Bonds and Oil Drive Global Stocks Lower

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

In New York trading fall of aveerages accelerated in the last hours on rising bond yields and dragged brokers and banks. Worries related to sub-prime lending problems weakened trading sentiment. Oil retreated from its high, dragged energy stocks. European stocks closed up on takeover speculation. Germany closed at record high. Shanghai fell on three companies, including PetroChina, plan to sell $6 billion of stocks. Hong Kong closed at record for the third day in a row. Real fell in Brazil.

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

Yields edged increased on 10-year U.S. bonds and closed at 5.13% and 30-year bond rose to close at 5.234%.

Crude oil dropped 68 cent to close at $68.86 per barrel, natural gas down 13 cent to close at $7.39 per mBtu, and gasoline futures fell 0.65 cents to close at 222.81 cents per gallon.

Gold dropped $4.80 to close at $660.00 per ounce, silver lost 3.5 cents to close at $13.25 per ounce, and copper futures lost $121 to close at $7,472 per metric ton.


Latin American Markets closed sharply lower. Mexico led the region with a loss of 1.6% followed by a decline of 1.1% in Brazil, and 0.6% fall in Chile and Argentina. Rising bond yields in New York trading hurt the sentiment across the region. Real, Brazilian currency fell 1.8% from the peak but closed only 1.3% lower. Brazil with interest rate of 12% and inflation of 3.4% has one of the highest yielding debts in the world. Mexican 10 and 20 year bonds fell as well and dragging the peso 1% in trading.

In Sao Paulo trading, Tele Norte and Telemar Norte, two subsidiaries of fixed line operator Telemar declined. The parent Telemar Norte Participacoes has arranged a credit line of $6 billion to purchase preferred shares of its two units. The non-listed parent fixed line operator offered a deal ago that investors rejected as too low. Petrobras ((PBR)), Banco Bradesco ((BBD)) and Itau Holdings ((ITU)) fell in local trading.

In Mexico City trading, the IPC index fell 1.6% on rising yields in bond market and weak currency. Bond market sentiment drove stock trading. Homex, Femsa, Grupo Televisa, American Movil and Telemex fell between 1% and 2% in local and in New York trading. Coca Cola Femsa gained 1%.

European Markets closed higher across the region driven by merger talk and falling bonds. Except Italy and U.K. markets around the region closed higher. Germany closed up 0.7% and closed at record followed by 0.3% gain in France, the Netherlands and Norway. Italy fell 0.2% and U.K. dropped 0.01%.

In London trading, FTSE Index fell a fraction after spending most of the day in the positive territory. Vendanta Resources, largest copper and zinc miner in India, gained 3%, BHP Billiton jumped 1.5%, and Kazakhmys rose 1.3%. Copper futures rose 2% on the worries that strike in Peru and Chile may lower global supply. Tesco fell another 1.9% after dropping 5% in previous session dragging with it Marks & Spencer 2%. British Airways rose 1.1% on a rating upgrade from S&P on improving operating performance. DSG International fell 1.3% on the earnings report that reflected asset write -down in Italy and business closure cost in France. The company reported full-year profit of 5 million pounds compared to profit of 216 million pounds profit a year ago. The company also said that it is not likely to exercise an option to buy Russian chain Eldorado and spend 100 million pounds to buyback stocks. Cadbury Schweppes fell 1.7% on continued restructuring talks.

In trading in Paris, stocks looked at commodities trends. Rising copper and falling rubber price played a role in affecting trading sentiment. Michelin & Cie rose 1.4% on rubber retreating nearly 10% from its peak price a month ago. Total SA gained 0.5% on 6% rise in oil prices in a week of trading. Areva climbed 4.5% on the news that the company has applied for design approval to U.K. Atomic Energy Authority. U.K. is looking for ways to replace its old nuclear plants. Electricite De France gained 4% and ArcelorMittal jumped 1%. Mr. Mittal said in a conference that the company is looking to source 80% of its iron ore needs from its own mines in the next ten years.

In Frankfurt trading, DAX Index closed to a record high on a rise of 0.7%. Alliaz ((AZ)) rose 2.1% on the news report that the insurance giant is considering to sell stake in Dresdner Bank. Truck maker, MAN AG, gained 2% on the company stating that growth in Eastern Europe and Middle East is helping sales. Wall Street Journal reported that Lufthansa along with private equity firm Apax Partners are looking for ways to bid for Spanish carrier Iberia SA. Fresenius AG fell 3% on the news that Deutsche Bank and WestLB are planning to sell 3.56 million shares in the company. Pfeiffer Vacuum declined 0.9% on weaker performance in the second quarter than in the first quarter, according to company CEO.

