Danone, Wolseley, Siemens Drag Europe

Elena
10 Jul, 2007
New York City

European stock markets closed in the negative on Tuesday, pressured by weak dollar and a record foreign-exchange high for the euro. Profit warning from retailer Home Depot sparked new concerns about the struggling U.S. housing market. BHP Billiton dropped 3.9%, Anglo American dropped 3.6%, and Rio Tinto Group tumbled 2.9%. Germany and France led decliners, posting a drop of 1.4%.followed by the U.K. with a decline of 1.2%.

[R]1:00PM NY, 5:00 PM Frankfurt European markets closed lower, led by resource stocks.[/R]

European stock markets closed in the negative on Tuesday, pressured by weak dollar and a record foreign-exchange high for the euro. The euro hit an all-time high of $1.3738 vs. the dollar ahead of the Fed Reserve’s Chairman Bernanke''s comments. Declines on Wall Street also weighed on regional markets sentiment. Profit warning from retailer Home Depot sparked new concerns about the struggling U.S. housing market. Germany and France led decliners, posting a drop of 1.4%.followed by the U.K. with a decline of 1.2%.

In Frankfurt shares of automaker declined. Volkswagen fell 1.7%, while BMW declined 2.5%. In the tech sector, Siemens, which makes 20% of its sales in the U.S, dropped 2.4% on weak dollar.

In Paris Danone shares slipped 1.8%. Numico was again in focus, with shares surging 20.7% after the company agreed to be acquired by Danone, or $16.7 billion.

In London growth-sensitive miners were the most notable decliners. BHP Billiton dropped 3.9%, Anglo American dropped 3.6%, and Rio Tinto Group tumbled 2.9%. Wolseley, provider of building and construction products in the U.S, slipped 2.2% and homebuilder Taylor Wimpey Plc led dropped 3.4%. In the foods sector, shares of Unilever rose 2%. On the side of the gainers, Marks & Spencer Group Plc advanced 1.4% on strong Q1 sales.


[R]11:30AM U.S. market averages regained some ground. Retail and financial companies traded down.[/R]

U.S. stocks regained some ground in late morning trading, as investors turned to bargain hunting. However, the three major averages continued to trade below the flat line, due to significant weakness among airline, housing, and retail stocks. An increase by the price of oil also weighed on sentiment. At the same time, the higher energy prices contributed to an advance by energy stocks.

Profit warnings from retailers Sears Holding and Home Depot sent stocks lower. Sears ((SHLD)) dropped 7%, while Home Depot ((HD)) gained 1% on share repurchase plan. Among other retailers, Wal-Mart Stores Inc ((WMT)) and Target Corp ((TGT)) lost 1.7% each. D.R. Horton ((DHI)), the largest U.S. home builder, fell 2.8% after it said quarterly orders for new homes fell 40% from a year ago and that it expects to post a loss after impairment charges.

Telecommunications stocks broadly retreated, with Alcatel-Lucent ((ALU)), down 1.9%, Tellabs Inc. ((TLAB)), down 1.8%, and Verizon Communications ((VZ)), falling 1.5%. Drug stocks also declined, with shares of Noven ((NOVN)) down 9%.

Subprime worries weighed on financial companies, with Lehman Bros falling 2.5% and Bear Stearns, down 1.6%. J.P. Morgan Chase & Co. ((JPM)) was the biggest decliner on both the Dow and the S&P 500, falling 2.1%. Citigroup Inc ((C)) lost 1.4%. The Dow Jones industrial average was down 65.52 points, or 0.48%, at 13,584.45. The S&P''s 500 Index was down 9.85 points, or 0.64%, at 1,522.00. The Nasdaq was down 13.88 points, or 0.52%, at 2,656.14.


