Banks, Pharmas Weigh on Europe

Elena
09 Nov, 2006
New York City

European stock markets closed mixed, reflecting earnings-inspired gains from industrial conglomerate Siemens and brewer Inbev and weakness in the healthcare and financial sectors. London FTSE 100 finished down 0.1% dragged by pharma and ban stocks. The German DAX 30 added 0.2%, supported by Siemens. The French CAC 40 rose 0.2%, helped by EADS.

[R]1:00PM European markets closed mixed.[/R]
European stock markets closed mixed, reflecting earnings-inspired gains from industrial conglomerate Siemens and brewer Inbev and weakness in the healthcare and financial sectors. London FTSE 100 finished down 0.1%, as losses among banking and pharmaceutical stocks like HBOS, GlaxoSmithKline, and AstraZeneca weighed on the index. The financial sector moved lower after the Bank of England raised its key interest rate by 5%. Drug stocks continued its recent decline amid the election victory by the U.S. Democrats. BT Group declined 2.3% despite a 28% in Q2 profit.

The German DAX 30 added 0.2%, boosted by 3.1% gain for Siemens on higher profit and sales for 2006. On the telecommunications front, shares of Deutsche Telekom ended 0.2% higher as the company outlined cost-cutting goals.

The French CAC 40 rose 0.2%, helped by EADS. Company’s shares rose 6.8% on reports linking Dubai International Capital with a potential EADS stake buy but eventually ended with a gain of just 1.1%. Shares of French bank Societe Generale edged 0.7% lower after it said its Q3 net profit rose 12.4% to 1.27 billion euros.

Crude oil climbed to the highest level this month a day after data showed weaker gasoline and diesel fuel inventories. Crude oil December contract rose $1.12 to $60.95 a barrel. London Brent climbed $1.51 to trade at $61.10. The U.S. dollar traded mixed against its rival currencies. The euro was quoted at $1.2782, up from $1.2756. The dollar bought 118.37 yen, up from 117.80. The British pound stood at $1.8990, down from $1.9049. European gold prices advanced. In London, gold traded at $625.20 per troy ounce, up from $623.20. In Zurich, the precious metal traded at $624.33 per ounce, up from $623.33. Silver closed at $12.75, up from $12.62.


[R]11:30AM Blue-chip stocks declined, while tech shares advanced.[/R]
Stocks reversed from earlier gains, as weaker-than-expected consumer sentiment data and higher oil prices limited the advance generated by Cisco profit, a narrowing trade deficit and lower import prices. Gold stocks rallied along with the price of the precious metal. Computer hardware and oil services stocks also moved to the upside.

With technology stocks benefiting from better-than-expected quarterly results from Cisco ((CSCO)), the tech-heavy Nasdaq advanced in morning trading on Thursday. Cisco boosted networking stocks, rising 7% on 28% profit jump. At the same time, losses by Merck ((MRK)) and Pfizer ((PFE)) helped to drag the Dow lower. The stocks turned in two of the pharmaceutical sector''s worst performances, falling 2.3% and 1.8% respectively. However, Dow component Hewlett-Packard ((HPQ)) rose 1.5% after Goldman Sachs raised earnings estimates and the price target for the stock. Gold stocks rallied along with the price of the precious metal. Computer hardware and oil services stocks also moved to the upside.

Media giant Viacom ((VIA)) dropped 2.1% as the company reported a 16% decline in Q3 earnings, but the results topped analyst forecasts. In late morning of trading, the Dow Jones industrial average fell 17.12, or 0.14%, to 12,159.42. The Standard & Poor''s 500 index rose 1.04, or 0.09%, at 1,386.92, while the Nasdaq composite index added 14.95, or 0.63%, to 2,399.86. Bonds were mostly flat, with the yield on the benchmark 10-year Treasury note at 4.63% from 4.64% late Wednesday.


