HSBC, Axa Send Europe Sharply Lower

Elena
24 Jul, 2007
New York City

European stock markets posted steep losses Tuesday, with financials and energy firms leading decliners. Disappointing earnings from U.S. mortgage lender Countrywide Financial pressured financial shares like Axa and HSBC. London closed down 1.9%, as the worst floods in 60 years weighed on retailers. France and Germany followed suit, each falling 1.7%.

[R]1:00PM NY, 5:00 PM Frankfurt European markets steeply dropped amid weak financial and energy stocks.[/R]

European stock markets posted steep losses Tuesday, with financials and energy firms leading decliners. Disappointing earnings from U.S. mortgage lender Countrywide Financial pressured financial shares like Axa and HSBC. London closed down 1.9%, as the worst floods in 60 years weighed on retailers. France and Germany followed suit, each falling 1.7%.

In Frankfurt the auto-sector advanced after Merrill Lynch upgraded truck maker Man AG to buy from neutral, sending its shares up 1.5%. Utility company E.ON was another notable decliner, falling 2.4%.

In Paris the insurance sector was under pressure amid higher interest-rate worries. Shares in insurance company Axa fell 3.3%, while BNP, France''s biggest bank, fell 2%. Unibail, Europe''s largest publicly traded real-estate company, fell 2.3%. Among other losers, semiconductor STMicroelectronics fell 2.6%, while oil company Total declined 2.3%.

In London weaker oil prices pushed shares in energy companies lower, with Royal Dutch Shell losing 2.6%. BP fell 1.9%, despite a surprise rise in second-quarter profit. Among miners, BHP fell 1.7%, reversing from earlier gains. The firm said that annual output of alumina, copper, iron ore, aluminum, manganese ore, nickel and coking coal reached record levels. In the financial sector, HSBC, Europe''s largest bank by market value, fell 1.6%. Among retailers, Next slid 2.7%, Kingfisher fell 2.3%, while Home Retail Group declined 3.3%. Telecom carriers also suffered weakness, with Vodafone''s shares down 2.9%.


[R]11:30AM U.S. market averages steeply dropped amid disappointing earnings and subprime concerns.[/R]

U.S. stocks moved steeply lower Tuesday, reflecting disappointing quarterly earnings from DuPont Co. and American Express, as well as renewed subprime concerns.

Dow member DuPont ((DD)) fell 5.3% after the chemicals giant reported flat Q2 profit as higher sales offset the cost of energy and research. Company''s earnings missed the average analyst expectations. Another blue-chip, American Express Co. ((AXP)) dropped 4% as the company posted 12% profit growth in Q2 on record card member spending, but also reported an 85% jump in loss provisions.

A considerable drop of 75% in Q2 profit of chip maker Texas Instruments ((TXN)), as well as softer-than-expected profit outlook also weighed on market sentiment. In addition, a 33% profit drop by subprime lender Countrywide Financial ((CFC)) added further pressure on the market, with the stock falling 7.8%.

Among other companies releasing Q2 results and again on the Dow, fast food giant McDonald''s Corp ((MCD)), edged down after it reported in-line-with-expectations earnings per share. AT&T Corp. ((T)) fell 0.5% although the telecom''s earnings beat expectations. The network provider for Apple Inc.''s iPhone, said it activated substantially fewer iPhones than expected during the quarter.

By sector, energy, natural gas and oil stocks posted the most notable declines, while the multimedia, semiconductor and hardware sectors advanced. In late morning trading, the Dow fell 89.50, or 0.64% to 13,853.92. The S&P''s 500 index shed 10.69, or 0.69%, to 1,530.88. The Nasdaq lost 19.43, or 0.72%, trading at 2,671.15. Bonds rose, with the yield on the benchmark 10-year Treasury note down to 4.95 Tuesday from 4.96% late Monday.


[R]9:00AM Credit-markets jitters and profit drop at TI weighed on pre-market mood.[/R]

U.S. stock futures were indicating a lower opening on Tuesday, dragged by continuous jitters in credit markets, as well as Q2 earnings drop and a soft outlook from chip maker Texas Instruments. Among other companies posting Q2 results, Lockheed Martin, AT&T and PepsiCo posted better-than-expected quarterly profits. S&P 500 futures slipped 2.70 points at 1,546.30 as Nasdaq 100 futures fell 6.75 points at 2,046.75.00. Dow industrial futures were down 34 points.

On the earnings news front, American Express Co. ((AXP)) reported a 12% rise in Q2 net income. However, profit increase was limited by an 85% jump in loss provisions at the credit-card giant''s main U.S. business.

Netflix Inc. ((NFLX)), the online DVD rental pioneer, reported 50% increase in its Q2 profit, benefiting from a gain related to a patent lawsuit settlement.

AT&T ((T)), the U.S. largest provider of Internet and phone services, reported 61% jump in Q2 net to $2.9 billion, or 47 cents per share, up from $1.81 billion, or 46 cents per share last year.

Lockheed Martin Corp. ((LMT)), the world''s largest defense contractor, said its Q2 earnings rose 34% on higher sales across most of its businesses. The company said it earned $778 million, or $1.82 per share, up from the $580 million, or $1.34 per share a year ago, while revenue rose 7% to $10.65 billion. Quarterly results beat estimates for earnings of $1.53 per share per share on $10.2 billion in revenue. Lockheed also lifted its 2007 forecast.

PepsiCo ((PEP)) said its Q2 net profit rose to $1.56 billion, or 94 cents a share, from $1.38 billion, or 81 cents a share, a year ago, beating estimates for earnings of 89 cents a share. The company lifted its 2007 earnings guidance to at least $3.35 a share.


[R]8:15AM Texas Instruments posted 75% earnings drop in Q2.[/R]

Texas Instruments Inc. ((TXN)), the world''s largest supplier of chips used in mobile phones, reported 75% earnings drop in Q2, compared with the year-ago period. The company said net income for Q2 was $610 million, or 42 cents per share, down from $2.39 billion, or $1.50 per share. Quarterly revenue stood at $3.42 billion, down from $3.7 billion in the year-ago period, due to a weaker demand for a broad range of products. The financial results met the average analyst expectations of earnings of 42 cents per share on $3.45 billion in revenue.

Last year, the chipmaker''s Q2 earnings were lifted by the $1.65 billion sale of its sensors business, as well as a $70 million royalty settlement and a $57 million sales tax refund. Texas Instruments projected Q3 earnings of 46 cents to 52 cents per share on revenue of $3.49 billion to $3.79 billion. Analysts expect earnings in the same range with quarterly sales of $3.7 billion. Company''s shares fell 3.3% in pre-market trading.