U.S. Markets Struggled; Asia, Europe Up

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

Stocks in New York closed lower after tech stocks declined in the afternoon trading. Same stores sales for the September month were mixed. Target, J C Penney, Kohls, Limited, and Nordstrom fell after they lowered earnings guidance for the quarter. Wal-Mart raised the estimate for the third quarter. UK led the gainers in Europe. Asian markets closed higher. Australia, Hong Kong, India, Indonesia, and Korea closed at a record high.

[R]5:30PM New York, 11:30 PM Frankfurt, 3:00AM Mumbai – U.S. markets closed lower after tech stocks declined. Same store retail sales were mixed. UK led the gainers in Europe. Australia, India, Indonesia, Hong Kong, and Korea closed at record high.[/R]

[R]Global Markets Indexes[/R]

Dow Jones Industrial Average closed down 63.57 or 0.45% to a close of 14,015.12, S&P 500 edged lower 0.52% or 8.06 to 1,554.41, and Nasdaq Composite Index traded up 39.41 or 1.40% to a close of 2,772.20. In Toronto TSX Composite gained 46.75 or 0.33% to close at 14,229.44.

Of the 30 stocks in Dow Jones Industrial Average 8 closed higher, 22 closed lower, and none was unchanged. Boeing led the decliners with fall of 2.5% followed by losses in Caterpillar of 2.1%, in Intel of 1.74%, Alcoa of 1.7%, and United Tech of 1.6%. General Motors led the gainers with a rise of 4.9% followed by increases in Wal-Mart of 2.9%, Citigroup of 2.5%, and American Express of 0.9%.

Of the stocks in S&P 500 144 closed higher, 350 fell, and 6 closed unchanged. Five stocks rose 3% or more and 28 fell 3% or more. Ford Motor led the gainers with a rise of 6.5% followed by a rise of 4.9% in General Motors, and 4.3% in Johnson & Johnson. Nordstrom led the decliners with a fall of 7.5% followed by a loss of 7% in J C Penney, 5.8% in SanDisk, 5.6% in Amazon.com and Brunswick, and 4.8% in Polo Ralph Lauren.

In London FTSE 100 Index closed up 91.50 or 1.38% to 6,724.50, in Paris CAC 40 index 24.34 or 0.42% to close at 5,862.83, and in Frankfurt DAX index increased 0.58% or 47.12 to close at 8,033.69. In Zurich trading SMI added 0.39% or 35.98 to close at 9,218.28.

In Tokyo Nikkei 225 index added 1.64% or 281.09 to close at 17,458.98, in Hong Kong Hang Seng index closed up 1.97% or 563.69 to 29,133.02, in Australia ASX 200 closed up 0.50% or 33.60 to a record close of 6,7771.90, Sensex surged 0.84% or 155.82 to 18,814.07. In South Korea Kospi Index added 17.33 or 0.87% to a record close of 2,058.85. Indonesia surged 46.73 or 1.8% to a record close of 2,638.21.

In Latin Markets Peru led the gainers with a rise of 1.02% followed by increases of 0.86% in Colombia, 0.45% in Venezuela, and 0.01% in Chile. Argentina led the decliners with a fall of 1.43% followed by declines in Brazil of 1.17 and in Mexico of 1.2%.

In Brazil, iBovespa Index fell 1.17% or 741.27 to close at 62,455.77 and in Mexico Bolsa Index declined 0.46% or 148.45 to close at 31,980.95. Of the 63 stocks in iBovespa index in Brazil, 15 gained, 48 lost, and none closed unchanged.

Brasil Telecom and Natura led the decliners with a fall of 4.6% followed by losses in Souza Cruz of 4.6%, in Banco Itau of 3.8%, and in Unibanco of 2.7%. Cyrel Commercial led the gainers with a rise of 3.6% followed by increases in TIM of 1.7%, Vivo of 1.4%, and in Telesp of 1.3%.
Bond Yields edged a fraction on 10-year U.S. bonds to 4.64% and 30-year bond edged higher to close at 4.873%.

