Core Inflation, Retail Data Lift Stock Futures

Elena
11 May, 2007
New York City

U.S. stock market futures were pushed higher on Friday by hopes for interest rate cuts, raised by flat core producer prices and lower retail sales. The Labor Department said that higher energy prices lifted wholesale prices by 0.7% in April, but core inflation was tame again. U.S. retail sales had their worst performance in 7 months, falling a worse-than-expected 0.2% in April. Market also digested the latest assessment from ex-Fed Reserve Chairman Alan Greenspan.

[R]9:00AM U.S. stock futures traded advanced on core inflation and retail data.[/R]
U.S. stock market futures were pushed higher on Friday by hopes for interest rate cuts, raised by flat core producer prices and lower retail sales. The Labor Department said that higher energy prices lifted wholesale prices by 0.7% in April, but core inflation was tame again. U.S. retail sales had their worst performance in 7 months, falling a worse-than-expected 0.2% in April. Market also digested the latest assessment from ex-Fed Reserve Chairman Alan Greenspan who reportedly said that the odds are two-to-one against a U.S. recession, buoyed by improving prospects around the world.

Among pre-market highlights, American International Group ((AIG)) posted a 29% profit increase, as its property and casualty insurance business avoided big losses and after it maintained premium growth. Nvidia ((NVDA)) rose 4.6% in pre-open trade on better-than-expected 44% profit rise on 24% revenue growth. Alcatel-Lucent ((ALU)) rose nearly 3% after it posted Q1 profit decline and forecast higher Q2 sales. Credit Suisse upgraded the stock to outperform from neutral.

Of companies drivren by analyst comments, Amgen ((AMGN)) dropped 2.8% following two downgrades. J.P. Morgan cut its rating on the stock to neutral from overweight. Citigroup downgraded Amgen to sell from hold. S&P 500 futures rose 3.7 points at 1,502.70 and Nasdaq 100 futures climbed 4.5 points at 1,891.00. Dow industrial futures rose 35 points.

[R]PPI rose 0.7% in April. Core inflation remained flat.[/R]
Friday morning, the Department of Labor released its closely watched report on wholesale prices in the month of April. The report showed that prices rose a little more than economists had expected, although core prices were unchanged. The Labor Department said that its producer price index rose 0.7 percent in April following a 1.0 percent increase in the previous month. The increase came in slightly above economist estimates of a 0.6 percent increase. The bigger than expected increase in prices was largely due to another significant increase in energy prices, which rose 3.4 percent in April after rising more than 3 percent in each of the two previous months.

Higher prices for gasoline, liquefied petroleum gas, home heating oil, residential electric power, residential natural gas, and diesel fuel contributed to the continued increase in energy prices. At the same time, the report showed a slowdown in the pace of growth in food prices, which rose 0.4 percent in April compared to a 1.4 percent increase in March. Prices for fresh and dry vegetables, beef and veal, and dairy products rose less than they had a month earlier. The report also showed that the core producer price index, which excludes food and energy prices, was unchanged for the second consecutive month. Economists had been expecting core prices to increase by 0.2 percent. The Labor Department added that wholesale prices rose at an annual rate of 3.2 percent in April. Core prices were up 1.5 percent year-over-year.


[R]8:00AM NY-7:00PM Mumbai Sensex ends higher in volatile trading. Bajaj Auto surges.[/R]

The Sensex on BSE finished 24.93 points, or 0.18%, higher at 13,796.16.

The session was extremely volatile as the index traded within a range of 301.23 points. The market-breadth ended almost even, as 1,268 stocks advanced while 1,276 declined and only 82 remained unchanged. Of the 30 stocks in the Sensex, 11 advanced, while the rest declined. The turnover on BSE was Rs 4,429 crore, slightly higher than Rs 4,304.80 crore on Thursday. On NSE, the turnover was Rs 9,404.94 crore, compared with Rs 9,225.37 crore on Thursday.

Economic news

Mayawati-led Bahujan Samaj Party has a great lead over the ruling Samajwadi Party and the Bharatiya Janata Party as the latest trends in the 403-member Uttar Pradesh assembly polls suggested. Out of 304 seat vote counting available at the state election headquarters, BSP was leading in 145 seats while the SP and BJP followed with 70 and 45, respectively. UP elections are keenly watched for voter preferences and indicator of national trend.

Wholesale inflation rate in India slowed for a second week as prices of fruits, vegetables and spices declined. The key wholesale price index was 5.66% in the week ended April 28, from 5.77% in the previous week. Analysts forecast inflation at 5.75%.

