Rising Oil Weighs

Elena
23 Feb, 2007
New York City

U.S. stocks kept trading in the negative territory, reversing a course of recent gains. Rising oil prices weighed on the sentiment, along with a court ruling that Microsoft must pay $1.5 billion to Alcatel-Lucent to settle a patent dispute. Higher oil prices hit shares of General Electric, United Technology and Caterpillar. Investors were also awaiting speeches by Federal Reserve officials later in the session.

[R]11:30AM U.S. stock averages traded in the negative ahead of Fed speeches.[/R]
U.S. stocks kept trading in the negative territory, reversing a course of recent gains. Rising oil prices weighed on the sentiment, along with a court ruling that Microsoft must pay $1.5 billion to Alcatel-Lucent to settle a patent dispute. Shares in Microsoft ((MSFT)) slipped 1.3%, while Alcatel-Lucent ((ALU)) advanced 1.6%. Higher oil prices hit shares of General Electric ((GE)), United Technology ((UTX)) and Caterpillar ((CAT)). Other drags on the Dow were shares of J.P. Morgan Chase ((JPM)) and IBM ((IBM)), each down about 1%.

By sector, oil, gold and semiconductors posted strength, while banks, real-estate investment trusts and software declined. Bank of America ((BAC)) dropped 1.6%. Shares of the largest U.S. bank Citigroup Inc. ((C)) fell 0.6%. H&R Block ((HRB)) gained 3.8%, as the tax preparation company swung to a Q3 loss on costs related to its mortgage business. Investors were also awaiting speeches by Federal Reserve officials later in the session.

On the earnings news front, Clear Channel Communications Inc. ((CCU)), the nation's largest operator of radio stations, said its Q4 earnings tumbled 54% ahead of an $18.7 billion planned buyout by a group of private equity firms. Net income dropped to 43 cents per share, down from 86 cents per share a year earlier, beating estimates of 41 cents a share.

In late morning trading, the Dow Jones industrial average was down 36.77, or 0.29%, at 12,649.25. The Standard & Poor's 500 index was down 5.38, or 0.37%, at 1,451.00, and the Nasdaq was down 8.46, or 0.34%, at 2,516.48. Bonds rose, rebounding from weakness Thursday and following completion of a five-year note auction Thursday. The yield on the benchmark 10-year Treasury note falling to 4.68% from 4.73% late Thursday.


[R]9:45AM U.S. stocks opened lower, dragged by technology stocks.[/R]
U.S. stock averages started trading slightly lower on Friday, weighed down by a notable advance in crude oil prices. Tech stocks came under pressure on news of a patent ruling against Microsoft Corp. BEA Systems Inc. ((BEAS)) was a notable decliner, falling 7% after the business-software developer released Q1 revenue forecast below analyst estimates. Other decliners included Dell Inc. ((DELL)), Intel Corp. ((INTC)) and Microsoft Corp. ((MSFT)), each down about 1%.

Energy stocks advanced on the back of rising oil prices. Chesapeake Energy Corp. ((CHK)) climbed 2.7% after reporting stronger-than-expected Q4 earnings. The retail sector was boosted by gains for Lowe''s Cos. ((LOW)). Shares of the home-improvement retailer jumped 6% on better-than-expected Q4 results and an upbeat forecast. Shares of network-equipment suppliers traded mixed Alcatel-Lucent ((ALU)) rising 1% after it won a patent dispute with Microsoft. Among other telecom stocks, Alltel Corp. ((AT)) dropped 1%, while Ericsson LM ((ERIC)) gained 1%. Tekelec ((TKLC)) shares fell 7.3% after the maker of telecommunications signaling devices reported a Q4 net loss of 2 cents a share, vs. a net loss of 72 cents a share last year, missing expectations of a profit of 3 cents. In the first hour of trading, the Dow Jones industrial average was down 32.05, or 0.25 percent, at 12,653.97. The Standard & Poor''s 500 index was down 2.59, or 0.18%, at 1,453.79, and the Nasdaq was down 6.74, or 0.27%, at 2,518.20. Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.70% from 4.73 percent late Thursday.


[R]9:30AM FTSE 100 edges lower as Lloyds TSB and Rolls Royce drag stocks down.[/R]
The UK market was lower on Friday. By mid-day, the FTSE 100 had recovered some of its poise and was trading 10 points lower at 6370.2.

Advancers

Mining companies gained, following higher metals prices on commodities markets. Xstrata was 2.2% higher, Anglo American rose 1.3% and Rio Tinto gained 1.1%.

Oil stocks also advanced as the crude price breached $61 a barrel on a continued threat of conflict with Iran over its nuclear ambitions. BP rose 1.7% and Royal Dutch Shell was 0.6% higher.

Advertising company WPP added 1.3% as it announced its annual profits and revenues topped forecasts. Earnings before interest, taxation, depreciation and amortisation came in at just over 1 billion pounds for the first time.

Drax Group, the power generator, rose 2.6% on private equity bid talk, while Tate & Lyle added 0.1% as reports circulate it could be close to a deal to sell its European starch division.

