Housing Report Limits NY Gain; Gold, Oil Rise

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

In New York, averages rose in cautious trading on weak housing starts. May starts fell 2.1%, hurting builder stocks, dollar and copper in commodities trading. Home Depot agreed to sell its division to private equity group for $10.3 billion and said that it plans to spend $22.5 billion to purchase its stock. Expedia rose 14%, company announced to buyback 42% of its stock. Tesco in London fell 5% on slower growth. India gained 1.5% on $8 billion of IPO. Korea and Shanghai close at record level.

[R]5:00PM NY, 11:00 PM Frankfurt, 2:30AM Mumbai – Global Markets[/R]

Yields edged lower on 10-year U.S. bonds and closed at 5.08% and 30-year bond rose to close at 5.20%.

Crude oil gained 1 cent to close at $69.10 per barrel, natural gas down 17 cent to close at $7.52 per mBtu, and gasoline futures fell 2.97 cents to close at 223.46 cents per gallon.

Gold gained $4.80 to close at $664.70 per ounce, silver gained 9 cents to close at $13.325 per ounce, and copper futures gained $39 to close at $7,593 per metric ton.


Latin American Markets closed mixed with Argentina and Chile rising but Mexico and Brazil closing lower. Chile led the region with a gain of 1.4% followed by a rise of 1% in Argentina but Mexico lost 0.5% and Brazil declined 0.2%. Argentina reported industrial production rose 6.4% in May from a year ago.

In Sao Paulo trading, Petrobras gained nearly 0.6% despite the possibility of workers strike in the first week in July. Workers are seeking better wage conditions and speedier promotion. The company is expected to produce at least 2 million barrels per day and likely to double its production by the year 2015. Cosan Industria, largest processor of sugarcane in the world, reported fourth quarter profit of $86.5 million from a loss a year ago on revenue decline of 8%. Investors continue to pour money in Brazil stock market on strong economic fundamentals. Embraer ((ERJ)) fell 1%, a day ago the company reported that it has won order for 30 jets from Lufthansa and 10 jets from Japan Airlines. Bradesco and Itau fell in trading.

In Mexico City trading, the index fell 0.5% as bond yields fell. Government raised 5.1 billion peso on the sale of 10 year bonds at a yield of 7.56%, lower than 7.7% in an auction one month ago. American Movil ((AMX)), Grupo Televisa and Cemex ((CX)) fell but Femsa, Wal-Mart de Mexico gained in local trading.

European Markets closed lower on higher oil prices, fall in German investors’ confidence and decline in retail sales growth at UK grocery chain. Oil prices at a nine-month high, and weak bond yields in the region closed eight of the top ten markets in the region lower.

U.K. market with a loss of 0.8% led the region followed by 0.7% decline in Spain and fall of 0.45% in Switzerland. Italy bucked the trend in the region with a gain of 0.2%.

In London trading, Tesco fell 4.9% on reporting sales growth of 4.7% for the thirteen weeks ending May 26th. The stock suffered its worst one-day decline in the last four years and the company blamed its slower growth in rising energy cots and interest rates. The news dragged Marks & Spencer by 2.6%, William Morrison dropped 1.3%, and J. Sainsbury lost 0.4%. Recent acquisition at Debtmatters Group lifted profit threefold, on the news stock surged 12%. HMV Group jumped 2.4% on takeover rumors. Strategic Thought Group fell 30% on the news that the company CEO has resigned and it is likely to miss earnings estimates.

In trading in Paris, CAC 40 fell 0.3% on the worries that economic slowdown may lower earnings. Carrefour, largest European retailer, fell 1.4% in sympathy with a decline at U.K. retailer Tesco. AirFrance-KLM lost 2.2% on the news that Ryan Air will lower prices to rock bottom on 3 million seats this summer. Arerva SA, nuclear reactor maker, gained 1.2% on the news that the company has received $1.4 billion contract from South Korea. Thales, largest European defense company, rose 2% on the company qualifying to win a contract of $2.7 billion radio handset order for the U.S. Navy. Thales and Harris are short-listed for the contract but final selection is not released yet. Vivendi gained 0.8% on Goldman Sachs upgrade citing margin improvement.

In Frankfurt trading, DAX index dropped less than 0.1% on a sudden change in survey of investor sentiment in June. The ZEW Center for Economic Research said that the index fell to 20.3 from 24, a survey of investors and analyst expectations. ThyssenKrup fell 0.7% on the news. Air Berlin fell 2.8% on the news that the company offices were searched for evidence related to insider trading during takeover of DBA. Allianz rose 0.6% on target price upgrade by HSBC to 209 euros from 183 euros. Henkel, detergent maker, rose 1% on the target price revision of 10% to 44 euros from WestLB AG.