[R]AM 10:30 The Sensex goes back to winning ways after two days of losses.[/R]
The Sensex on BSE finished 64.98 points, or 0.5%, higher to end at 13,137.49. The Sensex traded in a range of 123.04 points. The market-breadth was strong. As 1,473 shares advanced on BSE, 1,033 declined and 88 stocks were unchanged. For every 4 advancers there were 3 decliners. From the Sensex stocks, 17 advanced, while the rest declined. The turnover on BSE was Rs 4,088 crore, lower than Rs 4,305 crore on Wednesday. The turnover on NSE was Rs 7,837.47 crore, lower than Rs 8,572.66 crore on Wednesday.

Economic news

The Union Cabinet on Thursday discussed lifting a ban on sugar exports but did not set a date for such a move, a cabinet minister announced.

The Reserve Bank of India has announced that resident individuals would be allowed to remit up to $50,000 per financial year (increased from $25,000) for any current or capital account transactions or a combination of both.

Advancers

Satyam Computer advanced 3% to Rs 428 to lead the gainers, on reports that it has won a $71 million order for 7 years, from Qantas Airways of Australia.

ICICI Bank rose 1.4% to Rs 794.90. The stock struck an all-time high of Rs 804 in late-trading. ICICI Bank expects interest rates to remain steady. HDFC Bank ended 1.4% higher to Rs 1,017.

Tata Steel gained 2% to Rs 504. Some of the major shareholders of Corus Group have sold their shares in the company, raising doubts about a counter offensive to the $8 billion bid of Tata Steel for the Anglo-Dutch steel maker.

Software large-cap Infosys rose 0.8% to Rs 2,144. The stock gained for the third day in a row today, after shareholders approved a sponsored ADR issue, on Tuesday.

Index heavy Reliance Industries advanced 0.6% to Rs 1,260. Mahindra & Mahindra gained 6.6% to Rs 832 after Renault said on Thursday it was expanding its existing joint venture with Mahindra & Mahindra to manufacture more models for the Indian market.

Recently listed Development Credit Bank jumped 5% to Rs 51.10. Other companies which advanced included Indo Tech Transformers, jumping nearly 14% to Rs 218.55. Petron Engineering Construction gained 5% to Rs 177.10.

Glenmark Pharma surged nearly 6% to Rs 460. Financial Technologies jumped 7% to Rs 1,924.85. Infrastructure Development Finance Company gained nearly 5% to Rs 79.05. Bank of India and Union Bank of India have joined efforts with Infrastructure Development Finance Company for loan syndication.

Decliners

Car large-cap Maruti Udyog led the decliners falling nearly 3% to Rs 909.80 following reports that Nissan Motor Company has terminated talks with Japanese compact car maker Suzuki Motor Corp, for a project in which Suzuki was to build a Nissan model in India for sale in the local market.

Hindalco Industries plunged 3% to Rs 182.20, after the RBI said that foreign investors will not be allowed to buy shares in the firm without its permission, as foreign investment had touched the 22% limit.


[R]9.45AM The Nasdaq and S&P 500 opened higher. The Dow declined.[/R]
U.S. stocks opened mixed Thursday, with the Nasdaq and S&P 500 extending recent gains, while the Dow moving lower. The strength in the tech sector was contributed by better-than-expected quarterly results from tech bellwether Cisco ((CSCO)). The networking giant rose 6.8% after reporting strong Q1 profit growth and provided positive guidance. Shares of Cisco moved sharply higher on the news, contributing to significant strength in the networking sector. Cisco Systems pushed technology stocks higher after the world''s largest networking equipment maker reported a 28% rise. Technology stocks were also supported by Dow component Hewlett-Packard Co. ((HPQ)), rising 1.3% after Goldman Sachs lifted the company’s price target to $46 from $42.50.

Some strength also emerged among gold, internet, and computer hardware stocks. However, airline stocks came under pressure in early trading. Additionally, a notable loss of 1.4% posted by Merck ((MRK)) weighed on the Dow. Retail stocks advanced after J.C. Penney Co. ((JCP)) posted higher-than-expected Q3 profit on sales and raised its full-year financial forecast.

