Stocks Skid, Thailand and Circuit City Down 15%

123jump.com Staff
19 Dec, 2001
New York City

Producer Price Index for the month of November rose 2%, the most since 1974, on volatile energy price jump of 6.1%, food price rise of 0.1% and auto price gain of 2%. Stock fell at the opening and Nasdaq losr 1% in the first hour of trading. Housing start in the month rose to 1.58 million, a 6.7% jump from October. Morgan Stanly is considering to spin-off Discover Card. Circuit city stock fell on unexpected quarterly loss. Emerging markets around the world dropped more than 1%.

[R]4:00PM NY – 10:00PM Frankfurt – 2:30AM Mumbai[/R]

Yield on 10-year U.S. bond closed at 4.593% and the 30-year bond closed at 4.718%.

Gold gained $8 to close at $625.90 a troy ounce, silver increased 25.5 cents to end at $12.780 a troy ounce and copper declined 0.75 cents to close at 302.200 cents per pound.

Oil advanced 94 cents to close at $63.150 a barrel and heating oil lost 0.70 cents to finish at 171.370 cents a gallon. Gasoline was up 3.83 cents to end at 70.05 cents a gallon. Natural gas gained 1 cent to close at $7.085 per mBtu.

Asian markets closed lower led by Thailand with a decline of 14.84%, India with a decrease of 2.54% and Hong Kong with a loss of 1.19%. There were no advancers. Asian stocks ended lower on weakness in the financial sector. Thai Central Bank imposed restrictions on foreign investing and a day later lifted ban. The Bank plans to control and restrict ‘currency speculating’ only.

European markets closed lower led by Spain with a decline of 0.98%, France with a decrease of 0.82% and U.K. with a loss of 0.70%. There were no advancers. European stocks were down on weaker tech companies and resource stocks.

Latin America markets closed mostly higher led by Canada with an advance of 0.28%, Brazil with an increase of 0.19% and Argentina with a gain of 0.12%. The only decliner was Mexico with a loss of 0.93%.

[R]1:00PM European markets closed down, dragged by tech and mining stocks.[/R]
European stocks closed in the red Tuesday, dragged down by weaker tech companies and resource stocks. German software group SAP declined 1% after peer Oracle posted lower-than-expected sales of new software licenses. Miner companies like Rio Tinto and BHP Billiton posted losses. Deal news from Vodafone Group and some European stock exchanges were also in the spotlight. Shareholders of Euronext exchange approved the pan-European stock exchange's tie-up with NYSE Group. Euronext shares rose 0.7% in Paris. Shares in the LSE dipped 0.5% after it again rejected a takeover bid from the Nasdaq Stock Market. Among other movers of the day, recruitment firm Hays dipped 2.8% in London after Credit Suisse cut its rating on the company to underperform from neutral. Also shares in German steelmaker Salzgitter dropped 3.8% after the bank cut its rating on the company. Drug maker Astra Zeneca lost 4.4% in London on fears that the European Patent Office ruled that one of the European substance patents for its heartburn treatment Nexium will be rejected by the office. The German DAX 30 and London FTSE 100 dropped 0.7% each, while the French CAC 40 slipped 0.8%.

Crude oil prices gained slightly Tuesday. Crude oil January contract added 19 cents to $61.84 a barrel. Heating oil fell to $1.7175 a gallon, while gasoline fell to $1.6582. Natural gas futures rose to $7.106 per 1,000 cubic feet. The U.S. dollar lost recent gains against its major currency rivals. The euro was quoted at $1.3179, up from $1.3098. The dollar bought 117.94 yen, down from 118.19. The British pound was quoted at $1.9651, up from $1.9490. European gold prices recovered. In London, gold traded at $620.20 per troy ounce, up from $613.17. In Zurich, the precious metal traded at $619.95 per ounce, up from $610.45. Silver closed at $12.61, up from $12.56.


[R]11:30AM Market declined on economic worries. Delta Air Lines rejected U.S. Airways’ hostile bid.[/R]
Stocks traded in the negative, as economic data and disappointing earnings news raised concerns about the strength of the domestic economy. Inflation at the wholesale level showed its biggest jump in more than 30 years in November, pushed higher by gas prices. Overseas news also weighed on sentiment, as the stock market in Thailand plunged 15% after the Thai government announced controls on foreign investment.

