Dow at New High; Sharp Gains in Europe, Brazil

123jump.com Staff
01 Oct, 2007
New York City

Stocks in New York trading rallied after Citigroup and UBS reported large losses from credit market turmoil. Banks, home builders, and rating agencies jumped in the hope that now the losses can be estimatd for the industry. Citigroup reported a loss reflecting 2.5% of their subprime portfolio. UBS said that it expects a loss of 4 billion francs. Italy, Germany, and France rallied. Air France and Deutsche Borse jumped. Mining companies closed sharply higher. Brazil and Mexico surged.

[R]5:30PM New York, 11:30PM Frankfurt, 3:00AM Mumbai – Stocks in the U.S. rallied with Citigroup and UBS reporting large losses. Investors expected welcomed transparency and had estimated wider losses. Japan rallied in Asia. Brazil and Mexico surge.[/R]

Dow Jones Industrial Average rose 191.92 or 1.4% to 14,087.63, Nasdaq added 39.49 or 1.46% to 2,740.99, and S&P 500 increased 20.29 or 1.33% to 1,547.04. In Toronto TSX Composite increased 0.72% or 101.69 to close at 14,200.58.

In Brazil, iBovespa Index closed 3.10% higher or 1,875.28 to a record close of 62,340.34 and in Mexico Bolsa index surged 1.85% or 559.49 to close at 30,855.68.

In London FTSE 100 Index edged higher by 39.40 or 0.61% to 6,506.20, in Paris CAC 40 index added 57.57 or 1.01% to close at 5,773.26, and in Frankfurt DAX index increased 0.77% or 60.91 to close at 7,922.42. In Zurich trading SMI added 1.00% or 89.07 to close at 9,022.55.

In Tokyo stock market Nikkei 225 index up 0.36% or 60.27 to close at 16,845.96, in Hong Kong Hang Seng index closed up 0.29% or 77.32 to 27,142.47 in Friday trading, in Australia ASX 200 closed up 0.06% or 4.10 to a close of 6,563.70, and in India Sensex closed up 37.52 or 0.2% to a record close of 17,328.62.

Bond Yields declined on 10-year U.S. bonds to 4.557% and 30-year bond declined to close at 4.792%.

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 $4.10 in New York trading to close at $754.10 per ounce, silver closed down 6 cents to $13.85 per ounce, and copper for front month delivery in London gained $2.00 to $8,068.00 per pound.

Dollar edged higher against euro to $1.4230 from $1.425 and lower to 115.71 yen from 114.88 yen.

Of the 30 stocks in Dow Jones Industrial Average 2 closed lower, 28 closed higher, and none were unchanged. McDonalds led the gainers with a rise of 2.8% followed by increases of 2.5% in Verizon, 2.4% in Hewlett Packard, and 2.2% in Citigroup. General Motors and Verizon were the only two stocks that declined with a loss of 1.8% and 0.2% respectively.

Of the stocks in S&P 500 437 closed higher, 60 fell, and 3 closed unchanged. Eight stocks gained more than 3% and six fell more than 3%. Pulte led the gainers with a rise of 8.6% followed by advances in Teradata of 7.3%, in Hasbro of 7%, and Freeport McMoran of 6%. Centex, D R Horton, and Countrywide jumped 5%. Walgreen led the decliners with a fall of 15% followed by a decline of 6% in CVS and Supervalu. Medco Health fell 3.3% and Ford Motor declined 3.1%.

In Latin Markets trading Brazil led the gainers with a rise of 3.10% followed by increase of 2.00% in Argentina, and 1.85% in Mexico, and 1.5% in Chile. Of the 63 stocks in iBovespa index 53 gained, 7 lost, and 3 closed unchanged. Bradesco led the gainers with a rise of 7% followed by gains of 6.5% in Lojas Renner, and 6.4% in Vale Rio Doce.

[R]4:00PM New York, 9:00PM London - The UK stocks rallied, pushed by gains by the resource shares. The UK pound surges against the yen. Anglo America plans to sell 50 percent of its stake in AngloGold Ashanti.[/R]

London shares surged with mining stocks dominating the top five gainers. Tale and Lyle led the gainers. Northern Rock whose share price recovered last week following revelations that the bank was talking to a potential investors lost 27% today. The share retreated on news that it may be taken over at a discount. Anglo America has announced its intention to sell 50% of its stake in Anglo Ashanti and eventually withdraw from the board.

