Global Investors Look for Answers

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

Markets around the world remained nervous and looked for direction for the U.S. credit market jitters. The Central banks around the world pumped liquidity to the system. Japan, U.S., Europe, and Australia added liquidty. The worldwide injection has now exceeded $200 billion in the last ten days. The Bank of England lent $620 million to an unnamed bank at penalty rate. Oil fell but copper traded firm. Gasoline in New York trading fell. Gold edged lower.

[R]4:30PM New York, 10:30PM Frankfurt, 2:00 AM Mumbai[/R]

Market averages in New York traded in volatile fashion as investors worried of the next fallout from the credit malaise. Much publicized meeting between the Senate Banking Committee Chairman, the Fed Chairman, and Treasury Secretary did not reveal any new information. Countrywide soared on buyout speculation. European stocks edged higher. Oil fell. Asian stocks reacted to local news and earnings report.[/R]

Dow Jones Industrial Average gained 0.12% or 42.27 to 13,121.35, Nasdaq lost 0.32% or 3.56 to 2,508.07, and S & P 500 lost 0.32% or 0.39 to 1,445.55.

FTSE 100 Index in the U.K. closed down 7.40 or 0.12% to 6,086.10, in Tokyo Nikkei 225 closed at 15,901.34, up 1.07% or 168.86, and in Brazil, iBovespa Index traded up 647.60 to 49,206.36.

Yields edged lower on 10-year U.S. bonds and closed at 4.59% and 30-year bond rose to close at 4.95%.The yield spread between the long and short narrowed as investors pile on to the treasuries.

Crude oil decreased $1.65 to close at $69.47 per barrel, natural gas closed down 22 cent to $5.82 per mBtu, and gasoline futures decreased 7.5 cents to close at 186.37 cents per gallon.

Gold dropped 30 cents in New York trading at $666.30 per ounce, silver lost 23 cents to close at $11.67 per ounce, and copper futures gained $4.00 to close at $7,072.00 per metric ton.

In New York, traders looked for direction and waited to hear comments after the close-door meeting between the Senate Banking Committee Chairman, Treasury Secretary, and the Fed Chairman. The comments from Mr. Dodd, Chairman of the Banking Committee did not shed any new light on the current credit market turmoil. Jeffrey Lacker, Richmond District Federal Reserve President, made a hawkish statement in the afternoon and singled out inflation as the Fed’s main target. The statement dampened the mood on Wall Street as investors were looking a signal on rate cut in the next meeting.

After a day of mopping up liquidity from the market, the Fed added $3.75 billion of liquidity in the market. The total funds added to the system now top $100 billion, higher than added during the September 11 crisis. Central Banks around the world added liquidity. In Japan, BOJ added nearly $7 billion and Australia pumped less than $300 million. New York Fed lowered fee it charges to lend securities to 0.5% from 1.0% today. Despite the higher liquidity the credit markets remain nervous and spread between the short and long term bonds remain narrow. The commercial paper market remains closed to borrowers other than prime borrowers and investors remain jittery in Asia, Europe and in New York.

American Eagle lowered its profit outlook and Staples lowered its sales outlook for the year. Saks reported earnings of 17 cents per share on revenue rise of 15% and revised upwards its revenue outlook. Target reported same store sales increase of 4.9% and profit increase of 13% in the second quarter on 9.5% rise in revenue to $14.6 billion.

Of the 30 stocks in Dow Jones Industrial Average 17 closed lower and 13 advanced. Of the 30 stocks 7 declined more than 1% and 5 stocks gained more than 1%. ExxonMobil led the index stocks with a fall of 2.2% followed by 2.1% decline in United Technology, and 1.5% decrease in Hewlett Packard. Verizon Communication led the gainers with a rise of 1.5% followed by 1.4% increase in Home Depot and 1.2% in Disney.

Of the stocks in S&P 500, 221 stocks closed lower and 275 gained, 4 stock closed unchanged. Countrywide Financial led the index stocks with a gain of 8.8% followed by 6.1% rise in E*Trade, 5.8% in LSI Corp, and 5% in Nvidia. Starwood Hotels and CB Richard Ellis gained 4.5%. UST Inc led the decliners with a fall of 6.6% followed by decline of 3.8% in Ambac, 3.5% in Murphy Oil, and 3.4% in Rowan Companies. Monster Worldwide, Jones Apparel, and Hess Corp dropped little over 3%.

