India Down 4%

Elena
13 Jun, 2006
Mumbai

The Indian benchmark seems to be in correction mode over the past few days. It has plunged sharply by 28.50% from its all-time high on 11 May 2006, as markets witnessed sharp decline. Global markets plunged today as well on worries of higher interest rate costs, expected to hurt corporate profits.

[R]10:30AM The Indian Sensex lost more than 4% in a volatile session.[/R]
The Sensex in India finished with a loss of 413.50 points, or 4.36%, on 9,062.65. The turnover on BSE was Rs 2,691 crore, indicating a total lack of interest, as investors were avoiding making new investments due to the high volatility. Monday’s turnover was Rs 2,752 crore. The market-breadth was negative, as 2,092 stocks lsot and only 264 advanced. Only 49 shares remained unchanged. HDFC led the decliners, plunging 9.8% to Rs 1,015.15, on 3.67 lakh shares. A block deal of 2 lakh shares was hit at Rs 1,050 by 10:43 hour. Auto stocks were struck, as Bajaj Auto shed 4.85%, to Rs 2,255, while Hero Honda declined 6.85%, to Rs 659. Tata Steel plummeted 9% to Rs 388.50 on 23.50 lakh shares traded on the market. Bhel tumbled 8.25% to Rs 1,599.95 while Wipro lost 7.15% to Rs 391.40.

Infosys was off 5% to Rs 2,635 on 2.44 lakh share. It has set 14 July 2006 as a record date for bonus issue. Large-cap RIL lost 4.85% to Rs 859 on 31.43 lakh shares traded on BSE.Banking shares fell hard on concerns that tightening interest rates would limit credit growth. The BSE bankex fell 3.99%. IndusInd Bank was down 14% to Rs 29.30, Centurion Bank of Punjab fell 12.56% to Rs 19.15, Federal Bank plunged 9% to Rs 139.70, HDFC Bank dived 8% to Rs 640, and ICICI Bank shed 2.85% to Rs 461.80. Reliance Petroleum slid to a new all-time low of Rs 58.70 on 30.70 lakh shares on profit-booking. Hindustan Zinc lost 10%, to Rs 456 on 8.43 lakh shares after it reported a reduction in prices by Rs 9,300 per tonne.


[R]9:45AM Stocks opened lower on wholesale inflation data.[/R]
U.S. stocks started below the flat line, reflecting a report which showed that core producer prices rose more than expected, increasing concerns the Federal Reserve may continue to increase interest rates. During the first hour, the general market bounced back with the airline sector standing out as one of the morning''s best performers, up 2.3%, helped by a slide in oil prices below the $70 per barrel mark. Retail and HMO stocks were also among the best performers in early trading, each rising more than 1%. There were only a few movers to the downside, including the gold sector which fell about 2.6%, moving below its 200-day moving average. Oil and natural gas stocks were lower in the early going, hurt buy a decline in oil prices. However, the oil service sector was showing a modest advance. In earnings news, Goldman Sachs Group Inc. ((GS)) posted sharply better-than-forecast Q2 results, helped by strong investment banking and trading business. Nevertheless, Goldman Sachs slid $1 to $144. Best Buy Co. ((BBY)) posted 38% profit growth, beating estimates as cost-cutting measures boosted its margins. Best Buy jumped $2.31 to $51.34. In the first hour of trading, the Dow added 39.46, or 0.37%. The Standard & Poor''s 500 index was up 3.17, or 0.26%, and the Nasdaq gained 13.16, or 0.63%. Bonds edged upward, with the yield on the 10-year Treasury note slipping to 4.97% from 4.98% late Monday.


