World Markets Decline

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

Worries of inflation, interest rate uncertainty and rising prices of oil and commodities took market averages down around the world. In the overnight trading Asia declined led by a fall in Thailand and Korea. In Europe averages closed lower across the region as eight of the twelve major markets declined. Latin American markets closed lower led by a sharp decline of 4% in Brazil. Russia closed 1% lower.

[R]4:30PM Market averages lost between 1.7% and 2% in the session.[/R]

-Dow declined 183.86 points, Nasdaq lost 45.65 and S&P 500 traded lower 20.24.
-Yield on 10-year bond closed at 5.08% and on 30-year bond closed at 5.19%
-Crude oil closed up 66 cents to $72.03 per barrel.
-Gold advanced $12 but settled at $2.90 higher to $653.90 per ounce.

Market averages slid in the last thirty minutes of trading dragging tech heavy Nasdaq down 2.1% and large cap index Dow and S&P down 1.7% near close. Markets around the world fell as investors worried about the direction of interest rates in the U.S., rising commodities and crude oil prices. President appointed Goldman Sachs’s CEO Henry Paulson as the next Treasury secretary of the U.S. succeeding John Snow. Mr. Snow’s resignation has been widely rumored in the media in the last one month. Market did not pay much attention to the appointment and headed south as stocks in the banking, transportation and tech sectors declined. Markets in Europe lost at least 2% or more and in the emerging economies lost between 1% in Asia and 4% in Brazil.

[R]3:30PM Bovespa index in Sao Paolo lost 4%.[/R]
Brazil main index lost 4% on worries of rising interest rates and capital leaving its financial market. Market main average Bovespa is trading lower 1,520 points to 36,624 and dragging with it index in Argentina by 3.4% and in Mexico 3%. Brazil index had risen close to 42,000 and gained 90% in the last 12 months. The index is still up 10% from the beginning of the year. Of the fifty five stock in the index 53 declined and 2 were unchanged as market closed. Brazilian Central Bank Monetary Policy Committee is to meet this Wednesday to cut widely anticipated cut in base lending rate known as Selic. Market will also receive first quarter GDP read on Wednesday. Largest flat steel manufacturing company in Brazil Usinas Sidurgicas lost 6% and iron ore miner CVRD ((RIO)) lost 2% on the news that Chinese companies have rejected 19% price hike proposed by the miner. Largest mobile telecom operator Vivo lost 9% on the downgrade from Merrill Lynch.

[R]2:30PM Market averages fall in the afternoon trading.[/R]
Market averages continue their negative bias in the afternoon trading. Nasdaq is down 1.5% and DOW and S&P 500 are down 1.3%. Market averages after rising for three days in a row are sliding again on rising oil and commodities prices. Stocks in publishing sector are trading higher as Tribune & Co. ((TRB)) reported that it plans to buyback 25% of its outstanding stocks and sell $500 million of its ‘non-core assets’. Crude oil price rose 1.5% and traded as high as 2% on jitters of supply and demand. Crude oil in the mid-afternoon trading traded at $72.20 per barrel. Gold price rose as $12 per ounce but settled at $2.90 to $653.90 per ounce. Silver rose 30 cents.

[R]12:30PM European markets plunged.[/R]
European stocks posted steep losses at close, reflecting speculations about further interest-rate increases and lower economic growth. Weakness on Wall Street also contributed to the downtrend as U.S. stocks were deeply hurt by sliding dollar, resurgent oil prices, and disappointing corporate news. European auto stocks like Volkswagen and BMW notably declined on the weaker dollar. EADS, the Airbus owner, showed a significant loss of 4.5%. A well-received strategy and buyback plan from mobile-phone giant Vodafone Group failed to offset declines. The German DAX 30 dropped 2.3%, the French CAC 40 slid 2.4%, and London FTSE 100 tumbled 2.4%.

Oil climbed ahead of OPEC meeting in Venezuela and the hurricane season. Light crude July delivery gained 90 cents to $72.27 a barrel. London Brent crude gained 78 cents to $71.37. Gasoline added 5 cents to $2.1850 a gallon, while heating oil was unchanged at $1.9895. Natural gas futures rose 14 cents to $6.185 per 1,000 cubic feet The dollar dropped in European trading. The euro traded at $1.2894, up from $1.2741. The dollar bought 111.79 yen, down from 112.40. The British pound stood at $1.8845, up from $1.8594.