Asian markets diverged as regional news and events dominated trading. Thailand led the region with a loss of 3.5% followed by declines of 3.1% in India, 2.8% in Singapore, 2.4% in Indonesia, and 2% in Philippines. Japan led the gainers in the region with a rise of 1.1% followed by 0.9% close after volatile trading in Australia, and 0.6% increase in Hong Kong.

In Latin Markets trading Chile led the region with a gain of 2.5% followed by Argentina with a rise of 1.54%, 1.2% in Brazil, and 0.21% in Mexico. Of the 60 stocks in the Brazil iBovespa index 49 closed higher and 11 closed higher. Cosan led the gainers with a rise of 5% in bovespa index followed by Cyrela Commercial with a gain of 5.1% and 4.3% increase in TIM and Tam.


[R]3:00PM New York, 8:00PM London - UK shares rose marginally in volatile trading, dragged by renewed U.S. credit marker fears. Bank and metal stocks trade mixed and supermarket shares fell. Bank of England extends $628 million emergency funding to unnamed bank. Virgin Media CEO resigns.[/R]

UK investors traded cautiously amid renewed U.S. subprime mortgage market problems. London rose 0.12% after a shaky morning trade, tracking higher U.S. shares, as Federal Reserve officials committed to resolving the credit market woes. Of the 102 stocks in the FTST 100 index, 51 fell, 49 gained and 2 were unchanged. Bottom 20 dragged by more than 1%, as gains were restricted to a maximum 2.5%.

In London trading FTSE 100 added 0.12% or 7.4 added 0.12% to 6,086.10 in volatile trading, as risk averse investors kept off equities. The Bank of England extended an emergency $628 million loan to an unnamed bank, at a punitive rate of 6.75%, 1% higher than current lending rate. The European Union is considering lifting a ban on UK beef exports, as the foot and mouth disease appears to be in control.

Of the index stocks in FTSE 100, BHP Billiton led with 2.04% followed by International Power plc rising 1.6%. British Airways added 1.52%, BT Group plc surged 1.5% and British Land Co plc pushing higher 1.42%. Financial shares, Standard Chartered and Schroders plc rose 1.31% each. Retail shares fell after the Competition Commission announced yesterday that it was probing supermarkets over alleged abuse of suppliers. Barratt Dev led with a decline of 3.25% followed by Experian Group sliding 2.5% and Punch Taverns lost 2.4%. Intercontinental dragged 2.33% while Drax Group finished lower at 2.29%. Retailers, Marks & Spencer, Tesco and Kingfisher fell 2.25%, 1.12% and 1.15 in that order. Northern Rock, Man Group and Barclays plc lost over 1% each. Metal shares rose helped by firming world commodity prices.

Virgin Media announced Tuesday CEO Steve Burch stepped effective today to pursue personal interests. Chief operating officer Neil Berkett will step in his shoes until a replacement has been found, said the company.

Housing group, Persimmon plc reports interim net earnings to June surged 10% to 196 million pounds, up from 179.1 million pounds reported in the comparative period in 2006. Earnings per share rose 65.2 pence from 60.3 pence, a year earlier. Sales dropped 3% to 1.51 billion pounds. Persimmon shares closed lower 2.2%.

In Frankfurt trading DAX 30 lifted 0.23% to 7 424.75 helped higher by motor shares, as banks dropped. Top five gained by over 1%. German investor confidence fell to negative 6 % in August from 10.4% in July, an independent survey by the ZEW Institute revealed Tuesday. Analysts had, on average, predicted a reading of negative 3 points. ZEW said there was concern that the weakness in the U.S. sub-prime sector could hit German exporters and banks.