Well received economic news also generated positive sentiment. Investors cheered data, showing that trade deficit showed a sharp improvement in September, import prices dropped 2% in October, and initial jobless claims dropped 20,000 to 308,000. In the first hour of trading, the Dow Jones industrial average fell 9.76, or 0.08%, to 12,166.78. The Dow reached a new closing high of 12,176.54 on Wednesday. The Standard & Poor''s 500 index was up 1.21, or 0.09%, at 1,386.93, and the Nasdaq composite index added 11.37, or 0.48%, to 2,396.31.

[R]Initial jobless claims dropped by 20,000.[/R]
Thursday morning, the Department of Labor released its report on initial jobless claims in the week ended November 4. The report showed that jobless claims fell by more than economists had been expecting. The report showed that jobless claims fell to 308,000 from the previous week''s revised figure of 328,000. Economists had expected jobless claims to fall to 318,000 compared to the 327,000 originally reported for the previous week. The Labor Department added that the less volatile four-week moving average edged down to 311,250 from the previous week''s revised average of 311,500. The report also showed that continuing claims in the week ended October 28 rose to 2.448 million from the preceding week''s revised level of 2.405 million.


[R]9:30 AM London benchmark index falls due to Bank of England rate hike.[/R]
The FTSE 100 index in London lost 22.8 points to trade at 6,216.2, down from a five-year high in the previous session.

Economic News

The Bank of England on Thursday raised its key interest rate to 5% from 4.75%, its highest level in more than five years, as the central bank acts against possible wage increases that may appear in a few months.

Decliners

GlaxoSmithKline lost 1.4%. Concerns that the US Congress will look to cut the price of drugs following the recent mid-term elections had impacted GlaxoSmithKline negatively.

Mining stocks were also sharply weaker, with Xstrata off 2.4%. BT fell 1.8% after it revealed its share of the UK broadband market fell to 25% in the three months to the end of September, down from 30% in the previous quarter.

Man Group lost 0.8%, retreating from a strong run in advance of news of a 33% rise in interim profit before tax of $766 million.

Royal & Sun Alliance met expectations with news of operating profit of 590 million pounds, but its shares lost 1.1% as investors booked profits.

Dairy Crest fell 3.7% after it announced plans to place 6.3 million new shares in order to fund its 248 million acquisition of Saint Hubert, the French and Italian spreads business of Uniq.

Advancers

Scottish Power shares were last flat. Scottish Power shares jumped in early trade on reports that the Spanish group would bid for the company. The news provided hope for a further bout of cross-border consolidation and sent the wider utilities sector higher. Scottish & Southern Energy rose 2.9%.

SABMiller, the brewer, was 2.6% stronger after it reported a 33% rise in interim revenue and a 22% hike in profit before tax.

Punch Taverns was 2.1% stronger after the pub chain reported a 48% increase in profit before tax.


[R]9:00AM Stocks futures pointed to a nixed start, with Cisco providing a boost.[/R]
U.S. stocks indicated a flat market opening Thursday, reflecting rising oil prices and positive Cisco Systems quarterly earnings. U.S. stock futures edged slightly higher after a report showed a narrower-than-expected September trade deficit and a drop in import prices. The U.S. Commerce Department said the trade deficit narrowed by 6.8% to $64.3 billion, which was the largest narrowing since December 2004. In another report, the Labor Department said import prices dropped 2% in October, the largest drop in three years. Initial filings for state unemployment benefits fell 20,000 to 308,000.

Cisco Systems Inc. ((CSCO)), the world''s largest networking equipment maker, reported a 28% jump in quarterly profit on soaring sales of its core products and gains from a recent acquisition. The company posted Q1 net income of $1.61 billion, or 26 cents per share, compared with $1.26 billion, or 20 cents per share last year. Excluding one-time charges, Cisco would have earned $1.9 billion, or 31 cents per share. Cisco also from benefited from its recent $6.9 billion acquisition of Scientific-Atlanta Inc., which added $584 million to Cisco''s sales during the quarter. The company''s shares rose 8.6% to $27.27 in pre-open trading.

