Nervous Trading in NY, Europe

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

Market averages in New York opened higher but lost the momentum in the afternoon trading. Weekly unemployment in the U.S. fell 2,000 to 322,000 at the end of the last week as expected. Bank of America invested $2 billion in Countrywide expressing the vote of confidence in the mortgage market. The Reserve Bank of Australia pumped more liquidity in the system. Isetan and Mitsukoshi in Japan agree to merge. Cement companies in India rally. ICBC Bannk and the Bank of China reported higher profit.

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

[R]Market averages in New York lost its early momentum and closed fractionally lower at close. European markets closed higher. Asian markets led the world indexes with several markets closing near 3% gains. The Bank of Japan left rates unchanged. Subprime loan debacle continues to drag investor confidence around the world.[/R]

Dow Jones Industrial Average lost 0.25 to 13,235.88, Nasdaq fell 11.11 to 2,541.69, and S & P 500 declined 1.57 to 1,462.50.

FTSE 100 Index in the U.K. closed down 0.90 or 0.01% to 6,196.90, in Tokyo Nikkei 225 closed at 16,316.32, up 2.6% or 415.58, and in Brazil, iBovespa Index traded down 216.08 or 0.42% to 51,528.48.

Yields edged lower on 10-year U.S. bonds and closed at 4.62% and 30-year bond rose to close at 4.921%.The yield spread between the long and short narrowed as investors pile on to the treasuries.

Crude oil increased 33 cents to close at $69.59 per barrel, natural gas closed up 2 cents to $5.60 per mBtu, and gasoline futures increased 3.05 cents to close at 191.95 cents per gallon.

Gold lost 30 cents in New York trading to close at $668.40 per ounce, silver lost 7 cents to close at $11.79 per ounce, and copper futures gained $179.50 to close at $7,201.50 per metric ton.

In New York averages opened higher but lost the momentum as trading progressed. The $2 billion investment in Countrywide by Bank of America was seen as a vote of confidence in the morning trading, but by afternoon trader moods had changed. Traders were wondering that favorable terms offered to Bank of America may indicate that the financial position of the loan portfolio may be weaker than anticipated by the mortgage lender. Countrywide jumped 15% at the open but closed up only a fraction. Investors kept wondering how many other companies out there with subprime portfolio that are worth less than they are valued on the book. Bank of China, second largest Chinese bank said that it has app $10 billion of subprime loan exposure and has set aside $132 million for loan losses. Mitsubishi UFJ, Japan’s largest bank, said that it has $2.6 billion and sixteen Taiwan based banks have 1.2 billion of exposure in the subprime and collateralized debts.

On the earnings front several companies disappointed investors. The Children’s Place fell 17% after company reported a loss and lowered its earnings outlook for the year. Aeropostale, Inc ((ARO)) second quarter earnings jumped to $14.7 million from $8.4 million and earnings per share rose to 19 cents per share from 10 cents per share a year ago. Bebe stores ((BEBE)) earnings in the fourth quarter fell to 21 cents from 23 cents a year ago on gross margin decline to 48.1% from 50.5%. JDS Uniphase reported larger than expected profit in the fourth quarter but optical business revenue fell 15% prompting the stock to lose 5%.

Of the 30 stocks in Dow Jones Industrial Average 18 closed lower and 12 advanced. Of the 30 stocks in index, 6 lost more than 1% and 3 gained more than 1%. Home Depot led the decliners with a loss of 2.1% followed by a fall of 1.7% in Boeing and General Motors. Hewlett Packard led the gainers with jumped 1.7%, McDonalds rose 1.2%, and IBM gained 1%.

Of the stocks in S&P 500, 347 stocks closed lower and 146 gained, 7 stock closed unchanged. Nucor led the decliners with a fall on 4.2% followed by losses of 4% in JDS Uniphase, Norfolk Southern, and Intuit. CSX, Janus and First Horizon lost 3.7%. Limited Brands led the gainers in the index with a rise of 5.5% followed by gains of 3.9% in Supervalu, 3.2% in Computer Science. Tyson Foods, Windstream, and Weatherford International jumped 2.7%.

Asian markets climbed higher across the region. Philippines and Taiwan led the region with a gain of 2.8% followed by rises of 2.7% in Hong Kong, 2.5% in Australia and Indonesia, and 2.8% in Taiwan. Japan jumped 2.6% on the Bank of Japan decision to leave the rates unchanged. India fell on the worries that sharp division within ruling coalition on the proposed nuclear deal with the U.S. may threaten the government.