Asian Markets closed higher in the region led by a sharp rise in India on the optimism related $8 billion worth of IPOs. India led the region with a rise of 1.5% followed by a gain of 0.9% in Shanghai, 0.7% in Indonesia, 0.4 advance in Malaysia and Australia, increase of 0.1% in Korea and Japan edged up 1%. Philippines, Thailand and Pakistan closed lower.

Hong Kong and Taiwan markets were closed on account of holiday.

In South Korea engineering, and shipping stocks led the market index to a record high but brokerage stocks fell on comments from financial regulators. Daelim Industrial surged 9%, followed by 4.3% surge in Daewoo Engineering and Hyundai Engineering. Daewoo Securities dropped 5% and Hyundai Securities lost 4%.

Trading in India reflected enthusiasm related to three large IPOs. The Sensex Index gained 1.5% on the firm orders for ICICI Bank and Sterlite IPOs. Bank stocks rose in sympathy with the ICICI offering. Sterlite raied $1.75 billion through ADR listing in New York and ICICI Bank was able to sell half the $4.3 billion to domestic investors in less than 20 minutes and the other half is scheduled to sold to American investors this evening.

In Shanghai trading, stocks continued to gain ground for the ninth trading session in a row. Real estate stocks led a rise in index but several bank stocks came under pressure after a loan crackdown announced by China. China Merchants Property gained 4.6% on the top of 8% gain last week, China Vanke rose another 4.2% after adding 6% in Friday’s trading. China will remove 553 items from export rebates and lower rebates issued to 2,268 items. The auto tire manufacturers are likely to be hurt the most. Shanghai Tyre & Rubber Company fell 2% on the news. Rebates will be reduced to several grades of steel, toys, textiles and toys items.

In Tokyo trading, main index closed up 0.1% as the yen rebounded against euro. Cadbury agreed to purchase Sansei Foods Co. by offering 66% premium (or 2,750 yen) to its trading price at close of Monday and the stock rose daily limit of 18%. Rising oil prices and fall in shipping rates prompted a sell-off in shipping companies. Broker recommendations lifted Daiichi Sankyo by 4.4% and Nikon Corp by 3%.

In Sydney trading, rising oil price in the region lifted oil gas companies. Woodside, BHP and Santos Limited jumped more than 2%. Sigma Pharmaceuticals Ltd offered A$1.1 billion for vitamin and pharmacy business of Symbion Health, higher than a competing bid of $1.05 billion from Ironbridge Capital and Archer Capital. Dry weather in the West prompted the government to cut its wheat production target by 10% to 22.5 million tons.

[R]1:00PM NY, 5:00 PM Frankfurt European markets finished lower, dragged down by retail and airlines stocks.[/R]

European stock markets finished in the red on Tuesday, led by weakness in retail and airlines stocks. Retailers were the worst performers, as British supermarket giant Tesco reported weaker sales. Tesco''s shares dropped 4.9%. U.K. rivals J Sainsbury and William Morrison also moved to the downside, while France''s Carrefour lost 1.5%.

Rising oil prices, trading over $69 a barrel, had a negative impact on the transport sector. Airlines Ryanair, EasyJet and British Airways dropped more than 2% each. Air Berlin shares fell 2.8%.

Among individual stocks, shares of Bayer added 1.1% after the German chemicals and pharmaceutical giant lifted its earnings forecast for 2007 and 2009. Thales rose 2.2% after the U.S. Navy awarded Thales Communications Inc. a $3.5 billion contract to provide supplies of handheld radios.


[R]11:30AM U.S. market averages traded in a lackluster fashion.[/R]

U.S. stocks turned in a lackluster performance, reflecting mixed housing data showing that May home construction fell roughly in line with estimates, while building permits rose more than expected. Quarterly earnings decline posted by electronics retailer Best Buy ((BBY)) weighed on the sentiment, raising concerns about consumer spending. In other earnings news, Carnival ((CCL)) added 1% after the world''s largest cruise group posted a 3% profit increase in Q2.

Expedia ((EXPE)), online travel site operator, surged 16% after the company said it will repurchase up to 42% of its common stock for $3.5 billion. The company is considering repurchase of as many as 116.7 million shares for at least $27.50. In other corporate news, Home Depot ((HD)) agreed to sell its supply division to three private equity firms in a deal worth approximately $10 billion.

By sector, internet and airline shares led advancers, followed by semiconductors and broker/dealers. Network Appliance ((NTAP)) climbed 4.6%, Iomega ((IOM)) rose 2.9% and Seagate Technology ((STX)) gained 3%. Tech stocks were pressured by Yahoo ((YHOO)), falling 1.5%. Health insurance and retail showed modest weakness.