[R]9:00AM Stock futures indicated a lower opening on economic data.[/R]
U.S. stock futures moved lower after a report showed U.S. producer prices rose just 0.2% in May, while prices excluding food and energy rose a steeper-than-expected 0.3%. In a separate report, the Commerce Department said retail sales rose 0.1% in May from a 0.5% rise in April, meeting expectations. In corporate news, shares of Goldman Sachs ((GS)) advanced in pre-market training and are expected to be actively traded on Tuesday after the investment bank reported almost doubled Q2 earnings growth. Shares of Best Buy ((BBY)) moved higher after the consumer electronics retailer reported Q1 earnings growth that exceeded analyst estimates. The company also reiterated its full year earnings guidance. Standard & Poor''s 500 futures were down 3.40 points, below fair value. Dow Jones industrial average futures were down 6 points, and Nasdaq 100 futures were down 0.50 point.

[R]Core prices growth in May exceeded expectations.[/R]
Tuesday morning, the Department of Labor released its highly anticipated report on wholesale prices in the month of May. While overall price growth came in below economist estimates, core price growth exceeded expectations. The Labor Department report showed that wholesale prices rose 0.2 percent in May following a 0.9 percent increase in April. The increase came in well below economist estimates of an increase of about 0.5 percent. The modest increase in wholesale prices compared to the previous month came as the pace of growth in energy prices slowed to 0.4 percent in May from 4.0 percent in April. Additionally, food prices fell 0.5 percent in May. At the same time, the report showed that core prices, which exclude food and energy prices, rose 0.3 percent in May following 0.1 percent increases in the two previous month. Economists had been expecting core prices to increase by 0.2 percent.

[R]Retail sales growth in May slightly exceeded estimates.[/R]
Department of Commerce released its report on retail sales in the month of May on Tuesday, showing that sales edged slightly higher. The increase came as a surprise to most economists. The reported showed that retail sales edged up by 0.1 percent in May following an upwardly revised increase of 0.8 percent in April. Sales had been expected to come in unchanged compared to the 0.5 percent increase originally reported for April. The modest increase in sales was partly due to a notable rise in sales at gasoline stations, which rose 1.9 percent in May after a 5.5 percent increase in April. Non-store retailers also saw significant sales growth. The report also showed that sales, excluding a 1.6 percent decrease in auto sales, rose 0.5 percent in May compared to a 0.8 percent increase in April. Economists had expected ex-auto sales to increase 0.5 percent.

Goldman Sachs, ((GS)), investment bank reported Q2 net earnings of $4.78 a share, compared with $1.71 a share in the year-ago period on the strongest quarter in 6 years at its investment banking unit as well as strong trading results in fixed income and equities. The firm added that net revenue totaled $10.10 billion compared to $4.81 billion last year. The company beat analysts expectations for earnings of $4.28 a share.

World Wrestling Entertainment Inc, ((WWE)), media and entertainment company, reported that Q4 income dropped to 15 cents a share, from 23 cents a year earlier on revenue decline to $114.3 million from $118.3 million in last year's Q4. The company beat analysts’ forecasts for earnings of 13 cents a share.

Best Buy Co., ((BBY)), home electronics retailer, reported net income advanced to 47 cents a share, from 34 cents a share in the year-ago period on 14% sales growth. The company missed analysts, expectations for a profit of 36 cents a share. The company's domestic and international segments said same-store sales gained 4.6% and 7.1%, respectively.

Jabil Circuit Inc, ((JBL)), electronics contract manufacturer, lowered its outlook for core earnings in Q3 due to operational issues within its electromechanical business and at certain production and repair facilities in the America's region. The company now envisages core earnings of 33 to 37 cents a share in Q3, below its prior estimate of 47 cents a share. Jabil added that core earnings exclude amortization of intangibles, the impact of stock-based compensation, and any charges or other factors. On a GAAP basis, the company guidance is between 26 and 30 cents a share for the quarter. It left intact its outlook for revenue of $2.5 billion to $2.6 billion for the period.


