U.S. Faltering Indexes Drag Europe and Mexico

123jump.com Staff
15 May, 2007
New York City

U.S. stocks showed a rally in oil, railroads and banks but tech stocks declined on inflation and housing report. The rally that started in the morning failed as mid and small cap stocks fell. Crude oil and gold rose as dollar continued to weaken. The Brazil currency rose to a six year record and currencies in Asia rose as well. Wal-Mart, Home Depot and Limited earnings kept investors away. Reuters and Thomson agreed to merge and Daimler sold Chrysler divison. Europe and Mexico closed lower.

[R]4:00PM NY; 10:00PM Frankfurt; 2:30AM Mumbai - GLOBAL MARKETS[/R]

Consumer price in April rose 0.4% and the core inflation excluding food and energy rose 0.2% lifting mood on Wall Street trading and encouraging higher indexes in Brazil, Argentina and Germany, Italy and Spain.

Daimler Chrysler agreed to sell 80% of its Chrysler unit stake to private equity group Cerberus Capital. Wal-Mart cautioned outlook for the second quarter and Home Depot earnings fell 30%. Gold bounced back as dollar continued to weaken across major currencies of the world. Tyco has set up $3 billion reserve to settle five year old class action lawsuits emanating from accounting scandals.

Reuters and Thomson agreed for a merger valuing Reuters at $17.4 billion but its stock fell on regulatory concern. HeidelbergCement agreed to pay nearly $16 billion for Hanson, building material supplier. Capitalia in Italian trading rose 5% adding to a rise of nearly 10% in less than two weeks of trading on merger rumors. Deutsche Post and Daimler Chrysler rose on earnings but Unilever, Danone and Nestle fell on broker downgrade on the food sector.

After fifteen consecutive cuts in interest rates in Brazil, retail sales jumped to a record level in three years in March. Retail sales in March rose 11.5% after rising revised 9.1% in February. The currency Real rose to a six-year high after gaining 1.3% today and jumping 48% against the U.S. dollar in the last fifty months.


Yield on 10-year U.S. bond closed at 4.718% and the 30-year bond closed at 4.890%.

Gold gained $4.40 to close at $674.50 a troy ounce, silver increased 8 cents to end at $13.315 a troy ounce and copper declined $248.000 to close at $7687.000 per metric ton.

Oil gained 71 cents to close at $63.170 a barrel and heating oil advanced 2.340 cents to finish at 189.020 cents a gallon. Natural gas decreased 8.8 cents to close at $7.864 per MMBtu. Gasoline went up 0.140 cents to end at 230.260 cents a gallon.

Asian markets closed lower on disappointing economical news. The decliners were led by China with a decline of 3.64%, South Korea with a decrease of 1.02% and Japan with a loss of 0.93%. The advancers were Philippines with an increase of 1.31% and Thailand with a gain of 0.15%. Australia lost 0.78%.

European markets finished higher boosted by in-line-with-expectations U.S. core inflation data. The advancers were led by Norway with a gain of 0.97%, Spain with an increase of 0.94% and Italy with a gain of 0.90%. There were no decliners.

Latin America markets finished higher on local news and good inflation data out of the U.S. The advancers were Argentina with an increase of 0.55% and Brazil with an advance of 0.05%. The only decliner was Mexico with a loss of 0.06%. Canada advanced 0.18% on gains in the materials sector.

[R]2:30PM NY, U.S. Market Movers[/R]

MetroPCS Communications Inc. ((PCS)), wireless service provider, shares climbed 6.52% after the company said its first-quarter income more than doubled due to new net subscriber growth. MetroPCS reported a net income of $30.2 million, or 11 cents per share, in its first quarter, compared with $12.2 million, or 4 cents per share, in the same quarter last year. Revenue for the quarter jumped 63% to $536.7 million versus $329.5 million in the year-ago period.

Ingersoll-Rand Co. ((IR)), refrigeration equipment, locks, tools and machinery maker, said that it will evaluate alternatives for company’s Bobcat and construction-related businesses, including a possible sale or spin-off to shareholders. The company''s board approved the expansion of its share repurchase plan to $4 billion from $2 billion previously. Ingersoll-Rand said it will complete $2 billion of buybacks by the end of the third quarter. About $330 million shares have been repurchased to date under the authorization. Ingersoll-Rand said the company’s Bobcat, utility equipment and attachments business generated about $2.6 billion in 2006 revenue. As a result shares of the company climbed 7.36%.

Altana AG ((AAA)) topped the list of Biggest Percentage Price Gainers on the New York Stock Exchange. Shares of the company climbed 20.98%.

