Democrats' Election Victory Weighs

Elena
08 Nov, 2006
New York City

Following Tuesday

[R]9:00AM Stock futures turned lower as Democrats seem to take over.[/R]
Following Tuesday’s strong rally, U.S. stock market futures dropped Wednesday, pressured by the possibility that the Democrats may gain control over the House of Representatives and the Senate as a result of the midterm elections. Although the Democrats were largely expected to take control of the House, they weren''t widely expected to take over the Senate. The possible takeover by the Democratic Party raised concerns among investors, as they are known to be less friendly to business than the Republicans and fewer U.S. government decisions are expected in the next two years.

In earnings news, Satellite television broadcaster DirecTV Group Inc. ((DTV)) reported that its Q3 profit nearly quadrupled to 30 cents a share, up from 7 cents last year, driven by 13% higher revenue and a lower rate of customer defection. Shares of the company climbed 6.5%, to $23.25 in premarket trading. Dynegy Inc. ((DYN)) reported a Q3 loss as the power company recorded a large write-down related to a Kentucky power plant. It forecast a bigger loss for the year than it previously estimated. Dynegy posted a loss of 14 cents per share, compared with a profit of 6 cents per share, a year earlier.

Major companies due to report earnings news include Federated Department Stores ((FD)), Cablevision Systems ((CVS)) and Cisco Systems ((CSCO)). True Religion Apparel ((TRLG)) is expected to drop sharply after warning it won''t meet analyst expectations for earnings or revenue. UTStarcom ((UTSI)) may see a downward move after delaying the release of its Q3 earnings for a review of its stock-option grant practices.

In corporate news, NYSE Group Inc.((NYX)), the operator of the New York Stock Exchange, announced on Wednesday it will reduce more than 500 jobs due to cut costs, eliminate duplicate services and leverage the results of its March acquisition of the Archipelago electronic exchange.

In European trading, Airbus owner EADS posted an unexpected loss, while automakers Volkswagen and PSA Peugeot Citroen turned mixed after naming new CEOs. S&P 500 futures dropped 6.60 points at 1,382.40 and Nasdaq 100 futures dropped 9.75 points at 1,742.00. Dow industrial futures dropped 39 points at 12,149.

[R]7:30AM Asian stocks end broadly lower, Japan falls on interest rates talks.[/R]
Asian markets finished broadly lower on Wednesday. The Nikkei 225 Index closed the session 1.1% lower at 16215.74. Mizuho Financial Group shed 2.7%, while shares of Softbank plunged 4.1% ahead of its earnings report due after the market close. Consumer-finance company Aiful, falling more than 7% after reporting weak financial results, finished down 1%. Shares of Canon fell 0.8%, while Nikon slipped 2.6%.

Toyota Motor jumped 1.8%, after the leading auto maker by sales in Japan posted strong profit growth for the fiscal first-half, raised its full-year profit outlook. Also in the auto sector, Honda Motor gained 0.5%.

Indexes in Hong Kong and Australia paused from record-breaking streaks, with Hang Seng Index in Hong Kong down 0.7% at 18807.35 as investors booked profits on China Mobile and other large-cap stocks that have led the recent rally. China Mobile fell 2.5%, its second day of loses. Property stocks remained in demand a day after the leading banks slashed interest rates by a quarter percentage point and blue-chip Henderson Land rose 1.5%. Mainland refiner Sinopec rose 0.4% on softer crude-oil prices and continuing speculation it will be added to the Hang Seng Index when results of quarterly index review are announced Friday.

Australia S&P/ASX 200 fell 0.6% to 5459.20, after setting highs for three straight sessions as investors worried about higher interest rates. BHP Billiton fell 1.5%, while oil and gas producer Woodside Petroleum fell 0.9%. Australian-listed shares of Singapore Telecommunications jumped 4.9% after reporting a better-than-expected 19% rise in quarterly profit.

The Kospi index in South Korea fell 0.5% to 1380.07. In Seoul, the construction sector declined 3.5%, although a rise in heavy technology stocks limited losses. Technology stocks posted gains, with Samsung Electronics advancing 1%, helped by a recent rise in technology shares in the U.S. New Zealand shares ended at record closing high for the second day in a row, as the benchmark NZX-50 Index added 0.2% to 3818.25.


[R]6:30AM European stocks fall in early trading Wednesday on US election results.[/R]
European markets were lower on Wednesday. By mid morning, the FTSE 100 in London lost 0.3% to 6,222.3, Frankfurt Xetra Dax shed 0.4% to 6,338.43, and the CAC 40 in Paris was down 0.4% to 5,417.95.

Advancers

Shares in European defense company and Airbus owner EADS advanced 2.1% in Paris after it confirmed it expects to reach sales of well above 37 billion euros in 2006. German retailer KarstadtQuelle rose 2.8% after the firm said its third-quarter profit before interest, taxes, depreciation and amortization fell 51.4% to 57.4 million euros.

Peugeot rose 1.5% after finding a replacement to Jean-Martin Folz, who already had said he is quitting.

Decliners

BHP Billiton shed 2.2%, while Xstrata lost 1.9%. Hypo Real Estate led the decline after its third-quarter results failed to beat expectations, despite a 25% rise in net profit. The shares fell 3.4%.

Truckmaker Scania declined too after German rival MAN appeared less likely to succeed in its bid for the Swedish company. Shares of Scania, which carry the majority of the voting rights, fell 2.9%.

Volkswagen, the biggest shareholder of Scania, was down 1.7% after Bernd Pischetsrieder, chief executive, unexpectedly announced his departure at the end of the year.

Oil and gold

Crude oil rose on trader and analyst speculation that U.S. heating oil inventories will drop with winter approaching in the Northern Hemisphere. Crude oil for December delivery advanced as much as 37 cents, or 0.6%, to $59.30 a barrel in after-hours electronic trading on the NYME. Brent crude oil for December settlement rose 25 cents to $58.73 a barrel on the London-based ICE Futures exchange.

Gold was trading in London at a $625.50 bid per troy ounce, down from $625.75 on Tuesday

Currencies

The U.S. dollar was lower against other major currencies in European trading Wednesday. The euro was quoted at $1.2792, up from $1.2771 Tuesday. The British pound was quoted at $1.9074, up from $1.9055. The dollar bought 117.55 Japanese yen, down from 117.68.