Decliners

Lloyds TSB declined despite posting another strong performance in 2006. It saw growth in all its divisions and said it envisaged double-digit profit growth in the future. Profit before tax increased 11% to 4.24 billion pounds on interest and similar income that rose to 14.3 billion pounds from 12.5 billion pounds last year. Lloyds insurer and re-insurer Advent Capital dipped although it swung back into profit for the full year. Shares were 1.6% lower.

Shares in Rolls-Royce fell after broker UBS cut its recommendation on the stock to reduce from neutral. The broker cited concern about increased competition from rival Pratt & Whitney.


[R]9:00 AM Market futures pointed to a lower opening on rising oil prices.[/R]
U.S. stock futures declined on Friday, pressured by recovering oil prices and patent concerns dragging down software giant Microsoft ((MSFT)). Shares of the software maker slipped 0.5% in pre-open trade following a court ruling that it owned Alcatel-Lucent ((ALU)) $1.52 billion over a dispute on MP3 music-related patents. In earnings news, Lowe’s Cos ((LOW)) said its Q4 profit fell to $613 million, or 40 cents a share, from $693 million, or 43 cents a share last year, beating estimates of 37 cents a share. Net sales slipped to $10.41 billion from $10.81 billion. The company said that same-store sales fell 5.3%. For Q1, Lowe''s forecast a total sales increase of 5% to 6%, a same-store sales decline of 2% to 4%, and earnings of 49 cents to 51 cents a share.

Among other pre-market highlights, Ituit ((INTU)), tax software firm, reported lower quarterly profit. It also agreed to sell its outsourced-payroll business. Tax preparer H&R Block ((HRP)) said it swung to a loss in Q3, citing costs related to its mortgage business. S&P 500 futures eased 1.1 points at 1,458.10 and Nasdaq 100 futures dropped 2.75 points at 1,851.50. Dow industrial futures dropped 7 points.


[R]8:30AM Asian markets ended mostly higher on Friday with Japan up, HK down.[/R]
Asian markets finished mostly higher on Friday. Japanese Nikkei Index finished 0.4% higher at 18,188. Shares closed higher on buying on the increase in commodity prices, although Sanyo Electric plummeted 21% on a report that it is being probed for grossly misrepresenting losses in its past earnings results. Higher prices for base commodities supported trading house Mitsubishi Corp. to end 3% up. Utility stocks advanced after a recent sell-off in the sector began to make their dividend yields look more reasonable. Kansai Electric Power jumped 2.3%.

Bucking the uptrend, the Hong Kong Hang Seng Index closed 0.5% lower at 20,712. Profit-taking weighed on stocks after recent increases, but Huiyuan Juice rallied 68% on its debut. Large-cap HSBC declined for a fourth day, down 0.4% despite the company saying the head of its North American operations Bobby Mehta has stepped down.

South Korean Kospi Index advanced 0.3% to 1,470. Gains were led by brokerages and builders. Brokerage stocks advanced on increasing trading volume and expectation of annual dividend payouts, which are due to be paid starting March. Samsung Securities gained 4.4% and Woori Investment & Securities added 3.9%.

Australian S&P/ASX 200 increased 0.3% to close at 6,036. Takeover talks sent the market to another record high, while upbeat profits from leading companies also helped demand. Coles soared 8.6%. Other large-caps in demand included QBE Insurance, which advanced 3%. Bolnisi Gold surged 6.5% on recent gains in gold prices and other gold stocks. Markets in China and Taiwan were closed for the Lunar New Year holiday.


[R]8:00 AM Microsoft must pay $1.52 billion to Alcatel-Lucent.[/R]
According to a court ruling, software company Microsoft Corp. ((MSFT)) is obliged to pay $1.52 billion in damages to telecommunications equipment maker Alcatel-Lucent SA ((ALU)) for violating two patents which govern the conversion of audio into the digital MP3 file format on personal computers.

Back in 2003, Lucent Technologies filed 15 patent claims against Gateway Inc. and Dell Inc. for technology developed by its research arm Bell Labs, its research arm. In April the same year, Microsoft joined the group of defendants, claiming that the patents were closely tied to its Windows operating system.

Microsoft disputed that Alcatel-Lucent''s patents govern its MP3 encoding and decoding tools. It also said it licenses the MP3 software used by its Windows Media Player from a German company called Fraunhofer-Gesellschaft. Microsoft’s management think that the verdict is unsupported by the laws, as the MP3 technology is properly licensed from Fraunhofer for only $16 million. Microsoft said the court threw out Alcatel-Lucent''s claims that it willfully violated the patents, which would have led to three times higher damages.

Microsoft plans to appeal the jury''s decision. Its case is likely to have broader implications for the hundreds of companies using license MP3 technology from Fraunhofer. Shares of Microsoft slipped 0.5% in pre-market trading, while Alcatel-Lucent''s stock added 0.8%.