[R]11:30AM Stocks extended losses on resurgent oil prices.[/R]
Stocks came under pressure Tuesday, reflecting profit taking, lower-than-expected same-store sales from Wal-Mart and resurgent oil prices. The major averages moved into the negative with the Nasdaq down 1% and the Dow down more than 100 points. Dow component Wal-Mart ((WMT)) lost 2.3% after the retailer estimated May comparable store sales growth towards the low end of its previous guidance. The retail sector moved to the downside. The loss shown by the Dow was also contributed by a notable loss by General Motors ((GM)), which dropped 3.4% after Deutsche Bank downgraded its rating on the auto maker to Sell from Hold.

The brokerage sector was one of the market''s worst performances, with TD Ameritrade ((AMTD)), Lehman Brothers ((LEH)) and Legg Mason ((LM)) helping to lead the sector lower. The Amex Securities Broker/Dealer Index was down 1.7%. Shares of Goldman Sachs ((GS)) dropped 1.5% on news that the company''s Chairman and CEO Henry Paulson had been nominated to replace John Snow as Treasury Secretary. Airline stocks also moved to the downside on fears of higher fuel prices. The Amex Airline Index dropped 1.6%. Significant weakness was also visible in the disk drive sector, led by SanDisk ((SNDK)) which declined on negative comments. The Amex Disk Drive Index slipped 1.6%.

Among rising stocks, Kinder Morgan ((KMI)) rose 21%, helping to lead the natural gas sector higher after the company revealed that an investor group led by its Chairman and CEO offered to acquire the company for $100 per share in cash. Gold stocks showed notable gains, as reflected by the 2.4% rise shown by the Amex Gold Bugs Index.

[R]Consumer confidence fell less than expected.[/R]
The Conference Board released its report on consumer confidence in the month of May on Tuesday, showing that its consumer confidence index fell compared to the previous month. Nonetheless, the decline was not as steep as economists had been expecting. The report showed that the consumer confidence index fell to 103.2 in May from a revised 109.8 in April. Economists had expected the index to fall to a reading of 101.0 in May compared to the 109.2 originally reported for April. The decrease by the index reflected a deterioration in confidence about the present situation as well as about the outlook for the next six months, with the present situation index falling to 132.5 in May from 136.2 in April while the expectations index fell to 83.7 from 92.3.

The Conference Board said the percentage of consumers claiming that conditions are good fell to 28.0 from 29.7, while the percentage of those claiming conditions are bad rose to 15.4 from 15.1. Labor market conditions were also seen as less favorable. The report also showed that the percentage of consumer expecting business conditions to worsen increased to 13.2 from 9.3, while those expecting business conditions to improve fell to 16.5 percent from 17.3 percent. The outlook for the labor market was also less optimistic.

[R]10:30AM Indian Sensex plunges, dragged by auto and cement shares.[/R]
Sensex in India declined 66.51 points (0.6%) to finish at 10,786.63. The turnover on BSE was $750 million or Rs 3,208 crore higher than Monday’s $550 million or Rs 2,486 crore but still a long way from the $1 billion or Rs 5,000 crore its peak in the first week of May. The market breadth worsened in late trading when the large-caps weakened. 1,350 stocks declined on BSE, 1,098 advanced. Among the key decliners were Hero Honda diving 7.6% to Rs 780 on operating margins likely to be under heavy pressure in the current fiscal year and despite strong quarterly results. Other auto stocks also declined in sympathy. Tata Motors shed 5.8% to Rs 777, TVS Motor lost 4.8% to Rs 123.90, Maruti Udyog plunged 4.4% to Rs 756, and Bajaj Auto lost 1.9% to Rs 2,811. Metal shares lost as well in volatile trading. Aluminum maker, NALCO plummeted almost 8% to Rs 235, Sterlite Industries shed 3.3% to Rs 430 and Hindalco declined 2.3% to Rs 184. Tata Steel dipped 2.9% to Rs 544.60 and public sector steel giant SAIL was down 0.4% to Rs 84.40.

