Oil Rallies, U.S. Indexes Edge to Peaks

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

U.S. markets advanced on lower than expected claims for unemployment, share buybacks, and rising energy prices. Second quarter U.S. GDP growth rate was revised lower to 3.8% from 4%. Unemployment claims fell 15,000 at the end of the last week, but new homes sales fell by 8.3% in August. Energy and mining stocks rallied in the U.S. European indexes closed higher led by a rise in UK, France, and Germany. Brazil, India, Hong Kong, and Singapore closed at a record high.

[R]4:30PM New York, 10:30PM Frankfurt, 2:00AM Mumbai – Second quarter GDP growth was revised lower to 3.8% in the U.S., unemployment declined, and new home sales fell. Brazil and several Asian markets closed at record highs. European markets paced higher as well.[/R]

Dow Jones Industrial Average increased 34.79 or 0.25% to 13,912.94, Nasdaq gained 10.56 or 0.39% to 2,709.59, and S&P 500 added 5.96 or 0.39% to 1,531.38. In Toronto TSX Composite gained 0.68% or 94.76 to close at 14,129.73.

In Brazil, iBovespa Index closed 1.40% higher or 823.32 to a record close of 59,681.10 and in Mexico Bolsa index fell 0.09% or 26.23 to close at 30,268.54.

In London FTSE 100 Index gained 53.40 or 0.83% to 6,486.40, in Paris CAC 40 index added 0.75% or 42.60 to close at 5,733.37, and in Frankfurt DAX index increased 0.64% or 49.64 to close at 7,853.15. In Zurich trading SMI added 0.30% or 26.24 to close at 8,885.95.

In Tokyo stock market Nikkei 225 index jumped 2.41% or 396.48 to close at 16,832.22, in Hong Kong Hang Seng index closed up 2.40% or 634.86 to 27,065.15, in Australia ASX 200 closed up 0.87% or 56.70 to a record close of 6,538.10, and in India Sensex closed up 229.20 or 1.35% to a record close of 17,150.56.

Bond Yields declined on 10-year U.S. bonds to 4.59% and 30-year bond declined to close at 4.85%.

Crude oil gained $2.79 to close at $83.09 per barrel for a front month contract, up 35% for the year so far, natural gas lost 12 cents to $6.91 per mBtu, and gasoline futures increased 6.3 cents to close at 209.10 cents per gallon.

Gold increased $4.40 in New York trading to close at $739.90 per ounce, silver closed up 7 10 cents to $13.645 per ounce, and copper for front month delivery in London lost $50.00 to $7,986.00 per pound.

Dollar edged lower against euro to $1.4150 from $1.4125 and higher to 115.63 yen from 115.55 yen.

Of the 30 stocks in Dow Jones Industrial Average 12 closed lower, 18 closed higher, and none was unchanged. Alcoa led the gainers with a rises of 1.3% or 50 cents to $38.97 followed by increases of 1% in Boeing, 0.9% in 3M, and 0.8% in Altria. General Motors led the decliners with a fall of 3.03% or $1.14 to $36.50 followed by losses in Disney of 0.9% to $34.22, in Hone Depot of 0.8%, and in Intel of 0.7%.

Of the stocks in S&P 500 325 stocks closed higher, 170 fell, and 5 closed unchanged. Seventeen stocks in the index declined more than 3%. SLM Corp led the gainers in the index with a rise of 9% to $49.12 followed by gains in Moody’s of 6.3%, in Micron of 5.7%, in Vulcan Materials of 5%, and in McGraw Hill of 4.8%.

Tesoro Corp led the decliners with a loss of 5.1% or $2.56 to $47.14 followed by declines in Akamai of 5%, in Embarq of 4.5%, in Sunoco of 4.1%, and in Paychex of 3.6%.

In New York ahead of trading reports on new home sales, second quarter GDP, and initial claims of unemployment lifted the averages. The three popular averages were higher for the most of the day. Nasdaq and S&P 500 jumped up 0.4% at the close. The second quarter GDP growth rate was lowered to 3.8% from 4% and unemployment claims fell 15,000 at the end of last week to 298,000. The most watched data on new home sales in August fell 8.3% to annual rate of 795,000, sharpest decline in seven years. The new home sales are expected to fall further as tighter credit standards make it difficult for people to borrow and unsold inventory of homes piles.

