Nokia Weighs on European Stocks

Elena
05 Jan, 2007
New York City

European stocks finished in the red on Friday, pressured by weakness in the energy sector and concerns over mobile-phone maker Nokia''s revenue. Losses on Wall Street also weighed, with U.S. stocks falling on stronger-than-expected payrolls data. The German DAX 30 dropped 1.2%, followed by the French CAC 40 and London FTSE 100, each down 1.1%.

[R]1:00PM European markets closed down, dragged by Nokia and oil stocks.[/R]
European stocks finished in the red on Friday, pressured by weakness in the energy sector and concerns over mobile-phone maker Nokia''s revenue. Losses on Wall Street also weighed, with U.S. stocks falling on stronger-than-expected payrolls data. Oil companies were notable decliners, dragged down by further retreating oil prices. The French Total slipped 1.3% and the U.K. Royal Dutch Shell fell 2.4% as oil dropped as low as $55 a barrel. Shares of Nokia lost 4.2% in Finland after U.S. rival Motorola cut its sales and earnings forecast. Credit Suisse lowered its rating on Nokia to neutral from outperform. Shares of Ericsson slipped just 0.2%. according to analysts, the semiconductor and mobile-networks segments will also be negatively affected by Motorola''s warning. Outside the sector, Alstom dropped 3.5% in Paris after Citigroup downgraded the company to neutral. The German DAX 30 dropped 1.2%, followed by the French CAC 40 and London FTSE 100, each down 1.1%.

Crude oil prices slipped toward $55 a barrel on mild winter weather and ample supplies. Crude oil February contract fell 27 cents to $55.32 a barrel. London Brent slipped 27 cents to $54.84. The U.S. dollar advanced against its major currency rivals. The euro was quoted at $1.2995, down from $1.3086. The dollar bought 118.79 yen, down from 119.08. The British pound was quoted at $1.9291, down from $1.9443. European gold prices declined. In London, gold traded at $604.20 per troy ounce, down from $627.10. In Zurich, the precious metal traded at $601.95 per ounce, down from $626.65. Silver closed at $12.17, down from $12.74.


[R]11:30AM The Nasdaq dropped 1%, dragged by tech stocks.[/R]
U.S. stock markets extended losses as a surprising surge in job creation and wages undermined investors’ hopes for an interest rate cut in the short term. Weakness in the tech sector also weighed on the market sentiment, sending the Nasdaq more than 1% lower. Motorola ((MOT)) fell 8% after the cell-phone maker cut its earnings estimates, dragging down technology shares. Among other tech stocks posting losses, Intel Corp. ((INTC)) fell after a downgrade at Credit Suisse, while Qualcomm Inc. ((QCOM)) dropped 2.8%. Credit Suisse cut its rating and price target on Broadcom Corp. ((BRCM)), which was among the top drags on the Nasdaq. The stock fell 4.2%.

Heavy losses by gold stocks also contributed to the downward moves by the major averages. Gold stocks continued to decline as the price of the precious metal moved sharply lower amid some strength shown by the U.S. dollar. Elsewhere, Herbalife Ltd. ((HLF)) was a notable decliner, falling 20%, as the nutritional supplements company reiterated Q4 profit expectations of 52 cents to 55 cents per share, excluding realignment costs. The company projected sales between $482.7 million and $484.7 million, which is 18% higher than last year''s quarterly sales of $409 million. In late morning trading, the Dow Jones industrial average fell 100.46, or 0.80%, to 12,380.23. The Standard & Poor''s 500 index was down 10.76, or 0.76%, at 1,407.58, and the Nasdaq composite index was down 29.15, or 1.19%, at 2,424.28. Prices plummeted in the Treasury market, with the 30-year bond price dropping more than a full point shortly after the jobs report. The yield on the benchmark 10-year Treasury note rose to 4.68% from 4.61% late Thursday.


[R]10:30AM NY – 9:30PM Mumbai The Sensex ends lower, oil and gas advance.[/R]
The Sensex on BSE finished 11.19 points, or 0.08%, lower at 13,860.52. Volatility was high as the index traded in a range of 208 points. The market-breadth was positive as 1,640 shares advanced, 1007 declined and 53 remained unchanged. Fro every three advancers, there were two decliners. Of the 30 stocks in the Sensex, 18 declined, while the rest advanced. The turnover on BSE was Rs 4,146 crore, lower than Rs 4,532 crore on Thursday. The turnover on NSE was Rs 8,771.98 crore, slightly higher than Rs 8,556.02 crore on Thursday.

