Record Lows in Dollar Lift Metals

123jump.com Staff
20 Sep, 2007
New York City

Dollar declined to historic levels against several currencies lifting metals prices and stocks of commodities companies. Dollar fell to a three-decade low against Canadian dollar, fell below $1.40 mark against euro, and reached a nine-year low against Indian rupee. Goldman Sachs earnings jumped 79% and that at Bear Stearns fell 61%. ConAgra reported earnings rise of 10%. Nickel soared 10%, zinc jumped 5% and gold closed 1.4%. Oil closed above $83, record high for the fifth day in a row.

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

[R]Rise in oil and metals prices dominated trading in New York trading. Dollar fell to three-decade low against Canadian dollar and fell below $1.40 against euro.[/R]

Dow Jones Industrial Average fell 48.86 or 0.35% to 13,766.70, Nasdaq decreased 12.19 or 0.46% to 2,654.29, and S&P 500 declined 10.29 or 0.66% to 1,518.74.

FTSE 100 Index in London lost 31.00 or 0.48% to 6,429.00, in Tokyo markets surged to 16,413.79, up 0.20% or 32.25, and in Brazil, iBovespa Index traded lower 0.62% or 357.78 to 56,906.44.

Bond Yields gained on 10-year U.S. bonds to 4.68% and 30-year bond to close at 4.95%.

WTI Crude oil increased $1.39 to close at $83.32 per barrel, fifth record close in a row for a front month contract, natural gas closed down 17 cents to $6.008 per mBtu, and gasoline futures increased 4.17 cents to close at 213.51 cents per gallon.

Gold gained $10.40 in New York trading to close at $739.90 per ounce, silver closed 36 cents higher to close at $13.47 per ounce, and copper for front month delivery in London added $301.00 to $7,919.00 per pound.

Of the 30 stocks in Dow Jones Industrial Average, 20 closed lower, 9 closed higher, and one was unchanged. Home Depot led the decliners with a fall of 2.4% to $35.52 followed by 2.2% drop in Citigroup to $47.20, and 1.5% decline in Disney to $34.04. Boeing led the gainers with a rise of 1.2% to $101.25 followed by 1.1% increase in AT&T to $42.03, and 0.6% rise in Hewlett Packard to $50.10.

Of the stocks in S&P 500, 107 stocks closed higher and 391 fell, 2 closed unchanged. Nineteen stocks declined more than 4%. Circuit City fell 18% to $8.67 after reporting earnings and lowering outlook for the rest of the year. Followed by losses of 7% in DR Horton, 7% in Pulte Homes, and 6.6% in KB Home, and 5.9% in Masco Corp. Precision Capstone led the gainers with a rise of 5% followed by 3% in U.S. Steel, and 2.9% in National Oilwell.

In New York deals, dollar, earnings, and oil dominated news. Dollar reached to three decade low and reached a near parity against Canadian dollar. Dollar also fell against euro and broke through $1.40 level and fell to a nine-year low against Indian rupee. Traders were also unsettled by the speculation that Saudi Arabia may remove its dollar peg to its currency. Saudi Arabia has not followed through and lowered its interest rate after the Fed rate cut. Market is rife with the speculation that the peg is likely to be removed which Saudi government later in a day denied. The lack of statement from the Fed on dollar after the rate cut added to dollar’s weakness. Several traders have speculated that the dollar is likely to trade below $1.50 to a euro if the Fed does not change its course.
Commodities rose on the weakness in dollar, lifting agricultural products, metals, oil, and precious metals to elevated levels. Gold jumped 1.4% to $732 and oil increased and traded near $82 per barrel. Nickel led the metals surge with a rise of 10% followed by increase of 5% in zinc, 4% in copper, and 3.3% in aluminum.

Before the stock market opening, Goldman Sachs and Bear Stearns reported earnings. Goldman ((GS)) earnings jumped 79% and that at Bear fell 61%. Third quarter earnings at Goldman jumped sharply on the mortgage bonds shorting and sharp rise in revenue in asset management and principal trading. Bear Stearns earnings declined on sharp losses in mortgage markets.

