Commodities Weigh on European Shares

Elena
11 Sep, 2006
Frankfurt

European markets finished mostly in the negative, pressured by weakness among resource stocks as crude oil and gold prices moved steeply down. Resource companies like BHP Billiton and Rio Tinto slipped over 4%. London FTSE 100 closed down 0.5%, the French CAC 40 fell 0.3%, while the German DAX reversed earlier losses to add 0.1%.

[R]12:30PM European markets ended down on weak resource stocks.[/R]
European markets finished mostly in the negative, pressured by weakness among resource stocks as crude oil and gold prices moved steeply down. Resource companies like BHP Billiton and Rio Tinto slipped over 4%. Losses at oil and gas giants like Royal Dutch Shell and Total also weighed. Yet the telecom sector provided some support after speculation emerged that Telecom Italia may sell its mobile operations. France Telecom jumped 3.5%, Deutsche Telekom advanced 3%, and Vodafone rose 1.1%. London FTSE 100 closed down 0.5%, the French CAC 40 fell 0.3%, while the German DAX reversed earlier losses to add 0.1%

Oil prices fell $1 after OPEC agreed to keep output steady. Light crude October delivery fell $1.19 to $65.06 a barrel. London Brent dropped $1.23 to $64.10. The U.S. dollar traded mixed. The euro traded at $1.2685, up from $1.2676. The dollar bought 117.74 yen, up from 116.87. The British pound stood at $1.8617, down from $1.8649. European gold tumbled below $600. In London the precious metal traded at $585.30, down from $609 per ounce. In Zurich gold traded at $585.55, down from $609.10. Silver closed at $11.22, down from $12.08.


[R]11:30AM Weak resource and tech stocks drag sentiment.[/R]
Losses by resource stocks and a decline by the shares of Dell kept market averages in the negative territory. Metal and energy stocks came under pressure amid a continued decrease in commodities prices. Gold stocks moved sharply lower, as the price of gold pulled back below $600 an ounce. Energy stocks tumbled on falling crude prices, with oil giant and Dow component Exxon Mobil Corp ((XOM)) standing out as a notable decliner, off 2.8%.

Networkers, airlines, and biotech also showed weakness. Computer maker Dell ((DELL)) fell 1.7% after it said it would delay its Q2 earnings filing and suspend its buyback program. Meanwhile, semiconductors notably advanced, helping to limit the downward move. Shares of Freescale Semiconductor ((FSL)) shot up 18% on news private equity firms are close to an acquisition deal of the company for $16 billion.

There are economic reports due Monday, but a number of Federal Reserve officials are offering their views on the economy. The Fed Reserve is scheduled to meet on September 20 to discuss interest rates. In late morning trading, the Dow Jones industrial average lost 37.94, or 0.33%. The Standard & Poor''s 500 index shed 6.24, or 0.48%, and the Nasdaq composite index fell 12.46, or 0.58%. Bonds edged lower, with the yield on the benchmark 10-year Treasury note rising to 4.80% from 4.78%on Friday.


[R]10:30AM The Sensex sheds 3% due to pressure on blue-chip stocks.[/R]
The Sensex on BSE ended 367.96 points, or 3% lower, to finish at 11,550.69. The market-breadth was weak as 1,972 shares declined, 536 advanced and 45 shares were unchanged. Four stocks declined for every stock that advanced. The turnover on BSE was Rs 3,390 crore, compared to Friday’s Rs 3,459 crore. The turnover on NSE was 7,187.38 crore. Volatile Sensex fell more than 3% or 385 points on July 17th. Sell orders from internation funds drove the index lower.

Metal stocks led the decliners. Hindustan Zinc plummeted 8.4% to Rs 599.10, Sterlite Industries declined 8% to Rs 435.50, Hindalco lost 6% to Rs 172.40, and NALCO shed 5% to Rs 201. Steel large-cap Tata Steel dived 5.9% to Rs 493.50.

Other major stocks that declined included Tata Motors slipping 6% to Rs 840, Hindustan Lever losing 4.9% to Rs 228.95, ACC shedding 4.9% to Rs 898.95, Cipla sinking 4.6% to Rs 245, Gujarat Ambuja Cements declining 4.4% to Rs 110, HDFC Bank losing 3.7% to Rs 818, Infosys dropping 3.6% to Rs 1,729. Index heavy Reliance Industries declined 2.7% to Rs 1,099, closing off a lower level after diving 4.3% to a low of Rs 1,081.50.

