Weak Banks, Retailers, and Miners

123jump.com Staff
07 Jan, 2008
New York City

European markets dropped on a weakness in metals and mining sector, declining financials, and falling retailers. Marks & Spencer, Next, Kingfisher, and Sainsubury declined on the worries that retail sales in the holiday period were weaker than estimated. Credit Suisse and UBS declined after a local Swiss report suggested that new capital may be required in the banks. Credit Suissse dropped 2.6%. Xstrata fell 6% and BHP declined more than 3%.

[R]4:00PM New York, 10:00PM Frankfurt, 8:00AM next day Sydney[/R]

European Markets

In London FTSE 100 Index closed lower 12.80 or 0.20% to 6,335.70, in Paris CAC 40 Index increased 6.04 or 0.11% to close at 5,452.83 and in Frankfurt DAX index higher 8.48 or 0.11% to close at 7,817.17. In Zurich trading SMI lower 19.41 or 0.24% to close at 8,110.57.

North American Markets indexes

Dow Jones Industrial Average closed up 27.31 or 0.21% to a close of 12,827.49, S&P 500 closed up 4.55 or 0.32% to 1,416.18, and Nasdaq Composite Index traded down 5.19 or 0.21% to a close of 2,499.46.

In Toronto TSX Composite lost 151.44 or 1.10% to close at 13,627.14.

Of the 30 stocks in Dow Jones Industrial Average, 15 closed higher, 15 closed lower, and none was unchanged.

Alcoa led the decliners in the index with a loss of 5.9% followed by losses in Hewlett Packard of 4.5%, in Boeing of 4%, in Exxon Mobil of 1.5%, and in IBM of 1.33%.

Altria Group led the gainers in the index with a rise of 2.8% followed by increases in Coca Cola of 1.9%, in Verizon of 1.6%, in Wal-Mart of 1.56%, and in Merck 1.5%.

Of the stocks in S&P 500, 254 closed higher, 243 fell, and 3 were unchanged.

Forty Four stocks fell more than 3% and thirty three rose more than 3%.

E*Trade led the decliners in the index with a loss of 9.6% followed by declines in Nvidia of 9.4%, in Fluor Corp of 7.3%, in Countrywide Financial of 7.1%, in Network Appliance 6.9%, and in Terex Corp of 6.8%.

SLM Corp led the gainers in the index with a rise of 7.7% followed by Biogen Idec of 4.94%, in Eli Lilly & Co of 4.9%, in St Jude Medical of 4.75%.

South American Markets Indexes

In Latin Markets Chile led the decliners in the region with a loss of 1.92% followed by decreases in Venezuela of 1.20%, in Argentina of 1.2%, in Peru of 0.75%, and in Mexico of 0.64%.

Venezuela, the only gainer in the region, rose 0.51%.


Asian Markets

In Tokyo Nikkei 225 Index closed lower 190.86 or 1.30% to 14,500.55, in Hong Kong Hang Seng index closed decreased 340.20 or 1.24% to 27,179.49, in Australia ASX 200 closed lower 145.00 or 2.30% to close 6,161.60.

In South Korea Kospi Index close at decreased 32.76 or 1.76% to close at 1,831.14, in Thailand SET index closed lower 13.40 or 1.63% to 808.31, and Indonesia JSE Index edged increased 11.22 or 0.41% to 2,776.41. Sensex index in India closed higher 125.76 or 0.61% to 20,812.65.

Bond Yields decreased on 10-year U.S. bonds to 3.83% and 30-year bonds increased to 4.33%.

[R]Commodities, Metals, and Currencies[/R]

Crude oil fell $2.76 to close at $95.150 per barrel for a front month contract, natural gas increased 1.3 cents to $7.854 per mBtu, and gasoline futures decreased 7.79 cents to close at 243.31 cents per gallon.

Gold dropped $3.70 in New York trading to close at $862.00 per ounce, silver closed down 17 cents to $15.29 per ounce, and copper for front month delivery decreased 2.35 cents to 313.40 per pound and in London copper futures decreased $58.50 to $6,881.00.

