World Markets Dive

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

Market averages around the world declined on the North Korean Missile launch. Global markets sold-off on rate jitters, missile launch and private job market report. Gold and oil rose 2%. Enron founder, Ken Lay died at the age of 64 due to heart failure. Nissan and Renault are ready to talk with General Motors. Rambus signs a licensing pact with Toshiba.

[R]4:45PM North Korea launches missiles and markets around the world dive.[/R]

-S&P 500 closed 9.28 points lower, Dow closed down 76.20 and Nasdaq closed 37.08 lower.
-Yield on 10-year bond closed at 5.237% and 30-year bond closed at 5.287%.
-Crude oil gained $1.26 to close at $75.19 per barrel.
-Gold advanced $13.70 per ounce to close at $629.70.

-Asian Markets closed lower, led by near 1% decline in Japan, Taiwan and Singapore. Thailand closed 2% lower.
-European Markets closed at least 1% lower and Germany declined by 1.8%. Russia closed 2.5% and South Africa closed 2.02%.
-Latin American markets closed sharply lower led by 3.9% decline in Mexico and 2.7% in Brazil. Argentina closed down 1.3% and Chile lost 0.8%.

North Korea launched test missiles and markets around the world declined. North Korea tested seven missiles. The third launched missile, intercontinental ballistic missile named Taepodong 2, was aborted or failed in the first 42 seconds of its operation according to American officials. South Korean media further added that the fuel ignition system failure caused missile explosion with the debris falling in the coastal water surrounding Japan and Russia. Russian military experts and South Korean media said that as many as ten missiles may have been fired but American officials did not confirm the number.

Market averages in New York declined on North Korean missile tests. A private report on job markets suggested that 368,000 people were added in June to payrolls. Department of Labor is expected to release its data on jobs on Friday of this week. Commerce Department released report on factory orders, the orders in June rose 0.7%, 0.1% more than the estimates, and better than 1.8% decline in April.

Industrial, technology and retail sector stocks declined.

Asian markets took the dive first and oil and gold rose 2%. Japan, Thailand, Taiwan and Singapore had a sharp market correction. Oil and gold remained under pressure for the most of the day. In the Europe markets declined as well. North Korea and interest rate jitters weighed on the markets. In addition, France’s Credit Agricole said that it is no longer interested in buying U.K.’s Alliance & Leicester. The British bank stock declined 6% at close dragging with other bank stocks. EADS lost another 4.1% after the company said that its co-CEO Noel Forgeard and Airbus CEO Gustav Humbert have resigned.

Latin American stocks closed sharply lower, led a near 4% decline in Mexico. Mexican market finally woke up to the reality that it may take 4 to 5 weeks before final result of the Presidential election is known. Earlier the local election authority said the ruling party candidates lead declined from 1% to 0.6% when more than 99% of votes were counted prompting recount requests from both parties.


[R]12:30PM European markets dropped on North Korean missiles.[/R]
European markets closed sharply in the negative after North Korea launched seven missiles, with traders worried that the disagreement between North Korea and the United States could intensify. Investors were also nervous about interest rates decision ahead of announcement by both the Central European Bank and the Bank of England. In corporate news, Britain's Alliance & Leicester dropped 5.7% after Credit Agricole said it wouldn't go ahead with a bid for the U.K. mortgage bank. The German DAX 30 dropped 1.8%, the French CAC 40 climbed 1.3%, and London FTSE 100 rose 1%.

Oil prices rose on international concerns, related to North Korean nuclear testing. Light crude August delivery lost 4 cents to $73.89 a barrel. Heating oil added 1 cent to $2.0330 a gallon, while gasoline gained one cent to rise to $2.2230. Natural gas futures fell 5 cents to $6.050 per 1,000 cubic feet. London Brent rose 45 cents to$72.96. The dollar traded higher versus major currencies. The euro traded at $1.2704, down from $1.2791. The dollar bought 115.66 yen, up from 114.58. The British pound stood at $1.8334, down from $1.8446. European gold prices moved lower. In London the precious metal traded at $620.30, down from $621.80 per ounce. In Zurich gold traded at $619.95, down from $621.50. Silver closed unchanged at $11.24.


