Autos, Rates Take Europe Steeply Down

Elena
06 Jun, 2007
New York City

European stock markets ended in the red on Wednesday, reflecting interest rate worries worldwide and weakness in the automotive sector. Interest rates were in the spotlight after the ECB lifted its key interest rate to 4%. Automotive stocks stood out as the worst performers, with Volkswagen falling 2.5% and Renault losing 4%. The German DAX Xetra 30 tumbled 2.4%, the U.K. FTSE 100 dropped 1.7%, and the French CAC-40 declined 1.7%.

[R]1:00PM NY, 5:00 PM Frankfurt European markets ended lower, dragged down by rate worries and weak automotive stocks.[/R]

European stock markets ended in the red on Wednesday, reflecting interest rate worries worldwide and weakness in the automotive sector. Interest rates were in the spotlight today after the European Central Bank lifted its key interest rate by a quarter of a point to 4%. Steep declines on Wall Street, with Dow losing over 100 points, also weighed.

Automotive stocks stood out as the worst performers, with Volkswagen falling 2.5% and Renault losing 4%. Among other stocks in focus, GlaxoSmithKline fell 0.7% on further evidence of the overall cardiovascular safety profile of its diabetes drug Avandia. Again the pharmaceutical sector, Danish biotech Bavarian Nordic climbed 10% after it gained a contract from the U.S. Department of Health and Human Services to manufacture 20 million doses of its smallpox vaccine Imvamune.

The German DAX Xetra 30 tumbled 2.4% at 7,730.05, the U.K. FTSE 100 dropped 1.7% to 6,522.70 and the French CAC-40 declined 1.7% at 5,977.87.


[R]11:30AM U.S. market averages steeply dropped, with the Dow losing over 100 points.[/R]

U. .S. market averages posted heavy losses in late morning trading, with the Dow Jones Industrial average losing over 100 points. The steep decline followed news that Q1 unit labor costs jumped higher than expected, sparking inflation and interest rate concerns. The Labor Department said that U.S. worker productivity grew at a slower-than-expected pace, driving up labor costs by 1.8%.

Rate-sensitive stocks, including utilities and banks, weighed on market sentiment after the European Central Bank lifted its key interest rate by 0.25% to 4%. Shares of utility Exelon Corp. ((EXC)) fell 2%. FPL Group ((FPL)) stock lost 2.5% despite a price target upgrade from Citigroup.

Investment bank Goldman Sachs ((GS)) fell 1.4%, while rival JPMorgan Chase & Co. ((JPM)) lost 1%. Considerable weakness also emerged among transportation stocks, with Overseas Shipholding ((OSG)), falling 3% and Burlington Northern ((BNI)), losing 2.7%. Pharmaceuticals, telecoms, internet, oil and gold stocks also moved sharply lower.

At the same time, some brokerage stocks posted strong gains. E*Trade ((ETFC)) climbed 5.7% and TD Ameritrade ((AMTD)) moved up 4% amid speculation about further consolidation among discount brokers. In the retail sector, Guess ((GES)) rose 5% on strong Q1 earnings and improved full-year earnings outlook.

The blue-chip average was led down by DuPont ((DD)) and IBM ((IBM)), each falling 2.2%. Dow members United Technologies ((UTX)) and Boeing ((BA)) declined 1.5%. The Dow Jones industrial average was down 107.03 points, or 0.79%, at 13,488.43. The Standard & Poor''s 500 was down 12.36 points, or 0.81%, at 1,518.59. The Nasdaq Composite was down 23.75 points, or 0.91%, at 2,587.48.


[R]9:45AM U.S. stocks opened in the negative on rate concerns.[/R]

Wall Street opened lower on Wednesday, reflecting inflation and interest rate concerns, sparked by increased European key interest rate and higher unit labor costs Q1. First-quarter productivity came in line with expectations, rising 1%, down from the previous estimate of 1.7%. However, unit labor costs rose a higher-than-expected 1.8%.

Among companies in focus, Guess ((GES)) climbed 6.2% after the retailer lifted its full-year earnings outlook. TD Ameritrade ((AMTD)) was another gainer in early trading. The stock rose 4% after two hedge funds with a stake in the brokerage suggested that it should consider a merging deal.

On the side of the losers, Panera Bread ((PNRA)) tumbled 13% after the retailer cut its Q2 earnings and same-store sales guidance on lower same-store sales expectations and rising costs. Company''s stock was downgraded by Morgan Keegan. Whole Foods Market ((WFMI)) declined 3.4% after the Federal Trade Commission filed a lawsuit to prevent it from merging with Wild Oats ((OATS)). Following the news, Morgan Stanley cut Whole Foods rating to equal-weight from overweight.

The blue-chip average was led lower by Alcoa Inc. ((AA)), Home Depot Inc. ((HD)) and IBM ((IBM)), each falling 1.2%. 3M Co ((MMM)) was another decliner on the Dow, losing 0.7%. The Dow Jones industrial average fell 68.27, or 0.50%, to 13,527.19. The Standard & Poor''s 500 index fell 9.49, or 0.62%, to 1,521.46, and the Nasdaq composite index fell 21.48, or 0.82%, to 2,589.75.


