Europe Closes Off Highs

Elena
22 Jun, 2006
Frankfurt

European markets closed higher, although British Airways overshadowed the positive trading sentiment. The company closed down 5.9% after the carrier disclosed that the U.K. Office of Fair Trading and the U.S. Justice Department are looking into the carrier and other airlines over pricing and fuel surcharges. The German DAX 30 rose 0.55%, the French CAC 40 gained 0.6%, and London FTSE 100 rose 0.3%.

[R]12:30PM European markets finished higher.[/R]
European markets closed in the positive, although British Airways overshadowed the positive trading sentiment. The company closed down 5.9% after the carrier disclosed that the U.K. Office of Fair Trading and the U.S. Justice Department are looking into the carrier and other airlines over pricing and fuel surcharges. European stocks were largely supported by defensive stocks, but finished off session highs as U.S. markets reversed from yesterday’s rally. The German DAX 30 rose 0.55%, the French CAC 40 gained 0.6%, and London FTSE 100 rose 0.3%.

Oil prices advanced for a second day in a row after a weekly petroleum report showed that gasoline inventories rose less than expected. Light crude July delivery rose 64 cents to $70.97 a barrel. Heating oil added 1 cent to $1.9504 a gallon. Gasoline futures rose 1.6 cents to $2.0820 a gallon. Natural gas futures were steady at $6.590 per 1,000 cubic feet. The dollar gained ground versus major currencies. The euro traded at $1.2632, down from $1.2659. The dollar bought 115.16 yen, up from 114.79. The British pound stood at $1.8389, down from $1.8439. European gold prices moved higher. In London the precious metal traded at $594.40, up from $574.90 per ounce. In Zurich gold traded at $593.15, up from $5674.80. Silver closed at $10.56, up from $10.22.


[R]11:30AM Stocks traded lower on profit taking.[/R]
Stock markets posted weakness Thursday morning, contributed by profit taking. Telecommunications stocks showed considerable weakness. Qualcomm ((QCOM)) posted a significant loss, falling 4.2% after Nokia ((NOK)) said it plans to ramp down its CDMA manufacturing by April 2007. Qualcomm holds most patents to the CDMA technology. Other chipmakers also came under pressure, contributing to a 1.3% loss by the Philadelphia Semiconductor Index. Maxim ((MXIM)), National Semiconductor ((NSM)) and Freescale Semiconductorare moved notably down. The networking sector declined, dragged by Foundry Networks ((FDRY)) and 3Com ((COMS)), sending the Amex Networking Index down 1.3%. Some internet stocks moved steeply lower, with shares of RealNetworks ((RNWK)) down 8.1% after Goldman Sachs downgraded its rating on the company''s stock to Underperform from In-Line. Among individual stocks, Phoenix Technologies ((PTEC)), software company, tumbled 29% after the company significantly cut its Q3 revenue guidance. In corporate news, Rite Aid sank 6% after the drugstore operator said its Q1 profit fell. In late morning trading, the Dow Jones industrial average fell 22.57, or 0.2%. The Standard & Poor''s 500 index was down 4.12, or 0.33%, and the Nasdaq composite index lost 13.09, or 0.61%. Bond yields remained inverted as prices fell. The yield on the 10-year Treasury note edged up to 5.19% from 5.16% late Wednesday, while the 2-year yield steadied at 5.22%.


[R]10:30AM India gains on upbeat global markets.[/R]
The Sensex in India advanced 235.74 points, or 2.3%, to close at 10,275.88. The benchmark reached its high of 10,362.74 in intra-day, but then it lost 127.90 points to decline to 10,234.84 in the evening trading. The turnover on BSE was $723 million or Rs 3,254 crore, up from Wednesday’s $628 million or Rs 2,826 crore. The market-breadth was positive as 1,996 stocks advanced, 482 declined and 33 shares remained unchanged. Gainers included HDFC soaring nearly 10% to Rs 1,118 on bargain-hunting and on reports that the demand for housing loans is still strong. Engineering & construction large-cap L&T advanced nearly 8% to Rs 2,190. Metal shares jumped on recovery in metal prices on LME. Hindustan Zinc advanced 9.6% to Rs 595 on 2.5 million shares. Hindalco advanced 4.4% to Rs 170 on a heavy volume of 3.7 million shares. Sterlite Industries added 2.4% to Rs 383 and Nalco advanced 5% to Rs 235.70. However, the stock ended well-off from its high.