In late morning trading, the Dow Jones industrial average rose 0.74, or 0.01%, to 13,613.72. The Standard & Poor''s 500 index fell 1.25, or 0.08%, to 1,529.80, and the Nasdaq composite index fell 6.96, or 0.26%, to 2,619.64. Bonds rose, with the yield on the benchmark 10-year Treasury note slipping to 5.12% from 5.15%late Monday.


[R]Housing starts declined 2.1% in May.[/R]
Tuesday morning, the Department of Commerce released its closely watched report on housing starts and building permits in the month of May. The report showed that housing starts fell, while building permits increased. The report said that housing starts fell 2.1 percent to an annual rate of 1.474 million units in May from a revised rate of 1.506 million units in April. With the decrease, housing starts were 24.2 percent below the revised May 2006 rate of 1.944 million units. Economists had expected starts to fall to a 1.475 million unit rate from the 1.528 million unit rate originally reported for the previous month. The decrease in housing starts was largely due to a steep drop in starts in the West, which fell 19.7 percent in May.

Housing starts in the South edged down 1.6 percent, while starts in the Northeast and Midwest both rose more than 15 percent. At the same time, the Commerce Department said that building permits rose 3.0 percent to an annual rate of 1.501 million units from the April rate of 1.457 million units. With the increase, permits came in above economist estimates of a 1.470 million unit rate. Despite the increase, building permits remain 21.7 percent below the revised May 2006 estimate of 1.918 million units. The report also showed that privately-owned housing completions fell 0.5 percent to an annual rate of 1.534 million in May from the revised April estimate of 1.542 million.


[R]9:45AM U.S. stocks opened lower, despite a smaller-than-expected drop in home construction.[/R]

Wall Street opened below the flat line after data showing a smaller-than-expected drop in home construction failed to offset disappointing earnings from Best Buy, as well as concerns about rising crude oil prices. Electronics chain Best Buy ((BBY)) fell 4.6% after reporting Q1 earnings decline.

In corporate news, Blackstone Group is expected to price its long-awaited IPO on Thursday. The private equity fund plans to sell investors a 12.3% equity stake in its management business for about $4 billion, with shares expected to price from $29 to $31. In other corporate news, Yahoo ((YHOO)) fell 1% after Chairman Terry Semel resigned as CEO.

In midmorning trading, the Dow Jones industrial average fell 19.42, or 0.14%, to 13,593.56. The Standard & Poor''s 500 index fell 3.71, or 0.24%, to 1,527.34, and the Nasdaq composite index fell 11.77, or 0.45%, to 2,614.83. Bonds rose, with the yield on the benchmark 10-year Treasury note slipping to 5.13% from 5.15% late Monday.


[R]9:30AM London dips on weakness in Tesco, Vodafone.[/R]

In London, the benchmark index, FTSE 100, lost 0.4% to 6696.9.

Advancers

Capita led the advancers, up 2.4% after Citigroup upgraded its rating to buy, on a deal with Resolution that boosts Capita strong gains in the insurance outsourcing market.

The price of oil retreated slightly but was still trading around $72 on Tuesday on worries about supplies from Nigeria. The surging price of oil sent shares of BP 1.1% higher.

Strong guidance for metals prices from Man Securities supported miners. Lonmin rose 0.7% and Rio Tinto was 0.6% stronger, helped by Credit Suisse hiking its price target on the stock.

Decliners

Tesco, the biggest retailer in the UK, lost 3.3% after it posted Q1 same-store sales growth of 4.7%, which is lower than the previous quarter. The company warned it would be a tougher year in more subdued markets, as consumer spending is limited by rising interest rates. Other retailer also dipped. Marks & Spencer slid 1.9% and J Sainsbury was trading down 0.8%.

Vodafone lost 1.7%. The decline was brought about by a report, which quoted AT&T CEO Randall Stephenson stating that AT&T was not interested in coming out with a bid for Vodafone.


[R]9:00AM U.S. stock futures pointed lower, despite positive housing data. Best Buy earnings weighed.[/R]

U.S. stock futures recovered from earlier weakness following a report that showed a slightly smaller-than-expected drop in the pace of May home construction. The Commerce Department said that housing starts fell by 2.1% to a seasonally adjusted annual pace of 1.47 million in May, as building permits for new construction rose 3%.

However, disappointing quarterly results reported by Best Buy ((BBY)) prevented stock futures from getting into the positive territory. The electronic retailer said its Q1 earnings dropped 39 cents a share from 47 cents a share a year earlier, missing expectations of 49 cents a share. The stock slipped over 4%.

