Economic Growth Slows to 1.6% Rate

Elena
27 Oct, 2006
New York City

U.S. stock futures traded lower, hurt by disappointing GDP data. The Commerce Department reported that Q3 U.S. economic growth slowed sharply, increasing at a real seasonally adjusted annual rate of 1.6% after a 2.6% increase in Q2. The growth rate came in below the 2.0% growth rate expected by economists.

[R]9:00AM Gross Domestic Product slowed to 1.6%.[/R]
The Commerce Department reported that Q3 U.S. economic growth slowed sharply, increasing at a real seasonally adjusted annual rate of 1.6% after a 2.6% increase in Q2. The growth rate came in below the 2.0% growth rate expected by economists.

Chevron Corp.'s ((CVX)) said its Q3 soared to $5 billion, hitting a new high in its 127-year history The company posted 40% profit jump of $5.02 billion, or $2.29 per share, up from $3.59 billion, or $1.64 per share last year, beating analysts' estimates of $2.03 a share. Avon Products Inc. ((AVP)), a direct seller of cosmetics, reported a Q3 net income drop of 47% to 19 cents a share from 35 cents a year ago. The quarterly results were hurt by higher ad spending, restructuring costs, and a charge related to a tax dispute resolution in Britain. Revenue rose 9% to $2.06 billion from $1.89 billion last year, exceeding estimates. Wireless carrier Alltel ((AT)) posted Q3 profit jump of 11% to $1.04 from 98 cents a year ago, due to strong customer additions.

In merger-and-acquisition news, Mexican cement manufacturer Cemex SAB de CV said it is considering an offer of about $11.7 billion in cash for Australian heavy building materials maker Rinker Group Ltd. The Mexican company would also assume about $1.1 billion in Rinker debt. The deal would create one of the world's biggest building materials companies with revenue of $23.2 billion and more than 67,000 employees in more than 50 countries. S&P 500 futures shed 2.10 points to 1,390.80 and Nasdaq 100 futures fell 3.00 points to 1,750.00. Futures for the Dow Jones Industrials Average dropped 19 points to 12,170


[R]8:00AM Stock markets declined ahead of GDP data.[/R]
U.S. stock market futures pointed to a lower opening Friday, reflecting quarterly earnings from Microsoft and nervousness before GDP data, expected to show that the U.S. economy grew at a slower pace. On Thursday better-than-forecast profits released by Exxon Mobil Corp., Dow Chemical, Comcast Corp. and others boosted the sentiment, carrying the S&P 500 index to its highest close in about six years.

On Friday, investors were looking to the GDP figures, expected to show that during the third quarter the U.S. economy has grown at a 2% annualized rate, down from 2.6% growth in the second quarter, due to slowing housing market. On the corporate news front, Microsoft ((MSFT)) reported late Thursday an 11% rise in both profit and revenue in Q1 amid higher-than-expected sales of products including server software. But the company also warned that its results for its Q2 would be hurt by plans to defer about $1.5 billion in revenue to the following quarter. Sun Microsystems ((SUNW)), computer server and software maker, reported narrower quarterly loss as revenue rose 17%.

The IPO of the Chinese bank ICBC was in the centre of international news. Shares of the bank soared in both Shanghai and Hong Kong in its debut. Goldman Sachs ((GS)) has a 5% stake in ICBC, and underwriters on the IPO were Merrill Lynch, Deutsche Bank and Credit Suisse. Dow Jones futures were recently down 14 points, S&P 500 futures slipped 2.2 points and Nasdaq futures declined 2.2 points.


[R]7:30AM HK buoyed by largest IPO, Japan retreats on banks.[/R]
Asian markets ended mixed on Friday. In Tokyo, The Nikkei 225 Stock Average ended 0.9% lower at 16669.07. Banking company Mitsubishi UFJ shed 1% on concerns that weaker consumer price inflation means the Bank of Japan will be in no hurry to lift interest rates further. Japanese nationwide core consumer prices in September rose 0.25% on year, below analyst expectations of a 0.3% rise.

Advances by Honda, Nissan Motors and Sony cushioned broader losses. Shares of Honda rose 2.4%, while Nissan gained 2.2% on optimism new model releases and Sony rose 1.2%. Canon fell 2.4% after the group reported stronger quarterly profits but failed to upgrade its earnings outlook

The Hang Seng was up as much as 0.5% to 18446.46. In the largest IPO in the world, shares for ICBC soared in Hong Kong but disappointed investors in Shanghai. The largest lender of China saw its stock price rise 15%, but only 5.1% in Shanghai.

Elsewhere, Australia S&P/ASX 200 shed 0.6%. South Korea Composite Stock Price Index, or Kospi, dropped 0.4% while Malaysia KLSE Composite gained 0.5%. New Zealand benchmark NZX-50 index traded nearly flat. Taiwan Weighted Price Index rose 0.6% and Singapore Straits Times Index gained 0.1%.


[R]6:30AM European stocks marginally better Friday, as pharma stocks dip.[/R]
European markets were broadly flat by mid morning on Friday. the FTSE 100 eased slightly to 6,182.7, Frankfurt Xetra Dax was also marginally better at 6,286.34, while the CAC 40 in Paris fell 0.1% to 5,426.07.

Advancers

Telecoms led the advance on Thursday upbeat earnings from Telenor and France Telecom. Meanwhile, Telekom Austria was said to be considering buying a stake in Greek Hellenic Telecom, known as OTE, when the Greek government sells a stake early next year.Telekom Austria gained 2.9%, while OTE added 1%.

Telenor, which performed strongly yesterday, added a further 1.7%, while France Telecom gained 0.6%. Sector peers Deutsche Telekom and Spanish Telefonica gained 1.5% and 1.1% respectively.

Chip stocks were higher, wit Infineon up 1.1% and Franco-Italian group STMicroelectronics adding 1%. ASML, the Dutch maker of chip manufacturing equipment gained 1.5%. Nokia, the Finnish mobile phone group, gained 1.2% after announcing a network contract win in Ukraine.

Decliners

UK pharmaceuticals groups AstraZeneca and GlaxoSmithKline led the decline after downgrades from Credit Suisse. Astra shed 1.9%, while Glaxo fell 2.6%.

Oil and gold

Crude oil futures advanced on Friday, recovering to some extent from a sell-off by some traders who were locking in gains made when prices surged earlier this week. The front-month December light, sweet crude contract on the NYME was up 23 cents to $60.59 a barrel. Brent crude at London ICE Futures exchange rose 26 cents to $61.03 a barrel.

Gold opened Friday at a bid price of $594.00 a troy ounce, down from $594.30 late Thursday.

Currencies

The euro edged down against the U.S. dollar Friday after news that orders to U.S. factories surged last month by the greatest amount in more than six years. The euro bought $1.2678 in morning European trading, compared with $1.2693 in New York late Thursday. The British pound fell to $1.8882 from $1.8907. The dollar was also higher against the Japanese yen, rising to 118.49 yen from 118.39 yen.