Investors Await Employment, Earnings Reports

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

Markets in the U.S. fell after a week of hectic trading. Weekly petroleum report indicated that inventories are healthly but are on the decline. Oil fell. Banks in European trading closed higher after Deutsche Bank reported 2.2 billion in losses in mortgage related activities. French defense contractor EADS is investigated by market regulators for insider trading by executives. Emerging markets in Latin America and Asia fell. India bucked the trend and soared 3% to a record close.

[R]4:30PM New York, 10:30 PM Frankfurt, 2:00AM Mumbai – Stocks in New York fell. European markets edged higher led by banks. Emerging markets declined. Brazil fell nearly 3%. India surged to record high. Hong Kong retreated from its record high.[/R]

Dow Jones Industrial Average fell 86.25 or 0.61% to 13,961.06, Nasdaq declined 19.37 or 0.71% to 2,727.74, and S&P 500 fell 7.76 or 0.50% to 1,538.87. In Toronto TSX Composite declined 0.84% or 119.40 to close at 14,033.33.

In Brazil, iBovespa Index closed 2.93% lower or 1,816.18 to close at 60,200.94 and in Mexico Bolsa index declined 0.8% or 244.32 to close at 31,207.47. Chile and Peru fell a fraction.

In London FTSE 100 Index edged higher by 34.80 or 0.54% to 6,535.20, in Paris CAC 40 index added 6.91 or 0.12% to close at 5,806.18, and in Frankfurt DAX index increased 0.11% or 8.5 to close at 7,955.30. In Zurich trading SMI added 0.16% or 14.71 to close at 9,088.70.

In Tokyo stock market Nikkei 225 index up 0.9% or 153.11 to close at 17,199.89, in Hong Kong Hang Seng index closed down 2.55% or 719.81 to 27,479.94, in Australia ASX 200 closed up 1.47% or 96.20 to a close of 6,659.90, Sensex surged to another record high and closed up 518.42 or 2.99% to a record close of 17,847.04. In South Korea Kospi index added 2.6% to 2,014.09.

Bond Yields increased on 10-year U.S. bonds to 4.55% and 30-year bond gained to close at 4.79%.

Crude oil fell $0.11 to close at $79.94 per barrel for a front month contract, up 32% for the year so far, natural gas declined 15 cents to $7.28 per mBtu, and gasoline futures increased 1.31 cents to close at 199.59 cents per gallon.

Gold fell $0.60 in New York trading to close at $735.70 per ounce, silver closed up 2 cents to $13.47 per ounce, and copper for front month delivery in London gained $54.00 to $8,222.00 per pound.

Dollar edged higher against euro to $1.4087 from $1.41 and lower to 116.74 yen from 115.81 yen.

Of the 30 stocks in Dow Jones Industrial Average 9 closed higher, 21 closed lower, and none were unchanged. Alcoa led the decliners with a loss of 2.9% to $37.72 followed by a loss of 2.2% in Intel, and 1.6% decline in IBM and Caterpillar. Home Depot led the gainers with a rise of 1.4% followed by increases of 1.1% in Merck, 0.7% in General Motors, and 0.6% in Wal-Mart.

Of the stocks in S&P 500 174 closed higher, 316 fell, and 10 closed unchanged. Twelve stocks fell 3% or more and 15 stocks gained 3% or more. Ciena Corp led the gainers with a rise of 6% followed by increases in Harley Davidson of 5.5%, KB Home of 5.3%, and Circuit City of 5.1%. Temple Inland jumped on the news that Carl Ichan controlled fund has a stake in the company.
Micron Technology led the decliners with a loss of 8.9% followed by losses in Nvidia of 4.2%, in Applied Materials of 3.76%, and Teradata of 3.6%.

In Latin Markets trading Brazil led the decliners with a fall of 3.10% followed by losses of 1.20% in Chile, and 0.87% in Mexico. Argentina fell 0.27%. Of the 63 stocks in iBovespa index 19 gained, 43 lost, and one closed unchanged. Vale Do Rio Doce also known as CVRD lost 8% and led the declining stocks in the index. J P Morgan downgraded the stock on valuation. Bradespar fell 6.5%, Banco do Brasil declined 5.6% and Itau lost 4.4%. Tele Norte Leste jumped 4.6% and led the gainers in the index. Brasil Telecom and Comgas jumped 2%.

