange said would create ''the world''s largest and most liquid global securities marketplace ''with combined listings of $27 trillion. Deutsche Boerse shares rose 0.8% to 101.90 euros ($130.19) in Frankfurt, while Euronext shares gained 2.9% to 69.50 euros ($88.79) in Paris.


[R]7:30 AM Asian Markets close mixed. Japanese Nikkei slumps.[/R]
Asian markets closed mixed. Japanese benchmark, Nikkei 225 Average plunged on weak financial stocks, especially at the world''s biggest bank by assets, Mitsubishi UFJ Financial Group Inc., which declined 6.1% after releasing a guidance predicting a decline in 2006 profit. Japan''s No. 2 lender Mizuho Financial shed 4.8%. South Korean benchmark Kospi index edged 0.7% lower. Singapore bucked the downtrend to advance 0.53%. The late rally also boosted Jakarta''s Composite Index 1.32% and Kuala Lumpur which was up 0.11%. Australia S&P/ASX 200 dropped 0.3% while Hong Kong''s Hang Seng Index advanced 0.37%. Hong Kong’s oil companies advanced, after Monday''s sharp declines. Australia’s leading blue chips declined on continuing anxiety and volatility in commodity markets, with opinion split on whether the washout had come to an end.


[R]6:30AM European stocks bounce back on bargain hunting.[/R]
On the corporate front in early trading, Statoil, the Norwegian oil producer, advanced 4.6%, and Norsk Hydro, oil and metal corporation, edged 4% up. Likewise, Saipem, Italian oilfield group, climbed 3.3% and Atlas Copco, Swedish toolmaker advanced 4.4%. Euronext, European stock exchange operator, added 3.5% up, in the wake of Deutsche Börse, its peer, revealing a cash and stock merger plan. Technology stocks also performed well, ASML, Dutch maker of memory chips, climbed 5.1% and Telenor, Norwegian telecom, gained 2.7%.

Crude oil for July delivery advanced 34 cents to $70.30 a barrel and London July Brent gained 35 cents at $69.70. Gold hit a high of $663.30 an ounce and was quoted at $661.50/652.30. The dollar gained against the euro. The euro bought $1.2834, lower than $1.2864 late Monday. The British pound slipped to $1.8821 from US$1.8863 on Monday, though the dollar edged down to 111.44 Japanese yen from 111.50.