[R]9:30AM The FTSE 100 is lower in afternoon trade Wednesday on banks, retailers.[/R]

In late morning trade Wednesday, the FTSE 100 which plunged 67 points, or 1%, to 6,555.4.

Advancers

GlaxoSmithKline, having lost 12% in two weeks, led the gainers on Wednesday, adding 1.72 %, as the pharmaceuticals company defended its diabetes drug Avandia.

The battle for Baggeridge Brick, up 0.2%, intensified as Austrian building group Wienerberger raised its all-cash offer. Recruiting company SThree remains upbeat, 2.4% higher, saying it has continued to perform strongly in the first half and is well-positioned to make further progress for the full year.

Decliners

Next led the large-caps decliners. It lost 4.1% a day after a British Retail Consortium survey announced British retail sales growth slowed in May to its weakest rate in six months. Marks and Spencer shed 3.9 %, and Kingfisher fell 3.2%.

Northern Rock lost 2.9% after JP Morgan downgraded its recommendation from neutral to underweight. Shares in Oxonica slumped 54% after the nanomaterials group terminated a supply agreement and added that it may need to raise additional funds in the next few months.


[R]9:00AM U.S. stock futures pointed lower ahead of economic data.[/R]

U.S. stock futures predicted weak market opening on Wednesday, reflecting interest rate concerns after a rate hike in Europe and before data on Q1 productivity.

Declines in European stock markets weighed on U.S. stock futures, as he ECB lifted its key interest rate by 0.25% to 4%, in line with expectations. The Labor Department is expected to report worker productivity increase by 1%, down from the previous estimate of 1.7%. Stronger growth could add to recent worries that the Fed Reserve will increase rates rather than cut them in the near term.

Among pre-market highlights, TD Ameritrade Holding ((AMTD)) climbed 8% after hedge funds SAC and Jana Partners suggested that the online brokerage firm should either merge with Charles Schwab & Co ((SCHW)) or E-Trade Financial Corp. Whole Foods Market ((WFMI)) dropped 2.1% in the pre-open after the Federal Trade Commission decided to file a lawsuit to block the merger of the company with Wild Oats ((OATS)).

In other corporate news, Guess ((GES)) rose 4% after the retailer lifted its full-year earnings outlook. Dow Jones industrial futures expiring in June fell 54, or 0.40%, to 13,561. Standard & Poor''''s 500 index futures dropped 6.60, or 0.43%, to 1,527.10. Nasdaq 100 index futures declined 8.50, or 0.44%, to 1,927.50.


[R]8:30AM Asian markets end lower with Japan down, China up.[/R]

Asian markets closed mostly lower on Wednesday. In Tokyo, the 225-issue Nikkei Average ended 0.1% lower, declining 12.88 points to 18,040.93. Advantest declined 1.11% and Toyota fell 0.26%.

On the plus side, commodity-linked shares gained, with Marubeni rising 9.5% on reports it will participate in an electric power, water desalination plant profit in United Arab Emirates. Sony also climbed 0.4% after reports that the company intendss to invest 60 billion yen, or $494.19 million, over the next three fiscal years to raise production of imaging sensors for cellular phones and digital cameras.

In China, the Shanghai Composite Index advanced 0.2% to 3776.32 in volatile trading. Hong Kong Hang Seng Index retreated from modest gains in the late trading, closing 0.1% lower, declining 23.54 points to 20,818.61. Australian S&P/ASX 200 index settled 0.6% lower at 6,337.1 on interest-rate-sensitive stocks after a stronger-than-expected report of first-quarter gross domestic product growth worried investors that lending rates will be hiked by the central bank to curb inflation before the end of year.

Other markets around the region also declined. Hong Kong Hang Seng Index gave up 0.11% to end at 20,818.61, but the Weighted Price Index of the Taiwan Stock Exchange rose 0.1% to close at 8,314.68 points. Markets in South Korea were closed for a holiday.


[R]7:30AM NY-6:30PM Mumbai Sensex plunges on a broad sell-off in large-caps.[/R]

The Sensex on BSE finished 279.08 points lower, or 1.92%, at 14,255.93.

The market-breadth was negative as there were more than two decliners for every advancer. For 842 stocks that advanced, 1,706 stocks declined and only 67 stocks were unchanged. Of the 30 stocks in the Sensex only four advanced, while all the others declined. The turnover on BSE was Rs 5,256 crore, sharply higher than Rs 4,390 crore on Tuesday. On NSE, the turnover was Rs 10, 225 crore, much higher than Rs 9,190 crore on Tuesday.

Economic news

The commerce ministry announced in a statement that the government of India has approved 24 Special Economic Zones to be established in the country. Another nine SEZs were approved but they also have to be approved by state government departments, while 13 applications were deferred.

The Reserve Bank of India commented that despite the strong economic growth about one crore people engaged now in agriculture should find non-agricultural employment to generate living wages.

