Germany, France Drop 3%

Elena
27 Feb, 2007
New York City

European stocks closed in the red Tuesday, taking a hit from the plunge in the Chinese stock market, led by shares of leading mining companies. Rio Tinto, BHP Billiton and Anglo American all fell by more than 4%. British Airways slid 3.6% and Deutsche Lufthansa declined 2.9%. Iberia was another decliner, losing 4.2%. The DAX 30 closed down 3% at 6,819.65, the French CAC-40 declined 3% at 5,588.39 and the U.K.''''s FTSE 100 slipped 2.3% at 6,286.10.

[R]1:00PM European markets closed steeply lower, hit by China’s decline.[/R]
European stocks closed in the red Tuesday, taking a hit from the plunge in the Chinese stock market, led by shares of leading mining companies that do business in Asia. Economic growth concerns in the U.S. also contributed to the declines among mining stocks, with Rio Tinto, BHP Billiton and Anglo American all falling by more than 4%. Oil prices pressured oil-sensitive sectors such as travel-related stocks. British Airways slid 3.6% and Deutsche Lufthansa declined 2.9%. Iberia was another decliner, losing 4.2% after the airline''s Q4 net loss widened to 9.5 million euros from 5.8 million euros a year earlier. Elsewhere, German household-products maker Henkel fell 5.7% on strong 2006 profit results. In deal news, Volkswagen slipped 2.4% after the carmaker raised its stake in German truck maker Man AG to 29.9% from approximately 20%. Swedish truck maker Volvo lost 4% after it agreed to buy from Ingersoll-Rand its road-development division for $1.3 billion. The DAX 30 closed down 3% at 6,819.65, the French CAC-40 declined 3% at 5,588.39 and the U.K.''s FTSE 100 slipped 2.3% at 6,286.10.


[R]11:30AM Wall Street fell in depressive mood. All sectors traded in the red.[/R]
U.S. market averages suffered considerable weakness on Tuesday morning, with Dow Jones falling as low as 120 points. The blue-chip index was weighed by steep declines in shares of Alcoa ((AA)), down 3%, Caterpillar ((CAT)), down 2.4%, Dupont ((DD)), down 2%, and General Motors ((GM)), falling 3%. Another Dow component, Wal-Mart ((WMT)) fell 1.4% after it agreed to acquire 35% of Trust-Mart, a Taiwanese-owned operator of hypermarkets in China. On the Nasdaq, Internet company Baidu.com Inc. ((BIDU)) dropped 4%, Shanda Interactive Entertainment Ltd. ((SNDA)), slipped 3.8%, and Netease.com Inc. ((NTES)) fell 3.1%. Apple ((APPL)) also helped push the tech-heavy average lower with a decline of 2.2% after announcing a delay in the launch of Apple TV. Xerox Corp. ((XRX)) also weighed, falling 1.3% on lowered earnings outlook.

Gold, financials, and real-estate investment trusts led decliners and only individual stocks traded higher. Brocade Communications ((BRCD)) rose 5% after posting earnings above expectations. Better-than-expected existing homes sales and a rise in consumer confidence failed to offset the negative sentiment generated by a steeper-than-expected drop in durable goods orders in January, but helped limit losses. In late morning trading, the Dow Jones industrial average dropped 142.28, or 1.13%, to 12,489.98. The Standard & Poor''s 500 index was down 17.36, or 1.20%, at 1,432.01, and the Nasdaq composite index was down 42.41, or 1.69%, at 2,462.11.

[R]Existing home sales rose more than expected.[/R]
Tuesday morning, the National Association of Realtors released its report on existing home sales in the month of January. The report showed that existing home sales rose much more than economists had expected. The report showed that existing home sales rose 3.0 percent to a 6.46 million unit rate in January from a revised 6.27 million unit rate in December. Economists had expected sales to rise to a 6.24 million unit rate compared to the 6.22 million unit rate originally reported for the previous month. NAR also said that total housing inventory levels rose 2.9 percent to 3.55 million existing homes available for sale at the end of January. This represents a 6.6-month supply at the current sales pace, unchanged from the revised December level. The report also showed that the national median existing-home price for all housing types fell to $210,600 in January. With the decrease, the median price is down 3.1 percent year-over-year.


[R]9:45AM U.S. stocks opened deeply in the red. The Dow tumbled 130 points[/R]
Wall Street opened deeply in the red on Tuesday, joining a global stock decline amid concerns of slowing economies in China and the U.S. A 10% drop in Chinese stocks, a warning that the U.S. economy may be headed for a recession, and weak data on durable goods orders exacerbated concerns about the economy. The Dow Industrial average dropped about 130 points in early trading. Blue-chip company Wal-Mart ((WMT)) contributed to the decline, falling 0.9% after it agreed to buy 35% of Trust-Mart, a Taiwanese-owned operator of hypermarkets in China. The tech sector posted weakness, with Apple ((APPL)) down 2.4% after announcing a delay in the launch of Apple TV. Xerox Corp. ((XRX)) lost 2.2% after the company lowered its earnings outlook.