Asian Markets closed higher in the region on falling bond yields and optimistic outlook on earnings. Most markets rose except indexes in Korea and Shanghai. Taiwan led the regional indexes with a gain of 2.2% followed by a rise of 1.75% in Thailand, 1.4% in Philippines, and 0.8% in India, Indonesia and Malaysia. Australia and Hong Kong rose 0.4% but Korea fell 1.3% and Shanghai dropped 2.2%.

In Hong Kong trading, a day after holiday, market raced to catch up with rising regional exchanges and closed at a record high for the third session in a row. A talk of offering of $5.6 billion from PetroChina kept investors at the table lifting its share by 5%. Cnooc, oil giant was up 2.5% on a rating upgrade from Credit Suisse.

In South Korea trading, stocks fell from the record high on falling engineering, shipping and brokerage stocks. After the Korean securities said that the government is n favor of more players in the brokerage sectors and may issue license to banks. Merger rumored brokerage stocks fell sharply as hopes of merger between Hyundai Securities and Daewoo Securities faded. Both stocks declined corrected 10%. Kookmin Bank ((KB)) rose 4% on the news. Korean steelmaker is scheduled to build a steel plant in Vietnam.

In Mumbai trading, banks and auto stocks rallied and led the index higher by 0.8%. State Bank of India reported that it plans to float bonds in international markets worth $225 million and Tata Motors plans to raise $450 million as well. Domestic tranche of ICICI secondary offering was sold in less than 20 minutes to investors in India and international tranche also attracted investment from investors around the world.

In Shanghai trading, stocks fell for the first time after gaining for nine sessions in a row. Talks of large offering from PetroChina ((PTR)), China Cosco and China Construction Bank sparked worries that liquidity may dry up after the offering. PetroChina plans to offer close to $5.5 billion worth of stocks in Shanghai and its stock gained 5.5% in New York and in Hong Kong trading. China Cosco sold $1.97 billion worth of stocks in an offering today and China Construction Bank is likely to raise at least $1 billion in coming months.

Chinese steel makers sold-off a day after China said that it plans to eliminate tax and rebates and other export incentives to the industry. Laiwu Steel declined 5%, Baoshan Iron and Steel dropped 2.2%, and Wuhan Iron fell 3%.

China Merchants Bank and China Vanke fell nearly 4% after surging more than 15% each in the last week of trading.

In Tokyo trading, Nikkei index gained 0.3% as bond yields fell and export sensitive large cap stocks rebounded. Mitsubishi Heavy Industries gained 4% on the news that the company will benefit from orders in Paris Air Show in the global aircraft industry. The most active stock in the first section on Tokyo Exchange, Mitsubishi Heavy was reported to be in talks with Boeing to market its first passenger jet aircraft. Komatsu gained 2.2%. Falling rubber futures prices helped Japanese tire makers. Sumitomo Rubber Industries jumped 6% and Bridgestone gained 2.2%. Sky Perfect JSAT, cable and Internet services provider surged 6% on the news that the company has agreed to provide hosting services to local video sharing services launched by a Google subsidiary.

In Sydney trading, main index gained 0.4% reflecting regional trend. Copper and oil prices gained in region on the worries of strikes in Chile and Peru. Revised and higher bid for vitamin and pharmacy business of Symbion Health, from Ironbridge Capital and Archer Capital was accepted by the company. The revised bid of A$1.085 included debt of the company. Banking stocks gains led the index to close at a record high. Macquarie Bank rose 2%, QBE Insurance gained 1%, National Australia Bank edged up 0.5%.


[R]1:00PM NY, 5:00 PM Frankfurt European markets finished higher, led by tech and insurance stocks.[/R]

European stock markets finished in the positive on Wednesday, with German stocks reaching a record high, boosted by strength among technology and insurance stocks. A strong opening on Wall Street also gave a boost.

The world's biggest mobile phone maker Nokia advanced 1.8% after it unveiled a new corporate structure. Nokia's supplier Bluetooth firm CSR surged 6.4% after it was upgraded to outperform from neutral by Credit Suisse. Chipmaker Infineon Technologies was another gainer in the tech sector, moving up 1.8%.

Among insurance stocks, Allianz rose 2.1% amid deal speculations. Zurich Financial added 1.8%. Losses in the retail sector helped limit gains, with DSG International and H&M moving notably lower. Swedish clothing chain H&M lost 1.5% after its Q2 pretax profit came in short of expectations. DSG International fell 0.6% after it said annual adjusted profit before tax dropped 5%.

