Weak Dollar Agianst Euro and Pound

123jump.com Staff
01 Dec, 2006
New York City

Twin deficits of budget and trade deficits are finally dragging the dollar to a record low against world currencies. softening economy and slowing manufacturing and construction activites only added to the latest slide. The U.S. likely to report record annual trade deficit of more than $800 billion and current account deficit of higher than 5.8% of GDP in the year 2006. Lower dollar pushed stocks lower in the mid-day trading.

[R]12:30PM NY – 6:30PM Germany[/R]
The dollar tumbled to a two-year low against euro, 14-year low against pound and multi-year low against yen. Weaker manufacturing report in the U.S. and diverging read on the industry in Europe supported a broad decline of dollar. Dollar at mid-day traded at $1.33 to a euro and $1.985 to a British pound. Most currency traders and analysts expect the dollar to continue to slide against euro and yen and remain at depressed level against pound in the coming months. The yen dropped to a record low against the euro and softer than expected inflation report in Japan. The yen traded at 154.03 to a euro on the inflation report. The Bank of England has raised its interest rates to keep the economy from overheating. The latest rate hike came on Nov 9th to a five-year high at 5%. The ECB in Europe is likely to raise rates as economic activities are likely to expand and unemployment rate is at a five-year low 7.7% across the region.

[R]11:15AM Sensex advances 150 points supported by banks, auto shares.[/R]
The Sensexon BSE gained 148.47 points, or 1%, to close at 13,844.78, a record closing. The market-breadth was strong. As 1,484 shares advanced on BSE, 1,080 declined and 72 stocks were unchanged. The turnover on BSE was Rs 4,451 crore, lower than Rs 4,854 crore on Thursday. The turnover on NSE was Rs 8,200.29 crore, lower than Rs 12,725.13 crore on Thursday.

Economic news

The wholesale price index rose 5.45% in the 12 months to November 18, 2006, higher than the previous week annual rise of 5.29%.

India economy is on track to match recent years growth rates of about 8% in the financial year to March 2007, minister of state for finance Pawan Kumar Bansal said on Friday.

Foreign institutional investors were net buyers of Rs 258.10 crore on Thursday, November 30, according to data released today.

Most active

Parsvnath was the most active stock with a turnover of Rs 218.50 crore followed by Donear Industries, Indiabulls, Reliance and Paramount Communications.

Advancers

Ranbaxy Laboratories surged nearly 4% to Rs 385.60, with the stock rallying in late-trading after the company announced the acquisition of Be-Tabs Pharmaceuticals, the fifth largest generic drugs company in South Africa, for $70 million.

Auto shares dominated the proceedings on decent-to-strong sales numbers for November. Bajaj Auto rose 4% to Rs 2,751, after its total sales rose 33% in November 2006, to 2,43,713 units from a year ago. Hero Honda rose nearly 2% to Rs 757.35. Hero Honda today launched two new versions of its CD series motorcycles.

Tata Motors surged 4% to Rs 844.25, on expectations of strong sales for November 2006. Tata Motors is likely to disclose its monthly sales figures today. Maruti Udyog added nearly 3% to Rs 952.60. In early-trade today, the car major reported selling 55,033 vehicles in November, a 16.1% rise from a year earlier.

Private bank stocks were in demand after the latest data showed lower-than- expected rise in inflation. State Bank India jumped 4% to Rs 1,369.90. Cellular services provider Reliance Communications rose 3.7% to Rs 445.25. Reliance Energy gained 2.2% to Rs 540.05. As per reports, Maharashtra Electricity Regulation Commission has directed the company to discontinue levy of load management charges. Reliance Industries advanced 1.3% to Rs 1,262.25.

A number of energy companies surged. Alstom Projects jumped 9.7% to Rs 468.90, Bharat Bijlee gained 7.9% to Rs 1,205, ABB surged 7% to Rs 3,747, Voltamp Transformers gained 5.8% to Rs 631.80, Areva T&D rose 5% to Rs 972.10, Siemens advanced 4.7% to Rs 1,182, and KEC International gained 3% to Rs 390.