On the earnings news front, Morgan Stanley ((MS)) rose 2.3% after it posted a stronger-than-expected Q4 profit despite earnings decline from the previous year. The company also announced plans to spin off its Discover credit card business. On the side of the decliners, Circuit City Stores ((CC)) dropped 18% after it posted an unexpected loss in Q3 profit due to sharp discounts on flat-panel televisions and computer equipment. The company lowered its full-year sales forecast. Applied Signal Technology ((APSG)) slipped 16.7% after the digital security company reported Q4 earnings below expectation. GenVec ((GNVC)), a gene-based drug developer, climbed 33.3% after a mid-stage clinical trial showed a pancreatic cancer treatment candidate, TNFerade, helped improve the survival rate of patients

In corporate news, Delta Air Lines ((DALRQ.PK)) filed a reorganization five-year business plan that calls for it to emerge from Chapter 11 bankruptcy protection as a standalone company. According to advisers, a reorganized Delta will have a consolidated equity value of roughly $9.4 billion to $12 billion. The plan is expected to result in a recovery by Delta's unsecured creditors of roughly 63% to 80% of their allowed claims. It also rejected US Airways' $8.3 billion hostile takeover bid to create the nation's largest airline. US Airways shares fell 1.9% in morning trading.

By sector, a turnaround by the price of oil contributed to some strength in the energy sector. Meanwhile, weakness among technology stocks helped to offset the strength in the energy sector. In late morning trading, the Dow Jones industrial average was down 16.50, or 0.13%, at 12,424.77. The Standard & Poor's 500 index was down 2.28, or 0.16%, at 1,420.20, and the Nasdaq composite index was down 14.70, or 0.60%, at 2,420.87. Bonds were little changed, with the yield on the benchmark 10-year Treasury note flat at 4.59% from late Monday.


[R]10:30AM The Sensex broke its winning streak on an intense selling pressure.[/R]
The Sensex on BSE finished 349.08 points, or 2.54% at 13,382.01. The market breadth was negative on BSE, with almost two decliners for every gainer. On BSE, 1,641 shares declined while 919 advanced and 69 remained unchanged. From the Sensex 30 stocks, only Hero Honda advanced, rest declined. The turnover on BSE was Rs 4,114 crore, higher than Rs 3,772 crore on Monday. The turnover on NSE was Rs 9,066.2 crore, compares to Rs 8,222.2 crore on Monday.

Economic news

Thai stocks slumped almost 15% Tuesday as panic seized the market after the Central Bank of the country imposed a 10% penalty on overseas investors if they take out funds within a year of investment, pulling markets down throughout the region including India.

India must take preventive measures to curb inflation as it is still not clear that inflation worries are over, Finance Minister Chidambaram stated on Tuesday.

George Soros, a global financial speculator, today cautioned India not to go for full float of rupee and added that the government should not let the economy get overheated. Mr. Soros is widely blamed for his attacks on weak currencies in Asia for personal gains during the Asian contagion in the year 1998.

Most-active stocks

Reliance Industries was the most active stock on BSE with turnover of Rs 219.19 crore followed by BHEL and Tech Mahindra.

Advancers

Hero Honda was the only advancers from the Sensex stocks, up 0.89% to Rs 757. Sugar stocks advanced on a day of broad sell-off. On Monday, Union Cabinet took a decision to let sugar companies export. Uttam Sugar advanced 3.61% to Rs 136.50, Sakthi Sugar was up 3.80% to Rs 106.50, Ugar Sugar Works surged 7.51% to Rs 17.90, Mawana Sugar gained 3.78% to Rs 52.15.

Decliners

BHEL led the decliners, plummeting 5.39% to Rs 2,262.35. According to analysts the decline is the likely loss of equipment orders for the upcoming mega power projects.

Of all the sectors, capital goods sector led the decliners. Crompton Greaves dipped 6.3% to Rs 193, Bharat Electronics lost 4.99% to Rs 1,252, SKF Bearings shed 3.20% to Rs 277.20, BEML was down 3.86% to Rs 925 and ABB slipped 3.62% to Rs 3,535.

NTPC dipped 5.05% to Rs 133.60, Reliance Communications lost 4.80% to Rs 445.45, L&T shed 4.21% to Rs 1,410 and ACC declined 3.82% to Rs 1,013.

Index heavy Reliance industries plunged 3.20% to Rs 1,248 despite reports that Reliance Industries and its partner Niko Resources have discovered huge oil in the hydrocarbon rich Krishna-Godavari basin.

Tata Steel declined 3.23% to Rs 452.30 having advanced to a high of Rs 475 in view of reports that the UK Takeover Panel is likely to condust two way auaction for Corus.

IT stocks declined on overnight drop in the U.S. market. Infosys shed 3.20% to Rs 2,152, Satyam Computer was down 3.51% to Rs 463, TCS lost 3.52% to Rs 1,140, Wipro sank 3.21% to Rs 563.25.


