Oil 18-month Low, Venezuela Drops 19%

123jump.com Staff
09 Jan, 2007
New York City

News of job cuts at Sprint Nextel and earnings revision from other companies kept market averages under check. Oil dropped to an eight months low failed to excite traders. Apple released new mobile phone with features of iPod. Venezuela plans to nationalize largest TV network and electric utility. The news dragged the local market index down 19%. Asian markets rebounded after a two-day drop.

[R]4:15PM NY – 10:15PM Frankfurt – 2:45AM Mumbai[/R]
[R]Earnings warning from Sprint and other companies and market nervousness ahead of earnings season overshadowed eighteen-month low oil price. Markets in New York closed lower. Venezuelan market index fell 19% on the news of nationalization of local electric utility and TV network.[/R]

Yield on 10-year bond closed unchanged at 4.655% and the 30-year bond closed at 4.741%.

Gold advanced $4.30 to close at $613.70 a troy ounce, silver gained 20.5 cents to end at $12.565 a troy ounce and copper increased 1.5 cents to close at 254.30 cents per pound.

Oil lost 53 cents to close at $55.560 a barrel and heating oil declined 0.110 cents to finish at 155.60 cents a gallon. Natural gas increased 27.2 cents to close at $6.650 per MMBtu.

Asian markets finished mostly higher led by Australia with a gain of 1.45%, Japan with an increase of 0.86% and Taiwan with an advance of 0.69%. The decliners were Thailand with a loss of 2.69%, Indonesia with a decrease of 1.79% and Hong Kong with a decline of 0.66%. Japanese stocks advanced on bargain-hunting on domestic demand-sensitive issues such as banks and insurance companies.

European markets closed mixed, reflecting losses for major oil companies and some positive broker upgrades across several sectors. The advancers were led by Netherlands with an increase of 0.62%, Belgium with an advance of 0.44% and Switzerland with a gain of 0.27%. The only decliner was Spain with a decrease of 0.08%.

Latin America markets ended lower led by Argentina with a decrease of 2.73%, Mexico with a decline of 2.03% and Brazil with a loss of 1.92%. Americas markets surged as a reaction to the sharp drop in overseas commodities prices, particularly oil. Venezuelan market index fell 19% on the threat of nationalization of the largest TV network and electric utility.

[R]1:00PM European markets closed mixed, with oil majors weighing.[/R]
European stocks closed mixed, reflecting losses for major oil companies and some positive broker upgrades across several sectors. The energy sector suffered considerable weakness as the dispute between Russia and Belarus over oil and gas prices continued. In London, heavyweight BP declined 3.1% as the firm reported that Q4 production declined from a year earlier. Total's shares sank 1.3%, Statoil declined 3.1% and Norsk Hydro lost 1.2%. On the other hand, travel stocks rose as oil prices declined, with airline Deutsche Lufthansa, up 1.5% and rival Air France-KLM, up 0.5%. Outside the energy sector, U.K. retailer Marks & Spencer dropped 4% after disappointing Q3 sales. On the side of the gainers, Siemens rose 1.8% after the company said that it had sold the air-intake module and air-filtration division to Mahle. Shares of France Telecom rose 2.7% after UBS upgraded the carrier to buy from neutral. The French CAC 40 rose 0.3%, the German DAX added 0.1%, while London FTSE 100 inched up 0.03%. Declining crude also pressured the oil-heavy Russian and Norwegian markets, with the Russian RTS index falling 6.4% and the Oslo All-Share index moving 1.5% lower.

Crude oil prices slipped to a year-and-a-half low Tuesday on mild winter weather and lower fuel demand. Oil prices have slipped 12% since the beginning of 2007. Crude oil February contract fell $1.62 to $54.47 a barrel. London Brent slipped $1.28 to $54.32. The U.S. dollar was mixed against its major currency rivals. The euro was quoted at $1.2991, down from $1.3019. The dollar bought 119.43 yen, up from 118.74. The British pound was quoted at $1.9391, up from $1.9378. European gold prices turned mixed. In London, gold traded at $608.83 per troy ounce, up from $607.10. In Zurich, the precious metal traded at $606.55 per ounce, down from $607.50. Silver closed at $12.26, up from $12.18.


