Global Rout - Round 2

123jump.com Staff
27 Jul, 2007
New York City

Market averages in New York closed at their worst level of the day on steep sell-off in the last ten minutes of trading. Earliers European markets closed lower by 1% across the region on continues worries of financing for the leverages takeovers. Baker Hughes reported lower than expected earnings. Manpower, staffing agency plunged 7%. Blackstone IPO plunged 5% and closed at a new low from its first day of trading. Tokyo closed down 2.4%, Korea and Taiwan plunged 4.2%.

[R]4:00PM New York, 10:00PM Frankfurt, 1:30 AM Mumbai – New York quickens the pace of sell-off in the last fifteen minutes of trading. Europe lost nearly 1% across the region.[/R]

New York and European markets closed lower for the second day on the worries related to U.S. housing market and widening spreads in the credit markets. Asian markets opened sharply lower tacking the losses on Wall Street. Emerging markets in the region fell the most. Japan dropped 2.3% and resource companies driven Australia lost 2.8%.South American markets rebounded led by 1.0% gains in Mexico and Chile. Turkey led the global decline with a loss of 4.2%, dropped another 0.5% at the end of the week.

Yields edged lower on 10-year U.S. bonds and closed at 4.798% and 30-year bond rose to close at 4.954%.

Crude oil increased $2.07 to close at $77.02 per barrel, natural gas closed 17 cents higher to $6.11 per mBtu, and gasoline futures increased 2.6 cents to close at 210.17 cents per gallon.

Gold traded lower $2.80 to close at $672.30 per ounce, silver increased 23 cents to close at $12.72 per ounce, and copper futures lost or $5 to close at $7,859 per metric ton.

Dow Jones plunged 208.10 to 13,265.47, Nasdaq plummeted 37.11 to 2,562.23, and S&P 500 sunk 23.71 to 1,458.95. Russell 2000 index of small cap companies fell 1.7%, S&P 500 dropped 1.6%, Dow Jones decreased 1.54%, and Nasdaq declined 1.43%.

FTSE 100 Index in the U.K. closed down 36 to 6,215.20, in Tokyo Nikkei 225 closed at 17,283.81, down 418.28, and Brazil iBovespa lost 2,027.37 to close at 53,973.93.

Two-days of selling left Japan with virtually no gain for the year so far with investors dumping stocks of exporters, banks and auto companies. Other markets in Asia corrected between 3% and 4%. European markets declined for the second day in a row. The losses were limited to less than 1% across the region and worries of rising euro against dollar but insurance stocks fell for the second day.

The U.S. Commerce Department reported second quarter preliminary read of the economic growth of 3.4% and revised first quarter growth to 0.6% from 0.7%. The consumer spending in the quarter edged only 1.3% but business spending grew 8.1%. International trade added 1.18% to economic growth. Investment new structures including factories, office buildings and warehouses surged 22%.

The price index for personal consumption increased 4.3% in the second quarter and core rate excluding volatile food and energy rose 1.4%.

Recently priced IPO of leveraged buyout group Blackstone fell 5.45% to $24.30, its lowest close from the first day trading high of $36.90. Chicago Mercantile Exchange ((CME)) jumped $13 or 3.53% to $556.50. Dow Jones & Company increased 98 cent to $54.70 on the report on the Wall Street Journal website that certain branch of controlling shareholder Bancroft family is opposed to a sale to News Corporation and are looking for higher payment for its class B voting shares. Bancroft family owns 19% of the company but controls 64% of voting stocks.

Latin American Markets managed to rebound led by 1.1% gain Mexico followed by 0.9% rise I Chile, 0.1% increase in Argentina. Brazil fell 1.5%.


[R]1:00PM NY, 5:00 PM Frankfurt European markets finished in the red on credit-market concerns.[/R]

European stock markets finished in the red for a third day in a row. Stocks traded in a volatile session, weighed down by credit-market concerns, sparked yet again by Cadbury Schweppes, which delayed the sale of its U.S. beverage unit. Worries about the worsening climate for financing corporate takeovers added to negative sentiment. After the biggest one-day sell-off in four years on Thursday, the U.K. closed down 0.6%.France followed suit, losing 0.6%, while Germany dropped 0.8%.