Dollar edged higher against euro to $1.4698 and lower to 108.9950 yen. For the 2007 dollar lost 11.8% against euro.


[R]1:00PM New York, 6:00PMLondon – Business survey of UK businesses predict tougher market conditions for the next six months.[/R]

Stock in U.K. fell on sell-off of homebuilders and retailers after analysts and reports projected revenues might decline.

In London trading FTSE 100 index declined 0.2% or 12.80 to 6,335.70.

Of the 102 FTSE 100 index stocks, 30 gained, 70 declined, and 2 were unchanged. British Energy led advancers rising 6.04% after JP Morgan Chase raised the price estimate on the stock from 660 pence to 730 pence.

The Confederation of British Industries revealed in the Financial Service Survey, jointly prepared with PricewaterhouseCoopers, listed on its Web site today that business conditions deteriorated in the last quarter of 2007, the fastest since March 1991. However, the IT industry managed to increase profitability over the review period and is still hiring staff and planning to invest more.

According to the Survey, firms will continue to witness weaker market conditions in the next three months, though at a slower rate. Demand from individual consumers is also expected to stabilise in the coming six months.

Profitability at banks fell sharply, while fund managers and insurance brokers “fared much better”. Business sentiment among financial institutions also worsened in the quarter to December.

“Despite this, firms reported a surprise fourth consecutive quarter of growth in profitability (a balance of gain of 6%, slower than last survey''s gain of 14% but better than the predicted loss of 14%), although this is not expected to continue into early 2008.” The press release said.

Banks earnings will be limited by rising funding costs and late payment on loans after a record drop in revenues in the three months to December.

In a further sign of the impact of the credit squeeze, a survey-record proportion of financial services firms (24%) felt that their ability to raise funds would be a constraint on their growth over the next 12 months. This was a particular concern for building societies, with 92% of respondents from that sector flagging it as an issue. A record high of 36% of banks were also concerned that fund raising ability would constrain expansion.

Of the FTSE 100 index shares British Energy led advancers with a rise of 6.04% followed by gains of 3.53% in GlaxoSmithKline Plc, 3.38% in Smith & Nephew, 2.84% in AstraZeneca, and 2.33 in National Grid Plc.

Taylor Wimpey led the decliners in the FTSE 100 with a drop of 7.32% followed by losses of 6.98%, in Schroders Plc, 6% in Intercontinental, and 5.96% in Xstrata Plc.

Other homebuilders fell as well after Dresdner Kleinwort analyst Alastair Stewart urged investors to sell homebuilders on the expectations of weak earnings. Persimmon fell 5.52%.

Retailers fell on negative reports of earnings projections. Sainsbury fell after the Times newspaper reported that the company might not be able to realise profit targets for the Christmas period. The stock closed down 3.58%.

Marks & Spencer also plummeted after The Sunday Times reported that the retailer might report its worst Christmas sales figure for two years. Marks & Spencer dropped 3.76%.

Next Plc tumbled 4.64% and Kingfisher dropped 5%.

Commodity stocks also edged lower as global economic outlook deteriorated on the expectations that world economic slow-down will lower the demand for commodities. Anglo American Plc slipped 4.70% and BHP Billiton slumped 3.31%.

Balfour Beatty said today the company has won a 350 million pound order from BAA Limited to expand facilities at Heathrow Airport. Heathrow’s Terminal 5 is scheduled to open in March 2008 at a cost of 4.5 billion pounds.


[R]12:00AM New York – U.S. stocks trade sideways. MasterCard and MSCI stocks fell sharply again.[/R]

Dow Jones Industrial Average edged 7.31 higher to 12,807.25, Nasdaq declined 3.21 to 2,501.44, and S&P 500 rose 2.74 to 1,414,39.