Brokerage stocks showed significant weakness, with Lehman Brothers ((LEH)) turning in one of the sector''s worst performances, down 4.3%. Jefferies ((JEF)), E*Trade ((ETFC)), and Bear Stearns ((BSC)) all slipped more that 3%. Considerable weakness was also visible in the wireless and disk drive sectors. Housing stocks also declined, despite better-than-expected existing home sales data.

Among stocks driven by analyst comments, shares of Marvel Entertainment ((MVL)) slipped 4% on brokerage downgrade, due to concerns about the stock''s valuation. Shares of NYSE Group ((NYX)) fell 3% after J.P. Morgan downgraded its rating on the operator of the New York Stock Exchange to underweight from neutral. Bed Bath & Beyond ((BBBY)) slipped 2.4% after UBS downgraded its rating on the home furnishings retailer, citing valuation. In the first hour of trading, the Dow Jones industrial average dropped 122.57, or 0.97%, to 12,509.69. The Standard & Poor''s 500 index was down 16.87, or 1.16%, to 1,431.41, and the Nasdaq composite index was down 46.07, or 1.84%, to 2,458.45. Bond prices rose as investors bought into the safe-haven Treasury market, with the yield on the benchmark 10-year Treasury note dropping to 4.60% from 4.63% late Monday.

[R]Consumer confidence increased in February.[/R]
The Conference Board released its report on consumer confidence in the month of February on Tuesday, showing that its consumer confidence index increased unexpectedly and rose to its highest level in five years. The report showed that the consumer confidence index rose to 112.5 in February from a revised 110.2 in January. Economists had expected the index to fall to 109.0 compared to the 110.3 originally reported for the previous month. With the increase, the consumer confidence index rose to its best level since April of 2001, when it was at 114.0. The Conference Board said that the present situation index rose to 139.0 in February from 133.9 in January, as those claiming conditions are “good” increased to 29.4 percent while those saying conditions are “bad” fell to 14.3 percent. At the same time, the expectations index edged up to 94.8 in February from 94.4 in January, as those expecting business conditions to improve rose to 16.7 percent. The outlook for the labor market was also relatively more upbeat.


[R]9:30AM London is lower Tuesday, following weak global markets.[/R]
The UK market was lower on Tuesday. By mid afternoon the FSTE 100 was 142 points, or 2.2%, lower at 6,292.2.

Advancers

With the crude price gaining further to top $62 a barrel, Royal Dutch Shell was one of only a handful of FTSE 100 advancers. The oil company was up 0.3%, while Reuters was the biggest advancer, up 1.4%, ahead of the information group figures on Thursday.

Engineer GKN was up 8.4% after an upbeat trading statement alongside its final results. Broker Cazenove provided a further boost, upgrading the shares to outperform from in line. Chrome and chemical company Elementis was also higher 4.3% after it posted a 159% rise in full year profit and said 2007 has started on a positive note, with further progress expected this year.

Decliners

As Chinese market tumbled today, mining stocks bore the brunt of the sell-off as gains in the sector have largely been powered by Chinese demand. Xstrata lost 5.3%, Vedanta Resources eased 4%, BHP Billiton dropped 4% and Lonmin fell 3.8%. Kazakhmys dropped 5.8%. Confidence in the sector was further eroded by concerns over a potential windfall tax in South

Asia-focused bank Standard Chartered shed 2.7% despite beating forecasts with a 19% increase in full-year profits. Car rental group Avis Europe slumped 17.5% after it announced annual pre-tax profit almost halved and expects market conditions to remain tough.


[R]9:00 AM Market futures steeply dropped on 10% in the Chinese equity market and weak durable goods orders.[/R]
U.S stock market futures sharply dropped Tuesday, depressed by a 10% plunge in the Chinese equity market, followed by steep European and Asian losses. Shanghai''s Composite Index hit a ten-year low amid profit-taking sparked by concerns that the government may impose new measures to cool speculative trading. Weaker-than-expected durable goods data in the U.S built on the negative sentiment. Orders of new durable goods dropped 7.8% in January, while economists were expecting a decline of 5.5%, on average. Data on home sales, due out today, is expected to provide some indications on the economy.

