ECB Keeps Rates Unchanged

Elena
06 Jul, 2006
New York City

The European Central Bank held its key interest rate steady at 2.75%, in line with expectations, but promised to be vigilant on inflation. The latest ECB''s decision coincided with the decision made by the Bank of England to hold interest rates steady at 4.5% for the 11th consecutive month.

[R]11:30AM Stocks traded higher on bargain hunting.[/R]
The major averages moved firmly in the positive territory with traders turning to bargain hunting after the sharp decline Wednesday. Stocks shot higher, lifted by sharp gains in shares of major tobacco companies, including Altria Group ((MO)). Altria gained 7.6% to $78.88 after a favorable court ruling, strongly boosting both the Dow and the S&P 500 index. The health insurance sector advanced over the course of morning training, lifted by Humana ((HUM)), up 2%. The Morgan Stanley Healthcare Payor Index rose 1.3%. Significant strength was visible in the gold sector, as the precious metal gained in value after some weakness recently. Airline stocks made a strong performance, supported by gains for ExpressJet ((XJT)) and JetBlue ((JBLU)) partly due to some weakness in the price of oil, which pulled back off the record high after a petroleum report showed a bigger-than-expected decline in crude oil inventories but an unexpected increase in gasoline inventories. At the same time, the price decrease contributed to some weakness in the oil service sector. The Philadelphia Oil Service Index dropped 0.9%. In late morning trading, the Dow Jones industrial average gained 97.01, or 0.87%. The Standard & Poor's 500 index was up 6.21, or 0.49%, and the Nasdaq composite index added 11.34, or 0.53%. Bonds gained ground, with the yield on the 10-year Treasury note down to 5.19% from 5.22% late Wednesday.

[R]Crude oil inventories extended recent decline.[/R]
Crude oil inventories declined during the most recent week, according to government statistics released Thursday. This added to a slide posted in the previous period. Meanwhile, gasoline inventories ticked higher, reversing part of the previous week''s slide. The Department of Energy''s Energy Information Administration said that crude oil inventories fell by 2.4 million barrels for the week ended June 30. Specifically, the measure slipped to 341.3 million barrels from the previous week''s level of 343.7 million barrels. This followed a decline of 3.4 million barrels in the previous week. Oil inventories for the June 30 week were 3.6% higher than last year. Meanwhile, gasoline inventories showed a week-over-week advance of 700,000 barrels. This followed a decline of 1 million barrels in the previous week, which snapped a streak of gains. The level of gasoline inventories was 1.4% below last year. Distillate fuel oil had an inventory advance of 1 million barrels during the week. This built on a recent streak of gains, including an advance of 1.8 million barrels in the previous week.


[R]10:30AM Indian Sensex slips 1.3% on profit taking.[/R]
The Sensex in India declined 151.67 points, or 1.3%, to close at 10,767.97. The stock trading on Bombay Stock Exchange was $600 million (or Rs 2,691 crore) lower than Wednesday’s $617 million (or Rs 2,775 crore). During the session, 955 shares advanced, 1,347 declined and 93 were unchanged.

Tata Steel in a plan to strengthen its control on the company has asked its parent company Tata Sons to increase its holding. Tata Steel plans to issue 27 million shares in a preferential allotment at a price of Rs. 516 per share. Tata Sons has also acquired 3 million shares in VSNL, international telecom company controlled by Tata Group.

In other corporate news Videocon, consumer electronics products maker has agreed to acquire worldwide unit of Daewoo, South Korean electronics maker for a price of $500 million.

In the stock market trading cement stocks led the gainers but stocks in banking, auto, metals and capital goods stock led the losers.

HDFC, ACC, HLL and Gujarat Ambuja led the gainers, while ICICI Bank, Satyam, Dr Reddy, BHEL and Tata Steel declined the most. ICICI Bank shed 4%, to Rs 486. The company’s shares today turned ex-dividend on the bourses (divided Rs 8.50 per share). Tata Steel lost 2.8%, to Rs 548 on 3 million trading volume due to profit-taking after a recent surge. Power-equipment company BHEL declined 3% to Rs 1,912. IT shares slipped too. Satyam Computer was down 3%, to Rs 710.15, TCS declined 2.3%, to Rs 1,804, Wipro was off 1.2% to Rs 490 and Infosys edged down 0.4%, to Rs 3,175.

High oil prices pulled auto shares down, as Hero Honda lost 2.2%, to Rs 775, Bajaj Auto shed 1.4%, to Rs 2,769 and car large-cap Maruti Udyog slipped 1%, to Rs 802. Engineering & construction company, L&T, shed 2.3% to Rs 2,215. Index large-cap Reliance Industries shed 1.2%, to Rs 1,081, on profit-taking after a recent jump in the stock on 2 million trading volume.