[R]9:45AM Stocks dropped at opening, amid disappointing sales at Oracle and inflation worries.[/R]
U.S. stocks opened lower on Tuesday after government data showed the sharpest rise in producer prices in 32 years last month, sparkling inflation and higher interest rates concerns. The Labor Department reported that the Producer Price Index climbed 2% in November, while the core PPI, which excludes energy and food prices, rose 1.3%. In other report, the Commerce Department said construction of homes rose by 6.7% in November, but at the same time applications for building permits dropped for the 10th straight month. Further pressure was exerted by news that the stock market in Thailand tumbled 15% Tuesday after the Thai government announced controls on foreign investment.

Earnings-related news also generated negative mood. Oracle Corp. ((ORCL)) was the biggest drag on the Nasdaq, falling 4.6% as the software maker posted disappointing sales results. Circuit City Stores ((CC)) said it swung to a loss in Q3 because of sharp discounts on flat-panel televisions and computer equipment. The company also lowered its full-year sales forecast. The stock slipped 17%. Best Buy Co. ((BBY)) also declined, down 4.2%. On a positive earnings note, investment bank Morgan Stanley ((MS)) reported 10% profit drop in Q4, which came in above estimates. The company reported net income drop of $2.21 billion from $2.47 billion a year ago. On a per-share basis, the profit was $2.08, down from $2.32 a year ago, exceeding expectations of $1.77 a share. The stock rose 2.8%.

In the first hour of trading, the Dow Jones industrial average was down 27.95, or 0.22%, at 12,413.32. The Standard & Poor's 500 index was down 3.97, or 0.28%, at 1,418.51, and the Nasdaq composite index was down 18.99, or 0.78%, at 2,416.58. Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.58% from 4.59% late Monday.


[R]Housing starts rose above expectations.[/R]
The Department of Commerce released its report on housing starts and building permits in the month of November on Tuesday, showing that housing starts rose more than economists had been expecting. The report showed that housing starts rose 6.7 percent to a seasonally adjusted annual rate of 1.588 million units in November from the revised October estimate of 1.488 million units. Economists had expected housing starts to increase to 1.550 million units compared to the 1.486 million unit rate originally reported for the previous month. The increase in housing starts was partly due to a notable increase in housing starts in the South, where starts rose by 18.5 percent. Housing starts in the Northeast rose 8.6 percent, while starts in the Midwest and West fell 6.3 percent and 8.1 percent, respectively. Despite the increase compared to the previous month, housing starts were still 25.5 percent below the November 2005 rate of 2.131 million units. At the same time, the report showed that building permits fell 3.0 percent to a seasonally adjusted annual rate of 1.506 million units in November from a revised October rate of 1.553 million units. Building permits were down 31.3 percent year-over-year.

[R]Producer prices index rose 2%.[/R]
Tuesday morning, the Department of Labor released its report on producer prices in the month of November, showing that prices rose much more than economists had been expecting. The increase was partly due to a rebound in energy prices. The Labor Department said that its producer price index rose 2.0 percent in November following a 1.6 percent decrease in October. The increase came in well above economist estimates of an increase of about 0.5 percent. A rebound in energy prices contributed to the increase in producer prices, with energy prices rising 6.1 percent in November after falling 5.0 percent in October. A significant turnaround in gasoline prices contributed to the rebound by energy prices. The Labor Department also said that prices for light motor trucks increased 13.7 percent in November after falling 9.7 percent in October. Prices for passenger cars and alcoholic beverages also turned up after falling in the previous month. The report also showed that the core producer price index, which excludes food and energy prices, rose 1.3 percent in November after falling 0.9 percent in October. Economists had expected the core index to edge up by 0.2 percent.


[R]9:30AM The FTSE 100 declined in early trade on Tuesday, despite Britvic bid.[/R]
The FTSE 100 in London was off 28.6 points, or 0.5%, to 6,218.8, in late morning trade.

Advancers

Britvic shares surged 6.8%, an all time-high, as hopes that Permira may revive its interest boosted the stock However, Permira would not be permitted to make a full bid for the company until March at the earliest as the company dropped the its bid earlier this year.

GlaxoSmithKline advanced 0.4% after the drug maker decided to strengthen its product pipeline with the $2.1 billion acquisition of rights to a promising leukaemia drug developed by Genmab of Denmark.

Decliners

Vedanta Resources shed 4.4 %, Kazakhmys dipped 1.9% and BHP Billiton sagged 1.6%. The trend was worsened by lower metals prices on commodities exchanges.

Vodafone was dipped 0.5 % weaker at 144¾p after the mobile telephone operator revealed plans to sell its 2 % holding in Swisscom Mobile.

Hanson, the aggregates provider, broke its upward momentum after a strong run up to a trading statement which stood by existing full-year profit forecast. Its shares shed 0.7%.

London Stock Exchange shares declined 0.4 % following its report of details of its rejection of Nasdaq latest, hostile, bid for the company to shareholders. It announced the bid was at the lowest level permitted by the Takeover Code and was utterly unacceptable.


