European Shares Suffer Dollar Weakness

Elena
30 Nov, 2006
New York City

European stock markets finished in the negative territory Thursday, pressured by weak U.S. manufacturing data which added to the continuous weakness of the dollar.The weaker U.S. currency hurt exporter issues like automakers and technology stocks. Car maker Volkswagen slipped 3.8%, while electronics conglomerate Philips Electronics lost 0.9%. The French CAC 40 led decliners, falling 1%, followed by the German DAX 30, down 0.9%, and London FTSE 100, down 0.6%.

[R]1:00PM European markets closed lower amid weak U.S. dollar.[/R]
European stock markets finished in the negative territory Thursday, pressured by weak U.S. manufacturing data which added to the continuous weakness of the dollar. The euro hit a 20-month high of $1.3274, while the pound reached a 14-year peak of $1.9694. The weaker U.S. currency hurt exporter issues like automakers and technology stocks. Car maker Volkswagen slipped 23.8%, while electronics conglomerate Philips Electronics lost 0.89%. However, resource stocks posted gains, helping to limit losses. Oil major BHP Billiton and mining company Xstrata, both dropped 1%. Consumer-oriented stocks were also in the spotlight, with home improvement retailer Kingfisher which lost 2.1% on weaker sales, and Danone Group, falling 1.9% after recent strength. The French CAC 40 led decliners, falling 1%, followed by the German DAX 30, down 0.9%, and London FTSE 100, down 0.6%.


[R]11:30AM Contraction in Midwest business activity dragged stocks down.[/R]
U.S. stocks declined as an unexpected contraction in Midwest business activity raised concerns about the outlook for corporate profits. The Chicago purchasing managers'' index fell to 49.9 in November from 53.5 in October, below expectations of increase to 55.0. Wal-Mart Stores Inc.''s forecast for little improvement in December sales added to the downward trend. Wal-Mart ((WMT)) was the biggest drag on the S&P 500 and the Dow as the retailer dropped 1.6% after forecasting flat to 1% higher December same-store sales. Further weakness to the retail sector was provided by shares of J.C. Penney Co. Inc. ((JCP)) which dropped 3.7% after the retailer said November same-store sales rose a less-than-expected 1.4%. Teen clothing retailer Abercrombie & Fitch Co. ((ANF)) fell 4.2% after posting a 3% decline in November same-store sales rather than a 3% increase.

Shares of defense stocks moved lower. Dow component Boeing Co. ((BA)) dropped 1.4% to $87.65, while chemical maker DuPont Co. ((DP)) slipped 1.9% to $47. The downside movement was limited by gains for energy and gold shares which benefited from a considerable rise by crude oil and gold prices, respectively. Exxon ((XOM)) shares rose 0.9% at $76.64 on the NYSE. Housing stocks also posted strong gains after Banc of America upgraded its rating on the sector to neutral from underweight. In corporate news, Pfizer ((PFE)) rose 2% after it raised its full-year profit outlook and said its development pipeline would produce a number of late stage products in the coming years. The Dow Jones industrial average was down 50.55 points, or 0.41%, at 12,176.18. The Standard & Poor''s 500 Index was down 5.54 points, or 0.40%, at 1,393.94. The Nasdaq Composite Index was down 12.66 points, or 0.52%, at 2,419.57.


[R]10:30AM The Sensex advances in volatile trading boosted by domestic growth.[/R]
The Sensex on BSE finished 79.58 points, or 0.58%, higher at 13,696.31. The market-breadth was negative. For 1,341 shares that declined on BSE, 1,217 advanced and 58 shares were unchanged. From the Sensex 30 stocks, 18 advanced while the rest declined. The turnover on BSE was Rs 3,954 crore, lower than Rs 4,409 crore on Wednesday. The turnover on NSE was Rs 12,725.13 crore, much higher than Rs 8,083.89 crore on Wednesday.

Economic news

The economic growth of India unexpectedly accelerated to 9.2% last quarter, driven by government and consumer spending that may force the central bank to raise interest rates to curb inflation. The expansion reported by the Central Statistical Organisation in New Delhi today was more than the 8.9% predicted by economists for the three months ended Sept. 30 from a year earlier.

Most Active

Recent IPO Parsvnath was the most active stock with a turnover of Rs 865 crore followed by Action Construction, Info Edge, Lanco Infrastructure and Indiabulls.