[R]11:30AM Stocks traded steeply lower on profit taking.[/R]
Stocks moved steeply down and the major averages moved firmly into negative territory, as news of a series of missile tests by North Korea led traders to turn to some profit taking. In economic news, the Commerce Department released a better-than-expected report on factory orders. Orders rose by a solid 0.7% in May, rebounding from a 1.8% drop last month, exceeding economists’ expectations of a rise just 0.1%.

Despite some strength in the price of gold, the gold sector stood out as one of the market's worst performances as traders cashed in on some of the sector's recent gains. Some semiconductor stocks moved sharply lower, with Marvell Technology ((MRVL)) being the most notable decliner, down 7.4% after it received a letter of informal inquiry from the SEC and a grand jury subpoena for documents related to its stock option grants and practices. Maxim Integrated Products ((MXIM)), chip maker, fell 2.9% on receiving a subpoena, requesting documents related to its stock option grants and practices. Rambus ((RMBS)) rose 6.7% on its announcement of a patent licensing agreement with Toshiba for memory controllers. Energy stocks also moved sharply lower, despite an increase in the price of oil. The Philadelphia Oil Service Index dropped 2.6%. Some networking, disk drive, and transportation stocks also showed significant weakness. In late morning trading, the Dow Jones industrial average fell 99.25, or 0.88%. The Standard & Poor's 500 index lost 13.62, or 1.06%, and the Nasdaq composite index dropped 41.43, or 1.89%. Bonds fell sharply, exacerbating the drop in stocks. The yield on the 10-year Treasury note rose to 5.23% from 5.15% late Monday.


[R]Factory orders rose 0.7% in May.[/R]
Wednesday morning, the Department of Commerce released its report on factory orders in the month of May. The report showed that orders rose much more than economists had been expecting after falling in the previous month. The Commerce Department said new orders for manufactured goods rose 0.7 percent in May following a revised 2.0 percent decrease in April. Economists had expected orders to increase 0.1 percent compared to the 1.8 percent decrease originally reported for April. The increase in orders came as a 1.6 percent increase in orders for manufactured non-durable goods more than offset a 0.2 drop in orders for manufactured durable goods. The report also showed that shipments of manufactured goods rose 2.2 percent in May following a 0.1 percent decrease in April. At the same time, inventories of manufactured goods fell slightly following a 1.0 percent increase in April. As a result, the inventories-to-shipments ratio fell to 1.15 in May from 1.17 in April.

[R]10:30 AM Indian benchmark index soars on favorable fund outflow reports.[/R]
The Sensex in India finished the day 257.42 points, or 2.4% higher, at 10,919.64. The turnover on BSE was $617 million or Rs 2,762 crore, higher than Tuesday’s Rs 2,058 crore. The market-breadth was positive, as 1,297 stocks advanced, 1,040 declined and 88 shares were unchanged.

Metal shares soared, led by firm metal prices on the London Metal Exchange. Hindustan Zinc surged 10% to Rs 617.55 on a huge volume of 1.5 million shares. Sterlite Industries advanced 3.5% to Rs 414, and Hindalco climbed 1.5% to Rs 179.65. Tata Steel advanced nearly 5%, to Rs 562.70. Tata Group intends to raise its stake in Tata Steel to 33.6% this fiscal year from 26.79%.

Cement shares were also in focus. Grasim jumped 5% to Rs 1,985, Gujarat Ambuja Cements advanced 3.3%, to Rs 102, ACC gained 3.4%, to Rs 816 and UltraTech Cement rose 1.6%, to Rs 745. In June 2006, cement dispatches advanced 8.2% to 51.95 lakh tonnes (5.2 million tones) as the traditional pick-up in construction activity before the monsoon boosted cement demand.

Hindustan Lever jumped nearly 4%, to Rs 241.50. The stock advanced on a huge volume of 2 million shares. Cigarette leader, ITC gained nearly 3.2% to Rs 184.70. Power utility Reliance Energy soared nearly 5%, to Rs 477. Tata Power gained 4%, to Rs 487.

Reliance Communications advanced 5%, to Rs 260 on reports that mobile phone operators have come to an agreement to share seven transmission towers in Delhi and two in Mumbai to reduce cost of setting up new towers by 50%. Bharti Tele-Ventures gained 2% to Rs 371. Maruti Udyog, largest auto maker, gained 4% to Rs 818 following reports that Suzuki Motor Corporation will build a new compact car in India for Nissan Motor Co., to be sold in Europe.

