U.S. Inflation Data Help Europe

Elena
16 Nov, 2006
New York City

European stock markets finished mostly higher on Thursday, reflecting strong auto stocks and well-received U.S. inflation data. However, disappointing financial results from chipmaker Infineon Technologies, bank BNP Paribas and publisher Reed Elsevier limited the upward trend. London FTSE 100 climbed 0.4%, the German DAX 30 rose 0.2%, while the French CAC 40 edged down 0.1%.

[R]1:00PM European markets closed mostly higher.[/R]
European stock markets finished mostly higher on Thursday, reflecting strong auto stocks and well-received U.S. inflation data. However, disappointing financial results from chipmaker Infineon Technologies, bank BNP Paribas and publisher Reed Elsevier limited the upward trend. The German DAX 30 rose 0.2%, as gains for Volkswagen and DaimlerChrysler offset weakness in the shares of Infineon Technologies. The chipmaker dropped 2.3% after it said its quarterly results were weighed down by charges for the carve-out of memory-chip unit Qimonda. The upbeat U.S. consumer price inflation data lifted interest-rate sensitive stocks like Deutsche Bank, up 0.6%. London FTSE 100 climbed 0.4%, boosted by 6.7% gain for electricity grid operator National Grid. Shares of Anglo-Dutch media conglomerate Reed Elsevier, lost 4.6% because of a weak textbook market. The French CAC 40 edged down 0.1%, dragged by weakness in the banking sector after BNP Paribas dropped 2%, even after reporting a stronger-than-forecast 25% profit rise. Rivals Societe Generale and Credit Agricole also closed lower.

Crude oil prices were steady below $59. Crude oil December contract fell 16 cents to $58.60 a barrel. Heating oil added 3 cents to $1.72 a gallon, while gasoline lost 2 cents to $1.57. Natural gas futures fell 24 cents to $7.08 per 1,000 cubic feet. London Brent rose 20 cents to $60.81. The U.S. dollar traded higher against its rival currencies. The euro was quoted at $1.2807, down from $1.2823. The dollar bought 118.11 yen, up from 118.05. The British pound was unchanged at $1.8892. European gold prices recovered from recent decline. In London, gold traded at $624.40 per troy ounce, up from $621. In Zurich, the precious metal traded at $623.35 per ounce, up from $620.20. Silver closed at $13.05, up from $12.75.


[R]11:30AM Applied Materials weighed on tech stocks.[/R]
U.S. stocks reversed from earlier gains and turned mixed in late Friday trading, with the Nasdaq falling below the unchanged line, while the Dow and the S&P 500 trading in positive territory. The market welcomed news that consumer price inflation eased in October, but bellwether Applied Materials hurt sentiment with disappointing quarterly results.

Applied Materials ((AMAT)) weighed on the tech sector, falling 4.8% after the maker of semiconductor manufacturing equipment reported a weaker-than-expected Q3 profit. The company also lowered its guidance for Q4. Dell Inc. ((DELL)) was another drag on the Nasdaq, falling fell 4.6% after the computer maker delayed its Q3 earnings report as the SEC started a formal investigation into the company.

Sears Holdings ((SHLD)) said that Q3 profits more than tripled, boosted by $101 million in investment income and cost-cutting. Earnings jumped to $1.27 per share, up from 35 cents per share a year earlier, beating analyst expectations of 98 cents. However, company’s sales continued to decline. Revenues dropped to $11.9 billion from $12.2 billion. Same-store sales fell 4.8% at Sears stores. Company’s shares dropped 4.6% in morning trading. Williams-Sonoma ((WSM)) tumbled 8.1% after the seller of home furnishings reported a 21% drop in Q3 profit. The company also lowered its Q4 forecast.

