Lonmin, Rio Tinto Boost Europe

Elena
13 Jun, 2007
New York City

European stock markets recovered from earlier weakness to close higher on Wednesday, boosted by strong opening on Wall Street and solid gains in the mining sector. Among mining stocks, shares in Lonmin climbed 4.8%, Vedanta Resources rose 3.5% and Rio Tinto gained 4.5%. The U.K. FTSE 100 advanced 0.6%, the French CAC-40 rose 0.6%, while the German DAX Xetra 30 finished virtually unchanged at 7680.76.

[R]1:00PM NY, 5:00 PM Frankfurt European markets gained ground, boosted by strong mining stocks.[/R]

European stock markets recovered from earlier weakness to close higher on Wednesday, boosted by strong opening on Wall Street and solid gains in the mining sector. U.S. markets rebounded after better-than-expected retail sales in May boosted optimism about the national economy and corporate profits. Among mining stocks, shares in Lonmin climbed 4.8%, Vedanta Resources rose 3.5% and Rio Tinto gained 4.5%.

Among other notable gainers, mortgage lender Alliance & Leicester rose 1.3% after it said its core operating profit for 2007 will come at the top end of analyst forecast range. Shares in Spanish clothing chain Inditex rose 1.5% after reporting a better-than-forecast Q1 profit.Also in the retail sector, shares of luxury fashion group Burberry rose 2.1% after it was upgraded to buy from neutral at Merrill Lynch. Shares in supermarket group J. Sainsbury rose 1.5% on speculation of stake buying.

The U.K. FTSE 100 advanced 0.6% at 6559.60, the French CAC-40 rose 0.6% at 5934.27, while the German DAX Xetra 30 finished virtually unchanged at 7680.76 as insurer Allianz and real estate company Hypo Real Estate weighed on the index, losing more than 1%.


[R]11:30AM U.S. market averages traded higher on optimism about corporate profits.[/R]

U.S. market averages continued to post gains, as easing rate concerns helped generate positive sentiment. Retreating bond yields fueled a rebound in rate-sensitive shares including banks, utilities and home builders. Among utilities, shares of Edison International ((EIX)) added 1%, while FirstEnergy ((FE)) gained 0.6%. Shares of chip makers reversed from yesterday''s losses, with Qualcomm ((QCOM)) leading advances on the Nasdaq with a 1.8%.

Shares of consumer-oriented issues big manufacturers also advanced after robust retail sales boosted optimism about the national economy and corporate profits. Altria Group ((MO)) added nearly 1%. Boeing ((BA)) was a leading gainer on the Dow, rising 1.7%. Caterpillar ((CAT)) added 0.4% after it increased its quarterly cash dividend 20% to 36 cents from 30 cents a share. Shares of Exxon Mobil ((XOM)) gained 0.4% as oil prices rose following data that showed a surprise drop in refinery utilization rates.

The Dow Jones industrial average was up 63.78 points, or 0.48%, at 13,358.79. The Standard & Poor''s 500 Index was up 8.17 points, or 0.55%, at 1,501.17. The Nasdaq Composite Index was up 11.14 points, or 0.44%, at 2,560.91. The yield on the benchmark 10-year Treasury note retreated to 5.23% after selling sent it to a five-year high above 5.33% in European trade.


[R]9:45AM U.S. stocks opened higher, boosted by strong retail sale. Bond yields retreated.[/R]

U.S. stocks recovered from earlier weakness to open higher on Wednesday. Market sentiment improved on optimism about profit growth after strong retail sales in May indicated strength in consumer spending.

The Commerce Department said that retail sales jumped 1.4% in May, the largest gain in over 16 months, beating expectations of a 0.7% increase. The dollar rallied, reaching a four-month high vs. the yen and an 11-week high against the euro after the retail sales data. In addition, bond yields retreated from five-year highs.

The blue-chip average was supported by gains in the shares of Alcoa ((AA)), up 1.8% and Boeing ((BA)), up 1.2%. However, Dow component Walt Disney ((DIS)) lost 0.7%after completing the sale of its ABC Radio unit to Citadel ((CDL)) for $1.35 billion.

