Market to Open Slightly Up

Elena
28 Feb, 2007
New York City

U.S. stock futures pointed to a slightly higher opening on Wednesday, following a heavy global sell-off yesterday. The pre-market sentiment was helped by partial recovery in Shanghai, as well as data on Q4 economic growth, which was revised down less than expected. The Commerce Department said that economy grew at a sluggish 2.2% pace in Q4, much slower than the initially reported reading of 3.5%. Economists had been expecting a downward revision of 2%.

[R]9:00 AM Market futures pointed to moderately higher start. GDP in Q4 rose 2.2%.[/R]
U.S. stock futures pointed to a slightly higher opening on Wednesday, following a heavy global sell-off yesterday. The pre-market sentiment was helped by partial recovery in Shanghai, as well as data on Q4 economic growth, which was revised down less than expected. The Commerce Department said that economy grew at a sluggish 2.2% pace in Q4, much slower than the initially reported reading of 3.5%. Economists had been expecting a downward revision of 2%.

In corporate news, the world’s biggest home improvement retailer Home Depot Inc.((HD)) said it will invest $2.2 billion into improving its business in 2007, despite expectations of lower earnings and weak sales growth. The comopany said it will open 115 new stores this year. Home Depot said that for fiscal 2007 it expects sales growth in the range of flat to an increase of 2%, a decline in same-store sales and earnings per share decline of 4% to 9%. Company's shares dropped 1% in the pre-open.

Another Dow component, aerospace and defense contractor Boeing ((BA)) added 0.8% after it was upgraded to neutral from underweight at J.P. Morgan, due to valuation. In the defense sector, the broker cut its rating on Lockheed Martin ((LMT)) and upgraded L-3 Communications ((LLL)). In other broker news, investment banks Goldman Sachs ((GS)), Lehman Bros. ((LEH)) and Bear Stearns ((BSC)) were downgraded to neutral from buy at Merrill Lynch. S&P 500 futures on Wednesday rose 10.80 points to 1,406.10 and Nasdaq 100 futures climbed 14.25 points to 1,764.75. Dow industrial futures rose 75 points to 12,255.


[R]8:00AM NY-7:00PM Mumbai Sensex drops steeply on Budget Day.[/R]
The Sensex on BSE finished 540.74 points, or 4.01%, lower at 12,938.09. The market was highly volatile and traded within a range of almost 500 points. The market-breadth was very weak as there were four decliners to every advancer. Of the 30 stocks in the Sensex, only ITC advanced, while the other 29 stocks declined. Of all the stocks, 598 stocks advanced, 1,900 declined and 32 were unchanged. The turnover on BSE was Rs 5,825.82 crore, higher than Rs 4,019.74 crore on Tuesday. On NSE, the turnover was Rs 12,686.73 crore, much higher than Rs 8,148.78 crore on Tuesday.

Economic news

The Union Budget

Finance Minister Chidambaram presented the budget for 2007-08 to parliament today.

Highlights

The average inflation rate is seen at between 5.2% and 5.4 % in 2006/07 and the government is confident it can tackle the present inflationary trend. Revenue deficit remains at 2.1% and fiscal deficit is at 2% of GDP. Increase in gross tax revenue is by 19.9%. The minister also said all indicators point to an accelerating rate of investment. During the period between April 2006 and January 2007 foreign direct investment is estimated at $12.5 billion. Overseas investment exceeds portfolio investments. Government is to set up a panel to study the impact of forward trading in commodities. Exports are seen crossing Rs 5,53,260 crore, or $125 billion in 2006/07.

The budget does not hold any surprises to investors and is geared towards taming inflation and the increase in prices. There are no changes in the personal income tax slabs, rates; corporate income tax, central exercise, service tax rates and the other levies. Only the peak customs duties have been reduced by 2.5% on non-farm products to make the industrial inputs cheaper that is aimed at tempering with retail prices of consumer goods.

Investors are particularly dissatisfied with the increase in dividend distribution tax by 2.5% and bringing all knowledge-based companies under the minimum alternative tax, or MAT.

As a whole, the budget disapponts. There are no steps proposed to increasing productivity in agriculture, electricity and other sectors, which badly need investments and productivity improvement..

Trading highlights

Reliance was the most-active stocks with a turnover of Rs 325.25 crore followed by Reliance Communications and Infosys.