Cement shares plunged as ACC shed 3.3% to Rs 774, UltraTech Cement lost 4.5% to Rs 625, Gujarat Ambuja Cements declined 3% to Rs 94.80. Reliance Industries edged 1.1% down to Rs 945.75 after rising during the day. It had advanced up to 2% at one point of time in early afternoon trade, to notch a high of Rs 976.60 on heavy trading volume of 1.4 million shares. Second largest cement maker in Southern India, Madras Cement reported fourth quarter earnings rise of 42% to $7.5 million on revenue of $66 million (Rs 300 crores). For the fiscal year 2006 the company reported revenue and earnings rise of 36%. Total revenue for the year jumped to close $200 million or Rs 1,008 crores. The company is engaged in two separate expansion plans to add cement capacity of two million tons each in South Indian state of Tamil Nadu and Andhra Pradesh.

There were a few gainers. Titan Industries surged 4.4% to Rs 701 on trading volume of 1 million shares. Vishal Exports jumped 20% to Rs 6.64 and Jindal Steel & Power advanced almost 3% to Rs 1,789 on the news that it had been the sole company to bid for developing Bolivia’s largest iron ore mines. Freight and express mail delivery service company Blue Dart Express rose 3% to Rs 480 on the news that the company has added to Boeing air freighters to its fleet of aircrafts.

[R] 9:45AM Stocks opened steeply down.[/R]
U.S. stock markets opened in the negative, reflecting weaker-than-expected same-store sales for Wal-Mart, uncertainty about interest-rate hikes, and concerns over rising oil prices and sliding U.S. dollar. Investors turned to profit taking after three strong sessions in a row last week. Wal-Mart ((WMT)) led the Dow lower after the retailer said its May same-store sales are expected to be near the low end of its previous guidance. The stock dropped 2%. Another Dow component General Motors ((GM)) declined 3% after Deutsche Bank downgraded its rating on the auto maker to Sell from Hold.

Shares of Goldman Sachs ((GS)) fell 0.7% after Chief Executive and Chairman Henry Paulson was nominated to replace Treasury Secretary John Snow. In early trading, the disk drive, brokerage, and housing sectors posted weakness. Among disk drive stocks, SanDisk ((SNDK)) posted a significant loss following negative comments. In the first hour of trading, the Dow sank 56.11, or 0.5%. The Standard & Poor''s 500 index was down 4.95, or 0.39%, and the Nasdaq composite index dropped 11.22, or 0.51%. Bonds slipped, with the yield on the 10-year Treasury note edging up to 5.06% from 5.05% late Friday.

[R]9:00AM Stock futures were weak on Wal-Mart same-store sales.[/R]
After the long holiday weekend, the U.S. stock futures were pointing to a lower market opening, as Wal-Mart Stores Inc. posted lower same-store sales for May and concerns about interest rates increases weighed ahead of key economic data due out later in the week. S&P 500 futures were down 5 points, below fair value. Dow Jones industrial average futures were down 39 points, and Nasdaq 100 futures were down 8.75 points.

Wal-Mart ((WMT)) reported Saturday 2.3% same-store sales increase, the low end of its forecast, citing steep gasoline and utility prices. The world''s biggest retailer had forecast growth in the range of 2% to 4%. The FOMC minutes, due out on Wednesday, are expected to shed some light on the outlook for interest rates. In other corporate news, Deutsche Bank lowered its rating on General Motors Corp. ((GM)) to Sell from Hold, citing valuations. Shares of the car maker declined nearly 3%. Kinder Morgan ((KMI)) rose 22% in pre-market trading after the company revealed that an investor group led by its Chairman and CEO offered to acquire the company for $100 per share in cash.

Columbus McKinnon Corp((CMCO)), maker of material handling products, reported Q4 earnings of $2.53 a share, up from a profit of 56 cents a share a year-ago. Q4 includes a tax benefit gain of $38.6 million reflecting the reversal of a valuation allowance against deferred tax assets, primarily U.S. federal net operating loss carryforwards, and $600,000 in after-tax expenses related to debt refinancing activities. If not for items in both periods, the company posted a pro forma profit of 52 cents a share in Q4, up from a equivalent profit of 29 cents a share a year-ago. Sales advanced 1.8% in the period to $147.1 million from $144.5 million in the sametime a year ago. The company beat analysts’ estimate for a profit of 46 cents a share. The company also said it expects capital spending of between $8 million and $10 million in fiscal 2007.

