Wider Trade Deficit

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

Market average remained under pressure for the most part of the day. In late afternoon trading averages trade near the worst level of the day. Worries of rising inflation and interest rates persisted in the market. International trade defict in April grew to $63.4 billion as import of petroleum products, automobiles and consumer goods rose. At the current rate of growth in deficit, annual deficit is expected to surpass $770 billion. Single largest deficit was registered with China.

[R]3:00PM International trade deficit for April was reported at $63.4 billion.[/R]
America’s appetite for foreign goods seems to be insatiable. Nations deficit in April rose $6.4 billion from a year ago. Deficit in goods rose to $69.5 billion and surplus in services rose to $6 billion. America registered trade surplus with only three of the forty five largest nations it trades with namely Australia, Belgium and Egypt. Deficit with China rose to $17 billion in the month and $64 billion in the first four months of the year. Deficit with European Union of nations rose to $9.3 billion and to $37 billion for the year. Deficit with Japan rose $7.8 billion in April and $28 billion since the beginning of the year. Deficit with OPEC rose in the month to $8 billion and for the year so far to $32 billion. Deficit with Canada rose to $6 billion and $27 billion for the year so far.

[R]12:30PM European markets rebounded from steep declines.[/R]
European markets rebounded from heavy sell-off and steep losses Thursday to finish Friday session sharply higher. The positive market sentiment was generated by strong buying interest in technology and mining stocks. Shares of STMicroelectronics, Infineon Technology, Philips Electronics, and Nokia climbed after Texas Instruments raised its Q2 financial targets. Miners like Rio Tinto, Anglo Saxon, and Xstrata moved sharply higher. The German DAX 3-0 rose 1.7%, the French CAC 40 climbed 1.8%, and London FTSE 100 surged 1.7%.

Oil prices reversed from a three-day decline, rising on continued Iraq interest. Light crude July delivery climbed $1.40 to $71.75 a barrel. London Brent crude rose 85 cents to $69.90. Gasoline futures added 52 cents to $2.1575 a gallon, while heating oil inched up 3 cents to $2.0130. Natural gas futures rose 10 cents to $6.294 per 1,000 cubic feet. The dollar was mixed versus major currencies. The euro traded at $1.2635, down from $1.2644. The dollar bought 113.83 yen, down from 114.16. The British pound stood at $1.8432, up from $1.8424. European gold prices advanced. In London the precious metal traded at $615.65, up from $612.90 per ounce. In Zurich gold rose to $615.50 from $611.20. Silver traded at $11.38, up from $11.38.


[R]11:30AM Technology and biotechnology stocks boost the Nasdaq.[/R]
Stock markets made a strong performance Friday morning, reflecting bargain hunting and data showing that the U.S. trade deficit widened less than expected. The positive sentiment generated by the data was partly offset by report, indicating that import prices rose much more than economists had expected in May, adding to recent concerns about the pace of inflation. Technology stocks stood out among notable gainers, with the Philadelphia Semiconductor Index advancing 1.4%. National Semiconductor ((NSM)) turned in one of the semiconductor sector''s best performances after the chip maker reported adjusted Q4 earnings that exceeded analyst estimates. The sector also benefited from an upgrade by Prudential. Some disk drive, computer hardware, and networking stocks also posted notable gains. Strength in the biotechnology sector also helped the Nasdaq move higher, with the Amex Biotechnology Index up 1.9%. Recovering from recent heavy losses, gold stocks advanced, as reflected by the 1.7% gain currently shown by the Amex Gold Bugs Index. Bargain hunting boosted the airline sector, with the Amex Airline Index posting a 1.4%gain. Continental ((CAL)) helped to lead the sector higher, moving upward by 3.8%. In late morning trading, the Dow rose 7.29, or 0.07%. The Standard & Poor''s 500 index was up 0.11, or 0.01%, while the Nasdaq composite index gained 8.21, or 0.38%. Bonds prices drifted, with the yield on the 10-year Treasury note slipping to 4.99% from 5% late Thursday.