Economic news

The wholesale price index advanced 5.48% in the 12 months to December 23, higher than the annual rise of 5.43% in the previous week on a rise in the prices of food and manufactured product. During the same time last year the annual inflation rate was 4.62%.

The Reserve Bank of India has denied foreign institutional investment the status of foreign direct investment obtained through private placement of equity by real estate companies. The move has been taken in order to control the asset bubble in the fast-growing realty sector.

In trade today

New issue Pyramid Saimira was the most-active stock with a turnover of Rs 254.30 crore followed by Sobha Developers and Sesa Goa.

Advancers

ONGC led the gainers, up 2.81% to Rs 899.25 on 4.85 lakh shares on reports that it is very near to buying up to 33% stake in two Caspian sea blocks offshore of Turkmenistan. HPCL was also up 3.34% to Rs 297.35, GAIL India advanced 3.94% to Rs 275.55, BPCL added 2.13% to Rs 351.75, IOC finished up 1.32% to Rs 476.10 and MRPL edged 0.86% higher to Rs 41.20.

ICICI Bank jumped 2.21% to Rs 910.10 as it said that its offshore dollar-denominated debt offering had received a strong response. Housing finance large-cap HDFC gained 1.90% to Rs 1,611.15, as it had raised prime lending rates by 50 basis points from January 1 2007.

Index heavy Reliance Industries gained 0.60% to Rs 1,288 on 9.36 lakh shares. It traded in a range of Rs 1,311.70 and Rs 1,278. Pyramid Saimira Theatre ended at Rs 158.20 on BSE, compared to IPO price of Rs 100. The stock debuted at Rs 135. It struck a high of Rs 163.85 and low of Rs 125.

Sesa Goa, iron ore leader, soared 11.32% to Rs 1,727.25 on reports that it will start negotiations on annual price contracts with major global customers from February 2007. Dabur Pharma also surged 5.13% to Rs 81 as the company on Thursday said it had launched its new nano technology based chemotherapy agent, Nanoxel, in the country.

Decliners

Reliance Communications led the decliners, down 3.90% to Rs 447.10. Maruti Udyog was off 3.06% to Rs 938 as it stock dipped to a low of Rs 930 following reports that the Government may rewrite small car specification for excise duty.

Cement stocks also plunged. ITC lost 2% to Rs 165.50, Hindalco was down 2.52% to Rs 170.50 and Gujarat Ambuja Cements shed 2.59% to Rs 139.

Traders took profit in IT stocks ahead of December quarterly results. Infosys Technologies edged lower 0.48% to Rs 2,274.80, TCS was down 0.10% to Rs 1,262.55, Wipro shed 1.16% to Rs 598.80 and Satyam Computers slipped 0.10% to Rs 501.50.


[R]9:45AM Market opened lower amid rate concerns and Motorola sales warning.[/R]
U.S. stock markets opened Friday trading session in the negative, reflecting rate concerns, raised by stronger-than-expected employment rate in December, steeply lower oil prices and a profit warning from Motorola. Best Buy ((BBY)) rose 1.5% after the consumer electronics retailer said same-store sales rose 7%. Circuit City ((CC)) erased earlier gains made on its report that December same-store sales rose 4.2%. In earnings news, Global Payments ((GPN)) posted 11% profit rise in Q2 to 42 cents per share, up from 37 cents per share last year on 9% revenue growth The stock dropped 10.5%. In the first hour of trading, the Dow Jones industrial average fell 28.44, or 0.23%, to 12,452.25. The Standard & Poor''''s 500 index was down 4.90, or 0.35%, at 1,413.44, and the Nasdaq composite index was down 13.06, or 0.53%, at 2,440.37. Prices plummeted in the Treasury market, with the 30-year bond price dropping more than a full point after the jobs report. The yield on the benchmark 10-year Treasury note soared to 4.70%from 4.61% late Thursday.

[R]December employment rate increased more than expected.[/R]
Friday morning, the Department of Labor released its report on the employment situation in the month of December, showing that the U.S. economy added more jobs than economists had been expecting while the unemployment rate remained unchanged. The report showed that non-farm payrolls increased by 167,000 in December following an upwardly revised increase of 154,000 in November. Economists had expected an increase of about 100,000 jobs compared to the increase of 132,000 jobs originally reported for the previous month. The better than expected job growth reflected gains in several service-providing industries, including professional and business services, health care, and food services.