[R]11:30AM Oil prices drop weighed on the market. Tech shares pushed the Nasdaq up.[/R]
U.S. market averages turned mixed in late morning trade, reflecting a steep decline in crude oil prices and optimism about the technology sector. Energy stocks weighed on the Dow as crude oil prices dropped 2.7% to $54.58 a barrel. BP plc ((BP)) slipped 3.5%, Chevron ((CVX)) lost 2.1%, and Exxon Mobil ((XOM)) lost 0.6%. At the same time, General Electric ((GE)) helped offset losses for the blue-chip average, rising 1% on reports that the conglomerate is seeking bids for its plastics unit. Tech stocks were among the biggest drivers in the session with news coming from the annual Macworld Expo in San Francisco and Consumer Electronics Show in Las Vegas. Apple Computer ((AAPL)) rose 1.9% on expectations the company will announce its first mobile phones.

Investors were also eagerly awaiting the kick-off of the new earnings season, with Alcoa ((AA)) reporting after market close. The world's biggest aluminum producer is expected to report earnings of 65 cents per share on sales of $7.63 billion. Sprint Nextel ((S)) fell 10% after releasing a profit warning for 2007 and as a result receiving several analyst downgrades. On the corporate news front, Verizon Communications ((VZ)) rose 1% after Venezuelan President said he will nationalize the country's largest telecoms company, CANTV, in which Verizon holds a share. In late morning trading, the Dow rose 19.63, or 0.16% to 12,433.12. The S&P 500 index was up 1.16, or 0.08%, at 1,414.00, and the Nasdaq composite index added 7.13, or 0.29%, to 2,445.33. Bonds held steady, with the yield on the benchmark 10-year Treasury note slightly higher to 4.66% from 4.65% late Monday.


[R]10:30AM NY- 9:30PM Mumbai The Sensex falls Tuesday on selling pressure on IT stocks.[/R]
The Sensex on BSE closed 85.82 points, or 0.63%, lower to end at 13,652.15. The market was highly volatile with intra-day high of 13,748.42, and low of 13,493.38, trading in a range of 255 points. The market-breadth was strong at the beginning of trade but turned weak as the session progressed. As 1,274 shares advanced on BSE, 1,369 declined and 54 shares were unchanged. Of the 30 stocks in the Sensex 19 declined, while the rest advanced. The turnover on BSE was Rs 4,698 crore, higher than Rs 3,731 crore on Monday on several block trades on BSE, as also on a debut of Cairn India resulting in a high turnover. The turnover on NSE was Rs 8,806.52 crore, as compared to Rs 7,619.67 crore on Monday.

Economic news

The government is considering a reduction in petrol prices in the wake of falling petrol and diesel prices if international oil prices continue to decline and if crude falls below $ 50 a barrel level, Petroleum Secretary M S Srinivasan stated today.

Trading highlights

Cairn India Ltd., the Indian arm of British explorer Cairn Energy Plc, declined 20% on its stock market debut on concerns about likely transportation delays. Cairn India market debut was at 148 rupees, 7.5% below its issue price of 160 rupees a share, and slipped to a low of 128.65. It had raised $1.18 billion in its IPO, which was below its expected pricing range between 160 and 190 rupees.

Cairn India was the most-active stock with a turnover of Rs 445.55 crore followed by Gujarat Ambuja and Great Offshore.

Advancers

Gujarat Ambuja Cements led the advancers, up 2.45% to Rs 140. The stock rose after a block deal of 2.25 crore shares was traded on BSE at Rs 136.65 per share. Oil and gas large-cap ONGC gained 1.45% to Rs 924.10, and index heavy Reliance Industries edged 0.46% higher to Rs 1,283, on a volume of 4.71 lakh shares.

Outsourcing company HOV Services surged 10% to Rs 198.55, as it obtained a mandate to collect accounts worth $700 million in the healthcare sector on Tuesday. Punj Lloyd gained 2.10% to Rs 1,020, as the company won an offshore platform project worth around $ 290 million from ONGC.

