China Moves Away from Dollar

albena
30 Nov, -0001
New York City

China would have its currency, the yuan, pegged to a basket of currencies rather than just tied to the greenback. It also vaulted the yuan 2% higher vs. the dollar. This surprising move could hit the profits of companies that source heavily from China. According to a number of reports, London police have responded to small blasts at 3 subway stations and also to some events related to buses.

U.S. MARKET AVERAGES

U.S. stocks opened lower on Thursday after China moved away its yuan currency exchange rate versus the dollar, which could hit the profits of companies that source heavily from China, such as Wal-Mart Stores Inc, whose shares fell 1.4% percent.

Stocks tended to move higher in pre-market trading after the news that China would no longer peg its currency to the U.S. dollar but instead tied it to a basket of various foreign currencies. But later stocks declined on news of further blasts in London’s underground.

The airline sectors is among the biggest decliners in the early trading, with Delta ((DAL)) leading with an 11% decline. Delta posted a 2Q loss that narrowed versus last year, but investors reacted to the management changes when the company revealed a new CFO.

Internet sector bounced back from its lower levels Wednesday, bolstered by an earnings-related 16% advance in eBay ((EBAY)).

Leading tech stocks dipped early Thursday with losses from Apple ((AAPL)), Dell Inc. ((DELL)), Cisco((CSCO)) and Hewlett-Packard ((HPQ)).

Microsoft reports its fiscal fourth-quarter earnings Thursday. Excluding stock-based compensation expenses, analysts see earnings at 31 cents a share, up vs. 28 cents a year ago.

Google is expected to post second-quarter earnings of $1.20 a share, excluding stock-based compensation, up vs. 58 cents a share last year.

Amgen rose 15%, after reporting its first $1 billion quarterly profit, as sales surged, and lifted forecasts for the year.

Intel lost 4.4% after posting 2Q earnings in line with analysts' projections, but gross margins off the mark.

Yahoo dropped 11%, after posting 2Q earnings were essentially in line with analysts' expectations.

First BanCorp jumped 23% after reporting 2Q earnings up to 57 cents a share vs. 36 cents a year earlier. Net interest income increased by $33.7 million.

Cott lost 5.2% after it reported lower earnings on higher sales in the second quarter and lowered guidance for the full year.

CNF gained 6.8% as 2Q earnings rose 90% on maintaining cost controls and winning new business.

ECONOMIC NEWS

The number of Americans filing new claims for unemployment benefits declined by the largest amount in 2 1/2 years last week, reflecting a slowdown in layoffs in the auto industry.
The Labor Department said that new benefit claims fell by 34,000 to a new total of 303,000 as the labor market continued to signal strength.

The drop of 34,000 was the largest one-week improvement since a decline of 35,000 in the week of Dec. 21, 2002. The decline was more than triple the 10,000 drop that private analysts had forecasted. The total of 303,000 claims last week was the lowest level in 16 weeks. The four-week moving average also declined last week to 318,000, the lowest level in more than four months.

Alan Greenspan will start the second half of his semi-annual monetary policy testimony in the mid-morning and is expected to repeat most of the comments he made on Wednesday. Senators might ask the Fed chief questions about his opinion concerning the Chinese revaluation of their currency.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks ended mixed. Some markets were boosted by China’s economic news, the positive assessment of the U.S. economy and solid earnings reports. The Japanese stocks closed flat after early gains in tech, auto and bank shares, supported by gains in Wall Street. Australian stocks reached a record high of 1% on improved confidence in global growth and demand for commodities. Hong Kong’s Hang Seng rose only 0.1% on a decline in property shares after banks raised their prime rate. Taiwan’s Taiex closed down 0.5% dragged on by financial stocks. In currency markets the dollar lost ground against the yen and stood at 112.38.

The Australian All Ordinaries jumped 0.9%, the South Korea Seoul Composite climbed 0.02%, the Shanghai Composite slid 0.04% and Hong Kong's Hang Seng added 0.12%

The Australian stock market reached a record high Thursday on growing confidence in global growth and demand for commodities, particularly from China. The benchmark S&P/ASX 200 index advanced 42 points, or 1% to 4,343.2, beating the previous high on June 17. The index also reached an intraday record of 4,351.7. Australian traders cheered the news that China's economy climbed 9.5% in the first half and Alan Greenspan's comments overnight that the U.S. economy should produce sustained growth with low inflation. Both China and the U.S. are major trading partners with Australia, and China is a big importer of Australian iron ore and coal.

