NY Averages Struggle, Europe Up

123jump.com Staff
13 Aug, 2007
New York City

Market averages opened higher but steadily declined in the afternoon trading and close lower. Home builders, mortgage lenders, and energy companies led the decline. Blackstone reported its first profit as a public company. The European Central Bank carried out largest liquidity operation of $65 billion, for the third day in a row. UK led the region with a gain of 3%. Asian markets rebounded on weak volume. Copper traded higher in Asia. Australia revised higher its inflation forecast.

[R]4:00PM New York, 10:00PM Frankfurt, 1:30 AM Mumbai[/R]

The Central banks in Europe, U.S., Japan, and Australia pumped liquidity in the market for the third day in a row. The largest infusion of $65 billion came from ECB and $2 billion from the Fed in Washington. UK led the European markets with a gain of 3% and several markets in the region closed above 2%. Asian markets staged a mild rebound. Argentina and Mexico edged a fraction up.[/R]

Dow Jones closed down 3.01 to 13,236.53, Nasdaq declined 2.66 to 2,542.23, and S&P 500 fell 0.72 to 1,452.92.

FTSE 100 Index in the U.K. closed up 180.70 or 3% to 6,219.00, in Tokyo Nikkei 225 closed at 16,800.05, up 0.27% or 35.96, and in Brazil, iBovespa closed down 0.4% to close at 52,434.01.

Yields edged lower on 10-year U.S. bonds and closed at 4.77% and 30-year bond rose to close at 5.00%.

Crude oil increased 15 cents to close at $71.62 per barrel, natural gas closed unchanged to $6.82 per mBtu, and gasoline futures decreased 1.5 cents to close at 193.98 cents per gallon.

Gold traded $0.70 lower to close at $680.90 per ounce, silver lost 1.7 cents to close at $12.86 per ounce, and copper futures declined $12.50 to close at $7,518.00 per metric ton.

In New York trading stocks opened higher on central bank intervention in Australia, Europe, Japan and the U.S. In the day’s trading averages steadily lost their momentum and in the last thirty minute of trading succumbed to sellers.

The Fed added $2 billion in the U.S financial system. The ECB added another $65 billion, in Japan central bank added $5 billion, and in Sydney the Reserve bank added $1.2 billion. While the bankers were forced to add lower amount of capital in the market, and normality appears to have returned to the market, traders and bankers remain nervous. The third day of coordinated action by the banks around world has managed to calm markets for now.

The European Central Bank continues to add largest liquidity in the markets, keeping the traders guessing the extent of the problem. The European Central Bank was forced to inject liquidity on Thursday and Friday. In the two days it has added nearly 130 billion euros in the market to curb the interest rate rising above its target rate of 4%. The rates had risen to 4.7% and after the injection interest rates fell to 4.1% but the credit markets remain jittery.

Home builders stocks fell after the third quarter homes delivery from Hovnanian Enterprises. The company reported that it sold 31% less from a year ago totaling 3,179 homes. The cancellation in the third quarter jumped to 35% from 33% a year ago and a backlog of contracts declined 31% to 7,126 homes. Beazer Homes plunged 11%, D R Horton fell 3%, Pulte Homes dropped 7%, Lennar declined 6%, and Toll Brothers declined 4%. Countrywide Financial fell nearly 3% for the second day after reporting that current financial market volatility may hurt the company performance. Washington Mutual fell 2% after losing 3% in previous session after saying that closing non-prime loans and securities have become difficult.

Of the 30 stocks in Dow Jones Industrial Average 11 closed lower and 19 advanced. Hewlett Packard led the index stocks with a gain of 3%, followed by a rise in Alcoa of 2.3%, 2.1% in General Motors and Boeing, and 1% in Verizon and AT&T. American Express led the decliners with a loss of 1.7% followed by 1.6% decline in Home Depot and Exxon Mobil, and 1.4% decrease in Procter & Gamble.

Of the stocks in S&P 500, 221 stocks closed lower and 276 gained, 3 stock closed unchanged. Home builders, mortgage lenders, and banks, and electric utilities stocks dominated the losers list.

Pulte Homes and Centex led the index stocks with a loss of 7.3%. Lennar and KB Home fell 6%. Ambac Financial, Moody’s, Countrywide, and Fifth Third Banc fell close to 4%. MGIC Investment Corp dropped another 3% after losing 13% in Friday’s trading. Valero, Progress Energy, Southern Company, and Duke Energy lost more than 4%. Computer Science soared 10% and led all the stocks in the index followed by a rise of 8% in Centurytel, 7% in EMC, 6% in Ralph Lauren, Discover Financial, Waste Management, and Sears Holdings.