Motor stocks rose reasonably. Bayer AG led rising 3.7% pushed by a takeover bid from Novartis AG followed by DaimlerChrysler up 2.93% and Volkswagen AG adding 2.5%. Henkel KGAA AG rose 2.1% with BASF AG rising 1.7%. Banks declined rattled by US credit market worries. Deutsche Postban fell 1.8% followed by Muenchener Rue-R ease 1.6%. E.ON AG and Deutsche Post RG shed 1.29% and 1.26% respectively. Man Ag lost 0.84% while Commerza Bank fell 0.70%.

[R]1:00PM NY, 5:00 PM Frankfurt European markets closed slightly higher, boosted by automakers and chemicals.[/R]

European stock markets finished a volatile Tuesday session slightly higher, as lower oil prices boosted the shares of automakers and chemicals firms helping them to offset losses from retailers, insurers and banks, generated by persisting worries about the strength of the global economy. Across the region, France closed up 0.4%, followed by Germany with 0.2% advance and the U.K., up 0.1%.

In Frankfurt automakers were leading gainers, with Volkswagen moving up 2.1% after posting a 10% increase in July sales. Chemicals firms were also supported by retreating oil prices, sending BASF shares up 1.7%. In deal-related news, Bayer gained 3.8% on speculation the company will get a takeover bid from Swiss drug maker Novartis.

In Paris Arcelor Mittal gained 2.6% after Credit Suisse Group raised its recommendation on global steel stocks. The maker of steel tubes Vallourec rose 2.7%. Tire maker Michelin and airline France-KLM benefited from lower oil prices, moving up 3% and 3.7%, respectively.

In London oil-sensitive stocks also gained, with British Airways rising 1.5% and Ireland's Ryanair Holdings adding 0.8%. Mining giant BHP Billiton climbed 2% as the price of nickel rallied. Xstrata, copper producer, climbed 1.2%. In the financial sector, Northern Rock declined 2.1% on negative comment from Bear Stearns. Shares of mortgage lender Northern Rock slipped 2% on worries about how it funds its mortgage lending.


[R]11:30AM Market averages traded in a volatile fashion.[/R]

U.S. stock averages rebounded in a volatile trading after Senate Banking Committee Chairman Christopher Dodd said Fed Chairman Ben Bernanke is ready to use all tools at his disposal to help relieve the liquidity issues shaking Wall Street.

The measures taken by the Fed so far included injecting more liquidity into the banking industry and cutting the discount rate. Investors keep optimism that the Fed will make a step further and will cut the more important federal funds rate.

In corporate news, Countrywide Financial ((CFC)) jumped 8% on speculations the U.S. biggest mortgage lender could be bought out by Berkshire Hathaway. TXU Corp. ((TXU)) was also sent higher by speculations that Warren Buffett's Berkshire Hathaway might acquire it.

The housing sector extended losses posted in the previous session.
Standard Pacific ((SPF)) and Toll Brothers ((TOL)) were downgraded by Bank of America, sending them down 7.8% and 3.6%, respectively.

Transportation stocks also moved notably down after two consecutive sessions of significant gains. Landstar Systems ((LSTR)) led the sector down with a decline of 3%. At the same time, internet stocks gained, led by RealNetworks ((RNWK)) after it announced that it will join forces with MTV by merging their online digital downloading services. The stock rose 5.9%.

In late morning trading, the Dow Jones industrial average rose 14.71, or 0.11% to 13,136.06, having moved in and out of positive territory. The Standard & Poor's 500 index was up 5.23, or 0.36%, at 1,450.78, and the Nasdaq composite index rose 8.98, or 0.36%, to 2,517.57.


[R]10:00 AM NY, 9:00PM Hong Kong – Stocks in Shanghai and Hong Kong lost its early momentum in trading at close. Earnings and rising metal prices dominated trading sentiment.[/R]

Asian markets diverged as regional news and events dominated trading. Thailand led the region with a loss of 3.5% followed by declines of 3.1% in India, 2.8% in Singapore, 2.4% in Indonesia, and 2% in Philippines. Japan led the gainers in the region with a rise of 1.1% followed by 0.9% close after volatile trading in Australia, and 0.6% increase in Hong Kong.

The composite index in Manila jumped 9.8% or 283.18 points to close at 3,167.52. The market opened after a holiday and surged to its one-day best gain since 2001. The rate cut in the U.S. helped the market rebounds when other markets in the region rebounded in Monday trading. The broader All-share index jumped 8% to 2,016.16.