The German DAX 30 advanced 0.7% at 8,090.49 to reach a new closing high. The French CAC-40 gained 0.4% to 6,093.29. The U.K. FTSE 100 edged lower to close at 6,649.30.


[R]11:30AM Market averages turned lackluster amid cautiousness about bond yields.[/R]

U.S. stock averages turned in a lackluster performance for the third straight session, due to a lack of significant economic data. Investors were also cautious about Treasury bond yields. The 10-year note's yield was at 5.11%, up from 5.09% late Tuesday. Some positive sentiment was generated by falling oil prices and Home Depot's $22.5 billion stock-repurchase program. Crude oil prices retreated after the Energy Department reported U.S. crude and gasoline inventories rose last week.

Home Depot ((HD)) led blue chips higher with an advance of nearly 7%. Among earnings-related movers, FedEx ((FDX)) said its Q4 profit rose 7%, helped by an 8% increase in revenue and higher package volumes. Company's stock rose 3.1%. Shares of CarMax ((KMX)) surged 11% after the used car retailer reported Q1 earnings that came in line with analyst estimates and confirmed its full year guidance. Circuit City ((CC)) traded up 0.6%, although the retailer reported quarterly loss.

By sector, airlines, telecoms and broker/dealers stocks posted strength. Brokers were supported by 2% in the shares of investment bank Morgan Stanley ((MS)) on the back of 40% earnings rise. Among airline stocks, Continental ((CAL)) rose 3.3%, AMR ((AMR)) advanced 3.2%, and US Airways ((LCC)) gained 2.8%. At the same time, oil, real estate investment trusts and utilities declined.

In late morning trading, the Dow Jones industrial average rose 24.87, or 0.18%, to 13,660.29. The Standard & Poor's 500 index gained 1.20, or 0.08%, at 1,534.90. The Nasdaq composite index advanced 4.20, or 0.16%, to 2,630.96.


[R]9:45AM Wall Street opened higher, lifted by Morgan Stanley and Home Depot.[/R]

Wall Street opened higher, lifted by falling bond yields, better-than-forecast profit at Morgan Stanley and a $22.5 billion buyback at Home Depot. Shares of Morgan Stanley ((MS)), No. 2 U.S. investment bank, rose 2% on 40% profit rise. Blue-chip stocks were led higher by Home Depot ((HD)) whose shares surged nearly 7%.

Among other earnings-related movers, Circuit City ((CC)) shares declined after the electronics retailer posted Q1 loss of 33 cents per share, compared with a profit of 4 cents a share last year, missing estimates of a loss of 32 cents per share. Revenue fell 4% to $2.49 billion, as more customers purchased low-margin products.

Further in earnings news, CarMax ((KMX)) surged 9.4% after the retailer said its Q1net income rose 15% to $65.4 million, or 30 cents a share, from $56.8 million, or 27 cents a share a year ago, meeting analyst estimates. CarMax reaffirmed 2008 earnings forecast of $1.03-$1.14 a share.

FedEx ((FDX)) rose 2% after the company reported a 7% quarterly profit rise. The company also settled an issue with Airbus over a cancelled order for the A380 superjumbo. In corporate news, MGM Mirage ((MGM)) dropped 10% after Kirk Kerkorian's Tracinda said it is ending negotiations on the potential purchase of MGM Mirage's properties. The Dow Jones Industrial Average was down 14 points at 13,619The S&P 500 index fell 2.98 points to 1,530, while the Nasdaq Composite fell 4.9 points to 2,621.


[R]9:30AM The FTSE 100 advances in mid-day trading on strong mining stocks.[/R]

By mid-day, the FTSE 100 rose 0.6% to 6,689, a gain of 38.8 points.

Advancers

Goldman Sachs upped their share price targets on the six biggest miners, citing metals prices would continue to increase through 2008. The brokerage thinks platinum prices will strike top levels through 2009. South Africa-focused platinum miner Lonmin rose 2.9% and Vedanta Resources gained 3.8%. Anglo American rose 1.9%, while Xstrata, whose stock Goldman also upgraded to buy from hold, added 1.5%.

J Sainsbury advanced 0.9% after the supermarket group came out with results that showed lower-than-expected sales growth of 5.1% for its first quarter. Also, talk that French bank Société Générale was mulling a bid for Lloyds TSB saw shares in the British bank rise 1.6%.

Decliners

Cadbury Schweppes led decliners, losing 2.6% a day after the confectionary group intends to implement a drastic reorganisation plan involving 7,500 job cuts, factory closures, and the sale of its beverage businesses.