Advancers

ITC was the only gainer of the Sensex stocks, as it rose 4.03% to Rs 171.85, on the premise that it will be able to pass on the 5% hike in excise duty announced on cigarettes to customers. The Finance Minister P Chidambaram today announced a complete exemption of excise duty on all instant food mixes and biscuits, whose retail price does not exceed Rs 50 a kilo. ITC is not only the top cigarette maker, it also makes biscuits and ready-to-eat food. Relief from excise duty for biscuits and ready-to-eat foods will support for the company.

Decliners

Satyam Computers led the decliners, down 8.42% to Rs 412.5, Wipro lost 7.3% to Rs 560.9 were the most prominent decliners among the IT stocks. Index heavy Reliance Industries declined 3.65% to Rs 1,353.80 on a volume of 23.76 lakh shares. HDFC shed over 6% to Rs 1,502. Tata Steel and Maruti slipped around 5.5% each to Rs 443 and Rs 838, respectively.

Gujarat Ambuja Cements shed 7.8% to Rs 116, ACC dipped 6.4% to Rs 900. Other cement stocks also lost. Grasim tumbled over 5% to Rs 2,213. UltraTech Cement plunged nearly 6% to Rs 891, and Shree Cement dropped over 7% to Rs 1,147.


[R]7:30AM Asia closes lower on Wednesday on weak performance from US market.[/R]
Asian markets closed lower on Wednesday. The Shanghai Composite Index rebounded 3.9%, adding 109.28 points to finish at 2,881.07 on Wednesday. On Tuesday, the Shanghai index plunged 8.8%. The drop followed fears that government would undertake measures to slow the fast-moving index. Premier Wen Jiabao tried to steady investor sentiment by issuing a comment through state press late Wednesday in order to allay the fears.

Other markets around the region plunged on the pooe performance by US markets overnight. Japanese Nikkei 225 stock index lost 515.80 points, or 2.9%, to 17,604.12. Australian stocks settled down 2.7% after shedding 3.5%, while Singapore Straits Times Index was off 3% to 3,136.58 points, after sagging 5.6% earlier. Philippine stocks nosedived 7.9%, their worst drop since 1997, at the height of the Asian financial crisis. Many Asian markets were in correction mode after their recent spectacular performance. Benchmark indexes in China, Australia and Singapore had all hit records in February. Before the plunge this week, Malaysian stocks had advanced 17% this year, while Philippine shares had climbed about 12%.


[R]6:30AM European markets declined following global sell-off.[/R]
European markets were lower on Wednesday. By mid morning, Frankfurt Xetra Dax fell 1.6% to 6,712.13, the CAC 40 in Paris shed 1.7 % to 5,494.49 and London’s FTSE 100 slid 1.6% to 6,187.9. Of the emerging markets, Turkish Istanbul share index fell more than 3%, while Russian RTS index was off 2.7%.

Advancers

There were no prominent advancers.

Decliners

Rodamco Europe, the Dutch shopping centre owner, fell 4.3%. The company earlier in the week reported quarterly earnings that missed market expectations. Also in the sector, French Unibail fell 3.5 % and Spanish Metrovacesa shed 2.1%.

Stocks connected with emerging markets were lower and Raiffeisen International, the Austrian bank which owns assets across Russia and eastern Europe, fell 3.2%. EFG Eurobank, which has exposure through its Turkish assets, fell 3.5%. Swiss bank Julius Baer, the best performing stock on the SMI index this year, fell 3.8%. Eon, the German utility fell 4.2% after further doubts were cast on its 41billion euros bid to takeover Spanish Endesa.

Munich Re, the German reinsurer, fell 1.4% after it reported record full-year earnings of 3.5 billion euros, but added that it expected a general tendency towards a somewhat softer market.

Oil and gold

Crude oil for April delivery shed $1.54, or 2.5%, to $59.92 a barrel in after-hours electronic trading on the New York Mercantile Exchange, the biggest intraday drop since Feb. 20. It traded at $60.96 in early trade in London.

Brent crude for April settlement lost as much as $1.12, or 1.8%, to $60.24 a barrel on the ICE Futures exchange and traded at $61.14 a barrel in early trade in London.

Gold rose as investors sought a haven following a rout in global equities sparked by the biggest decline in Chinese share prices in a decade and amid tension over Iranian nuclear research. Gold for immediate delivery rose as much as $9.30, or 1.4%, to $672.65 an ounce and traded at $671.95 in early trade in London.

Currenciers

The euro was lower against the U.S. dollar Wednesday as fears of a worldwide slump in markets weighed on the common currency. The euro bought $1.3188, compared with the $1.3243 it bought in New York late Tuesday. The British pound fell to $1.9552 from $1.9632 the day before. The dollar rose to 118.58 Japanese yen from 118.22 yen.