Weaker U.S. Open Weighs on FTSE

Ivaylo
10 Jul, 2007
New York City

The UK market is trading sharply lower as investors took profits as US futures show that Wall Street will slip at the start after Home Depot lowered earnings estimates. Miners, cruise operator Carnival and British Airways are all down, while retailers are bucking the downtrend as Marks & Spencer leads the sector higher. The benchmark index FTSE 100 lost 0.87%, and is trading at 6,654 in mid-afternoon session.

[R]9:30AM London is sharply lower with miners down, while retailers are higher led by Marks & Spencer.[/R]

In London, leading stocks plunged with miners Xstrata and BHP Billiton lower as recent gains give way to profit taking. Carnival and British Airways are also lower as oil prices remain around $72 a barrel and the IEA predicted an energy crunch at the start of the next decade. On the plus side, retailer Marks & Spencer lifted the sector as investors expressed relief at better than anticipated first quarter figures following poor weather in June.

Advancers of the Day

Retailers were in focus after Marks & Spencer cheered investors with an upbeat trading statement. The retailer reported a 2% rise in first quarter. The company firmed 2.7%.

Next tracked the strong performance of Marks & Spencer, trading 1.9% higher, while Debenhams and Mothercare both gained 1.1%.

Consumer goods company Unilever was higher 3.8% on bid speculation.

Decliners of the Day

BHP Billiton lost 3.1% as reports circulate that the biggest miner is in talks with private equity firms to team up for a possible $40 billion bid for US aluminium company Alcoa. Antofagasta lost 1.6% and Anglo American shed 1.4%.

Carnival, the biggest cruise operator in the world, fell 2.9% on continued strength in crude oil prices. British Airways were also hit, down 1.9%.

Wolseley retreated 2% after US Home Depot reduced its 2007 earnings outlook.

[R]8:30AM Asian markets end mixed with Japan declining on stronger yen, and China falling on profit-taking.[/R]

In Tokyo, the index edged lower as real estate stocks and export shares declined. The benchmark Nikkei 225 Average finished 0.05% lower at 18,253. The yen strengthened to 123.43 per dollar from 123.65 at yesterday's close. The real estate sector lost on fears that the Bank of Japan may raise interest rates in near future. Two of the biggest real estate developers dropped. Mitsui Fudosan dipped 1.4% and Mitsubishi Estate lost 1.5%. Exporters also suffered as the yen strengthened against the dollar. Toyota lost 0.5 %, while Canon Inc. fell 1 %.

In Hong Kong, expectations of strong first-half earnings from Chinese banks led the rally. The Hang Seng Index gained 0.3% to close at 22,886. Industrial & Commercial Bank of China surged 5.1% as the largest bank by assets in the country announced that its first-half net profit is likely to advance more than 50% from a year earlier. China Merchants rallied 7.2% as it also expects first-half profit to double from the same period the previous year.

Banks and telecoms buoyed South Korea. The Kospi Index in Seoul advanced 0.6% to 1,895. An upward revision of the country’s gross domestic product by the Bank of Korea to 4.5% from 4.4% also boosted the rally. Kookmin Bank gained 2.2% and Shinhan Financial Group closed 5.7% higher.

In China, gains from the banking sector were pared by profit-taking. The benchmark Shanghai Composite Index retreated 0.8% to settle at 3,853. Youngor Group dropped 1.5% and Shanghai Automotive lost 3.2%, while ICBC ended 1.7% higher and China Merchants rallied 7.5%.

In Sydney, resources stocks declined on profit-taking, erasing some of the gains they have won in recent sessions. Australian S&P/ASX 200 shed 0.6% to 6,362. In copany news, BHP Billiton shed 1% after advancing 3.5% on Monday, while Rio Tinto inched 0.1% higher. Lead and zinc company Zinifex plunged 3.9%.

[R]7:30AM NY-6:30PM Mumbai Sensex sheds 36 points, Tata Motors rallies, the rupee advances.[/R]

The Sensex on BSE finished 35.85 points lower, or 0.24%, at 15,009.88.

The benchmark index opened 54 points higher at 15,100.13 and rallied to a record high of 15,114.95 in morning trading, a gain of 69.22 points for the day. It dropped to a low of 14,966.40 in early afternoon trading.

The market-breadth was positive in the morning, but turned strongly negative in the latter part of the session. Of the 2,710 stocks traded on the market, 1,170 advanced, while 1,467 declined and only 73 were unchanged. Of the 30 stocks in the Sensex, 14 advanced, while 16 declined. The turnover on BSE was Rs 5,024 crore, higher than Rs 4,845 crore on Monday. On NSE, the turnover was Rs 10,720 crore, compared to Rs 9,762 crore on Monday.