Among other pre-market highlights, Yahoo ((YHOO)) advanced 4% after the Internet search giant named co-founder Jerry Yang as CEO, replacing Terry Semel. Epix ((EPIX)) was a notable gainer in pre-market trading, with shares jumping 16% after the FDA declined to approve the company''s experimental blood-pool imaging agent but indicated it may not need further clinical trials to be conducted.

Cruise operator Carnival ((CCL)) is one of the very few companies of importance, scheduled to release earnings reports. Bayer ((BAY)) lifted its earnings outlook for 2007 and 2009. S&P 500 futures were down 2.80 points, but above fair value. Dow Jones industrial average futures were down 25 points while Nasdaq 100 futures were down 6.50.


[R]8:30AM Asian markets gain on Tuesday with Japan and South Korea leading the region higher.[/R]

Asian markets ended higher. The Nikkei 225 Average closed 0.1% higher at 18,164. Kawasaki Heavy gained 1.6% after announcing it is likely to join a project, led by China Ocean Shipping, to build a shipyard in China. Oji Paper advanced 1.5% and Tokushu Tokai added 1.9% after the companies stated they will form an alliance.

South Korean Kospi Index added 0.1% to 1,807.85. Construction stocks and shipbuilders rallied on their second-quarter results. Daelim Industrial soared 9.2% and Daewoo Engineering & Construction gained 4.3%.

In China, the benchmark, Shanghai Composite Index, added 0.4% to close at 4,270. Property stocks gained on strong earnings expectations. China Vanke advanced 4.2% and China Merchants Property gained 4.6%. Shares of banks fell. Bank of China declined 0.2%, Bank of Communications lost 1.4% and China Citic Bank slipped 1.3%.

Australian S&P/ASX 200 rose 0.5% to 6,372. BHP Billiton advanced 0.7%, Rio Tinto added 1.2% and Woodside Petroleum rose 2%. Financials also performed strongly, with National Australia Bank gaining 0.5% and Westfield Holdings rising 1.7%.


[R]8:15AM Best Buy Q1 earnings dropped 18%.[/R]

Best Buy Co. ((BBY)) announced that its Q1 earnings declined 18%, due to weak results in China and increased sales of lower-margin products. The electronics retailer said its quarterly profit fell to $192 million, or 39 cents per share, from $234 million, or 47 cents per share a year ago. Revenue rose 14% to $7.93 billion, from $6.96 billion last year.

Quarterly results came in below earnings estimates of 49 cents a share, but topped revenue expectations of $7.85 billion. Revenue growth was driven by higher transaction size, as consumers bought higher-priced items. Same-store sales increased 3% during the quarter. Best Buy fell 5% in premarket treading.


[R]7:30AM NY-6:30PM Mumbai Sensex surges 215 points Tuesday, on banks, oil.[/R]

The Sensex on BSE finished Tuesday 215.36 points, or 1.53%, higher at 14,295.50.

The market-breadth was positive with 1,403 stocks gaining, 1,144 stocks declining and only 82 stocks were unchanged. Of the 30 stocks in the Sensex, 23 advanced, while the rest declined. The turnover on BSE was Rs 4,326 crore, compared with Rs 3,795 crore on Monday. On NSE, the turnover was Rs 8,350 crore, higher than Rs 7,064 crore on Monday.

Economic news

Copper and zinc producer Sterlite Industries raise over $1.75 billion of stock through the issue of American depository receipts at $13.44 apiece, the biggest by any Indian company. One ADR is equal to one local share.

A government official announced today that the Indian textile industry is targeted to reach $115 billion by the year 2012 and accelerate its growth rate to 16% from 9%.

Trading highlights

Time Technologies was the most-active stock with a turnover of Rs 180.41 crore followed by HTMT Global and Nitin Fire.

Advancers

Bank stocks were buoyed by the strong sale of ICICI Bank’ secondary offering. ICICI Bank made its record sale in 20 minutes. The simultaneous offering in New York and Mumbai is expected to raise $4.3 billion.

State Bank of India surged over 4% to Rs 1,372 and was the best performing stock listed among stocks listed in the Sensex index. SBI is set to raise $225 million from the overseas market this year by issuing perpetual bonds.

Other banks also followed suit. Bank of India was up 6.7% to Rs 204, Bank of Baroda gained 1.9% to Rs 265, and Kotak Mahindra Bank advanced 4.8% to Rs 589. Engineering & construction large-cap L&T advanced 3.6% to Rs 1996. The company won an order worth Rs 610 crore for a residential building project in Dubai.

