Rates Rise Across The Globe

123jump.com Staff
08 Jun, 2006
New York City

Global rates are on the rise. ECB raised benchmark rate by 25 basis points to 2.75% but Bank of England left rates unchanged to 4.5%. South Korea raised overnight call rate by a quarter percentage point to 4.25%. Turkey raised rates by 1.75% to 15% and Thailand increased by 25 basis to 5%. South Africa raised rates by 50 basis points to 7.5%. Rise in rates pressured metals and oil prices. Markets in the U.S. lost more than 1% at its worst level. Dow recovered from 170 point loss to close up.

[R]4:00PM Market averages recovered in the last 30 minutes of trading.[/R]

-Dow closed up 7.92 points, Nasdaq down 6.48 and S&P 500 up 1.78.
-Yield on 10-year bond closed at 5.00% and 30-year bond at 5.07%.
-Crude oil closed down 47 cents to $70.35 per barrel.
-Gold closed down $18.80 to $613.80 per ounce. Gold is down 17% from May 10th peak of $720.

-European markets closed lower close to 2.5% across the region with a loss of 6.5% in South Africa and 5.5% in Norway. German and France lost 3%. Russia plunged 4.8%.
-Latin markets recovered from the worst levels in the afternoon. Brazil dropped 2% but closed up 0.4% and Mexico lost 3% but closed down 0.9%.
-Asian markets lost more than 2% across the region. Tokyo lost 3.1%, India lost 4.7% and Taiwan declined 4.25%.

Nervous investors were bombarded with a global rise in interest rates. In the overnight trading India, Thailand and South Korea raised the rates and in the early morning ECB, South Africa, and Turkey raised rates. Bank of England left the rates unchanged.

Nervous investors in New York sold stocks in the morning trading despite the rise in dollar and fall in oil prices. At its worst level Dow dropped 170 points and Nasdaq lost 1%. Dow recovered in the last thirty minutes of trading to close in the positive territory. In the economic news initial jobless claims dropped by 35,000 to a seasonal average of 302,000 for the week ending.

[R]3:15PM Market averages recovered from the worst level of the day.[/R]
Metals and Metal stocks are under pressure as rates around the world rise and the strength of the dollar depress metal prices. Gold is trading near $600 for the first time since April 26th. Gold is down $16 at $607.10 per ounce. International value of dollar, investors confidence in interest rate direction and global supply and demand had kept gold in a volatile trading. It took gold 25 years to climb above $700 price in the first week of trading in May. Since then gold has declined 17% from the peak in May at $720 price. In the near-term traders are looking for gold price to drop to $570. Silver and copper are trading lower. Silver is down 81 cents to $11.07 per ounce and copper is down 22 cents to $3.34. Silver is down 26% from the peak of $15 price on front-month contract value reached on May 10th. Copper is down 19% from the peak of $4 price on May 10th.

[R]12:30PM European markets closed at the lowest level for 2006.[/R]
European markets closed at their lowest levels for the year. The steep decline reflected a rate rise by the European Central Bank and fears over rate-tightening moves in the world economies. The ECB lifted its interest rate by a quarter point to 2.75%, and the Bank of England left rates on hold at 4.5%. The euro fell 1.3% to $1.2636, but strengthening dollar failed to lift sentiment. Mining and oil stocks were the most notable losers after metals and oil futures dropped on news the al-Qaida leader Abu Musab al-Zarqawi was killed in an air strike. Mining company BHP Billiton slipped 6%, while BP fell 3.1%. The German DAX 30 tumbled 2.9%, the French CAC 40 slid 2.9%, and London FTSE 100 dropped 2.5%.

Oil prices dropped below $70 on news that al Qaeda’s leader Abu Musab al-Zarqawi was killed in an air strike. Light crude July delivery dropped $1.47 to $69.35 a barrel. London Brent crude fell $1.12 to $68.07. The dollar rose versus major currencies on speculations of further interest-rate increases. The euro traded at $1.2641, down from $1.2794. The dollar bought 114.27 yen, up from 113.46. The British pound stood at $1.8399, down from $1.8560. European gold prices further declined. In London the precious metal traded at $612.90, down from $621.25 per ounce. In Zurich gold fell to $611.20 from $619.45. Silver traded at $11.33, down from $11.65.

[R]11:30AM Energy and oil stocks moved sharply down.[/R]
Worries about rising global interest rates and inflation helped stocks move into the negative territory. The rate hikesby the European Central Bank and the Bank of Korea raised concerns about the possibility of further interest rate increases by the Federal Reserve. U.S. crude oil futures fell almost 2% below $70 a barrel, dragging energy companies lower. Shares of Exxon Mobil Corp.((XOMM)) fell 1%, ConocoPhillips ((COP)) dropped 1.7%, and Chevron ((CVX)) lost 1.6%. The decrease in the oil price followed the death of al Qaeda’s leader Abu Musab al-Zarqawi which raised hopes for a let-up in attacks on Iraq''s oil industry. The Philadelphia Oil Service Index dropped 3%.