In the absence of economic or corporate news today market averages traded sideways. Stocks in Asia closed lower tracking the losses in Friday’s trading in the U.S. Japan, Hong Kong, Australia, and Korea declined. India bucked the trend and closed higher on sharply higher bank stocks.

Sony closed higher in Japan and shot up 3% in New York trading after Time Warner agreed to release high definition movies on its Blu-ray and not on HD DVD format supported by Toshiba.

Jeffries Group plunged 10% or $2.30 to $17.50 after it projected a loss in the fourth quarter on trading in two portfolios. The net loss is estimated from two principal trading account of $24 million or 17 cents per share.

“As the extremely challenging environment that began in the summer continued in the fourth quarter, particularly in November and December, we took immediate and decisive action to address a number of issues, and improve efficiency and operating leverage,” said Richard B. Handler, Chairman and CEO of Jefferies. “We have now shut down the two trading accounts that lost money, we terminated a number of employees in these and other business units.”

In 2006, Brian Friedman, Chairman of our Executive Committee, and Richard B. Handler, Chairman and chief executive were granted restricted shares in respect of 2007 with a value at that time of $6.5 million and $13 million, respectively.

In light of recent results, both will receive no bonuses in respect of 2007, and they have asked the Compensation Committee of the Board to reduce their future compensation by the value of the number of shares we were granted, effectively negating thier grant for 2007.

Oil edged lower $2.61 to $95.30 a barrel and gold declined $3.90 to $861.80 an ounce.

ICICI Bank ((IBN)), the Indian bank’s American depository receipt rose $5.34 or 8.7% to $66.99 after local reports suggested that banks may not have to apply for a license to open a new branch.

MasterCard ((MA)) fell sharply in the morning trading as investors worried that a slow-down in consumer spending will hurt the company’s earnings. MasterCard declined as low as $187.44 before recovering to a loss of $4.42 to $196.81.

MSCI Inc ((MXB)) recently spun-off company from Morgan Stanley fell another 6% or $1.72 to $28.43. The stock has lost nearly $10 in the last week of trading and fallen off from the recent high of near $38. The company priced 14 million shares at $18 per share in the public offering on November 14, 2007.

[R]10:00AM New York, 7:30PM Mumbai – Banks rallied on the possible abolition of licensing rules.[/R]

Stocks in India closed mixed on Monday with the Bombay Stock Exchange Sensex index gaining 0.6% or 126 at 20,812 in subdued trading.

In today’s trading on the BSE, 1,564 shares advanced, 1,346 slipped, and 24 remained unchanged. Of the stock in Sensex, 18 out of 30 shares from the Sensex index fell.

Turnover on the BSE was at 10,661 crore rupees while revenue on the NSE stood at 23,321 crore rupees. Reliance Natural Resources recorded the highest turnover of 651.35 crore rupees on BSE.

In the broader markets, Nifty advanced 0.08%. The 50-share index closed at 6,279 levels.

Selling pressures was visible in IT, healthcare and metal shares while buying in banking and real estate stocks was active.

Among the index shares, ICICI Bank, ITC Ltd, Reliance Communication, DLF, Reliance Industries and Hindustan Unilever were among the leading advancer. Each gaining more than 1%.

Of the National Stock Exchange-50 shares, Suzlon Energy, Siemens, Reliance Petroleum, Unitech Ltd and Sterlite Industries were among the leading gainers with gaining more than 1.1%.

Banks rallied in today’s trading but IT, healthcare, and metals stocks declined.

According to news reports, the mandatory licensing requirement for Indian banks to open branches may be done away with. The department of financial services is taking up the matter with the Reserve Bank of India.

ICICI Bank gained 6.1% to 1,363.9 rupees and State Bank of India gained 0.5% to 2,402.95 rupees.

The meeting of cabinet level ministers on January 17th is widely expected to recommend a revision on petrol and diesel prices after recent run-up in crude oil prices.

Of the BSE stocks, Reliance Industries rose 0.9% to 3,013 rupees.