Asian markets rebounded after a volatile day of trading. Shanghai led the region with a gain of 1.5% followed by 1.2% advance in Korea, 1.0% rise in India and Australia, 0.65% addition in Singapore, and 0.45% increase in Hong Kong.

In Latin Markets trading Argentina and Mexico led the region with a gain of 0.63% followed by 0.5% decline in Chile, and 0.4% decrease in Brazil.

In Sao Paolo trading iBovespa index lost 42.43 to close at 52,595.70 with 32 stocks in the index falling, 26 stocks gaining, and 2 stocks remained unchanged. Cyrela Commercial led the index stocks with a surge of 12% followed by 2.7% rise in Ambev, and 2% increase in Telemig, Braskem, Unibanco, Sabesp. TAM led the decliners with a loss of 5% followed by 4% decline in Natura, and 3% decrease in Brasil Tele, Gerdau, and Cosan.


[R]1:00PM NY, 5:00 PM Frankfurt European markets closed steeply higher amid easing subprime worries.[/R]

European stock markets rebounded to close steeply higher Monday, boosted by solid gains in the shares of mining and financial stocks after recent declines. Markets also benefited from a positive comment from Morgan Stanley and easing subprime concerns, as central banks injected additional cash flows into the financial institutions. ECB added 47.5 billion euros to provide liquidity for the banking system. Across the region, The U.K. surged 3%, followed by France which advanced 2.2% and Germany, rising 1.8%.

In Frankfurt airline Deutsche Lufthansa stood out among gainers, moving up 4.2%. Premiere AG, Germany''s biggest television broadcaster, dropped 3.1% after it said CEO Georg Kofler is quitting and start a company outside the media industry.

In Paris insurance firm AXA posted a solid gain of 4.2% followed by Credit Suisse Group after the ECB injected fresh flow of money to banks and said markets are returning to normal. BNP Paribas, the nation’s biggest bank, climbed 2%.

In London mining shares were the most notable gainers, helping the index post its best one-day gain in over four years. Shares of copper miner Kazakhmys surged 10.4% after an upgrade to buy at UBS. Among other advancers, Antofagasta rose 10.5%, Rio Tinto jumped 7.1%, and Anglo American climbed 8.3%.

Financials stocks like insurance group Old Mutual, private-equity fund manager 3i Group and hedge-fund manager Man Group also rebounded in London, each of them climbing more than 5.1%. Shares of HBOS Plc gained 3.8%. In deal-related news, shares of the U.K.''s Imperial Chemical Industries added 2.8% after it agreed to be acquired for 670 pence a share by Akzo Nobel.


[R]12:00 New York, 5:00 London – FTSE 100 index jumped 3% on regional strength.[/R]

FTSE 100 index closed 180.70 or 3% to 6,219.00. The index in the UK increased in strength with the rising indexes across the region. Of the 102 stocks in the index, 93 stocks gained and 9 stocks declined.

The pound traded lower against $2.013 compared to $2.02. The yield on the short term bonds increased 5.56%. Manufacturers output prices increases 0.2% in July after gaining 0.2% in June. For the year the prices increased 2.4%.

The European Central Bank for the third day added liquidity to the system of 47 billion euros, down from 61 billion euros. Japan and Australia provided added liquidity but significantly lower than added in the last two trading days.

Mining companies led the rising stocks on higher copper prices. Antofagasta led the index stocks with a gain of 11%. Kazakhmys increased 11% followed by 8% increase in Anglo American and Rio Tinto, and 7% rise in BHP Biliton. Vedanta Resources and Xstrata jumped 6%. Kingfisher led index stocks with a fall of 1.6% followed by 1.2% decline, and 0.82% decrease in Johnson Matthey.

Insurance and financial companies led the rise in the FTSE 100. Legal & General led the asset manager gained 3.7% followed by Royal & Sun Alliance jumped 3.4%, and Barclays increased 3.2%. Invesco jumped 3.2%, Friends increased 2.6%, and HSBC added 2.33%.

Imperial Chemical Industries Plc agreed to merge with Akzo Nobel $16 billion in three-way sales. After a protracted battle and revised buyout ICI agreed to 670 pence per share. ICI agreed to sell for 2.7 billion pounds its electronic materials business to Henkel KGaA.

Vodafone Group gained 4.4%. Power companies increased led by British Energy 4.6% followed by 4% rise in Centrica, 3.8% increase in International Power, and 2% advance in United Utilities.