On the deal news front, Goldman Sachs ((GS)) and Blackstone Group revealed that they are offering $11.4 billion for Biomet ((BMET)). The Dow Jones industrial average was up 55.82 points, or 0.42%, at 13,350.83. The Standard & Poor''s 500 Index was up 6.23 points, or 0.42%, at 1,499.23. The Nasdaq Composite Index was up 9.32 points, or 0.37%, at 2,559.09.

[R]Retail sales jumped 1.4% in May.[/R]

Wednesday morning, the Department of Commerce released its report on retail sales in the month of May, showing that sales rose much more than economists had expected following a modest decrease in the previous month. The report showed that retail sales surged up 1.4 percent in May following a revised 0.1 percent decrease in the previous month. Economists had expected sales to edge up 0.6 percent compared to the 0.2 percent decrease originally reported for April. The stronger than expected sales growth was partly due to a notable increase in sales by gas stations, which surged up 3.8 percent in May after rising 1.8 percent in April. An increase in gasoline prices contributed to the strong growth in sales by gas stations.

Strong sales growth by clothing and clothing accessories stores and building material and garden equipment dealers also contributed to the rebound in sales. The report also showed that sales by motor vehicle and parts dealers rebounded by 1.8 percent in May following a 0.5 percent decrease in April. Excluding sales by motor vehicle and parts dealers, retail sales rose 1.3 percent in May after a revised 0.1 percent increase in April.

Economists had expected ex-auto sales to rise 0.7 percent compared to the lack of growth originally reported for the previous month. The strong retail sales growth is an indication that consumers continue to spend money in spite of high energy prices. While this is a good sign for the economy, it may add to recent concerns about the outlook for interest rates.


[R]9:30AM London edges higher at mid-day Wednesday on miners, Royal & Sun Alliance.[/R]

At mid-day, the FTSE 100 canceled out early morning losses and was trading up 0.07% at 6,527, a gain of 6 points.

Advancers

Royal & Sun Alliance led the gainers, advancing 3.8%, on speculation that American Insurance Group could be mulling a bid for the insurer. Miners supported the index otherwise under pressure as the global bond sell-off accelerated. Antofagasta gained 3.3 % after the Chilean copper producer announced the price of copper had proven stable in the light of recent economic declines and would remain high well into next year.

Rio Tinto, Xstrata, and BHP Billiton, three of the large-caps in the sector, all advanced after they stepped up action on some Australian coal sales tracking a severe storm in southeastern Australian that flooded coal mines and disrupted ports. Rio Tinto rose 2.7%, Xstrata gained 2%, and BHP Billiton rose 1.2%.

Decliners

Three large-cap companies traded without further rights to their latest dividend payments. Johnson Matthey fell 2.54 %. Cable & Wireless fell 1.7% lower,. Kelda lost 2.4%. Wolseley, the world biggest distributor of building supplies, lost 1.9% after data showed a 2.5% drop overnight in the US homebuilders index.


[R]9:00AM U.S. stock futures indicated a lower market opening. Retail sales jumped 1.4% in May.[/R]

U.S. stock futures traded lower on Wednesday, following several weak sessions in a row and news that U.S. retail sales advanced 1.4% in May. This is the biggest gain in 16 months, coming in well above analyst expectations of a 0.7% increase. Consequently, the dollar continued its recent upward move, rising 0.7% vs. the yen.

In another economic report, the Labor Department reported that prices of imported goods rose 0.9% in May, as imported petroleum prices climbed 2.7%. In addition, bond yields on 10-year Treasurys jumped 5.315%, up from 5.25% on Tuesday.

In deal news, investors led by The Blackstone Group, Goldman Sachs, Kohlberg Kravis Roberts and TPG revealed their bid offer of $46 a share, or $11.4 billion, for medical devices maker Biomet. Walt Disney ((DIS)) completed the sale of ABC Radio to Citadel ((CDL)) for $1.35 billion. S&P 500 futures fell a half point at 1,507.00 and Nasdaq 100 futures fell 1.5 points at 1,916.50. Dow industrial futures were up 8 points.


[R]8:30AM Asian markets finish lower Wednesday with Japan, HK leading decliners.[/R]

Asian markets finished lower on Wednesday. The Nikkei 225 Average finished the day 0.2% lower at 17,733. Real-estate issues were hurt the most, like Mitsubishi Estate which dropped 1.7%. Real-estate companies are sensitive to interest rates. Hong Kong Hang Seng Index fell 0.3% to close at 20,579. Property stocks led the decline in Hong Kong. Wharf Holdings fell 1.4%, Sino Land shed 0.9% and Hang Lung Properties lost 0.8%. Swire Pacific slipped 0.5%, and New World Development fell 0.5%.