[R]10:30AM Indian Sensex recovers on a global recovery in markets.[/R]
The Sensex in India finished 514.65 points higher, or 5.54%, to end at 9,810.46 as buying dominated throughout the trading session. The turnover on BSE totaled $762 million or Rs 3,429 crore, down from Thursday’s turnover of Rs 3,682 crore or $820 million. Most stocks advanced as 1,588 stocks rose, 820 lost and 37 shares stayed unchanged. The Reserve Bank of India hiked yesterday its borrowing rate to 5.75% and its repurchase rate to 6.75% with immediate effect. Interest rates were raised in many parts of the world, including Europe, South Africa, Thailand and Korea. Central Bankers around the world worry that rising metals and oil prices will induce.

Large-cap companies led the gainers. Reliance Industries was the most active stock with a total turnover of Rs 593.44 crore, followed by Tata Steel with Rs 94.93 crore and SBI with Rs 93.92 crore. Reliance Energy jumped the most, by 14.25%, to Rs 431 on 0.35 million shares. Grasim Industries soared 13.85%, to Rs 1,780 on 86,170 shares and Reliance Industries advancing 11.48%, to Rs 920. Sugar stocks advanced with Triveni Engineering rising 20%, to Rs 69.60, Mawana Sugar jumping 18.54% to Rs 69.05 and Bajaj Hindustan edging up 5.86%, to Rs 320. Wyeth soared 13.55%, to Rs 535.05 on strong quarterly results and GAIL India surged 8.48%, to Rs 239.75 on incorporation of Aavantika Gas, a joint venture company with HPCL. Mphasis BFL jumped 20.90%, to Rs 176.50, following Electronic Data Systems Corporation announcement on Thursday that it has acquired controlling stake in the company. Cummins India also soared 10.65%, to Rs 180.75 on strong quarterly results.


[R]9:45AM Stocks traded near the unchanged mark.[/R]
Stocks opened near the flat line Friday, as Texas Instruments Inc.’s lifted guidance and a brokerage upgrade of Coca Cola helped market steady, following steep declines on inflation fears and globally rising interest rates. Texas Instruments ((TXN)) raised its Q2 earnings and revenue targets, giving a boost to technology stocks. The semiconductor sector was one of the best performers with an advance of 2%, led by National Semiconductor ((NSM)) which rallied 6% on strong earnings. The computer hardware and the disk drive sectors climbed about 1.1%. Networking and software stocks showed modest strength as well. Dow component Coca-Cola ((KO)) added 30 cents to $43.69 after Bear Stearns upgraded the beverage maker to ‘outperform’ on gains from a weak dollar. News on the nation''s widening trade deficit and an upswing in prices for imported goods was calmly received. The Commerce Department reported that domestic trade deficit widened by $1.5 billion to $63.4 billion, below estimates of $65 billion. Meanwhile, the Labor Department said high oil prices drove up May import prices by 1.6%, or 0.6% excluding petroleum, while export prices excluding agriculture rose 0.6%. In the first hour of trading, the Dow advanced 3.37, or 0.03%, to 10,942.19, after opening the session lower. The Standard & Poor''s 500 index was up 0.85, or 0.07%, while the Nasdaq gained 9.67, or 0.45%. Bonds prices drifted, with the yield on the 10-year Treasury note edging up to 5.01% from 5% late Thursday.