Service-providing industries added 178,000 jobs in December, more than offsetting a decrease of 11,000 jobs in goods-producing industries. The drop in jobs in goods-producing industries was largely due to a continued decline in manufacturing jobs. The Labor Department also said that the unemployment remained unchanged at 4.5 percent in December, which was in line with economist estimates. In the previous month, the unemployment rate edged up to 4.5 percent from 4.4 percent due to an increase in the size of the labor force. The report also showed that average hourly earnings increased by $0.08 or 0.5 percent in December to $17.04. With the increase, the year-over-year growth in average hourly earnings edged up to 4.2 percent in December from 4.1 percent in November.


[R]9:30AM NY – 2:30PM London The FTSE retreats on utilities, oil and gas stocks.[/R]
The FTSE 100 in London shed 16.8 points, or 0.3%, to trade at 6,270.2 in mid-morning session.

Decliners

Scottish & Southern Energy suffered heavy losses of 3% while International Power shed 2.3%. Kelda Group declined 1.3%. Cairn Energy also lost 2%, hit by weaker oil prices as crude dropped below $56 a barrel. Royal Dutch Shell was off 1% and BG Group lower by 1.5%.

Miners declined on copper prices which hit 9-month lows on continuing demand worries. BHP Billiton retreated 1.5% while Lonmin traded 1.4% lower.

CSR, Bluetooth maker for mobile phone components, continued to trade in the red after recently being accused of violating a wireless connections technology patent. It was down 2.5%.

Games Workshop Group were down by 8.4% following a profit warning. The company, which makes and sells figurines, announced that full year sales, and therefore profits, are likely to miss current market expectations.

Advancers

Support services firm Cape announced that earnings for the full year will top market expectations as its strong first half performance has continued throughout the second half of the year and will yield a positive set of full year results.

The retail sector attracted attention a day after well received results from fashion group Next. Merrill Lynch was moved to reiterate buy advice and the previous target price, with increased profit and earnings forecasts.

Supermarket leader Tesco was in focus, up 2.22%, as well as rival William Morrison, 1.39% higher, while J Sainsbury advanced 0.84% before the trading update next Thursday.


[R]9:00AM Market futures traded down, despite strong employment data.[/R]
U.S. stock futures remained in the negative territory even after stronger-than-expected December payrolls data eased concerns about an economic slowdown. The Labor Department released an employment report Friday which showed that the jobs market ended 2006 on a positive note. Total nonfarm payroll employment increased by 167,000 in December to 136.2 million, following increases of 86,000 in October and 154,000 in November. The number of new jobs added to the economy in December exceeded analysts'' forecasts for a gain of around 115,000. The Labor Department also said that the jobless rate fell from 4.9% at the beginning of the year to 4.5%. Average hourly earnings jumped by 0.5%, higher than the 0.3% rise expected. U.S. stock futures remained in the negative territory even after stronger-than-expected December payrolls data eased concerns about an economic slowdown.

Friday pre-market sentiment was considerably hurt by a profit warning from handset maker Motorola Inc., as well as downgrades of Dell Inc. and Exxon Mobil. A move by China to limit growth also contributed to the weakness. Motorola ((MOT)) dropped nearly 10% in pre-opening hours as the mobile phone maker cut its Q4 earnings and sales forecast, citing lower margins and average selling prices due to an unfavorable geographical and product mix of mobile-phone sales. Dell Inc. ((DELL)) fell 1.9% in pre-open after J .P. Morgan cut the computer maker to underweight from neutral on concerns over its enterprise business. Dow component Exxon Mobil ((XOM)) was downgraded at Lehman to equal-weight on concern over slowing production growth. Elsewhere, shares of Circuit City Stores ((CC)) and Best Buy ((BBY)) gained 4% each after reporting same-store sales increase and ahead of quarterly earnings release. S&P 500 futures were down 5.6 points, below fair value. Dow Jones industrial average futures fell 38 points, and Nasdaq 100 futures fell 8 points.


[R]8:00AM Motorola cut its Q4 earnings and sales forecast.[/R]
Motorola Inc. ((MOT)) slashed its Q4 earnings and sales forecast, citing lower margins and average selling prices due to an unfavorable geographical and product mix of mobile-phone sales. It sold 66 million units in the quarter, up 48% from last year and 23% from Q3 levels. The world''s No. 2 mobile phone maker said that Q4 sales will come in the range of $11.6 billion to $11.8 billion, lower than earlier guidance of between $11.8 billion and $12.1 billion.

