Employment Data Lift Stocks in Europe, Americas

123jump.com Staff
01 Jun, 2007
New York City

U.S. economic reports pleased traders and lifted averages in the U.S., Europe and Latin America. Higher than expected rise in employment and strong personal consumption in April left the impression that the U.S. economy may rebound sooner than expected. The news supported a near 1% rise across major markets in Europe and Latin America. Telecom and utilities takeover talks lifted stocks in Europe. Mexico and Brazil advanced 2% but Shanghai fell more than 3%.

[R]4:30PM NY, 10:30 PM Frankfurt, 2:00AM Mumbai – Global Markets[/R]

Yields gained on 10-year U.S. bonds and closed at 4.96% and 30-year bond closed at 5.06%.

Crude oil rose $1.07 cents to close at $65.08 per barrel, natural gas fell 6 cent to close at $7.88 per mBtu, and gasoline futures rose 4.13 cents to close at 224.45 cents per gallon.

Gold rose $10.20 to close at $676.90 per ounce, silver gained 22 cents to close at $13.74 per ounce, and copper futures advanced $182 to close at $7,452 per metric ton.

Asian Markets closed higher across the region led by 2.3% rise in Thailand, 2.1% increase in Philippines, 1.4% gain in Indonesia, and 1.3% advance in Taiwan. Singapore and South Korea gained nearly 1%. Various indexes in Shanghai fell between 2% and 3.5% for the second time this week. Gains in Exporters and auto companies led the rise in Tokyo with the Nikkei Index closing up 0.5%. Toyota rose 2.2% on the expectations of strong sales in the U.S. in May. Thai SET index rose to 12-month high on the hopes that elections in December will allow several parties to participate. Constitution Tribunal cleared Democratic Party of electoral fraud but dissolved Thai Rak Thai party controlled by former Prime Minister Thaskin. Indian market advanced on lower inflation.

European Markets closed higher across the region on optimism of economic growth in the U.S. and merger speculation in telecom and utility industries. Germany led the region with a gain of 1.4% followed by a near 1% rise in Spain, Norway, Switzerland, France and UK markets. Renault rose 7% on recent meeting with investors. Rumors of takeover kept telecom stocks rising led by gains of 4% in Deutsche Telekom, 3% in Vodafone and 2.5% in France Telecom. Talks of further investment from Belgian billionaire in utilities sector lifted E.On by 1.5% and EDF by 4.5%. British Energy Group rose 2% after the British government raising money to pay for nuclear reactor decommissioning.

Latin American Markets rose across the region led by gains of 2.2% in Brazil, 1.73% in Mexico and 0.6% in Chile. Good employment report in the U.S. lifted markets in the region. Steel, telecom and beverage companies rose in Brazil. AmBev, subsidiary of InBev gained on the hopes of merger with Anheuser-Busch. Mexican peso rose on the U.S. employment report and yield differential with the U.S. 10-year bond declined to 2.6%. Peso traded near seven-month high and Colombian peso reached seven-year high against dollar. Consumer prices in Venezuela rose 1.7% in April, after gaining 1.2% in March, bolstering fears that inflation in 2007 may top 16% inflation in 2006.


[R]9:45AM U.S. stocks opened higher, helped by economic optimism and gains in the tech sector.[/R]

Wall Street opened higher, lifted by stronger-than-expected job growth in May and gains in the tech sector. Market gladly received news that nonfarm payrolls rose by 157,000, exceeding last-month growth and analyst expectations. The unemployment rate wad steady at 4.5%, as expected. Further boost to the market sentiment was given by a report which showed that inflation fell back into the Fed Reserve's comfort zone and data showing strengthening manufacturing sector.

Technology stocks showed significant strength after Dell ((DELL)) posted Q1 profit results that topped expectations. The company also said it would cut 10% of its work force within the next two years in order to reduce costs. Dell rose 3%. Dow Jones & Co. ((DJ)) climbed 15% after the Bancroft family said they will meet with Rupert Murdoch's News Corp. ((NWS)), which had offered $5 billion for the company. In other deal news, 3M ((MMM)) said it acquired the manufacturing and marketing rights to the Peridex brand periodontal rinse product from Zila Inc. for $9.5 million in cash.

Commodities also moved higher in early trading. Crude oil futures gained 43 cents to $64.44 a barrel and the front-month gold contract rose $6.60 to $667.60 an ounce. In the first hour of trading, the Dow Jones industrial average rose 43.64, or 0.32%, to 13,671.28. The Standard & Poor's 500 index rose 7.19, or 0.47%, to 1,537.81, and the Nasdaq composite index rose 17.14, or 0.66%, to 2,621.66. Bonds fell, with the yield on the benchmark 10-year Treasury note rising to 4.93% from 4.89% late Thursday.

[R]Nonfarm payrolls advanced 157,000 in May.[/R]
The U.S. economy added more jobs in the month of May than economists had been expecting, according to a report released by the Department of Labor on Friday, although the job growth was exclusively in the service sector. The report showed that employers added 157,000 jobs in May following a downwardly revised increase of 80,000 jobs in April. Economists had been expecting an increase of 135,000 jobs compared to the increase of 88,000 jobs originally reported for the previous month. The better than expected job growth was entirely due to increased employment in the service sector, which rose by 176,000 jobs in May after adding 119,000 jobs in April. Strong growth in health care and food service jobs contributed to the strength in the sector.