Pharma stocks also fell under selling pressure. Ranbaxy shed 3.7% to Rs 401.25. Ranbaxy Laboratories announced Monday that it had received approval from the U.S. FDA to market Loperamide Hydrochloride and Simethicone tablets. Loperamide is an anti-diarrhoeal drug, while simethicone relieves gas.

The only stock from the Sensex group to close in positive territory was Hero Honda advancing 1.3% to Rs 746. Select shares bucked the trend and advanced as well. Blue Star soared 6.6% to Rs 723.65, Alembic Glass gained 5% to Rs 2,090.15, Hercules Hoists gained 10%, to Rs 2,649.50, Jindal Drilling rose 5% to Rs 319.60, Phillips Carbon Black jumped 5% to Rs 76.15, Rishi Laser added 4.6% to Rs 78.50, Machino Plastics advanced 4% to Rs 59.60, Subhash Projects increased 3.9% to Rs 144, Orient Paper rose 3.3% to Rs 537 and Balkrishna Industries gained 3% to Rs 557.50.

United Western Bank surged 5% to Rs 22.05, continuing its upward movement. LML Ltd. skidded 19.78% to Rs 14.80 after the two-wheeler maker stated its net worth had been eroded by the end of August.

Prime Minister Singh is scheduled to visit Brazil for a two-day talks beginning tomorrow. Trade between the two nations have grown fifteen fold in ten years to $3.2 billion. Mr. Singh’s visit marks the first visit by an Indian Prime Minister in the last 38 years. Mr. Singh will also attend trilateral talks between Brazil, India and South Africa known as IBSA summit this week.


[R]9:45AM Stocks opened lower on Dell and lower oil.[/R]
U.S. stocks started trading in the negative Monday morning, as declining oil prices sent energy shares lower and news that Dell Inc. suspended its share repurchase program further weighed on the sentiment. Another drag on the market was Bank of America ((BAC)) which lost 1% after securities firm UBS downgraded the nation''s largest retail bank on signs of weakening credit and eroding deposit trends. Dell Inc. ((DELL)) fell 3.9% after announcing it will delay filing its fiscal Q2 report and suspend its share repurchase program due to accounting probes. In the first hour of trading, the Dow Jones industrial average lost 21.77, or 0.19%.

Gold stocks posted steep losses in early trading, as the price of gold dropped $20.30 to $597 an ounce. Similarly, a continued decrease by the price of oil contributed to significant weakness in the oil service sector. The computer hardware, airline, and housing sectors also moved to the downside. At the same time, gains by semiconductor stocks helped to limit the downside for the markets. Freescale Semiconductor ((FSL)) led the semiconductor sector higher, climbing 18% on news a private equity firms is close to a deal to acquire the company for more than $16 billion. The Standard & Poor''s 500 index shed 3.82, or 0.29 %, and the Nasdaq composite index fell 13.33, or 0.62%.


[R]09:00AM Stock futures traded down on weak oil prices.[/R]
U.S. stock market futures traded lower across the board Monday, dragged by retreating crude oil prices. Oil giants like Exxon Mobil were in focus in pre-market trading as crude October delivery fell 1.5% to $65.26 a barrel amid expectations that OPEC will keep production steady at high rates. Investors were also anxious ahead of inflation data releases due out this week, expected to shed light on the outlook for interest rates. No major economic reports were scheduled for Monday.

Among companies in focus, Dell ((DELL)) dropped 3.4% to $20.91 in pre-open trading after the PC maker said it was delaying the filing of the Form 10-Q for Q2, citing certain accounting and financial matters related to the informal SEC investigation. In addition, Dell suspended its buyback program and postponed a meeting with analysts scheduled for Wednesday.

In merger-and-acquisition news, a consortium of investment firms was near a deal late on Sunday to acquire Freescale Semiconductor Inc. ((FSL)) for more than $16 billion. Its stock rose 19% at $36.50 in early electronic composite trading. Steelmaker Ipsco Inc. ((IPS)) agreed to acquire steel tube maker NS Group Inc. ((NSS)) for about $1.46 billion. There were further signs of merger activity as Nordic and Baltic bourse group OMX ((OMX)) held exploratory talks about being acquired by exchange operator Nasdaq Stock Market Inc. ((NDAQ)). Standard & Poor''s 500 futures were down 5.3 points, below fair value. Dow Jones industrial average futures were down 39 points and Nasdaq 100 futures were down 7.5 points.


