Europe Hits Multi-Year Highs

Elena
14 Feb, 2007
New York City

European stocks ended higher on Wednesday, reaching new multi-year highs as autos, mining and technology stocks advanced. Fed Reserve Chairman

[R]1:00PM European markets closed higher, lifted by autos, miners and tech stocks.[/R]
European stocks ended higher on Wednesday, reaching new multi-year highs as autos, mining and technology stocks advanced. Fed Reserve Chairman’s testimony also lifted sentiment. In the automotive sector, auto giant DaimlerChrysler rose 4.6% after it said it''s considering strategic options with partners for Chrysler. Following DaimlerChrysler’s restructuring moves, Volkswagen shares rose 2.5% and Porsche shares increased 1.6%. Miners Xstrata, Vedanta Resources and Rio Tinto closed more than 2% higher, helped by stronger metals prices and continued deal speculation. The technology sector was boosted by gains of 1.1% from French telecom equipment maker Alcatel-Lucent which said that it may cut up to about 12% of its workforce in that country. Other technology companies, including mobile phone company Nokia and telecom equipment maker Ericsson also rose. The German DAX 30 closed up 1% at 6,961.18. Earlier in the session, the index touched a six-year high, the French CAC-40 climbed 0.8% at 5,725.84, its highest level since May 2001, and the U.K. FTSE 100 index ended 0.6% higher at 6,421.20.


[R]11:30AM U.S. market averages rallied. The Dow hit a new high.[/R]
U.S. stock averages traded higher Wednesday morning, with the Dow hitting a new record high. Blue-chip stocks were boosted by 2.3% gain for Caterpillar ((CAT)), 1.7% for Microsoft ((MSFT)), 1.3% for Intel Corp. ((INTC)) and 1.6% for Verizon ((VZ)). Financial stocks like American Express ((AXP)), up 2.3%, JP Morgan Chase & Co. ((JPM)), up 1% and Citigroup ((C)), up 1% also provided support. Farm equipment maker Deere & Co. ((DE)) jumped 9% after it posted a bigger-than-expected Q1 profit on strong international equipment sales. Earnings rose about 1% to $1.04 per share, up from 99 cents per share a year ago, exceeding estimates of earnings of 79 cents per share. Revenue rose 5% to $4.4 billion. The company also boosted its earnings outlook for the year.

Among other companies releasing quarterly results, Office Depot Inc. ((ODP)) said its Q4 earnings rose 27% as the office supplies retailer cut operating costs and used promotions to drive holiday sales. Net income jumped to 48 cents per share, up from 34 cents per share a year ago. The stock fell 2.4%. DaimlerChrysler ((DCX)) rose 4.5% after announcing its cost-cutting plan. Chip-equipment maker Applied Materials ((AMAT)) supported the tech sector with an advance of 4% on better-than-expected quarterly results. By sector, broker/dealers , computer technology and metals miners were leading gainers, while real estate investment trusts issues declined. In late morning trading, the Dow Jones industrial average was up 83.08, or 0.66%, at 12,737.93. The Standard & Poor''s 500 index was up 11.19, or 0.77%, at 1,455.55 and the Nasdaq composite index rose 31.14, or 1.27%, to 2,491.02. Bonds rose sharply following Bernanke''s testimony, with the yield on the benchmark 10-year Treasury note falling to 4.76% from 4.81% late Tuesday.

[R]Ben Bernanke Predicted Modest Economic Growth in 2007.[/R]
Federal Reserve Chairman Ben Bernanke began 2-days of congressional testimony on Wednesday, telling the Senate Banking Committee that moderate economic growth is likely for 2007. The Fed chief also stated that the central bank remains worried about inflation, despite recent improvement on that front. In his prepared remarks, the Federal Reserve chairman reported that the U.S. economy seems likely to expand at a moderate pace this year and next, with growth strengthening somewhat as the drag from housing diminishes. Bernanke said that the estimates of Fed governors and regional bank presidents call for real GDP to increase about 2-1/2 to 3 percent in 2007, slightly lower than the projection given last July. For 2008, the forecast calls for growth of about 2-3/4 to 3 percent.