In deal news, Clear Channel ((CCL)) agreed to be acquired for about $18.7 billion by an investment group led by Thomas H. Lee Partners LP and Bain Capital Partners LLC. The deal includes about $8 billion in debt. Clear Channel gained 3.9%. Reader''s Digest ((RDA)) rose 7.1% after it accepted an acquisition bid for about $1.61 billion by an investment consortium led by private equity group Ripplewood Holdings LLC. In late morning trading, the Dow Jones industrial average was up 28.25, up 0.23%, at 12,279.96. The Standard & Poor''s 500 index was up 3.49, up 0.25%, at 1,400.06, and the Nasdaq composite index was down 1.80, or 0.07%, at 2,440.95. Bonds showed little movement, with the yield on the benchmark 10-year Treasury note flat at 4.62% from late Wednesday.


[R]10:30AM The Sensex rises for the sixth consecutive day on banks, cement shares.[/R]
The Sensex on BSE advanced 36.52 points, or 0.27%, to end at 13,505.89. The market was highly volatile. The BSE Sensex traded withing a range of 129 points for the day. The market-breadth was positive in early trading but turned negative due to weak small-caps. As 1,537 shares declined on BSE, 1,009 advanced and 62 stocks were unchanged. For every two advancers, there were three decliners. From the Sensex stocks 12 advanced, while the rest declined. The turnover on BSE was Rs 6,110 crore, higher than Rs 5,088 crore on Wednesday. The turnover on NSE was Rs 10,321.46 crore, much higher than Rs 8,768.6 crore on Wednesday.

Economic news

Strong macro economic fundamentals and erasing of the revenue deficit are pre-requisites for moving toward capital account convertibility, former RBI Deputy Governor S. S. Tarapore, who headed the Committee on Fuller Capital Account Convertibility asserted.

Most active stocks

Gujarat Ambuja Cement was the most active stock with a turnover of Rs 716.88 crore. It was followed by Hindustan Zinc and ACC.

Advancers

Gujarat Ambuja Cement was in focus today. The stock rose 1.65% to Rs 139.50, on a cumulative volume of 51.65 lakh shares. The block deals with a turnover of Rs 694 crore, constituted 3.6% (5 crore shares, 2.5 crore shares each) of its equity capital of Rs 272.02 crore (face value Rs 2 per share). It was also the most active stock on BSE, accounting for around 11.75% of the total turnover on BSE.

Another cement large-cap, ACC, surged 5.83% to Rs 1,079. It had also advanced to an all-time high of Rs 1,093.80, intraday.

Private sector HDFC Bank led the advance, up 6.58% to Rs 1,148.25 It had hit a new all-time high of Rs 1,150, in the last moments of trading. India’s largest private sector bank ICICI Bank ended marginally lower by 0.10% to Rs 880.35. SBI jumped 3.21% to Rs 1,216, on a volume of 14.28 lakh shares. It had also surged to an all-time high of Rs 1,227.95.

Other banks also rallied. Punjab National Bank was up 0.27% to Rs 548, Federal Bank gained 4.20% to Rs 223.55, Indian Overseas Bank added 4.36% to Rs 120.80, Oriental Bank of Commerce moved 1.73% higher to Rs 255, Canara Bank edged up 0.89% to Rs 300, and Bank of India gained 2.63% to Rs 191.

Sterlite Industries advanced 0.90% to Rs 542.15, on the back of robust second-quarter results, and a board decision to venture into power sector. The company reported a surge in consolidated net profit for the quarter ended September 2006 to Rs 1,207 crore from Rs 259 crore.

Decliners

IT large-cap Infosys shed 1.27% to Rs 2,195. It has recovered from a low of Rs 2,154. Tata Motors declined 1.51% to Rs 811, amid reports that it has cut Tata 207 LCV price, by Rs 75,000. Cigarette large-cap ITC finished at Rs 185.25, down 0.30% from its previous close of Rs 185.80.