South Korean Kospi Index lost 0.5% to 1,722. Advances in brokerage sector bucked a general downward trend, as rising concerns over inflation and likely interest rate hikes in global economies sparked profit-taking. Seoul Securities closed 12% higher, while NH Investment & Securities advanced 9.6%. Brokerage firms could not helped the market to end higher, though. Daewoo Shipbuilding & Marine Engineering ended 3% lower. GS Engineering & Construction fell 4.2%, Samsung Electronics slipped 0.9% while Hyundai Motor lost 1%.

Shanghai Composite Index rallied 2.6% to end at 4,176, bucking the overall downtrend on a strong local currency which boosted property developers and financial companies. China Vanke rose 5.5% and China Merchants Property rallied 8%. Among financial firms, China Life gained 2.2% and China Merchants Bank ended 4.7% higher. Australian S&P/ASX 200 dipped 1% to 6,181. BHP Billiton declined 1.7% after copper on LME lost 2.5% and nickel fell 5.8%. Interest rate sensitive stocks also declined - ANZ Bank fell 1.2%.


[R]8:15AM Investor group offered $11.4 billion for Biomet.[/R]

Investors led by The Blackstone Group, Goldman Sachs, Kohlberg Kravis Roberts and TPG revealed their bid offer of $46 a share, or $11.4 billion, for medical devices maker Biomet ((BMET)).

LVB Acquisition LLC and LVB Acquisition Merger Sub announced on Wednesday that they started a tender offer to buyout the outstanding shares of the company, whose shareholders have shown reluctance to support the deal.

Following completion of the tender offer, LVB Acquisition will complete a second-step merger in which any remaining common shares of Biomet will be converted into the right to receive the same per share price paid in the offer. The offer and withdrawal rights will expire at 12:00 a.m., ET on July 11.


[R]7:30AM NY-6:30PM Mumbai Sensex loses 128 points Wednesday in lackluster session.[/R]

The Sensex on BSE finished Wednesday 127.92 points lower, or 0.91%, at 14,003.03.

The market-breadth was very weak. For 1,083 stocks which advanced, 1,372 declined and 85 were unchanged. Of the 30 stocks in the Sensex, only nine advanced, while the rest declined. The turnover on BSE was Rs 3,530 crore, lower than Rs 3,836 crore on Tuesday. On NSE, the turnover was Rs 8,096 crore, slightly lower than Rs 8,177 crore on Tuesday.

Economic news

The strike of the employees of state-owned airline Indian brought to a halt operations and wreaked havoc in airports across the country today. The workers paid no heed to the government’s threat of a lock-out, and were unfazed by warnings that the strike was illegal. The airline flies 300 flights a day and carries daily 30,000 passengers on its network of 40 cities. The domestic carrier Indian is expected to merger with flagship of India and international carrier Air India to compete in the rapidly changing marketplace. Indian, in the last two years, has seen its market share decline from 42% to 20%.

The rupee retreated against the U.S. dollar as buying from importers broke its rising streak. In early trade, the rupee stood at 40.855 per dollar, lower than the previous close of 40.747.

Trading highlights

New issue Time Technoplast was the most-active stock with a turnover of Rs 636.30 crore followed by Reliance and Nestle. Time Technoplast ended at Rs 480.35 on BSE, 53% over the IPO price of Rs 315.

Advancers

Dr.Reddy''s surged 2.7% to Rs 628 and was the best performing stock in the Sensex. The stock rallied after Credit Suisse increased its rating to outperform from neutral. Satyam surged 1.7% to Rs 486. All other major IT stocks declined, though.

Tata Motors advanced 0.7% to Rs 646, Hindalco Industries advanced 0.6% to Rs 160 and Cipla edged 0.1% higher to Rs 208.

Decliners

SBI led the decliners, down 3.2% to Rs 1,289. The bank declined on worries of a possible interest rate hike by RBI in the wake of the strong industrial production data for April. Other banks also lost. ICICI Bank dipped almost 1% to Rs 910. The bank announced today it had moved forward documents to raise up to Rs 8,750 crore, or $2.1 billion, in India in a sale of shares as part of a programme to raise up to $5 billion both in India and the U.S.