On inflation, Bernanke said the decline in oil prices has caused a fall in overall inflation. Also, readings on core inflation, which exclude the impact of food and energy, have improved modestly in recent months - though the rate remains somewhat elevated. Bernanke repeated a sentiment included in the Fed''s last policy statement, which indicated that central bank''s predominant policy concern remains the risk that inflation will fail to ease as expected. Bernanke reaffirmed that the Fed is prepared to take action to address inflation risks if necessary. The Fed chairman also made comments on monetary policy in general. He pointed out that the central bank could do more to improve its communication, though no decisions have been reached on how to go about making the improvement.


[R]9:45AM U.S. stocks opened higher on positive comments from Fed Reserve Chairman.[/R]
U.S. stock markets opened on a positive note on well-received comments from Federal Reserve Chairman Ben Bernanke on inflation, easing concerns that the Fed might raise interest rates later this year. Ben Bernanke expects inflation will continue to ease and he also said that the economy should grow moderately in 2007, despite a slowing housing market. Among companies in focus, chip equipment maker Applied Materials ((AMAT)) boosted tech stocks as it rose 4.3% after reporting tripled quarterly profit. Deere & Co. ((DE)) rose 8% after the maker of farm equipment posted profit increase as equipment sales overseas made up for declines in the U.S. and Canada. The Dow was boosted by strong gains in the shares of Caterpillar Inc. ((CAT)), up 2.1%, Microsoft Corp. ((MSFT)), up 1.3%, Intel Corp. ((INTC)), rising q11.2% and Verizon Inc.((VZ)), up 1.7%.

Again in earnings-related moves, restaurant chain operator P.F. Chang''s China Bistro ((PFCB)) gained 9% although it reported Q4 profit drop of 5%, weighed down by higher costs. Among losers, Coca-Cola ((KO)) shares declined as its Q4 profit dropped despite higher sales. Excluding one-time items, the world''s largest beverage maker''s profit topped analyst forecast. In the first hour of trading, the Dow Jones industrial average rose to a new intraday high of 12,719.74, eclipsing a high of 12,700.28 set Feb. 7. The Standard & Poor''s 500 index was up 8.19, or 0.57%, at 1,452.45 and the Nasdaq composite index rose 19.72, or 0.80%, to 2,479.60. Bonds rose sharply following Bernanke''s testimony, with the yield on the benchmark 10-year Treasury note falling to 4.76% from 4.81% late Tuesday.

[R]Business inventories came in unchanged in December.[/R]
The Department of Commerce released its report on business inventories in the month of December on Wednesday. The report showed that inventories unexpectedly came in unchanged compared to the previous month. The report showed that inventories came in unchanged following a downwardly revised 0.2 percent increase in November. Economists had expected inventories to edge up 0.1 percent compared to the 0.4 percent increase originally reported for the previous month. The lack of growth in inventories came as modest increases in manufacturers and retailers'' inventories were offset by a decrease in merchant wholesalers'' inventories. The Commerce Department also said that total business sales rose 1.4 percent in December following a 0.5 percent increase in November. The increase reflected sales growth for manufacturers, retailers, and merchant wholesalers. Subsequently, the report also showed that the total business inventories/sales ratio edged down 1.28 in December from 1.30 in November.

[R]9:30AM The FTSE 100 advanced Wednesday on miners, Wolseley.[/R]
The UK market was higher. By late morning, the FSTE 100 in London was trading broadly flat at 6,379.4.

Advancers

Wolseley touched a high and although Cinven denied any future bid, Wolseley was still trading 4.6% higher. Mining stocks continued to benefit from higher metals prices as the price of tin and copper surged. Rio Tinto rose 2%, Vedanta Resources gained 2.1%, Anglo American added 1.8% and Antofagasta firmed 1.5%. Prudential rose 0.8% as ABN Amro set a new price target on the life assurer, a 23% upside.

