Techs, Utilities, Miners Lift Europe

Elena
07 Feb, 2007
New York City

European stocks closed in the green territory Wednesday, boosted by gains for mining and tech stocks, as well as continued deal speculation in the utility sector. BHP Billiton rose 5.5% amid a surprising $10 billion share buyback. In the tech sector, shares in Infineon Technologies rose more than 10%. Among utility stocks, E.On shares rose 1%. The DAX 30 gained 0.6% at 6,915.56, the French CAC-40 rose 0.5% to 5,703.00 and the the U.K. FTSE 100 rose 0.4% at 6,369.50.

[R]1:00PM European markets closed higher, boosted by BHP Billiton and Infineon.[/R]
European stocks closed in the green territory on Wednesday, boosted by strong earnings reports and buyback news from mining giant BHP Billiton. Gains posted by Infineon Technologies and continued deal speculation in the utility sector also generated upbeat sentiment. BHP Billiton was a notable advancer, rising 5.5% in London after it reported 41% profit growth and announced a surprise $10 billion share buyback. In the tech sector, shares in Infineon Technologies rose more than 10% after the German chipmaker said it received a contract to supply chips for Nokia. Among utility stocks, E.On shares rose 1% after the board of Endesa approved E.On''s offer of 38.75 euros a share. The gains in Germany spread through the European utility sector, with Spanish utilities Union Fenosa rising 4% and Iberdrola gaining 2.7% in Madrid amid continued deal talk. In earnings-inspired gains, shares in French advertising group Publicis climbed 5% amid 4.8% revenue growth. British Airways was in focus, rising 4.7% after Merrill Lynch upgraded the airline to buy from neutral. The DAX 30 gained 0.6% at 6,915.56, the French CAC-40 rose 0.5% to 5,703.00 and the the U.K. FTSE 100 rose 0.4% at 6,369.50.

Crude oil prices hovered round $59 a barrel after weekly petroleum report. Light, sweet crude March delivery rose 7 cents to $58.95 a barrel. Heating oil added to $1.6960 a gallon, while gasoline rose to $1.5739. London Brent was unchanged at $58.42. The U.S. dollar traded mixed against its major currency rivals. The euro was quoted at $1.3009, up from $1.2978. The dollar bought 120.72 yen, up from 120.08. The British pound was quoted at $1.9689, down from $1.9704. European gold prices advanced. In London, gold traded at $654.90 per troy ounce, up from $652.03. In Zurich, the precious metal traded at $653.70 per ounce, up from $649.60. Silver closed at $13.72, up from $13.57.


[R]11:30AM The Dow Jones Industrial average topped 12,700.[/R]
U.S. stock averages traded higher, boosted by retreating oil prices and solid gains in the tech sector. The Dow topped 12,700 for the first time, reflecting a robust sales forecast from Cisco Systems Inc. and a stronger-than-expected productivity growth. The blue-chip average was lifted by gains for Caterpillar ((CAT)), up 1.6%, Hewlett-Packard ((HPQ)), up 1.1%, and Intel ((INTC)), also up 1.1%. However, losses posted by Pfizer ((PFE)) and Alcoa ((AA)) helped to limit the upside for the blue-chip average.

The tech sector was led higher by Cisco Systems ((CSCO)) which rose 4% amid better-than-expected results and lifted revenue and profit guidance. Further support was provided by Amazon.com Inc. ((AMZN)), rising 1% after it announced it is partnering with TiVo Inc. ((TIVO)) to offer movies and TV shows. Following the news, shares in TiVo gained 5%. At the same time, Texas Instruments ((TXN)) was down 1.4%, after Infineon Technologies ((IFX)) said it received a contract to supply chips for Nokia Corp. phones. Infineon climbed 11%. In late morning trading, the Dow rose 21.07, or 0.17 percent, to 12,687.38. The Standard & Poor''s 500 index was up 3.68, or 0.25%, at 1,451.68, and the Nasdaq composite index rose 20.25, or 0.82%, to 2,491.74. Bonds rose following the economic data, with the yield on the benchmark 10-year Treasury note falling to 4.76% from 4.77% late Tuesday.