At the same time, the manufacturing sector continued to lose jobs, as manufacturers cut 19,000 jobs in May after losing 20,000 jobs in the previous month. Employment in the construction sector was flat after showing a notable decline in April. The report also showed that the unemployment rate remained unchanged at 4.5 percent, as economists had expected. Additionally, the Labor Department said that average hourly earnings rose by $0.06 or 0.3 percent to $17.30. With the increase, average hourly earnings are up 3.8 percent compared to the same month last year.


[R]9:30AM The UK benchmark index FTSE 100 is higher on miners, retailers.[/R]

The FTSE 100 in London was 10 points, 0.15%, higher at 6,631 in early afternoon trade.

Advancers

Home Retail Group was 2.8% higher as there are rumors of a possible buyout by private company CVC. Hammerson is also in positive territory, 2.2% higher on bid interest from British Land. Pub operator Punch Taverns advanced after Goldman Sachs hikes its rating on the stock to buy from neutral.

Miners were stronger on favorable prices. BHP Billiton gained 0.65%, while Vedanta Resources advanced 1.7 per centas copper prices struck their highest level in more than a week in London.

Biofuels Corporation surged 48.7% as Barclays of the U.K has agreed to give Biofuel ana dditional overdraft worth 7 million pounds to meet interim demands.

Decliners

Centrica, the gas utility, dipped 1.6% after damage to pipeline led to a leak which temporarily closed its gas terminal at Easington. Pennon, the water company, dipped after HSBC reduced its rating on the stock to underweight from neutral.


[R]9:00AM U.S. stock futures pointed advanced, boosted by strong jobs data.[/R]

U.S. stock futures advanced on Friday, boosted by upbeat employment data. Better-than-expected margins and unexpected job cut plan announced by Dell also provided help. The Labor Department said that nonfarm payrolls expanded by 157,000 in May slightly above the 150,000 expected by economists. The unemployment rate was steady at 4.5%, in line with expectations. Average hourly earnings rose 0.3% to $17.30.

Among companies in focus, Dell ((DELL)) rose 4% in pre-market trading after posting a slight profit decline and a better-than-expected operating margin. The computer giant also said it would cut about 10% of its workforce. Merrill Lynch downgraded the stock to neutral from buy. Dow Jones & Co. ((DJ)) climbed 14% in pre-open trade after the Bancroft family said they will meet with Rupert Murdoch's News Corp. ((NWS)), which had offered $5 billion, or $60 a share, for the publisher of Dow Jones & Co.

On the earnings news front, Hovnanian Enterprises ((HOV)) said it swung to a Q2 loss of $30.7 million, or 49 cents a share, compared with earnings of $101 million, or $1.55 a share a year ago. The home builder said revenue for the period fell to $1.11 billion from $1.57 billion. Analysts had expected a per-share loss of 48 cents on revenue of $1.16 billion. In addition, the company said it had withdrawn its prior estimates for 2007 earnings.

S&P 500 futures rose 6.8 points at 1,539.70 and Nasdaq 100 futures jumped 8.5 points at 1,940.74. Dow industrial futures rose 48 points. The yield on 10-year Treasury notes rose to 4.912%.


[R]8:30AM Asian markets close mostly higher with Japanese export stocks leading the advance.[/R]

Asian markets finished mostly higher. The Nikkei 225 Stock Average settled 0.5% higher at 17,958.88. Toyota advanced 2.6% and Elpida Memory was up 5% in Tokyo. Shares of Mitsubishi Heavy gained 1.8% on reports that British aerospace group BAE Systems has been into talks with the Japanese industrial group to give a license to the manufacturing of the Eurofighter jet if Japan chooses to purchase the aircraft.

Hong Kong Hang Seng Index ended 0.2% lower at 20,602.87. The plans of China to enlarge overseas investment for domestic insurers buoyed Hong Kong-listed insurance companies. Chinese Shanghai Composite Index also declined 2.7% to 4,000.74. Shanghai-listed shares of oil refiner Sinopec surged 6.1%, while aluminum company Chalco soared 8.7%.

Indexes in Singapore and South Korea advanced to records. The Kospi index in Seoul gained 0.9% to 1,716.24, while Straits Times Index in Singapore finished 1.1% higher at 3548.32. Samsung Electronics gained 3.7% in South Korea. Australian S&P/ASX 200 closed 0.3% higher at 6,333.50. BHP Billiton led gainers in the resource sector after industrial metals prices advanced in overnight trading.


[R]8:15AM Dell Q1 profit slightly down. The computer maker plans to cut 8,000 jobs.[/R]
Dell Inc. ((DELL)) said late Thursday that preliminary Q1 profit came in slightly below expectations. The computer maker reported profit of $759 million, or 34 cents per share, compared with $762 million, or 33 cents per share last year. First-quarter sales advanced 1% from the year ago period to $14.6 billion. Analysts had expected earnings of 26 cents per share on sales $13.95 billion.