[R]11:30AM Market averages traded higher amid easing credit concerns.[/R]

U.S. market averages rebounded Monday after the Fed Reserve and other central banks injected more cash into global financial systems, easing concerns about credit tightness. The Federal Reserve added only $2 billion in liquidity into the market, far below the $52 billion requested by banks. Economic data also generated optimism, as July retail sales rise 0.3% following June''s 0.7% decrease.

In corporate news, Goldman Sachs Group ((GS)) added 1% after it said it invested additional $3 billion in its troubled Equity Opportunities hedge fund. Among stocks driven by analyst comments, J.P. Morgan Chase Co. ((JPM)) gained 1% after Deutsche Bank upgraded its stock to buy from hold.

By sector, telecommunication stocks advanced, led by Telephone Data Systems ((TDS)) whose shares jumped 11%. Strength was also visible among technology stocks. Wireless, computer hardware, and networking stocks posted significant gains.

However, housing stocks continued their recent downward trend. Accredited Home Lenders Holdings ((LEND)) dropped 30% after private equity firm Lone Star Funds said it abandoned plans to complete its tender offer for the mortgage lender due to the company''s weakening financial position. Lone Star said that Accredited no longer met the conditions of its $400 million buyout offer. Accredited warned that it is likely to face bankruptcy without a deal.

In late morning trading, the Dow Jones industrial average rose 60.40, or 0.46%, to 13,299.94. The Standard & Poor''s 500 index advanced 9.28, or 0.64%, to 1,462.92, and the Nasdaq composite index rose 15.94, or 0.63%, to 2,560.83.


[R]11:00AM New York, 9:00PM Mumbai – Sensex in Mumbai fell sharply on the last day of trading, third weekly loss.[/R]

Sensex in Mumbai trading gained 148.96 points or 1.0% to close at 15,017.21 in volatile trading. In the broader market 807 stocks fell, 1,915 increased, and 47 were unchanged. Rupee in international trading weakened to 40.63 against one dollar from 40.53.

Daily turnover on the Bombay Stocks Exchange increased to 4,126 crore rupees from 5,221 crore rupees. Of the thirty stocks in index, 3 lost ground while 27 increased in value.

Recently listed Everonn Systems soared 15% to 592 rupees and was the most active stock in the BSE trading followed by Orbit Corporation, IFCI and Tata Steel. Orbit is reported to be in talks with Reliance Industries to sell its land holdings.

IDBI jumped 10% to 126 rupees on the news report that the company subsidiary is likely to push in retail brokerage business in the coming months.

Transport Corporation of India declined 2% to 112 rupees after it place 50,00,000 or 5 million shares, or 7% stake in the company to a FID Funds.

Saurashtra Cement jumped 10% to 63.40 after the company said that it will convert part of its convertible debt issued to India Debt Management or sell 14% stake in the company. The company plans to discuss and finalize this transfer in the board meeting on August 16th.

Shobha Developers fell 2.2% to 795 rupees after reporting first quarter earnings of 40 crore rupees, an increase of 140% on sales rise of 31% to 269 crore rupees.

India Hotels jumped 3% after the company decided to issue two rights issues and raise 844 crore rupees.

Bajaj Auto rose 2.5% to 2,377 rupees ahead of shareholder meeting. Consumer stocks jumped with defensive stocks climbing. Hindustan Unilever jumped 4% to 203 rupees followed by 3% rise in Godrej Consumer, 2.6% increase to 1,260 in Nestle India, and 1.2% increase in ITC.

Software exported fell led by 1.13% decline in Tata Consulting Services to 1,132 leading all the stocks in the Sensex. Infosys gained 0.2% to 1,955, and Wipro closed down 0.1% to 479 rupees.

NTPC, the power generation company, jumped 2% to 168 rupees on induction in Nifty index.


[R]09:45AM Wall Street opened higher. Nasdaq rallied 1%.[/R]

Wall Street opened Monday session in the positive after the Fed said that it would add liquidity, following a move by the Bank of Japan to inject $5 billion into the markets and an addition by the ECB of $65.3 billion. Commerce Department''s report showing a 0.3% increase in July retail sales also generated positive sentiment.

In corporate news, Goldman Sachs ((GS)) posted steep losses at its Global Equity Opportunities fund but said the firm made a $3 billion investment in it. Company''s shares added 1.4%. Sears Holding ((SHLD)) warned on Q2 profit but added $1.5 billion to its stock buyback authorization plan. The stock rose 4%.

Hovnanian Enterprises ((HOV)) added 1.8% after it said it delivered 31% fewer homes in Q3. The home builder also said it would take pre-tax charges of $90 million to $110 million on land impairment and development cost write-offs.