FedEx ((FDX)) dropped after revising its outlook for the rest of the year but reported better than expected earnings. Carnival ((CCL)) and ConAgra ((CAG)) jumped after reporting better than expected earnings.

AthenaHealth jumped 97% in the public offering. The medical software company priced its initial public offering at $17.50 per share but closed at $35.50.

Borse Dubai and Nasdaq have entered into agreement in a 3-way to a deal that may have far reaching impact around the world. The landmark deal is likely to have global repercussions as exchanges consolidate. Borse Dubai will acquire OMX and sell the Swedish exchange to Nasdaq and acquire 19.9% stake in the U.S. exchange. The Nasdaq will sell 28% of its 31% stake in London Stock Exchange to OMX. However, rival bidder Qatar Investment Authority is considering a higher bid for OMX and said that it has acquired 20% stake in LSE.

In Latin Markets trading Argentina led the decliners with a fall of 0.76% followed by losses of 0.6% in Brazil and 0.09% in Mexico. Chile gained 1.5%. Of the 63 stocks in iBovespa index 18 gained, 43 lost, and 2 closed unchanged. TAM led the decliners with a loss of 4.8% followed by declines of 4% in Copel, and 3.9% in Duratex, and 3.6% in Tele Norte. Ljoas Renner led the gainers with a rise of 3.9% followed by increases of 2% in Light, and 1.6% in Embraer. Vale Rio Doce gained 1.4%.

[R]2:00PM New York, 7:00PM London - UK stocks tumbles as Northern Rock shares continue sliding. The Bank of England blames British and European banking laws for the banking crisis. Dollar declines in international trading.[/R]

London stock retreated to close lower 0.48% or 31 to 6,429.00. Northern Rock fell 27.9% after the U.K. Treasury said it would not take responsibility of new accounts deposits at the lender. UK will not protect any new accounts opened at the bank after the mid-night of Sept 19th and the protection guarantee excludes debts and other hybrid securities issued by the company.

Northern Rock closed at 185 pence with a total loss of 84% for the year. Stocks of some banks marginally advanced but future of Northern Rock is increasingly in unchartered territory.

Bank of England Governor Mervyn King has distance himself from failing to deal with banking crisis by saying the British and European Union laws restrained the London Bank to deal with the worst banking crisis since 1973. King extended 10 billion pounds in cask to banks, a reversal from his earlier position to avoid assisting banks in need of extra liquidity. A credit squeeze caused by the collapse of the subprime mortgage market in the U.S. forced Northern Rock to seek an emergency loan from the central bank last week. This culminated heavy withdrawals despite guarantees from the government that it will safeguard their savings.

The Office of National Statistics reported Thursday that retail sales in August increased 0.6% or 4.9% for the year largely driven by heavy discounts. Retail sales increased 0.7% in July and the increase in August sales was unexpected. The August sales increase was driven by 1.3% increase in food sales, 1.6% in clothing sales and at non-food sales increased 0.2%. Consumers in the UK are stretched with 1.3 trillion in consumer debt. Rising home values have allowed consumers to borrow against home equity and splurge into non-essential purchases. Rising interest rates have so far not crimped the consumer spending.

Borse Dubai and Nasdaq have entered into agreement in a 3-way to deal. The landmark deal is likely to have global repercussions as exchanges consolidate. Borse Dubai will acquire OMX and sell the Swedish exchange to Nasdaq and acquire 19.9% stake in the U.S. exchange. The Nasdaq will sell 28% of its 31% stake in London Stock Exchange to OMX. However, rival bidder Qatar Investment Authority is considering a higher bid for OMX and said that it has acquired 20% stake in LSE.

Of the FTSE 100 shares, Northern Rock and Alliance led the decliners with a loss of 27.9% and 7.3% respectively followed by loss of 5.8% in Kingfishers, 5.3% in Home Retail group, and 5% decline in Persimmon. Carnival led the gainers with a rise of 7% followed by increases of 4.2% in Friends Provident, 2.8% in Sainsbury, and 1.9% in Kazakhmys, and 1.6% in Anglo America.

