FTSE Plunges on HBOS

Ivaylo
12 Jun, 2007
New York City

The UK market plunged into negative territory by midday on Tuesday, despite slower-than-expected inflation lifting some stocks. Banking stocks dipped on reports of a smaller mortgage market share at HBOS. Rolls Royce led advancers on news that it may become sole supplier of engines for Airbus A350. The FTSE 100 was trading down 0.3%, at mid-day.

[R]9:30AM FTSE 100 is down Tuesday on news about HBOS.[/R]

The FTSE 100 was trading down 22.5 points at 6,545, a decline of 0.3%, at mid-day.

Economic news

The Office for National Statistics reported its index of consumer prices advanced by 0.3% between April and May, leaving the annual inflation rate at 2.5%, down from 2.8% in the year to April. The improvement is on falling household energy bills.

Advancers

Rolls-Royce was the leading large-cap, adding 2.5%, in view of its participation in the International Paris Air Show and on talks that it could become a sole supplier of engines for the Airbus A350. Man Group upgraded the stock, raising its stance to buy from neutral Tamer inflation data boosted retailers like Persimmon, which added 2.4%.

Imperial Chemical Industries shares rose 1.8% on market speculation of a possible takeover bid from BASF of Germany. Johnson Matthey rose 2.2% after Merrill Lynch resumed coverage of the European chemicals sector with a buy rating for the company.

Decliners

HBOS hogged the limelight, announcing its share of the home loans market would decrease below 10% in the first half. The biggest mortgage lender in the UK added a customer retention programme introduced in 2006 had not produced expected effect. Shares in the company were trading down 4.9%.

Other banking stocks also fell in sympathy and also after the comment by the governor of Bank of England that lifting interest rates is still an option to be considered. Northern Rock lost 3.7%. Alliance & Leicester was down 2.2%. Bradford & Bingley lost 2.2%.

Centrica retreated from positive zone during the previous session on rumours of an imminent bid from Gazprom. The UK gas distributor lost 0.7% as investors booked profits.

[R]8:30AM Asian markets advance Tuesday with only Japan bucking the utrend.[/R]

Asian markets ended mostly higher. Japan bucked the uptrend and lost. The Nikkei 225 Average finished the day 0.4% lower at 17,761. Stocks were hurt by profit-taking in insurers like Mitsui Sumitomo Insurance and shipping stocks such as Nippon Yusen, with higher bond yields also weighing on the overall market. Mitsui Sumitomo Insurance ended 4.7% lower, while Mizuho Financial Group fell 0.4% on a rating downgrade by Credit Suisse. Among shipping companies, Nippon Yusen dipped 2% and Kawasaki Kisen Kaisha lost 4.6%.

Hong Kong Hang Seng Index edged up 0.1% to close at 20,636. An increase in large-cap China Mobile, up 2%, countered declines in property companies to lead the benchmark index slightly higher. The Shanghai Composite Index in China surged 1.9% to settle at 4,072. Electricity producers rallied Tuesday on expectations of growing power demand this summer. China Yangtze Power advanced 6%, Datang International Power Generation soared 10%, the daily limit, and Shenzhen Energy Investment closed 6.7% higher.

South Korean Kospi Index also rose 0.8% to 1,730. NH Investment rallied by the 15% daily limit. Kyobo Securities soared 10% after its largest shareholder Kyobo Life Insurance announced it intends to put the brokerage firm up for sale in the future. Shipbuilders advanced on higher freight charges and are likely to extend gains at least until the third quarter on robust order flow. Hyundai Heavy Industries added 3% and Samsung Heavy Industries rose 2.6%.

Australian S&P/ASX 200 gained 0.1% to 6,240. The market ended slightly higher, helped by BHP Billiton, but interest-rate worries weighed on financial stocks. BHP rose after global resource stocks surged over the weekend. Banks were mostly weaker, with Westpac down 0.8% and Commonwealth Bank of Australia 0.7% lower.

[R]7:30AM NY-6:30PM Mumbai Sensex edges higher on a late rally in cement stocks.[/R]

The Sensex finished on Tuesday 47.54 points higher, or 0.34%, at 14,130.95.

The market-breadth was very weak as there were two decliners for every advancer. For 823 stocks which advanced, 1,678 declined and 80 were unchanged. Of the 30 stocks in the Sensex, 13 advanced, while all the rest declined. The turnover on BSE was Rs 3,817 crore, slightly higher than Rs 3,524 crore on Monday. On NSE, the turnover was Rs 8,177 crore, also higher than Rs 7670 crore on Monday.

Economic news

Industrial production in India grew 13.6% annually in April 2007 compared with 9.9% growth in April 2006. Manufacturing output advanced 15.1% in April 2007 against 11% in April 2006. Industrial output growth of March 2007 has been revised upwards at 14.5%.

The Indian rupee advanced today again to 40.7600 per dollar, trading up from 40.79 on June 11 2007. The increase was mainly in connection with foreign fund inflow to buy in the IPO of DLF.

Trade highlights

Reliance was the most active stock with a turnover of Rs 176.65 crore followed by Nitin Fire and Reliance Communications.