In Frankfurt Deutsche Bank, Commerzbank posted significant losses, falling 0.6% and 0.8%, respectively. Shares of Allianz lost 2%, as several large European insurance companies continued to worry about the portfolio exposure. There were companies posting gains on the back of their quarterly financial results. Volkswagen rose 3.6% as the auto maker said it expects to meet its 2008 earnings goal a year early.

In Paris shares of insurance company Axa continued to decline, down 0.9%. Cap Gemini was another notable loser, falling 2.3%. Shares in luxury-goods firm LVMH added 1% on strong first-half sales and profit from recurring operations. Saint-Gobain rose 2% after the supplier of building materials posted 31% rise in first-half net income.

In London candy and beverage group Cadbury Schweppes gained 2.4%, as investors expressed relief that the sale wasn''t scrapped altogether. The mining sector stood out among the most notable losers again, with shares in Rio Tinto falling 2.7% and Antofagasta losing 3.6%. Among insurers, Irish Life & Permanent declined 3.8%


[R]11:30AM U.S. stocks extended recent decline, led by oil and financial stocks.[/R]

U.S. stocks continued to trade in a bearish mood, extending decline from the selloff in the previous session. Generally positive economic data, showing robust economic growth in Q2 failed to offset losses.

Energy companies led decliners, despite a notable increase in crude oil prices. Chevron ((CVX)) fell 1.6%, despite reporting a 24% jump in Q2 profit. Sunoco ((SUN)) and Marathon Oil ((MRO)) also posted steep losses, falling 3.8% and 5%, respectively.

Sell-off in financial shares continued on concerns that losses in the subprime mortgage market may spill over into the broader market. Citigroup ((C)) lost 0.9%. Oil-sensitive airlines, housing stocks, natural gas, disk drive, and tobacco stocks also moved significantly lower.

The Dow Jones industrial average was down 89.90 points, or 0.67%, at 13,383.67. The Standard & Poor''s 500 Index was down 9.91 points, or 0.67%, at 1,472.75. The Nasdaq Composite Index was down 15.25 points, or 0.59%, at 2,584.09.


[R]10:00AM New York, 8:30PM Mumbai – Sensex drops led by a global decline. Ballarpur Industries soars 7% on restructuring.[/R]

The Sensex in Mumbai trading pummeled 541.74 or 3.4% to 15,234.57 participating in a global sell-off in stocks on a heavy trading volume. Emerging markets suffered most led by 4.2% decline in Turkey, 4% loss in Brazil and similar losses in Korea and Philippines.

Stock trading turnover on BSE totaled 6,593 crore rupees, up 15% from a day ago trading volume of 5,758 crore rupees. Only three stocks in 30-stock index managed to close higher and the rest declined.

Gainers

Ballarpur Industries soared 7% to 131 rupees after the company decided to transfer controlling stake in three manufacturing plants to an overseas subsidiary. The new company with a capitalization of 1,950 crore rupees will look for international acquisition.

Moser Baer increased 2% to 311 rupees after the company and Norwegian based REC Group have signed silicon wafer sourcing deal for eight years.

Earnings

Largest cigarette maker, Indian Tobacco Company, reported 20% increase in the first quarter earnings to 782 crore rupees, largely on higher prices of its cigarettes. The company sale increased 16% to 3,325 crore rupees. The stock after the news jumped 2.7% to 171 rupees. During the week company also announced a plan to spin off its consumer products group.

Glaxo Smithkline Consumer Healthcare jumped 3.6% to 595 rupees after reporting second quarter earnings of 42 crore rupees on sales increase of 17% to 315 crore rupees.

Decliners

Metals and mining stocks declined on weak metal prices in the international markets. Tata Steel fell 7.9% to 647 rupees, Hindustan Zinc lost 5.5% to 704 rupees, Sterlite Industries declined 4.5% to 628 rupees, and Steel Authority of India lost 5.1% to 147 rupees.