In Shanghai trading CSI 300 Index increased 1.8% to close at 4,972.70 on earnings news and pilot program to let local investors invest in Hong Kong.

Bank of China jumped 1.5% after the government agency allowed local residents to invest in Hong Kong listed companies in a pilot program.

China Southern Airlines reported first half profit of Rmb308 million compared to a loss of Rmb854 million loss. The airlines also said that it has signed a deal with Boeing to buy 55 Boeing 737 planes to be delivered in the years 2011 and 2013. The company carried 49.2 million passengers in 2006.

Chalco, the largest aluminum maker in China, jumped 9.4% to Rmb39.70 after it reported net income decline of 5.2%. The company also agreed to buy 49% stake in Yunnan Copper. The third largest copper company stock increased 5.3%. Other copper companies rallied on the news and rising copper prices in the international trading. Jiangxi Copper jumped 5% and Anhui Tongdu Copper increased 4%.

In Hong Kong trading Hang Seng index closed 0.6% or 133.72 higher to settle at 21,729.35 after gaining as much as 4.7% in the day. Of the 39 stock in the index, 23 gained and 14 declined. The daily turnover was recorded at HK$116.8 billion and GEM market was HK$724 million.

Hong Kong Exchanges & clearing Limited soared 6.2% to HK$123 on the news that the pilot program with a China controlled bank will allow its local residents to invest its foreign currency in Hong Kong stock market. China controls $2.2 trillion in foreign reserves and is planning to allow local companies and citizens to invest in international markets and assets. Credit Suisse revised its rating on the exchange operator to 'neutral' on the news.

China Unicom and China Mobile jumped 2% and 1% respectively in the trading. Hong Kong traded shares of Chinese banks increased in trading. China Life jumped 3% and Industrial & Commercial Bank of China rose 2.4%.


[R]09:45AM Wall Street lacked direction at opening amid further credit markets problems.[/R]

Wall Street lacked direction at opening hours, reflecting further credit problems and uncertainty about what the Fed Reserve's next move might be to steady the markets and the economy.

Countrywide Financial ((CFC)) rose 2.9% on speculations it might be a takeover target due to losses related to subprime mortgages. Capital One Financial ((COF)) added 1.9% announced a decision to close its wholesale mortgage business and reduce 1,900 jobs.

Better-than-expected earnings reports from several retailers provided some boost to the market sentiment. Target Corp. ((TGT)) added 0.6% after the discount giant reported 13% earnings increase and improved gross margins. BJ's Wholesale Club ((BJ)) said Q2 profit jumped 37% on 8% sales growth, beating expectations. The stock rose 5%.

However, shares of Staples ((SPLS)) fell 1.8% after posting a lower-than-expected 11% profit rise. Shares of Saks ((SKS)) dropped 2.5% after the retailer said it narrowed Q2 losses to 17 cents a share, from 15 cents a share a year ago.

In the first hour of trading, the Dow Jones industrial average fell 14.80, or 0.11%, to 13,106.55, having moved in and out of positive territory. The Standard & Poor's 500 index was down 0.87, or 0.06%, at 1,444.68, and the Nasdaq composite index edge up 2.02, or 0.08%, to 2,510.61. Bonds were flat, with the yield on the benchmark 10-year Treasury note at 4.60%.


[R]09:00AM U.S. stock futures advanced, lifted by hopes the Fed Reserve will cut interest rates.[/R]

U.S. stock futures advanced on Tuesday, boosted by optimism that the Federal Reserve will make further steps by cutting its main base rate in order to relieve continuous global credit worries.

Banc of America Securities ((BAC)) downgraded a number of home builders, including Toll Brothers ((TOL)), Hovnanian Enterprises ((HOV)) and Standard Pacific ((SPF)), saying cancellations jumped as lenders pulled commitments from buyers already in the backlog and new buyers failed to qualify.

At the same time, Capital One Financial ((COF)) announced a decision to close its wholesale mortgage business and reduce 1,900 jobs as the credit card giant loses confidence in the profitability of originating home loans. The stock gained 1.2% in pre-market trading.