In Shanghai trading CSI 300 gained 1.7% or 84.24 to close at 5,135.93. The Shanghai Composite Index jumped 1.1% to close at 1,415.18.

In European markets stocks closed higher across the region. Norway led the region with a gain of 0.75% followed by 0.3% rise in Switzerland, 0.2% in Germany, and 0.1% in France and UK. Spain fell 0.5%. German government reported fiscal surplus in the first half. The consolidated budget for the federal and regional governments and social security was recorded at 1.2 billion euros or $1.6 billion. The recovery in fiscal deficit was on the higher tax revenue. The historic budget surplus was last recorded in the second half of 2000 and only twice in 1973 and 1989 according to the Federal Statistical Office.

In Latin Markets trading Argentina led the region with a gain of 1.2% followed by Mexico with a rise of 0.6%, Brazil with a gain of 0.02%. Chile fell 0.23%.

Of the 60 stocks in the Brazil iBovespa index 22 closed higher and 38 closed lower. Cyrela and Electrobras led the decliners with a loss of 4.8% in the index stocks. Natura and Aracruz fell more than 3%. Telesp led the gainers in the index with a rise of 5.2% followed by 4.3% gain in Brasil Telecom, and 3.3% rise in Souza Cruz and Cyrela Commercial.


[R]12:00PM New York, 17:00PM London-London shares rose marginally in cautious trading. UK gets EU approval to resume beef exports. Second quarter business investment surged 7.4%. Competition Commission to lift ban on prices on four giant bank.[/R]

London shares closed virtually unmoved in nervous trading Thursday. Financial and consumer shares led. After rising 1.1% in early morning trade, London shares rose a slender 0.02%, tracking weaker US share after adding 1.81% in yesterday’s trading. Of the 100 FTSE shares, 54 rose, 45 dropped and 3 were unchanged.

In London trading FTSE 100 rose 0.02% or 1.4 to 6 197.40 in mixed trading, as US shares opened flat. Financial and consumer shares led. The pound rose beyond $2 on speculation the Bank of England will raise interest rates. Office of National Statistics announced Thursday business investment in Q2 up 7.4% year-on-year and up 0.8% on Q1 thanks to increased expenditure by non-manufacturing industries, both private and public. Compared with 2006 Q2, total non-manufacturing investment rose 8.1% and private sector manufacturing pushed higher 2.4%. Public corporations manufacturing fell 29.2 %.

Office of National Statistics reported production of commercial vehicles in the three months to July increased by 2.2% compared to three prior three months and from a year ago sales were up 9.9%. Total car production, during the review period rose 5.4%. Home production decreased by 5.9% in this period while export production increased by 9%. The Office said on an average 131,000 cars a month were produced. At least 103,000 cars were for the export market and 28,000 for domestic market.

European Union veterinary experts agreed Thursday to lift the two-week old London meat export ban next week. EU said UK had made satisfactory progress on controlling foot and mouth disease. Restrictions will be limited to farms in a 10km zone around the source of the outbreak southwest of London. The UK Meat and Livestock Commission said it has lost more than 30 million pounds to foot and mouth.

Financial and consumer stocks reasonably rose. Banks and mortgage lenders gained after the news that Bank of America has invested $2 billion in subprime lender Countrywide Financial. The stocks of northern Roc and HBOS gained. Of the FTSE 100 index stocks, Schroders plc led gainers rising 3.83% followed by Schroders plc NV up 3.05%. Northern Rock added 2.82%, Tesco plc and Sabmiller plc gained 2.70% respectively. Financials Experian Group, Man Group and Intercontinental all rose more than 1%. Hammerson led the decliners falling 2.91% followed by Segro plc down 2.68%. Persimmon lost 2.31% while British Land Co plc and Land Securities dropped 2.18% and 1.99% respectively. Xstrata, Lonmin plc and Rolls Royce fell after leading gains yesterday.

The Competition Commission said today it will allow Barclays, HSBC, Lloyds TSB and Royal Bank of Scotland to charge for market prices on small and medium sized business banking products. The controls were imposed after a two-year study of the market for banking services for SMEs concluded in 2002 that the four big banks had been making excess profits of £725m a year in England and that the market did not operate in the public interest. Competition Commission Deputy Chairman Christopher Clarke said in the statement that the measures “are no longer appropriate”.