Reliance Communications lost 2.5% at Rs 486 and Hindustan Unilever and Larsen & Toubro sank nearly 2% each to Rs 186 and Rs 1,871, respectively. Tata Steel eased from high of Rs 611 and was down 1.3% to Rs 595. Index heavy Reliance Industries slipped 1.5% to Rs 1,674.

Except for Satyam, all other major IT stocks declined. TCS was down 1% to Rs 1,202, Infosys lost 0.4% to Rs 1,980 and Wipro shed 1.6% to Rs 531. Cement stocks were also hit as Gujarat Ambuja dipped 1.3% to Rs 109 and ACC, which was leading the advancers yesterday, dropped around 1% to Rs 979.


[R]6:30AM European stocks decline on Wednesday on interest rate fears.[/R]

European markets declined on Wednesday. The U.K. FTSE 100 index slipped 0.1% at 6,513.10, the German DAX Xetra 30 index declined 0.5% at 7,643.90 and the French CAC-40 index lost 0.3% at 5,879.90. National benchmarks fell in all 17 western European Markets that were open.

Advancers

Alliance & Leicester gained 0.9% after it upgraded core operating profit for 2007 at the top end of the forecast range as it also named finance director David Bennett as its next CEO.

Spanish clothing chain Inditex gained 1.7% after its first-quarter net profit rose 33% to 200 million euros, with sales up 19% to 2.0 billion euros. Profit of 185 million euros had been expected from the owner of the Zara and Massimo Dutti clothing chains.

Decliners

Allianz, the largest insurer in the region, slid 0.8 percent and Deutsche Bank, the largest bank in Germany, fell 0.8 percent.

Utilities fell, being most sensitive to interest rate hikes. British Energy, whose nuclear reactors can produce about a fifth of the electricity in the U.K., slipped 1.3 percent. RWE AG, Germany second-largest utility, shed 1.1 percent.

Construction companies also suffered. Bouygues, the second-biggest construction company in the world, fell 2 percent. Skanska AB, No. 3 construction company in Europe, dropped 1.6 percent. Acciona SA, Spain fourth-biggest construction company, slid 3 percent.

Oil and gold

Crude oil traded little changed in New York on talks U.S. gasoline stockpiles advanced for a sixth straight week as refiners increased output. Oil for July delivery was down 19 cents at $65.16 a barrel in after-hours electronic trading on the New York Mercantile Exchange. Gasoline for July delivery was at $2.13 a gallon in New York after falling 0.8 percent to $2.135 yesterday. Brent crude oil for July settlement fell 21 cents to $68.58 a barrel on the London-based ICE Futures exchange in London.

Gold traded in London at $644.10, down from $648.60 late Tuesday. Silver opened in London at $12.98, down from $13.09.

Currencies

The U.S. dollar surged against other major currencies in European trading Wednesday morning. The euro traded at $1.3271, down from $1.3318 late Tuesday in New York. The British pound traded at $1.9693, down from $1.9727. The dollar fetched 122.32 Japanese yen, up from 121.82.


[R]5:30AM Copper loses more than 2% Tuesday, gold and silver sink on profit-booking.[/R]

On the New York Mercantile Exchange, copper shed 6.9 cents to end at $3.287 a pound. Chinese imports of copper fell 28 percent in May from April. China is the greatest source of demand in the metals futures and any waning in Chinese imports unnerves the market.

Precious metals prices also retreated. Gold for August delivery shed $5.90 an ounce to settle at $653.10 on the Nymex as the U.S. dollar gained against the euro and other world currencies. Gold is considered a hedge against inflation. July silver gave up 18.5 cents, settling at $13.09 an ounce.

After crude oil futures added more than 1$ a barrel on Monday, gold lost on Tuesday on profit-taking. Light, sweet crude for July delivery fell 62 cents to close at $65.35. Gasoline futures dropped 1.63 cents to end at $2.135 a gallon.

On the Chicago Board of Trade, wheat rallied, extending gains from Monday when it advanced 28 cents. July wheat rose 9 cents to settle at $5.65 a bushel on the CBOT. July corn lost 2.4 cents a bushel to close at $3.934, while soybeans finished down 3.4 cents at $8.264 a bushel.