Decliners

EMI led the decliners, falling 10% after the music publisher issued its second profit warning in a month. The company announced it expected revenue from its recorded music division to decline by about 15%. GlaxoSmithKline lost 0.9% as the pharmaceutical group traded without rights to its latest dividend payment. Cruise operator Carnival also went ex-dividend, losing 0.4%. British Energy continued its downward journey, hitting its lowest level since June 2005. The nuclear power group was down 4.2%.


[R]9:00 AM Market futures pointed higher. Coca-Cola and DaimlerChrysler provided support.[/R]
U.S. stock futures traded higher ahead of Federal Reserve Chairman’s testimony in front of Congress. Ben Bernanke is expected to deliver his report on monetary policy to the Senate Banking Committee beginning at 10:00 am on Wednesday. Among pre-market highlights, DaimlerChrysler ((DCX)) rose 4.6% after it announced a recovery plan for its U.S. Chrysler group, including reducing its workforce by 13,000 employees. The automaker also said its Q4 profit fell 40%, as revenue lost 2%. The company''s Chrysler Group swung to a loss, while profits improved at its Mercedes Group. Beverage giant Coca-Cola ((KO)) added nearly 1% in the pre-open as Q4 earnings excluding charges beat analyst estimates.

An early boost to the tech sector was given by chip equipment maker Applied Materials ((AMAT)) which rose 2.5% in the pre-open after reporting tripled quarterly profit as companies built chips for use in consumer electronics. In economic news, the U.S. Commerce Department said retail sales were flat in January, hurt by a big drop in auto purchases. Department stores posted strong sales during the month but they were offset by a 1.3% drop in sales of autos amid weak demand. It was the biggest one-month drop in auto sales since a 2.4 percent plunge last June. S&P 500 futures edged up 1.60 points to 1,451.00 and Nasdaq 100 futures rose 2.25 points to 1,798.25. Dow industrial futures gained 11 points to 12,697.

[R]January retail sales came in unchanged.[/R]
Wednesday morning, the Department of Commerce released its report on retail sales in the month of January, showing that sales unexpectedly came in unchanged compared to the previous month due to decrease in auto sales. The report showed that retail sales came in unchanged in January following an upwardly revised 1.2 percent increase in December. Economists had expected sales to increase by 0.3 percent compared to the 0.9 percent increase that was originally reported for the previous month. Despite the decrease in sales in January, retail sales were still up 2.3 percent compared to same month last year, although that marked a notable slowdown from the 5.7 percent year-over-year growth reported for December. The decrease in sales in January was partly due to a 1.3 percent drop in auto sales, which came after a 1.0 percent increase in December.

Excluding auto sales, retail sales rose 0.3 percent in January compared to economist estimates of a 0.4 percent increase. Strong growth in sales at department stores, furniture and home furnishings stores, and food and beverage stores contributed to the increase in ex-auto sales. At the same time, the report showed a notable decline in sales at electronics and appliance stores as well as a decrease in sales at gasoline stations. Sales at gas stations fell 0.7 percent in January after surging up 3.6 percent in December due to a decrease in gas prices. While the lack of growth in retail sales may raise some concerns about the strength of the U.S. economy, it may also help to ease recent worries that the Federal Reserve could resume raising interest rates.


[R]8:30AM NY-7:30PM Mumbai Sensex declines further on RBI hike of CRR.[/R]
The Sensex on BSE finished 81.08 points, or 0.58%, lower at 14,009.90. The market breadth was negative, out of 2,564 stocks traded, 1,491 declined, 1,012 advanced and the rest 61 were unchanged. Of the 30 stocks in the Sensex index, 15 advanced, while the rest declined. The turnover on BSE was Rs 3,998 crore, lower than Rs 4,875 crore on Monday, while on NSE, the turnover was Rs 8,878.7 crore, also lower than Rs 9,995.7 crore on Monday.