Auto makers jumped on the announcement from the minister for petroleum and natural gas Murli Deora that the government does not intend to raise the price of petrol or petroleum products, auto makers extended their gains. Tata Motors gained 2.8% to Rs 663, Bajaj Auto rose 2.1% to Rs 2125, Maruti Udyog added 1.1% to Rs 752 and Hero Honda Motors gained around 2% to Rs 666.

Grasim, Reliance Communications, ONGC, and Gujarat Ambuja surged near 3% each to Rs 2,450, Rs 504, Rs 915, and Rs 113, respectively. Index heavy Reliance Industries advanced 3.3% to Rs 1,727.

Decliners

IT large-caps declined the most today, as the Indian rupee hit a one-week high against the dollar. Satyam slipped 1.8% to Rs 468, and Infosys declined 1.6% to Rs 1,957. Hindalco Industries also lost 0.3% to Rs 162.


[R]6:30 AM European markets edged higher on Bayer and oil companies.[/R]

European markets advanced on Tuesday morning. The U.K. FTSE 100 index rose 0.2% at 6,715.10, the German DAX Xetra 30 index increased 0.4% at 8,064.23 and the French CAC-40 index advanced 0.3% at 6,104.14.

Advancers

Oil and gas companies were strong as BP and Royal Dutch Shell gained more than 0.5% each while other commodity sector companies. Potential mining sector deals were back in the spotlight early Tuesday, with the resource sector in focus after reports that mining giant BHP Billiton planning a bid for Alcan of Canada. BHP Billiton added 0.7%.

Bayer also advanced with shares up 1.4% after the German pharmaceutical company, at its investor day presentation, upped its earnings forecast for 2007 and 2009. Bayer announced that the integration of Bayer Schering Pharma is proceeding more quickly than planned and its consumer health business has had a strong performance.

Vivendi rose 1.2% after Goldman Sachs upgraded the media and telecommunications conglomerate to buy from neutral.

Decliners

Retailers were weak. Tesco dropped 3%, the biggest decline since September 2005. The retailer announced first-quarter sales, excluding gasoline revenue, gained 4.7% in same-store sales. That is the slowest pace in a year and less than the median estimate of 5%.

Marks & Spencer also declined 1.3% in sympathy and Carrefour, the world second-largest retailer, dropped 2%. J Sainsbury, the U.K. third-largest supermarket chain, slid 0.7%.

Commodities

Crude oil declined from near a nine-month high in New York as investors speculated recent gains that followed unrest in Nigeria were unjustified. Crude oil for July delivery fell 35 cents, or 0.5%, to $68.74 a barrel in after-hours electronic trading on the New York Mercantile Exchange. Brent crude oil for August settlement fell 40 cents, or 0.6%, to $71.78 a barrel on the ICE Futures exchange.

Gold fell in London for the first time in five days as the dollar decline against the euro came to a stop, reducing demand for the metal as an alternative investment. Silver also declined. Gold for immediate delivery dropped $1.70, or 0.3%, to $654.65 an ounce. Silver fell 1 cent to $13.21 an ounce.

Currencies

The U.S. dollar was mixed against other major currencies in European trading Tuesday morning. The euro traded at $1.3389, down from $1.3411 late Monday in New York. The British pound traded at $1.9836, down from $1.9837. The dollar bought 123.66 Japanese yen, up from 123.61.


[R]5:30AM Gold and copper gain Monday on dollar weakness, Treasury yields.[/R]

Gold for August delivery advanced $1.40 to settle at $660.10 an ounce on the New York Mercantile Exchange. August silver, though, shed 2.4 cents to finish at $13.296 an ounce, declining after traders made profits from last week gains. Platinum for July advanced $12 to close at $1,299.50 an ounce after production was halted at a major mine in South Africa, a country where strike threats are also lifting prices.

On the Nymex, July copper futures gained 0.10 cent to end at $3.4220 a pound. Lead on the LME advanced 1% to a new record high, while zinc dipped 1.5%, nickel shed 4% and aluminum fell 1%.

Labor unions in Nigeria called for a general nationwide strike to protest a government price raise on automobile fuel. Mounting political tensions in the Middle East and tight gasoline supplies and refinery glitches in the United States also boosted energy prices. Crude oil futures for July delivery gained $1.09 to settle at $69.09 a barrel. July gasoline futures added 0.42 cent to settle at $2.2643.

Grain prices were mixed on the Chicago Board of Trade. July wheat futures slid 5.5 cents to close at $6.01 a bushel on the CBOT, still trading near levels unattained in over 10 years after heavy rains hurt the U.S. wheat crop. July corn shed 3 cents to close at $4.16 a bushel.