Biodel Inc. ((BIOD)), which specializes in treatments for diabetes and osteoporosis, shares climbed 20% after the company reported that it has two insulin product candidates in clinical trials to treat diabetes.

Linn Energy LLC ((LINE)), oil and gas company, said it recorded a first-quarter loss, as a large loss in energy trading undermined rising output. Shares fell 5.34%. Quarterly losses totaled $67.8 million, or $1.35 per share, compared with a prior-year profit of $22 million, or 84 cents per share. Revenue from oil and gas sales, marketing and other activities increased to $43.1 million versus $17.9 million a year earlier.

STEC Inc. ((STEC)), computer memory maker, said that its guidance was disappointing amid an unstable pricing climate. Two Wall Street brokerage houses cut ratings on the company. The company also said its first-quarter profit jumped on the sale of its consumer unit, but warned of a softer market and falling component prices. Shares of the company declined 25.7%.

Kaiser Aluminum Corp. ((KALU)) first-quarter profit declined 55% as higher costs offset sales growth. Net income fell to $17.1 million compared with $38.4 million a year ago. Per-share earnings increased to 86 cents to 48 cents as the company reduced its number of shares outstanding to 20.2 million from 79.7 million. Sales rose 17% to $392.2 million against $336.3 million last year as the company raised prices on its metals and fabricated products and boosted shipments to the aerospace and defense industries.

Bare Escentuals Inc. ((BARE)), cosmetic and skin care products maker, said it filed for a public offering of 10 million shares of its common stock. Certain stockholders are offering 9.9 million shares, while the company is offering 100,000 shares. Shares fell 3.78%.

Biosite Inc. ((BSTE)), medical test maker, shares of fell 3.19% after a potential buyer said it will not take part in a further bidding war for the company. Beckman Coulter Inc. said it would not raise its buyout offer for Biosite above the $90 per share, a $5 hike from its original offer, made in March.

[R]1:00PM NY, 5:00 PM Frankfurt European stocks gained ground on U.S. data and gains for DaimlerChrysler, Reuters, Hanson.[/R]
European stock markets gained ground on Tuesday, boosted by in-line-with-expectations U.S. core inflation data. The upward move was also contributed by deal-related gains from media firm Reuters Group and construction giant Hanson. Notable gains in the shares of DaimlerChrysler gave also proved support. Reuters rose 3.4% after it agreed to back a $17.2 billion takeover from Canada''s Thomson Corp. Building-materials supplier Hanson rose 4.7% as Germany''s HeidelbergCement agreed to pay 8 billion pounds ($15.8 billion) for the company.

Elsewhere, Italian bank Capitalia climbed 5.3%. Among earnings-related gainers, Daimler Chrysler rose 3% after the company reported Q1 net profit of $2.64 billion, up from a year-ago equivalent profit of $1.05 billion. The U.K.''s FTSE 100 added 0.2% at 6,568.60, the German DAX Xetra 30 rose 0.6% at 7,505.35 and the French CAC-40 advanced 0.4% at 6,049.76.


[R]11:30AM Market averages advanced on tame inflation data.[/R]
U.S. stock averages moved higher, sending the Dow industrials to an all-time high above 13,450, as tame inflation data offset disappointing earnings from Home Depot ((HD)) and Wal-Mart Stores ((WMT)). The advance by the Dow was largely attributed to another strong performance of General Motors ((GM)), rising 4.3%. Blue chips were also supported by 1% gains in the shares of Boeing ((BA)) and General Electric ((GE)). Interest-rate sensitive companies posted gains on optimism that the Fed Reserve will reduce interest rates in the near future. Credit card issuer American Express Co. ((AXP)) and investment bank JPMorgan Chase ((JPM)) gained 1.1% each.

In corporate news, Tyco International ((TYC)) agreed Tuesday to pay about $3 billion to settle shareholder claims that arose after former CEO Dennis Kozlowski and other top officers were charged with multiple counts of grand larceny, conspiracy, securities fraud and falsifying business records. Tyco shares gained 1.4%. Ingersoll Rand Co. ((IR)) surged 8% after the company said it is exploring the sale of spin-off of its Bobcat and construction-related businesses. Its board also doubled its manufacturing share repurchase program to $4 billion. The Dow Jones industrial average was up 83.38 points, or 0.62%, at 13,430.16. The Standard & Poor''s 500 Index was up 6.72 points, or 0.45%, at 1,509.87. The Nasdaq Composite Index was up 3.04 points, or 0.12%, at 2,549.48.