Engineering & construction large-cap L&T gained 3.5% to Rs 2,268. L&T said on Monday that it had secured an order worth Rs 329 crore (app $58 million) for high technology equipment. Bank shares were in high demand. HDFC Bank gained 3%, to Rs 812. IT stocks were also in focus on expectations of strong Q1 June 2006 results. Infosys gained 1.5% to Rs 3,190, and software giant TCS advanced 1.9% to Rs 1,849, and Satyam Computer climbed 0.8%, to Rs 733.70. TCS is now up close to 100% from its IPO price. Index large-cap Reliance Industries) gained 2.4% to Rs 1,099.30 continuing its recent sharp rise.


[R]9:45AM Dow and Nasdaq tumbled.[/R]
U.S. stock markets came under pressure in early trading, as news of a series of missile tests by North Korea inspired traders to lock in profits. North Korea launched seven missiles Wednesday, sending stocks around the globe down, with investors worried that the disagreement between North Korea and the United States could intensify. A large number of sectors suffered declines in the early going. The Nasdaq led the major averages lower with a decline of 1.2%. Technology stocks were among the most notable decliners, with the disk drive space falling by 1.8%, followed by the networking and software sectors, each falling by more than 1.4%.

Semiconductors posted significant weakness, dragged by Marvell Technology ((MRVL)) which dropped 5.4% after it received a request from the U.S. SEC and federal prosecutors over its executive stock compensation plans. Home building stocks were also weak, with Hovnanian ((HOV)) leading the group lower with a decline of 3.2%. Ryland ((RYL)) and Beazer Homes ((BZH)) also dropped more than 3%. Transportation stocks also fell as crude oil neared $74 per barrel. In the first hour of trading, the Dow Jones industrial average fell 61.71, or 0.55%. The Standard & Poor's 500 index lost 8.15, or 0.64%, and the Nasdaq composite index dropped 22.47, or 1.03%. Bonds fell along with stocks, with the yield on the 10-year Treasury note rising to 5.21% from 5.15% late Monday.


[R]9:00AM Stock futures pointed to a higher opening.[/R]
U.S. stock futures indicated a weaker market opening, resuming trading after the Independence Day Holiday. The trading session is expected to be volatile with worries about North Korea weighing on market sentiment. Stocks dropped across Europe and Asia after North Korea launched at least seven missiles. General Motors ((GM)) is also seen in the spotlight on news that Renault and Nissan CEO is set to meet his counterpart at GM later this month in Detroit. In economic news, the Commerce Department is due to release a report on factory orders in the month of May, with economists expecting orders to edge up 0.1% in May following a 1.8% drop in April. On the corporate front, Citigroup raised its rating on McGraw-Hill Cos. Inc. to ‘buy’. Jefferies & Co. lowered its rating on chip supplier Atheros Communications Inc. ((ATHR)) to ‘hold’ and cut its price target to $20 from $30.S&P 500 futures fell 5.2 points, below fair value. Dow Jones industrial average futures slid 44 points and Nasdaq futures were down 8.50 points.

Wilson Bowden, ((WLB)), home builder, reported that completions in the first half of the year declined 2.5% to 2,135, while the forward order book at the end of the period advanced 52% at 2,266 units. The company added that the average selling price per units climbed 6% to $382,000, reflecting a 3.1% increase in average unit size. Wilson Bowden also added that, as expected, margins remain under pressure because 50% of completions come from sites bought in the last two years, a period in which cost inflation has exceeded selling price gains. The company announced it continues to expect 2006 performance to be in line with expectations.

Oce NV, ((OCENY)), Dutch printing company, reported that its Q2 net profit advanced 6.1% to 12.2 million euros ($15.6 million) on 22.3% revenue growth. The company added that it has introduced a more aggressive pricing policy for its printing systems, which resulted in a fall in gross margin to 41.3% from 41.8%. The increase in sales from its new pricing policy will feed through to increased servicing revenue along with higher toner and ink sales.

Quest Software Inc, ((QSFT)), custom software applications developer, reported that it plans to restate certain past financial results to reflect proper recognition of expenses related to stock option grants. The company anticipates the restatement to result in material additional expenses. Quest intends to restate results for the fiscal years 2000 through 2005 and Q1 of fiscal 2006. The company plans to report its revenue for its fiscal Q2 on August 8.