[R]7:30AM Asian markets plunged Tuesday on Thai cetral bank decision.[/R]
Asian markets finished lower Tuesday. Panic selling on the Stock Exchange of Thailand weighed the SET index down 14.8% to finish at 622.14. The Bank of Thailand on Monday unveiled its rigorous measures yet to restrict speculative inflows that have lifted the Thai currency, the baht, to a nine-year high. Starting Tuesday, all banks must hold in reserve for one year 30% of capital inflows that are not trade or services-related, or repatriation of Thai residents investments abroad, the bank announced.

In Tokyo, the Nikkei 225 fell 1.1% to 16,776.88. Financial stocks were hit the hardest from the correction. Nikko Cordial declined 14% after it was put on a watch list by the Tokyo Stock Exchange. Mizuho Financial shed 1.6% and telecom and Internet services provider Softbank declined 3.6%. Japan Tobacco plunged 6.4% as investors took profits after the tobacco company formally announced Friday it would take over British cigarette maker Gallaher Group. Energy company Inpex Holdings dipped 1.6%.

In Hong Kong, the Hang Seng Index closed 1.19% lower at 18,964.55. Shares of PetroChina slipped 2.9%, while the largest offshore oil producer of China, CNOOC shed 2.2%. The Hang Seng China Enterprises Index slipped 1.8% to 9,068.65. Singapore Straits Times Index sank 1.6%. Australia S&P/ ASX 200 lost 0.6% and South Korean Kospi was off 0.3. Malaysia KLSE Composite declined 1.7% and Indonesia JSX Composite was down 1.6%., Taiwan Weighted Price Index canceled out earlier gains to finish 0.3% lower and China Shanghai Composite shed 0.2%.


[R]6:30AM Eurpean stocks slipped on Tuesday with tech stocks leading the deecline.[/R]
European markets were lower in early trading on Tuesday. The U.K. FTSE 100 index declined 0.4% to 6,221.10, the German DAX Xetra 30 index dipped 0.5% to 6,562.24 and he French CAC-40 index lost 0.6% to 5,497.33.

Advancers

Swisscom shares gained 0.6% following its statement that it will take 100% control of Swisscom Mobile, agreeing to buy 25% stake from Vodafone Group for $3.48 billion.

Genmab surged 16 % after GlaxoSmithKline agreed to pay $2.1 billion for a stake in Genmab and rights to one of the cancer and arthritis treatments of the company.
Colruyt SA climbed 3.4 % to 154.1 euros. The biggest discount food retailer in Belgium raised its annual profit forecast after low prices and warmer weather helped to lift first-half sales.

Decliners

SAP shares declined 0.7% in Frankfurt after peer Oracle Corp reported higher second-quarter sales and profit overnight but also said that sales of new software licenses, which are a key indicator of future growth, advanced less than expected.

Mining stocks led declines. Vedanta Resources Plc, the largest copper and zinc producer of India, fell 3.9 % in London and BHP Billiton lost 1 %.

Shares in the London Stock Exchange shed 0.6% after it again recommended that shareholders reject the latest takeover bid from Nasdaq Stock Market.

Vodafone Group shares dipped 0.7% in London. ASML Holdings slipped 0.8% after it has agreed to buy closely held semiconductor-design group Brion Technologies Inc. for $270 million.

BP, the second-largest oil producer in Europe, dropped 0.5 % while Total, the regional third-largest, lost 1 %.

Oil and gold

Crude oil fell on signs mild weather will curb heating demand in the U.S., the world's biggest oil consumer, and as inventories remained above seasonal averages. Crude oil for January delivery fell 39 cents, or 0.6%, to $61.82 a barrel on the New York Mercantile Exchange and traded at $61.83 in London. Brent crude for February settlement declined 47 cents to $61.66 a barrel on the London-based ICE Futures exchange.

Gold rose for the second day as the dollar fell against the euro, boosting the appeal of the metal as an alternative investment. Gold for immediate delivery in London rose as much as $1.40, or 0.2%, to $617.65 an ounce. It traded at $616.05 an ounce at 10:33 a.m. local time.

Currencies

The euro climbed the most in two weeks against the dollar after business confidence in Germany, unexpectedly surged in December. The euro rose to $1.3167 in London from $1.3098 late yesterday in New York. The European currency was at 155.27 yen, from 154.75 yen.

The pound rose against the dollar after an index of house prices held near a four-year high in November. Against the dollar, the pound climbed to $1.9616 at 10:20 a.m. in London from $1.9452 yesterday.

The U.S. dollar was trading at 118.02 yen on Tuesday, down from 118.19 yen from late Monday in New York.