The company projected earnings per share in a range of 13 cents to 16 cents a share, including 10 cents of charges on investment-related losses, stock compensation expenses and taxes. The profit projections came in below analysts’ expectations of earnings of 39 cents a share on sales of $11.99 billion.

Goldman Sachs predicts that Motorola will see several quarters of average-selling-price weakness. It also warned that product differentiation, a key driver of Motorola''s recent gains, is likely to decrease because of the introduction of some thin products in the first half of 2007 by Nokia.

Motorola shares were down 9.4% in pre-market trading.



[R]7:30 AM Asian markets closed mostly down with Japan lower and HK higher.[/R]
Asian markets ended mostly lower on Friday. IN Japan, the Nikkei 225 index closed down 262.08 points, or 1.5%, to 17,091.59. Exporters were hit by profit-taking. Toyota Motor shed 2.4%, while Honda fell 3%. Toshiba Corp advanced 1.6% though, after the Nikkei daily reported the second-largest machinery maker in Japan intends to market a new boiling-water reactor for nuclear power plants. The stronger yen also hurt exporters of consumer electronics. Canon Inc dipped 2.1% while camera maker Nikon slipped 3.8%.

The Hang Seng Index in Hong Kong bucked the downtrend and gained 0.9% to 20,211.28. Mainland financial shares ended mixed. Shares of Industrial & Commercial Bank of China added 0.4%, while Bank of China lost 0.5%. Mainland insurer China Life Insurance declined 3.3%. The Shanghai Composite in China ended 1.9% lower to 2,664.85, while Singapore Straits Times index rose 0.3%.

Australia S&P/ASX 200 pared early gains to finish down 0.2% at 5,572.00, while New Zealand''s NZSX-50 advanced 0.2% to 4,035.27. Shares of the largest mining company in the world, BHP Billiton, fell 0.9%, while Rio Tinto shed 1.5%. Resource companies declined, tracking drops in energy prices. Australian Woodside Petroleum lost 1.9%


[R]6:30 AM European markets slipped on Friday on weaker commodities, tech stocks.[/R]
European markets were lower on Friday. The FTSE 100 in London shed 0.5% to 6,255.5, Frankfurt Xetra Dax fell 0.6% to 6,636.94, the CAC 40 in Paris lost 0.5% to 5,546.44.

Decliners

Credit Suisse downgraded its rating on world number one handset maker Nokia from outperform to neutral. Nokia shed 3.4 %. French rival Alcatel-Lucent dipped 1.2%, while Ericsson of Sweden, whose Sony-Ericsson joint venture is the world fourth-biggest handset maker, slipped 0.9%.

Alstom, the French engineering group, also fell 4.2% after Citigroup reduced its recommendation from hold to sell, on the premise that investors were paying too much for the stock

Energy stocks were weak as oil prices declined on the back of strong US inventories. The producers worst affected were Statoil of Norway, which fell 2.2% and British BG Group, down 2.2%.

Total, the largest oil refiner in Europe, dropped 1.1% and Royal Dutch Shell Plc, the biggest oil company in the region, decreased 0.9%.

Advancers

Weakening oil prices gave a boost, however, for airline stocks in Europe. German Lufthansa led the advancers, up 2.6% and Air France-KLM gained 1.9% and Irish Ryanair added 1.7%.

Telecommunications shares advanced, paced by Royal KPN NV, the largest Dutch phone company, and Telecom Italia SpA, the biggest phone operator in Italy. KPN added 1.4% as did Telecom Italia.

Oil and gold

Crude oil stayed virtually the same in New York, ready for its biggest weekly decline since April 2005, as mild U.S. weather reduced consumption and fuel stockpiles jumped. Crude oil for February delivery traded at $55.52 a barrel, down 7 cents, on the New York Mercantile Exchange in early trade. Brent crude for February settlement rose 8 cents to $55.19 a barrel on the London-based ICE Futures exchange.

Gold rose for the first day in three in London on speculation investor demand will increase because of declines in the dollar. Gold for immediate delivery rose $1 to $623 an ounce in early trade in London. Silver rose 1 cent to $12.605 an ounce in London while platinum gained $5 to $1,125.50 and palladium increased $4.50 to $341.50.

Currencies

The dollar advanced slightly on the euro, extending its rally begun earlier in the week and ahead of the release of key payroll data in the U.S. later Friday. The euro bought $1.3080 in early trading, barely down from $1.3087 in New York late Thursday. The British pound also declined to $1.9403 against the dollar, down from $1.9427 overnight. Against the Japanese yen, the dollar bought 118.15, down from 119.10 yen in New York.