Mexico Leads Global Rally

123jump.com Staff
03 Jul, 2006
New York City

Markets around the world gained on the first day of the third quarter. Averages rose in Asia, Europe and Americas. Mexico led the global gain with 4.2% surge. Investors perceived that the ruling party candidate has 1% lead when 96% of votes were counted. Construction spending fell unexpectedly in May, according to the Commerce Department. June sales of GM, Ford, Chrysler and Nissan declined. Honda and Toyota reported sales gain.

[R]2:30PM Major averages advance as market approached near close.[/R]

-Dow closed up 77.80 points, Nasdaq up 18.33 and S&P 500 up 9.99.
-Yield on 10-year bond closed at 5.16% and 30-year closed at 5.21%.
-Crude oil priced was unchanged and closed at $73.93 per barrel.
-Gold up 20 cents to close at $616.20 per ounce.

-Asian markets closed higher, led by 1.3% rise in Indonesia and 0.8% gain in India, Thailand and Philippines. Japan and Australia closed near 0.4%.
-European markets closed higher, led by 1.4% rise in Norway. Switzerland, UK and Belgium gained close to 0.9%.
-Latin American stocks surged led by 4.2% advance in Mexico and 1.4% in Brazil.

Global markets staged a rally led by Latin American markets. Averages in New York rose as news on construction spending and manufacturing was released. May spending declined unexpectedly on the fall in private spending however an index of manufacturing activity showed widening base across the nation but at a slower pace then expected. The index of manufacturing activity from Institute of Supply fell to 53.8 in June from 54.4 in May lower than expected 55.

Domestic auto makers reported a decline in auto sales in June. GM ((GM)) reported 26% decline, followed by 15% decline by Chrysler ((DCX)) and 6.9% by Ford ((F)) from a year ago. U.S. sales of Toyota Motors ((TM)) sales rose 15% and that of Nissan ((NSANY)) fell 19%.

Separately boards of Nissan and Renault approved to open talks with General Motors to explore three way merger talks between companies.

Mexico and Brazil rallied for different reasons. Mexico surged more than 4% on the perception that losing candidate is not going to carry out days of protest. Investors had feared that in the event of close election, either candidate may ask for a recount and slow down the progress of building the government. With more than 96% of the polling booths counted, local media is projecting, Mr. Felipe Calderon, candidate from the ruling party PAN, with 36.4% votes and populist candidate Mr. Lopez Obrador with 35.5% votes.

73 million of the 110 million people in Mexico were eligible to vote and close to 40 million people voted during this election. The stock market rallied on the news that the Mr. Calderon has a lead of 370,000 after 96% of counting and it is unlikely to be reversed when all the votes are counted. Mexican peso gained 2% to close at 11.128 to a dollar.

ADR listed Mexican stocks rose in New York trading. American Movil ((AML)) gained 6%, Cement maker Cemex ((CMX)) advanced 5.3% and Grupo Televisa ((TV)) rose 5.9%. Home builder Dessaroladora Homex ((HXM)) gained 1%. Beverage and bottling company Fomento Economico Mexico ((FMX)) rose 5%.

Brazil stock market gained 1.4% with a strong rise in telecom and banking stocks. Mobile telephone company TIM Participacoes gained 5.3% on the news that it has cancelled stock offering announced earlier. Other telecom stocks Tele Norte rose 1.6% but Embratel declined 0.3%. Banking stocks Banco Itau gained 3.7% and Banco Bradesco gained 4%.

[R]12:30PM European markets ended higher.[/R]
European markets closed in the positive, lifted by gains for oil majors and merger-and-acquisition news. Upbeat start on Wall Street also provided support to the market sentiment. Oil companies like BP and Royal Dutch Shell rose 1.2% and 1.4% respectively. Automaker Renault added 0.2% on news that its board meets late Monday to discuss a potential alliance with General Motors. Among other car makes, DaimlerChrysler shares added 0.4%, while Volkswagen gained 0.7%. Merger-and-acquisition speculation also helped to inspire European gains, including British supermarket group WM Morrison, up 3.7% and brewing company SABMiller, up 1.2%. The German DAX 30 rose 0.55, the French CAC 40 added 0.3%, and London FTSE 100 climbed 0.9%.

Oil prices climbed close to $74 ahead of the Independence Day holiday. Light crude July delivery gained 19 cents to $73.70 a barrel. The dollar traded mixed versus major currencies. The euro traded at $1.2808, up from $1.2787. The dollar bought 114.68 yen, up from 114.30. The British pound stood at $1.8447, down from $1.8485. European gold prices moved higher. In London the precious metal traded at $624.20, up from $613.50 per ounce. In Zurich gold traded at $624.25, up from $615.25. Silver closed at $11.28, up from $11.04.