Electronics retailer DSG International declined 1.1% after it reported a 5% decline in full-year profits to 295.1 million pounds. The stock also dropped on DSG decision not to enter the Russian market after a review of how other retailers had performed there.

Asia-focused bank Standard Chartered declined 1 % despite it announcing it was performing very strongly in the year to date and was about to meet full-year profit growth of 17 %.


[R]9:00AM U.S. stock futures advanced on better than expected earnings from Morgan Stanley and $22.5 billion buyback at Home Depot.[/R]

U.S. stocks advanced in pre-open trading on Wednesday, boosted by higher-than-expected earnings from Morgan Stanley and lower bond yields. The bond market has continued its recovery, with the benchmark 10-year Treasury bond was down 5/32 to 95 11/32, yielding 5.103%.

Morgan Stanley ((MS)) advanced 2.2% after posting 40% earnings increase, beating analyst estimates. Positive sentiment was also generated by a $22.5 billion share buy-back from Home Depot ((HD)). The Dow component shares jumped 6.2% in the pre-open.

Among other pre-market highlights, Circuit City ((CC)) dropped 2.6% in the pre-open after the electronics retailer posted Q1 loss of $54.6 million, or 33 cents per share, compared with a profit of $6.4 million, or 4 cents a share. Revenue fell 4% to $2.49 billion from $2.6 billion a year ago, as more customers purchased low-margin products. Analysts had expected a loss of 32 cents per share on revenue of $2.44 billion.

Shares of FedEx Corp. ((FDX)) moved slightly higher after it reported a 7% quarterly profit increase. Futures for the Dow Jones Industrial Average were up 55 at 13,810, while those for the S&P 500 index rose 4.70 points to 1,553.


[R]8:30AM Asian markets finished mixed Wednesday with Japan up, China down.[/R]

Asian markets finished mixed Wednesday. The Nikkei 225 Stock Average rose 0.3 percent to 18,211.68 in Japan. Mitsubishi Heavy Industries settled up 3.8% on a report it signed a partnership agreement under which Boeing will support the first passenger jet in Japan. Nissan Motor was up 0.8%, and Sharp finished 0.4% higher.

In Hong Kong, strong gains in Chinese oil producers buoyed the benchmark index to another closing record for the third consecutive session. The benchmark Hang Seng index advanced 0.47% to 21684.67. Offshore oil producer Cnooc surged 2.7% after a ratings upgrade by Credit Suisse, and PetroChina soared 5.2% after unveiling plans to list shares in Shanghai.

In China, the market closed lower on worries that new share offerings will lead to a supply glut, after oil company PetroChina announced it plans a Shanghai listing. The Shanghai Composite Index lost 2.42% to 439.18. Steel makers declined after China announced late Tuesday it will reduce or abolish tax rebates on export of metal and steel products from July 1. Baoshan Iron & Steel shed 2.2%, Wuhan Iron & Steel lost 2.7% and Laiwu Steel tumbled 5.2%.

In South Korea, the Kospi index fell 1.33% to 1783.79 on weakness in brokerage stocks. Hyundai Securities fell 13.5% and Daewoo Securities declined 9.8% as merger and acquisition premiums built into the stock prices subsided.

In Australia, the market closed at a record high as speculation continued that the Future Fund of the government was buying large amounts of share price index futures. Most of the strength was seen in financials, with National Australia Bank up 0.5%, QBE Insurance up 1.1% and Macquarie Bank up 1.8%. Among resource stocks, BHP Billiton dipped 1.1% and Rio Tinto shed 0.7% after London Metal Exchange prices declined overnight.


[R]8:15AM Morgan Stanley reported 40% earnings increase in Q2.[/R]

Morgan Stanley ((MS)) announced that its Q2 net income rose 40% to $2.58 billion, or $2.45 a share, from $1.84 billion, or $1.75 a share a year ago. Company’s revenue increased 32% from the previous year to $11.5 billion. Quarterly results exceeded expectations of net income of $2.01 a share on revenue of $10.03 billion. The No. 2 U.S. investment bank attributed the earnings rise to fees from advising clients on acquisitions and stock trading. The stock jumped 1.7% in pre-market trading.


[R]7:30AM NY-6:30PM Mumbai Sensex spurts 116 points in a broad rally, led by banks and auto stocks.[/R]

The Sensex on BSE finished 116.45 points, or 0.81%, higher at 14,411.95.

The market-breadth was very strong as 1,446 stocks advanced, while 1,103 declined and 87 were unchanged. Of the 30 stocks in the Sensex, 23 advanced, while only seven declined. The turnover on BSE was Rs 5,049 crore, much higher than Rs 4,607 crore on Tuesday. On NSE, the turnover was Rs 9,977 crore, compared to Rs 8,350 crore on Tuesday.

