Weaker Dollar, Oil at $62 to Drag Stocks Down

albena
30 Nov, -0001
New York City

Futures eased Wednesday morning, pointing to a lower opening as crude reached a new high and the euro climbed vs. the dollar. The Mortgage Bankers Association

U.S. AVERAGES

U.S. stock futures pointed to a downward bias early Wednesday, after the rally on Tuesday, which gave the Nasdaq and S&P 500 new closing highs. Technology stocks led stocks higher on Wall Street Tuesday amid signs of increased technology spending by businesses.

Time Warner Inc. ((TWX)), the world's largest media company, posted a quarterly net loss on a legal settlement, but said it plans to buy back up to $5 billion in stock over the next two years

Rising oil ahead of fuel inventory report are likely to take stocks off their 4-year highs hit Tuesday. As many as 21 named storms and 11 hurricanes are forecast for the 2005 hurricane season, matching a record set in 1933, according to U.S. government forecasters.

The euro advanced versus the dollar, last quoted at $1.2312, up over 1%, on speculation that Middle Eastern oil producers were shifting revenue away from dollars.

Treasury prices were higher, slashing the yield on the 10-year note to 4.32% vs. the 4.33% late Tuesday. The U.S. Treasury Department is expected to announce the return of the 30-year bond Wednesday, according to some reports.

ECONOMIC NEWS

Economic releases due Wednesday include the reading on the strength of the nation's services sector from the Institute of Supply Management at 10:00 a.m. The ISM Services index is expected to drop to 61.0 for July versus a 62.2 level in June, according to economists.

Mortgage application volume declined in the most recent week, according to industry report released Wednesday, with a rise in purchase activity not quite overcoming a fall in refinancing.

The Mortgage Bankers Association reported that its market composite index of mortgage loan application volume declined 0.3% for the week ended July 29. The 4-week moving average for the market index, which flattens out week-to-week volatility, slid 3.2% The index of purchase activity advanced by 1.9%, while the index of refinancing activity declined by 3%. The refinance share of total applications dropped to 41.7% versus 42.9% in the previous week.

INTERNATIONAL MARKET NEWS

Asian markets closed mixed, while Japanese stocks ended higher Wednesday, benefiting from the rally on Wall Street, but couldn't hold the key 12,000 level. The Nikkei Average closed up 0.35% to 11,981. The index reached 12,009 during the session, beating the previous intraday high for this year set Tuesday.

Sydney's All Ordinaries ended down 0.4% to 4,325 and Seoul's Kospi index declined 0.2% to 1,117. Singapore's Straits Times Index edged down 0.5% to close at 2,365. Shanghai, Indonesia, Malaysia and Taiwan markets finished higher. Hong Kong's Hang Seng index declined 0.1% to close at 15,118.

After several days of gains European markets stumbled Wednesday on some mixed earnings from several major companies, although deal news of of Adidas and Reebok was welcomed.

Germany's DAX 30 index edged 0.3% lower to 4,917.02, France's CAC 40 index dropped 0.4% to 4,485.8, and the U.K.'s FTSE 100 index declined 0.3% to 5,314.2, hit by several major stocks trading without the rights to the latest dividend payments.

The broader pan-European Dow Jones Stoxx 600 declined 0.3% to 286.50.

ENERGY, METALS AND CURRENCIES MARKETS

Worries of tight U.S. supplies and disruptions combined with the concern over the long-term stability of Saudi Arabia after the death of King Fahd pushed oil to an intraday active contract record early Wednesday.

U.S. light sweet crude for September delivery soared in electronic trading to $62.35 a barrel, just above the $62.30 mark set Monday, before retreating to $62.34, up 45 cents a barrel.

London Brent crude traded at a record $61.15 a barrel, up 53 cents from Tuesday.

The U.S. dollar declined versus the euro Wednesday as the market focused onto economic data due to be released later in the week. In morning European trading, the euro was quoted at $1.2312, up versus $1.2199 the day before in late New York trading.

