European Shares Slide

Elena
19 Sep, 2006
New York City

European markets finished steeply in the red, despite benign U.S. wholesale inflation data and earnings-inspired gains. DaimlerChrysler lost 0.1% amid profit warning, while auto parts supplier GKN dropped 4.3% after UBS downgraded the company following DaimlerChrysler''s warning. London FTSE 100 dropped 1%, followed by the German DAX 30, down 0.9%, and CAC 40, down 0.6%.

[R]12:30PM European markets closed in the red.[/R]
European markets finished steeply in the red, despite benign U.S. wholesale inflation data and earnings-inspired gains. Investors kept a close eye on economic data, looking ahead to the Fed Reserve’s decision on interest rates Wednesday. Bank of Ireland rose 1.6% on expectations to deliver an excellent performance in the current half-year and raised its earnings forecast. Among other gainers, oil giant BP gained 0.3% in London, while peer Total added 0.1%. In the auto sector, DaimlerChrysler lost 0.1% amid profit warning, while auto parts supplier GKN declined 4.3% after UBS downgraded the company following DaimlerChrysler''s warning. London FTSE 100 dropped 1%, followed by the German DAX 30, down 0.9%, and CAC 40, down 0.6%.

Oil prices pulled back on receding supply worries and signals of cooling energy market. Light crude October delivery fell 69 cents to $63.11 a barrel. Gasoline futures slipped over 6 cents to $1.55 a gallon. The U.S. dollar turned lower versus major currencies. The euro traded at $1.2710, up from $1.2705. The dollar bought 117.04 yen, up from 117.85. The British pound stood at $1.8873, up from $1.8808. European gold traded mixed. In London the precious metal traded at $578.60, down from $579.50 per ounce. In Zurich gold traded at $580.10, up from $578.90. Silver closed at $11, up from $10.53.


[R]11:30AM Market averages lost direction ahead of Fed’s decision.[/R]
Stocks traded in a lackluster fashion Tuesday morning with investors looking ahead to the Federal Reserve''s decision on interest rates on Wednesday. Steeper-than-expected decline in housing starts weighed on market sentiment. On back of the weaker housing starts data, related retailers like Home Depot ((HD)) slipped 10 cents to $36.14, while Lowe''s Co. ((LOW)) fell 31 cents to $36.17. In company news, Napster ((NAPS)) jumped 14.9% to $4.08 after the company said late Monday it hired UBS Investment Bank to ‘examine potential combinations,’ including a sale of the company. According to the opinion of analysts, companies like Amazon.com Inc., RealNetworks Inc. may take interest. DaimlerChrysler AG ((DCX)) rose 13 cents to $49.31 after the company said its Chrysler Group will cut deliveries to dealers by 90,000 vehicles in Q3 due to falling sales of trucks and SUVs. While some weakness emerged in the gold, housing, and semiconductor sectors, the disk drive, computer hardware, and airline stocks moved to the upside. In late morning trading, the Dow Jones industrial average fell 17.29, or 0.15%. The Standard & Poor''s 500 index slipped 1.00, or 0.08%, and the Nasdaq composite index rose 0.37, or 0.02%. Bonds rose as stocks fell, with the yield on the 10-year Treasury note at 4.75%, down from 4.81% Monday.


[R]10:30AM The Sensex dips in volatile trading due to profit-taking.[/R]
The Sensex on BSE shed 100.83 points, or 0.84%, to close at 11,970.47. The BSE benchmark index traded in a range of 237.40 points during highly volatile session. The market-breadth was positive for most part of the day, but turned negative as small and mid-cap sector stocks slumped. For 1,595 shares that declined on BSE, only 929 advanced and 62 stocks were unchanged. From the Sensex stocks 24 declined while only 6 advanced. Decliners beat advancers 1,582 to 924 on trade of 230 million shares. The turnover on NSE was Rs 7,518.14 crore.

Most active stocks

Mahindra Gesco was the most-active stock on BSE with a turnover of Rs 213.57 crore, followed by Tech Mahindra with Rs 200.08 crore and Reliance Communications with Rs 165.35 crore.

Decliners

Tata Motors led the decliners, plunging 3.61% to Rs 828, Cipla fell 2.82% to Rs 253, Maruti was down 2.81 % to Rs 915, Grasim fell 2.66% to Rs 2,430 and Gujarat Ambuja fell 2.63% to Rs 113. Marsons Ltd fell 2.6% to Rs 3 even after securing an order from ABB Ltd for supply of electrical equipment worth approx Rs 20 million for their project at DPL, Durgapur, West Bengal. Reliance Energy fell 2.78% to Rs 455.

ONGC slipped 0.65% to Rs 1,148. It announced on Tuesday that it was aggressively pursuing opportunities to import liquefied natural gas and intended to acquire petroleum assets in Kazakhstan and Cuba. Hindalco Industries fell 0.8% to Rs 166.75 after performing well during most of the day. PVR Ltd declined 0.4% to Rs 254.05 on announcing its expansion into smaller cities with the launch of the PVR Talkies.