[R]Crude oil inventories declined.[/R]
Government data released Wednesday showed that crude oil inventories edged lower in the most recent week, halting a recent streak of gains. Meanwhile, gasoline inventories continued to rise, and distillate stockpiles recorded another slide. The Department of Energy''s Energy Information Administration said that crude oil inventories slipped 400,000 barrels in the week ended February 2. Specifically, the measure dipped to 324.5 million barrels from the previous week''s level of 324.9 million barrels. This followed a recent streak of gains, including an increase of 2.7 million barrels in the previous week. Meanwhile, gasoline inventories showed a week-over-week increase of 2.6 million barrels. The extended recent gains, including a rise of 3.8 million barrels in the previous week. The level of gasoline inventories was 2.2% above last year. Meanwhile, distillate fuel oil had an inventory decline during the week ended February 2. Stockpiles of these products, which include heating oil, slipped by 3.7 million barrels. This added to a decline of 2.6 million barrels recorded in the previous week.


[R]9:45AM Market opened higher, lifted by tech rally.[/R]
U.S. stocks opened higher on Wednesday, benefiting from strength in the technology sector largely contributed by 3.5% gain for Cisco Systems ((CSCO)) on the back of strong earnings and a higher sales forecast. Amazon.com ((AMZN)) also helped, rising 1% after it announced it is partnering with TiVo ((TIVO)) to offer movies and TV shows. TiVo shares gained 5%. Infineon Technologies ((IFX)) rose 8% after the German chip maker received a contract to supply chips for Nokia. The Dow Jones Industrial average was supported by 1.1% rise for Caterpillar Inc ((CAT)) and 0.6% rise by the shares of IBM ((IBM)).

In earnings-related news, Whirlpool ((WHR)) fell 2.5% after the appliance maker reported a 14% profit decline on discontinued operations. Net income dropped to $1.37 per share, compared with $1.83 per share last year, missing estimates. Restaurant chain Cheesecake Factory Inc. ((CAKE)) shares traded down 2.5%, due to al 9% profit drop in Q4 because of compensation charges and higher operating costs. Net income slipped to 26 cents per share from 28 cents per share in the prior year period. Cigna Corp. ((CI)) stock rose nearly 1% after the company''s adjusted earnings per share beat expectations.

News Corp ((NWS)) rose 1.7% after the media company reported Q2 net income decline. FEI Co ((FEIC)) jumped above 16% after the maker of special microscopes to analyze semiconductors swung to a Q4 profit on higher sales, beating estimates. Among other early movers, New Oriental Education & Technology Group ((EDU)) climbed 8%. In the first hour of trading, the Dow Jones industrial average rose 5.61, or 0.04%, to 12,671.92. The Standard & Poor''s 500 index was up 1.45, or 0.10%, at 1,449.45, and the Nasdaq composite index rose 8.17, or 0.33%, to 2,479.66.

[R]Fourth-quarter productivity grew at a faster pace.[/R]
Wednesday morning, the Department of Labor released its preliminary report on labor productivity in the fourth quarter, showing that productivity grew at a faster pace than economists had been expecting. The report showed that productivity grew 3.0 percent in the fourth quarter compared to a revised 0.1 percent decline in the third quarter. Economists had expected 2.0 percent productivity growth compared to the 0.2 percent growth originally reported for the previous quarter. The strong productivity growth came as an increase in output outpaced an increase in hours by a large margin. The report showed that output grew 4.2 percent, while hours edged up by a much more modest 1.2 percent. For the third quarter, output growth was revised down to 1.9 percent from 2.3 percent, while the increase in hours was revised to 2.0 percent compared to the 2.1 percent growth originally reported.

The report also showed that unit labor costs rose by 1.7 percent in the fourth quarter compared to an upwardly revised 3.2 percent increase in the third quarter. Unit labor cost growth in the third quarter was originally reported at 2.3 percent. The Labor Department also said that labor productivity for all of 2006 rose 2.1 percent following a 2.3 percent increase in 2005. The productivity growth represented the slowest pace of growth since a 1.6 percent increase in 1997. Additionally, unit labor costs for the year rose 3.2 percent compared to a 2 percent increase in 2005, marking the fastest pace of unit labor cost growth since a 4.2 percent increase in 2000.