[R]Commodities, Metals, and Currencies[/R]

Crude oil rose $1.78 to close at $83.08 per barrel for a front month contract, up 35.0% for the year, natural gas declined 0.13 cents to $6.88 per mBtu, and gasoline futures increased 3.3 cents to close at 206.66 cents per gallon.

Gold increased $10.70 in New York trading to close at $756.70 per ounce, silver closed up 32 cent to $13.99 per ounce, and copper for front month delivery in London increased $126.00 to $8,233.00 per pound.

Dollar edged lower against euro to $1.419 from $1.414 and higher to 117.20 yen from 117.26 yen.

[R]U.S. Earnings Watch[/R]

PepsiCo ((PEP)) added 2% after it reported third quarter earnings. Stock closed lower after it was dragged down in market sell-off. Net revenue increased 11%; division operating profit grew 10%; and the Company generated core earnings of $0.99 per share, an increase of 11%. On a reported basis, net income grew 17% and earnings per share grew 19%, and included non-cash tax benefits of $115 million related to the resolution of certain foreign tax matters.

[R]U.S. September Same Stores Sales[/R]

Apparel retailers reported mixed report of sales in the September month but several of them issued lowered sales guidance for October or reduced earnings for the quarter ending in September. Almost all the apparel retailers blamed weak performance on warm weather in the month. J C Penney and Nordstrom fell more than 7%.

Wal-Mart ((WMT)) increased its third quarter estimates between $0.66 and $0.69 per share from $0.62 to $0.65 per share. The company also reported for the last five weeks same store sales rise of 1.4% and for the 35-weeks a gain of 1.5% excluding fuel sales. The company also guided sales rise in October between flat and 2%. The stocks closed up $1.31 to $46.90.

Target ((TGT)) reported sales gain of 1.2%, below its already lowered range between 1.5% and 2.5%. The company estimates the annual earnings of below its previous estimate of $3.60 per share and issued October sales guidance of increase of between 3% and 5%. The stock fell $1.15 to close at $64.62.

Limited Brands, Ltd ((LTD)) reported sales drop of 4% and said that its earnings will be below 4 cents per share in the third quarter. The stock closed up 38 cents to $21.96.


[R]3:00PM New York, 1:30AM Mumbai – Sensex charges ahead on strong liquidity. Infosys Technologies reported a rise of 19% in profit. Government delays fuel price hike.[/R]

The BSE 30-share Sensex ended up 0.8% or 155.8 to 18,814. The CNX Nifty edged higher at 1.5% or 83 to 5,524.9. The BSE reported a turnover of 10,603 crore rupees and NSE reported turnover of 15,866 crore rupees.

Of the 30 shares of the Sensex, 23 gained and the remaining slid. Of the BSE stocks, 1, 323 advanced, 1,378 shed while 394 remained unchanged.

Infosys Technologies Ltd reported a rise of 18.8% profit in the most recent quarter. Net profit surged 10.91 billion rupees or $271 million between July and September up from 9.18 billion rupees achieved in the comparative period.

Revenue generated from software services was up 19% to 41.1 billion rupees or $1.02 billion helped by new 48 clients which include Royal Philips Electronics NV, which placed a $250 million order with Infosys in July.

However, stock fell sharply as its revised earnings forecast for coming quarters. Infosys stock fell 7 percent to close at 1,976 rupees Thursday. The stock had risen sharply through past week.

It now estimates basic earnings per share increase between 17.5% and 18.1% to 78.60 and 78.99 rupees or $1.99 and sales increase between 165.88 and 166.48 billion rupees in the financial year ending March 2008.

The company reported a rise in its operating margin to 27.5% from 24.7 % in the proceeding April-June quarter. Net profit was in line with analysts’ expectations. The company said higher billing rates, better utilization of staff and hedging helped.

Infosys raised its prices by 1.9% from a year ago.

Government has decided not to increase fuel prices. It will now issue oil bonds worth 23.457 crore rupees to partly compensate public sector oil companies for the losses incurred on fuel sales. The Cabinet decided to issue oil bonds to Indian Oil, Bharat Petroleum and Hindustan Petroleum to compensate for the losses they would incur during the current fiscal year for not raising prices of petrol, diesel, LPG and kerosene in line with costs. The loss in recovery on fuel sales is estimated at 54,935 crore rupees and the government is shouldering 42.7% of losses through bonds liability.