[R]9:00AM Stock futures indicated a positive opening.[/R]
Stock futures indicated a positive start, trying to gain some ground after its recent sell-off on fears about rising global interest rates. On Thursday, the major averages ended mixed due to a late recovery. On Friday the positive market sentiment was generated by Texas Instruments Inc. ((TXN)) which gave a better-than-expected profit forecast, offsetting worries about higher interest rates and slower economic growth. Shares of Texas Instruments rose 3.3% before the bell as the chip maker raised its outlook for Q2 earnings and revenue. Shares of NRG Energy Inc. ((NRG)) may also be in focus as the company agreed to sell its stake in Gladstone to Transfield Services Ltd. ((TSEAX)) for about $179 million. The Nasdaq Composite index was nearly 10% off its April peak, which could make traders turn to bargain hunting. Standard & Poor''s 500 futures were up 4 points, above fair value. Dow Jones industrial average futures were up 34 points, and Nasdaq 100 futures were up 12.25 points.

[R]Trade deficit in April widened less than expected.[/R]
Friday morning, the Department of Commerce released its report on the U.S. trade deficit in the month of April. The report showed that the trade deficit widened less than economists had expected. The Commerce Department said that the trade deficit widened to $63.4 billion in April from a revised $61.9 billion in March. Economists had expected the deficit to widen to $65.0 billion compared to the $62.0 billion deficit originally reported for the previous month. The wider trade deficit came as the value of imports increased 0.7 percent to $179.1 billion while the value of exports edged down 0.2 percent to $115.7 billion. The increase in the value of imports was largely due to a rise in the value of goods imports. The report showed that imports of goods rose 0.9 percent to $151.3 billion, reflecting notable increases in imports of industrial supplies and materials, capital goods, and automotive vehicles, parts, and engines. While the value of imported goods increased, the value of exported goods fell 0.6 percent to $81.9 billion due to decreases in exports of consumer goods and capital goods. As a result the goods deficit widened to $69.5 billion in April from $67.7 billion in March. At the same time, the services surplus edged up to $6.0 billion in April from $5.8 billion in March. The report also showed that politically sensitive U.S. trade deficit with China widened by 9 percent to $17.0 billion in April from $15.6 billion in March.

[R]Increase in import prices exceeded expectations.[/R]
The Department of Labor released its report on import and export prices in the month of May on Friday, showing that import prices rose much more than expected. Export prices also showed a notable increase. The report said that import prices rose 1.6 percent in May following a 2.1 percent increase in April. The increase came in well above economist estimates of an increase of about 0.7 percent. The rise in import prices was largely due to a 5.2 percent increase in petroleum import prices, which came after an 11.5 percent increase in Aril. Excluding petroleum imports, import prices rose by a more modest 0.6 percent. The report also showed that export prices rose 0.7 percent in May after a 0.6 percent increase in April. Excluding a 0.8 percent increase in prices for agricultural exports, export prices rose 0.6 percent in May.

Club Mediterranee, ((CU.FR)), French travel group, reported it reversed to a first-half profit of 1 million euro, up from a loss of 25 million euros in the year-ago period. Sales advanced 10.5% to 828 million euros and comparable sales grew 7.7%. The company added it continued to gain markets share and that the number of customers advanced in France, despite the lackluster business environment. Club Med said synergies with Accor resulted in a gain of 6.4 million euros in the first half and that summer bookings are up 5.1%

Factory Card Outlet & Party Co, ((FCPO)), party good retailer, reported Q1 earnings of 3 cents a share, down from a profit of 10 cents a share a year-ago. Sales advanced slightly to $57 million from $55.7 million in the same period a year ago. The company added same-store sales declined 0.3% for the quarter.

Signet Group, ((SIG)), specialty retailer jeweler, reported that pre-tax profit for Q1 advanced 10% to 30.7 million pounds. Sales for the period rose 13.7% to 419.6 million pounds and comparable sales advanced 2.8%. The group added that the general retail environment remained challenging in the U.K. throughout the quarter and that its comparable sales'' performance was broadly in line with other retailers.


[R]8:00AM Cathy Pacific Airways agreed to acquire Dragon Airlines.[/R]
Cathay Pacific Airways Ltd. agreed to acquire Hong Kong Dragon Airlines Ltd for $1.05 billion and double its stake in Air China in a deal aimed at giving Cathay a larger share of the world''s fastest growing aviation market. The quality of operations for both companies is expected to improve dramatically.