Advancers

Private sector banking large-cap HDFC Bank led the gainers, up 3.21% to Rs 1,122, on a volume of 71,305 shares. ICICI Bank was up 1.53% to Rs 870, State Bank of India advanced 1% to Rs 1314, Karnataka Bank gained 3.89% to Rs 129.50, UTI Bank added 0.83% to Rs 475 and Kotak Mahindra Bank edged up 1.86% to Rs 380.

IT shares were in focus. Satyam Computers gained 0.73% to Rs 455, Wipro jumped 1.70% to Rs 593 and Infosys added 0.51% to Rs 2,168.20. The ADRs of the three software export leaders, Infosys, Satyam and Wipro, rose between 0.5% and 1.8% on Wednesday.

Software large-cap TCS surged 2.11% to Rs 1,189, after signing a 7-year deal worth $65 million for reorganising IT services of Somerfield. Somerfield is a leading UK-based, small-format food retailer.

Dr Reddy’s Lab advanced 2.91% to Rs 756, as ICICI Securities reiterated a buy on the stock, fairly valuing it at Rs 997.

Among non-Sensex stocks, Raipur Alloys & Steel jumped 20% to Rs 122.70, as Reliance Mutual Fund acquired 12.5 lakh shares at Rs 100.47 per share, vide block deals, on Wednesday. Gujarat Apollo Equipments surged 8.03% to Rs 197.10, as the company deferred the rights issue indefinitely on Tuesday.

Decliners

Tata Steel led the decliners, down 1.99% to Rs 467.50, as 4.36 lakh shares changed hands on BSE. Index heavy Reliance Industries lost 0.24% to Rs 1,246.10, on a volume of 4.84 lakh shares. Hindalco and Gujarat Ambuja declined 1.5% each to Rs 173 and Rs 144, respectively.

Oil & refinery stocks declined after the government announced a reduction in retail prices of diesel and petrol by Re 1 and Rs 2, respectively, on Wednesday. Indian Oil Corporation shed 3.74% to Rs 446, Hindustan Petroleum Corporation lost 2.72% to Rs 284 and Bharat Petroleum Corporation was off 2.88% to Rs 344.

Other news

Real estate developer Parsvnath Developers closed at Rs 540, up 80% from its listing price of Rs 240 and issue price of Rs 300 on the BSE.


[R]9:45AM Stocks opened flat on mixed retail sales and rising oil.[/R]
Stocks were flat at opening after retailers posted mixed sales results for November and consumer spending rebounded, showing its biggest increase in three months in October. Blue-chip stocks edged higher, helped by same-store sales from retailers including solid numbers from Target Corp. ((TGT)) and disappointing data from J.C. Penney Co. ((JCP)). Wal-Mart ((WMT)) weighed as it projected flat sales in December after reporting 0.1% decline in November same-store sales. Shares of Federated ((FD)) rose 1.7% after the company posted a stronger-than-expected gain in November same-store sales. Shares of shoe retailer DSW Inc. shot up 13% after the company posted strong quarterly earnings and raised its yearly forecast. Crude oil prices rose to a two-month high, helping energy shares. Exxon ((XOM)) shares gave the biggest lift to the S&P 500, up 1%, hitting an all-time high. The Dow Jones industrial average was up 14.26 points, or 0.12%, at 12,240.99. The Standard & Poor''s 500 Index was up 1.13 points, or 0.08%, at 1,400.61. The Nasdaq Composite Index was down 0.15 points, or 0.01%, at 2,432.08.


[R]9:30AM London benchmark index bounced back Thursday on bid speculation.[/R]
The FTSE 100 in London was 16.2 points, or 0.3%, higher at 6,101.4.

Advancers

Wolverhampton & Dudley was the main talking point in London market on Thursday. Shares in the pub company, which also owns Marston brewery, rose 4.3% to a record high on speculation of a 20-pound-a-share private equity bid approach.

QinetiQ Group, the defence and security group, led the advancers. Its shares climbed 7.6% after half-year numbers met expectations and the company said it was confident of meeting full-year earnings forecasts.

Hanson, the building materials group, advanced 1.8% on fresh bid rumours. Traders said a leading broker house was pushing a story that Cemex, the Mexican company that owns RMC, could turn attention to Hanson.

Energy stocks were also in demand as crude futures rose to a two-month high of $63.49 a barrel. Cairn Energy firmed 2.2% and BG Group gained 2.2%. Despite the rising oil price British Airways also climbed 1.9% on consolidation hopes.