Decliners

IT stocks were hit ahead of the third quarter earnings season. Satyam Computers led the decliners, down 4.40% to Rs 465, Infosys, which is the first to announce its Q3 results, shed 0.59% to Rs 2,193. Reliance Communications dipped 2.10% to Rs 426.20 on reports that it intends to raise up to $1.2 billion by way of a Global Depositary Receipt issue.

Cairn India stocks were offered on BSE at Rs 140 on BSE, a decline of 12.50% compared to the IPO price of Rs 160 per share, trading within Rs 155 - Rs 128.65 price-range. The stock ended sharply lower, at Rs 137.50.

HDFC Bank shed 1.73% to Rs 1,010, following rumors of a bonus issue. HDFC was down 1.73% to Rs 1,565, SBI plunged 3.30% to Rs 1,172.90 and Tata Motors lost 2.33% to Rs 906. Ranbaxy Laboratories edged 1.20% lower to Rs 414, following reports that it may bid for the generic drug arm of Darmstaadt-based German pharma major Merck.

The capital goods sector was the biggest decliner among sectoral indices. It lost 130 points, or 1.5%. KEC Infrastructure declined 3.4%, Alstom Projects was also down 3.3%, Crompton Greaves dipped 2.5%, and Siemens India lost 1.8%.


[R]9:45AM Market opened slightly higher amid rising oil prices.[/R]
U.S. stocks opened slightly higher Tuesday as a continuous slide in crude oil prices and gains for the tech sector helped offset the negative sentiment generated by Sprint Nextel Corp.'s ((S)) warning that its Q4 results will miss expectations. Shares of Sprint Nextel tumbled over 10%after the No. 3 U.S. mobile service provider said revenue will be flat or slightly higher in 2007 and profit will remain under pressure due to lower margins.

A barrel of light sweet crude fell to $54 a barrel, sending stocks in
the energy sector lower. ConocoPhillips ((COP)) fell 1.6%, while Dow component Exxon Mobil Corp. ((XOM)) lost 1.5% on the NYSE. At the same time, the price decrease contributed to significant strength in the oil-sensitive airline sector. Another Dow component General Electric Co. ((GE)) rose 1% on reports that the conglomerate is seeking buyers for its plastics business, valued at up to $10 billion. Shares of Wal-Mart Stores ((WMT)) led gainers on the blue-chip average, giving retailer stocks a boost with an advance of 1.2%.

The tech sector was in the spotlight as Apple Computer annual Macworld expo in San Francisco began, with speculations that the company may release a mobile phone based on its iPod digital music player. Shares of both Apple ((AAPL)) and AT&T ((T)) rose 1% in early trading. In the first hour of trading, the Dow Jones industrial average rose 21.79, or 0.18%, to 12,445.28. The Standard & Poor's 500 index was up 0.89, or 0.06%, at 1,413.73, and the Nasdaq composite index added 3.48, or 0.14%, to 2,441.68.


[R]9:30AM NY – 2:30PM London UK index advances on miners and financials.[/R]
By late morning, the FTSE 100 in London gained 21.5 points, or 0.4%, at 6,215.7.

Advancers

Banks were in favor as Credit Suisse upgraded HBOS, up 3.36%, from neutral to outperform and Lloyds TSB, up 1.4%, from underperform to neutral.

Metal prices firmed as copped edged 1% higher. BHP Billiton rose 2.1%, Xstrata gained 2% and Rio Tinto rose 1.6%.

An upgrade from Morgan Stanley from equal weight to overweight helped BSkyB surge as the company rose 3.5%.

In mid-caps, shares in Rightmove, the estate agent, soared 10.2% after a well-received trading update.

Decliners

Oil large-cap BP shed 2.6 % after a worse than expected trading update. The company announced production of oil and gas declined in Q4 of 2006 to around 3.82 million barrels of oil equivalent per day compared with 4.02 million in the last three months of 2005.