Reliance Energy rose 1.3% to 2,542 rupees on news reports that Reliance Power, in which it holds 50% stake, is exploring possibilities of taking over government power projects. These include Ratnagiri Gas and Power plant at Dabhol, to scale up its generation capacity.

Infosys was down 3.2% to 1,640 rupees, Wipro shed 2.8% to 483 rupees, Tata Consultancy Services fell 2.9% to 976 rupees.

Ranbaxy Laboratories was down 1.3% to 420 rupees, Cipla fell 0.6% to 211.50 rupees and Dr. Reddy''s Laboratories slid 1.7% to 716 rupees.

Tata Steel shed 0.3% to 927.50 rupees, Steel Authority of India lost 1.2% to 271 rupees and Hindalco Industries lost 1.9% to 217.15 rupees. National Aluminium Company rose 2.6% to 532.1 rupees and Sterlite Industries gained 1.02% to 1,070.3 rupees.

Reliance Communications rose 3.95% to 790.05 rupees. ONGC declined 3.3% to 1,299.95 rupees.

Larsen & Toubro Ltd rose 0.8% to rupees 4,277.65 on securing two major contracts from Cairn India for the construction of civil works and the consolidated construction works of Cairn''s project in Rajasthan.


[R]6:00AM New York, 6:00PM Hong Kong - Hong Kong dips 1.2% on weaknesses on the Wall Street.[/R]

In Hong Kong trading Hang Seng dropped 1.2% or 340.20 to 27,179.49, while the China Enterprises index of H shares declined 2% or 312.66 to 15,590.74.

Daily turnover on the main board was recorded at HK$113.5 billion compared to HK$99.8 billion on January 4.

Construction companies advanced on the rising expectations that the U.S. Federal Reserve will cut interest rates on January 30th after a weak December month employment report. Unemployment in December rose 0.3% to 5% sparking fears that the economy may be losing steam.

MTR Corp led the gainers in the property sector with a rise of 9.1% after Credit Suisse on Friday raised its target price for MTR by 31% to HK$35. MTR closed at HK$34.90. MTR holds one of the largest parcels of undeveloped land in Hong Kong.

Henderson Land jumped 2.4% to HK$76.3 and Sino Land rose 3% to HK$28.45 on the news.

Xinhua News Agency reported today that Shanghai High-Speed Railway Company has announced that the construction project of the Rmb 83.7 billion Beijing-Shanghai High-Speed Railway will be split among four companies: China Railway Group, China Communications Construction Company, China Railway Construction Corporation, and Sinohydro Corporation.

The railway from Beijing to Shanghai which stretches 1,318 kilometers has been divided into six route sections named TJ-1 to TJ-6. China Railway was awarded two tenders - TJ-2 and TJ-5 worth 26.3% of the entire project at Rmb 22 billion.

China Railway Construction was also awarded two tenders with a total cost of Rmb37.7 billion.

China infrastructure stocks climbed on the news. China Railway soared 2.1% to HK$11.60 and China Communications Construction Limited spiked 0.7% to HK$22.90.

The Standard, online publication, reported today that China National Aviation Corporation said yesterday it will offer not less than HK$5 per share for the 24% equity in China Eastern in a counterbid to Singapore Airlines offer if the latter fails to win shareholders approval at tomorrow’s extraordinary general meeting.

CNAC’s counter offer is 31.58% higher than that from Singapore Airlines’ and values the takeover bid at HK$9.43 billion.


Mirae Asset Global Investment Hong Kong analyst Patrick Pong Kwok-hung said today that this year’s outlook for banks in Hong Kong is positive as the net interest margin is likely to remain at last year’s level at 1.85%.

Also the prime HIBOR rate, used by small and medium sized banks, is expected to fluctuate between 3.2% and 3.3%.

HSBC plunged 1.8% to HK$127.80.

Crude oil for February delivery fell 0.8% to $97.11. Oil producer PetroChina Co Limited declined 2.3 % to HK$13.86.