The HK$8.22 billion deal terminates two years of complex negotiations, making ‘the world''s most significant aviation alliance’. The deal would be completed after receiving the approval of shareholders in the next two months. Cathay Pacific said in a published notice it would pay Dragon Airlines shareholders HK$820 million ($105.6 million) in cash, with the rest of the acquisition funded by new Cathay shares. It would also pay HK$4.7 billion ($605.5 million) to increase its stake in Air China by another 10% to reach a total of 20%. Air China will pay HK$5.39 billion ($694.4 million) for 10.16% of Cathay, and the two carriers will team up to form a Shanghai-based cargo airline. Cathay said that Dragonair will keep its own brand for six years as part of the deal. Cathay previously held 17.8% of Dragonair. As part of the deal, the shareholding of Cathay will change, with Swire Pacific moving lower in its stake to 40%, from 46.3%. Chinese conglomerate CITIC Pacific Ltd. will see its stake in Cathay decrease to 17.5% from 25.4%. China National Aviation Co., Dragonair''s parent, will hold 7.34% of Cathay. The carrier''s stocks soared 7% to HK$13.85 ($1.78) on Hong Kong''s stock exchange, with 56 million shares changing hands.


[R]7:30AM Asian shares bounce back on overseas upbeat mood.[/R]
Asian markets finished higher. Tokyo''s Nikkei 225 Stock Average rose 117.81 points, or 0.8%, to 14750.84 following a 462.98-point drop Thursday. Machinery stocks rose, with Komatsu soaring 6.2% and Fanuc advancing 1.2%. In Hong Kong, the Hang Seng Index advanced 1.16% to 15628.69, with HSBC Holdings and China Mobile gaining and Cathay Pacific advancing 0.7%, following its takeover of Hong Kong Dragon Airlines. Taiwan stocks bounced back with the Weighted Price Index of the Taiwan Stock Exchange advancing 112.82 points, or 1.8%, to 6444.63 after shedding 4.2% on Thursday. South Korea’s, Kospi gained 1.02%, or 12.52 points, to 1235.65, after declining 6.6%, or 85.91 points, to a seven-month low during the previous three trading sessions. Only China bucked the trend as the Shanghai Composite Index, tracking both Class A and Class B shares, shed 2.52% to 1551.38 and the Shenzhen Composite Index lost 2% to 397.66.


[R]6:30AM Europe recoups losses from Thursday in early trading.[/R]
European markets opened higher. The FTSE 100 in London was1.45 to 5,641.8, the Xetra Dax in Frankfurt advanced 1.4% to 5,457.17 and the CAC-40 in Paris rose 1.4% to 4,749.87. Stocks among Thursday’s big decliners led the gainers. Miners outperformed their weighting more than two-fold. Xstrata advanced 3.5% and BHP Billiton rose 3.1%. Sweden’s Atlas Copco having slumped on Thursday on economic growth worries advanced 4%. Electrolux splitting off its outdoor equipment division on Thursday put up 4%. Richemont, the Swiss luxury goods group, advanced 3.9%. Disappointing full-year operating profits pushed the stock more than 12% lower on Thursday. Technology stocks also advanced. Chipmakers Infineon rose 1.7% and STMicroelectronics advanced 2% and mobile phone maker Nokia climbed 2.8%.

Crude oil had advanced 5 cents to $70.40 a barrel by 0300 GMT, after dropping 47 cents on Thursday. London Brent crude climbed 14 cents to $69.19 a barrel. Gold bullion opened Friday at a bid price of $609.10 a troy ounce, lower than $612.90 late Thursday. The dollar gained against the euro. In morning European trading, the euro purchased $1.2639, lower than $1.2646 in New York on Thursday. The British pound dropped slightly to $1.8427 from $1.8428 in New York, while the dollar slid to purchase 113.88 Japanese yen from 114.21 the day before.