On the earnings news front, Target Corp. ((TGT)) said its Q2 net income rose 13% to $686 million, or 80 cents a share, up from $609 million, or 70 cents a share a year ago, meeting estimates. Company’s revenue increased 9.5% to $14.62 billion, slightly below expectations of revenue of $14.67 billion. The company's same-store sales rose 4.9%.

Among other retailers posting financial results, American Eagle Outfitters ((AEO)) reported a 13% profit rise and Staples ((SPLS)) posted 11% earnings rise.

After early losses, S&P 500 futures rose 3.8 points at 1,452.90 and Nasdaq 100 futures climbed 2.5 points at 1,900.25. Dow industrial futures rose 26 points.


[R]7:00PM Mumbai, 9:30AM New York – A lack of transparency in nuclear pact with the U.S. left the ruling Congress party coalition in chaos. Sensex fell 3% on the worries that general election may be called ahead of schedule.[/R]

Sensex in Mumbai trading dropped 438.44 points or 3.04% to close at 13,989.11 after rebounding from the low of the day with a loss of 485 points. CNX Nifty lost 134 points or 3.2% to close at 4,074.90. The fragile coalition between Congress party and Communists parties appear to be divided on nuclear pact with the U.S. Rupee in international trading recovered against the U.S. dollar to 41.10 from 41.33.

Communists controlled parties provide a support with 60 members in the parliament to Congress party with only 226 seats, 47 seats short of majority in 545 -member Lok Sabha.

The daily turnover on BSE increased to 4,201 crore rupees from 3,877.61 crore rupees and on NSE turnover gained to 10,779 crore rupees from 8,959 crore rupees. All 30 stocks in the Sensex fell.

Gokaldas Exports soared 10.2% to 252 rupees after the U.S. private equity firm Blackstone agreed to acquire 50% from the controlling Hinduja family and 20% from the public investors. After the deal Blackstone will control 70% in the company and Hinduja family will lower its stake from 69% to 19%.

Banks declined for the second day in a row led by 5.5% fall to 1,465.30 rupees in State Bank of India followed by 4.2% decline to 835.45 rupees in ICICI Bank, and 2% decrease to 1,105 rupees in HDFC Bank.

Reliance Industries is reported to have discovered oil reserve, one of the largest discoveries on the east coast so far, in the drilling of third well in Krishna Godavari basin. The stock in the general market decline fell 2.8% to 1,742 rupees.

Reliance Communications fell 4.2% to 486 rupees after jumping a day ago on market speculation that it is negotiating with Aircel. Reliance denied the rumors today. Reliance has a total of 37 million or 3.7 crore subscribers. Bharti Airtel plans to double its network towers to 80,000 in the next the six months. The stock dropped 0.7% to 821 rupees.

Software exporters fell as market worried that the current credit market volatility in the U.S. may affect earnings in the sector. Tata Consultancy Service fell 4% to 1,012 rupees, Satyam Computer declined 4.1% to 415 rupees, and Wipro lost 5% to 446.30 rupees.

Central Bank of India priced its IPO at 102 rupees and raised 820 crore rupees. The stock closed up 13% to close at 115.40 rupees on heavy volume of 2.4 crore shares. The issue was oversubscribed 62 times at the close on July 27th.

Real estate developers suffered in the market decline. Sobha Developers fell 4.7% to 750 rupees, Unitech declined 3.3% to 477 rupees, DLF lost 3.6% to 558 rupees, and Ansal API decreased 3% to 257 rupees. TCI Industries, the owner of Mukesh Mill properties in Colaba area of Mumbai jumped upper end of the daily limit 5% to 4,318 crore rupees. The stock has surged 5% every day for the last 28 trading sessions on the expectations that the mill will be acquired at a premium price by one of realtor companies. DLF recently agreed to pay 1,600 crore rupees for 38 acre land complex of DCM Shriram in New Delhi. Gayatri Projects fell 7.7% to 255 rupees after the company plans to raise foreign investor limit to 49%.