Banking stocks declined in the wake of market loss. Canara Bank led the sector with a sharp loss of 6.3 to 263 rupees, Bank of Baroda lost 3.7% to 292 rupees, HDFC Bank lost 3.5% to 1,175 rupees and State Bank of India lost 3%.

Power and capital good companies fell as well. Bhel plunged 5.2% to 1,665 rupees and L&T declined 4.6% to 2,424 rupees.

Mobile telephone operators were dragged lower 5%. Bharti Airtel lost 3.6% to 892 rupees and Reliance Communications 5.4% to 537 rupees.

Real estate stocks suffered heavily on a day when investors around the world demanded higher interest rates from riskier bonds. Unitech led the sector with a loss of 6% to 557 rupees, DLF lot 4.8% to 602 rupees, and Mahindra Gesco lost 3.7% to 572 crore rupees.


[R]09:45AM Wall Street opened lower, weighed down by credit markets concerns.[/R]

Stocks opened in the negative Friday, continuing the downward trend set yesterday when U.S. equities saw the second-biggest decline this year. Concerns about the worsening climate for financing corporate takeovers and about subprime mortgage markets continued to weigh. Economic news of robust economic growth in Q2 failed to offset the decline and the enthusiasm over it was only shortly lived. The Commerce Department said GDP rose 3.4%.

In positive earnings news, oil company Chevron ((CVX)) posted better-than-expected 24% earnings increase in Q2 on higher gasoline prices. The stock gained 0.4%. Fortune Brands ((FO)) posted 6% decline in Q2 profit, but the results beat expectations. The stock rose 2.8%. ITT Corp. ((ITT)) posted Q2 profit jump of 52% to $1.16 a share, from 75 cents a share a year ago, beating expectations. The stock was down 0.5%.

Energy companies posted the most notable declines, with shares of Exxon Mobil ((XOM)) falling 1.5%. One of the biggest drags on the Dow was Caterpillar ((CAT)), down nearly 1%. In corporate news, Medtronic ((MDT)) lost 0.6% after it agreed to buy Kyphon ((KYPH)) for $3.9 billion.

The Dow Jones industrial average was down 55.35 points, or 0.41%, at 13,418.22. The Standard & Poor''s 500 Index was down 7.45 points, or 0.50%, at 1,475.21. The Nasdaq Composite fell 15.32 points, or 0.59%, at 2,584.02.


[R]9:00AM U.S. stock futures pointed lower, despite strong economic growth in Q2.[/R]

U.S. stock futures were pointing lower Friday, despite data showing better-than-expected gross domestic product and a drop in core inflation in Q2. The Commerce Department said that the U.S. economy was strong in Q2 as the drag from the housing sector lessened. GDP advanced 3.4%, slightly higher than the 3.3% growth expected by economists. However, although the GDP indicates a healthy economic growth, it also reduces the possibility of interest-rate cuts before the end of the year.

Among the few major companies posting quarterly results Friday, U.S. oil company Chevron ((CVX)) posted better-than-expected 24% earnings increase in Q2 on higher gasoline prices. Pharmaceutical company Amgen ((AMGN)) also reported a stronger-than-forecast profit rise. Medco Health Solutions ((MHS)) lifted its 2007 profit outlook after reporting a 26% profit increase.

In merger-and-acquisition news, Medtronic ((MDT)) agreed to buy Kyphon ((KYPH)) for $3.9 billion, or $71 a share, a 32% premium to Kyphon''s close on Thursday. Kyphon surged 27% in pre-market trading.

S&P 500 futures fell 8 points at 1,479.90 and Nasdaq 100 futures dropped 7 points at 1,994.00. Dow industrial futures dropped 69 points, retreating from the second-biggest drop this year. On Thursday, Dow Jones industrials dropped as much as 450 points before closing with a deficit of 311 points.


[R]8:30AM New York – Asia and emerging markets suffer the heaviest loss since late February.[/R]

Asian markets declined following decline of 2.3% in the U.S. and 3% decline in the European markets. Japan, the largest market in the region, fell 2.3% mirroring losses on Wall Street.

Taiwan led the region with a loss of 4.22% followed by 4.09% decline in Korea. Philippines dropped 3.9%, India declined 3.4%. Hong Kong, Australia, and Indonesia fell 2.8%. Singapore and Thailand dropped 2.4%.