Advancers

Cement stocks were leading the advancers today as Cement Manufacturers'' Association said sales rose 10.6% to 14.21 million tons in May 2007. ACC soared 5.6% to Rs 807. Grasim surged 2% to Rs 2,395, and Gujarat Ambuja was up nearly 1% at Rs 110. Mid-cap cement shares were also higher with Birla Corporation rising 3.5% to Rs 218, India Cements 4.6% higher to Rs 174 and Madras Cement up 1.2% to Rs 2,561.

Tata Steel rallied 4% to Rs 603. ICICI Bank advanced 2% to Rs 919 and HDFC and Hero Honda gained 1% each at Rs 1,781 and Rs 706. Larsen & Toubro rose 0.9% to Rs 1,906 as the company secured a contract from Oil & Natural Gas Corporation and Steel Authority of India. ONGC awarded a Rs 877-crore project for the NQ Re-construction Project in Mumbai high north fields.

Index heavy Reliance Industries advanced 1.9% to Rs 1,700. The company rallied as there are reports it is looking for buying a stake in refineries in the U.S. and the Middle East. Bucking the trend with IT stocks, Infosys rose 0.3% to Rs 1,985 after its ADR soared 3.90% to $51.66 overnight on Nasdaq.

Decliners

IT stocks were severy hurt after the recent surge in the rupee. Satyam plunged nearly 4% to Rs 478. Wipro was down 0.6% to Rs 539 and TCS lost 0.5% to Rs 1,215. other decliners included Dr.Reddy''s and Maruti which dipped around 2% each to Rs 611 and Rs 719, respectively.

Auto stocks declined on fears that the government may hike gasoline and diesel prices in mid-July, 2007. Tata Motors lost 1.6% to Rs 641, Maruti Udyog dipped 2% to Rs 719, Bajaj Auto lost 0.6% to Rs 2106, and Mahindra & Mahindra lost 3.1% to Rs 696. Reliance Communications and Cipla declined around 1.5% each to Rs 498 and Rs 208, respectively and NTPC lost 1.3% to Rs 153.

[R]6:30AM European markets recover after early losses Tuesday on broker comment.[/R]

European markets were higher in late morning trading on Tuesday. In Germany, Frankfurt Xetra Dax added 0.3% to 7,729.35, the CAC 40 in Paris was flat at 5,937.96 and London FTSE 100 climbed 0.2% to 6,580.6.

Advancers

TeliaSonera, the biggest telecoms operator in the Nordic region, gained 4.6% after announcing Anders Igel, president and chief executive, would sted down at the end of July. The company also said that it was searching for a replacement to lead it through a new phase centered on growth, restructuring and value enhancement.

Austrian steel producer VoestAlpine climbed 4.3% as the sector continued to benefit from merger talk. Major shareholders in the company were reported to have been buying shares in Boehler-Uddeholm to help VoestAlpine boost its 54.6% stake, although this was denied. Credit Suisse upgraded its price target.

Lagardere, the French media group, gained 3.7% after Exane BNP hiked its recommendation on the stock from neutral to outperform.

Decliners

Banks weighed on the market after HBOS issued a warning that its share of the UK mortgage market were declining. The company fell 4.5%, while rival Northern Rock lost 3 % and Commerzbank of Germany dipped 1.6%.

Commodities

Crude oil for July delivery was at $66.06 barrel, up 9 cents, in after-hours trading on the New York Mercantile Exchange. Brent crude oil for July settlement shed 2 cents to $69.54 on the London-based ICE Futures exchange.

Gold traded in London at $652.80, up from $650.30 on Monday. Silver opened in London at $13.17, up from $13.11.

Currencies

The U.S. dollar was mostly higher against other major currencies in European trading Tuesday morning. The euro traded at $1.3347, down from $1.3359 late Monday in New York. The British pound traded at $1.9721, up from $1.9693. The dollar bought 121.78 Japanese yen, up from 121.77.

[R]5:30AM NY-4:30PM Mumbai Sensex is down in mid-afternoon Tuesday on interest rate fears.[/R]

The Sensex in BSE is 68 points lower at 14,015.

The market-breadth is very weak, as there are almost three decliners for every advancer. For 1,826 which have declined, 615 have advanced and 73 are unchanged.

Advancers

Cement shares were strong as ACC is the leading advancer, up 2% to Rs 780, while Gujarat Ambuja Cements gained 0.7% to Rs 109 and Madras Cement was up 1% to Rs 2,555. Cement shares advanced after the Cement Manufacturers Association reported sales gained 10.6% in the period up to May, 2007.

Index heavy Reliance Industries edged 0.35% higher to Rs 1,674. Larsen & Toubro gained 0.5% to Rs 1,900 on securing orders from Oil & Natural Gas Corporation and Steel Authority of India.

Decliners

IT stocks plunged as the rupee advanced against the dollar. Satyam has plunged over 4% to Rs 476. Wipro was down 1.5% to Rs 535 and TCS shed 0.9% to Rs 1,210. Reliance Communications has dipped nearly 3% to Rs 491, and Hindalco has shed 2.6% to Rs 157.

HDFC Bank, SBI and Maruti have lost around 2% each to Rs 1,078, Rs 1,314 and Rs 720, respectively.