NY Trends Lower After Deutsche Bank Warning

123jump.com Staff
03 Oct, 2001
New York City

In the early trading stocks in New York meandered with a decline in service industry index and lower than expected rise in payroll in Septemeber, and weak auto sales in the month. Before the market opening Deutsche Bank reported that its third quarter earnings will be lower on the account of 2.2 billion charge in the fixed income business. Micron swung to a loss of $158 million in the fourth quarter from $64 million profit a year ago. Hong Kong closed 2.6% lower but India closed at a new high.

[R]11:00AM New York – Stocks in early trading were weak. Tech stocks fell on a loss from Micron. Deutsche Bank took 2.2 billion in fixed income business and lowered earnings target.[/R]

Market indexes in the early trading are trending lower after the report on service industry, payroll survey, and earnings warning from Deutshce Bank and earnings from Micron Technology.

Dow Jones is trading 28.45 lower to 14,019.51, Nasdaq down 5.80 to 2,741.28, and S&P500 fell 3.20 to 1,543.61.

Deutsche Bank is the latest among banks to report losses from credit market turmoil. The bank said today that it plans to take a charge of 2.2 billion euros or $3.1 billion in its various units involved in leveraged loans, trading, mortgage backed securities, and structured investment vehicles.

Earnings in the third quarter are still estimated to be higher than a year ago on capital gains and tax credit. The earnings are estimated to be higher than 1.4 billion euros from 1.24 billion euros a year ago.

After the news the stock ((DB)) rose 2.5% to $135.47 in New York trading at the opening time.

Deutsche Bank is the latest to report losses from credit market. Earlier in the week UBS reported losses $3.4 billion and Citigroup said that it will take a charge of $5.9 billion in its fixed income related business and lowered its earnings by 60%. UBS on the account of the losses in the credit market will report its first quarterly loss in nine years.

The Institute for Supply Management index for service industry declined to 54.8 in September from 55.8. The index level indicates the service industry is still growing but at a slower pace.

The private sector payroll in September rose 58,000 and August data was revised lower to 27,000. The employment index focuses on private sector only and does not include government jobs.

Tech stocks led by chip sector were trading lower after Micron technology (MU)) reported a loss of $158 million in the fiscal fourth quarter from a profit of $64 million a year ago.

In a separate note Morgan Stanley analyst initiated coverage on Intel, AMD, and Nvidia with ‘underperform’ rating. Morgan also downgraded CSX to ‘underweight’ from ‘equaweight’ on valuation and worries that economic slowdown may lower transportation volumes.

In the overnight trading in Asia Hong Kong fell 2.6% but Japan added 0.9% and India surged to another record with a rise of 2.9%.

[R]6:00AM New York, 7:00PM Tokyo – Nikko Cordial deal and foreign investment in real estate lifted Tokyo stocks nearly 1%. Domestic sale in the U.S. of Japanese makers rose in a weak market.[/R]

In Tokyo trading Nikkei 225 rose 0.9% or 153.11 to 17,199.89. Of the Nikkei 225 stocks 178 gained, 45 declined and 2 traded unchanged. Nikko Cordial Corp led gainers jumping 14% after Citigroup announced its intention to buy out the remaining 32% shareholders through a share swap. Brokerage stocks jumped on the news Daiwa surged 5.8% and Nomura added 4%.

Citigroup says it will be listing its shares ahead of the deal in Japan to wholly acquire Nikko Cordial Corp for 530 billion yen and then delist Nikko Cordial in January of the next year. Citigroup is offering 1,700 yen per share of the third largest brokerage firm in Japan, a premium of 16% from the previous day of closing. Citigroup acquired nearly two thirds of shares in the brokerage company by June of this year.

The recent change in the law allows foreign companies to make a purchase of Japanese companies using stocks of foreign companies. Citigroup will have additional branch network of 100 offices. Japanese households have $13 trillion in assets; however most of these are tied in real estate, life insurance policies, and bank deposits.

Goldman Sachs says it will be investing 200 billion yen in property acquisitions in Tokyo, Osaka and Nagoya. Goldman Sachs has been active in the real estate market in Japan since 1991 and has been buying parking lots, commercial buildings, golf courses, and movie theaters.

Commercial land prices in Tokyo surged 24% and in Osaka increased 14% and Nagoya rose by 24% in the twelve months ending in June. The Ministry of Land, Infrastructure and Transport announced recently that commercial land prices rose 1% for the first time in 16 years. The Ministry also added that the commercial properties jumped 5.1% during the same period.

The yen traded firmer for the second day against the dollar at 115.79 from 115.74 yesterday.

Of the Nikkei 225 index stocks, Nikko Cordial Corp led gainers with a rise of 13.68%, followed by increases of 9.09% in IHI Corporation, 7.96% in Resona Holdings, 7.16% in Sumitomo Trust and Banking Company Limited and 6.48% in Credit Saison Co.

Realty stocks gained as well. Kajima Corp jumped 3.12%, Mitsubishi Estate Co. soared 2.68% and Kumagai Gumi added 1.71%.

Honda rose 0.26%, Nissan Motor added 1%, and Mazda jumped 4.52% correspondingly on sales increases to the U.S. market. Mazda led the domestic sales growth in the U.S. with a gain of 24% and sales at Honda jumped 9.4%.

Ajinomoto Company led the declining stocks with a fall of 4.36%, followed by losses of 2.96% in Meija Seika, 2.78% in Fuji Electric Holdings, 2.59% in Kikkoman Corporation and 2.52% in Matsushita Electric.

Fujitsu Limited is set to acquire Infinity Solutions Limited through Fujitsu New Zealand for 3 billion yen. The deal is set to be completed by October 16 and will increase sales of the New Zealand subsidiary to 10 billion yen in fiscal year to 2007.