Bank shares also joined the advancers mostly on renewed buying. State Bank of India advanced 4.4% to Rs 773, ICICI Bank gained 3.8% to Rs 513.65 and HDFC Bank rose 2.7% to Rs 727.90. Oil exploration large-cap ONGC surged nearly 4% to Rs 1,066 due to crude oil price rise to about $70.50 per barrel. Dolphin Offshore gained 10% to Rs 240.20 on reports that it is close to acquiring Mumbai-based, privately-owned shipping company, Procyon Offshore Services. Gujarat State Petronet rose 2% to Rs 32.15 after the company reported robust fiscal 2006 results. Mahindra & Mahindra soared 7% to Rs 580 on reports that it plans to build a factory in Tamil Nadu. The plant is likely to make multi-utility vehicle, Ingenio, which is expected to be launched in 2008.

IT stocks were in demand. Wipro advanced 2.2% to Rs 447, Satyam Computer gained 2.3% to Rs 680, TCS advanced 1.8% to Rs 1,672 and Infosys rose 0.6% to Rs 2,935. Reliance Capital surged 10% to Rs 515. The stock advanced on high volume of 4.8 million shares. Infomedia India advanced 20%, to Rs 194.25 on plans to buy-back its shares at Rs 245 per share. Infomedia intends to buy-back 14% of its equity from shareholders holding less than 50 shares. VisualSoft Technologies soared 12% to Rs 83 on reports in a section of the media that Megasoft, with development centers in Chennai and Hyderabad, is likely to acquire the company.

Among the decliners were Dr Reddy’s Lab dipping 6.7% to Rs 1,257. Ciba Specialty Chemicals also plunged 15% to Rs 295 after the company posted a sharp fall in Q4 March 2006 net profit, which declined to Rs 3.20 crore from Rs 7.90 crore in Q4 March 2005.


[R]9:45AM Stocks opened in the negative.[/R]
Stocks started below the flat line Thursday, reflecting cautiousness ahead of Fed Reserve meeting and higher oil prices. A slight rise in weekly unemployment claims drew little reaction from investors. The Labor Department said the number of jobless claims filed grew by 11,000 to 308,000 last week, just beating economists'' estimate of 305,000. The airline sector dropped on news that British and U.S. regulators are probing several carriers over ticket prices and fuel surcharges. British Airways PLC fell $4.51 to $63.28, and United Airlines parent UAL Corp. lost 38 cents to $31.87. Bed Bath & Beyond Inc. dropped $2.09 to $34.83 after the home retailer issued a weak full-year earnings outlook. In the first hour of trading, the Dow Jones industrial average fell 26.24, or 0.24%. The Standard & Poor''s 500 index was down 3.48, or 0.28%, and the Nasdaq composite index lost 6.62, or 0.31%. Bond yields remained inverted as prices fell. The yield on the 10-year Treasury note edged up to 5.17% from 5.16% late Wednesday, while the 2-year yield steadied at 5.2%.


[R]9:00AM Stock futures pointed to a roughly flat opening.[/R]
Stock futures indicated flat to higher opening Thursday, with trading expected to be lackluster due to the lack of significant news and traders looking ahead to next week''s Federal Reserve meeting. Economic data may attract some attention, as the Labor Department released its report on initial jobless claims, which showed that jobless claims rose a little more than economists had expected. In corporate news, shares of Allianz ((AZ)) are expected to see trading activity as the insurer said it is planning to cut 7,480 jobs due to the restructuring and modernization of its Dresdner Bank AG and Allianz Deutschland AG. Family Dollar ((FDO)) gained 2.4% in pre-market trading after the company reported better-than-expected Q3 earnings and raised its full year earnings forecast.

[R]Initial jobless claims rose slightly above estimates.[/R]
Thursday morning, the Department of Labor released its report on initial jobless claims in the week ended June 17. The report showed that jobless claims rose a little more than economists had expected. The Labor Department said that jobless claims rose to 308,000 from the previous week''s revised figure of 297,000. Economists had expected jobless claims to increase to 305,000 compared to the 295,000 originally reported for the previous week. The report also showed that the four-week moving average fell to 311,250 from the previous week''s revised average of 316,250. With the decrease, the less volatile moving average fell for the third consecutive week. The Labor Department added that continuing claims in the week ended June 10 rose to 2.439 million from the preceding week''s revised level of 2.421 million.

Family Dollar Stores Inc, ((FDO)), discount retailer, reported that Q3 income advanced to 37 cents a share, from 32 cents in the year-ago period. Sales increased to $1.57 billion from $1.43 billion in last year''s Q3. The company topped analysts’ forecasts for earnings of 35 cents a share. forecast earnings of 19 cents to 22 cents a share. Analysts'' estimate stands at 20 cents

Del Monte Foods Co, ((DLM)), packaged foods company, reported that Q4 net income advanced to 29 cents a share, from 9 cents a year earlier. Earnings from continuing operations were 21 cents a share and sales advanced to $799.2 million from $774.4 million in last year''s Q4. The company topped analysts’ forecasts for earnings of 20 cents a share. The company also announced a transformation plan that includes the elimination of management layers. Del Monte anticipates to incur pre-tax charges of about $110 million over the next two years from the plan, but also expects higher long-term growth because of costs savings. For the first quarter, Del Monte forecast earnings per share to be flat to a loss of 4 cents.