Of the index stocks Mahindra and Mahindra advanced 7.6% to 813.90 rupees. It was the top gainer in the Sensex followed by ONGC at 5.7% to 1,066.5 rupees, Grasim Industries at 4.14 % to 3,800.4 rupees and ACC at 3.5% to 1,260.3 rupees.


Larsen & Toubro surged 3% to 3,486.65 rupees, Suzlon Energy gained 0.5% to 1,778.1 rupees, Tata Steel rose 0.5% to 849.6 rupees, Hindalco Industries climbed 3.3% to 175.9 rupees while DLF rose 2.9% to 18.6 rupees.

Of the Sensex shares, Bharati Shipyard shed 0.8% to 570.70 rupees after it said that Shipping Corporation of India would acquire four anchor-handling tugs and supply vessels from the company for $89.28 million.

G L Hotels was down 9.08% to 330 rupees, Infotrek Syscom slid 8.8% to 63.4 rupees, while Nagpur Power retreated 8.4% to 56.1 rupees.

Adlabs Films surged 10.4% to 714 rupees after the Bombay High Court authorized it to fold its subsidiary into the company.

DLF jumped 2.9% to 918 rupees. The company said in a statement to the Bombay Stock Exchange plans to raise $1.5 billion in the international offering and use it to buy properties in India and other markets. DLF will be added to Sensex index next month.

DLF has formed partnerships with several international companies and embarked on larger projects. The realtor is building a town near Bangalore to in partnership with Dubai World for $15 billion and working on an hotel and retail project on 15 acre site in Gurgaon near New Delhi. The company recently acquired 38 acre land complex near New Delhi and plans to develop the surrounding area of 200 acres in residential lots and business offices.

[R]2:30PM New York – Retailers report weaker than expected same store sales gains on warmer weather in September[/R]

Apparel retailers reported mixed report of sales in the September month but several of them issued lowered sales guidance for October or reduced earnings for the quarter ending in September. Almost all the apparel retailers blamed weak performance on warm weather in the month.

Wal-Mart ((WMT)) increased its third quarter estimates between $0.66 and $0.69 per share from $0.62 to $0.65 per share. The company also reported for the last five weeks same store sales rise of 1.4% and for the 35-weeks a gain of 1.5% excluding fuel sales. The company also guided sales rise in October between flat and 2%.

Target ((TGT)) reported sales gain of 1.2%, below its already lowered range between 1.5% and 2.5%. The company estimates the annual earnings of below its previous estimate of $3.60 per share and issued October sales guidance of increase of between 3% and 5%.

Limited Brands, Ltd ((LTD)) reported sales drop of 4% and said that its earnings will be below 4 cents per share in the third quarter.

The company reported comparable store sales for the five weeks ended October 6, 2007 decreased 4 percent compared to the five weeks ended October 7, 2006. The company reported net sales of $713.2 million for the five weeks ended October 6, 2007, compared to sales of $781.3 million for the five weeks ended September 30, 2006.

The company reported a comparable store sales increase of 2 percent for the 35 weeks ended October 6, 2007. Net sales were $6.213 billion compared to net sales of $5.951 billion last year. Limited now expects to report third quarter earnings per share between $0.00 and $0.04 versus its previous guidance of $0.04 per share.

J.C. Penney ((JCP)) store sales fell 4.6% decline and lowered its third quarter earnings guidance between $1.00 and $1.04 per share from $1.28 per share.

Total department store sales decreased 1.2 percent for the five weeks ended Oct. 6, 2007. Comparable department store sales decreased 4.6 percent and total Direct sales decreased 8.5 percent, below management’s most recent guidance for a low-single digit sales increase for both. Internet sales increased 6.4 percent for the month, on top of a 36 percent increase last year. In last year’s September period, comparable department store and Direct sales increased 8.7 percent and 11.8 percent, respectively, representing one of the most difficult comparisons of the year.

Kohl’s ((KSS)) sales declined 3.2% and lowered the earnings guidance below initial estimate between 67 and 71 cents per share.