HSBC, Barclays plc and Royal Bank of Scotland finished lower 1.05%, 1.16% and 0.87% respectively. Lloyds TSB group ended higher 0.27%.

[R]12:30PM New York, 10:00PM Hong Kong - Stocks in Asia rose across the region. The Bank of Japan left rates unchanged. Stocks in shanghai closed higher, fourth record close in a row. ICBC and the Bank of China profit jump.[/R]

Asian markets climbed higher across the region. Philippines and Taiwan led the region with a gain of 2.8% followed by rises of 2.7% in Hong Kong, 2.5% in Australia and Indonesia, and 2.8% in Taiwan. Japan jumped 2.6% on the Bank of Japan decision to leave the rates unchanged. India fell on the worries that sharp division within ruling coalition on the proposed nuclear deal with the U.S. may threaten the government.

In Shanghai trading CSI 300 gained 1.7% or 84.24 to close at 5,135.93. The Shanghai Composite Index jumped 1.1% to close at 1,415.18.

Industrial & Commercial Bank of China first half income jumped 61% to Rmb41 billion from Rmb25.4 billion a year ago. Net fees and commissions jumped 89% to Rmb14.9 billion. The number of credit cards issued jumped 60% to 16.8 million and bank card issues rose 12% to 211 million in the last six months. Capital adequacy ratio was reported at 13.7% at the end of the first half. Assets under custody jumped 74%, wealth management sales increased 92%, and investment banking business income rose 33%.

The banks in China have come under pressure to raise their capital base in the last three years. Several banks have sought the funds from capital markets to lift the equity in the company.

The Bank of china, third largest bank, reported first half income of Rmb29.5 billion, an increase of 52% from a year ago and return on equity increased 1.8% to 15.18% and return on assets increased to 1.16%. The net interest income at the bank rose 29.6% to Rmb71.027 billion. Net interest spread and net interest margin widened by 0.37% to 2.49% and 0.39% to 2.66%. Total domestic personal lending rose 16% and deposits increased 6.4%. Capital adequacy rose to 13.39%.

Citic Securities surged 6% after the news that the company plans to raise Rmb25 billion or more than $3 billion to expand in asset management and investment banking business. China Vanke, the largest real estate developer in China, added 2.3% in addition to 3% rise in yesterday’s trading. The company plans to raise Rmb10 billion and expand its residential construction business.

Australian shares finished stronger on gains in metal and mining sector and strength in U.S. and European markets. Sydney climbed 2.6%, rising together with several Asian shares. Of the 201 shares in the ASX 200 index, 175 gained, 18 dropped, and 8 were unchanged. Of the index stocks, 10 gained between 6% and 11%.

In Sydney trading ASX 200 Index gained 2.58% or 154.7 to 6,159.70 on firming metal shares. The Aussie dollar firmed marginally to 80.33 cents for one American dollar after Bank of America invested $2 billion in Countrywide Financial. The investment is widely viewed as a vote of confidence in the company and mortgage market.

Of the Sydney shares, metals rallied sharply on rising world mineral prices. In the ASX 200 index, Minara Resources paced gainers rising 10.71% followed by Compass Resource closing higher 10.03% Fortescue Metals rose 9.83 % with Energy Resources and Pacific brands surging 9.4% and 8.6% respectively. Strong results from BHP Billiton yesterday added further flair to metals. BHP, Mincor Resources, Murchison Metals, Jubilee Mines, Rio Tinto Ltd and Acquarius Platinum all gained over 6.3%. Financial and real estate shares participated in the rally.

Of the ASX 200 Index stocks, media shares fell. Dyno Nobel Ltd sank 7.84% followed by Onesteel down 3.62%. Aristocrat Leisu lost 3.6%, Western Australia Newspaper fell 3.4% and Allco Finance Group dropped 3.16%. Fairfax Media shed 2.07% while News Corp CDI B eased 0.37%.

Gunns Ltd is now majority shareholder of timber products company Auspine after receiving wider interest in its takeover offer of A$332 million. The firm now controls over 50% of Auspine, up from 49.83% yesterday. Gunns is offering A$6.15 or 1.83 Gunns shares for each Auspine share. The offer closes at the end of this month lifting the stock by 2.65%.

Amalgamated Holdings said today full-year to June 30 net profit rose 38.3% to A$82.2 million (versus A$59.441 million 2006) underpinned by higher earnings from its international cinema business, Thredbo Alpine resort and property. The result was after one-off items and income tax. On a normalised basis, net profit was $81.914 million, up 11.2 % on prior year.