China National Materials Co Limited gained after the company said it would build three new production lines, boosting annual production in Guangdong province to six million tons. China National Materials stock closed up 5.3% to HK$11.88.


Asian Markets Round up

In Tokyo Nikkei 225 Index closed lower 190.86 or 1.30% to 14,500.55, in Hong Kong Hang Seng index closed decreased 340.20 or 1.24% to 27,179.49, in Australia ASX 200 closed lower 145.00 or 2.30% to close 6,161.60.

In South Korea Kospi Index close at decreased 32.76 or 1.76% to close at 1,831.14, in Thailand SET index closed lower 13.40 or 1.63% to 808.31, and Indonesia JSE Index increased 11.22 or 0.41% to 2,776.41. Sensex index in India closed higher 125.76 or 0.61% to 20,812.65.


[R]5:00AM New York, 7:00PM Tokyo - Tokyo plunged 1.3% on concerns of U.S. recession.[/R]

Stocks in Japan fell on worries that the U.S. economy will enter into a recession.

In Tokyo trading Nikkei 225 dropped 1.3% or 190.86 to 14,500.55, while the broader Topix Index slumped 19.20 to 1,392.71, below 1,400 for the first time in two years.

In the first section of the Tokyo Stock Exchange 9.8 billion shares worth 1.1 trillion yen were traded and in the second section 227 million shares valued at 4.1 billion yen changed hands.

Of the Nikkei 225 stocks 41 gained, 172 declined, and 12 were unchanged.

Sumitomo Metal Mining led decliners with a fall of 6.62%, followed by Nippon Sheet Glass losing 6.15% after commodity prices plunged on concern that a recession in the U.S. will affect demand.

Copper prices fell 0.9%, nickel slipped 2.6% and zinc tumbled 3.1%. Nippon Mining Holdings declined 1.34%, Sumitomo Metal Industries edged down 1% and Nippon Steel shed 2.84%.

The U.S. Labor Department reported on Friday that the net new jobs in the December month rose 18,000 after gaining 115,000 in November. The unemployment rate increased to 5%. The economy generated 1.3 million jobs in 2007 far lower than target of 2 million by the current Bush administration. In 2006, 2.3 million net new jobs were created.

The Bank of Japan reported today that the country’s monetary base rose for the fifth consecutive month by 0.4% in December from a year ago. The amount of cash in circulation plus the balance of current account deposits held by financial institutions soared to 90.78 trillion in December.

Also, current account deposits slumped 11.2% to 8.22 trillion yen, while the outstanding balance of notes in circulation increased 1.7% to 78 trillion yen.

Of the Nikkei 225 index stocks Millea Holdings led advancers with a rise of 5.91% followed by rises in Toto Limited of 3.93%, in T&D Holdings Incorporated of 3.47%, in Kumagai Gumi Company of 3.23%, and in Sky Perfect of 3.17%.

Retailers also gained after Fast Retailing reported last week that December sales rose 6.4% from a year ago. Fast Retailing soared 3.07% and JFront Retailing spiked up 0.42%.

Sony Corporation gained after Time Warner said it will back the Blue-ray high definition video format to make DVDs instead of Toshiba Corporation’s format. Sony rose 0.69% as a result, while Toshiba dropped 2.25%.

Sumitomo Metal Mining led a decline of Nikkei 225 index shares with a fall of 6.62% followed by losses in Nippon Sheet Glass of 6.15%, in Alps Electric Company Limited of 5.92%, in Kawasaki Kisen of 5.78%, and in Tokai Carbon Company of 5.56%.

Shipbuilders fell on concern that weakening economic growth in the U.S. will affect demand of commodities. Mitsui OSK Lines dropped 4.89%, Hitachi Zosen shed 4.86% and Mitsui Engineering & Shipbuilding slipped 4.35%.

Exporters also declined after the yen gained 107.91 against the dollar. However, it closed at 108.93. Toyota Motor Corporation tumbled 4.83%, Komatsu Limited dropped 3.50% and Casio Computer edged lower 3.52%.