The company reported today that sales for the five-week period ending October 6, 2007 increased 5.9 percent over the five-week period ending September 30, 2006. On a comparable store basis, sales decreased 3.2 percent.

For the 35 weeks ending October 6, 2007, total sales were up 9.2 percent over the 35 weeks ending September 30, 2006. On a comparable store basis, sales for the 35-week period increased 1.3 percent.

Larry Montgomery, Kohl’s Chairman and Chief Executive Officer, commented, “September sales were affected by weak demand in weather-sensitive businesses such as long bottoms, fleece and sweaters. We expect our third quarter earnings to be at the low end of our previous earnings guidance of $0.67 to $0.71 per diluted share.”

Nordstrom ((JWN)) sales increased 3.2% and lowered earnings guidance for the third quarter. Preliminary quarter-to-date sales of $1.34 billion increased 7.6 percent compared to sales of $1.25 billion during the same period in 2006. Quarter-to-date same-store sales increased 4.6 percent. Preliminary year-to-date sales of $5.69 billion increased 7.2 percent compared to sales of $5.31 billion during the same period in 2006. Year-to-date same-store sales increased 6.8 percent.

‘we entered the quarter with inventory levels above our plan and our below-plan sales performance put additional pressure on inventory levels. We are taking immediate action to bring inventory levels in line, which will negatively impact merchandise margins for the remainder of the year,'' commented Blake Nordstrom, President of Nordstrom, Inc.

The company''s below plan sales performance combined with its higher inventory position will lower expected earnings. As a result, the company now expects to deliver third quarter earnings per share of $0.50 to $0.53, which is below its prior outlook of $0.61 to $0.64. Additionally, third quarter same-store sales are now expected to increase two to four percent, below the four to five percent range announced at the end of the second quarter.

Saks Inc ((SKS)) reported sales totaled $307.4 million for the five weeks ended October 6, 2007 compared to $280.8 million for the five weeks ended September 30, 2006, a 9.5% increase. Comparable store sales increased 7.7% for the five-week period.

On a quarter-to-date basis, for the two months ended October 6, 2007, owned sales totaled $520.9 million compared to $458.9 million for the two months ended September 30, 2006, a 13.5% increase. Comparable store sales increased 11.8% for the two-month period.

Gap Inc ((GPS)) reported net sales of $1.43 billion for the five-week period ended October 6, 2007, which represents a 3 percent decrease compared with net sales of $1.46 billion for the five-week period ended September 30, 2006. Due to the 53rd week in fiscal year 2006, September 2007 comparable store sales are compared to the five-week period ended October 7, 2006. On this basis, the company’s comparable store sales for September 2007 decreased 7 percent compared with a 3 percent decrease as reported in September 2006.


Gap North America reported same store sales decline of 10% and Old Navy sales declined 8%. Banana Republic and International sales declined 2%.


Abercrombie & Fitch ((ANF)) reported net sales of $297.4 million for the five-week period ended October 6, 2007, a 1% increase over net sales of $295.3 million for the five-week period ended September 30, 2006. September comparable store sales decreased 4% for the five-week period ended October 6, 2007, compared to the five-week period ended October 7, 2006. Total Company direct-to-consumer net sales increased 42% to $22.1 million for the five-week period ended October 6, 2007, compared to the five-week period ended September 30, 2006.

Year-to-date, the Company reported a net sales increase of 16% to $2.270 billion from $1.963 billion last year. Comparable store sales decreased 1% for the year-to-date period. Year-to-date, the Company reported direct-to- consumer net sales increased 52% to $131.8 million.

Chico''s FAS, Inc. ((CHS)) today reported that its sales results for the five-week period ended October 6, 2007, increased 7.3% to $175.9 million from $164.0 million reported for the five-week period ended September 30, 2006. Comparable store sales for the Company-owned stores decreased 8.3% for the five-week period ended October 6, 2007 compared to the same five-week period last year ending October 7, 2006.