Economic news

The Indian rupee edged higher towards a nine-year high as there is some speculation that overseas funds will buy more local equities as the economy expands. In early trade, the rupee stood at 40.39 per dollar, up from 40.423 on Monday, and close to a nine-year high of 40.28 struck in late May 2007.

Trading highlights

ICRA was the most active stock with a turnover of Rs 186.50 crore followed by Orbit Corporation and DLF.

Tomorrow might be a crucial day for the markets with all eyes set on the Infosys as the company releases its Q1 results.

Advancers of the Day

Tata Motors rallied 4% to Rs 745 and was the leading gainer on reports that the company may list its profit-making arms.

Auto shares surged on expectations that the RBI will not raise interest rates in near future, as 50% to 75% of sales in the auto sector are derived from loan funds. Maruti surged 2.4% to Rs 813. Mahindra & Mahindra advanced 1.2% to Rs 788 and Bajaj Auto ended up 1.1% to Rs 2,128.

IT stocks also rallied, as the market considered the IT sector performance as being underestimated recently, given the strong core potential of the tech shares. Infosys advanced 1.3% to Rs 2,020. Satyam added 1% to Rs 497.

Decliners of the Day

Banking, cement and telecom shares were under pressure today. Reliance Communications led the decliners plunging 1.8% to Rs 543 and HDFC Bank dipped 1.7% to Rs 1,148.

In cement stocks, Grasim lost 1.5% to Rs 2,727 and Ambuja Cements dropped 1.4% to Rs 130. Engineering and construction company Larsen & Toubro shed 1.1% to Rs 2,389 although it won a Rs 542-crore order from Indian Oil Corporation.

SBI slipped 1.3% to Rs 1,551 and Bharti Airtel also dropped nearly 1.3% to Rs 872. Index heavy Reliance Industries lost 0.5% to Rs 1,702.

[R]6:30AM European markets are lower Tuesday dragged by poor performance by Home Depot.[/R]

All three major bourses were lower on Tuesday.

In London, FTSE 100 shed 0.2% at 6,700.80. U.K. stocks fell, led by Antofagasta, Xstrata and BHP Billiton Ltd. as copper prices reversed earlier gains in Asia. BHP Billiton dropped 1.2%. Marks & Spencer Group limited declines after the company beat analysts estimates and advanced 2.9%. Next also advanced 1.3%. Unilever climbed 3.7% amid takeovers in the food industry. Wolseley slipped 2.3% after U.S.-based Home Depot lowered its profit forecast.

In Germany, DAX 30 lost 0.3% at 8,051.82. DaimlerChrysler gained 1.8% as UBS raised its price target to 90 euros from 75 euros and kept its buy rating. The broker suggested six ways to improve Daimler truck division, including a sale of its Japanese business Fuso and job reductions in Germany.

In France, the CAC 40 dipped 0.3% at 6,085.28. Carrefour declined 0.8% ahead of the release of the first-quarter revenue of the French supermarket chain, due out after the Paris close. In another development, Groupe Danone offered to buy Royal Numico $16.8 billion in cash to gain the biggest share of the baby-food market in Europe. Numico shot up 23.5%, while Danone lost 1%.

[R]5:30AM Gold, silver gain while corn finishes lower.[/R]

Gold kept clambering out of its late-June trough of $638 an ounce, with the August contract advancing $7.70 an ounce to end at $662.50 on the New York Mercantile Exchange, supported by the dollar which dipped against the euro.

Other precious metals tracked gold higher. September silver closed at $12.82, up 6.3 cents an ounce.

Copper prices gained as the London Metal Exchange released a large outflow of inventory and as workers at a major Chilean mine went on strike. Nymex September copper gained 3.5 cents to $3.6295 a pound.

In the energy market, oil sank under the pressure of hopes for a corresponding decline in demand for crude from the Whiting, Ind., refinery. The unit, closed for maintenance, processes about 250,000 barrels of crude daily. Crude for August delivery shed 62 cents to close at $72.19 a barrel on the Nymex..

Brent crude hit an 11-month high of $76.34 a barrel on ICE Futures in London.

Gasoline futures surged 3.5 cents to finish at $2.3446 a gallon.

December corn inched down 1.6 cents to settle at $3.502 a bushel on the Chicago Board of Trade. Wheat for September also pulled back 10.4 cents to $5.994 a bushel.

Meanwhile, soybean prices surged over the $9 mark for the first time since 2004. November soybeans added 6 cents to close at $9.02 a bushel.