[R]11:30AM Stocks traded moderately higher on mild economic data.[/R]
Stocks moved moderately higher in light pre-holiday trading, reflecting mild economic data and news of a possible alliance between General Motors Corp.((GM)) and Nissan Motor. An unexpected slowdown in monthly manufacturing activity and construction spending and a drop in producers prices supported views that a moderating economy would keep the Fed Reserve from further raising interest rates. The gold sector stood out as the best market performance, with the Amex Gold Bugs Index extending a recent upward move with a 3.2% gain. Energy stocks also moved higher, as the price of oil increased. Strength was visible in the brokerage, telecommunications, and computer hardware sectors. Meanwhile, housing stocks came under pressure, contributing to a 0.7% loss by the Philadelphia Housing Sector Index. USG ((USG)), building products maker, helped to lead the sector lower, falling 22.3%. In late morning trading, the Dow Jones industrial average advanced 46.83, or 0.42 %. The Standard & Poor's 500 index was up 6.19, or 0.49%, and the Nasdaq composite index gained 9.91, or 0.46%. Bonds recouped some of their earlier losses following last week's rally, with the yield on the 10-year Treasury note rising to 5.16% from 5.14% late Friday.

[R]Construction spending unexpectedly dropped.[/R]
The Department of Commerce released its report on construction spending in the month of May on Monday, showing a drop in spending that came as a surprise to economists. The report showed that construction spending fell 0.4 percent in May following a revised 0.2 percent decrease in April. Economists had expected spending to increase 0.3 percent compared to the 0.1 percent decrease originally reported for April. The decrease in construction spending came as a drop in private construction more than offset an increase in public construction. The Commerce Department said that spending on private construction fell 0.6 in May, reflecting decreases in spending on both residential and non-residential construction. At the same time, spending on public construction rose 0.7 percent in May, benefiting from a 0.5 percent increase in spending on educational construction.

[R]Business activity in the manufacturing sector unexpectedly slowed down.[/R]
Monday morning, the Institute for Supply Management released its report on business activity in the manufacturing sector in the month of June, showing that the pace of growth in the sector slowed unexpectedly. The ISM said that its purchasing managers index fell to 53.8 in June from an unrevised 54.4 in May. While a reading above 50 indicates growth in the sector, economists had expected the index to increase to 55.0. The slowdown in the pace of growth in the sector was partly due to a slower pace of growth in production, with the production index falling to 55.1 in June from 57.2 in May. The report also showed a contraction in employment, as the employment index fell to 48.7 in June from 52.9 in May. The contraction comes on the heels of 12 consecutive months of growth. At the same time, the report showed an acceleration in the pace of new orders growth, with the new orders index rising to 57.9 in June from 53.7 in May. The ISM also said that prices continued to increase at a rapid pace, although the prices index dipped to 76.5 in June from 77.0 in May.


[R]10:30 AM Indian Sensex continues to advance for a second session in a row.[/R]
The Sensex in India finished the trading session 86 points higher, or 0.81%, to settle at 10,695.26. The turnover on BSE was much lower than Friday’s, amounting to $500 million or Rs 2,335 crore, compared with Friday’s $600 million or Rs 3,313 crore.

Reserve Bank of India reported that at the end of April 2006, foreign exchange reserve rose to $160 billion, a jump of $25 billion from a year ago. The Bank also said that the balance of payment reversed from a deficit of 4.7 billion at the end of December 2005 to a surplus of $13.2 billion at the end of March 2006.

IT companies climbed higher. Index large-cap Reliance Industries advanced. Cement stocks declined. Firm global crude oil prices boosted the commodity stocks. Auto shares mostly closed lower despite strong sales for the June month. IT shares advanced on expectations of strong fiscal first quarter ending in June 2006. Infosys advanced 2.6% to Rs 3,158. Infosys announces Q1 results on July 12th. TCS advanced 3% to Rs 1,790 and Satyam Computer climbed 0.5% to Rs 715. But, Wipro lost 2.6% to Rs 500. The fall in the rupee against the dollar in the quarter is expected to boost company earnings.

Reliance Industries edged up 0.9% to Rs 1,068.15, extending its recent rally. Reliance Communications was up 0.5% to Rs 250.20, making a solid intra-day rebound. The stock bounced back from the session’s low of Rs 238.10 on trading volume of 5 million shares.