Marks and Spencer succumbed to profit taking, down 1.7%, despite a firm Q3 performance with same-store sales up by 5.6%. Underlying food sales were by 3.6% higher while underlying sales of general merchandise rose by 7.1%.

Cairn Energy shed 1.6% in the wake of the disappointing listing of its Indian subsidiary, Cairn India, on the BSE and the NSE of India.


[R]9:00AM Market futures traded higher, boosted by tech shares.[/R]
U.S. stock market futures advanced, indicating a higher opening of Tuesday trading session ahead of the new earnings season and new product announcements from the two biggest technology shows of the year. The world's largest aluminum maker Alcoa ((AA)), the company kicking off the new earnings reporting season, is scheduled to release its quarterly results after the closing bell on Tuesday.

Apple Computer Inc. ((APPL)) rose 1.2% in pre-market trading. The computer maker will showcase new products at its annual Macworld expo, and there are speculations that the company may release a mobile phone based on its iPod digital music player. Other big tech companies announced plans at the Las Vegas Consumer Electronics Show, which started on Monday. Motorola Inc. ((MOT)) advanced slightly after it said it is developing set-top boxes that can send home television to phones.

Energy shares are expected to suffer weakness as oil futures extended losses, falling 3% to $54.37, the lowest since June 2005. The Energy Select Sector ETF ((XLE)) dropped 4% in electronic trading before market opening. In earnings news, Supervalu Inc. ((SVU)), the US third-biggest supermarket chain, reported Q3 earnings jumped 51%, boosted by its purchase of Albertsons Inc. stores. Supervalu said it earned 54 cents per share, up from 53 cents per share last year on revenue that doubled to $10.66 billion from $4.7 billion a year ago. The quarterly profit exceeded estimates of 54 cents a share on revenue of $10.53 billion. Supervalu reiterated its Q4 guidance of 59 to 66 cents per share.

In other corporate news, Dow component General Electric Co. ((GE)) said it is looking for buyers for its plastics business, valued at up to $10 billion. Apparel retailer Gap ((GPS)) said that it is considering business alternatives, including the possibility of putting itself up for sale. S&P 500 futures were up 2.2 points, above fair value. Dow Jones industrial average futures rose 29 points, and Nasdaq 100 futures were up 3.5 points.


[R]8:00AM Sprint Nextel dropped 11.4% in pre-open amid considerable subscribers loss and plans of workforce reduction.[/R]
Sprint Nextel Corp. ((S)) dropped 8% late Monday after reporting that its cell phone business suffered a net loss of 300,000 monthly subscribers in Q4 and that the company will reduce workforce by 5,000 jobs to just below 60,000 positions. Most of the job cuts are expected in Q1 of the new fiscal year.

During Q4, Sprint added 742,000 net subscribers, ending the year with a customer base of 53.1 million. The fourth quarter net additions included 876,000 from both wholesalers and affiliate companies that sell Sprint Nextel services, as well as 171,000 new customers for Boost. However, 306,000 direct subscribers left the company, driven by a continuing exodus of Nextel subscribers because of worsening service quality. Although the Sprint brand subscriber base grew during the quarter, it failed to offset the Nextel drop.

Sprint said it expects its 2006 results to be in line with its previous guidance, with full-year revenue of $41 billion to $41.5 billion and adjusted operating income before depreciation and amortization of $12.6 billion to $12.9 billion. On average, analysts forecast 2006 earnings of $1.26 per share on sales of $41.53 billion.
The update, which came after the close of Monday's regular stock session, also included a 2007 outlook which came in below many Wall Street forecasts. For 2007, the company projects operating revenue of $41 billion to $42 billion, while analysts expect earnings of $1.32 per share on sales of $42.04 billion.


[R]7:30 AM Asian markets finish mostly higher with China surging on China Life.[/R]
Asian markets finished higher on Tuesday. The Nikkei Index in Japan ended 0.9% higher at 17,238. Mitsui Sumitomo Insurance advanced 5.4%, Millea Holdings rose 3.4% and Sompo Japan Insurance gained 3.1%. Shinsei Bank jumped 3.6% and Mizuho Financial Group closed 2.3% higher. Steelmakers rebounded after their heavy losses on Friday. JFE Holdings advanced 4.9% and Nippon Steel rose 3.3%. Sony surged 6.5%, after Goldman Sachs raised its rating on the company to buy.