[R]7:30AM NY-6:30PM Mumbai Sensex finishes with a heavy loss, Grasim tumbles.[/R]
The Sensex on BSE ended 388.78 points, or 2.77%, lower at 13,632.53. The market-breadth was very weak as there were more than five decliners for every advancer. As 2,211 stocks declined, only 404 advanced and 38 remained unchanged. Of the 30 stocks in the Sensex, only one advanced, while the other 29 declined. The turnover on BSE was Rs 4,563.10 crore, higher than Rs 4,243.02 crore on Thursday. On NSE, the turnover was Rs 10,337.47 crore, lower than Rs 11,717.01 crore on Thursday.

Economic and corporate news

Tight money supply and tax reductions put soaring prices under control to some extent, with wholesale inflation declining to 6.63% during the week ended February 10 from a record level of 6.73% the previous week. Lower prices of food products, including vegetables, egg, mutton, poultry chicken, condiments, spices, fish-inland, sooji, gur, atta, sugar and some manufactured products led the drop in inflation. It is still above the RBI prediction of 5%-5.5%.

US retail company Wal-Mart Stores and Indian Bharti Enterprises are very close to finalizing a deal for a retail joint venture, Bharti announced on Friday. Wal-Mart announced on Thursday it was also in talks to partner Bharti on supply chain logistics and providing technology support.

Arcelor Mittal, the world largest steel company, said today that it has signed various Agreements with the State of Senegal in West Africa to develop iron ore mining in the Faleme region of South East Senegal, a project that may involve an investment of approximately $ 2.2 billion.

Trading highlights

Debutant Power Finance Corporation was listed today at Rs 104 as against its issue price of Rs 85. Despite the negative sentiment on the market, the stock ended with a gain of 31% (Rs 26.55) at Rs 111.55.

Power Finance Corporation was also the most active stock with a turnover of Rs 450.80 crore followed by Reliance Industries and Tata Steel.

Advancers

Tata Steel was the only advancer in the Sensex stocks, up 0.7% to Rs 459.2. It had struck a high of Rs 466.85, and was firm throughout the day. Reportedly, Corus, newly-acquired by Tata Steel company, had raised hot/cold rolled prices for European markets by 5% - 7% for the second quarter 2007 deliveries, which supported Tata Steel shares.

Decliners

Grasim led the decliners today. The stock lost almost 6% to Rs 2,271.1. Telecom services provider Bharti Airtel was another prominent decliner, down 5.7% to Rs 756.1. ITC was down 4.6% to Rs 166.1 and Reliance Communications, off 4% to Rs 432.4. Private bank ICICI Bank slumped 4.3% to Rs 907.9, as a surprise hike in CRR announced recently continues to weigh on the stock.

Maruti Udyog declined 1.50% to Rs 866. The government on Thursday invited potential buyers from public sector financial institutions, banks and mutual funds for selling its remaining 10.3% stake in the company. Index heavy Reliance Industries finished almost flat, down 0.1% to Rs 1,412.80. The company board meets on February 24 2007 to review plans for raising $2 billion.


[R]6:30AM Europe was flat on Friday on weakness in banking stocks.[/R]
European markets were trading flat on Friday. By mid-morning, Frankfurt Xetra Dax added 0.1% to 6,979.43, the CAC 40 in Paris fell 0.1% to 5,699.86 and London FTSE 100 shed 0.2% to 6,365.9.

Advancers

Alcatel-Lucent, telecommunications equipment group, jumped 2.1% after a US court ruled in its favour against software company Microsoft over an MP3 patent infringement. Microsoft was ordered to pay Alcatel-Lucent $1.52 billion in damages. Deutsche Börse was in favor after Atticus Capital, the New York-based hedge fund, raised its stake in the German stock exchange operator from 7% to 11.7% and encouraged the company to spin off or sell its Clearstream division. Its shares gained 1.1%.

Oil groups advanced after crude prices rose above $61 a barrel on the New York Mercantile Exchange. Statoil, the Norwegian group, was up 1.6 %, while Neste Oil, which was raised from sell to neutral by Goldman Sachs, gained 1.4%.

Fresenius Medical Care, the dialysis provider, also gained 1.7% after its stronger-than-expected results, released in the previous session, prompted Goldman Sachs to raise its price target.

Decliners

Financial stocks suffered intense profit taking after some strong results in recent sessions. Greek EFG Eurobank fell 1.5% after Deutsche Bank said it was placing 7.5 million shares, or 2% of the share capital, at no lower than 25 euro a share. Lafarge, the largest cement group in the world, gave up earlier gains as investors took profits after the company reported a 25% rise in full-year net profit and issued an upbeat outlook statement. The shares slipped 0.2%.

Oil and gold

Oil trading was slow Friday as the market adjusted to a surprising drop in U.S. gasoline and heating oil inventories. Light, sweet crude for April delivery edged just 1 cent higher to $60.96 in light electronic trading on the New York Mercantile Exchange. Gold opened Friday at a bid price of $675.70 a troy ounce, down from $677.20 late Thursday.

Currencies

The dollar was trading at 121.46 yen Friday, down from 121.60 yen late Thursday in New York. The euro slipped against the dollar to $1.3124 from $1.3125.