Blackstone Group ((BX)) was another notable gainer, rising 4% on a stronger-than-expected Q2 profit. In its first quarterly report as a public company, Blackstone posted revenue of $975.3 billion, below analyst estimates of $1.06 billion. The company''s IPO in June raised about $4 billion, but the stock fell short of expectations.

In the opening minutes of trading, the Dow Jones industrial average rose 82.27, or 0.62%, to 13,321.81. The Standard & Poor''s 500 index rose 10.12, or 0.70%, to 1,463.76, and the Nasdaq composite index rose 26.97, or 1.06%, to 2,571.86.


[R]09:00AM U.S. stock futures indicated a higher opening after recent steep declines.[/R]

U.S. stock futures pointed to recovery Monday, following a week of steep declines amid worries about the impact of subprime-mortgage defaults over the economic growth. However, overseas central banking injections helped relieve tensions. Banks are expected to release updates on the hits they have taken from the subprime crisis. Citigroup ((C)) reportedly lost more than $700 million in credit business in recent weeks.

In other corporate news, home builder Hovnanian Enterprises ((HOV)) added 1.4% in pre-market trading after it said it delivered 31% fewer homes in Q3. Sears Holdings ((SHLD)) warned on Q2 profit but added $1.5 billion to its stock buyback authorization plan. Sears shares rose 1.4%.

Among pre-market highlights, Blackstone Group ((BX)) jumped 6% after it posted a stronger-than-expected Q2 profit. The private-equity house also posted a loss of $52.3 million during the last 11 days of Q2 and warned that challenging financial market conditions continue.

On the economic news front, the Commerce Department said that U.S. retail sales rebounded in July, with total sales rising 0.3%, slightly below expectations of an increase by 0.4%. Stock futures accelerated throughout the morning. S&P 500 futures rose 17.1 points at 1,468.10 and Nasdaq 100 futures climbed 22.5 points at 1,951.50. Dow industrial futures rose 128 points.


[R]8:30AM New York, 8:30 PM Hong Kong – Asian markets corrected sharply on weakness in European and New York markets.[/R]

Asian markets rebounded after a volatile day of trading. Shanghai led the region with a gain of 1.5% followed by 1.2% advance in Korea, 1.0% rise in India and Australia, 0.65% addition in Singapore, and 0.45% increase in Hong Kong.

In Hong Kong trading stocks fell sharply at the opening but regained in the afternoon. Daily turnover on the main board dropped to HK$63.1 billion from HK$ 65.2 billion and volume on GEM market was reported at HK$0.7 billion, a decline of 20% from the previous session. Hang Seng Index at mid-day trading fell in the negative zone but attempted several rebounds in the afternoon trading and closed higher. Banks led the decliners. HSBC dropped 2% and Bank of East Asia fell 3%.

July consumer price index, a measure of inflation, jumped 5.6% on a sharp increase in food prices of 15.4% and meat price surge of as much as 45%. The inflation in June gained 4.4%. Expenses for food form 33% of basket of consumer spending. The rising food and energy prices have fueled the inflationary pressure and kept the inflation level above the target level for the last three of the six months. Inflation has been hovering around 3.5% for the first six months of the year and is likely to jump higher in the coming months. Inflation in non-food items jumped to 0.9%, lower than 1% in prior three months.

China reported July trade surplus of $24.4 billion, 67% jump from a year ago, and declined from $26.9 billion from June. The elevated surplus is fueling sharp rise in bank deposits, real estate prices, and stock market valuations. The rising demand is also fueling inflation in energy and food prices above the target set by the central bank. The People’s Bank of China said that the broadest measure of money supply, M2, rose 18% in July. Outstanding local currency loans in the month surged 16.6% and deposits in the local currency increased 16%. The foreign direct investment in the first seven months jumped 13% to $37 billion and keeping the economic growth rate at 12%.

Shanghai Composite Index led the region with a rise of 1.5% to close at 4,820.06, record high.

In Sydney trading ASX 200 gained 75.60 or 1.3% to 6,011.60. Of the total 201 stocks in the index, 136 gained, 55 declined, and 10 remained unchanged. Banks led the rising stocks after the Reserve Bank of Australia added liquidity in the system for the third day.

St. George Bank led the banking sector with a rise of 4% followed by Commonwealth 2.6% in National Bank of Australia, and 2.3% rise in Commonwealth Bank of Australia.

Leighton Holdings led the index stocks with a rise of 7.30% followed by 6.8% gain in Flight Centre, and 6% increase in Bradken, Crane Group, and SIMS Group. Perilya Ltd added 5.4% after falling 13.6% Energy Developers led the decliners in the index stocks with a fall of 9% followed by 5% loss in Queensland Gas, Arrow Energy, and 3% decline in Adelaide Bank and Sunland Group.