Among pre-market highlights, Xerox Corp. ((XRX)) lowered its Q1 earnings outlook due to restructuring charges. The company said it expects to earn 18 cents to 20 cents in the quarter, down from an earlier forecast of 21 cents to 23 cents. Shares fell 0.8% in pre-open trading. CBS Corp. ((CBS)) said it swung to Q4 profit of 43 cents a share, from a year-ago loss of $12 a share. Adjusted earnings from continuing operations rose to 60 cents a share, from 42 cents a share, above estimates of 47 cents. Company''s stock rose 2.3% in the pre-open. Sirius Satellite Radio ((SIRI)) said its Q4 loss narrowed to 17 cents a share from 23 cents a share on 82% subscription growth. The quarterly results beat estimates but the stock lost 1.3% in pre-market trading.

A number of companies were affected by analyst comments, including NYSE Group ((NYX)) which dropped 3.9% after it was cut to underweight from neutral at J.P. Morgan. Dow Chemical ((DOW)) was cut by Lehman Bros to underweight from equal weight, citing valuation. S&P 500 futures shed 11.00 points to 1,441.60 and Nasdaq 100 futures dropped 26.25 points to 1,811.50. Dow industrials futures declined 84 points to 12,570.

[R]Durable goods orders plunged 7.8% in January.[/R]
Tuesday morning, the Department of Commerce released its advance report on durable goods orders in the month of January, showing that durable goods orders fell much more than economists had been expecting. The report showed that durable goods orders fell 7.8 percent in January following a downwardly revised 2.8 percent increase in December. Economists had expected orders to fall 3.0 percent compared to the 2.9 percent increase originally reported for the previous month. The unexpected decline in durable goods orders reflected a steep drop in orders for transportation equipment, which fell 18.0 percent in January after rising 3.1 percent in December. The decrease reflected substantial declines in orders for both defense and commercial aircraft and parts. The Commerce Department said that durable goods orders fell by a more modest 3.1 percent excluding transportation, compared to a 2.6 percent increase in the previous month. Notable declines in orders for machinery, computers and electronics, and capital goods also contributed to the drop in durable goods orders. The report also showed that shipments of durable goods rose 0.2 percent in January following a 0.5 percent increase in December. Additionally, inventories of durable goods rose 0.3 percent after rising 0.7 percent in the previous month.


[R]8:30 AM Wal-Mart agreed to pay $1billion for 35% in Trust-Mart.[/R]
The world’s largest retailer Wal-Mart ((WMT)) agreed to buy a 35% stake in Trust-Mart, a major Chinese discount chain, in an effort to expand its presence in China. Financial details of the deal were not revealed, but according to reports Wal-Mart agreed to pay $1 billion for the stake. The company said that it is planning to acquire ownership control in the future. Wal-Mart is one of the numerous foreign retailers investing in China’s fast-growing retail markets one of its biggest and most prominent foreign employers, with a work force of 37,000 and 68 stores. It has been seeking international expansion to compensate for slowing growth in the United States. Its total international division accounted for 20% of its overall net sales of $312.4 billion in 2005.


[R]8:15AM Asia finishes lower on Tuesday, China plummets.[/R]
Asian markets ended lower on Tuesday. The Shanghai Composite Index plunged 8.8% to close at 2,771.79, its biggest single-day drop since February. 18, 1997. Shares in airlines, steelmakers and financial issues led declines. Profit-taking was triggered by worries new macro-tightening policies could be introduced after the annual session of the China National People Congress that reconvenes on March 5. Baoshan Iron & Steel hit the 10% downside limit, Citic Securities plummeted 9.7% and China Life Insurance declined 9%.

Japanese Nikkei 225 ended 0.52% lower to 18,119.92, as property shares declined. Mitsui Fudosan retreated 2.5%. The firm had advanced about 38% in the last three months. Decliners also included Mitsubishi Estate, whose shares fell 2.8%. Toyota Motor rose 0.2% after reports that biggest vehicle maker in Japan plans to spend up to 100 billion yen to build a sport-utility vehicle assembly plan in Mississippi.

Other indices around the region also declined. Hong Kong Hang Seng Index settled 1.76% lower at 20,147.87. Australian S&P/ASX 200 finished 0.83% lower at 5,993.80 and Singapore Straits Times Index shed 2.29% to 3,232.02. Taiwan Weighted Price Index retreated 0.02% to 7,901.96, while South Korean Kospi ended 1.05% lower at 1,454.60.


[R]8:00AM NY-7:00PM Mumbai Sensex declines on selling pressure, weak global markets.[/R]
The Sensex on BSE finished 170.69 points, or 1.25%, lower at 13,478.83. The market was highly volatile and traded within a range of 294.85 points. The market-breadth was slightly positive as 1,330 stocks advanced, 1,205 declined and 62 were unchanged. Of the 30 stocks in the Sensex, seven advanced while the rest 23 declined. The turnover on BSE was Rs 4,019.74 crore, higher than Rs 3,956.87 crore on Monday. On NSE, the turnover was Rs 8,148.78 crore, lower than Rs 9,046.18 crore on Monday.