[R]8:00AM Ipsco agreed to acquire NS Group for $1.46 billion.[/R]
Steelmaker Ipsco Inc. ((IPS)) agreed to acquire steel-tube producer NS Group Inc. ((NSS)) in a deal valued $1.46 billion, or $66 a share, with the transaction price representing a 43% premium to NS Group''s share price of $46.15 Friday. Ipsco will finance the purchase with cash on hand and debt from a committed bank-credit line. The transaction, which is expected to close in 2006, has been approved by both companies’ boards. Banc of America Securities will advise financially Ipsco, while Raymond James will be a financial advisor of NS Group.

The companies said the acquisition will add to Ipsco''s 2007 earnings before the effect of synergies. The companies estimate the value of operating synergies at more than $50 million before taxes and they expect to fully realize them within three years. Late in July, Ipsco reported Q2 net income above estimates. Quarterly profit rose 23% to $156.4 million, or $3.25 a share, as sales climbed 30% to $893.6 million. NS Group reported Q2 profit fell 14% to $32 million, or $1.41 a share, as sales advanced 15% to $192.3 million. The new firm will have annual revenue of around $4 billion.


[R]7:30AM Asian markets end lower on energy stocks.[/R]
Asian markets finished lower on Monday. The Nikkei 225 Average finished the day 1.78% lower at 15794.38. Shares dropped as a steeper-than-expected fall in machinery orders pulled down Fanuc, Okuma and other machinery makers. Orders declined 16.7% on a month-to-month basis in July. Fanuc fell 2.1%, Okuma dropped 4.4% and Makino Milling Machine slipped 4.2%. Oil-related stocks dropped after oil futures fell to levels not seen in five months on the NYME last Friday. Japan Petroleum Exploration slumped 3.7% and Inpex Holdings lost 3.4%.

Hang Seng Index in Hong Kong lost 1.15% to close at 16948.59. The fall in the Hang Seng Index was led by China-related shares, particularly energy companies. Offshore oil producer Cnooc shed 2.5%, pulled down by further declines in oil prices. Among other China-related companies, China Mobile dropped 2%.

South Korea Kospi Index declined 1.54% to 1334.08 and Australia S&P/ASX 200 fell 1.42% to 5026. Stocks in South Korea closed lower on foreign selling, led by losses in banking and automobile stocks. Kookmin Bank shed 2% and Woori Finance Holdings fell 2.1%. Affiliates of Hyundai Automotive Group declined after South Korea antitrust regulator announced Monday it started an investigation into suspected violations of fair trading rules at the group affiliates.

In Australia, growth concerns weighed on the stock market for the fourth straihgt day, as investors pulled back from the market in view of weaker-than-expected economic data from Japan. Mining group BHP Billiton, falling 3.5%, tracked decliners.


[R]6:30AM European markets slip Monday on miners weakness and oil.[/R]
European shares were lower by mid-morning on Monday. The U.K. FTSE 100 index slipped 0.4% at 5,853, the German DAX Xetra 30 index dipped 0.3% at 5,777 and the French CAC-40 index edged down 0.5% at 5,049. BHP Billiton, Rio Tinto and Anglo American all lost more than 3% and oil and gas shares including Royal Dutch Shell and Total also lost.

Telecom Italia, mobile-phone provider, is expected to announce Monday that it will sell its mobile unit, according to an online report Sunday. Vodafone Group which gained 0.7% after it said that it plans to launch a fixed-line broadband service before the end of the year. U.K. insurance company Prudential gained 1.5% after a report suggested that reinsurance group Swiss Re has approached Prudential in a bid to buy its closed life fund business for around 5 billion pounds ($9.4 billion).

Oil prices dropped below $66 a barrel Monday amid expectations that OPEC ministers would not change their production targets when they meet later in the day. Light, sweet crude for October delivery fell 28 cents to $65.97 a barrel in electronic trading on the NYME.

Gold traded lower Monday at $596.20 an ounce, down $18.70 an ounce from Friday close of $614.90. The euro rose against the U.S. dollar. The European currency bought $1.2683 in early European trading, up from $1.2676 late Friday in New York, after a sell-off in the yen supported the U.S. currency. The British pound also strengthened against the dollar on Monday, trading at $1.8660, up from $1.8649 in New York. The dollar gained against the Japanese currency, trading at 116.96 yen, up from 116.87 on Friday.