Three popular averages traded higher at the opening in New York on lower than expected unemployment report. Market ignored the new home sales and lowered GDP estimate for the second quarter. Market traded higher till the mid-day as energy prices climbed and mining stocks remained firm. The talk of iron ore price revision for the shipment in the next year, lifted metal stocks but metal prices declined in the afternoon trading. Fund managers ahead of the quarter carried out portfolio rebalancing. European markets closed higher led by mining and financial stocks. British Air placed an order for 36 planes and Northern Rock is in discussion with J C Flowers and others for asset sale.

In the late afternoon market focused on housing sector stocks and lifted most builders and companies related to housing infrastructure. Rating agencies Moody’s and McGraw Hill jumped lifted by speculation that after yesterday’s Senate hearing the companies may be spared from severe penalties. Mining stocks closed sharply higher. Energy stocks rallied on a more than 3% rise in oil lifting stocks of Exxon Mobil, Chevron, and ConocoPhillips.

Wyeth and ConAgra, and Lockheed jumped after these companies planned to increase dividend or increased share buyback.

In the overnight trading in Asia, Japan led the region with a sharp rise in financial and energy stocks. Banks and realty stocks led the gainers. Hong Kong, India, Singapore, and Australia closed at record highs. In Australia mining companies led the rise. In Hong Kong index closed above 27,000 for the first time on strength in telecom stocks. China Mobile ((CHL)) surged 6% and China Netcom added 7%. In Korea shipping companies closed higher. In India broad strength in the market kept the index at another high.

In Latin Markets trading Brazil led the gainers with a rise of 2.2% to a record close followed by increase of 1.13% in Chile, and 0.70% in Argentina and Mexico. Of the 63 stocks in iBovespa index 51 gained, 12 lost, and none closed unchanged. Brasil Telecom led the decliners with a loss of 2.6% followed by 2.1% decline in Embraer. Cyrela led the gainers with a rise of 9% followed by gains of 4% in Bradesco and Lojas America.

[R]3:00PM New York, 8:00PM London – UK stocks gained 0.8% on financial stocks. British Air split an order for planes between Airbus and Boeing.[/R]

UK shares rallied for the second day spurred by the gains in financial stocks. British Airways shares rose on order to place an order of 4 billion pounds.

In London trading FTSE 100 surged 0.83% or 53.4 to 6,486.40 spurred by gains recorded by financial stocks. Of the FTSE 100, 73 stocks gained, 29 dropped. Alliance Leicester led the gainers in the index with a rise of 8.5% and Compass Group led the decliners with a fall of 3%.

Home builders jumped after the housing report today. Taylor Wimpey soared 6% to 275p, Persimmons added 4.7% to 953p, and Barratt Developers increased 3.7% to 753p. Home prices in September increased 0.7% from the August month to 184,723 pounds, an increase of 9% from a year ago according to Nationwide Building Society.

The Organization for Economic Cooperation Development, OECD said the UK may need to lower interest rates to sustain its economic growth. Global credit crunch could cut Britain''s economic growth rate below the 2.5% expected next year. Initial projections indicated that the global financial turmoil may slow down the UK economy by 1%.

Of the FTSE 100 shares, Alliance was the biggest gainer. It surged 8.46%. Homebuilder, Taylor Wimpey jumped 6.59%, Northern Rock at 6.32%, Standard Life at 5.9% while HBOS closed weaker at 4.9%.

British Airline stock closed higher at 4.2% after it placed an order of 36 planes at a list price of $8.2 billion. The airline will purchase 12 Airbus A380 and Boeing 787 planes. According to news reports, it is the biggest purchase in 9 years. The deliveries are expected between 2010 and 2014. The new deliveries will increase the airlines’ capacity by 4%. The purchase of the aircraft will be partly funded by debt of $1.5 billion. The airline would increase capacity and frequency on flights to Hong Kong, Los Angeles and San Francisco from London Heathrow. The planes will use Rolls Royce engines.

Of the stocks in the FTSE 100 index, Compass led the losers. It lost 2.97% followed by losses in Vedanta Resources of 2.47%, Tullow Oil of 1.9%, Kazakhmys Plc of 1.7% while Scottish, and Castle closed fell 1.68%.

U.K. based Foxtons closed its U.S. real estate brokerage business after the company ran out of money, according to Asbury Park Press newspaper in New Jersey. The discount broker with a 3% commission and salaried staff failed to catch on as other realtors avoided selling homes listed with the company. The company laid off most of its staff of 380 people and may file for bankruptcy protection.

[R]11:00AM New York, 8:30PM Mumbai - Sensex in Mumbai surged on short covering ahead of expiry of September 2007 derivatives. Sugar stocks declined.[/R]

Sensex in Mumbai closed at record level on short-covering ahead of expiry of September 2007 derivatives contracts. IT stocks also recovered from previous losses.