Decliners

Kingfisher, the parent company of DIY retailer B&Q, was the biggest FTSE 100 decliner. Its shares dropped 3.2% unsettled by the costs of its store refurbishment programme.

Northern Rock, off 1.5%, was also under pressure, after Credit Suisse downgraded the bank to underperform from neutral, citing increased competition and concerns that the mortgage market will sink in 2007.

Car dealership Pendragon slipped 2.6%, as Citigroup cut earnings forecasts in the wake of this week cautious comments on current trading.


[R]9:00AM Stocks futures pointed higher, helped by Target and Limited Brands.[/R] U.S. stock futures gained, supported by better-than-expected November sales for Target and Limited Brands. However, at that point November retail sales were mixed and worries about department stores limited gains after sales at J.C. Penney Co. Inc. and Kohl''s Corp. disappointed investors. Target ((TGT)) shares rose almost 1% before the opening bell after the company posted a 5.9% increase at stores open at least a year. Limited ((LTD)) said sales at stores open at least a year jumped 12% in November. Shares of the company rose 2.3%. J.C. Penney and Kohl''s sales increases fell short of expectations. J.C. Penney ((JCP)) shares fell 1.7%, while shares of Kohl''s ((KSS)) slid 1.6%. Energy stocks were in focus for a second day as crude oil prices rose to a two-month high of $63.02 a barrel.

In economic news, the Commerce Department reported that consumer spending rebounded in October after two lackluster months, increasing by 0.2%. Spending was bolstered by solid growth in incomes, which rose by 0.4%, reflecting solid employment growth. According to another economic report, the number of initial jobless claims posted an unexpectedly large increase last week, rising by 34,000 to 357,000. Standard & Poor''s 500 futures were up 1 point, about even with fair value. Dow Jones industrial average futures were up 7 points, and Nasdaq 100 futures were up 1.5 points.

[R]Personal income rose less than expected.[/R]
Thursday morning, the Department of Commerce released its report on personal income and spending in the month of October. The report showed personal income rose slightly less than expected, while personal spending rose slightly more than expected. The report showed that personal income rose 0.4 percent in October after increasing by 0.5 percent in each of the three previous months. Economists had been expecting income to increase by another 0.5 percent. The increase in income came as private wage and salary disbursements increased $34.9 billion in October following an increase of $33.4 billion in September. Additionally, supplements to wages and salaries rose $7.5 billion in October after a $6.8 billion increase in September. The Commerce Department also said that personal spending rose 0.2 percent following a revised 0.2 percent decrease in September. Economists had expected spending to increase by 0.1 percent compared to the 0.1 increase originally reported for the previous month. Subsequently, the report also showed that personal saving as a percentage of disposable personal income was a negative 0.6 percent in October, compared with a negative 0.7 percent in September.

[R]Initial jobless claims advanced by 34,000.[/R]
The Department of Labor released its report on initial jobless claims in the week ended November 25 on Thursday, showing that jobless claims saw a significant increase. The increase came as a surprise to economists. The report showed that jobless claims rose to 357,000 from the previous week''s revised figure of 323,000. Economists had expected jobless claims to fall to 315,000 compared to the 321,000 originally reported for the previous week. The Labor Department also said that the less volatile 4-week moving average rose to 325,000, from the previous week''s revised average of 317,750. The report also showed that continuing claims in the week ended November 18 rose to 2.480 million from the preceding week''s revised level of 2.435 million.


[R]8:00AM Retailers reported November same-store sales.[/R]
The U.S. largest retailers posted mostly disappointing sales results in November, reflecting sluggish sales in the first half of the month. Wal-Mart Stores, Costco Wholesale Club and J.C. Penney were among the early retailers, posting weaker-than-expected numbers. At the same time, retailers like Limited Brands and Target Corp reported better-than-expected monthly same-store sales.

Limited Brands Inc. ((LTD)) reported November same-store sales increase of 12%, exceeding estimated figure of 7.8%. Target Corp. ((TGT)) said that its November sales at stores open at least one year rose 5.9%, slightly above expectations of 5.7% increase. Total sales for the month rose 11.7% to $5.12 billion.

Nordstrom ((JWN)) said Thursday that November same-store sales rose 5.4%, meeting analysts'' average estimate. Total sales gained 6.1% to $749.4 million.