Dow component 3M ((MMM)) said it would sell its global branded pharmaceutical business in 3 deals for a total of $2.1 billion. Media giant Viacom ((VIA)) reported a 16% drop in Q3 earnings, still above analyst forecasts. The company also said its chief financial officer was resigning. S&P 500 futures rose 1.2 points, above fair value. Dow Jones industrial average futures were unchanged after being down 6 points before the data, and Nasdaq 100 futures gained 7.25 points.

[R]Import and export prices dropped in October.[/R]
The Department of Labor released its report on import and export prices in the month of October on Thursday. The report showed a decrease in both import and export prices. The report said that import prices fell 2.0 percent in October, matching the decrease that was seen in the previous month. The decrease was largely due to a significant decline in prices for petroleum imports. Prices for petroleum imports fell 8.3 percent in October following a 9.7 percent decrease in September. Excluding petroleum imports, import prices still fell 0.6 percent in October after edging up 0.2 percent in the previous month. The Labor Department also said that export prices fell 0.4 percent in October after a matching decrease in September. The drop in export prices came in spite of a notable increase in prices for agricultural exports. Prices for agricultural exports rose 1.1 percent in October after a 0.5 percent decrease in September. Excluding agricultural exports, export prices fell 0.5 percent in October after a 0.3 percent decrease in the previous month.

[R]U.S. trade deficit narrowed sharply due to weaker oil prices.[/R]
Thursday morning, the Department of Commerce released its report on U.S. international trade in goods and services in the month of September, showing that the trade deficit narrowed even more than economists had expected. The report showed that the trade deficit narrowed to $64.3 billion in September from a revised $69.0 billion in August. Economists had expected the deficit to narrow to $66.0 billion from the $66.9 billion originally reported for the previous month. The smaller deficit came as the value of exports increased while the value of imports fell. The report showed that the value of exports rose 0.5 percent to $123.2 billion in September, while the value of imports fell 2.1 percent to $187.5 billion. The notable decrease in the value of imports came amid a substantial decline by the price of oil, which helped to reduce the value of oil imports. The trade deficit with OPEC narrowed to $9.2 billion in September from $11.2 billion in August. At the same time, the report also showed that the politically sensitive trade deficit with China widened to $23 billion in September from $22.0 billion in August.


[R]8:00AM 3M Co. agreed to sell its pharmaceutical business for $2.1 billion.[/R]
3M Co. ((MMM)), manufacturer in the health care, telecom, and transportation sectors, announced it would sell its global branded pharmaceutical business in three deals for a total $2.1 billion. The deals are part of a strategic review the company revealed in April. Graceway Pharmaceuticals Inc. agreed to acquire 3M''s pharmaceutical operations in the U.S., Canada, and Latin America for $875 million. Meda AB agreed to buy 3M''s pharmaceutical business in Europe for $857 million. And Ironbridge Capital and Archer Capital will buy the Asia-Pacific operations, including Australia and South Africa, for $349 million.

1,050 people work in 3M''s worldwide pharmaceuticals unit. About 70%, or 735, of them will be given employment opportunities with the acquiring companies. The deals are subject to regulatory clearances. 3M said the deal is expected to complete in the fourth quarter. In addition, it said it would record a gain on the transactions, and will incur charges as restructuring further cintinues.


[R]7:30AM Asian stocks finish mixed Thursday, Japan, Australia fall.[/R]
Asian markets finished mixed on Thursday. The Nikkei 225 Index fell 0.1% to 16198.57. Internet and telecom company Softbank Corp. rose 1.1% after reporting strong quarterly profit results. KDDI, cellular operator, rose 2.4% after posting strong subscriber growth in October. NTT DoCoMo, the biggest cellular operator in Japan, traded flat. Shares of Toyota rose 0.2%, extending gains after closing at a life-time high in the previous session.