Construction firm Punj Lloyd jumped 7.6% to Rs 1,112, after the firm said it had an order worth Rs 1,000 crore. Gas cylinder maker Everest Kanto Cylinder jumped 10% to Rs 606.50, on expectation that the firm will announce a large order in the next few days.

Decliners

Hindalco declined 0.81% to Rs 171.95, TCS fell 0.72% to Rs 1,183.30, Gujarat Ambuja was down 0.59% to Rs 143.30 and Grasim shed 0.08% to Rs 2,762.

Other news

Salaries in India rose faster than any other major country in Asia this year, companies in India and in the Asian region are under pressure to retain talent and spend more to compensate employees, a global resource company has said.

[R]10:20AM October construction activity report and manufacturing activity survey drag market averages lower.[/R]
S&P 500 down 5.12, Nasdaq down 19.2 and Dow down 39.2
Market averages turned negatively on the heels of two reports. October manufacturing activity survey index fell to 49.5 fro 51.2 according ISM and construction in the month fell 1% according to Department of Commerce. This drop was on top of revised 0.8% drop in September activity. Residential construction fell 1.9%, biggest decline since June of this year. However, government construction rose 0.8% to $273.1 billion annual rate. Residential construction fell for the seventh month in a row.


[R]9:30AM London benchmark index advances on Friday on mining stocks.[/R]
The FTSE 100 in London advanced 31.7 points or 0.5% to 6,080.5 in mid-morning exchanges.

Advancers

Vedanta Resources gained 2.3% and Xstrata traded 3.3% higher. Xstrata was also lifted after Xstrata Nickel announced the first phase of development of its Fraser Morgan nickel project in Ontario. Rio Tinto rose 1.40%, while BHP Billiton advanced 0.52%.

International Power shares added 3.8% after Morgan Stanley raised its price target. Fellow utilities followed suit with Kelda Group up 2.4% and United Utilities 2.3 % higher.

In corporate news, Wolverhampton & Dudley Breweries shares climbed 3.8% after it reported solid full-year results.

UK insurer Prudential was trading 1.4% to the good on a positive Asia outlook. The company said it expects at least to double 2005 asian life new business profits by 2009. Morgan Crucible rose 1.2% on the back of a broker upgrade. Credit Suisse raised its price target on the engineer.

Decliners

Industrial products manufacturer Chapelthorpe declined too as the shares lost around a quarter of their value after it warned of exceptionally difficult trading conditions and axed its dividend. Chapelthorpe plunged 27.59%.

AstraZeneca remained depressed, as yesterdays comments from Sanford Bernstein remained fresh in the mind. AstraZeneca lost 1.32%. Citigroup downgraded Rank Group from buy to hold, sending the shares of the leisure group 3.2% lower.


[R]9:15AM Futures trading indicate a mild positive bias at the opening.[/R]
Market averages are expected to open higher as futures trading indicate a slight positive bias in Nasdaq and S&P500 indexes. Nasdaq is trading 2 points ahead and S&P500 is trading 1.8 points ahead of the opening. Traders are focused on ISM report on manufacturing sentiment report for November, auto sales and dollar trading in currency markets. Dollar is up a small fraction against yen on October inflation report of 0.1%, lower oil prices helped. European shares rose on revised price projection by Goldman Sachs. Xstrata, BHP Biliton and Rio Tinto led the rally in mining stocks at mid-day trading in Europe. A local bank survey of European manufacturing suggested expanding manufacturing activities to a 17-month high lifting euro to a 20-month high. Dollar held steady against pound after dropping to a 14-year low.

[R]7:30AM Asian markets ended mostly higher with Japan up, while HK dipped.[/R]
Asain markets finished mostly higher on Friday. Japanese benchmark Nikkei 225 stock index rose 47.45 points, or 0.3%, to close for the week at 16321.78. In Hong Kong the Hang Seng Index fell 269.66 or 1.4%, to 18690.82. Local phone operator PCCW plunged 5%, a day after shareholders rejected a proposal to sell the stake of chairman Richard Li in the company. China Mobile fell 2.5%, Sino Land slipped 0.1% and Sun Hung Kai Properties dropped 2.2%.