Tata Steel advanced 1.3% to Rs 540 after the company said on Monday that its quarterly sales jumped 28% in volume from a year earlier on robust demand from the auto sector. Sales of steel climbed to 1.12 million tonnes, with sales to the auto sector rising 32% to 0.19 million tonnes, the company said in a statement. Production advanced 17% to 1.11 million tonnes. ONGC advanced 1.3% to Rs 1,123 on the back of firm crude oil prices, which were near $74 a barrel. State Bank of India gained nearly 2% to Rs 742 after it forecast a 25% loan growth in the year to March 2007.

Cement shares were weak as heavy rains lashed Maharashtra – a key cement consuming state. UltraTech Cement slipped 3% to Rs 727, Grasim lost 1.7% to Rs 1,900 and ACC declined 0.6% to Rs 779. Construction activity slows down during the monsoon season, resulting in a reduction of demand. Gujarat Ambuja Cements edged down 0.8% to Rs 98.70, June shipments advanced 8.3% from a year earlier to 1.18 million tonnes from 1.09 million tonnes. Car producer Maruti Udyog shed 1% to Rs 789.60 despite strong sales for June 2006. Bajaj Auto closed flat at Rs 2,740 despite the company reporting strong sales for the June month. Sales at Bajaj Auto advanced 33% to 213,918 units from 161,282 units.



[R]9:45AM Stocks opened higher on GM news.[/R]
U.S. stocks advanced Monday ahead of June data on manufacturing, with gains in shares of Dow component General Motors Corp. ((GM)). The car maker boosted market sentiment, rising 1.6% on news of possible alliance with Renault and Nisan. The board of French automaker Renault is set to meet to discuss opening up its partnership with Nissan to the U.S. carmaker. Some strength was visible in the computer hardware sector, boosted by a strong gain for Apple ((AAPL)), with the personal computer and iPod maker up 1.3%. Hewlett-Packard ((HPQ)) and Lexmark ((LXK)) also posted notable gains. The gold sector advanced along with the price of the precious metal, sending the Amex Gold Bugs Index up 1.9%. However, buying interest remained somewhat subdued, with many traders getting a head start on the Independence Day holiday. The markets close at 1 p.m. ET and will be closed on July 4. In the first hour of trading, the Dow Jones industrial average advanced 59.88, or 0.54%. The Standard & Poor's 500 index was up 5.59, or 0.44%, and the Nasdaq composite index gained 7.89, or 0.36%. Bonds ticked lower after last week's rally, with the yield on the 10-year Treasury note rising to 5.17 percent from 5.14 percent late Friday.


[R]9:00AM Stock futures pointed to a higher opening.[/R]
U.S. stock futures pointed to a higher opening Monday ahead of June data on manufacturing. However, trading is expected to be light with an early close before Tuesday's Independence Day holiday. Positive news from Dow component General Motors Corp. ((GM)) may help give a boost to stocks as the board of French automaker Renault is set to meet to discuss opening up its partnership with Nissan to the U.S. carmaker. Data on U.S. domestic car and truck sales for June are also due on Monday. Wal-Mart Stores Inc. ((WMT)) is expected to decline after reporting that June same-store sales rose 1.2%, the low end of its forecast. Citigroup Inc. ((C)) may also be in the spotlight on Monday as its Chairman and CEO Charles Prince rejected the idea of breaking up the financial services giant. S&P 500 futures rose 3.3 points, above fair value. Dow Jones industrial average futures gained 12 points and Nasdaq 100 futures were up 4.5 points.

Calpine Corp, ((CPNLQ)), power company, reported a quarterly loss of $1.23 a share, wider than a loss of 38 cents a share a year-ago. In a Form 10-Q filed with the Securities and Exchange Commission, the company said revenue totaled $1.36 billion, down from $2.04 billion in the same period a year earlier.

Maximus Inc, ((MMS)), provider of consulting and IT services to state and local governments, reported it expects to record a $10 million charge after settling a lawsuit in Georgia. The lawsuit, which related to alleged fraudulent guarantees of computer equipment leases signed by two former employees, followed the settlement of a related lawsuit in Pennsylvania in September. The company added the $10 million charge was not included in its recent earnings estimate for fiscal 2006 of 57 cents to 67 cents a share.

Qiao Xing Universal Telephone Inc ((XING)), telecommunications products maker, reported it expects net sales to advance up to 30% in 2006 to $463 million. The company also forecast an average yearly rate of growth of 35% in net income from 2006 to 2010.