[R]8:00AM Refco neared a deal with customers from Bermuda unit.[/R]
One of the U.S. biggest commodity brokerages Refco and nearly two dozen subsidiaries collapsed into bankruptcy proceedings, following an accounting scandal last year. Resolution of those cases has been complicated by dozens of lawsuits filed by RCM customers and creditors. More than 50 customers of Refco Inc.'s unregulated Bermuda unit struck a deal that would allow them to retrieve $2.3 billion from the unit. However, a single holdout customer retains the power to scuttle the pact. If the certain commodities trader doesn't agree to join the deal within two weeks, court proceedings would begin to liquidate Refco Capital Markets.

Under the settlement, RCM customers holding securities accounts would recover more than 70% of the value of their claims. Customers who hold foreign-exchange accounts would get more than 26% of the value of their claims. The foreign-exchange customers, moreover, would get an advance payment of $221 million once the deal takes effect. A third class of customers would get back the precious metals they deposited with RCM, or the proceeds from the sale of those metals.

Nearly two dozen customers, including Moscow-based hedge fund VR Global Partners and U.S. food company Cargill Inc., have signed the pact, but the customer with the single biggest claim against RCM hasn't agreed. If an agreement can't be reached within two weeks, RCM's bankruptcy case will be converted from a Chapter 11 reorganization to a Chapter 7 liquidation.


[R]7:30 AM Asian markets fell in the wake of North Korea missile launches.[/R]
Asian markets finished lower on Wednesday. The Japanese Nikkei 225 Index led the decline, shedding 0.73% to end the day at 15523.94. Exporters led Japanese decliners Wednesday. Nikon lost 0.49%, while Nintendo slumped 2.76%. Auto makers also suffered, with Honda plunging 2.17% and Toyota losing 1.16%. Nissan, whose board Monday announced it was open to bringing General Motors into its partnership with Renault, declined 1.9%. The Korea Composite Stock Price Index, In Seoul, sank 2.1% in opening minutes amid worries over the North Korea missile test, but then rebounded into positive territory briefly before slipping back. The benchmark index finished the session down 0.5% at 1279.85. The Hang Seng Index in Hong Kong fell 0.62% to 16267.18. Fixed-line phone company PCCW shed 0.89% amid concerns that negotiations over the potential sale of its telecom and media assets were at an impasse. China Netcom, which holds a 20% stake in PCCW and opposes the sale of the Hong Kong company's core assets to foreign bidders, dropped 3.87%. China's benchmark Shanghai Composite Index surged 2.2% as the Bank of China's initial public offering of yuan-denominated Class A shares made its trading debut in Shanghai. Elsewhere around the region, Taiwan's Weighted index shed 1.11%. Australia's S&P/ASX 200 edged down 0.15%.


[R]6:30AM Europe fell by mid-morning on bank statement and North Korea scare.[/R]
European markets traded lower by mid-morning on Wednesday. The U.K. FTSE 100 index shed 0.4% at 5,860, the German DAX Xetra 30 index slipped 0.5% at 5,700 and the French CAC-40 index dropped 0.5% at 4,960. Among the decliners was British bank Alliance & Leicester losing 6.3% in London in the wake of France's Credit Agricole announcement that it decided not to make an offer for Alliance & Leicester. Agricole slipped 0.3%. Tire makers, Continental and Michelin, each lost more than 1.5%, after Japan's Sumitomo Rubber warned on 2006 profitability levels following higher raw material costs. Advancers included Irish building materials company CRH gaining 1.2% after it said that, due to an improved performance in each of its business segments. France's Scor also advanced 4% after agreeing to buy German reinsurer Revios for 605 million euros ($775 million) from Globale Re.

Light sweet crude oil was traded over $73 a barrel, down 51 cents at $73.42. Gold was fixed in London at a recommended price of $625.75 bid per troy ounce at midmorning, up from $621.80 late Tuesday. Silver traded in London at $11.28 per troy ounce, up from $11.24. The dollar was up against the European currency. The euro traded at $1.2762, down from $1.2791 late Tuesday in London. The British pound traded at $1.8439, down from $1.8446. The dollar bought 115.04 Japanese yen, up from 114.58.