The Essar group is currently negotiating with international bankers to raise $5 billion leveraging its 33% stake in mobile telephone company. The borrowing would be made by Essar Global, the overseas arm of Essar Group, to pay for recent acquisitions of steel plants in Trinidad and Tobago, Canada, US and building power plants.

Trading highlights

Nitin Fire, for the second day in a row was the most-active stock with a turnover of Rs 417.60 crore followed by Wipro and Reliance Industries.

Advancers

Hindalco led the few gainers, surging 1.9% to Rs 149. Hindalco was in focus after Alcan Inc of Canada bought 76% of Alukbond India, an aluminium composite panel-maker, for less than $50 million, causing speculation that the Canadian company may put up an offer together with Sterlite Industries for Hindalco.

Reliance Communications added 1% to Rs 516. Satyam Computers advanced 0.4% to Rs 465 and Grasim gained marginally to Rs 2,452.

Decliners

Tata Steel and HDFC plunged over 3.5% each to Rs 618 and Rs 1,831, respectively. Tata Motors shed 3.4% to Rs 687. Tata Motors intends to reduce production of trucks at its plant in Pune. Higher interest rates are expected to delay orders from transportation companies.

Reliance Energy shed 3.2% to Rs 533 and BHEL plunged 3.1% to Rs 1,340 both on profit taking. Reliance Industries lost 3.3% to Rs 1,687 on 9.66 lakh shares, declining sharply from a high of Rs 1752. Reportedly, the government on Tuesday, June 5 2007, approved Reliance’s Haryana special economic zone, which would be spread over 10,000 hectares.

ONGC shed 3.3% to Rs 864. ONGC is negotiating with Norwegian company Norsk Hydro, a stake in exploration block in the Krishna-Godavari basin. Other decliners included NTPC and ITC which dipped over 2% each to Rs 156 and Rs 158, respectively. Cement shares were not spared. Gujarat Ambuja and ACC shed 1.7% to Rs 111 and Rs 822, respectively. Bharti Airtel slipped 1.5% to Rs 825.


[R]6:30AM European markets decline on Wednesday on rate concerns.[/R]

European markets declined on Wednesday. The German DAX Xetra 30 index lost 0.5% at 7,881.48, the U.K. FTSE 100 index slipped 0.5% at 6,601.50 and the French CAC-40 index traded 0.4% lower at 6,053.99. National benchmarks declined in all of the 15 western European markets that were open.

Economic news

ECB policy makers will raise the benchmark rate by a quarter-point to 4% today, the highest since August 2001.

Advancers

U.K. drug company GlaxoSmithKline rose 1.6% after it said that late Tuesday that the overall cardiovascular safety profile of its diabetes drug Avandia is sound. Another pharma company, Merck KgaA, also increased 0.2%, building on strong gains made Tuesday when speculation emerged that it would join the DAX 30 index. Anglo-Swedish drug company AstraZeneca rose 0.2% after an early decline.

Decliners

E.ON, the biggest utility in Germany, shed 0.8%, while Iberdrola SA, the second-biggest power company in Spain, slipped 1.6 %. Thales retreated 2.6%, as Societe Generale reduced its recommendation on the stock to sell from hold. Retailers were also weak with Marks & Spencer dropping 1.8%.

Commodities

Crude oil for July delivery rose 3 cents to $65.64 a barrel in after-hours electronic trading on the New York Mercantile Exchange. Brent crude oil for July settlement gained 8 cents to $70.53 a barrel on the ICE Futures exchange in London.

Gold for immediate delivery rose $1.30, or 0.2%, to $671.35 an ounce in London. Silver fell 2.5 cents to $13.74.

Currencies

The U.S. dollar was mixed against other major currencies in European trading Wednesday morning. The euro traded at $1.3521, down from $1.3522 late Tuesday. The British pound traded at $1.9908, down from $1.9920. The dollar bought 121.30 Japanese yen, down from 121.33.


[R]5:30AM NY-4:30PM Mumbai Sensex plunges in mid-afternoon trade on a sell-off in large-caps.[/R]

The Sensex on BSE is down 244 points at 14,291 in mid-afternoon trading.

The market-breadth is strongly negative as 1,694 have declined, 797 have advanced and 77 are unchanged.

Advancers

Hindalco up nearly 2% at Rs 149. Hindalco was cheered after Alcan Inc of Canada bought 76% of Alukbond India, an aluminium composite panel-maker, for less than $50 million., causing speculation that the Canadian company may put up an offer together with Sterlite Industries for Hindalco.

Decliners

Tata Motors and SBI have declined 3.7% each to Rs 684 and Rs 1,384, respectively. Tata Motors intends to reduce production of some trucks at its plant in Pune as higher interest rates, caused by soaring inflation, make transport companies and tour operators delay or drop purchase plans. Index heavy Reliance Industries and BHEL have dropped 3.5% each to Rs 1,685 and Rs 1,335, respectively. ICICI Bank, ONGC and Maruti have shed 3% each to Rs 910, Rs 867 and Rs 776, respectively.