Gerber Scientific Inc., ((GRB)), apparel and flexible materials company, reported Q4 net income of 17 cents a share. Results were hurt by a charge of 2 cents a share related to the adoption of accounting for contingent asset retirement obligations. Revenue came to $143.1 million. The company did not provide year-ago results. The company topped analysts’ expectation for earning of 11 cents a share. The company added that incorrect accounting for its non-qualified supplemental pension plan may have resulted in an understatement of previously reported expenses during fiscal 1994 through fiscal 2005, net of income taxes, of about $800,000 to $1.5 million.

[R]8:00AM BA investigated for alleged price-fixing.[/R]
British and U.S. agencies are reportedly investigating alleged price-fixing by British Airways and other airlines on passenger fares and fuel surcharges. BA said it was assisting the Office of Fair Trading and the U.S. Department of Justice with the investigations, with Virgin Atlantic and American Airlines also cooperating with the investigation. BA shares tumbled following the announcement, and were down 4.9% at 349.75 pence in midmorning trading on the LSE.

American Airlines said that it ‘has received a United States federal grand jury subpoena in connection with a government investigation into alleged price fixing in the air passenger industry.'' Eight other airlines, Ryanair, bmi, Continental, Lufthansa, Finnair, KLM, Icelandair and SAS, said they were not being investigated. But SAS AB''s SAS Cargo in Copenhagen, Denmark, said the EU alleged that cooperation among airlines began in 2000 and involved agreements about surcharges imposed by airlines to offset certain external costs. SAS said the costs included surcharges on fuel, added security after the Sept. 11, 2001, attacks in the U.S., and premiums for war-risk insurance after the start of the war in Iraq.


[R]7:15AM Asian stocks finish higher on Japan’s trade data and overseas gains.[/R]
Asian markets closed higher. The Nikkei 225 Average closed up 3.36% to 15,135.69, making its first break above the 15,000 level in two weeks. Sentiment was upbeat on the release of the economy ministry''s all-industries index, which advanced 1.3% in April from March, the first gain in three months. Camera maker Canon gained 3%. Consumer electronics company Sony climbed 2.3%. Chip-equipment maker Kyocera surged 4.6% and Toshiba Corp. added 2.8%, advancing as the electronics maker gave a press briefing late in the day to launch its next-generation, high-definition optical disc recorder. In Hong Kong, shares followed the regional trend. The Hang Seng Index advanced 1.1% to 15826.70, as some investors considered a global correction based on concerns over rising U.S. interest rates and inflation had been overstated. Taiwan shares also finished higher as strength in U.S. markets overnight sparked bargain hunting on the local exchange. The Weighted Price Index of the Taiwan Stock Exchange gained 185.56 points, or 2.9%, to 6485.15, bouncing back from a six-month low Wednesday, when it shed 1%.Construction companies led Thursday''s gainers, advancing 5.2% overall, followed by electronics firms, which accounted for 73% of volume and advanced 4%.Markets in South Korea, Singapore and Australia gained more than 1%. Shanghai and Wellington were 0.8% higher. Shares listed in Shanghai slipped slightly.


[R]6:30AM European shares gain on overseas rally and resource stocks.[/R]
European markets traded higher in mid-morning session. The U.K. FTSE 100 index rose 1% to trade at 5,723, the German DAX Xetra 30 index advanced 1.3% at 5,573 and the French CAC-40 index added 1.1% at 4,826. Mining shares such as Anglo American Antofagasta, and oil companies, including BP and Royal Dutch Shell, were among the top gainers in Europe. Allianz announced plans to reduce nearly 7,500 jobs as part of a restructuring plan targeting stronger earnings. The company advanced 1.7%. Lafarge, the French building materials group, advanced 3.3% after it lifted its mid-term targets and said it was considering selling its underperforming roofing business to help boost profits. Deutsche Borse advanced 4.2% and Euronext gained 2.9% as investors digested the latest comments from Euronext’s suitors. John Thain, chief executive of the New York Stock Exchange, denied any possibility of making him abandon his bid for the bourse operator.

U.S. light crude oil for August advanced 64 cents to $70.97 a barrel, putting up nearly a dollar on Wednesday, in a gasoline-led rally. European benchmark Brent advanced 65 cents to $69.82. The dollar fell slightly against the euro. The 12-country currency bought $1.2663, up from $1.2660 Wednesday evening in New York. The British pound advanced on the dollar as well Thursday, rising to $1.8457 from $1.8447. The dollar dropped against the yen, to 114.85 yen from 114.87.