Economic news

The rupee retreated Wednesday as an oil refiner bought dollars, but expectations of foreign investment flows into a $2.1 billion domestic share sale by ICICI Bank diminished losses. In morning trading, the rupee was at 40.83 per dollar, down from 40.79 on Tuesday.

India will approach the World Bank to take out a loan to develop an e-governance project to process all government purchases.

The petroleum ministry intends to offer additional 80 oil and gas blocks in the seventh round of auction under the New Exploration Licensing Policy, in mid-August. In February, under NELP-VI, the ministry gave 52 blocks of which 21 deep-water blocks to Oil and Natural Gas Corporation.

Trading highlights

Divi's Lab was the most-active stock with a turnover of Rs 165 crore followed by Reliance Capital and Educomp Solutions.

Advancers

Cement major Gujarat Ambuja Cements advanced 4.6% to Rs 118, led the gainers. Other cement stocks gained as cement shortage is expected to last for the next two years. ACC was up 0.8% to Rs 850 and Grasim advanced 3.1% to Rs 2,513.

State Bank of India rallied nearly 4% to Rs 1,425 on the news that the bank plans to sell $225 million abroad in perpetual bonds. HDFC gained 2% to Rs 1,812. ICICI Bank added 0.4%, to Rs 948 after the reports that the Singapore government intends to buy about 40% of ICICI record share sale.

Autos were in focus. Tata Motors rallied 3.5% to Rs 686. Tata Motors intends to raise $450 million overseas by selling shares to meet the capital and product development expenditure in view of its growth projects. Maruti advanced nearly 3% to Rs 773, and Bajaj Auto added 2% to Rs 2,162.

BHEL and Larsen & Toubro ended up around 1.7% each to Rs 1,430 and Rs 2,028, respectively. Index heavy Reliance Industries gained 0.3% to Rs 1,732. IT stocks ended mixed with Wipro 0.5% to Rs 524 higher and Satyam Computers, up 0.7% to Rs 472.

Decliners

Ranbaxy plunged 2% to Rs 352, and led the few decliners. TCS dropped 1.3% to Rs 1,146. Hindustan Lever lost 0.3% to Rs 189 and Infosys dipped 0.1% to Rs 1,954.


[R]6:30AM European market gain Wednesday on strength in banking stocks, insurers.[/R]

European markets advanced on Wednesday morning. The German DAX index rose 0.9% to 8,100,66 after striking a seven-year high of 8,104.39 early in the session, while the French CAC-40 index advanced 0.5% to 6,099.46. The U.K. FTSE 100 index climbed 0.5% to 6,682.50. National benchmarks advanced in all of the 17 western European markets that were open.

Advancers

Car maker Renault gained %, while Allianz of Germany advanced 2.6%. HSBC gained 1.1 %. Lower bond yields increase the value of debt owned by insurers and banks. Clariant, the world's second-largest maker of specialty chemicals, climbed 2.2%
Misys, a U.K. provider of software for banks and hospitals, rose 3% after the company reported fiscal 2007 earnings and margins topping estimates..

Decliners

Swedish clothing chain H&M slipped 4% after it reported that second-quarter sales and profits just missed expectations. Still, the shares have been trading strongly in the past few years and touched a 10- year high in April.

DSG International, the operator of electronics retailers under the PC World and Currys names, announced annual adjusted profit before tax dropped 5% to 295.1 million pounds, in line with estimates the company gave in May, while sales rose 14% to 7.93 billion pounds.

Commodities

Oil prices declined Wednesday on caution that a U.S. fuel supplies report due later in the session will show increases in oil product inventories but a fall in crude oil stocks. Crude oil for July delivery, which expires later Wednesday, lost 15 cents to $68.95 a barrel in electronic trading on the New York Mercantile Exchange.

Gold fell for the first time in a week as a decline in the price of oil diminished the appeal of the precious metal. Gold declined $1.80, or 0.3%, to $659.65 an ounce, the first drop since June 12. Silver fell 3 cents, or 0.2%, to $13.31 an ounce.

Currencies

The euro traded higher against the U.S. dollar on Wednesday despite a new report that showed producer prices in Germany advanced last month. In morning European trading, the euro bought $1.3423, up from $1.3406 in New York late Tuesday. The Japanese yen fell to 123.23 yen from its level Tuesday of 123.35 yen. The British pound edged lower to $1.9878 from $1.9879 on Monday.