Weak European Close

Elena
24 May, 2006
Frankfurt

European markets closed in the negative, reflecting significant weakness among industrial, mining and airline stocks. Weakening dollar hurt shares of industrial exporters like Siemens and Sweden

[R]12:30PM European markets finished in the red.[/R]
European markets moved steeply to the downside Wednesday, underperforming other regions. Stocks closed in the negative, reflecting significant weakness among industrial, mining and airline stocks. Weakening dollar hurt shares of industrial exporters like Siemens and Sweden’s SKF. Sharp swings in metals prices sent miners like Rio Tinto and BHP Billiton lower. European airlines declined on bird-flu fears, with Deutsche Lufthansa leading decliners, down 2.8%, followed by British Airways and Air France-KLM. The German DAX 30 plunged 1.6%, the French CAC 40 slipped 1.3%, and London FTSE 100 tumbled 1.6%.

Oil prices retreated after a weekly petroleum report showed increasing gasoline stockpiles and flat demand. Light crude July delivery lost 81 cents to $70.95 a barrel. London Brent crude dropped $1 to $70. Gasoline fell 4 cents to $2.0065 a gallon. Natural gas slipped 17 cents to $6.09 per 1,000 cubic feet. European gold prices declined Wednesday. In London the precious metal fell to $642.25 an ounce from $666.75. In Zurich gold traded at $642.75, down from $669.30. In London silver fell to $12 from $12.40. The dollar advanced in European trading. The euro traded at $1.2761, down from $1.2861. The dollar bought 112.67 yen, up from 111.32. The British pound stood at $1.8659, down from $1.8843.


[R]11:30AM Stocks traded higher on easing inflation worries.[/R]
The three major averages moved firmly into the positive, reflecting some bargain hunting and optimism that the Fed Reserve will stop raising interest rates. After showing some weakness in early trading, housing stocks moved notably higher, leading the Philadelphia Housing Sector Index up 1.1% on the heels of the Commerce Department''s report on new home sales in April. The semiconductor sector also posted significant strength, supported by notable gains for Altera ((ALTR)) and Applied Materials ((AMAT)). The Philadelphia Semiconductor Index was up 0.8%. Oil service stocks reversed from early losses, benefiting from an increase in the price of oil. Crude oil prices rose after an inventory report showed a much steeper-than-expected decline in U.S. crude oil inventories. At the same time, gold stocks showed significant weakness as the price of the precious metal sharply dropped, with gold for June delivery down $29.70 at $644 an ounce. The Amex Gold Bugs Index was down 2.6%. Most other metal prices also moved lower, contributing to weakness throughout the metal sector. Among individual stocks, General Motors ((GM)) was one of the best Dow’s performances, rising 6.9% after Merrill Lynch upgraded its rating on the auto maker to Buy from Neutral. Vonage Holdings Corp. ((VG)) slipped in its trading debut after the company set its IPO at $17 a piece, the midpoint of its expected price range. Vonage was down $2.47 at $14.53.

[R]Crude oil inventories declined, while gasoline stockpiles rose.[/R]
Crude oil inventories fell in the latest week, according to government statistics released Wednesday. The slide accelerated a decline posted in the previous period. Meanwhile, stocks of gasoline pushed further higher, building on a recent streak of gains. The Department of Energy''s Energy Information Administration revealed that crude oil inventories dropped by 3 million barrels for the week ended May 19. Specifically, the measure slipped to 343.9 million barrels from the prior week''s level of 346.9 million barrels. The move in the latest period added to a decline during the previous week of 100,000 barrels. That slide was preceded by a gain of 300,000 barrels in the prior week and an advance of 1.7 million barrels in the week before that. In the most recent week, oil inventories were 3.6% higher than their levels of the same time last year. Gasoline inventories posted a week-over-week advance of 2.1 million barrels, the government said. This followed an advance of 1.3 million barrels in the previous week. In the latest period, gasoline stocks were 2.8% below their levels of last year. Inventories of distillate fuel oil recorded an advance in the most recent week, climbing by 2.5 million barrels. This followed a decline of 100,000 barrels in the previous week.