The expectations of higher U.S. interest rates contributed to some strength in the value of the U.S. dollar, resulting in a sharp decrease by the price of gold. Gold for August delivery was down $16.40 at $616.20 an ounce, taking the Amex Gold Bugs Index down 5.2%. Despite the decrease by the price of oil, transportation and airline stocks posted weakness. The Dow Jones Transportation Index dropped 2.3%. Technology stocks moved sharply lower, contributing to the steep decline by the tech-heavy Nasdaq. The Dow was helped by a 3% rise in shares of Procter & Gamble Co. ((PG)) after the consumer products company confirmed its quarterly sales and earnings forecasts. Shares of Jos A. Bank Clothiers Inc. ((JOSB)) fell 28% to $26.71 after the company reported earnings below analysts'' expectations. The Dow Jones industrial average was down 44.35 points, or 0.41%. The Standard & Poor''s 500 Index was down 7.84 points, or 0.62%. The Nasdaq Composite Index was down 26.17 points, or 1.22%.


[R]10:30AM Indian Sensex loses 4.7% in volatile trading.[/R]
Sensex in India declined 460.95 points (4.7%), to finish at 9,295.81, its lowest finish since 19 January 2006. The turnover on BSE was Rs 3,675 crore or $860 million, up from Wednesday’s Rs 3,539 crore. The market breadth was strongly negative with 2,212 stocks losing, 161 that advancing and 29 stocks remained unchanged.

Among the biggest decliners was large-cap Reliance Industries plummeting 8% to Rs 820 on 4.5 million shares traded on BSE. Other decliners included VSNL which plunged 10.8% to Rs 300.65, Tata Steel lost 8.8% to Rs 420 and Tata Power declined 7.9% to Rs 425. Bajaj Auto was also off 8.4% to Rs 2,320, while Cipla declined 7.6% to Rs 195.50. Dr Reddy’s Lab dived 6.9% to Rs 1180, Wipro lost 6.9% to Rs 414. Bank stocks were down too, as ICICI Bank shed 5.9% to Rs 500.15. Bajaj Hindustan, dropped 20% to Rs 240.55 at the start of session, but later recovered and advanced to an intra-day high of Rs 360.75, a rebound of 20%. Indian Hotels plummeted 4.85% to a low of Rs 825.50 to recover to Rs 885 at the end of trading.

Reliance Communication Ventures fell 16%, to Rs 195.25 on a high volume of 57 lakh shares on BSE. L&Talso shed 6%, to Rs 1,862 although the company on Wednesday stated a liberal 1:1 bonus. Metal shares also participated in the decline. Sterlite Industries lost 6%, to Rs 307, Hindalco plunged 2.8% to Rs 150, Hindustan Zinc shed3.3% to Rs 441 and Nalco lost 1.1% to Rs 201. Despite recovering from heavy losses the Sensex constituents NTPC, HDFC Bank, Gujarat Ambuja Cements, Hero Honda, ACC and ITC all closed in the red. The only exception was car maker Maruti Udyog, advancing 0.3%, to Rs 720.


[R]9:45AM Stocks traded mixed on higher interest rates worries.[/R]
U.S. stocks opened mixed on concerns about rising global interest rates. The news of the death of al Qaeda''s leader in Iraq and strong sales from McDonald''s Corp failed to raise market sentiment. The Nasdaq and the S&P 500 fell after the European Central Bank added to concerns about rising rates after it raised interest rates by 25 points to 2.75%. The Dow was supported by shares of McDonald''s ((MCD)) after the restaurant chain reported better-than-expected May comparable sales. McDonald''s shares were up 0.7%. Procter & Gamble also supported the index, rising 2.2% after reaffirming its Q4 earnings guidance. The gold sector moved further to the downside as the price of the precious metal fell $14.10 to $618.50 an ounce.

The Amex Gold Bugs Index fell 3%, which is its worst intraday level in over two months. Energy stocks were also under pressure as oil prices declined below $70, reflecting news that the terrorist leader Abu Musab al-Zarqawi was killed in a U.S. air strike in Iraq. ConocoPhillips ((COP)) shares fell almost 1% to $60.08, while shares of rival Chevron Corp. ((CVX)) slipped 0.7% to $57.68. The transportation sector also showed weakness, with the Dow Jones Transportation Average falling 1.3%. The Dow Jones industrial average was up 1.92 points, or 0.02%. The Standard & Poor''s 500 Index was down 3.92 points, or 0.31%. The Nasdaq Composite Index was down 14.03 or 0.65%.

[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] Thursday morning, the Department of Labor released its report on initial jobless claims in the week ended June 3, showing that jobless claims fell much more than expected after showing an unexpected increase in the previous week. 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 by 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.