The British pound climbed to $1.7825 versus $1.7705 on Tuesday, and the greenback bought 111.29 yen, down versus 111.38 yen the night before.

EARNINGS NEWS

Hanson, building materials company, posted first-half 28% pretax income rise, or 172.3 million pounds on 9.3% sales growth, good performance and high property profits.

Allied Irish Banks reported firs-half earnings of 71.7 euro cents vs. 63.8 euro cents a year ago on loan and deposit growth. The company raised its 2005 outlook to earnings in the range of 1.40 to 1.42 pounds, up from earlier forecast of 1.38 to 1.40 pounds.

Rio Tinto, Anglo-Austrian miner, posted first-half net income increase of $2.17 billion, up from $1.61 billion a year ago, beating estimates of $1.95 billion. The company raised its interim dividend to 38.5 cents from previous 32 cents.

Marconi, telecom equipment maker, reported 1Q wider net loss of 36 million pounds compared with a loss of 10 million pounds last year on 15.9% sales decrease.

Swift Energy, oil and gas properties operator, posted 2Q net income of 96 cents a share, up vs. 46 cents, gained in the same period last year on strong revenue growth, beating analysts’ forecasts of 90 cents a share.

Las Vegas Sands, casino operator, announced 2Q net income declined to 24 cents a share, down from $1.42 a share in the year-ago period despite revenue growth. Adjusted net income was up at 27 cents a share from 12 cents a share a year earlier.

Time Warner, Internet services and high-speed broadband services provider, posted 2Q loss of 7 cents a share after agreeing to settle litigation for $3 billion. It would've missed consensus forecasts of 19 cents a share after the 25 cents a share charge impact is taken away on declines from film and AOL divisions.

Earle M. Jorgensen, metal products distributor, announced 1Q profit fell 48 cents vs. 58 cents in the same period last year, due to a rise in the number of diluted shares and despite an increase in net income and strong revenue.

Cigna, health care provider, posted a 2Q net income rise of up to $5.48 a share, up vs. $3.59 a share last year on strong results and related benefits businesses.

Commerzbank, commercial bank, posted a first-half net profit rise of up to 570 million euros, up from 486 million euros last year in the same period, after encouraging developments in net interest and net commission income trends.

BMW, car maker, announced 2Q pre-tax profit declined to 916 million euros on higher raw material prices and stiffer competition. Net profit fell 1.2% to 663 million euros despite good performance from new models, matching analysts’ expectations of between 606 million and 714 million euros.

Havas, French advertising group, announced sales were up to 370 million euros in 2Q on strong recovery and sales growth outside France.

Westlake Chemical, basic chemicals manufacturer, posted 2Q net income rise, with earnings reaching 74 cents a share, up from 69 cents in the year-ago period on higher sales, missing expectations of 80 cents a share.

Gildan Activewear, active wear apparel manufacturer, posted third quarter net earnings of 57 cents a share, up vs. 44 cents, gained in the same period in fiscal 2004 on increased sales, beating analysts’ expectations by a penny.

CORPORATE NEWS

Adidas-Salomon AG said Wednesday that it has agreed to buy Reebok International ((RBK)) for $3.8 billion. Under the deal, which could be completed during the first half of 2006, the German shoe and apparel maker will acquire its U.S. rival for $59 per share.

Time Warner announced that it has reached an agreement in principle to resolve its primary securities class action litigation and established reserves of $3 billion related to this and other related securities litigation matters.

XM Satellite Radio reached a deal to carry news, information and music programming from New York Times Co.'s newly established radio unit. Under the agreement, XM will place news, features, reviews and commentary from newspaper and radio employees of the Times company on its satellite channels.

OTHER NEWS

Japan’s Prime Minister Junichiro Koizumi has threatened to dissolve parliament for a snap election if the upper house fails to pass postal privatization legislation before the current session ends on August 13th. A vote on the bill could be held as soon as Friday, according to reports.