Jet Airways fell 1.6% to Rs 643 even after the US State Department gave security clearance enabling the private carrier to launch flights to America. The airline plans to launch flights between from India via Belgium to New York and plans to fly to Toronto via Hong Kong. In Europe the airline plans to fly to Rome, Zurich and Dusseldorf.


[R]9:45AM Stocks opened higher, led by inflation data and merger deals.[/R]
Stocks opened higher on news of tame inflation in October due to falling gas prices and a couple of multibillion-dollar merger deals. The Consumer Price Index fell 0.5%, matching the decline in September, while core inflation index edged up 0.1%, the smallest increase in eight months. More positive news came from another economic report which showed that the number of initial jobless claims fell by 2,000 to 308,000 last week, the smallest reading in a month.

In merger-and-acquisition news, Clear Channel Communications Inc. ((CCU)), the largest U.S. radio-station owner, agreed to be acquired by an investor group led by private-equity firms Thomas H. Lee Partners and Bain Capital Partners for $18.7 billion in cash. The deal includes about $8 billion in debt. Company’s shares rose 4.5% in early trading. Under terms of the deal, shareholders of Clear Channel will receive $37.60 a share in cash, a 10.2% premium to Clear Channel''s Wednesday closing price of $34.12. In another merger deal, Reader''s Digest ((RDA)) rose 8% after agreeing to be acquired for about $1.61 billion by an investment consortium.

Rate-sensitive housing sector advanced as the inflation data added to optimism that the Fed Reserve is not likely to raise interest rates again. Toll Brothers ((TOL)) turned in one of the housing sector''s best performances, with the luxury home builder currently up 4.3%. Hovnanian ((HOV)) and KB Home ((KBH)) also moved higher, both up 2.3%. The airline sector posted strength, led by AirTran ((AAI)) and AMR ((AMR)), up 2.8% and 2.6% respectively. However, JetBlue ((JBLU)) helped to limit the upside for the sector, falling 2% after UBS downgraded its rating on the airline to reduce from neutral, citing valuation.

In the first hour of trading, the Dow Jones industrial average was up 23.05, up 0.19%, at 12,274.76. The Standard & Poor''s 500 index was up 4.41, up 0.32%, at 1,400.98, and the Nasdaq composite index was up 0.76, or 0.03%, at 2,443.51. Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.60% from 4.62% late Wednesday.

[R]Industrial production rose 0.2% in October.[/R]
The Federal Reserve released its report on industrial production and capacity utilization in the month of October on Thursday. The report showed that industrial production growth came in line with economist estimates. The report showed that industrial production rose 0.2 percent in October after falling 0.6 percent in September. The Federal Reserve noted that production in August was revised up to show a gain of 0.3 percent compared to the previously reported unchanged reading. The increase in industrial production came amid a significant rebound in production in the utilities sector, which rose 4.1 percent after falling 4.6 percent in September. The rebound reflected colder-than-normal conditions following mild temperatures in September. Production in the manufacturing sector edged down 0.2 percent for the second consecutive month, while production in the mining sector rose 0.6 percent in October after rising 0.4 percent in September. The Federal Reserve also said that capacity utilization edged up to 82.2 percent in October from an upwardly revised 82.1 percent in September. Economists had expected capacity utilization to rise to 82.0 percent compared to the 81.9 percent originally reported for the previous month.


[R]9:30AM London edged up in early trading Thursday on National Grid.[/R]
By mid-day, the FTSE 100 index in London was up 8.5 points, or 0.1%, to 6,238.1.

Advancers

National Grid led the advancers, up 5.1%, as the energy network operator announced higher profits and plans to demerge its mobile phone mast business and return $1.9 billion to shareholders.

Cadbury Schweppes rose 2% amid talk that a private equity group was lining up a takeover of the confectionary group.

Anglo American gained 0.7% on rumours that Larry Yung was adding to his holding in the mining group via a derivative position. Mr Yung, one of the richest men in China, bought a 1% last week.