In London trading FTSE 100 advanced 0.6% or 39.4 to 6,506.2 spurred by gains recorded by mining stacks. Tate Lyle was the top advancer while Kazakhmys, Antofagasta, Vedanta Resources and Home retail shares lifted the UK shares. Of the London shares, 72 gained, 29 fell while one unchanged.

The UK pound rose to a 7-week high versus the Japanese yen as investors'' appetite for risk improved, giving them confidence to buy higher-yielding currencies funded by loans in Japan.

The pound also gained to the highest in two weeks against the Swiss franc. The pound rose to 236.84 yen from 235.05 on Friday and advanced to 238.76 against the Swiss franc from 238.25 at the end of last week.

Of the FTSE 100, Tate and Lyle led the gainers with a surge of 9.39% followed by Kazakhmys Plc at 7.12%, Antofagasta at 5.3%, Vedanta Resource at 4.78%, and Home Retail closed stronger at 4.3%.

Other mining stocks that advanced on the FTSE 100 were BHP Billiton, which surged 3.7%. Xstrata gained 36.4%, Rio Tinto jumped 2.4% while Anglo America climbed 2.16% Anglo American Plc says it will dispose 50% of its stocks AngloGold Ashanti Ltd. and eventually withdraw from the board. The world mining giant said it plans to sell 61 million AngloGold shares, worth about $2.89 billion and lower its stake from 42% to 20%.

Northern Rock fell sharply to close at 26.3% on speculation that bank that was may be sold at a discount to its share price. According to news reports, The UK Treasury has given permission to Lloyds TSB Group Plc to offer revised for Northern Rock after it pulled out of talks last month.

[R]8:00PM London, 3:00PM New York - Citi Group and Swiss rival UBS profit warnings drag London. Air France - KLM boosts CAC40.[/R]

Europe’s banking sector was weighed down on Monday after two of the world’s largest investment banks issued profit warnings. Citigroup admitted its third-quarter earnings would be 60% lower after $5.9 billion in write-downs for securities backed by underperforming mortgages.

Citi’s warning comes after Swiss rival UBS said it would slash jobs after taking a $3.4bn or CHF 4 billion write-down on bond portfolio, resulting in a third-quarter loss of up to Swiss Franc 800m. UBS also plans to reorganize its operations after reporting a first quarterly loss in nine years.

Nokia (NOK)) has agreed to be acquired by Navteq ((NVT)) for $8.1 billion or $78 per share. The expensive acquisition at 52 times earnings is the largest acquisition by Nokia Nokia has been shifting its focus away from hardware and infrastructure business to software and services business. Navteq, twenty two year old company, based in Chicago, provides digital mapping service for the internet and mobile platforms.

In London trading FTSE 100 was 0.61% weaker to close at 6,506.20.

Rising metal prices lifted stocks of mining companies. Gold and copper traded higher in New York and in London. A possible strike at a plant in Peru lifted copper price by a fraction and gold added 0.6% in today’s trading.

BHP Billiton added 7% to 1,815p, Vedanta Resources increased 4.8% to 2,127p, and Anglo American rose 2.2% to 3,360p. Xstrata gained 3.6% and Lonmin added 1.5%.

Of the 102 stocks in the FTSE 100 index, 72 increased, 29 declined, and 1 was unchanged. Tate & Lyle led the gainers with a rise of 9% followed by increases of 7% in Kazakhmys, and 4.8% in Vedanta Resources.

Northern Rock led the decliners with a loss of 27%. The news on Citigroup continued to put pressure on Northen Rock which lost a further 26.28 % to 132.10p on fears that any takeover would be at a sharply discounted price.

Other decliners included Associate British Foods with a loss of 2.6% followed by 2.4% in British Land, in 2.2% in Liberty International, and 1.7% in Pearson.

In German Frankfurt''s the DAX 30 put on 0.77% to 7,922.42 after 24 of the 30 stocks closed higher.

Hypo Real Estate led the gainers in the index with a rise of 2.42 euros or 6.05% to 42.39 euros on news that the European Commission has cleared the proposed 5.7 billion euro acquisition of Dublin-based Depfa Bank PLC. Hypo Real Estate is offering 6.80 euro and 0.189 new Hypo Real Estate shares for each Depfa share, valuing each share of Depfa at 16.14 euro.

