Oil Surge Drags Stocks Down

Elena
21 Sep, 2005
New York City

Asian markets finished mixed with Japan's Nikkei reaching a new four-year high of 13,196 on domestic economu confidence and South Korea's Kospi also up to a record of 1,196. European markets lost ground at mid-day on raise U.S. interest rates. Avon Productsowered guidance on low sales.

U.S. MARKET AVERAGES

U.S. markets are expected to open down as stock futures have been trading in the negative territory, pointing to a lower start of the trading session. The three major averages dropped on Tuesday as the Fed Reserve raised interest rates for an 11th time without giving signs of a probable halt of the rate-hike campaign. A new surge of oil prices also weigh on pre-market trading. Crude-oil started rising again on fears that the new Hurricane Rita could hit the still recovering from Katrina oil facilities. Oil prices crossed $67 a barrel even though OPEC agreed on releasing 2 million barrels of spare crude. Heating oil, gasoline and natural gas also rose.

Dow Jones industrial average futures dipped 6 points.. Nasdaq 100 futures fell 4 points, dragging them below their fair value. Seven S&P 500 companies are due to report quarterly earnings before the bell today, including investment bank Morgan Stanley and package carrier FedEx Corp.


INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks closed mixed with Japan’s Nikkei and South Korea’s Kospi reaching record highs. The Japanese stocks rose 0.4% to hit another peak of 13 196 mainly on strong confidence in the economic growth of the country which has risen since Prime Minister Junichiro Koizumi was reelected. South Korean shares accumulated further 0.5% to yesterday gains and reached the record 1196. Among the other regional markets, Hong Kong’s Hang Seng lost 0.1%, while Sydney’s All Ordinaries dropped 0.6%.


European markets fell across the region at mid-day, hurt by increased U.S. interest rates and another spike in oil prices over $67 a barrel as Hurricane Rita neared the Gulf Coast. The German DAX 30 tumbled 1.3%, the French CAC 40 dropped 1.2%, and London’s FTSE lost 0.6%. The euro gained 0.9% to $1.2222.

ENERGY, METALS, CURRENCIES

Oil prices surged over $67 a barrel on fears that Hurricane Rita could hit the still recovering oil facilities in the Gulf of Mexico, ignoring to a great extent the agreement of OPEC to release daily 2million barrels of spare crude in order to ensure oil supplies. Light sweet crude November delivery climbed 96 cents to $67.15 a barrel on the Nymex. Heating oil added 3 cents to $2.0401 a gallon, while gasoline gained 6 cents to $2.0400. Natural gas reached a new peak of $12.790 per 1,000 cubic feet.. London Brent rose 98 cents to trade at $65.18.

Gold advanced in European trading. In London the precious metal traded at the recommended price of $467.00 per troy ounce, up from $465.50. In Hong Kong gold fell $2 to close at $468.25. Silver was trading at $7.31 per ounce, down from $7.36.

The U.S. dollar fell against the other major currencies on raised interest rates. The euro was quoted at $1.2197, up from $2162. The dollar changed hands at 111.33 yen, down from 111.61. The British pound was trading at $1.8067, up from $1.8038.

EARNINGS NEWS

Biomet,((BMET)) medical products maker, announced 1Q net profit rose 66% to 40 cents a share, with sales up 10.7% on continued strong sales of orthopedic reconstructive devices and dental reconstructive implants for its record quarter, missing analysts’ forecasts of 41 cents. The company said it was comfortable with 2Q consensus earnings forecasts of 42 to 44 cents a share.

FedEx Corp. ((FDX)) posted 1Q earnings of $1.10 a share, up from $1.08 a share in the same period last year on 10% revenue growth for the comparable quarter. 1Q income included a $79 million charge for facility leases, without which Memphis-based FedEx said it would have earned $1.25 a share, beating analyst estimate for earnings of $1.17 a share. FedEx expects 2Q income $1.30 to $1.45 a share and raised its 2006 outlook to $5.25 to $5.50 a share.