[R]9:45AM U.S. markets opened mixed on rate cuts optimism and disappointing earnings.[/R]
U.S. stocks opened mixed Tuesday. Hopes that the Fed Reserve will cut interest rates amid weaker-than-expected consumer price inflation in April generated positive sentiment, but disappointing results from Home Depot and Wal-Mart Stores weighed. The Labor Department said that the consumer price index rose 0.4% after rising 0.6% in March, while core prices rose 0.2% after a 0.1%gain.

Home Depot ((HD)) lost 1.7% after posting a 30% profit decline in Q1, missing expectations. The retailer also said annual earnings would be at the low end of its outlook. The world''s biggest retailer Wal-Mart ((WMT)) traded flat after it said its Q1 earnings met lowered forecasts but its Q2 outlook came at the lower end of analyst expectations. Anglient Technologies ((A)) jumped 7% on better-than-expected quarterly earnings per share and revenue outlook.

The blue-chip average was pushed higher by shares of General Motors ((GM)), rising 3.3%, American Express Co. ((AXP)) and JP Morgan Chase ((JPM)), both rising 1.1%. Other auto makers also advanced. DaimlerChrysler ((DCX)) rose 3% after an announcement on Monday that it agreed to sell 80% of Chrysler. Ford ((F)) climbed 3%. In midmorning trading, the Dow rose 88.01, or 0.66%, to 13,434.79 after rising to a new trading high of 13,444.79. The Standard & Poor''s 500 index was up 8.85, or 0.59%, at 1,512.00, while the Nasdaq composite index recovered from an earlier loss and rose 9.04, or 0.36%, to 2,555.48.

[R]Consumer prices index rose 0.4% in April.[/R]
Tuesday morning, the Department of Labor released its report on consumer prices in the month of April, showing that prices rose a little less than economist had expected. The increase in core consumer prices came in line with estimates. The Labor Department said its consumer price index rose 0.4 percent in April following a 0.6 percent increase in March. The increase came in slightly below economist estimates of a 0.5 percent increase. A significant increase in energy prices contributed to the increase in consumer prices, with energy prices rising 2.4 percent in April after surging up 5.9 percent in March. The rise in energy prices also contributed to a 1.2 percent increase in transportation costs.

The continued increase in energy prices was partly due to a notable increase in gasoline prices, which rose 4.7 percent in April following a 10.6 percent increase in the previous month. The report also showed that the core consumer price index, which excludes food and energy prices, edged up 0.2 percent in April after rising 0.1 percent in March. Economists had expected a 0.2 percent increase. The release of the consumer price data comes on the heels of last week''s report on April producer prices, which showed a slightly bigger than expected 0.7 percent increase in prices. However, the report also showed that core producer prices were unchanged for the second consecutive month.


[R]9:30AM The FTSE 100 is higher Tuesday on takeover activity.[/R]

The FTSE 100 was up 6.6 points at 6,562.1 in mid-day trade.

Advancers

Reuters advanced 3.7% as Thomson Corp agreed an 8.7 billion pounds deal to buy the media and information group. Hanson also rose 3.3% after it agreed to an 8 billion pounds takeover offer from HeidelbergCement of Germany. The recommended offer at 11 pounds per share should create the second-largest construction material company in the world.

Pub operator Enterprise Inns was in focus, as it gained 5.9% after announcing it was exploring whether it could meet the qualifying criteria for admission as a Reit, or real estate investment trust, without the need for material restructuring of its business.
The news gave a boost to the leisure sector with Punch Taverns up 4.1% and Mitchells & Butlers up 1.3%.

Homeserve rose 8.9% as UBS raised its stance on the providers of home assistance services from neutral to buy and predicted an expansion into the US would be a success.

Decliners

Miners continued to fall on the back of a decline in base metal prices and fading bid hopes. Rio Tinto lost 1.6%. Anglo-American was down 0.4%.


[R]9:00AM Stock futures traded flat after inflation data.[/R]
U.S. stock futures were flat Tuesday, reflecting in-line core inflation data and lackluster earnings reports from Wal-Mart Stores and Home Depot. The Labor Department said that U.S. consumer prices rose 0.4% in April, boosted by increases for energy and groceries. Excluding food and energy, the core consumer price index rose 0.2%, meeting forecasts.