[R]9:30AM NY-2:30PM London FSTE inches higher at mid-day Wednesday.[/R]
The UK market was slightly higher at mid-day trading on Wednesday. The FSTE 100 in London was barely 0.15% higher at 6,356.

Advancers

BHP surged 4.4% after it posted a large rise in profits and an extra $10 billion cash return to shareholders. Chief executive Chip Goodyear also announced he would retire by the end of the calendar year 2007. Anglo American and Vedanta were also higher, boosted by higher metal prices. Anglo American advanced 1.2%, while Vedanta was 2.4% higher. Another strong performer was British Airways, up 3.2%, on the back of a positive comment from Merrill Lynch. The broker raised the airline to buy from neutral. British American Tobacco also moved 1.1% higher as SG Securities raised the stock to buy and lifted the estimates on the shares.

Decliners

The pharmaceutical sector was in negative territory especially companies trading without rights to the latest dividend payout like AstraZeneca, down 1.8%, and Compass Group which was lower by 1.7%. GlaxoSmithKline declined 0.6% ahead of Q4 figures tomorrow. Although Q1 revenue of airline easyJet is up 15% from last year with the January load factor up 0.7% to 74.9% and passenger numbers in January rising 11.1%, the airline dipped 2.4%. Children’s entertainment company DIC Entertainment said that annual earnings will miss market expectations as TV advertising sales decline. The company plummeted 19.5%.


[R]9:00AM Market futures gained on Cisco earnings and strong productivity data.[/R]
U.S. stock futures advanced on Wednesday on the back of a better-than-expected quarterly profit and outlook from Cisco Systems which boosted investor confidence in the strength of corporate profits. The release of strong fourth-quarter productivity and tame wage inflation data also helped generate positive sentiment. The Department of Labor said that Q4 labor productivity grew at a faster pace than previously expected. The report showed that productivity grew 3% compared to a revised 0.1 % decline in Q3, exceeding expectations of 2% productivity growth.

Nasdaq futures were pushed higher by 5% advance in the shares of network equipment maker Cisco Systems Inc. ((CSCO)) which posted a 40% profit jump and strong guidance. The company said net income for the Q2 rose to $1.92 billion, or 31 cents a share, up from $1.38 billion, or 22 cents a year earlier. The quarterly results were boosted by Cisco''s acquisition of Scientific-Atlanta and strong demand for Internet equipment among telecom companies and small businesses. Again on the earnings news front, financial services firm Moody''s Corp. ((MCO)) posted a better-than-expected quarterly profit and shares of health insurer Cigna Corp. ((CI)) said quarterly profit rose 10%. In other corporate news, Ford Motor ((F)) advanced as the automaker said about 8,000 U.S. hourly workers left the company in January after taking buyout offers. S&P 500 futures were advanced 2.00 points to 1,455.30 and futures on the tech-heavy Nasdaq 100 rose 8.50 points to 1,812.00. Dow industrial futures gained 16 points to 12,713.


[R]8:30AM NY-7:30PM Mumbai Sensex strikes all-time high, Bajaj Auto surges.[/R]
The Sensex on BSE finished 164.94 points, or 1.1%, higher at 14,643.13. The market-breadth was positive until mid-afternoon but then turned negative. For 1,337 shares that declined on BSE, 1,320 advanced and 51 shares were unchanged. Of the 30 stocks in the Sensex, 17 advanced, while the rest declined. The turnover on BSE was Rs 4,641 crore, lower than Rs 6,103 crore on Tuesday. On NSE, the turnover was Rs 10,333.92 crore, higher than Rs 9,840.6 crore on Tuesday.