In addition, the computer maker said it was to planning to cut more than 8,000 jobs over the next year as part of a restructuring program. The layoffs represent 10% of Dell''s global work force of 88,100 employees. The job reductions came as a result of Dell’s struggle to regain market share after Hewlett-Packard Co. Dell shares advanced nearly 5% in pre-market trading.


[R]7:30AM NY-6:30PM Mumbai Sensex ends with modest gain on selling pressure in late trading.[/R]

The Sensex on BSE finished 26.29 points, or 0.18%, higher at 14,570.75.

The market-breadth was positive as 1,369 stocks advanced, 1,190 declined and 96 stocks remained the same. Of the 30 stocks in the Sensex, 17 advanced while the rest declined. The turnover on BSE was Rs 4,669 crore, slightly higher than Rs 4,536 crore on Thursday. On NSE, the turnover was Rs 9,872 crore, much lower than Rs 11,963 crore on Thursday.

Economic news

Wholesale price inflation decreased to 5.06% for the week ended May 19 from 5.27% in the previous week on softer prices of food articles like moong and wheat, and manufactured products.

The Reserve Bank of India will continue its policy to contain liquidity and inflation which may result in a hike in the cash reserve ratio, according to bankers.

India’s exports in the new fiscal 2008 showed an increase of 23% to $10.6 billion in April, compared with the same time a year earlier despite a sharp surge in rupee against the dollar.

Trading highlights

MIC Electronics was the most-active stock with a turnover of Rs 281.40 crore followed by Indiabulls Real and SBI.

Advancers

Cipla soared 3% to Rs 224. The stocks seems to attract interest again after it had dipped sharply, when it had reported poor results late last month. Satyam surged 2% to Rs 479.

Banking shares gained on an easy liquidity in the financial markets. HDFC Bank rallied 1.7% to Rs 1,159. ICICI Bank was up 1% to Rs 928 and State Bank of India added 1.9% to Rs 1,378. BHEL was up 1.1% at Rs 1,414, while Infosys gained 1% to Rs 1,940.

Decliners

Auto stocks performed the worst today, as they were under selling pressure. An increase in crude oil prices together with margin pressure worries weighed on the stocks. Hero Honda tumbled 2.6% to Rs 713, while Tata Motors shed 1.3% to Rs 747.

Bharti Airtel and Hindustan Lever were down over 1% each to Rs 838 and Rs 201, respectively. Index heavyweight Reliance Industries lost 0.6% at Rs 1,750 on 4.55 lakh shares. It soared to an intra-day high of Rs 1,779 and plunged to a low of 1,745.


[R]6:30AM European markets advance Friday on merger talk in utilities.[/R]

European markets were higher on Friday. By late morning, Frankfurt Xetra Dax added 0.7% to 7,934.85, the CAC 40 in Paris gained 0.5% to 6,135.32 and London FTSE 100 climbed 0.4% to 6,647.1. National benchmarks rose today in all of the 17 western European markets that were open except Portugal, Luxembourg and Greece.

Advancers

Iberdrola, the second-largest power company in Spain, surged 3.1%. Lafarge, the world biggest cement maker, advanced 1.9%. GBL owned by Belgian Albert Frere intends to raise more than 1 billion euros, or $1.3 billion by selling new shares. GBL is the largest shareholder in French utility Suez and holds a stake in Lafarge.

British Energy Group gained 2.8%. The U.K. government said it sold 400 million shares in British Energy, raising money to pay for the decommissioning of nuclear reactors owned by the country biggest power generator. Électricité de France, rose 2.6% after the head of the company raised the possibility of joint ventures with Gaz de France.

Reatlers were also higher. Metro, which had its price target raised by Bernstein, gained 3.4%, while Karstadt Quelle added 0.6%.

Decliners

Investment group GBL, reported to be considering a over 1 billion euros capital was down 0.4%.

Banca Italease plunged 13%. The stock slid 2.5% yesterday after MF reported that the chairman of the bank will soon present to the board the results of an internal investigation into the relationship between its chief executive and a real-estate investor who is facing criminal charges.

Commodities

Crude oil was virtually unchanged despite concern U.S. refiners are not increasing gasoline production fast enough to replenish fuel stockpiles for the summer. Crude oil for July delivery was $64.06 a barrel, up 5 cents, in after-hours electronic trading on the New York Mercantile Exchange. Brent crude oil for July settlement was trading for $67.86 a barrel, down 18 cents, on London ICE Futures exchange.

Gold advanced in London on indications that demand for jewelry and coins is strengthening. Silver gained for a second consecutive day. Gold rose $2, or 0.3%, to $662.50 an ounce. Silver advanced 3.5 cents, or 0.3%, to $13.47 an ounce.

Currencies

The dollar gained against the euro ahead of a U.S. employment data Friday. The euro bought $1.3446 in morning European trading, compared with $1.3453 in New York late Thursday. The British pound edged down to $1.9791 from $1.9796, while the dollar rose to 121.89 Japanese yen from 121.73 yen.