[R]8:00AM Intelsat Ltd. and PanAmSat Corp. are set to complete a $3.2 B merger deal.[/R]
After three years of intense deal making by outstanding private-equity companies on both sides of the Atlantic, Intelsat Ltd. and PanAmSat Corp. are ready to merge. The companies are scheduled to complete a $3.2 billion merger deal Monday, creating a closely held company. The combined company’s fleet will consist of more than 50 orbiting spacecraft, making it the largest and most diversified global satellite-services operator. The new company is planning to expand its business in India and Latin America. At the same time, it hopes to participate in the drive to turn cellular phones and other mobile devices into Internet connections and entertainment centers.

With offerings including direct-to-home television broadcasting and support for classified U.S.-government operations, the enlarged Intelsat promised to shrug off the industry's staid image by exploiting burgeoning technologies. Investors who purchased some $3 billion in high-yield bonds from the two firms will demand significant synergies, little geographic overlap and streamlined management bent on reviving up growth in unconventional ways, if necessary. However, the combined company is likely to face major integration, personnel and marketing challenges to break out of the slow-growth pattern. The biggest immediate financial help is likely to come from a nearly 40% cut in the combined company's work force. Total head count eventually will shrink to about 1,000 from 1,400 or so, with PanAmSat executives largely overseeing marketing efforts and Intelsat officials primarily in charge of technical and operating issues.

For Q1 PanAmSat posted revenue of $213.2 million, up 2.1%, while Intelsat reported a 4% drop in overall revenue to $280.4 million.


[R]7:15 AM Asia closes mostly higher.[/R]
Asian markets closed broadly higher. The Nikkei 225 finished the day at 15571.62, for a 0.43% gain. Retailers and banks led gainers. Clothing-chain operator Fast Retailing gained 2.3%. Seven & I Holdings, operator of 7-Eleven, gained 0.5%. Among the financials, Sumitomo Mitsui Financial Group advanced 1.7%, while Resona Holdings gained 4.4%. Exporters also registered gains, with Hitachi up 0.4%, and Nikon up 0.6%. Nissan Motor shares advanced 0.6%, buoyed by news the company is open to inviting General Motors into its alliance with Renault, a move that could create an automotive group eclipsing Toyota Motor. The benchmark Shanghai Composite Index advanced 1.5% to 1697.28, its highest close since it finished at 1715.14 on April 13, 2004. The Shenzhen Composite Index gained 1.6% to 440.13. Hong Kong shares ended higher, with Hang Seng Index advancing 59.04 points, or 0.4%, to 16326.66. On the Hong Kong stock exchange, offshore oil company Cnooc Ltd. gained 0.8%, while aluminum giant Chalco advanced 4.35%. Australia's S&P/ASX 200 index climbed 0.36% and Taiwan's Weighted index was up 0.14%. South Korea's Kospi index was the only one to buck the trend edging down 0.04%.


R][6:30 AM European shares advanced lifted by commodities and strong Asia.[/R]
European markets traded higher on Monday. The U.K. FTSE 100 index edged up 0.4% to trade at 5,854, the German DAX Xetra 30 index gained 0.2% at 5,694 and the French CAC-40 index increased 0.01% at 4,966. European movers included U.K. defense contractor BAE Systems which dropped 4.3% after it announced that an independent expert has valued its 20% stake in European plane manufacturer Airbus at 2.75 billion euros, below market expectations. EADS, which owns the rest of Airbus, edged down 0.5%. Oil companies were also in demand after British oil giant BP said that second-quarter production is expected to reach 4 million barrels of oil equivalent a day, or 3 million boepd excluding TNK-BP operations, primarily due to divestments. BP shares slipped 0.1% in London. British supermarket group WM Morrison advanced 1.7% in London after a report stated that the company is being targeted by a private-equity consortium consisting of Texas Pacific, CVC and Permina. Also, brewing company SABMiller increased 1.4% after it said that it has agreed to buy the Sparks and Steel Reserve brands and related and related trademarks from McKenzie River Corp. for $215 million.

Oil prices reached nearer $74 a barrel on Monday on concerns over the possibility of record demand for gasoline during the Independence Day holiday in the US. Nymex is closed for two days because of the Independence Day holiday. Brent crude for August delivery rose 15 cents to $73.66 a barrel. Gold hit a high of $620.50 an ounce before easing to $619.35/620.35 by 0944 GMT. The U.S. dollar advanced against most other major currencies in European trading Monday. The euro traded at US$1.2760, down from US$1.2787 late Friday in New York. The dollar bought 114.76 Japanese yen, up from 114.38. The British pound traded at US$1.8432, down from US$1.8485.