Deutsche Postbank, the second gainers in the index jumped 5.75% followed by TUI Ag with a rise of 4.6%, and Deutsche Borse with a gain on 2.4%. Merck led the decliners with a loss of 2.2%.

In France Paris the CAC40 had picked up 1.01% to 5,773.26.
Automakers led the gainers in Paris trading. Renault soared 4.3% to 106.06 euros after the September sales increased 9% to 48,400 from a year ago according to the national automotive association. PSA Peugeot increased 1.2% to 58.60 euro after reporting nearly 2% rise in sales to 60,175.

Air France KLM closed up 6.48% to €27.44 amid reports that after Goldman Sachs has added the stock to its buy list with a €30 price target, citing prospects of consolidation in the sector. La Tribune said that the company plans to offer flights from Europe to Los Angeles and other direct flights to U.S. are planned by the airline.

Naturex, maker of food ingredients, fell 11% to 40 euros after reporting a decline of 25% to 2.1 million euro.


[R]1:30 PM New York – Markets in the U.S. trade higher after more information from banks on subprime losses. Nokia and Navteq discuss merger.[/R]

The Dow Jones Industrial Average climbed as high as 14,080.70, above its record close of 14000.41 set in July. Less than an hour after the opening bell the Dow was trading 0.7% higher at 13997.97. The S&P 500 was up 1,542 points or 1.02% at 1,537.14 with 406 stocks reporting gains and only 93 were down.

This comes after a report on the manufacturing sector came in below analysts’ expectations. Manufacturing in the U.S. grew in September at the slowest pace in six months as orders declined and companies reduced inventories.

Teradata Corp. ((TDC)) after a spin-off from NCR jumped 5.83% to $27.60. Teradata Corp. began operating as an independent company on Monday as the data warehousing business completed its spinoff from NCR Corp.

According to the press release from the Teradata, “NCR shareholders received one share of Teradata common stock for every one share of common stock they held in NCR as of the close of business on September 14, 2007. One hundred percent of the approximately 181 million shares of Teradata common stock were distributed.”

Freeport-McMoRan ((FCX)) was up $4.25 or 4.05% to $109.14. The group is believed to have benefited from the integration of its takeover of Phelps Dodge.

Leading the decliners was Walgreen ((WAG)) after reporting a decline in fourth quarter earnings due in part to lower reimbursements on popular generic drugs and higher expenses. Fourth quarter earnings decrease 3.8%; diluted earnings per share decrease 2.4% to 40 cents. The company plans to spend $2 billion in the fiscal 2008 primarily to open 550 new stores. For the fiscal year 2007 the net earnings increased 16.6% to $2.04 billion and earnings per share increased 18% to $2.03 per diluted share.

“This quarter was negatively impacted by lower generic drug reimbursements, combined with higher salary and store expenses, and higher advertising costs,” said Chairman Jeffrey A. Rein.

The stock dropped $6.74, or 14.27% to $40.50.

Also among decliners was SuperValu ((SVU)) down $2.74, or 7.02% to $36.27. Analysts believe the company will struggle to modernize its store base and may face pricing pressure in the next nine to twelve months.

[R]12:00PM New York – Banks are in focus ahead of earnings and on the warnings of losses in subprime from UBS and Citigroup.[/R]

Stocks in New York are trading higher in the morning. Dow Jones is at 140,045.52 up more than 1%, Nasdaq is at 2,733.71 up 32.21, and S&P 500 is up 15.97 to 1,542.71.

Citigroup warned investors that current credit market troubles in the subprime sector will lower its earnings by 60% in the third quarter. Citigroup earnings in the third quarter are now expected to fall near $2.2 billion. The company earned $5.51 billion or $1.10 per share and was expected to earn $1.09 per share prior to today’s announcement. The bank also said that it will release its earnings four days earlier on October 15th.

Citigroup said that expects a loss of $600 million in trading operations, $2.6 billion in credit losses, will write down loans of $1.3 billion in subprime mortgages and LBO lending and $1.4 billion in LBO loans.

The press release added that the “write-downs of approximately $1.4 billion pre-tax, net of underwriting fees, on funded and unfunded highly leveraged finance commitments. These commitments totaled $69 billion at the end of the second quarter, and $57 billion at the end of the third quarter. Write-downs were recorded on all highly leveraged finance commitments where there was value impairment, regardless of the expected funding date.”
The bank recorded losses in the sub-prime mortgage market and further added in the release that “losses of approximately $1.3 billion pre-tax, net of hedges, on the value of sub-prime mortgage-backed securities warehoused for future collateralized debt obligation securitizations, CDO positions, and leveraged loans warehoused for future collateralized loan obligation securitizations.”

