Inflation Worries Weigh on Opening

Elena
24 Nov, 2006
New York City

U.S. stock markets opened in the negative, as the holiday shopping season began in earnest and a sharp drop in the dollar added to inflation worries, and diminished the appealing of U.S. shares to foreigners. The euro broke through the $1.30 level for the first time since April 2005. The sharp sell-off of the dollar continued and it fell to as low as 115.61 yen from 116.27 yen late Thursday. The British pound rose to $1.9351 from $1.9156.

[R]9:45AM Stocks opened in the negative, dragged by inflation worries.[/R]
U.S. stock markets opened in the negative, as a sharp drop in the dollar added to inflation worries and diminished the appealing of U.S. shares to foreigners. The euro broke through the $1.30 level for the first time since April 2005. The sharp sell-off of the dollar continued and it fell to as low as 115.61 yen from 116.27 yen late Thursday. The British pound rose to $1.9351 from $1.9156. The steep decline of the dollar sent gold futures on a strong rally. Gold for December delivery jumped $9.30 to $638.30 an ounce in electronic trading. The Nymex is closed for trading Friday, leaving the electronic Chicago Board of Trade contract as only way to trade the precious metal. At the same time, mining stocks advanced along with the gold price. Shares of Meridian Gold Inc. ((MDG) jumped 6.2%.

Shares of U.S. retailers moved slightly lower. Shares of Federated Department Stores Inc. ((FD)) slipped 0.7%. Shares of Wal-Mart Stores Inc. ((WMT)), which is due to release its initial 'Black Friday' sales on Saturday, dipped 0.5%. Outside the sector, Intel Corp. ((INTC)) fell 1.1% to $21.48 after a South Korean newspaper reported the company had decided to close a research and development center in the country.

A quiet trading session is expected as a lot of investors haven’t come back from the Thanksgiving holiday, but the thin trading is also likely to lead to erratic movements. The stock markets will close at 1 p.m. EST. In the first hour of trading, the Dow Jones industrial average was down 66.73, or 0.54%, at 12,260.22. The Standard & Poor's 500 index was down 6.59, or 0.47%, at 1,399.50, and the Nasdaq composite index was down 15.84, or 0.64%, at 2,450.14.


[R]9:30AM The FTSE 100 sinks on Friday as profit-taking seized the market.[/R]
In afternoon trading on Friday, the FTSE 100 declined 0.86% at 6,088.

Decliners

Exposed to the US markets companies were suffered including fund manager Amvescap, down 3.11%, credit checking firm Experian, declining 2.45% and plumbing supplies group Wolseley, shedding 1.21%. Life insurers Prudential and Old Mutual were also stuck well in the red. Prudential was off 2.45% and Old Mutual lost 2.73%.

Banks extended recent losses as the interest rate outlook remained unclear. Barclays shed 1.4%, Lloyds TSB fell 1.3% and Alliance & Leicester was down 1%.

Airlines shrugged off a report that Gordon Brown will raise taxes on air travel to combat environmental damage. Easyjet sank 0.35% though despite investors focusing on the weak crude price.

Deutsche Bank downgraded Kingfisher to sell from hold ahead of third quarter figures due next week. The broker remains cautious, saying the figures could lead to lower estimates on the DIY retailer. Kingfisher declined 2.14%.

Finnish biotech Inion slumped after it warned sales would be well below forecasts. That warning comes just seven weeks after it said there was no reason for its recent share price decline. Shares of Inion plunged 6.80%.

Advancers

Contrary to Easyjet, BA held steady and gained 0.92%. Cairn Energy shares continued to make gains on the back of Thursday successful Cairn India share placement. Shares in the oil explorer rose 1.3%.

Other news

A surge in business investment helped the UK economy grow above its long term trend in the third quarter, figures released on Friday confirmed. The news means that Gordon Brown is likely to revise higher his original forecast of growth for the year of 2 - 2.5% when he presents his pre-Budget report on December 6.


[R]8:00AM Stock futures declined on sharply weaker dollar.[/R]
U.S. stock market futures indicated a sharply lower market opening on Friday for a shortened trading day. The U.S. stock market was closed on Thursday and will close at 1 p.m. on Friday. The declines tracked weakness in Asian and European stock markets. What hurt pre-market sentiment wad a plunge of the U.S. dollar against other major currencies, with the euro climbing above $1.30 after economic data showed strong business confidence in Germany.

Shares of U.S. retailers were also in focus with the approaching holiday shopping season, and consumers seeking bargains on the day after Thanksgiving. Shares of Wal-Mart Stores Inc. ((WMT)) fell nearly 1% in European trading, while shares of Federated Department Stores Inc. ((FD)) dipped 0.2% as investors sought to gauge the impact of early holiday store traffic and price discounts on retailers'' profits. Pharmaceutical wholesaler McKesson Corp. said it renewed its supply agreement with Wal-Mart Stores and will remain the primary supplier of branded pharmaceutical products for Wal-Mart stores across the US.