Mid-cap Northern Foods rose 9.9% as long-time bear Credit Suisse lifted its recommendation from neutral to outperform for the first time in a decade.

Decliners

Mining group Vedanta Resources was among the leading decliners, off 7.4% in early session, as the market was stunned by plans announced today by the India-based company to build a 1.9 billion pounds, 2,400-megawatt, power plant in Jharsuguda, Orissa. The news accompanied a 355% rise in operating profit to $1.2 billion. Vedanta managed to erase some of the losses and is currently down 6.49%.

Publisher Reed Elsevier eased 4% after it said its Harcourt Education division has underperformed in recent trading. Asia-focused bank Standard Chartered fell 0.9% after UBS cut its rating from buy to neutral.


[R]Initial jobless claims fell by 2,000.[/R]
Thursday morning, the Department of Labor released its report on initial jobless claims in the week ended November 11, showing that jobless claims fell compared to the revised reading for the previous week. The report showed that jobless claims fell to 308,000 from the previous week''s upwardly revised figure of 310,000. Economists had expected claims to increase to 310,000 compared to the 308,000 originally reported for the previous week. The Labor Department also said that the less volatile 4-week moving average rose to 313,750 from the previous week''s revised average of 311,750. The report also showed that continuing claims in the week ended November 4 came in unchanged from the preceding week''s revised level of 2.443 million.

[R]Consumer price index dropped 0.5% in October.[/R]
The Department of Labor released its closely watched report on consumer prices in the month of October on Thursday, showing that prices fell more than expected due a steep decline in energy prices. The report also showed a smaller than expected increase in core consumer prices. The report showed that the consumer price index fell 0.5 percent in October, matching the decrease that was reported for September. Economists had been expecting a somewhat more modest decline of about 0.3 percent. The decrease in consumer prices was due in large part to a significant decline in energy prices, which fell 7.0 percent in October after falling 7.2 percent in September. Within energy, petroleum-based energy prices fell 10.7 percent, while prices for energy services fell 2.5 percent.

The core consumer price index, which excludes food and energy prices, edged up 0.1 percent in October after rising 0.2 percent in each of the three previous months. Economists had been expecting core prices to rise by 0.2 percent again. The drop in energy prices contributed to a notable decline in prices for transportation, which fell 3.1 percent in October after falling 4.1 percent in September. The report also showed that apparel prices fell 0.7 percent, while prices for medical care and education and communication increased. Food prices increased 0.3 percent for the second consecutive month.


[R]9:00AM U.S. stock futures were little changed ahead of CPI data.[/R]
U.S. stock futures traded little changed Thursday morning, with investors awaiting consumer inflation data release. Inflation is seen lower by 0.3% in October, but the core measure, excluding food and energy prices, is expected to have rise by 0.2%. Weekly jobless claims, October industrial production and capacity utilization and the Philly Fed survey are also due out today.

Among companies in focus will be Hertz Global Holdings and KBR Inc., as two closely followed initial public offerings. Hertz ((HTZ)), car-rental company, priced at $15 a share, below the expected range of $16 to $18 a share. The firm raised $1.32 billion. KBR ((KBR)), a spin-off of Halliburton, priced at $17 a share, at the top end of its $15-to-$17 share range. The sale of KBR shares raised $441 million for the parent company.

Quarterly earnings reports are expected from Hewlett-Packard ((HPQ)), Sears Holdings ((SHLD)), Starbucks Corp. ((SBUX)), and Gap Inc ((GPS)). Dell Inc. ((DELL)) was scheduled to release quarterly results Thursday, but postponed the quarterly financial report as the SEC stepped up its probe into the accounting practices of one of the personal computers maker. Dell shares declined over 2% in Germany. Applied Materials ((AMAT)) also dropped in Germany after the chip-equipment maker forecasted sales below analyst estimates.