[R]April new home sales posted growth.[/R]
The Department of Commerce released its report on new home sales in month of April on Wednesday, showing that new home sales rose compared to a significantly downwardly revised reading for March. The report showed that new home sales rose 4.9 percent to a seasonally adjusted annual rate of 1.198 million units in April from a downwardly revised rate of 1.142 million units in March. Economists had been expecting new home sales to fall to a 1.150 million unit rate from the 1.213 million unit rate originally reported for March. The increase in new homes sales was partly due to notable growth in the Northeast and South. Sales in the West showed a more modest increase while sales in Midwest fell slightly. The report also showed that the seasonally adjusted estimate of new houses for sale at the end of April was 565,000, representing a supply of 5.8 months at the current sales rate.


[R]10:30AM Indian Sensex fell 250 points amidst heavy volatile trading.[/R]
Sensex in India declined 249.63 points or 2.3% to close at 10,573.15. The turnover on BSE was $747 million or Rs 3,739 crore, down from Thursday’s $760 million or Rs 3,820 crore. The market breadth was positive until intra-day, but later weakened. 1,380 stocks fell compared to 1,065 stocks that advanced. ONGC lost almost 7% to Rs 1,153. Housing company HDFC also dived 7% to Rs 1,151 and metal stocks, soaring in the first half of the trading session, swung completely in the later hours. Tata Steel gave up 6.5% Sterlite Industries was down 4.6% to Rs 383 and Hindalco lost 4.4% to Rs 182.60. Auto stocks also declined. M&M plummeted 8% to Rs 565 and Maruti Udyog declined 6.6% to Rs 749. Baja Auto was down 4.9% to Rs 2,835, while Hero Honda lost 2.7% to Rs 771. Tat Motors declined 2.7% to Rs 760.

Earlier Tata Motors ((TTM)) reported fiscal fourth quarter earnings rise of 17% to Rs. 458 crores or $101 million on 28% rise in revenue to Rs. 6,880 crores or $1.53 billion. The company sold 148,159 trucks in the quarter up 23% from a year ago and 454,345 trucks up 14% from a year ago. The largest truck maker is also third largest automaker in India trailing only Japanese joint venture Maruti Udyog and South Korean maker Hyundai Motors. The company plans to launch a mini-car for a cost of less than $2,200 or Rs, 100,000 in the year 2008. The stock has declined more than 30% from its peak in trading on New York Stock Exchange. Heavyweight Reliance Industries also declined 3% to Rs 940.20 and software giant Infosys lost 2.4% to Rs 2,849. Among other companies that declined were Ranbaxy, shedding 2.5% to Rs 434.90.

Several small cap companies managed to soar. Among them were Panacea Biotech, Micro Tech, Auto Corporation of Goa, Manugraph Industries, Gujarat NRE Coke, and Rama Newsprint advancing between 7% and 17% in the session. Construction stocks were under selling pressure. Punj Lloyd plummeted nearly 9% to Rs 855, Gammon India lost 7.8% to Rs 450, Jaiprakash Associates shed 5.9% to Rs 433, and Hindustan Construction shed 5.9% to Rs 136.40. Patel Engineering lost 5% to close at Rs. 420.


[R] 9:45AM Stocks were weak in early trading.[/R]
U.S stocks opened modestly higher Wednesday, but shortly after the open the major averages turned lower, pulling back below the unchanged line. A rebound in oil and gold prices initially lifted the market, but renewed inflation jitters triggered broad selling. Market extended recent losses, despite a steep drop in durable goods orders that fed hopes that the Federal Reserve may soon stop raising interest rates. The Commerce Department said orders for big-ticket manufacturer items slipped 4.8% in April, much deeper than the 0.5% drop forecast by economists. The nervousness over inflation and interest rates also overshadowed a broker''s upgrade of General Motors Corp ((GM)), as well as lower oil and gold prices. In the first hour of trading, the Dow Jones industrial average dropped 18.49, or 0.17%. The Standard & Poor''s 500 index was down 3.05, or 0.24%, and the Nasdaq composite index rose 0.02%. The downbeat economic data gave the bond market confidence that the Fed won''t keep boosting interest rates. The yield on the 10-year Treasury note fell to 5% from 5.03% late Tuesday.