The Chinese yuan rose to a fresh high against the U.S. dollar, capping a week of gains and boosting share prices to a five-year high in Shanghai. The Shanghai Composite Index edged up 0.1% to 2102.05, its highest closing level since July 25, 2001, when it ended at 2112.25.

The Weighted Price Index of the Taiwan Stock Exchange climbed 45.85 points, or 0.6%, to 7613.57. Singapore shares dipped on cautious trading, but traders said the market uptrend is likely to continue over the next few weeks. The benchmark Straits Times Index declined 2.49 points, or 0.1%, to 2836.04.

South Korean shares inched up, as news that Chinese steelmaker Shanghai Baosteel Group may ask Posco to buy its shares buoyed the Korean company stock. The Korea Composite Stock Price Index, or Kospi, moved up 2.15 points, or 0.2%, to 1434.36. In Austarlia, the benchmark S&P/ASX 200 index shed 54.2 points, or 1%, to 5427.9. The stock market fell, with finance stocks under pressure as investors braced for weaker near-term performances on US markets.

[R]6:30AM European stocks gain in early trading on Friday on EDF issue.[/R]
European markets were higher on Friday. In mid-morning trade, London FTSE 100 climbed 0.5% to 6,080.3, Frankfurt Xetra Dax gained 0.6% to 6,350.17, and the CAC 40 in Paris added 0.5% to 5,353.74.

Advancers

EDF gained 6.2% after a French constitutional court said on Thursday that government controls on prices charged by energy suppliers were incompatible with European Union targets for opening up energy markets to competition.

The court was ruling on the proposed merger between Gaz de France and Suez. It cleared an energy bill needed for the privatisation of GdF, but the court ruled that the planned merger could not become effective before July, 2007. Shares in GdF fell 1.7%, while Suez shed 0.6%.

Air carrier Lufthansa gained 4.9% after Morgan Stanley lifted its price target on the stock. EADS, the European aerospace group, rose 3.8% after it was reported to be close to fixing a launch for its A350 mid-sized long-haul jet.

Decliners

Ahold, the Dutch retailer, fell 3% after it said it faced a challenging fourth quarter after its slightly better-than-expected third-quarter numbers revealed tough conditions in the US.

Oil and gold

Oil prices retreated Friday on easing worries that OPEC would significantly reduce output to boost prices following a remark by Venezuela that cartel members had agreed to keep oil at $50 a barrel. Light, sweet crude for January delivery fell 43 cents to $62.70 a barrel on the NYME. January Brent crude at London ICE Futures exchange slipped 42 cents to $63.84 a barrel.

Gold opened Friday at a bid price of $647.79 a troy ounce, up from $647.10 late Thursday.

Currencies

The euro bought $1.3242 in morning European trading, a little below its level of $1.3250 in New York late Thursday and off a session high of $1.3282. The British pound on Thursday rose to its highest level against the dollar since September 1992. It advanced to $1.9748 on Friday before settling back to $1.9689, still above its Thursday level of $1.9661. The dollar rose to 116.20 Japanese yen from 115.75 yen.

[R]5:00AM Gold and silver prices gained on Thursday on strong oil prices.[/R]
February gold futures jumped $11.10 to finish at $652.90 a troy ounce on the NYME. March silver futures gained 35.5 cents to close at $14.115 an ounce. Meanwhile, January platinum rose $24.30 to finish at $1,176.70 an ounce. March palladium gained $6.85 to close at $334.35 an ounce. March copper added 4.05 cents to settle at $3.1955 a pound.

The January crude oil contract jumped $1.31 to an intraday high of $63.77 a barrel before closing 67 cents higher at $63.13 a barrel. December heating oil rose 1.80 cents to close at $1.8133 a gallon, December unleaded gasoline ended 14.85 cents higher at $1.8191 a gallon. Natural gas for January delivery on the Nymex settled 2.7 cents lower at $8.84 a million British thermal units.

At the New York Board of Trade, Arabica coffee futures rose. December coffee closed 1.15 cents higher at $1.1970 a pound. March raw sugar settled 0.01 cent higher at 12.37 cents a pound, while May fell 0.01 cent to 12.26 cents a pound.