Interest Rates Weigh on Sentiment

Elena
08 Jun, 2006
New York City

Stock futures pointed to a weak opening after the ECB raised interest rates, reinforcing an upward trend in global rates. In earnings news, H&R Block, tax-preparation company, reported Q4 net income of $1.77 a share, 4% below a year ago when the company earned $1.83 a share. BMC Software, enterprise management software firm, reported Q4 net profit more than quadrupled to 31 cents a share, from 7 cents a year ago.

[R]9:00AM Stock futures indicated a weak opening on interest rate concerns.[/R]
Stock futures pointed to a weak opening Thursday after the European Central Bank raised interest rates, reinforcing an upward trend in global rates. The ECB raised interest rates by 25 basis points to a three-year high of 2.75%. Continuous anxiety about central bank actions and slowing economic growth contributed to significant weakness among global markets. News of the death of al Qaeda''s leader in Iraq, Abu Musab al-Zarqawi, failed to lift market sentiment. Adding to negative sentiment, shares of Finisar ((FNSR)), communications equipment firm, fell 10% after the bell on Wednesday on disappointing quarterly results. Shares of Jos A. Bank Clothiers Inc. ((JOSB)) fell 14% after the company reported earnings below analyst expectations. National Semiconductor Corp. ((NSM)) is seen to be in focus as it is expected to report fourth quarter earnings. Standard & Poor''s 500 futures were down 5.6 points, below fair value. Dow Jones industrial average futures were down 38 points, and Nasdaq 100 futures were down 8.25 points.

[R]The Labor Department said that initial jobless claims fell by 35,000.[/R]
The report showed that initial claims fell to 302,000 from the previous week's revised figure of 337,000. Economists had expected claims to fall to 325,000 compared to the 336,000 originally reported for the previous week. The less volatile 4-week moving average also fell, dipping to 327,750 from the previous week's un-revised average of 333,500. The decrease ended a streak of six consecutive increases by the moving average. The report also showed that continuing claims in the week ended May 27 fell to 2.415 million from the preceding week's revised level of 2.420 million.

H&R Block Inc, ((HRB)), tax-preparation company reported that Q4 net income was $1.77 a share, 4% below the same period a year ago when the company earned $1.83 a share. Revenue advanced 6% to $2.5 billion, H&R Block said. Fiscal 2007 earnings should be between $1.80 a share and $2.05 a share, the company added.

BMC Software Inc, ((BMC)), enterprise management software firm, reported Q4 net profit more than quadrupled to 31 cents a share, from 7 cents a share a year ago as the corporate software cut costs and revenue advanced 3.2%. The company added that revenue rose to $407.9 million from $395.1 million. If not for unusual items, the company''s profit would have been 35 cents a share, up from 4 cents a share on the same basis a year earlier. The company topped analyst estimate for a profit of 29 cents a share.

Hayes Lemmerz International Inc, ((HAYZ)), auto parts maker, reported Q1 loss grew to 46 cents a share, from a loss of 20 cents a share in the year-ago period. Sales dropped about 3% to $572.8 million from $589.2 million. Unfavorable currency exchange and the loss of sales from divested operations led to the fall in revenue, with lower demand in the U.S. offsetting higher international volumes, the company said.

Volt Information Sciences Inc., ((VOL)), provider of staffing services for technology companies, reported Q2 earnings of 59 cents a share, up from a profit of 29 cents a share a year-ago on 9% sales growth. The company beat analysts’ estimates for a profit of 36 cents a share. The company said its improved performance was due to strong demand and margin growth within its technical placement and administrative and industrial divisions, as well as growth in its higher margin permanent placement and recruitment process outsource offerings. It also attributed the positive effect to aggressive cost controls with workers' compensation and unemployment insurance.

CRA International Inc, ((CRAI)), provider of consulting services, reported Q2 earnings of 55 cents a share, up from a profit of 49 cents a share a year-ago on 25% revenue growth. Q2 results include stock option expensing of 7 cents a share. The company beat analysts’ estimates for a profit of 52 cents a share. The company added it recorded $600,000 in closure and severance costs that was largely offset aby a reduction in the company's corporate tax rate to 39% from 42%.


[R]8:00AM NYSE Group hired Société Générale to help it finalize the merger with Euronext.[/R]
NYSE Group Inc ((NYX)) hired the large European investment bank Société Générale to help it finalize its planned merger deal with Dutch exchange operator Euronext NV. Société Générale joins Citigroup Inc., which has been advising NYSE on the deal for several months. According to Thomas Finanial Société Générale is also one of the largest shareholders in Euronext.

The move by the owner of the Nymex followed a statement made by French President Jacques Chirac in which he expressed his preferences that Euronext should do a deal with Deutsche Börse AG instead of merging with NYSE Group. NYSE shares moved to the downside in the past two days on that news, while Deutsche Börse''s rallied on Wednesday, which makes the primarily share-based NYSE deal look slightly less attractive financially than it did a few days ago.


[R]7:30AM Nikkei ends down on global growth fears.[/R]
Asian markets finished lower. Tokyo’s Nikkei 225 index shed 462.98 points, or 3.07%, to close at 14633.03 points. Toyota Motor also declined, shedding 2.9% while Daiwa Securities dived 4.1%. Taiwan''s key stock index plummeted 4.2% to 6331.81, its six-month low due to domestic political strife and slide in regional stock markets. Hong Kong''s Hang Seng Index dropped 366.44 points, or 2.32%, to 15450.11, with the downtrend led by China Mobile and property developers. Korea’s benchmark Kospi index settled down 3.5% at 1223.13, a seven-month low, struck by an unexpected rate hike by the Bank of Korea and losses on global markets. Mobile phone maker LG Electronics shed 1.8%. Australia''s S&P/ASX 200 Index finished 2.4% down, with oil company Woodside Petroleum losing 1%.


[R]6:30AM Europe sheds more than 2% on growth worries.[/R]
European markets were down in mid morning trading. The FTSE 100 in London lost 2.2% to settle at 5,583.3, while the Xetra Dax in Frankfurt was off 2.3% to 5,417.64 and the CAC-40 in Paris declined 2.5%, stand at 4,704.83. The biggest decliners among the broad based fall were London listed miners with Xstrata off 6.2% and Antofagasta shedding 3.9%. Growth concerns struck industrial groups with Atlas Copco edging 5% down and Thyssen Krupp plunging 4.9%. Auto stocks also performed badly with BMW, shedding 0.4%, Porsche dropping 2.3% , Volkswagen slipping 1% and DaimlerChrysler declining 1.9%.France’s Renault dived 2.8% and Italy’s Fiat lost 2.8%.

Light sweet crude oil for July delivery dropped $1.15 cents to $69.67 a barrel and July Brent crude futures on London''s ICE Futures exchange lost 28 cents to $68.91 a barrel. Gold bullion started trading Thursday at a bid price of $621.85 a troy ounce, higher than $621.25 late Wednesday. The dollar rose slightly against the euro. In morning European trading, the euro purchased $1.2772, down from $1.2794 in New York on Thursday. The British pound eased to $1.8549 from $1.8560 in New York, while the dollar advanced to buy 113.76 Japanese yen from 113.46 yen the day before.