[R]April durable goods orders steeply dropped.[/R]
Wednesday morning, the Department of Commerce released its report on durable goods orders in the month of April. The report showed that orders fell much more than economists had expected. The report showed new orders for durable goods fell 4.8 percent in April following a 6.6 percent increase in March. The decrease was much steeper than the modest 0.5 percent decline that economists had been expecting. The steep drop in durable goods orders was due in large part to a significant drop in orders for transportation equipment, which fell 12.7 percent in April after rising 13.9 percent in March. Excluding transportation, durable goods orders fell by a more modest 1.1 percent. The report also showed that shipments of durable goods fell 0.9 percent in April following a 0.3 percent increase in March. Shipments of transportation equipment fell 3.2 percent.


[R]9:00AM Stock futures pointed to a flat start on commodities sell-off.[/R]
U.S. stock futures pointed to a market opening near the flat line as a renewed sell-off of oil, gold and other commodity stocks pressured shares of energy and metals companies. A suspected case of human-to-human transmission of bird flu in Indonesia also put investors on edge, but lifted shares of biotechnology companies, including Gilead Sciences Inc ((GILD)). At the same time, Dow component General Motors Corp. ((GM)) rose more than 3% in pre-market trading after Merrill Lynch upgraded its rating to ‘buy’ from ''neutral''. Shares of medical device maker Medtronic ((MDT)) are expected to be in the spotlight as the company reported a sharply higher Q4 profit and raised its guidance for fiscal year 2007. Shares of Whirlpool ((WHR)) could see some early weakness after the company lowered its full-year guidance to reflect the integration of Maytag. S&P 500 futures were up 2.30 points, but below fair value. Dow Jones industrial average futures increased 25 points, and Nasdaq 100 futures were up 0.25 point.

Eaton Vance Corp., ((EV)), asset manager, reported fiscal Q2 earnings advanced 23% from the year-ago period to 29 cents a share, missing analysts’ forecasts for a profit of 32 cents a share.

Payless ShoeSource Inc, ((PSS)), retailer, reported Q1 net income advanced 19% to 53 cents a share, from 45 cents in the year-earlier period despite revenue decline, topping analysts’ estimates for earnings of 40 cents a share.

Dollar Tree Stores Inc, ((DLTR)), retailer, reported that Q1 income advanced to 31 cents a share, from 26 cents a year earlier on sales and same-store sales growth. The company topped analysts’ views by a penny.

Delek U.S. Holdings, ((DK)), petroleum refining and supply and on retail marketing company, reported Q1 net income advanced to 33 cents a share, from break-even in the year-earlier period. Sales soared 188%. The company launched its IPO at $16 a share on May 4.

AutoZone Inc, ((AZO)), automotive parts retailer, reported Q3 earnings of $144.4 million, or $1.89 a share, down from a profit of $147.8 million, or $1.86 a share a year-earlier. The per share figure in Q3 was higher because the number of outstanding shares fell compared to the year-ago period. On an adjusted basis, outside stock option expensing, the company earned $1.92 a share in Q3 on 5.9% sales growth and 2.1% same-store sales growth. The company missed analysts’ estimate for a profit of $1.95 a share.

Williams-Sonoma, ((WSM)), home products retailer, reported Q1 net income fell 12% to 20 cents a share, despite 10% revenue growth. Q1 included 6 cents a share in charges for new accounting measures and for the Hold Everything consolidation, the company announced. The company beat analysts’ views for earnings of 17 cents a share. The group lowered its Q2 guidance, now seeing earnings outside charges between 27 and 29 cents a share, which is a reduction of two cents a share.


[R]8:00AM Newspaper publisher McClatchy agreed to sell two papers for $562 million.[/R]
Newspaper publisher McClatchy Co. ((MNI)) agreed to sell the Philadelphia Inquirer and the Philadelphia Daily News to Philadelphia Media Holdings LLC, a group of local investors, for $562 million. McClatchy will receive $515 million in cash, and the investment group, Philadelphia Media Holdings, will assume $47 million in pension liabilities.