[R]1:00PM New York, 10:30PM Mumbai – Rupee strengthens to a nine-year high lifting realty stocks and lowering software service companies.[/R]

Sensex in Mumbai gained 0.19% or 31.31 16,354.06 to close at a record level for the second day in a row.

The CNX Nifty gained 0.23% or 10.75 to 4,743.10. Mixed trading characterized on the Bombay Stock Exchange with 1,574 stock declining, 1,196 rising, and 56 remained unchanged. The Bombay Stock Exchange turnover was at the elevated level for the second day in a row to 7,033 crore rupees, though decline from 7,486 crore rupees.

Of the 30-stock in Sensex, 13 stocks advanced and 17 fell. IT companies dominated the top five losers in the Sensex. Wipro led the decliners in the index with a fall of 3.2% while Reliance Energy led the gainers with a rise of 4.8%. Mahindra and Mahindra was up 2.6% to 760 rupees, Hindalco Industries added 1.80% to 162 rupees, and ITC increased 3.5% to 193 rupees were among the risers in the Sensex.

Of the BSE stocks, DLF was most top traded and ended with a net turnover of 372.22 crore rupees. Net turnover for Wipro was at 231.32 crore rupees, Indiabulls Real Estate, 137.38 crore rupees, Reliance Natural Resources, 136.54 crore rupees and Reliance Industries, 130 crore rupees.

IT stocks slipped as rupee gained against the U.S. dollar in the wake of 0.5% cut of interest rate by the U.S. on Tuesday. The rupee hit a nine-year high at 39.67 to a dollar. The rupee has advanced 2.5% in the last two days, since the Fed lowered the rates.

Exports accounts for 50% revenue of the software services exporters. Wipro lost 3.2% to 433 rupees on huge volumes of 54 lakh (5.4 million) stock volume. Satyam Computers lost 1.75% to 422 rupees, Infosys Technologies dropped 2.9% to 1,800 rupees, and TCS declined 2.2% to 1,000 rupees.

Speculators lifted real estate stocks on the hope that lower interest rate in the U.S. will attract higher investment in the sector in India. Realty companies surged on the hopes that more investments will be announced by the international investors. Indiabulls Real Estate soared 10% to 577 rupees, DLF jumped 5% to 742 rupees, and Sobha Developers increased 4% to 827 rupees. Separately DLF was in the news that the company is exploring ventures with luxury retailers in Europe and also looking to enter in a partnership with large format retailers. Carrefour is the most talked about name in the rumor mills.

Reliance Energy surged 4.8% to 991 rupees on a heavy volume. News reports suggested that the company is exploring for coal mines in Indonesia, Australia, and Africa to provide a stable source of fuel for its power generating facilities. It plans to raise $12.0 billion in debt over the next five years to expand generation capacity nearly 16 times to 15,000 MW as noted by Capitalmarket.com publication.
Reliance Industries was up 1.02% to 2195 rupees on 5.96 lakh shares, Larsen & Toubro jumped 2.9% to 2,747 rupees. The company is seeking to acquire an undisclosed equity in Feedback Ventures, an integrated infrastructure services firm.


[R]11:00AM New York – 4:00PM London – Three way deal between Dubai, Nasdaq, and OMX involved a stake sale in LSE. Qatar is considering revising its higher offer for OMX.[/R]

Borse Dubai, recently formed entity in August of this year from the merger of the Dubai Financial Markets and the Dubai International Finance Exchange has acquired stake in 206 year old London Stock Exchange in a three-way deal with Nasdaq and Sweden’s OMX.

Nasdaq Stock Market Inc has agreed to sell its 28% stake in London Stock Exchange Group to Borse Dubai. Dubai will also take a 19.9% stake in Nasdaq. The two-step complex deal still needs regulatory approval from the U.S. authorities, which is not guaranteed.