Ford Motor announced Thursday it had suspended more than 1,200 striking workers. Workers claim the firm owes them in excess of A$25 million in unpaid bonuses and entitlements. The negotiated settlement between the striking workers and the company is expected in a week.


[R]10:00AM New York – Bank of America investment in Countrywide spurred stocks at the opening. After thirty minutes investors grew more cautious and averages pared gains.[/R]

Market averages at the opening rallied. The news of cash infusion from Bank of America in Countrywide provided added cushion that the company needs and is widely seen as a vote of confidence in the mortgage market and in the company. The stock rallied 15% at the opening but quickly settled to a gain of 5%.

Bank of America invested $2 billion in convertible preferred stock with annual yield of 7.25% at a conversion price of $18 a share within the next 18 months. At the conversion the bank will own between 16% and 17% stake in Countrywide. The Bank of America with this investment, if fully converted, will become the largest investor in the company. AXA, French insurance company holds 11% of stocks in Countrywide followed by funds controlled by Barclays and Legg Mason. The deal received a quick approval from the regulatory authorities.

The quality of the mortgage portfolio at Countrywide has deteriorated in the last one year. In the current housing market conditions investors expect a flow of bad news from the housing market is expected to continue. Loans that are overdue at least 30 days or more have risen to 5.7% from 1.6% a year ago. Approximately $600 billion of mortgages issued under variable rates are expected to be re financed in the year 2008. However, a significant percentage of homes have loans that exceed market value.

The Children’s Place ((PLCE)) reported second quarter loss of $27.1 million on net sales rise of 7% to $424.3 million including sales at Disney brand stores. The company revised its annual earnings guidance between $2.25 and $2.40 lower than a consensus estimate of $2.75 polled by 123jump. The stock declined 18% on the news. The company also expects a delay in SEC filings related to options investigation.

European markets were trading fractionally higher led by 0.7% gain in Paris and Germany. In the overnight trading Asian markets rose sharply led by near 3% gain in Philippines, Taiwan, Indonesia and 2.6% gain in Japan. The Bank of Japan left the rates unchanged but said the bank is prepared to raise rates if necessary.

[R]8:30AM New York, 6:00PM Mumbai – Sharp division in ruling coalition roil market sentiment in the afternoon trading.[/R]

Politics came back to haunt stock market in the afternoon trading.

Sensex dropped 84.7 or 0.6% to close at 14,163.98 after adding nearly 300 points by the mid-day trading. Markets across Asia rose sharply led by the Bank of Japan to decision to leave the rates unchanged. In Mumbai trading traders worried that the coalition government may be heading for turbulent times. CNX Nifty dropped 38.20 or 0.9% to close at 4,114.95.

The news from the Central Committee of CPI – Marxist Party left investors nervous. The party passed resolution to oppose nuclear pact with the U.S. and warning to the government to face serious fallout if negotiations with the International Atomic Energy Agency and Nuclear Suppliers Group continued.

The press release published on the party’s web site said that “the Central Committee does not want the current crisis to affect the government. However, this is contingent upon the government not proceeding further with the agreement. The Central Committee, therefore, authorises the Polit Bureau to take whatever necessary measures to see that the agreement is not operationalised.” The press release also noted the majority in parliament is against this nuclear deal.

On a separate note in a response to the party position, Prakash Karat, General Secretary of the party said that the ‘’party does not share the views of the BJP on the matter, since their approach has been to bargain with the United States for a favorable nuclear adjustment while accepting the status of a subordinate ally of the US.”

Of the stocks traded on BSE, 1,749 declined, 943 gained and 67 were unchanged. Of the 30 stocks in the index, 15 gained and 15 declined. Daily turnover on BSE rose to 4,779 crore rupees from 4,404 crore rupees in previous session. On NSE, turnover increased to 11,491 crore rupees from 10,533 crore rupees a day ago.

Gainers

Cement stocks rallied on the news that Swiss company Holcim SA has picked up 3.9% additional stake Ambuja Cements at 154 rupees for a total price of $200 million. The news lifted the sector. Birla Corporation jumped 6.8% to 263 rupees, India Cements increased 3.9% to 218 rupees, ACC gained 2% to 972, and Ambuja Cement added 1.2% to 132 rupees.

ITD Cementation soared 15% 462 rupees after the news that the company parent was awarded order of 893 crore rupees from Delhi Metro Rail Corp.