[R]8:00AM Arcelor Sa agreed to a merger deal with Russia’s Severstal.[/R]
Having strongly resisted Mittal''s bid since January, Arcelor agreed to a merger deal with Severstal last month that sees it swap newly issued shares for Severstal''s steel assets. Luxembourg-based Arcelor gave a value for the Severstal deal for the first time, saying in a document that its 295 million new shares were worth 13 billion euros ($16.34 billion) for a 32% stake. Severstal''s controlling shareholder, Alexei Mordashov, will pay Arcelor 1.25 billion euros ($1.59 billion) in cash and hand over his stake in all of Severstal''s steel assets and Italian steelmaker Lucchini SpA, which Arcelor values at 11.7 billion euros ($14.7 billion).

The deal will be called off if Mittal acquires more than 50% of Arcelor, the document said, and in that case Mordashov will receive a 140 million euro ($176 million) break-up fee. Mittal published a business plan, predicting strong growth even if it doesn''t manage to win the battle for Arcelor. On Monday Arcelor rejected Mittal''s revised 25.8 billion euros ($33 billion) cash-and-stock offer as inadequate and undervaluing the company. Arcelor said the Severstal merger would be more profitable than a deal with Mittal, saying its operations in Russia and South America would make up 40% of earnings and make the company more resilient to industry cycle problems. Based on 2005 results, it said earnings per ton would be nearly 30% higher than Mittal as Mittal was far more reliant on spot contracts and low-added value steel. Mittal countered criticism, saying it expected its earnings to reach $9.9 billion in 2008, more than 70% higher than 2005.


[R]7:15AM Asian stocks plunge on mounting U.S. interest rates fears.[/R]
Asian markets finished sharply lower. Asian stocks, being until early May among the world''s top performers this year, were hit by a sell-off last Thursday due to worries that higher U.S. rates would spark a global slowdown. Japan’s Nikkei 225 Index plunged 4.14% to 14218.60, the lowest finish since Nov. 16, 2005 and its biggest percentage loss in a single day since May 10, 2004. The index has plummeted 11.75% since the beginning of this year. Tech stocks were hit hard, as Sharp lost 7.09% and Matsushita Electric Company lost 5.54%. Kyocera plunged 5.57%. Hong Kong’s Hang Seng followed in Tokyo’s footsteps, losing 2.5% to 15234.42. Its fall intensified in the afternoon session after traders came back from the midday break to find the Nikkei had closed down 4.1%. South Korea''s Kospi Index tumbled 2.9% to 1203.86, its lowest finishing level since Nov. 1, 2005. Stocks in New Zealand and Malaysia performed better, but each shed about 0.5%. Australia''s benchmark S&P/ASX200 index dropped 2.6% to 4838.9, 10.5% lower than its record high of 5406.7, hit less than five weeks ago.


[R]6:30 AM European shares fall on global sell-off[/R]
European shares were lower in early trading. In London, the FTSE 100 shed 1.6% to 5,533.5, following declines across the mining sector. The German Xetra Dax fell 1.7% at 5,301.3 and the French CAC 40 dropped 1.9% to 4,637.7. The decline was broadly based with all the main Eurozone sectors trading lower and only a few individual stocks gaining slightly. On the corporate front, Schering was the only gainer on the German market, up 0.6% as the struggle for control of the German healthcare group continued with rivals Bayer and Merck fighting in an unprecedented takeover battle which has immobilized investors in Germany. Vinci was up 1.45 and led the FTSE Eurofirst 300 on bid hopes after reports of interest from rival French utility Veolia Environnement, which was down 2.7%.

Light sweet crude oil for July fell 32 cents to $70.04 a barrel by 0334 GMT, extending Monday''s $1.27 plunge. London Brent shed 31 cents to $68.62 a barrel. Gold bullion opened Tuesday at a bid price of $593.70 a troy ounce, down from $608.70 late Monday. The euro hit a one-month low of $1.2558, but steadied at $1.2590 by 0954 GMT. The dollar also hit a six-week high against the yen at 114.77 yen, before easing to 114.10 yen, steady from the U.S. close. The British pound stood at $1.8435 versus the dollar.