Among pre-market earnings highlights, Wal-Mart ((WMT)) declined 0.8% in pre-open trading as it met expectations with an 8% profit rise, with revenue rising 8.5% to $86.41 billion in Q1. The Home Depot ((HD)), the world''s largest home improvement retailer, posted Q1 earnings drop of 29.5% to $1.0 billion, or 53 cents per share, compared with $1.5 billion, or 70 cents per share last year, missing analyst estimates of earnings of 59 cents. The stock dropped 2.2%. Agilent Technologies ((A)) rose 3% in pre-open trade on better-than-expected quarterly earnings per share and revenue outlook.

On the merger-and-acquisition news front, Reuters Group ((RTRSY)) and Thomson Corp. ((TOC)) agreed to merge in a deal worth about $17.2 billion. Shares in Reuters Group rose 3.6% in the pre-open. In other corporate news, General motors ((GM)) and DaimlerChrysler ((DCX)) were upgraded after DaimlerChrysler''s move to sell 80% of Chrysler. DaimlerChrysler also said that its Q1 profit more than doubled due to the sale of its stake in Airbus owner EADS. S&P 500 futures edged up 1.6 points at 1,510.30 and Nasdaq 100 futures were flat at 1,896.25. Dow industrial futures rose 17 points.


[R]8:45AM Asian markets finish lower across the region with China, Japan leading downfall.[/R]

Asian markets finished lower on Tuesday. Japanese Nikkei 225 settled down 0.9% to 17,512.98. Stocks fell after the Japanese government released the core machinery orders figure falling 4.5%. Fanuc, the largest industrial-robot maker in the world, declined 1%. Steelmaker JFE Holdings lost 1.5%. Mitsubishi Electric, which makes factory machinery and robots, dipped 3.8%.

Automaker bucked the trend and gained. Shares of Toyota Motor rose 0.7%, while Honda Motor was up 0.7% and Nissan Motor added 0.9%. Suzuki Motor climbed 2.8%.

Shanghai Composite index plunged 3.6% to 3,899.17. Sharp declines in large-capitalized stocks drove the benchmark share index lower. Investors took profits on several large-cap stocks. China Minsheng Banking dipped 6.3%, wiping out its gains in the past two sessions.

Elsewhere around the region, Hong Kong Hang Seng index, which gained in early trading, closed in negative territory, down 0.5% at 20,868.15. South Korean Kospi settled down 1% at 1,589.37. Australian S&P/ASX 200 shed 0.8% to finish at 6291.20. The Singapore Straits Times Index lost 0.7% to 3,475.08 and Weighted index in Taipei declined 0.7% to 7,975.03.


[R]8:30AM Wal-Mart stores posted Q1 earnings in line with estimates.[/R]
Wal-Mart Stores ((WMT)), the world''s largest retailer, posted 8% increase in Q1 net income, coming in line with analyst estimates and 8.5% revenue growth, slightly missing expectations. The retailer reported quarterly earnings $2.83 billion, or 68 cents a share, up from $2.62 billion, or 63 cent a year ago, with revenue rising 8.5% to $86.41 billion from $79.68 billion. Analysts had expected the company to earn 68 cents a share on revenue of $86.94 billion.

Chief Executive Lee Scott said they were not pleased with their overall performance, but international operations had a strong quarter, especially Mexico operations and Asda in the U.K. The retailer''s consolidated profit margin thinned by 0.08% in the quarter. The company projected Q2 earnings from continuing operations to be 75 cents to 79 cents a share, compared with analyst expectations of 79 cents a share. U.S. comparable-store sales are seen higher by 1% to 2%.


[R]8:00AM NY-7:00PM Mumbai Sensex edges lower with IT and oil & gas stocks leading decliners.[/R]

The Sensex on BSE finished 36.53 points, or 0.26%, lower at 13,929.33.

The market-breadth was slightly positive as there were 1,330 stocks which advanced, 1,271 stocks, which declined, and 78 stocks which remained unchanged. Of the 30 stocks in the Sensex, 15 advanced, while the rest declined. The turnover on BSE was Rs 4,131 crore, almost unchanged from Rs 4,136.23 crore on Monday. On NSE, the turnover was Rs 9,135.04 crore, higher than Rs 8,472.51 crore on Monday.

Economic news

The rupee continued its advance and was quoted at 40.83 against the US dollar in late morning deals supported by weak dollar overseas and sustained dollar selling by exporters, despite capital outflows.

The finance ministry announced today that the government is not intending to raise rates on small savings scheme. Prevailing interest rates on small savings are within the range of 3.5% for the post office saving account and 8% under the post office monthly income account. Rates for Public Provident Fund and Senior Citizen savings scheme are 8% and 9% respectively.

The unavailability of spectrum has affected the telecom industry so sharply that the Department of Telecom is about to limit the number of operators in each service area to maintain a minimum quality of service. There are 23 telecom circles in the country.