Cement shares were in focus on expectations of strong Q1 June 2006 results. ACC advanced 0.2% to Rs 814.50 and Gujarat Ambuja Cements gained 0.2% to Rs 102.75. However, UltraTech Cement slipped nearly 4% to Rs 717.50 and Grasim declined 1.2%, to Rs 1,955.


[R]9:45AM Stocks rebounded on upbeat data.[/R]
U.S. stocks opened higher, following a report which showed a decline in initial jobless claims last week and signaled ongoing health in the job market. Lower oil prices and mild June retail sales also helped market rebound from steep losses in the prior session. Retailers posted slower same-store sales in June due to higher gasoline prices and rising interest rates. The results raised optimism that the moderating economy will prompt the Fed Reserve to stop interest-rate hiking. Weak retail sales dragged on some stocks. Dow component Wal-Mart Stores ((WMT)) dropped 55 cents to $47.02. The retailer had reported 1.2% rise in June same-store sales, below estimates of 2%. JCPenney Co. ((JCP)) sank 67 cents to $66.71, despite 4.3% rise in same-store sales, beating forecasts of 2.8%. In the first hour of trading, the Dow Jones industrial average gained 32.02, or 0.29%. The Standard & Poor''s 500 index was up 1.87, or 0.15%, and the Nasdaq composite index added 4.83, or 0.22%. Bonds were flat, with the yield on the 10-year Treasury note steady at 5.22% from late Wednesday.


[R]Initial jobless claims declined.[/R]
The Department of Labor released its report on initial jobless claims in the week ended July 1 on Thursday. The report showed that jobless claims fell modestly compared to the previous week. The Labor Department said that jobless claims fell to 313,000 from the previous week''s revised figure of 315,000. Economists had expected claims to increase to 315,000 compared to the 313,000 originally reported for the previous week. The report also showed that the four-week moving average rose to 308,500 from the previous week''s revised average of 306,000. The increase comes after the less volatile moving average fell in the four previous weeks. The Labor Department also said that continuing claims in the week ended June 24 rose to 2.455 million from the preceding week''s revised level of 2.403 million.


[R]9:00AM Stock futures pointed to a higher opening ahead of data.[/R]
U.S. equity futures indicated a positive start, as the major averages looked to rebound from yesterday’s decline when surging oil prices and worries about a North Korean missile test weighed on stocks, with technology leading the market lower. On Thursday market will be focused on a number of retail sales and economic data releases. Same-store sales for the month of June are expected to grow 3.2%, or 4.2%, excluding Wal-Mart Stores numbers. Among the companies which released disappointing results Costco ((COST)) reported same-store sales increase of 6%, vs. expectations of 6.9% gain, while Gap ((GPS)) posted a 6% drop in same-store sales, worse than the 5.1% estimate. Home furnishings retailer Pier 1 posted 18.4% drop, missing expectations for a decline of 14.1%. Teen retailers posted generally disappointing results. Abercrombie & Fitch Co. suffered a 4% decline in same-stores sales, vs. the expected 0.3% gain. Pacific Sunwear of California ((PSUN)) suffered a 2.7% drop in same-store sales, worse than the 0.5% decline expected. But Bebe Stores ((BEBE)) posted a 3.5% gain for June, in line with estimates.

Results at department stores were mixed, with Nordstrom ((JWN)) posting a 4.7% gain in same-stores sales, slightly below the 4.9% estimate, while Federated Department Stores Inc.((FD)) had a 1.7% increase in same-store sales, below the 2.8% estimate. Limited reported a 3% rise in same-store sales, below the estimated 5.1%. But J.C. Penney Co. Inc. ((JCP)) had a 4.3% gain in same-store sales in its department store business, better than the expected 2.8% increase. Ann Taylor posted a 12.5% growth in June same-store sales, surpassing the 6.1% estimate. At Children''s Place, same-stores sales rose 14%, better than the 10.8% projected by Wall Street. Dow Jones futures were recently up 26 points, S&P 500 futures rose 2.1 points, and Nasdaq futures rose 2 points.

Federated Department Stores Inc, ((FD)), department store operator, reported it expects earnings before items of for Q2 and $1.91 to $2.04 a share for the full year. The company said this outlook excludes one-time merger integration and inventory valuation costs and a gain on the sale of credit receivables. This post-split view is unchanged from its previously disclosed forecast.

Family Dollar Stores Inc, ((FDO)), retailer, reported same-store sales advanced 3.6%, down from analyst estimate for a same-store sales increase of 4.6%. The company said net sales rose 9.5% to about $620.5 million. The company also forecast a July same-store sales increase of 5%-7%.