The 30-Sensex index closed up 1.35% or 229 to close at 17,150.56. The CNX Nifty was up 1.22% or 60.05 to a new high of 5,000.55. Of the BSE stocks, 1,274 shares advanced, 1,457 retreated while 328 remained unchanged.

Among the 30-member Sensex pack, 21 advanced while the rest declined. Reliance Energy led the gainer with a rise of 8% to 1,108 rupees and Ambuja Cements led the decliners with a loss of 2.5% decline to 144 rupees followed by Hindustan Unilever with a loss of 2.3% to 220 rupees.

The Bombay Stock Exchange and the National Stock Exchange Stock have sought explanation from Reliance Natural Resources Ltd, whose share price has nearly doubled over the few days on news reports about its business plans. Stock market authorities in India brought the company under scrutiny last week to review possibilities of insider trading.

Reliance Natural Resources share price hit record peak of 103 rupees Tuesday from 52 rupees in September. The company had earlier indicated that it plans to sell its stake in alternative energy project and build a natural gas distribution network in different metropolitan areas.

Other gainer in the Sensex index included Infosys with a rise of 5.2% to 1,920 rupees and HDFC Bank 4.3% to 1,435 rupees. Reliance Industries slipped 0.17% to 2,317 rupees. Oil & Natural Gas Corporation closed higher at 3.7% to 972 rupees.

East India Hotel gained 2.8% to 119 rupees after the company severed its ties with Hilton hotels. The strategic partnership involved marketing and branding hotels under Trident Hilton name for fifteen years till 2019.

Praj Industries declined 0.5% to 237 rupees after the founders Pramod and Pramila Chaudhari sold 1.4 crore shares at 251 rupees to Tata Sons. The ethanol distillation and refinery developer based in Pune has investment from venture capitalist Vinod Khosla.

Rajesh Exports soared 6% to 982 rupees after the company plan to issue bonus shares and invite additional capital from international investors.

Satyam ((SAY)) intends to acquire IT infrastructure management services companies in the U.S. and Europe to serve its banking and telecom clients. Satyam draws most of its revenue from selling business software, consulting and process outsourcing. The company has seen rapid growth in the infrastructure management services sector where it assists companies their networks and databases. Satyam is also planning to consolidate its presence in China, Malaysia and Egypt as it adds its build its staff in these regions.

Bharat Heavy Electricals rose 2.4% to 2,035 rupees after receiving an order of 765 crore rupees from Steel Authority of India for a 62 MW power plant.

Traders also lifted stocks of DLF 1.4% to 749 rupees after it filed for telecom license and United Breweries soared 10% to 883 rupees after its founder acquired 50% stake in Epic Aircraft based in Oregon, U.S.A.

[R]9:00AM New York, 9:00PM Tokyo - Financial stocks lift Japan higher on improved sentiment.[/R]

Japan financial stocks rallied boosted by confidence lenders will recover from the global credit crunch. Investor confidence in lenders heightened on expectations the U.S Federal Reserve will cut interest rates further after a drop in U.S. durable goods orders.

In Tokyo trading Nikkei 225 added 2.41% or 396.48 to 16,832.22, the highest in seven weeks. Banks and realty stocks led the advance. Resona Holdings led the gainers in the sector with a sharp rise of 13.41%. Mitsubishi UFJ Nicos, Shinsei Bank Limited rallied as well. Of the Nikkei index shares 209 gained, 14 declined and 2 were unchanged. Suruga Bank Ltd. Soared 11% after the bank said that it exploring an arrangement for branch network and small business lending. Real estate developers Mitsui Fudosan jumped 7.7% and Sumitomo Realty & Development added 8%.

Bank of Japan board member Miyako Suda said today there’s need to raise the key interest rate to prevent the economy from overheating, adding that the credit market turmoil will have limited impact outside the U.S. She explained that the bank needs to monitor how the turbulence on the stock and money markets will ultimately affect sentiment of both companies and consumers. Suda while addressing a group in the Western Japan said that BoJ must take gradual but proactive action to lower the risk of overheating in the economy.

Bank of Japan last week kept the overnight lending rate on hold at 0.5%, remaining as the lowest in industrialized nations, cautioning that the bank will only raise interest rates when the credit markets stabilize.

The yen also traded firmer against a retreating dollar. The U.S. currency was quoted at 115.61 yen from 115.55.