Economic news

The government announced on Tuesday that there was no need to worry over the economy''''s rapid growth, and added that the momentum is sustainable even though containing inflation would be difficult. The government made the announcement on the eve of the release of the annual budget due Wednesday, February 28.

State election results showed that the ruling Congress party, is about to lose in the states of Punjab and Uttarakhand on voter concern about inflation and economic reforms.

Trading highlights

JSW Steel was the most-active stock with a turnover of Rs 163.65 crore followed by Power Finance and Global Broadcast.

Advancers

HDFC Bank led the gainers, despite the mixed trend in banking stocks on fears that rising inflation may bring about raising the interest rates. HDFC Bank gained 2.6% to Rs 976.2. Construction shares and large-cap Maruti Udyog also gained. Construction shares advanced on hopes that the budget will help the infrastructure sector, whereas Maruti Udyog added on expectations of cuts in excise duty on cars. Maruti gained 1.5% to Rs 887.7. ACC advanced 1.6% to Rs 961.1. ACC rose after Swiss Holcim increased its stake in Ambuja Cements India Private Ltd, a company which owns 35.15% of ACC.

Decliners

ICICI Bank lost 3.3% to 875.7. Although the trend was mixed, banking stocks were sold on concerns of rising inflation that could lead to hikes in interest rates, which could hit credit growth. Auto makers exhibited considerable weakness. Hero Honda shed 3.6% to Rs 680, and Bajaj Auto declined almost 3.2% to Rs 2,724.3. IT large-caps slipped. Satyam Computer lost 2.4% to Rs 450.5, Wipro shed 1.9% to Rs 602, TCS lost 1.4% to Rs 1,264 and Infosys shed nearly 1% to Rs .4% to Rs 2,195.15. Satyam Computers has made an alliance with US global defence and technology company Northrop Grumman for expanding in the global aerospace and defence market place.

Unlike ACC, Gujarat Ambuja Cements shed 2.3% to Rs 124.50, after the cement company announced it sold 11% stake in Ambuja Cements India to Swiss company, Holcim, for Rs 527 crore. ONGC, the oil exploration leader, declined despite higher global crude oil. The stock shed 2.1%, to Rs 817.4. Index heavy Reliance Industries lost 0.2% to Rs 1,401.


[R]6:30AM Europe is lower on Tuesday on weakness in banking sector.[/R]
European markets were lower on Tuesday. By mid morning, Frankfurt Xetra Dax shed 1.5% to 6,927.34, the CAC 40 in Paris lost 1.6% to 5,669.2 and London FTSE 100 fell 1.5% to 6,339.6.

Advancers

GKN, U.K. maker of car and airplane parts, rallied 8.7%, as the company said full-year profit more than tripled to 177 million pounds or $347 million after it sold more plane components and reduced spending on reorganization.

Reuters Group advanced 1.4% as Credit Suisse Group raised its recommendation on the world largest publicly traded provider of financial data to outperform from neutral.

Decliners

Austrian Raiffeisen International, which has substantial operations in Russia and Ukraine, fell 6.3%. Erste Bank, which also has businesses across central and eastern Europe, shed 3.4%. National Bank of Greece, which owns Finansbank of Turkey, fell 3.3%. Bank of Piraeus lost 3.1%.

BHP, the world largest mining company, lost 3.9% and Rio Tinto, the third biggest, declined 3.5%. Xstrata, the world fourth-biggest nickel producer, dropped 4.8%.

ABB, the Swiss engineering group, fell 4.6% after Deutsche Bank downgraded the stock from hold to buy. Shipping and port operator Möller Maersk was also hit by its exposure to emerging markets. The company, which owns shares in shipyards in Russia and China, also said that proposed tax changes in Denmark would have severe negative consequenses. The shares fell 4.2%.

Oil and gold

Crude oil traded little changed, near a nine-week high in New York, on speculation rising fuel demand and refinery shutdowns cut U.S. gasoline supplies. Crude oil for April delivery was at $61.48 a barrel, up 9 cents, on the New York Mercantile Exchange in early trade in London. Brent crude traded at $61.47 a barrel, up 14 cents, on the London-based ICE Futures exchange.

Gold fell in London after two days of gains to a nine-month high prompted some sales by investment funds. Gold for immediate delivery declined $1.40, or 0.2%, to $685.15 an ounce in early trade in London.

Currencies

The euro advanced against the U.S. dollar Tuesday, hitting two-month highs, after Alan Greenspan warned that the United States could be in a recession later this year. His remarks Monday night supported the euro to $1.3211 in morning European trading, hitting two-month highs, and above the $1.3185 it bought in New York late Monday. The British pound was barely changed, moving to $1.9652 from $1.9644. The dollar dropped to 119.58 Japanese yen from 121.04 yen.