Asian markets have been in the upswing the last five weeks with several markets trading at record levels. India and Philippines have traded at elevated levels on domestic economic strength; South Korea on rising exports and strong commodities prices have lifted Indonesia to a new highs.

Markets in Shanghai had run up 11% in the last five trading sessions and failed to participate in the current sell-off. Chinese government has raised interest rates on bank deposits, tightened the lending rules for real estate but investors continue to pour money into local stocks markets. In the month June, China reported daily new stock trading accounts opening near record level.

Australia fell 2.76% on weak metal prices and worries that strength is currency may affect commodity exports. New Zealand lost 1.8% after its strong currency came under heavy pressure faced by unwinding of yen carry trades.

Emerging markets in Asian reflected similar losses in South America and Europe. Brazil lost nearly 4% and Mexico dropped 3.6% on a day when stock markets around the world got clobbered. Turkey dropped 4.2% leading the global markets rout on Thursday and dropped another 1.35% at the end of the mid-day session today.


[R]8:15AM Medtronic agreed to buy Kyphon for $3.9 billion.[/R]

Medical technology group Medtronic Inc. ((MDT)) announced on Friday an agreement to buy Kyphon Inc. ((KYPH)) for $3.9 billion, or $71 a share. The transaction represents a 32% premium to Kyphon''s closing price of $53.68 on Thursday. The deal is expected to close in the first quarter of 2008. It is not expected to contribute to earnings in the first full year after the deal and provide a boost to the bottom line after that.

The acquisition is expected to boost the growth of Medtronic''s existing spinal business and enable it to provide physicians with a broader range of therapies, the company said. Separately Kyphon, a developer of medical devices to restore and preserve spinal function, said it earned 23 cents-a-share in Q2, up from 21 cents-a-share a year earlier.


[R]7:00AM New York, 8:00PM Tokyo – Tokyo declines mirroring losses in Europe and the U.S.[/R]

Nikkei 225 Index in Tokyo dropped 2.36% or 418.28 to 17,283.81 and Topix fell 37.47 or 2.33% to close at 1,699.71. For the week Nikkei lost 4.8% and curtailed its gain for the year to 0.3% and Topix dropped 4.3% and limiting its rise for the year to 1.1%.

The unwinding of carry trade in the region and a decline in the U.S. and European markets dominated the trading sentiment in Tokyo. The stocks fell at the opening and continued to trade lower in the session.

Decliners

Fujitsu plunged 6% to 789 yen after reporting a net loss of 14.8 billion yen. The company reported its first loss after nine quarterly profits in a row.

Canon plunged 5.5% to 6,510 yen, Nintendo lost 6.2% to 58,000 yen, and automakers fell as well in the sell-off. Toyota Motor dropped 1.8% and Honda Motor lost 2.5%. Daihatsu, Nissan and other makers fell as well.

Trading companies, oil refiners, and mining companies fell for the second day in a row after surging year to date. The largest oil refiner Nippon Oil lost 6.4% to 1,047 yen and largest oil explorer Inpex declined 3.2% to 1.2 million yen.

Retailers fell after reporting a surprise sales decline in June. Seven & I Holdings dropped 1.2% to 3,390 yen, supermarket operator Aeon Co. lost 4.6% to 1,917 yen, and Seiyu Limited declined 1.5% to 129 yen.

Ministry of Economy Trade and Industry reported that retail sales in June fell 0.4% from a year ago. Sales at large retailers were up 0.9% and wholesales sales were up 5.3%

Metals and oil trading companies dropped for the second day in a row. Sumitomo Mining, Marubeni, Mitsui Mining declined more than 2%. Nippon Steel was dragged in the sell off as well. Shipping companies repeated the losses of more than 2.2% for the second day in a row.

Gainers

Toyota group of companies saw their stocks rise on a day of sell-off. Hino Motors gained 1.3% to 791 yen after reporting a sharp rise in earnings on overseas sales. Toyota Tsusho, trading company in the group rose 4% to 3,130 yen after reporting earnings gain.