Citigroup ((C)) stock fell in the opening by 1% to recover later and traded up 2.5%.

Separately UBS ((UBS)) reported that it is likely to report a loss in the third quarter on the account of Swiss France 4 billion losses in bond portfolio. The loss will be its first loss in more than seven years. In the third quarter the group is expected to report a loss between Swiss Franc of 600 and 800 million and pre-tax profit for the first nine months will be near CHF 10 billion.

The company also plan to lay-off 1,500 people and replace its head of investment banking unit and group CFO. The investment bank chairman and CEO Huw Jenkins will “step down” and Group CFO Clive Standish to “retire”.

[R]6:00AM New York, 7:00PM Tokyo, Business confidence climbs near two year high at 23 points. Sony completed its life insurance unit IPO. Manufacturing survey showed appetite for investment. Yen weakens.[/R]

In Tokyo trading Japan’s stock index recovered from morning losses to close 0.38% higher or 60.27 to 16,845.96 on the first trading day of the week. Stocks were lifted by economic survey from the central bank showed improving business sentiment and plans by big companies to increase investment. Automotive exporter Mitsubishi Motor Corporation led advancers, climbing 5.14%, as the yen weakened.

Of the Nikkei 225 stocks 120 rose, 196 slipped and 9 traded unchanged. Nineteen stocks gained more than 1%.

Bank of Japan’s quarterly Tankan survey, for the last four weeks, showed the headline diffusion index, which measures sentiment at large manufacturers, stayed at 23 points. Economists had forecasted it would decline to 21 points. Sentiment climbed to a 2-year high of 25 points in December 2006, but has stayed at 23 points in the last three surveys.

Large companies increased their sales and profit estimate for the fiscal year ending March and plan to shore up investment by 8.7% from 7.7% in June. Japanese exports to China and Europe, coupled with the weakening yen, have helped to offset losses associated to the economic slowdown in the U.S.

However, big manufacturers’ outlook index for December was measured at 19 points, while for big non-manufacturers it stood at 21 points on expectations that business conditions will deteriorate to December due to the anticipated economic slowdown in the U.S. caused by the subprime mortgage crisis.

Overall index for large non-manufacturers slumped to 20 points compared to 22 points in June. However, confidence among non-manufacturers and smaller firms weakened as the five categories of small manufacturers and non-manufacturers fell from June.The manufacturer’s index was at 1 point in September from 6 points in June, while it fell to –10 from –7 in June.

Tankan index, a survey of more than 10,000 businesses including 2,400 large businesses, for workers demand declined to –7, the lowest since 1992, further indicating that there is a labor shortage. The Ministry of Labor said today that wages increased for the first time in nine months by 0.1% in August as unemployment rate hovered near a nine year low begins to spur wages.

Prime Minister Yasuo Fukuda said today he would strive to achieve primary trade balance by the fiscal year 2011.

Sony Corp completed initial public offering of its insurance unit, Sony Life Insurance Company. The company sold 800,000 shares at 400,000 yen, at the high end of the range of its filing range. In the largest offering in Tokyo for the year, Sony sold 725,000 and the rest were sold by the company. Sony share closed up 55 yen to 5,650 yen.

Of the Nikkei 225 index, Mitsubishi Motor Corporation led the gainers with a rise of soaring 5.14%, followed by gains of 4.52% in Tokyo Dome Corporation, 4.46% in Mitsubishi UFJ Financial Group, 4.37% in Fast Retailing, and 4.15% in Kikkoman Corporation.

Mitsubishi Motors advanced on weakening yen and positive earnings projections. Last week, the company revised half-year operating profit upward from 5 billion yen to 136 billion yen. Sales forecasts were reviewed up from 1.17 trillion yen to 1.27 trillion yen.

Mitsubishi UFJ rose on the stock split of 1 to 100 and reducing the minimum trading lot at 100 shares.

IHI Corporation led declining stocks in the index with a loss of 22%, followed by losses in Fuji Electric Company of 19.53%, Shimizu Corporation of 5.60%, Hitachi Zosen 4.62%, Mitsub Heavy Industry of 4.57%.