[R]Wholesale inventories rose 0.5% in May.[/R]

Tuesday morning, the Department of Commerce release its report on wholesale trade in the month of May, showing a notable increase in wholesale sales as well as a slightly bigger than expected increase in wholesale inventories. The report showed that wholesale sales rose 1.3 percent in May following a 1.5 percent increase in April. With the increase, wholesale sales were up 8.7 percent year-over-year. The wholesale sales growth came as a 0.5 percent drop in wholesale sales of durable goods was more than offset by a 2.9 percent increase in wholesale sales of non-durable goods. The Commerce Department also said that wholesale inventories rose 0.5 percent in May after rising 0.3 percent in the previous month. Economists had expected a 0.4 percent increase. With wholesale sales growth outpacing wholesale inventories growth, the inventories to sales ratio edged down to 1.11 in May from 1.12 in April. The ratio came in at 1.13 in May of 2006.


[R]9:45AM Wall Street opened in the negative ahead if Fed Reserve Chairman’s speech.[/R]

Wall Street opened lower on Tuesday amid unimpressive start of Q2 earnings season given by Alcoa''s earnings and slashed profit outlooks at Home Depot and Sears. Investors were also cautious ahead of speech by Federal Reserve Chairman Ben Bernanke on housing and inflation. In economic news, the Commerce Department said that May wholesale inventories rose 0.5%, higher than expected and higher than April''s 0.3% advance.

Dow component Home Depot ((HD)) rose 1.3% although it cut its full-year earnings forecast, due to sluggish housing market. The company launched a tender offer for 250 million of its shares. At the same time, Sears ((SHLD)) dropped 7% after warning that Q2 profit will decline, due to weaker sales. Among companies posting positive results, Pepsi Bottling Group ((PEP)) rose 4% after it raised its outlook for full-year earnings and said Q2 profit rose 9.5% to 70 cents a share, beating estimates.

The Dow was dragged down by its financial shares, with JP Morgan Chase ((JPM)), falling 2%, American Express Co. ((AXP)) and Citigroup Inc. ((C)), both losing over 1%. General Motors ((GM)) bucked the downward trend, rising 1.5% on a new upgrade from J.P. Morgan.

In the first minutes of trading, the Dow Jones industrial average fell 46.82, or 0.34, to 13,603.15. The Standard & Poor''s 500 index was down 8.48, or 0.55%, at 1,523.37, while the Nasdaq composite index was off 13.83, or 0.52%, at 2,656.19.


[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]9:00AM U.S. stock futures pointed lower, as reduced profit outlooks from Home Depot and Sears weighed.[/R]

U.S. stock futures pointed to a lower opening Tuesday, reflecting unimpressive start to Q2 earnings season and worries about corporate earnings, due to lowered profit outlooks from two retail companies. Renewed housing and inflation concerns ahead of a speech from Fed Reserve Chairman Ben Bernanke also weighed. The market also awaited the Commerce Department report on wholesale inventories, expected to show a 0.4% increase.

Aluminum giant Alcoa ((AA)) added 0.7% in the pre-open after posting in-line-with-estimate 4% profit decline. However, quarterly revenue missed the average analyst forecast Dow member Home Depot ((HD)) warned that 2007 earnings will fall more than expected, blaming the slowing housing market. Shares of the home improvement retailer added 1% in pre-market trading.

At the same time, Sears Holdings ((SHLD)) dropped 5.3% after it warned of lower-than-expected Q2 profit, due to weak sales. Among other companies posting quarterly results, Greenbrier ((GBX)) surged 19% after reporting better-than-forecast earnings. Cheesecake Factory ((CAKE)) gained on a 16% rise in Q2 revenue.

In other corporate news, General Motors ((GM)) and Ford ((F)) were upgraded to overweight at J.P. Morgan. S&P 500 futures dropped 4.7 points at 1,537.80 and Nasdaq 100 futures fell 9.5 points at 1,999.00. Dow industrial futures fell 30 points. Yields on 10-year Treasury bonds fell to 5.12%.


[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 percent, while Canon Inc. fell 1 percent.

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 negative in the latter part of the session. In the broader market 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 on 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.

Infosys Technologies is expected to earn in the first quarter ending in June at least Rs 980 crore, a 4% decline in earnings on 2% rise in revenue from the previous quarter. The company profits are expected to jump 25% in the quarter from a year ago. In the first quarter a year ago company reported earnings of Rs 800 crore. The company is expected to lower its annual earnings guidance for the fiscal year.


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, separately company was awarded 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%.