ITC, cigarette maker, jumped 2.3% to 162 rupees on the news that the company is planning to set up convenience stores in rural locations and plans to increase the number of stores in the network to 200 by the end of fiscal year in March 2008. The current large format retail store Choupal Sagar will be expanded to from villages to small towns.

Bharti Airtel jumped 1.2% to 858 rupees on the news that it is planning a sale of its tower business. Earlier the company said that it plans to increase number of towers to 80,000 from 40,000 in the next twelve months.

Larsen & Toubro increased 0.9% to 2,405. The company won repeat business of $70 million from a shipbuilding company in the Netherlands.

Birla Kennametal jumped 4.6% to 255 rupees after the board approved the five for one stock split. The 10 rupees stock will be valued at 5 rupees after the division.

Real estate stocks increased on firmness in financial stocks. But banks lagged. Omaxe led the sector with a sharp rise of 10% to 301 rupees followed by 2.2% or 252 rupees increase in Ansal API.

Decliners

Grindwell Norton lost 4% to 142 rupees after company sold its stake in Lincoln Hellos for 100 crore rupees.

Reliance Energy and ONGC fell 2.2% in the market volatility. Banks faced selling on higher volume. State Bank of India lost 3.1% to 1,412 rupees followed by 2.5% decline in ICICI Bank to 826 rupees. HDFC Bank dropped 1.3% to 1,105 rupees.

[R]7:00AM New York, 8:00PM Tokyo-Japanese stocks jumped tracking stronger US and European stocks. Bank of Japan votes to keep key bank rate at 0.5%. Japan and New Zealand discuss oil-sharing agreement. Supermarket sales fall 3% in July. Isetan to buy Mitsukoshi Ltd for 295 billion yen.[/R]

Japanese shares climbed higher spurred by growing investor confidence at home and in the U.S. Nikkei 225 jumped 2.61% helped by gains in financials and industrial shares. Of the stocks in the index, 202 gained, 18 retreated while 5 remained unchanged. In the index, 28 stocks gained over 5% and 5 dropped over 1%.

In Tokyo trading Nikkei 225 firmed 2.61% or 415.68 to 16,316.32 helped higher by financials and industrials stocks that tracked gains in Europe and US. The Bank of Japan decided Thursday by a majority vote of 8 to 1 to keep its key bank rate 0.5%. BOJ Governor Toshihiko Fukui, however, said today the bank will keep an eye on rates so they don’t fall too low. The yen dropped sharply, as stocks rose. Against the dollar, yen closed at 7-day lows at 115.92 from as low as 112 last week.

Japan’s Ministry of Economy, Trade and Industry indicated Thursday it will expedite talks with New Zealand for a bilateral agreement on an oil-sharing program using their stockpiles. Under the deal, New Zealand would be allowed to acquire options from Japanese firms to ensure oil procurement in the event of emergencies.

Japanese supermarket sales fell 2.8% in July year-on-year, the Japan Chain Stores Association said Wednesday. Overall sales at 8,658 outlets run by 79 companies totaled 1,180,383 million yen. On a same store basis, food sales fell 0.9% and clothing sales declined 10.2%.

Of the Nikkei 225 stocks financials and industrials shares gained. Komatsu Ltd led gains rising 8% followed by Sojitz Corp up 7.64%. Fujitsu Ltd gained 7.58%, Sumitomo Metals rose 7.53% while Sumitomo Min pushed higher 7.4%. Financials surged. Mitsui Trust Holdings, Marubeni Corp, Mizuho Financial, Sumitomo Mitsui, Mitsubishi UFJ F gained over 4%. Printing and paper manufacturing shares fell. Sapporo Holdings led decliners shedding 2.77% followed by Tokyu Corp down 2.06%. Nippon Suisan and Nicherei Corp lost 1.9% and 1.32% respectively. Toto Ltd eased 1.24%.

Millea Holdings Inc said Wednesday it expects to book an appraisal loss of some 1 billion-yen on investment in financial products incorporating U.S. subprime mortgage loans. The company said, however, its exposure to the US mortgage loans was ""limited"". Millea closed up 1.9%.

Departmental store, Isetan Co. will buy Mitsukoshi Ltd. for 295 billion yen by way of share allotment, the company announced Thursday. Mitsukoshi shareholders will receive 0.34 of a share in the combined company for each they already hold. Sales at the merged enterprise are forecast to rise to $14 billion annually. Isetan Co and Mitsukoshi Ltd shares closed higher 1.08% and 0.72% respectively.