Borse Dubai will acquire after paying cash 230 Swedish Kroner or $34.60 per share all of OMX and then sell the entire stake in OMX to Nasdaq for SKr 11.4 billion or $1.7 billion and a 19.9% stake in Nasdaq. The deal values Nasdaq at $41.01. Borse Dubai will also purchase 28% stake in London Stock Exchange from Nasdaq for 14.14 pound or $28.30 per share. Nasdaq will keep its 3% stake in LSE.

Borse Dubai offer for OMX values the entire exchange at SKr 27.7 billion Borse Dubai will have limited voting power of 5% on merged entity of Nasdaq and OMX and will have only 2 of the 16 board seats, according to Nasdaq.

In London trading LSE stock jumped to 1,603 pence and Nasdaq stock in the U.S. increased to $2.06 to $38.08.

Dubai International Finance Exchange, subsidiary of Borse Dubai, will enter into a strategic partnership with Nasdaq and license technology from newly formed Nasdaq and OMX.

The press release from Nasdaq also noted that “Borse Dubai will retain approximately 42.6 million of the NASDAQ shares (representing approximately 19.99 per cent of the fully diluted share capital it receives, restricted to 5.0 per cent of voting rights) with the remaining approximately 18.0 million NASDAQ shares (representing approximately 8.4 per cent of the fully diluted share capital) being held in trust, with an affiliate of Borse Dubai as beneficiary, and managed by an independent trustee. These shares will eventually be sold by the trust. While in the trust, these shares will be voted by the trustee pro rata with the votes of NASDAQ's other shareholders. Borse Dubai will be limited to a five per cent voting stake in NASDAQ, which is the maximum allowed by NASDAQ's certificate of incorporation and bylaws.”

Borse Dubai and Nasdaq have been locked in a bidding war to acquire OMX in Stockholm. The three way deal provides Nasdaq an easy way to sell its stake in LSE and acquire OMX and license its technology to Borse Dubai. Borse Dubai is able to acquire a stake in Nasdaq and LSE blunting another rivalry with Qatar, Middle Eastern nation.

Borse Dubai and Qatar are in rival bid to acquire OMX. While OMX board has recommended all cash bid from Borse Dubai, a higher bid from Qatar can topple the currently agreed deal between OMX and Borse Dubai. Qatar urged through its statement to shareholders of OMX not to accept bid from Dubai.

Qatar Investment Authority also said that it has acquired 20% stake in LSE and it is not planning to make an offer for the exchange.

[R]10:00AM New York – Bear Stearns earnings declined 61% on 37.5% lower revenue.[/R]

Bear Stearns revenue in the third quarter declined 37.5% from a year ago to $1.33 billion and earnings fell 61% to $166 million. Earnings per share in the quarter declined to $1.16 from $3.02 per share a year ago.

The annualized return on equity in the third quarter was 5.3% and 13.7% for the last twelve months.

The company ((BSC)) incurred $200 million loss related to BSAM High-Grade hedge fund.

""The third quarter was characterized by extremely difficult securitization markets and high volatility levels across asset classes. While our fixed income results clearly reflect these market conditions, we reported solid revenues in Investment Banking and record revenues in Global Equities and Global Clearing Services,"" said James E. Cayne, chairman and chief executive officer.

For the third quarter ended August 31, 2007, earnings were $171 million compared to $438 million a year ago.

Institutional Equities division reported net revenue increase of 53%. Net revenues in Capital Markets segment were down 36% from a year ago to $1.0 billion. Fixed income net revenue were $118 million, down 88% from a year ago. Investments banking net revenues were reported at $211 million, down 9% from a year ago.

Global Clearing Services group reported $332 million in revenue, up 30% from a year ago. Wealth management net revenues for the quarter were negative $38 million compared to $233 million.

Compensation as a percentage of net revenues was 49.9% compared to 48.1% a year ago.

The company authorized quarterly dividend of 32 cents per common share and increased its stock buyback to $2.5 billion from $2 billion.