Trading highlights

Indiabulls Real Estate was the most-active stock with a turnover of Rs 131.20 crore followed by SBI and Reliance Natural.

Advancers

BHEL led the gainers, surging 2.5% to Rs 2,519. BHEL intends to enhance its manufacturing capacity to 15,000 MW per annum with total investment of around Rs 3,200 crore during the Eleventh Plan, spread over the period 2007-2012.

Banking and financial stocks also rallied on fresh buying interest and on market talk that CRR, or cash reserve ratio, may be cut down by 50 basis points shortly. ICICI Bank rallied 2% to Rs 887. SBI advanced 1.7% to Rs 1,227, and HDFC Bank added 1.4% to Rs 1,010.

Other stocks which advanced included Hero Honda, up 1.4%, at Rs 700. Bharti Airtel, Dr.Reddy and ACC advanced around 1% each at Rs 833, Rs 657 and Rs 875, respectively.

Decliners

IT large-caps led the decliners on a stronger rupee against the dollar as any advance in the rupee directly influences revenue and profit of IT companies. Satyam shed 2% at Rs 452. Wipro dropped 1.8% to Rs 534. Infosys slipped 1.5% to Rs 1,973, and TCS was down 1% at Rs 1,237.

ONGC declined 1.8% to Rs 890. Index heavy Reliance Industries slipped 1.4% to Rs 1,598. Reliance was off from a high of Rs 1623.25 tracking reports that it has got a tax benefit of Rs 376.17 crore in 2002-03 because of unreasonable concessions due to under-assessment by tax authorities.

The other major decliners were Reliance Communications dropping 1.4% to Rs 475 and Bajaj Auto losing 1.2% at Rs 2,635.


[R]6:30AM European markets inch lower Tuesday in subdued trading.[/R]

National benchmarks declined in 10 of 18 markets in western Europe. The U.K. FTSE 100 index rose 0.1% at 6,562.50 and the German DAX Xetra 30 index inched up less than 0.1% to 7,461.36. The French CAC-40 index slipped 0.2% at 6,015.82.

Advancers

Nokia led the gainers, up 3.9% on Monday, firming up as the world top mobile handsetmaker, after the groupannounced it was winning greater market share. Nokia envisages having more than 36% of the global cellphone market in the second quarter, benefiting from strong growth in emerging markets.

DaimlerChrysler gained 1.8% after the German carmaker sold 80.1% of its loss-making Chrysler unit for $7.4 billion to Cerberus, the private equity group. DaimlerChrysler strength lifted Renault, up 2.5%.

More talk about consolidation in the Italian banking sector pushed Capitalia up 1.4% on talks of an imminent bid from rival UniCredit, 0.9% higher.

Decliners

Atos Origin dropped 13.8% as the French IT company stated that all discussions regarding a possible sale of the business had been terminated. Atos will continue with its restructuring plans, moving more staff offshore. The group is expected to look for Asian acquisitions.

Alstom announced better-than-expected full-year results with net income up by 152% to 448 million euros. But the French transport and power group dipped 1.7% amid disappointment with guidance on future profit margins.

Endemol slipped 0.6% after Telefonica sold its remaining 75% stake in the television production company which makes Big Brother for 2.63 billion euros to a consortium which include Mediaset.

Deutsche Postbank fell 1.1% amid disappointment at its first-quarter results which came in below consensus expectations.

Merck KGaA eased 0.7% after agreeing to sell its generics division to Mylan Laboratories of the US for 4.9 billion euros.

Commodities

Gold for immediate delivery shed $1.20, or 0.2%, to $668.55 an ounce, while silver for immediate delivery lost 3 cents, or 0.2%, to $13.13 an ounce. Aluminum for immediate delivery in London yesterday fell 1.9%, copper fell 3.1 %, lead, 0.6%, nickel, 2.6%, and zinc, 2.6%.

Crude oil for June delivery advanced 9 cents to $62.55 a barrel, in after-hours electronic trading on the New York Mercantile Exchange. Brent crude oil for June settlement fell 20 cents to $66.63 a barrel in electronic trading on the ICE Futures exchange. Gasoline for June delivery fell for the second day and was trading at $2.2816 a gallon, down 1.96 cents in New York.

Currencies

The U.S. dollar was mixed against other major currencies in European trading Tuesday morning. The euro traded at $1.3533, down from $1.3541 late Monday in New York. The British pound traded at $1.9758, up from $1.9732. The dollar fetched 120.41 Japanese yen, up from 120.29.