The transaction is expected to close in summer. At around the same time McClatchy''s $6.5 billion acquisition of Knight Ridder Inc. ((KRI)) is expected to be completed, a deal which will make McClatchy the second-largest U.S. newspaper publisher. The sale of the two papers is part of McClatchy''s plan to divest 12 of 32 newspapers it bought from Knight Ridder for about $4.5 billion plus the assumption of $2 billion of debt. Last month, the company agreed to sell the San Jose Mercury News and the Contra Costa Times to Dean Singleton''s MediaNews Group, and to sell the Monterey Herald and the St. Paul Pioneer Press to Hearst Corp. The four papers are selling for a total of $1 billion in cash.

The new owners of Philadelphia''s two major daily newspapers will have to solve two major problems- reversing circulation declines and shrinking profits at a time when Philadelphia Media Holdings LLC doesn’t consider cutting jobs. As publicly traded companies, newspaper conglomerates Knight Ridder and McClatchy have to answer to shareholders’ expectations of a better return for their money. The local investors hope to boost business by emphasizing local news and doing more with the Internet. The deal returns the Philadelphia papers to private ownership for the first time since 1969.


[R]7:30AM Japanese benchmark Nikkei rose while Hong Kong’s Hang Seng fell.[/R]
Asian markets finished mixed. The benchmark Nikkei 225 index advanced 308.00 points, or almost 2%, to close at 15907.20. Canon and Toyota Motor were among the gainers. Canon was 2.1% and Toyota Motor closed 3.2% higher. Real-estate also advanced as Sumitomo Realty & Development jumped 2.9%. Refiner shares also gained, with Nippon Oil advancing 2% and Inpex Holdings soaring 6.8%. Hong Kong shares closed lower,as the blue-chip Hang Seng dropped 41.92 points, or 0.3%, to close at 15822.64. China Mobile, the second-largest component of the benchmark was down 1.7%. Taiwan shares closed 0.5% up at 6877.01, with nontechnology stocks leading gains. Cathay Real Estate Development jumped 5.2%, and Goldsun Development & Construction surged by the daily limit of 7%. Australia''''s benchmark S&P/ASX 200 finished 23.9 points higher, or 0.5%, at 5037.7 points. The South Korea’s Kospi finished up 0.3%, or 3.52 points, at 1333.38. South Korean Hyundai Engineering & Construction soared 6%. Its creditors announced that they have ended its debt-restructuring program before schedule, and plan to start selling their stakes around July.


[R]6:30AM European bourses off to a lower start on Wednesday.[/R]
European stocks started sharply lower on Wednesday. It was a day of merger and acquisition steps with some deals started to unravel. Deutsche Börse must hold a meeting in the wake of Euronext refusal to its latest offer. The New York’s bid is lower than that of Deutsche Börse but Euronext has its eyes on the bigger board as it seems to present better opportunities. Borsa Italiana will also start talks with Euronext of a possible deal. In other news, OMV soared 8.9% in early trade after the Austrian oil company its merger with Verbund was stopped by the government because of political resistance from the country provinces. ThyssenKrupp, the German engineering conglomerate stated its willingness to buy Japanese elevator company Hitachi, offering almost double of its global market share.

Oil prices lost momentum on Wednesday ahead of weekly U.S. inventory data and an international meeting on Iran''''s nuclear program. Crude oil was trading down 48 cents at $71.28 a barrel and London July Brent crude oil shed 42 cents to $70.58. Gold traded lower in a narrow band on Wednesday, ttracing movements in the dollar and following closely oil prices. Spot gold was quoted at $668.20/669.00 an ounce by 0952 GMT. The dollar gained against the euro.The euro bought $1.2792 in early European trading, down from $1.2861 in New York late Tuesday. The British pound slipped to $1.8778 from $1.8843. Against the Japanese currency, the dollar advanced to 112.28 yen from 111.32 yen.