In China, the Shanghai Composite Index soared 3.7% to 2,808. Expectations of improved earnings supported shares to a record closing high following several large-cap companies forecast strong growth in 2006 net profit, while Class A shares of China Life made a stronger-than-expected debut. China Life closed at 38.93 yuan ($4.98), more than double its initial public offering price.

The Hong Kong Hang Seng Index shed 0.7% to 19,898 bucking the overall trend. Ping An Insurance declined 4.3%, while PICC fell 6.6%. China Construction Bank slumped 3.5%, Bank of China dipped 2.4% and ICBC declined 2.1%. In Australia, the S&P/ASX 200 index surged 1.6% to end at 5,590. The stock market finished higher on a broad-based recovery led by resource stocks as BHP Billiton gained 3.5%, Zinifex ended 4.5% higher and Minara rose 4% despite declines in zinc and nickel prices on the London Metal Exchange.

The Kospi Index in South Korea gained 0.3% to 1,374. The stock market ended slightly higher as investors hunted for bargains in banking and construction stocks. Kookmin Bank, the largest Korean commercial bank by assets, gained 1.4%, and Hana Financial Group advanced 2.4%. Hyundai Engineering & Construction surged 4% and GS Engineering & Construction gained 4%.


[R]6:30 AM European markets advance on construction and leisure sectors.[/R]
European markets were higher on Tuesday. By mid-morning, the U.K. FTSE 100 index rose 17.2 points, or 0.3% to 6,210.60, while the German Xetra Dax gained 43.2 points, or 0.7%, to 6,651.49 and the French CAC 40 added 37.5 points, or 0.7%, at 5,566.10.

Advancers

Saint Gobain led the advancers with a gain of 5%. On Tuesday, ABN Amro upgraded its recommendation from hold to buy. Aegon rose 4%, helped by an upgrade from neutral to buy by Merrill Lynch.

Holcim was in demand for a second session in succession, gaining 2.3% following an upbeat assessment from the chief executive of the Swiss concrete maker. EADS added 1.3% on news of an order for 50 A320 aircraft from Air Asia which arrived as the market closed on Monday.

Travel stocks advanced in Europe as oil prices sank, with airline Deutsche Lufthansa rising 1.2% and Air France-KLM gaining 0.4% after posting a 3.3% rise in passengers carried in December.

Decliners

Shares in large-cap BP declined 1.7% after it said that it expects disappointing fourth-quarter results. U.K. retailer Marks & Spencer was another decliner, down 1.9% after strong recent gains. Merrill Lynch also downgraded German insurer Allianz to neutral from buy. Allianz shares lost 0.3%

Beiersdorf fell 1.6% on profit taking after the maker of Nivea skin cream reported a 7% increase in full-year sales in 2006.

Oil and gold

Crude oil declined for a second day in New York, falling below $56 a barrel, as mild weather in the U.S. cut heating fuel demand and increased stockpiles. Crude oil for February delivery fell 58 cents, or 1%, to $55.51 in after-hours electronic trading on the New York Mercantile Exchange. In London, Brent crude for February settlement declined 53 cents, or 1%, to $55.07 a barrel.

Gold rose for a second day in London on slowing sales by investment funds and increased demand from jewelers. Gold for immediate delivery rose $2.90, or 0.5%, to $612.90 an ounce in early trade in London.

Currencies

The euro retreated against the dollar. The euro was at $1.3030, from $1.3024. The yen fell to 119.17 against the dollar in early trade in London, from 118.78 late in New York yesterday. It traded at 155.28 per euro, from 154.71, after reaching a record 158.06 on Jan. 3. Against the euro, the pound was at 67.09 pence in London from 67.22 pence on Jan. 8. It also traded at $1.9418 versus the dollar, from $1.9378.