Hong Kong Hang Seng Index ended 0.8% higher at 18952.86. Oil-related, property and tech stocks lifted the stock market. China largest offshore oil producer, Cnooc, rose 2.2%, while mainland refiner Sinopec rose 1.6%. In the property sector, property developer Cheung Kong Holdings gained 0.6%. Tech shares also helped Hong Kong, with China Mobile, the second biggest large-cap by value, up 1%. Shares of Lenovo Group, the third-largest computer maker in the world by market share, jumped 3.8% ahead of its earnings report due after the market close.

Australia S&P/ASX 200 fell 0.6% to 5429.00. The market fell after the central bank raised rates a quarter point, on Wednesday, to 6.25%, its third increase this year, in a setback to the government. Oil and mining shares declined, with Australian-listed miner BHP Billiton down 0.7%. Bucking the trend, Woodside Petroleum and Santos rose 1% on higher oil prices.

The Kospi index in South Korea jumped 1.4% to close at 1399.44 and Taiwan Weighted Price Index slipped 0.4% to 7151.13. In South Korea, the stock market ended higher helped by a Bank of Korea decision to keep its benchmark overnight call rate steady, and strong construction and banking issues. In Taiwan, shares fell slightly on profit-taking after gains early in the session. New Zealand NZX-50 Index set a fresh record close, eclipsing a record peak set Wednesday, gaining 0.1% to 3823.01.


[R]6:30AM Strong earnings and US stocks give European markets a boost.[/R]
European markets were broadly higher in early trading on Thursday. By mid morning, the FTSE 100 in London nudged lower to 6,233.6, Frankfurt Xetra Dax gained 0.2% to 6,361.94 and the CAC 40 in Paris added 0.2% to 5,447.92.

Advancers

Sampo led the advancers after it agreed to sell its banking division Sampo Bank to Danske Bank. Sampo shares were up 8.5%. Danske, which plans an equity issue fell 5.5%.

Banks were mixed however, with Piraeus Bank of Greece up 1.3% after reporting better-than-expected results on Wednesday. Domestic rival EFG Eurobank was up 2%.

Allied Irish Banks gained 2.3% after its Polish unit Zachodni WBK reported a 29% rise third-quarter profit, boosted by mortgage sales

Inbev, the Belgian brewer, gained 3.5% after reporting a 25% jump in third-quarter net profit, beating expectations thanks to strong growth in Latin America and eastern Europe.

Shares in Numico rose 4% after the Dutch food group announced a better-than-expected 25% rise in third-quarter operating profit.

Decliners

Adidas was at the bottom of the pile, falling 8.4%, after it issued a surprise profit warning. The German sportswear maker cut its 2007 profit forecast after higher spending on its US Reebok division, whose profit growth will now be lower than originally forecast.

Spanish power generator Iberdrola fell 2.3% after it said it was studying a possible bid for for the Scottish Power. Rumours valued Scottish Power at 12 billion pounds. The UK company shares gained 3.8%.

Oil and gold

Oil prices rose above $60 a barrel Thursday in reaction to figures showing lower U.S. gasoline and diesel fuel inventories and to leadership changes in the U.S. Congress following midterm elections. Light, sweet crude for December delivery rose 40 cents to $60.23 a barrel by midday in Europe in electronic trading on the NYME. December Brent crude on London ICE Futures exchange was up 73 cents at $60.32 a barrel.

Gold opened Thursday at a bid price of $617.60 a troy ounce, down from $623.60 late Wednesday.

Currencies

The euro advanced to a record against the yen and rose versus the US dollar on speculation the European Central Bank will increase interest rates to damp inflation. The euro reached 150.81 yen, an all-time high, and was trading at 150.76 yen in London, from 150.34 late in New York yesterday. It traded at $1.2785 from $1.2757. Against the dollar, the British pound was at $1.9064 at 10 a.m. in London from $1.9055 yesterday. It was also at 67.03 pence per euro, from 67.00. The dollar was trading at 117.90 yen by mid-afternoon in Tokyo, up from 117.73 yen from late Wednesday in New York.