Economic news

The government announced on Wednesday that it expected the economy to grow 9.2% in the fiscal year ending March 2007, topping the forecast of the Reserve Bank of India of 8.5% to 9%. The central statistics office also announced that manufacturing output growth was viewed at 11.3%, higher than 9.1% a year ago. The Indian government also said that it expects the economy of the country to experience its fastest growth in the upcoming 18 years.

The rupee hit a new high against the U.S. dollar on Wednesday, pacing gains in most Asian currencies. The dollar fetched 44.07/08 rupees.

Japanese carmaker Suzuki Motor Corporation has said it plans a further investment of 200 billion yen, or $1.66 billion in cars and two-wheelers in India.

Trading highlights

New listing Akruti Nirman was the most-active stock with a turnover of Rs 462 crore followed by Cambridge Tech and Shree Ashtavinayak.

Advancers

Bajaj Auto soared 9.21% to Rs 3,085.55. The company won product design infringement suit brought against Sri Lankan importer and Chinese manufacturer in the western region court of Sri Lanka. Insurance companies were also in focus. Aditya Birla Nuvo gained 9.6% to Rs 1,392 and Max India gained 5% to Rs 1,115, supported by a meeting of a group of ministers on amendments to the insurance bill that will raise the stake of foreign direct investments to 49% instead of 26% as it is currently.

IT large-cap Infosys also advanced 4% to Rs 2,360. Sensex index weight of Infosys free float factor will be raised to 0.85% from 0.8%, from February 12, 2007. Other large-cap advancers included Hindalco which surged 4.5% to Rs 182.10 and ICICI Bank which rose 2.6% to Rs 982 after the bank announced it had lifted the reference rate by 1% for corporate loans and home loans. The strong GDP report boosted select cement large-caps. Grasim gained 3% to Rs 2,877 and ACC rose 1.9% to Rs 1,064. Index heavy Reliance Industries rose 0.2% to Rs 1,392. Free float factor of the company has been reduced to 0.5% from 0.55%.

Decliners

Tata Motors led the decliners, down 2% to Rs 902.20 and ONGC also shed 1.8% to Rs 892. Hindustan Lever lost 0.8% to Rs 207.25. Ambuja Cement Ltd bucked the trend in cement stocks and fell 0.8% to Rs 141.45 and Tata Steel fell 0.6% to Rs 462.25.


[R]8:00AM BHP Billiton announced a surprising $10 billion buyback.[/R]
BHP Billiton ((BBL)) announced surprisingly a $10 billion share buyback Wednesday after reporting a net profit increase of 41% to a record $6.2 billion for the six months period ending in December. The miner''s revenue for the first half climbed 22% to $22.1 billion, driven by strong production results for most mineral commodities on soaring prices. BHP said the China-driven surge in commodity prices largely led to the record-high interim result, with higher prices boosting earnings by $3.94 billion. The half-year profit is a record for the company but falls just below market expectations of around $6.3 billion. BHP is planning to add another $10 billion to its previously announced $3 billion share repurchase plan. The equity purchases will include off-market purchases as well as open market purchases. BHP has bought back $1.7 billion of stock at an average price of $18.23 since announcing its earlier buy back plan. Including the $10 billion pledge, BHP has returned $17 billion to shareholders since August 2004.

The largest miner in the world also announced that CEO Chip Goodyear will retire by the end of 2007. BHP said there are strong internal candidates to replace Goodyear but the board will also consider external candidates. News of the buyback plan and healthy profit gain lifted BHP shares 6% on the Australian Stock Exchange.


[R]7:30AM Asian markets mostly rise with Japan, South Korea bucking the trend.[/R]
Asian markets advanced broadly on Wednesday. In Tokyo, the Nikkei 225 index lost 114.54 points, or 0.66%, to finish at 17,292.32. Advantest, semiconductor-equipment maker, shed 4.1%, leading the market lower. Investors feared that the company could be hurt by falling orders as chipmakers reduced investment spending due to declining DRAM and flash memory prices. Following suit, Tokyo Electron ended flat while Toshiba fell 0.8%. Retailers and banking stocks also dropped, with Isetan Co. sinking 6.4% to and Resona Holdings Inc. falling 0.9%. Canon, digital camera maker, declined 1.8% on the weaker yen, as it makes 75% of its total sales outside Japan.