Of the index shares Resona Holdings led the gainers, climbing 13.41%, followed by a 12.02% rise in Mitsubishi UFJ Nicos, 11.58% in Shinsei Bank Limited, 11.22% in Daiwa Securities Group and 10.55% in Credit Saison. Daikan Industries led the decliners, slipping 1.73%. Nippon Express lost 1.58%. Yokohama Rubber slumped 1.46%, Sumitomo Metal Mining shed 1.08% and Hino Motors retreated 0.99%.

Consumer lender Takefuji said today it will spend 10 billion yen to buy back 2.13% of its total shares. The company has lost 59% of its market value in the past year. Nikkei Newspaper reported that the consumer lender may post a 51 billion yen profit for the year ending March 31st. Another consumer lender Shares of Aiful have lost 53 percent of their value in the past year as the consumer loan industry has been rattled by customer claims for interest refunds following a change in the law stipulating that borrowers can claim refunds for excessive interest rate charges. On the news, three largest lenders, Takefuji, Aiful, and Promise jumped 15%.

Dramexchange, Asia’s biggest spot market for dynamic random access memory chips, said DRAM prices are likely to rise as demand swells up to the end of the year.

[R]5:00AM New York, 5:00 PM Sydney – Stocks in Australia jumped to a record close on the dollar reaching eighteen year high.[/R]

In Sydney trading ASX 200 Index gained 0.87% or 56.7 to 6,538.10.

Fortescue Metals Group, BHP Billiton, Rio Tinto and others rose sharply after Merrill Lynch forecasted that iron ore price may be raised by 50% for the next year shipment. The Fortescue jumped 2.4%, BHP added 0.8%, and Rio Tinto increased 1.3%.

The price negotiations begin in two weeks and are likely to be tense as Chinese steel makers may not agree on price increases. The iron ore prices have jumped more than 200% in the last four years. Steelmakers around the world are bracing for higher raw material costs that they have managed to pass to customers. Auto and other appliance makers are bearing the brunt of most of the price hikes. The World''s three largest iron ore importers Rio Tinto, BHP and CVRD of Brazil may seek price hike of 30% as demand from Chinese steelmakers is expected to exceed the ore supply. Australian benchmark shipment iron ore price is at $51.40.

Analysts predict iron prices to remain strong until 2010. Iron-ore miners are expanding capacity but demand growth is outstripping the supply from Australia, Brazil, and Africa. Steelmakers have been able to pass on higher ore prices to its customers. Hot rolled steel price used in making automobiles and household goods is up 11% from a year ago. Demand for iron ore supply is expected to rise at 11% and supply by 8%.

Woodside Petroleum is in a deal to sell to its Mauritania based oil exploration project to Malaysia''s state oil company Petronas for $418 million. The assets included a 47 percent in Mauritania''s only oil-producing project, Chinguetti field, and stakes in areas including Tiof, Tevet and Banda according to the filing with the Australian Stock Exchange. Woodside has sold the assets after it ran into political problems and less than expected oil reserves in the field. Chinguetti has an estimated reserve of 53 million barrels after the figure was slashed in November and its oil field produces 75,000 barrels of oil a day. Woodside stock rose by 0.5% today. The company had earlier announced that it plans to exit all of its operations in Africa. Woodside has explorations projects in Kenya, Libya, Algeria, and Liberia.

Rio Tinto group''s subsidiary, Energy Resources, that produces more than a 10th of the world''s mined uranium, has indicated that it will spend A$57 million expanding its Ranger mine in Australia''s Northern Territory, in order to add 4,857 metric tons of uranium oxide to the site''s reserves.

The Australian dollar traded to 18-year high on the back of widening yield premium. Indications of further interest rates cuts by the Federal Reserve also propped up the Aussie dollar which rose by 12% in the last four weeks. The Aussie dollar closed at $0.8795 at the close of trade, compared with $0.8729 late yesterday. The traders expect Aussie dollar to cross $0.8900 by the yearend. The Aussie currency has now risen by 5.5% since Sept. 18, when the Fed cut rates by half-a-percentage point to 4.75 percent. Traders looking to exploit arbitrage are focusing on yield spread of 2.5% between the Australian and the U.S. short term government bonds.

Of the ASX 200 index shares, Queensland Gas led the gainers with a rise of 8.44% followed by increases in Energy Resource Australia by 6.52%, in Paladin Resource by 5.72%, in Cabcharge Australia by 5.4%, and in Aquarius Platinum by 5.26%. Of the ASX 200 index stocks Centro Retail Group led the decliners with a fall of 4.9% followed by losses in Nufarm Ltd of 3.2%, Gud Holdings by 3.1%, in Compass Resources by 2.9%, and 2.9% in Aristrocrat Leisure.