Advanced Semi ((ASX)) said it received an indication of interest from investors led by The Carlyle Group that would value the company at $5.5 billion. Standard & Poor''s 500 futures were down 6.6 points, below fair value. Dow Jones industrial average futures were down 44 points, and Nasdaq 100 futures were down 13 points.



[R]7:30AM Asian markets end mostly lower Friday, Japan weighs the markets down.[/R]
Asian markets finished mostly lower on Friday. Japanese Nikkei 225-stock index ended down 1.1% at 15,734.60. In the autos sector, shares of Toyota fell 1.7%. Shares in electronics giant Sony fell 1.9%. Japanese bank Sumitomo Mitsui Financial Group tumbled 4.2% and fellow lender Resona Holdings fell 3.1%.

The Hang Seng Index in Hong Kong ended fractionally lower, declining 5.02 points to 19,260.30. The China Enterprises Index, a yardstick of China-incorporated shares listed in Hong Kong, declined 0.4% to 8,591.09. Among mainland property stocks, China Overseas Land rose 2.2% while China Resources Land rose 2.5%. Chinese financials traded lower with state-owned lender China Construction Bank down 1.2% while Bank of Communications fell 1%.

Kospi in South Korea rose 0.2% and Malaysia KLSE Composite traded gained 1.3%. Taiwan Weighted Price Index rose 0.6%, advancing for the ninth consecutive session. On other markets across Asia, S&P ASX/200 in Australia lost 0.2% to end at 5,453.60. Singapore Straits Times Index fell 0.5% and New Zealand NZX-50 Index shed 0.2%.


[R]6:30AM European markets decline in early trading on Friday due to a strong euro.[/R]
European markets were lower on Friday. In early exchanges, London FTSE 100 fell 0.5% to 6,112.3, Frankfurt Xetra Dax shed 0.9% to 6,418.82, in Paris the CAC 40 lost 0.7% to 5,386.1.

Advancers

Shares of Technip jumped 9.9% in Paris trading after two French newspapers reported that Eni or partly held unit Saipem, may bid for the oil-services group. Eni shares declined 0.9% in Milan. Shares of champagne maker Laurent-Perrier rose 1% in thin trading after it said first-half net income rose 47% to 13.1 million euros ($17 million), or 2.2 euros a share, with revenue up 10.5% to 100.3 million euros. A strong price and mix effect buoyed results. Remy Cointreau built on gains on Thursday on speculation it may be bought following a decision to leave a distribution joint venture. Shares of the cognac maker rose 2.8%.

Decliners

Financial were weak in early trasing. Crédit Agricole, which was cut from hold to sell by Citigroup in the previous session, fell 1.2%, while Belgian-Dutch financial services group Fortis lost 1.2% in Brussels. Other financial stocks with exposure to equity losses fell, with Zurich Financial, the Swiss insurance group, down 1.5%.

Oil stocks were also lower as crude prices slipped back towards $58 a barrel. French Total shed 0.8%, Austria OMV lost 1.7%, and Neste Oil, the Finnish refiner, fell 1%.

Exporters fell as the euro hit its highest level this year against the US dollar. Carmakers, which realise a large percentage of their earnings in the US, were among the most severe decliners. Peugeot, the French manufacturer, fell 2.2%, while German BMW shed 2.4%.

Oil and gold

Oil rose after a report that Eni SpA halted delivery of 60,000 barrels a day of Nigerian crude because of an attack by armed militants earlier this week. Brent crude oil for January delivery rose as much as 47 cents, or 0.8%, to $59.82 a barrel on London ICE Futures Exchange. The contract traded at $59.77 a barrel in early session in London. West Texas Intermediate crude advanced 37 cents to $59.61 a barrel on the NYME.

Gold drifted higher on Friday on a weaker dollar and dealers said the market was expected to be choppy in thin trading conditions during a U.S. holiday. Gold was quoted at $636.00/637.00 an ounce in early trading, up from $630.30/631.30 late in London on Thursday. Platinum also gained, but traded much below the record high in this week of $1,395 on talk of an exchange traded fund. Other precious metals followed gold upward move.

Currencies

The euro broke through the $1.30 barrier on Friday for the first time since April 2005, rising more than a U.S. cent on speculation about a European interest rate increase in light trading. In morning European trading, the euro spiked as high as $1.3085 from $1.2959 late the day before. The dollar weakened against other major currencies as well, falling to 115.81 Japanese yen from 116.16 the day before, while the British pound rose to $1.9316 from $1.9155.