Delta and Pine Land Co., ((DLP)), a maker of cotton seed, reported its Q3 net income rose to $1.28 a share, from 91 cents a share in the year-earlier period. Sales at the company advanced 41% to $286.6 million from $203.3 million. The company missed analysts forecast for earnings of $1.34 a share.

BJ''s Wholesale Club Inc, ((BJ)), retailer, reported it expects Q2 net income of 37-40 cents a share, lower than its earlier forecast of 43-47 cents a sahre and below the figure of 44 cents a share predicted by analysts. The company said June same-store sales fell 0.1% amid foul weather. Total sales for the period increased by 3.6% to $825 million.

Aeropostale Inc, ((ARO)), retailer, announced that June same-store sales rose 5.3%. Analysts forecast a gain of 0.8%. Total sales for the five weeks ended July 1 increased 22.7% to $105.8 million, the company added.


[R]8:00AM Macquarie leads a group to acquire Duquesne Light Holding.[/R]
A group led by Macquarie Infrastructure Partners is planning to acquire Duquesne Light Holding Inc., parent of Pittsburgh electric utility Duquesne Light, for $1.6 billion. The investors will pay $20 for each Duquesne share outstanding, almost a 22% premium over the stock''s close at $16.44 Monday on the Nymex. Company’s shares rose 18%, to $19.39 Wednesday in NYSE composite trading. The deal is expected to close in the first quarter 2007 after receiving federal and Pennsylvania regulatory approvals, as well as approval by Duquesne''s shareholders.

The group, including Diversified Utility & Energy Trusts, a 50-50 joint venture between Macquarie Bank and Australian investment firm AMP Ltd., will also assume more than $1.4 billion in long-term debt and other liabilities. The Macquarie consortium said it will honor the current collective-bargaining agreement for Duquesne''s union-represented workers. Non-represented employees also will keep their wage-and-benefit packages.


[R]7:30AM Asian markets finished mixed, Japan down on N. Korea missile tests.[/R]
Asian markets finished mixed on Thursday. The Nikkei 225 Stock Average slid 202.54 points, or 1.3%, to 15321.40. Consumer-finance companies were the big decliners, with Credit-card issuer OMC Card the biggest percentage decliner, plummeting 10%. Consumer-finance sector Takefuji slumped 5.7%. Real-estate stocks also came under fire. Sumitomo Realty & Development shed 2.4%, Mitsui Fudosan lost 1.6%, and Mitsubishi Estate was off 2.0%. The Korea Composite Stock Price Index, or Kospi, ended down 1.2%, or 15.89 points, at 1263.96, having its fourth-consecutive session of losses. LG.Philips LCD shed 3.4%, while Samsung Electronics dropped 0.8%. Kookmin Bank dropped 1.6%, and the auto maker Hyundai Motor dropped 1.4%. Hong Kong’s Hang Seng Index advanced 1.1% to end at 16440.99. Chinese computer-maker Lenovo Group gained as much as 4%. Taiwan''s Weighted index finished flat at 6659.07, while China share prices soared to a two-year high as investors returned to the market, buying big capitalized shares following recent declines. The benchmark Shanghai Composite Index rose 1.33% to 1741.47.


[R]6:30AM European shares gain ground on oil rally.[/R]
European markets were higher by mid-morning. The U.K. FTSE 100 index climbed 0.4% at 5,851, the German DAX Xetra 30 index rose 0.3% at 5,642 and the French CAC-40 index gained 0.4% at 4,940. On the corporate front, leading energy producers advanced. BP gained 1.5%, Royal Dutch Shell rose 1.1% and Total advanced 1.4%. Germany''s Bayer slipped 1.2% following its statement that it would sell 34 million shares to fund its acquisition of healthcare peer Schering. France''s Veolia Environnement dipped 1.9% after Vivendi disclosed plans to place its final 5% stake in the company, breaking the remaining ties to what was formerly called Compagnie Générale des Eaux. British bread company RHM advanced 1.1% to 271 pence after private equity firm Doughty Hanson said that it would place the remaining 93 million shares, or 26.6% of RHM, at 266 pence a share.

Oil held near record highs above $75 a barrel, supported by worries over Iran''s nuclear program and expectations of a drop in U.S. gasoline stockpiles as the summer season gets into gear. Gold hit a high of $628.30 an ounce before retreating to $624.00/624.70 by 0947 GMT, down from $627.40/628.10 in New York late on Wednesday, when gold advanced nearly $6. The dollar fell slightly against the European currency. The euro inched up to $1.2735 from $1.2732 as traders awaited a meeting of the European Central Bank later in the day. The dollar was trading at 115.48 yen, down 0.23 yen from late Wednesday in New York.