Advancers

Satyam gained 1.74% to Rs 837.50, TCS advanced 1.02% to Rs 1,007, Dr Reddy’s rose 0.43% to Rs 758 and ICICI Bank edged up 0.05 % to Rs 645.05. Reliance Communications rose 0.66%, to Rs 328.85, on 49.51 lakh shares. It had dipped sharply from an intra-day high of Rs 341.50, due to heavy selling.

Other news

Oil minister Murli Deora stated on Tuesday that fuel retailers in Maharashtra have agreed to withdraw their strike called to demand a cut in sales tax.

Goldman Sachs is reported to plan to invest $1 billion ( Rs. 4,500 crore ) in India over the next two years. The investment bank plans to expand investments from real estate and other infrastructure projects to asset management and support its global operations in merchant banking from India. The company has currently 1,000 people in Bangalore office and 40 people in Mumbai office. The Indian subsidiary CEO Brooks Entwistle said that India will have the third largest employee base for the company after the U.S. and Japan.


[R]9:45AM Stocks opened in the negative on interest rate worries.[/R]
U.S. stocks opened flat Tuesday after upbeat producer-prices data helped ease inflation fears, but another report showed a sharper-than-expected slowdown in home building, a day before the Fed Reserve announces its interest-rate decision. The pace of housing starts dropped twice as fast as expected, reaching its lowest level in over three years. Both the housing and the inflation data add to market expectations that the nation''s benchmark short-term interest rate will be left at 5.25% at the FOMC meeting Wednesday.

Technology stocks opened fractionally lower, though shares of Oracle Corp gained around 1% ahead of the business-software giant''s Q2 results. The semiconductor sector posted considerable weakness. The Philadelphia Semiconductor Index fell 1%, reversing from a three-month closing high Monday. Technology stocks opened fractionally lower, though shares of Oracle Corp gained around 1% ahead of the business-software giant''s Q2 results. In the telecommunications sector, most big phone stocks advanced after Motorola ((MOT)) agreed to acquire Symbol Technologies ((SBL)) for $3.9 billion. In the first hour of trading, the Dow Jones industrial average rose 2.56, or 0.02%. The Standard & Poor''s 500 index rose 0.48, or 0.04%, and the Nasdaq composite index rose 0.31, or 0.01%. Bonds rose as stocks fell, with the yield on the 10-year Treasury note at 4.76%, down from 4.81% Monday.


[R]09:00AM Stock futures turned flat on tame wholesale inflation data.[/R]
Stock futures were flat following an unexpected decline in core wholesale level inflation. The Labor Department said that U.S. producer prices rose by a smaller-than-expected 0.1% in August, while the core rate of the producer price index fell 0.4%, the largest drop since April 2003. Economists had expected a 0.3% gain in the August PPI and 0.2% rise in the core rate. Among companies in focus, Napster ((NAPS)) jumped 17% in pre-open trade after hiring UBS to study third-party interest in the company. Motorola ((MOT)) agreed to pay $3.9 billion, or $15 a share for Symbol Technologies. Shares of Motorola gained 0.4%, while Symbol’s climbed 15%. Business software giant Oracle ((ORCL)) is due to report its Q2 results after trading closes. S&P 500 futures dropped 1.6 points at 1,332.60 while Nasdaq 100 futures edged up 3 points at 1,655.50. Dow industrial futures rose 4 points.

[R]Housing construction dropped in August.[/R]
The Department of Commerce released its report on housing starts and building permits in the month of August on Tuesday, showing that housing starts fell more than economists had been expecting while building permits also fell. The report showed that housing starts fell 6.0 percent to a seasonally adjusted annual rate of 1.665 million units in August from a revised rate of 1.772 million units in July. Economists had expected housing starts to fall to a 1.750 million unit rate from the 1.795 million unit rate originally reported for the previous month. The decrease in housing starts was partly due to a 12.2 percent drop in housing starts in the Midwest. Housing starts in the West and South also fell, while housing starts in the Northeast increased by 5.4 percent. The Commerce Department also said that building permits fell 2.3 percent to a seasonally adjusted annual rate of 1.722 million units in August from a revised July rate of 1.763 million units.

[R]Producer prices rose less than expected in August.[/R]
Tuesday morning, the Department of Labor released its report on producer prices in the month of August, showing that prices rose less than economists had expected. The report also showed an unexpected drop in core prices. The Labor Department said that its producer price index rose 0.1 percent in August, matching the increase that was seen in the previous month. Economists had been expecting the index to increase by about 0.3 percent. The modest increase in producer prices was due in large part to a rebound by food prices, which rose 1.4 percent in August after falling 0.3 percent in July. A surge in prices for fresh and dry vegetables contributed to the increase in food prices. At the same time, the pace of growth in energy prices slowed significantly compared to the previous month, with energy prices edging up 0.3 percent in August after rising 1.3 percent in July. The report also showed that the core producer price index, which excludes food and energy prices, fell 0.4 percent in August after falling 0.3 percent in July. The decrease came as a surprise to economists, who had expected core prices to increase by 0.2 percent.