Nikkei news reported today that Mitsubishi Heavy Industries will reduce launch fees for its H-2A rockets by 35% to 60 million to 70 million yen next year to be competitive. The company also plans to cut time between orders and lift-off to a year.

The online publication of Nikkei news also reported Friday that investment fund Aetos Capital is bidding 930 billion yen for the takeover of Daito Trust Construction Company.

Rio Tinto reported in a statement to the Australian Stock Exchange that the company will pay $315 million for the construction of three 250,000 ton iron ore ships by Namura Shipbuilding Company. The vessels, which will increase exports of the ore and expand its fleet, will be delivered in 2012.

Aoen Corporation senior managing executive officer Maasaki Toyoshima told a CFS shareholders meeting in Tokyo yesterday that the company might increase its 15% stake in the drugstore operator if it rejects a 15 billion yen takeover bid from Ain Pharmaciez Incorporated.

Aeon is seeking an additional 18% of voting rights to prevent the takeover. The company closed 2.49% down.


Asian Markets Round up

In Tokyo Nikkei 225 Index closed lower 190.86 or 1.30% to 14,500.55, in Hong Kong Hang Seng index closed decreased 340.20 or 1.24% to 27,179.49, in Australia ASX 200 closed lower 145.00 or 2.30% to close 6,161.60.

In South Korea Kospi Index close at decreased 32.76 or 1.76% to close at 1,831.14, in Thailand SET index closed lower 13.40 or 1.63% to 808.31, and Indonesia JSE Index edged increased 11.22 or 0.41% to 2,776.41. Sensex index in India closed higher 125.76 or 0.61% to 20,812.65.


[R]4:00AM New York, 8:00PM Sydney – Australian stocks fell after investors confronted a possible slow-down in the U.S. economy.[/R]

ASX 200 index lost 2.3% or 145.2 to close at 6,161.60.

The Preliminary market turnover was 11.637 billion shares, worth $4.629 billion, with 294 stocks moving up, 1,011 moving down, and 309 unchanged. The most actively traded stock was Gondwana Resources with 365.94 million shares worth $15.3 million.

Mining Giant, Rio Tinto is reported to be interested in making a bid for Canadian uranium explorer Xemplar Energy. According to the media reports, Rio is eyeing Xemplar Energy’s recent uranium deposits find in Namibia, which is believed to be one of the world''s largest uranium deposits in Namibia.

Xemplar is waiting for independent verification of its uranium discovery. Rio already has stakes in two uranium mines, one in the Northern Territory and another in Namibia.


Rio''s interest in Xemplar comes after BHP Billiton made an informal £67 billion ($150 billion) takeover offer. Rio has rejected BHP''s offer, saying it was too low. Rio''s share fell 2.2%.

Australia & New Zealand Banking Group Ltd today raised its variable home loan rate by 0.2% points to 8.77% for new and existing customers. The second Australian bank has raised rates in Australia, even when the central bank has not raised interest rate.

National Australia Bank Ltd was the first to hike its rate when it raised its variable rate by 0.12% to 8.69 % last week.

The last round of increases in borrowing charges was in November when the central bank increased its key rate by a quarter of a percentage point. ANZ''s share fell 2.6% and National Australia declined 2.8%.

The Australian dollar closed weaker today after a choppy session that saw demand for the local currency was boosted as Japanese investors sold yen.

At the close, the Australian dollar was trading at $0.8730/35, down from Friday''s close of $0.8811/16.

Of the ASX 200 index shares, Lynas Corp Limited led the gainers with a rise of 7.2% followed by increases in Boart Longyear Group of 2.2%, in Asciano of 1.8%, in PMP Limited of 1.1%, and in Flight Centre of 1.1%.

Of the ASX 200 index stocks Fortescue Metals led the decliners with a fall of 13.3% followed by losses in Independence Group of 8.8%, in AED Oil Limited of 7.2%, in Zinifex Limited of 7.1 and in Henderson of 6.7%.