Australian S&P/ASX 200 advanced 0.5% to a record 5,899.80. BHP, the largest mining company by market value in the world, jumped 5.9%, as its first-half net income rose 41% from a year earlier. The benchmark Straits Times Index in Singapore gained 13.35 points, or 0.4%, to close at 3,236.6. In Hong Kong, the Hang Seng Index rose 24.49 points, or 0.1%, to 20,679.69. Shares were boosted by a recovery in China-related firms, particularly banks, after they declined in the last month. Bank of China surged 1.6%. In China, stocks rallied on renewed interest in banks and other index large-caps. The benchmark Shanghai Composite Index gained 1.5% to 2,716.18. The Shenzhen Composite Index jumped 1.9% to 666.96, while in South Korea shares dropped, breaking a four-day rally, on losses in banks and shipbuilders. The Korea Composite Stock Price Index fell 0.2%, to 1,426.29.


[R]6:30AM European stocks trade higher Wednesday morning on strong earnings.[/R]
European markets advanced on Wednesday. By mid morning, Frankfurt Xetra Dax gained 0.4% to 6,901.18, the CAC 40 in Paris added 0.3% to 5,693.04 and the FTSE 100 in London was 0.1% higher at 6,354.3.

Advancers

It was earnings news that boosted markets in early trading. Publicis, a French advertising agency, advanced 4.1% after it posted higher-than-expected full-year sales and said that its operating margin for the year would surpass the one in 2005. Peugeot, French carmaker, added 1.1%, after releasing a narrowing operating margin for 2006 but above expectations. Group sales had risen in Q4 following declines in the previous two quarters. BHP Billiton topped forecasts with its first-half results, as net profit rose 41% to $6.2 billion, while higher metals prices boosted the rest of the sector. Billiton surged 4.8% and Antofagasta added 1.5%. BHP Billiton announced a $10 billion share buyback on Wednesday.

The utilities sector was buoyant as expectations of consolidation firmed up Endesa of Spain announced late on Tuesday that the 41 billion euros offer from Eon of Germany was approved and the Spanish utility recommended the deal to shareholders. Endesa shares gained 0.7%, while Eon added 2.4%.

Decliners

Swiss pharmaceutical company Roche lost 2.6% after it reported weaker-than expected guidance outlook. Roche posted a 36% rise in full-year profit that was in line with forecasts, but the outlook for 2007 disappointed as the company expects lower sales of pandemic influenza treatment Tamiflu. In the auto sector, BMW shares declined 1.7% in Frankfurt, after shareholder Allianz announced that it plans to sell about 16.1 million shares in the car maker.

Oil and precious metals

Oil advanced as the market is awaiting the US weekly stocks report that is expected to show a drop in distillate stocks following a recent cold snap in the Northeast of the country. In early trade in London front-month Brent crude contracts for March delivery added 67 cents at $59.08 a barrel, while front-month New York light sweet crude contracts for March delivery advanced 60 cents to $59.49 a barrel. Gold gained in London for a third consecutive day on talks that higher costs will give rise to demand for precious metals as a hedge against inflation. Gold for immediate delivery advanced $2.35, or 0.4%, to $655.65 an ounce in early trading in London. Silver climbed 6.37 cents, or 0.5%, to $13.685 an ounce today, palladium gained $1.50 to $342.50 an ounce and platinum moved $5.50 higher to $1,188.50 an ounce.

Currencies

The euro gained some ground against the U.S. dollar on Wednesday and the yen retreated from earlier gains as speculations circulate that the Japanese currency would be a significant topic at the upcoming meeting of G7 financial ministers. The 13-nation euro bought $1.2989 in morning European trading, marginally up from $1.2978 in New York late Tuesday. The British pound declined slightly to $1.9703 from $1.9704 on the likelihood that the Bank of England would surely keep its interest rate unchanged at 5.25% when it also meets on Thursday. The dollar was up to 120.66 Japanese yen from 120.08 yen on Tuesday.