A government report showed that industrial production in India advanced 12.9% annually in March 2007, from a year earlier, higher than the annual growth of 10.8% in February on strong manufacturing output. Analysts had forecast annual industrial output growth of 10.40%.

Trading highlights

Page Industries was the most-active stock with a turnover of Rs 300 crore followed by Reliance Industries and Reliance Communications.

Advancers

Bajaj Auto soared over 4% to Rs 2,719 ahead of the board meet on May 17 to consider a proposal for demerger. Transferring some of the Rs 6,500 crore cash will improve the finance and insurance businesses, chariman Rahul Bajaj had announced earlier.

Reliance Communications surged nearly 3% to Rs 478 and NTPC rallied 2.5% to Rs 155.
SBI and TCS advanced around 2% each to Rs 1,149 and Rs 1,253, respectively.
Infosys and Ranbaxy were up over 1% each at Rs 2,000 and Rs 391, respectively.

Index heavy Reliance Industries rose 0.6% to Rs1,590, after rebounding from its low of Rs 1,555.05. On BSE, a high 13.25 lakh shares were traded.

Decliners

ACC led the decliners, plunging 4% to Rs 840. Grasim and Hindustan Lever dropped around 2.5% each to Rs 2,425 and Rs 185, respectively. Hindalco Industries lost 1.02% to Rs 145.10, after Novelis said its shareholders have approved acquisition by Indian aluminum producer.

Maruti Udyog slipped 0.20% to Rs 793. The government sold its remaining stake in Maruti for Rs 2,360 crore to a number of financial institutions led by Life Insurance Corporation. The government had offered 2.96 crore shares in the company, representing 10.27% stake.

Gujarat Ambuja, Cipla, and HDFC slipped around 1.5% each to Rs 119, Rs 205, and Rs 1,656, respectively. Tata Steel ended 1.3 lower at Rs 569, while Reliance Energy and Wipro were down over 1% each to Rs 509 and Rs 546, respectively.


[R]6:30AM European markets decline Friday on weak banking stocks.[/R]

European markets were lower on Friday. National benchmarks decreased in all of the 17 western European markets that were open. By mid morning, Frankfurt Xetra Dax shed 1.2% to 7,330.17, the CAC 40 in Paris lost 1.2% to 5,938.62 and London FTSE 100 slid 0.9% to 6,467.4.

Advancers

Bucking the negative trend Capitalia of Italy, which gained 1.3% after chief executive Matteo Arpe announced his bank would not stand still during the wave of consolidation in the banking sector.

German utility RWE raliied 5.5% on rumours French rival Electricite de France was interested in a takeover. RWE said it had not received an offer. Shares in EdF gained 0.6%.

B shares of Volvo, the Swedish truckmaker, added 3.9% after topping forecasts with its first-quarter net profit.

Decliners

Banks led the decliners. Shares in Fortis fell 3%, while Santander eased 0.3% and RBS lost 1.2%. ABN shares fell 0.3%.

U.S. export-oriented companies dropped. ABB fell for the first time in three days, shedding 2.1%. The Americas accounts for about a quarter of ABB revenue.

Shares of BASF slipped 1.5%. North America is the second-biggest market for BASF. Oil company BP, which generated more than a third of its sales in the U.S. in 2006, slid 1.4%.

Commodities

Crude oil gained on concern the U.S. supply of gasoline would be threatened by refinery halts and latest disruptions of production in Africa. Crude oil for June delivery rose 37 cents, or 0.6%, to $62.18 a barrel in after-hours electronic trading on the New York Mercantile Exchange. Brent crude oil for June settlement rose 62 cents, or 0.9%, to $66.41 a barrel in electronic trading on the ICE Futures exchange.

Gold advanced in London after some investors judged that prices, which ended at a five-week low yesterday, no longer reflect expectations for a third consecutive year of declining supply. Gold for immediate delivery gained $2.38, or 0.4%, to $668.03 an ounce. Silver dropped 2 cents to $13.015 an ounce, heading for a fourth weekly decline.

Currencies

The euro and the pound retreated from recent highs against the dollar in morning trading Friday, as lack of surprise over interest rate moves in Britain, Europe and the United States boosted the U.S. currency. The euro bought $1.3477 in morning European trading, compared with the $1.3508 it bought in New York late Thursday. The British pound slipped to $1.9784 from $1.9823 the night before even though the Bank of England lifted its key interest rate by a quarter of a per cent to 5.5%. The dollar rose to 119.86 Japanese yen from 120.44 yen the night before.