[R]9:00AM New York – Goldman Sachs earnings jumped 79%. Bear Stearns earnings fell 61%.[/R]

Goldman Sachs ((GS)) reported third quarter revenues of $12.33 billion and net earnings of $2.85 billion. Earnings per share were $6.13 compared to $3.26 billion a year ago and $4.93 billion in the second quarter of this year.

Net revenues in investment banking jumped 67% to $2.15 billion from a year ago. Net revenue in the financial advisory jumped more than 100% to $1.41 billion and equity and debt underwriting revenue increased 8% to $733 million. Revenue from trading and principal investments jumped 70% from a year ago to $8.23 billion and 24% higher than in the second quarter.

The company statement also added that ‘significant losses on non-prime loans and securities were more than offset by gains on short mortgage positions. In addition, net revenues in both commodities and credit products were higher compared with the third quarter of 2006.’

Net revenue in asset management and securities services jumped 35% from a year ago to $1.96 billion. Operating expenses jumped 55% from a year ago to $8.08 billion and compensation and benefit increased 68% to $5.92 billion.

The company declared a dividend of 35 cents per common share and $404.41 per Series A Preferred Stock.

[R]6:00AM New York, 7:00PM Tokyo, Japanese stocks closed up 0.2%. Commodity- related stocks and Real Estate however rallied buoyed by rising metals prices. Japan commercial land prices gains 1% and manufacturing companies to boost capital spending by 6.3%.[/R]

Japanese stocks were largely tepid as losses in technology stocks sparked by 10% fall in DRAM chips weighed on chipmakers. However, commodity related stocks and realty developers gained on rising metal prices and strengthening land prices. Of the Nikkei 225 index 131 stocks advanced, 84 slumped and 10 traded unchanged. Nikkei 225 Index edged up 32 points to close at 16,413.79.

The Ministry of Land Infrastructure and Transport says Japans commercial land prices firmed for the first time since 1991 by 1%. Decline in nationwide residential land prices slowed to 0.7% from 2.3%.

The Cabinet Office and Ministry of Finance survey released today shows that sentiment among manufacturers with one billion yen worth of capital soared 7.7 points this quarter, compared to a loss of 2.2. The gain in confidence was a significant reversal of the pessimism that characterized business in the second quarter. Japanese companies are also planning to increase capital spending, especially on equipment and factories by 6.3% and overall companies from all sectors are likely to increase investment by 1.5%.

Japan Iron and Steel Federation says the August production of crude steel increased for the fifteen month with an increase of 3.7% compared to a year ago to 9.97 million metric tons driven mainly by rising global demand.

Realty developer Mitsui Sumitomo led the rising stocks in the index with a gain of 5.62% on firming land prices, followed by mineral resources company Sojitz Corp, climbing 25 or 5.49%. Hitachi Zosen soared 5.26%, while Marubeni Corporation added 5.21%. Japan Steel Work jumped 4.61% propped up by metal prices.

Metal prices upward spiral, driven mainly by demand from emerging economies, especially China, continues, as copper added 4%, while nickel recorded the biggest rise in three years to 9.9%. Zinc gained 5.1%.

Consumer lender Mitsubishi UFJ led the index decliners with a loss of 13.41% on speculation that falling consumer spending will hurt earnings and reports that the financial institution expects a 100 billion loss this year. Chipmakers Tokyo Electron and Adventist Corp, the world’s biggest memory –chip-testing equipment shed 4.92% and 4.65% respectively. Chubu Electric Power lost 4.49% and Sumitomo Trust retreated 4.48%.

Concerns of declining consumer spending also took their toll on consumer lenders providing unsecured lending such as Aiful, Acom and Promise.

Bloomberg news service reported that according to an analyst at DRAMeXchange, Asia’s largest computer memory chip market, memory prices will drop 10% between $16 and $17 in the first half of this month. Elpida, the largest memory maker, fell 6% and chip makers Advantest and Tokyo Electron declined 5%.