European shares traded mostly higher at mid-day lifted by resource stocks, retail-sales data, and positive profit reports from Ericsson and SAP. Metal and mining shares were among the top gainers after China posted strong economic growth and a production update from Anglo-Australian miner Rio Tinto. U.K. stocks lost early gains from upbeat monthly sales data and earnings from top retailers and dropped 0.1% after reports of incidents and evacuations in London. German and French stocks gave up some of their early gains and added 1% and 0.6% respectively.

ENERGY, METALS AND CURRENCIES MARKETS

China put an end to a decade-old fixed exchange rate to the dollar. The new yuan rate revalues the currency by 2.1% to 8.11 per U.S. dollar immediately. China will value the yuan against a number of currencies as the new system will allow it to rise or drop according to the fluctuations of the dollar versus other currencies.

Oil prices eased after explosions were reported on London’s public transport system. Light sweet crude fell 35 cents to $57.67 a barrel. London Brent dropped 39 cents to $56.26. The fact that there were no injuries this time made for less impact on oil prices than the explosions on July, 7th exerted on the market. Losses were also limited by China’s modest currency revaluation.

The U.S. midweek supply report showed a build in distillate fuels, while crude inventories declined less than expected, as Hurricane Dennis caused little damage to output in the Gulf of Mexico. Inventories of crude oil slipped by 900,000 barrels to 320.1 million barrels, or 7% above year-ago levels.

Treasurys were sharply lower. The benchmark 10-year note dropped 14/32, or $4.375 per $1,000, to 99 9/32. Its yield rose to 4.21%. The 30-year bond fell 22/32 to 114 12/32, yielding 4.43%.

EARNINGS NEWS

Weyerhaeuser, forest products group, reported 2Q profit rise of $1.71 per share, up from $1.57 last year on sales growth. For the second quarter the company took gains of 37 cents a share, excluding them it would have reported $1.34 a share, beating analysts’ estimates.

Horizon Financial, commercial & mortgage lending provider, posted 1Q net income increase of 37 cents a share vs. 31 cents a year earlier, reflecting net interest income rise.

Coca-Cola, beverage company, reported 2Q profit rise of 72 cents a share. Excluding special items it would have posted 68 cents a share, exceeding previous forecasts of 64 cents a share. In the quarter the company bought back $1 billion in shares and is planning to buy at least $2 billion in 2005.

Equifax, provider of credit-management services, posted 2Q profit drop of 47 cents a share vs. 55 cents a year ago on 15% revenue growth.

Danaher, industrial products manufacturer, posted 2Q earnings growth of 70 cents a share compared with 56 cents a year ago. Excluding special items it would have reported earnings of 67 cents a share.

Charlotte Russe Holding, retailer, announced 3Q income fall of 14 cents per share , down from 23 cents in the comparable last-year quarter, missing estimates of 17 cents a share. In 4Q the company expects to report mid single-digit positive same-store sales and earnings between 16 and 20 cents per share.

Provident Financial Holdings, financial services company, reported 4Q net income rise to 68 cents a share, up from 60 cents last year on increased net interest income.

Nokia, Finnish mobile-phone maker, reported 2Q earnings of 18 euro cents on sales of 8.09 billion, missing estimates by a penny. The company sees its 3Q earnings between 14 and 17 euro cents a share on sales in the range of 7.9 billion to 8.2 billion euros.

Groupe Danone, dairy products maker, announced first-half net income fall of $422 million, down from $665 million a year ago, citing 200 million-euro provisions for its HOD U.S. home and office water-delivery business. Same-store sales grew 6.5%.

Reynolds & Reynolds, software seller, posted 3Q profit growth of 37 cents a share, including 3 cents a share benefit from lower tax rates. The company projected 2005 earnings in the range of $1.37 to $1.41 a share.

Boots, U.K. drugstore chain, posted 2Q sales growth of 1.9%, but same-store sales dropped 0.8%, missing expectations of 2% rise.

CORPORATE NEWS

It was reported Thursday that several top executives and board members at Delta Air Lines have warned CEO Gerald Grinstein that a turnaround plan there isn't working and that a Chapter 11 bankruptcy filing for the nation's No. 3 airline is inevitable. Delta is also slated to post its quarterly results early Thursday.

Australian mining giant BHP Billiton ((BHP)) said Thursday it has reached a deal to sell more than $4 billion worth of iron ore to Japan's JFE Steel. Billiton also said Thursday it had reopened its Olympic Dam copper, gold and uranium mine in South Australia after an explosion Tuesday in which a worker was killed.

Dow Jones & Co. agreed to transfer its 50% equity interests in CNBC Europe and CNBC Asia, as well as its 25% interest in CNBC World, to General Electric's NBC Universal, ending its international television partnership with CNBC. Dow Jones will post a second-quarter charge of about $36.7 million on the move.