Import Prices, Retail Sales Drag Pre-Market Mood

Elena
13 Jul, 2007
New York City

U.S. stock futures pointed modestly higher Friday, as data which showed a sharper-than-expected drop in retail sales and higher import prices offset gains in the shares of General Electric. The Dow member posted earnings in line with expectations and said it plans to exit the U.S. subprime mortgage business. It also raised its 2007 share-buyback program to $14 billion.

[R]9:00AM Higher import prices, weak retail sales weighed on pre-market moods.[/R]

U.S. stock futures pointed modestly higher Friday, as data which showed a sharper-than-expected drop in retail sales and higher import prices offset gains in the shares of General Electric ((GE)). The Dow member posted earnings in line with expectations and said it plans to exit the U.S. subprime mortgage business. It also raised its 2007 share-buyback program to $14 billion.

On the economic news front, June retail sales fell 0.9%, the largest decline since August 2005. Import prices rose 1% in June on a 4.7% gain in the price of imported petroleum.

Other companies in focus included Bank of America ((BAC)) after a Dutch court ruled that ABN Amro ((ABN)) can proceed with the sale of its LaSalle division to the U.S. banking giant. Aluminum giant Alcoa ((AA)) withdrew its bid for Alcan ((AL)) after Rio Tinto offered a higher bid yesterday.

In other corporate news, Amgen ((AMGN)) said its board of directors authorized an additional share buyback of up to $5 billion. S&P 500 futures rose 0.50 points at 1,556.20, while Nasdaq 100 futures rose 1.50 points at 2,036.25. Dow industrials futures added 10 point.


[R]8:00AM General Electric Q2 profit rose. It said it will quit the U.S. mortgage business.[/R]

General Electric ((GE)) said its Q2 net income rose $5.4 billion, or 53 cents a share, up from $4.9 billion, or 48 cents, a year earlier. Company’s revenue rose 12% to $42.3 billion vs. $37.7 billion a year earlier.

Excluding discontinued operations, earnings climbed 13% to 52 cents, up from last year''s 46 cents a share, meeting expectations of earnings of 52 cents a share on revenue of $41.7 billion. Quarterly profit was boosted led higher by its oil and gas, aviation, energy and commercial finance businesses.

General Electric announced Friday it will quit the U.S. mortgage business and sell off its existing loans. CEO Immelt said that they had sold $3.7 billion of WMC loans in the quarter. GE Money had strong growth in revenues and assets and increased its profit by 8%, despite losses in its WMC mortgage business.

GE said it will increase its 2007 share buyback program to $14 billion. The remaining $12 billion will be allocated during the second half of the year.


[R]7:30AM NY – 6:30 PM Mumbai Sensex spurts 181 points led by rally in metal stocks.[/R]

The Sensex on BSE finished 180.68 points higher Friday, or 1.20%, at 15,272.72.

The benchmark index opened 125 higher on strong cues from global markets and reached an intra-day high of 15,331, a record high. The market-breadth turned negative in the afternoon session as both small-cap and mid-cap stocks came under strong selling pressure. As 1,154 stocks advanced, 1,529 declined and 54 were unchanged. Of the 30 stocks in the Sensex, 22 advanced, while the rest declined. The turnover on BSE was Rs 6,714 crore , compared with Rs 6,113 crore on Thursday. On NSE, the turnover was Rs 14,883 crore, higher than Rs 12,882 crore on Thursday.

Economic news

The weekly wholesale price index in India rose in the last week of June to 4.27% from a year earlier, higher than 4.13% in the previous week and above analysts’ expectations of 4.10%, as prices of cereals, pulses and other food products increased. However, it was lower in comparison with the same time last year, which was 5.21%.

The Governor of the Reserve Bank of India Yaga Venugopal Reddy will announce the new interest rates in his next monetary policy statement on July 31. The bank has hiked the key repurchase rate, or the overnight lending rate, six times in the past 18 months.

Trading highlights

GMR Infrastructure was the most active stock with a turnover of Rs 396.60 crore followed by India Infoline and Reliance Industries.