Vodafone Group, ((VOD)), mobile operator, reported it lost 17.23 billion pounds ($32 billion) in the year ending March 31 from continuing operations, hurt by write-downs to its German and Italian businesses, while revenue advanced 10% to 29.35 billion pounds. The company added it will return 9 billion pounds ($16.7 billion) to shareholders in August, with 6 billion pounds coming from the sale of its Japanese operations.

Bombardier, aerospace and transportation company, reported Q1 net income dropped 56% to a penny a share, from 3 cents a share in the year-ago period on 6.1% revenue decline. Earnings from continuing operations before special items came to 2 cents against a penny. Revenue dropped to $3.53 billion from $3.76 billion.

[R]7:30AM Asian stocks closed generally lower.[/R]
Asian markets closed broadly down. Japan’s benchmark Nikkei 225 index dropped 56.23 points, or 0.4%, to close at 15859.45. Seven & I Holdings edged down 1.5% and retailer Daiei was down 3.3%. Auto stocks also suffered. Nissan Motor lost 0.9% and tire maker Bridgestone declined 2.3%.Hong Kong''s blue-chip Hang Seng Index dropped 105.88 points, or 0.7%, to 15,857.89. Mobile operator China Unicorn shed 2.8% and telecommunications company China Netcom lost 2.4%. Banks finished mixed. HSBC Holdings inched 0.2% up, while Hang Seng Bank lost 0.4%.

South Korea’s Composite Stock Price Index, or Kospi, finished down 0.9%, or 11.52 points, at 1317.70. Kookmin Bank, the country’s major lender, shed 2.2%, while Korea Exchange Bank advanced 2.6%. Exporters also lost, with Samsung Electronics dropping 1.6% and LG.Philips LCD falling 3.3%. Car maker Hyundai Motor plunged 4.8%. Singapore''s Straits Times Index finished up 1.63 points, or 0.1%, at 2441.54 points to buck the downtrend but Thai Beverage, the region’s largest IPO, failed to make an impressive debut as investors were worried about the IPO’s large size. Australia''s benchmark S&P/ASX 200 index fell 4.1 points to close at 5105.4 points. BHP Billiton dropped 0.5% and Rio Tinto shed 1.3%.

[R]6:30AM European shares decline on fears over interest rates and oil.[/R]
European markets traded lower in the morning. London’s FTSE 100 dropped 1.3% to 5,716.5, while Frankfurt’s Xetra Dax fell 1.1% to 5,691.51 and the CAC 40 in Paris, shed 1.1% to 4,961.06. Developments in the steel sector became obscured as opposition to Arcelor’s merger with Severstal stepped up. Mittal Steel, on the other hand said it would be content with a minority stake in Arcelor In this way, Mittal Steel, together with Severstal would become the two biggest shareholders. Stocks in Arcelor shed 0.9% while Severstal dropped 2.6% and Mittal edged down 0.8%. The chances of a more aggressive 50-point hike affected the market to a greater extent, hitting bank stocks. Among the biggest decliners were Commerzbank, falling 3.1% and National Bank of Greece, shedding 2.2%. There was a lot of volatility in the oil sector. OMV plunged 4.5% and France’s Total slid 1.1%. UK benchmark Vodafone had all eyes on its final results. It posted surprising revenue results, proving its loss was not as bad as expected.

Light, sweet crude oil for July delivery rose 4 cents to $71.41 a barrel, while July Brent crude at London''s ICE Futures exchange advanced 3 cents to $70.62 a barrel. Gold traded higher on Tuesday at $654.30 an ounce, up $5.30 an ounce from Monday''s close of $649.00. The dollar fell against the euro. The European currency advanced to $1.2836 from $1.2751, while the British pound rose to $1.8762 from $1.8594. The dollar fell more than half a yen to below 112 yen at one point before rising again to 112.01 yen.