In corporate news, Wal-Mart Stores Inc. ((WMT)) said Thursday it is expanding its $4 generic prescription program to 11 additional states and adding 17 more prescriptions to the program. The world''s largest retailer added 502 stores to those offering the discounted medications. In all, Wal-Mart is offering the program in 3,009 stores in 38 states. Wal-Mart said it intends to continue to push for expansion to other states as quickly as possible. Dow Jones futures were recently up 1 point, S&P 500 futures were off 0.9 point, and Nasdaq futures rose 0.2 of a point.


[R]7:30AM Asian stocks finish mixed Thursday, Japan slips, HK surges.[/R]
Asian markets finished mixed on Thursday. The Nikkei 225 Average in Japan ended the session 0.5% lower at 16,163.87. Canon rose 0.2%, while consumer-electronics and entertainment conglomerate Sony retreated from earlier gains to end even on the day. Nintendo shed 2.6% after touching an all-time high in intraday trading.

Mitsubishi UFJ Financial Group saw its shares decline 2.7%. Business daily Nihon Keizai Shimbun reported on Thursday that the biggest bank by assets in Japan is considering raising its annual dividend to 10,000 yen a share, amid booming earnings.

The Hang Seng Index in Hong Kong rose 0.3% to 19,154.07, extending its record run after closing above the 19,000-level for the first time on Wednesday. Trading in Hong Kong was dominated by institutional investors building positions in Chinese financial stocks.

Shares of Bank of China soared 4.9% to a record close. Industrial & Commercial Bank of China gained 0.8%, but China Construction Bank fell 0.7%. The China Enterprises Index rose 0.9% to 8,312.41. The index all-time high is 9,452.86, set on Dec. 19, 1993.

Australia S&P/ASX 200 closed 0.7% lower at 5,392.60, New Zealand NZX-50 Index shed 0.5%, Indonesia JSX Composite lost 0.1% and South Korea Kospi eased 0.1%. Malaysia KLSE Composite gained 0.9%, Taiwan Weighted Price Index added 0.3%, Singapore Straits Times Index gained 0.8%, and Shanghai''s Composite Index rose 1%.


[R]6:30AM European markets trade flat Thursday morning on banking stocks.[/R]
European markets traded flat in early session on Thursday. By mid morning, London FTSE 100 gained 0.1 % to 6,237.6, Frankfurt Xetra Dax was marginally lower at 6,428.54, and the CAC 40 in Paris fell 0.1 % to 5,507.39.

Advancers

In Europe, carmakers were in focus as Volkswagen shares rose 2 % on speculation that German rival Porsche was to make a full bid for the company after raising its stake to 29.9%.
Porsche, which J.P. Morgan upgraded to neutral from underweight, gained 4.2 %.

DaimlerChrysler shares gained 2.2% on speculation Mr Bernhard may be heading to the rival German manufacturer. Other carmakers also advanced. Renault gained 1.6%, while Peugeot added 3.7 %.


Decliners

Shares of Reed Elsevier the Anglo-Dutch media conglomerate, lost 1.9% after it said that its Harcourt Education division has been impacted by underperformance in the assessment business and a weak textbook market.

Peer Pearson shares slipped 0.3%. Infineon Technologies shares lost ground, down 2.6% in Frankfurt, after the fourth-quarter loss of the company narrowed to a below-forecast 36 million euros, from 100 million euros in the year-ago period.

Oil and gold

Light sweet crude oil for December delivery dropped 2 cents to $58.74 a barrel in electronic trading on the NYME. Gold opened Thursday at a bid price of $623.20 a troy ounce, up from $620.00 late Wednesday.

Currencies

The euro on Thursday slipped slightly against the dollar after U.S. Federal Reserve Bank minutes showed that it remained committed to curbing inflation by hiking interest rates. The euro bought $1.2806 in late morning European trading, compared with $1.2823 in New York late Wednesday. The British pound slipped to $1.8875 from $1.8892. The dollar was steady at 118.05 Japanese yen, the same level it was late Wednesday.