Crane Group Ltd. increased 6% after reporting annual income before one time charges rose 14.5% on 7% increase in sales to A$2.2 billion.

Qantas Airways said that it will set aside $40 million to cover charges from air freight price fixing.

For the third day in a row, the Reserve Bank of Australia added liquidity in the market to stem the rising interest rates and worries that credit crunch may stem economic growth. The bank added close $1.25 billion, lower than the money injected in the previous two trading days. The global injection of liquidity in local markets was carried out by the Federal Reserve Bank in Washington, the European Central Bank in Europe, and Central Bank in Japan.

In its quarterly policy, the bank also raised it inflation forecast to 3%, near the top of its range, and said that the inflation is likely to stay there during the next year. The bank also said that the economic growth is likely to increase to 4.5% at the end of the June of next year. The bank raised its target for cash rate to 6.5% last week, and forecasted today that the inflation will accelerate to 2.5% by the end of 2007 and will increase further to 3% in the year 2008.


[R]8:00AM Akzo Nobel agreed to acquire ICI for $16.2 billion.[/R]

Akzo Nobel ((AKZOY)), Dutch chemicals group, announced on Monday an agreement to acquire U.K. rival Imperial Chemical Industries in a cash deal worth 8 billion pounds ($16.2 billion) , or 670 pence a share. The transaction represents a 22% premium on the share price before the U.K. group announced it had received an approach in June. Akzo Nobel said that in addition to the bid price, ICI shareholders will also receive a second interim dividend of 5 pence a share.

Akzo''s previous offers of 7.2 billion pounds and then 7.8 billion pounds had been rejected by ICI. The acquisition of the maker of Dulux paints is expected to boost its coatings industry, enabling it to increase its global market share, as well as its presence in emerging markets, where ICI makes roughly a third of its sales.


[R]7:00AM New York, 8:00PM Tokyo – Market indexes in Tokyo rebounded as investors shrugged off U.S. mortgage market problems. Commodities, real estate, and financials led the rebound.[/R]

Nikkei 225 index plunged 35.96 or 0.2% to 16,800.95 at close with financial and brokerage stocks leading the decliners. Topix index dropped 1.29 to 0.1% close at 1,632.64.

The government reported economic growth in Japan in the second quarter slowed to an annualized rate of 0.5% from a revised 3.2% in the first quarter. The nominal economic growth rate was recorded at 0.3% and the measure of price changes, GDP deflator, fell 0.3% and domestic demand deflator gained 0.2%. Consumer spending continued to grow but at a slower pace of 0.4% in the second quarter. Another report showed that current account surplus rose to 1.52 trillion yen in June, 48% from a year ago. Japan is enjoying low unemployment rate of 3.7% but wages are still falling, keeping consumer spending weak.

The central bank in Japan added $5 billion of liquidity to keep interest rate below its target rate. The third injection of liquidity in as many days calmed the markets in the region. European markets also traded higher before Tokyo close. The Reserve Bank of Australia added $1.25 billion for the third day. While the amount of capital needed to maintain liquidity in the system was much lower than in the last two days of the last week.

According an analyst report cited by Nikkei News, nine largest Japanese financial groups have combined exposure to the U.S. subprime market of 1 trillion yen. The relatively light exposure in the Japanese banking system to the troubled mortgage market in the U.S. did not prevent investors selling stocks last week.

Of the 225 stocks in the index, 110 declined, 111 gained, and 4 were unchanged. Nisshinbo Industries, maker of textile products led the index stocks with a gain of 14.4% followed by rise if 11.4% in Mitsubishi Paper, 10.5% in Tokyo Dome Corporation, and 9.8% in Mitsubishi Materials. Fuji Electric, Comsys Holdings, Nippon Soda, and Hino Motors jumped 9%. Japan Tobacco, Olympus, and Nippon Express added 7%. Casio Computer led the decliners in the index with a loss of 9.4% followed by 9% loss in Nippon Meat, Odakyu Electric, and Tokyu Corp. Nitto Boseki, Toto, and Yokogawa dropped 7%.

Credit Saison dropped 5% on the news that the expenses from unpaid loans rose to 20.1 billion, up 41% from a year ago.

Energy and metal stocks rebounded from a sharp loss in Friday trading. Mitsubishi Materials surged 10%, Nippon Soda soared 8%, Nippon Oil up 4%, and Mitsui Mining & Smelting jumped 4%.