Advancers of the Day

Metal stocks led today’s rally. Hindalco soared 6% to Rs 174 on hopes of consolidation in the global aluminum industry after Rio Tinto launched today, 13 July 2007, a $38.1-billion offer to buy Canada''s Alcan Inc. Other metal shares which rose were SAIL zooming 10.5% to Rs 160, Hindustan Zinc soaring 8% to Rs 798 and Sterlite Industries up 3.5% to Rs 665. Tata Steel also surged 3.4% to Rs 695.

Index heavy Reliance Industries advanced nearly 3% to Rs 1,769. Reportedly, the government has appointed a group of ministers to analyze all aspects from production to pricing of gas to be produced from newer areas, particularly in the deep sea.

Cement stocks gained on renewed buying after cement sales rose of 4.6% in June 2007 compared with June 2006. ACC was up 2.2% to Rs 1,096, UltraTech Cement gained 2.9% to Rs 925, Ambuja Cements advanced 2.1% to Rs 129 and Grasim Industries added 1.8% to Rs 2,871.

Auto stocks were in demand as fears of interest rate hike in near future faded. Tata Motors gained 3.8% to Rs 767, Mahindra & Mahindra rose 2.7% to Rs 825 and Maruti Udyog advanced 0.7% to Rs 833.

Decliners of the Day

TCS led the decliners down 2.1% to Rs 1,137. Dr.Reddy''s lost 2% to Rs 668 and Hindustan Unilever shed 1.5% to Rs 203 while Ranbaxy also dipped 1.5% to Rs 353. Three companies were 1% lower with Reliance Communications down 1.2% to Rs 555, and Cipla and Bajaj Auto 1% lower each to Rs 211 and Rs 2,175, respectively.


[R]6:30AM European markets are higher Friday with Frankfurt leading the region higher.[/R]

By mid-day trade, national benchmarks rose in all 17 western European markets that were open, except Austria. The DAX 30 index in Germany was trading up 0.9% at 8,124.56, the French CAC-40 index was up 0.6% at 6,137.14 and the U.K.''s FTSE 100 index gained 0.4% at 6,724.50.

Saab AB rose the most in a month, up 1.9%, after the builder of the Gripen fighter plane reported a 48% growth in earnings. Nokia, the world largest mobile handset maker, gained 1.6%.

In Frankfurt, BASF led the advance after UBS upped its price estimate for shares of the largest chemical maker in the world. BASF rose 1.6%. BMW and Volkswagen AG gained after an industry group announced the first rise in European car sales in five months. BMW added 0.6% and Volkswagen rallied 0.8%. GPC Biotech surged 5.6% as Goldman Sachs Group added the unprofitable biotechnology company to its pan-European conviction buy list, on the stock''s attractive valuation.

In Paris, French stocks rose, led by Schneider Electric SA and Alstom SA. Schneider gained 2%, after Citigroup hiked its recommendation on the stock to buy from hold. Alstom, the third-biggest maker of power plants in the world, climbed 0.8 % as Citigroup. also raised its share-price estimate by 27 % on the stock. JPMorgan also lifted its recommendation on the stock to neutral from underweight. On the downside, L''Oreal fell 2.2% after the group posted a 9.4% increase in first-half sales to 8.51 billion euros, broadly in line with expectations, but with a mixed performance in the French and German markets.

In London, U.K. stocks were led higher by Vodafone, up 1.1%, after UBS AG raised its price estimate on the stock. Royal Bank of Scotland, the. second-biggest bank in the U.K, climbed 1.2%. Barclays, the third-largest bank, advanced 0.4%. Ladbrokes added 2.1%, as Deutsche Bank AG raised its recommendation on the world largest publicly-traded gaming company to buy from hold.

Currencies

The euro neared a record high against the dollar on Friday as concerns persisted about the strength of the U.S. economy. The euro traded at $1.3792 overnight, and bought $1.3781 in morning European trading. The British pound edged lower against the dollar, trading at $2.0296 from its level late Thursday of $2.0304. The dollar slipped to 122.33 Japanese yen from 122.41 yen.