Economic news

In an attempt to put inflation under control, the Reserve Bank of India raised, on Tuesday, the cash reserve ratio, popularly known as CRR. This refers to the level of deposit banks have to maintain with the Reserve Bank of India. The Reserve Bank of India hiked it by half a percentage point to 6%. The move will reduce the funds available for lending and may lower profitability of banks. The RBI took this step to curb the fast rising inflation in consumer prices and speculation in real estate prices.

India, the second largest wheat producer in the world, has banned all exports of wheat for the rest of the year 2007. No wheat was exported in 2006 as the country had to import the commodity for the first time in six years following a weak crop.

German bourse Deutsche Borse has acquired a 5% stake in the Bombay Stock Exchange for Rs 189 crore, putting the value of the oldest stock exchange in Asia at around Rs 3,800 crore or $855 million.

Corporate news

Vodafone announced it would invest two billion dollars over the next couple of years to expand Hutch-Essar into rural India, while promising cheaper mobile rates and better services to customers.

Trading highlights

Newly-listed Cinemax India was the most-active stock today with a turnover of Rs 171.20 crore followed by Infosys and Tata Steel.

Advancers

Aluminium large-cap Hindalco, which was the top decliner on Tuesday, led the advancers today, up 3.9% to Rs 147.60. Other gainers included Reliance Communications adding 2.6% to Rs 451.3, Bharti Airtel surging 3.2% to Rs 761 and ACC gaining 1% to Rs 1,021.6. Oil leader ONGC advanced 1.7% to Rs 900 and Tata Steel rose 1.5% to Rs 438.9.

ONGC Videsh Ltd., the overseas branch of India''s Oil and Natural Gas Corp. Ltd., announced on Wednesday it had bought a 20% stake in Italian firm Eni’s deepwater block in Congo. In return, ONGC has sold to Eni a 34% stake in its deepwater block in the Mahanadi basin. Index heavy Reliance Industries ended 0.8% higher at Rs 1,377.15 and had a major role in the recovery of the market from the lower level.

Decliners

Banks were the worst hit after the move of RBI on CRR. State-run SBI led the decliners, off 6.1% to Rs 1,101.25, on a volume of 8.31 lakh shares. It has rebounded from a low of Rs 1,085.55. ICICI Bank also shed 4.1% to Rs 915 and HDFC Bank declined 5.2% to Rs 1,016.65.

Auto maker Maruti Udyog lost 3.8% to Rs 857.40, Grasim was down 3.5% to Rs 2,655.85. Bajaj Auto shed 1% to Rs 3,015.16. The company is expecting revenues of Rs 10,000 crore for the current fiscal year with total sales of 28 lakh vehicles. Infosys shed 1.1% to Rs 2,283.95.


[R]8:00 AM Coca-Cola posted Q4 profit decline, hurt by a charge.[/R]
Coca-Cola ((KO)) reported Q4 net income decline of 22% to $678 million, or 29 cents a share, due to a 23 cents a share charge on an impairment at Coca-Cola Enterprises ((CCE)). Revenue rose 7% to $5.93 billion. Excluding the charge, the company would have earned 52 cents a share, exceeding estimates for earnings of 50 cents a share on revenue of $5.78 billion. Coca-Cola is planning to buy back between $2.5 billion to $3 billion in stock in 2007 after repurchasing $2.5 billion of shares in 2006


[R]7:30AM Asia finishes higher Wednesday with Australia leading the stocks higher.[/R]
Asian markets finished mostly higher on Wednesday. Sydney''s benchmark S&P/ASX 200 ended 0.4% higher at 5,960.50. BHP advanced 0.8%, while Rio Tinto added 2.3%. BHP and Rio Tinto were considering individual bids for Alcoa. Shares of Alumina gained 1.5%. In a statement to the Australian Stock Exchange, Alumina stated it does ot have any information about a possible takeover of its U.S.-based partner, Alcoa Inc. The Nikkei in Tokyo finished 0.74% higher at 17,752.64. Sony, Bridgestone and other large-caps gained, tracking gains on US markets on Tuesday. Shares of Sony advanced 3.8% while Bridgestone rallied 4.2% after guiding higher operating profit for the current fiscal year