[R]6:00AM New York, 6:00PM Tokyo - Asian shares continue rally second day running amid fading investor concerns over US credit market worries. Japan deputy finance minister opposes interest rate hike. Nissan Diesel shareholders give thumbs up for Volvo take-over. Australia has A$3.7 billion budget surplus. Evans and Tate Ltd placed under receivership.]/R]

Asian shares finished higher second day running spurred by withering investor concerns over spreading losses arising from US mortgage market problems. Japan rose 1.1% while Australia added 0.96%. Hang Seng rose 0.62%, Seoul up 0.28% and Taiwan up 0.07%. Of the 225 Nikkei stocks, 171 shares rose, 47 fell and 7 were unchanged. Of the index stocks, top 10 gained in excess of 5%. In Sydney, of the stocks in ASX 200, 117 stocks gained, 73 dropped and 11 traded unchanged out of the 201 shares.

In Tokyo trading Nikkei 225 inched higher 1.1% to 15 901.34 pushed by gains in industrial shares. Exporters, banks, metal stocks traded firmer as well. The Bank of Japan pumped in a further 800 billion yen into the financial system Tuesday to ease rates growth, the sixth such intervention in a week. The yen firmed marginally to 14.69 against the dollar from 114.88 yesterday. Late last week, the yen had risen to record highs at 112 per dollar.

Japan deputy finance minister, Hiroki Tsuda told a news conference Tuesday government would not relish a rate hike. He is quoted by local media as saying: “Since stock markets and currency markets remain uncertain, we expect the BOJ to closely monitor market movements and continue to make appropriate decisions depending on market conditions.” Speculation is abuzz in the market that BOJ intends to lift the key accommodation rate from the current 0.5%.

The Automobile Inspection & Registration Information Association reported Tuesday the number of private cars owned by Japanese families rose 0.7% to 57.2 million at the end of March. Per household the number of privately owned cars fell to 1.107 due to slower sales of larger vehicles.

Industrial shares led the Tokyo upsurge. Of the Nikkei 225 index stocks, NGK Insulators led with a gain of 7.9% followed by Chiyoda Corp up 6.31%. Marubeni Corp rose 6% after clinching a 30-year electricity deal with a Jakarta government firm, PT Perusahaan Listrik Negara (Persero). Under the contract, Marubeni will supply electricity to western Java for the coming 3 decades. Mitsui & Co rose 5.9% while Nippon Sheet Glass added 7.75%. At least 19 shares fell more than 1% in the index. Meiji Seika led losing 2.72% followed by Tokyo Gas Co Ltd down 2.64%. Oji Paper Co Ltd and Takara Holdings lost 2.6% and 2.4% respectively while GS Yuasa Corp anchored the top 5 losses down 2.31%.

Nissan Diesel Motor Co shareholders on Tuesday ratified the truck maker's plan to become a wholly owned subsidiary of AB Volvo. In March, the Swedish truck maker had already acquired a 96% stake in Nissan Diesel. Nissan Motor closed up 2.5%.
In Sydney trading ASX 200 Index marginally rose 0.96% to 5 989.40 amid volatility in metal stocks. The Federal Government generated budget surplus of A$17.3 billion in the fiscal 2007 and exceeded the estimate by A$3.7 billion. The Aussie dollar closed higher at 0.8018 for one U.S. dollar from 0.7976 yesterday’s close. Traders remained anxious over a U.S. Federal Reserve meeting Tuesday for any more measure to ease tight liquidity conditions in the U.S.

Of the ASX 200 stocks, Mincor Resources led putting on 10.40% followed by Downer EDI Ltd up 8.51% and Jubilee Mines NL rising 7.5%. Minara Resources added 6.1% while Arrow Energy lifted 6%. Several other metal shares were seen on the downside. Compass Resource led shedding 5.34% with Pacific Brands falling 4.35%. Oil Search Ltd lost 4.12%, Centennial Coal down 3.82% and Sino Gold Mining retreating 3.24%.

Virgin Blue reported Tuesday full-year to June 30 net profit up 92.3% to A$216 million. Earnings per share increase to 20.6 cents from 10.7 cents while revenue was up 16.3% to A$2.2 billion. A final dividend of 2 cents per share, down from 25 cents per share was declared.