Costco Wholesale Corp., ((COST)), warehouse retailer, reported November same-store sales up 5%, slightly below estimates of 5.7%. Costco same-store revenue in November rose 4% in the U.S. and 10% internationally. Company’s total sales climbed 9% to $4.84 billion. Comparable-store sales for the 13 weeks through Nov. 26 climbed 4%, while total sales rose 8% to $14.99 billion. Bebe ((BEBE)0, women’s-wear retailer, also fell short of estimates, with same-store sales that were up 5.8% below the 7.9% expected

Wal-Mart ((WMT)) said Thursday its November sales at U.S. stores open at least one year fell 0.1%. Analysts had been expecting the retailer to post flat same-store sales numbers. Total sales for the four weeks rose 11.9% to $28.57 billion from $25.53 billion. The world''''s biggest retailer projected flat to 1% higher comparable store sales in December.

Ann Taylor Stores Corp. ((ANN)), women''''s clothing retailer, announced its November same-store sales fell 4.3%, down from the expected drop of 2.3%, blaming unusually warm weather for the season. Net sales rose 2.1% to $186.4 million. The Gap ((GSP)) reported on Thursday that November same-store sales fell 8%, lower than the forecast for a drop of 5.4%.


[R]7:30AM Asian markets gain on Thursday, tracking strong US close overnight.[/R]
Asian markets finished higher on Thursday. The Nikkei 225 Average finished the day 1.2% higher at 16274.33. Among banking stocks, Mitsubishi UFJ Financial Group rose 2.1%, Sumitomo Mitsui Financial Group climbed 3.4% and Mizuho Financial Group ended 1.4% higher. In the auto sector, Toyota gained 1.3% and Honda advanced 2.2%.

The Hang Seng Index in Hong Kong rose 1% to close at 18960.48. Advancers included Yue Yuen Industrial Holdings, which rose on news that it agreed to raise its stakes in two units for $6 million. Shares of the world largest sports shoe maker closed 7% higher.

South Korean Kospi Index gained 0.7% to 1432.21. Samsung Electronics gained 1.4% and Hynix Semiconductor rose 0.7%. Brokerage shares rose on a foreign and institutional buying spree on expectations for the broader market next year. Samsung Securities advanced 1.5% and Daewoo Securities jumped 3.4%.

Shanghai Composite Index soared 2.2% to finish at 2099.29. Baoshan Iron finished 5.9% higher. Australian S&P/ASX 200 increased 0.5% to 5482.10. BHP Billiton saw a solid rise of 1.5% and Woodside Petroleum rose 2.9%, both stocks benefiting from higher oil prices.


[R]6:30AM European shares rise in early trading Thursday as oil prices advance.[/R]
European markets were higher on Thursday. The U.K. FTSE 100 index advanced 0.3% at 6,100.50, the German DAX Xetra 30 index climbed 0.2% at 6,375.28, and the French CAC-40 index rose 0.1% at 5,388.28.

Advancers

BHP, the biggest mining company in the world, added 2.1%. BHP said yesterday that demand for metals is strong and it may look for takeover targets. Rio Tinto, the third largest, gained 2.3%. Aluminum and zinc prices rose in London today and gold headed for a second straight monthly gain.
Oil companies Royal Dutch Shell and BP rose more than 1%, and shares in mining companies Xstrata and Antofagasta also traded more than 1% higher.

Sportingbet shares rose 4.3% on Thursday, as the online gambling company recovers from an 88% year-to-date share price decline on a ban in taking payments from the United States. Also, Prudential shares rose 1.2% after it was upgraded to buy from hold at Citigroup, saying that by 2010 it is free cash yield will be well above its U.K. peers, at 7.1% compared to 5.5%.

Decliners

Danone shares traded down 1.1% in Paris after a strong recent run. U.K.-headquartered home improvement retailer Kingfisher lost 2.1% after producing sales figures that showed continued weakness in U.K. operations.

Oil and gold

Crude oil for January delivery was at $62.40 a barrel, down 6 cents, in after-hours electronic trading on the NYME. Gold for immediate delivery in London rose as much as $1.73, or 0.3%, to $638.38 an ounce and in early trading was at $637.90.

Currencies

The U.S. dollar fell against other major currencies in European trading Thursday morning, dropping to its lowest level in 14 years against the British pound. The euro was quoted at $1.3190, up from $1.3156 late Wednesday. The British pound traded at $1.9558, up from $1.9462. The dollar bought 116.26 Japanese yen, down from 116.31.