[R]8:00AM Motorola agreed to acquire Symbol.[/R]
Motorola Inc. ((MOT)) agreed to acquire Symbol Technologies Inc. ((SBL)) in a cash deal of about $3.9 billion, or $15 per each outstanding Symbol share. The deal is expected to complete late this year or early in 2007, pending regulatory clearance and the approval of Symbol stockholders.

The transaction which combines two well-known names in wireless technology will considerably advance Motorola''s enterprise mobility strategy. Pending completion of the deal, Motorola will gain in Symbol a company well established in mobile-data computing and radio-frequency identification, or RFID, technology. Symbol is also known for having a leading role in the development of barcode-scanning technology.

Motorola said the deal will contribute to earnings per share on an adjusted basis in the first year after closing. The company also said it will take certain unspecified non-cash charges relating to amortization associated with acquired intangibles and other one-time accounting and transaction-related costs. Symbol jumped 15.4% in pre-market trading, while Motorola rose 0.4%.


[R]7:30AM Asian stocks witness lackluster session.[/R]
Asian markets ended flat. The Nikkei 225 Average finished the day 0.05% higher at 15874.28. Stocks ended mixed, while the weaker yen benefited exporter stocks such as Toyota Motor and Matsushita Electric Industrial. Toyota rose 0.5% and Matsushita Electric Industrial added 0.8%. Toshiba Corp. fell 2.3% after saying it will recall 340,000 batteries in its laptop computers. Sony Corp fell 0.8%. In August, Sony shares were hit by a larger-scale recall of its batteries by Dell Inc and Apple Computer.

Hong Kong Hang Seng Index fell 0.23% to 17346.70. Shares closed lower on concerns a U.S.-led slowdown in the global economy would hurt corporate earnings. HSBC Holdings fell 0.4% and China Mobile dropped 0.6%. South Korea''s Kospi Index closed 0.03% lower at 1373.95. stocks closed flat as foreign buying limited losses brought on by institutional selling. Heavyweight technology shares fell after their recent rise, while transport stocks rose on easing oil prices. Samsung Electronics fell 0.2% while Hynix Semiconductor lost 0.5%.

Taipei lost 0.01% to 6881.87, and Australia S&P/ASX 200 decreased 0.32% to close at 5056.80. Stocks in Taiwan finished unchanged, as profit-taking in technology and financial firms after their gains Monday offset increases in mainland China-focused companies on yuan-appreciation hopes. In Australia, BHP Billiton fell 0.2%, and Westpac declined 1.4% in a continued negative reaction to its disappointing earnings update last week.

The Shanghai Composite Index bucked the trend and advanced 0.1% to end at 1735.24. Shares ended mixed, with foreign currency-denominated Class B shares declining on profit-taking after local media rejected speculation of an imminent merger between the Class B-share and yuan-denominated Class A-share markets.


[R]6:30AM European markets make dull start on Tuesday in spite of gains.[/R]
European markets were trading flat by mid-morning on Tuesday. The U.K. FTSE 100 index was firm at 5,892, the German DAX Xetra 30 index edged down 0.1% at 5,922 and the French CAC-40 index was flat at 5,147. Attention is expected to focus on the macro-economic data with the ZEW survey of German economic sentiment due for release later in the session. On the corporate front, the emphasis is still on the proposed merger deal from MAN, after Scania rejected the German conglomerate bid.

Advancers

Copper miner Kazakhmys led the advancers as ots shares rose 1.1% after its first-half net profit nearly tripled MAN traded 1.5% higher as advisers hope that resistance by the leading shareholders, Investor and Volkswagem, to the deal is mainly over price and that a sweetened offer could win them over as neither rejected the bid on principle. TeliaSonera rose 1.8%, continuing its strong performance from the previous session.

Bank of Ireland advanced 1.5% following its statement it is expecting to deliver an excellent performance in the current half-year. Newspaper publisher Independent News & Media gained 3.1% after it said its adjusted first-half profit rose 9%.

Decliners

Telecom Italia lost 1.3% after the Morgan Stanley cut its rating to underweight from equal-weight. Scania was 0.3% lower after rejecting the takeover bid from MAN.

Economic news

Diplomatic relations between Japan and Russia could be seriously hurt by the revocation of Russia for the Sakhalin-2 oil and gas project on environmental issues, Japan government spokesman warned on Tuesday. Ferenc Gyurcsany has resisted calls to step down as Hungarian prime minister and vowed to restore public order after an anti-government demonstration turned into a riot.