In the weekly petroleum report inventories at the end of the last week declined according the EIA. U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) rose by 1.2 million barrels compared to the previous week. At 321.8 million barrels, U.S. crude oil inventories are above the upper end of the average range for this time of year. Total motor gasoline inventories decreased by 0.1 million barrels last week, and are well below the lower end of the average range. Finished gasoline fell last week while gasoline blending components rose. Distillate fuel inventories decreased by 1.2 million barrels, and are in the upper half of the average range for this time of year.

[R]3:00PM New York, 9:00PM Frankfurt – Stocks in Paris curtailed gains on defense contractor scandal investigation.[/R]

European markets closed fractionally higher led by a rise of 0.54% in UK followed by increases of 0.16% in Switzerland, 0.12% in France and Germany, and fractional loss in Italy. Norway fell on weak oil by 1.6%. Bank stocks were in focus.

Deutsche Bank ((DB)) closed 2.1% higher after reporting losses in its mortgage related business. The bank reported a combined loss of 2.2 billion euro in various units related to mortgage lending, the third European bank to report such losses. Earlier in the week UBS and Credit Suisse reported large losses and Citigroup reported a loss of $5.9 billion from the credit market jitters.

Credit Suisse ((CS)) and UBS ((UBS)) rose more 1%, HSBC ((HBC)) gained 1.5% and Barclays added 2%. Northern Rock jumped 12% after the news that a private equity group J C Flowers has arranged funding acquire the troubled mortgage lender. Financial Times reported that the leveraged buyout group has secured funding of 15 billion pounds without revealing its source of information.

In Paris trading CAC 40 closed up 0.12% or 6.90 higher to 5,806.18.

Lagardere fell 6% and EADS declined nearly 1% after the French newspaper Le Figaro reported that insider trading charges may be brought against the shareholders and management committee members of EADS.

The French regulator known as Autorite des Marches Financiers is working with prosecutors regarding insider trading involving 26% decline in the stock of EADS maker of Airbus. Production delays at Airbus A380 superjumbo plane wiped out more than 25% of its value between June 9th and 14th. Lagardere owns 7.5% in the French defense contractor. A380, the largest plane to hold more than 500 people has suffered production delays of more than two years and cost overrun with the current price tag of $18 billion from $12 billion estimated three years ago.

Executives that are likely to face prosecution according to Le Figaro article include Tom Enders, former co-chairman of EADS Manfred Bischoff, head of its North American unit Ralph Crosby, chief executive of EADS Arnaud Lagardere, and head of sales John Leahy.

In UK trading FTSE 100 index gained 0.54% or 34.80 to close at 6,535.20

UK banks led the rise in index as investors reassessed the losses at banks after the news from Deutsche Bank, Citigroup, UBS, and Credit Suisse. Barclays and HSBC have not declared losses yet and investors expect that losses at these banks will be high but lower than initial estimates. Barclays added 3.1% to 640p, mortgage lender HBOS gained 3% to close at 980p, and HSBC jumped 2.5% to 935p.

Vodafon Group fell 2.5% to 171p as it continues to battle with the tax authorities in India with tax liability of $2 billion and Cable & Wireless dropped 2% to 185p.

BAA Limited a unit of Ferrovial SA of Spain said that it may hurt its 9.3 billion pound debt refinancing if the government limits its fee increase to 18% next year. BAA operates Heathrow airport in London among other airports. Heathrow has one of the highest passenger fee and a mediocre record in traffic management. Recently, several Middle Eastern countries have exploited the long haul traffic to build their air travel business between North America and Asia using their cheaper and better organized hubs bypassing London and other European location. Passengers traveling through London to Asia may pay as much as 70% more in passenger fees and face persistent delays.

Ferrovial gained 2% to close at 64.20 euros.

[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.