South Korean benchmark Kospi index closed 1.3% higher at 1,436.10 as tensions over North Korea’s nuclear program subsided. Samsung Electronics rose 1.6% while LG Philips LCD declined 3% after the company said it was asked by the Korea Exchange to clarify speculation that Japanese consumer-electronics company Matsushita Electric Industrial may buy a stake in the company. Hong Kong Hang Seng Index closed 0.4% higher at 20,209.91. Shares of Hutchison Telecom advanced 1.5%. The telecom group plummeted 15% on Tuesday after confirming it had agreed to sell its 67% stake in Indian telecom-operator Hutchison Essar to Vodafone Group for $11.1 billion. Taiwan Weighted Price Index ended 0.9% higher at 7,809.45 and Singapore Straits Times index closed 1.1% higher at 3,182.21. Indonesian benchmark JSX Composite also closed up 1.4% at 1,750.98.


[R]6:30AM Europe trades higher on Wednesday on strength in software, services.[/R]
European markets were higher on Wednesday. The benchmark FTSE 100 Index in London increased 11.1, or 0.2%, to 6,392.90 in London in mid-morning trade, breaching the 6,400 level earlier. German Xetra Dax added 25.8 points, or 0.4%, to 6,921.18 and France’s CAC 40 gained 19.8 points, or 0.4%, at 5,702.44.

Advancers

Wolseley Plc surged 4.7% on a report Cinven Ltd. may make a 10 billion-pound, or $19 billion, bid for the company. Commerzbank rose 2.7 % after the second largest commercial lender in Germany reported record net profits for last year and raised its earnings targets for 2007. Adecco added 2.1% after Deutsche bank upgraded the Swiss employment group from hold to buy. Rio Tinto Group, up 2% and Xstrata Plc, 1.7% led gains by mining shares after copper and gold rose. Electrolux AB had the biggest rally in a decade, surging 18%, after the world second-largest household appliances maker returned to a profit. ASML Holding NV led technology stocks higher, up 2.2% as earnings surged at Applied Materials Inc. of the U.S. DaimlerChrysler AG, was up 1.5%, and led a rally by car companies after a newspaper reported it may sell its loss-making U.S. unit Chrysler.

Decliners

DSM fell heavily in early trade, retreating 8.6% after Q4 results from the Dutch chemical group fell short of forecasts. Societe Generale fell 2.3% after Q4 profits also missed market forecasts.

Oil and gold

Crude oil on the New York Mercantile Exchange rose $1.25, or 2.2%, to $59.06 a barrel. March gasoline gained 5.64 cents, or 3.6%, to $1.6091 a gallon. Gold climbed to a six-month high in London as the dollar extended declines against the euro, spurring demand for the precious metal as an alternative asset. Gold for immediate delivery gained $4.10, or 0.6%, to $668.35 an ounce in early trade in London.

Currencies

The euro advanced to the highest in almost six weeks against the dollar after European Central Bank Governing Council member Klaus Liebscher stated that ECB is concerned inflation will accelerate. The euro rose to $1.3097 in early trade in London from $1.3039 late yesterday in New York. Against the yen, it advanced to 158.56 from 157.98. The pound canceled out its decline against the euro and rose against the dollar after Bank of England policy makers announced inflation will fall to the 2% target by Q4 based on market forecasts for a second interest-rate increase this year. Against the euro, the pound was at 66.96 pence in London from 66.97 on Feb. 13, its weakest since Jan. 9. It was at 67.11 pence before the central bank released its quarterly inflation report. The U.K. currency was also at $1.9551 from $1.9525 before the report and $1.9469 late yesterday. Against the dollar, the yen traded at 121.29 in London from 121.16 late yesterday in New York.