For the thirty-five weeks ended October 6, 2007, total sales increased 10.7% to $1.18 billion from $1.07 billion reported for the thirty-five week period ended September 30, 2006. Comparable store sales for the Company-owned stores decreased 4.9% for the thirty-five week period ended October 6, 2007 compared to the thirty-five week period last year ending October 7, 2006.

American Eagle Outfitters, Inc ((AEO)) total sales for the five weeks ended October 6, 2007 were $222.8 million, a decrease of 5% compared to $233.4 million for the five weeks ended September 30, 2006. Due to the 53rd week in fiscal 2006, September 2007 comps are compared to the five week period ended October 7, 2006. On this basis, comparable store sales decreased 2%, compared to an 11% increase for the same period last year.

The company also said that September sales were below the its expectations due in part to lower store traffic, particularly in regions where weather was unseasonably warm compared to last year.

Total sales for the year-to-date 35 week period ended October 6, 2007 increased 13% to $1.850 billion, compared to $1.635 billion for the 35 week period ended September 30, 2006. Comparable store sales increased 4% for the year-to-date period.

Based on September sales results, the company lowered its outlook for October, which is reflected in its revised third quarter earnings guidance of $0.44 to $0.45 per share, compared to $0.44 per share last year. Previous third quarter guidance was $0.47 to $0.48 per share.

Mothers Work, Inc. ((MWRK)), maternity apparel retailer said that net sales for the month of September 2007 decreased 6.2% to $46.4 million from $49.5 million reported for the month of September 2006. The decrease in sales versus last year resulted primarily from a decrease in comparable store sales. Comparable store sales for September 2007 decreased 7.0% (based on 1,377 locations) versus a comparable store sales increase of 10.6% (based on 1,460 locations) for September 2006.


[R]11:00AM New York – Stocks in the morning trading in New York are trending higher after a rise in oil price, Wal-Mart lifting its earnings estimate, and lower trade deficit.[/R]

After nearly ninety minutes of trading, stocks in New York were trending higher. Dow Jones Industrial Average is up 65 to 14,144.05, Nasdaq up 16.9 to 2,828, and S&P 500 up 8.10 to 1,570.98.

The Commerce Department reported August merchandise and service trade deficit fell 2.4% to $57.6 billion, $1.4 billion less than $59 billion for the revised July deficit. Exports in August rose at $138.3 billion and imports gained $195.9 billion.

The report also noted that the August 2006 to August 2007 change in exports of goods reflected increases in industrial supplies and materials ($3.9 billion); capital goods ($3.4 billion); foods, feeds, and beverages ($1.7 billion); consumer goods ($1.3 billion); and automotive vehicles, parts, and engines ($1.1 billion). Other goods were virtually unchanged. The August 2006 to August 2007 change in imports of goods reflected increases in consumer goods ($1.8 billion); capital goods ($1.7 billion); automotive vehicles, parts, and engines ($0.9 billion); foods, feeds, and beverages ($0.6 billion); and other goods ($0.4 billion). A decrease occurred in industrial supplies and materials ($1.8 billion).

Wal-Mart ((WMT)) jumped 3.5% or $1.61 to $47.20 after it reported that store sales increased 6.4% from a year ago for the five weeks ending on October 5th at domestic stores, 6.8% at Sam’s Club, and 20.1% at the international stores. Same store sales during the period increased 1.4% and for the 35-week period for the year increased 1.5% not counting fuel sales.

The Company expects the comparable store sales of its U.S. operations for the October four-week reporting period to be between flat and 2 percent, said Tom Schoewe, executive vice president and chief financial officer. The October four-week period runs from October 6 through November 2, 2007.
''We estimate that earnings per share from continuing operations for the third quarter of fiscal year 2008 will change from within our previously stated guidance of $0.62 to $0.65 to a range of $0.66 to $0.69,'' Schoewe said. ''For the first two months of the quarter, we have seen improvement in initial margin and expense leverage at the Wal-Mart Stores division, which is driving this change.''

Gold traded up 1.1% or $8.70 to $754.40 lifting stocks of resource and mining companies. Freeport-McMoran ((FCX)) gained $1.00 to $118.09, BHP Billiton ((BHP)) surged $4.08 to $86.12, Rio Tinto ((RTP)) added $8.55 to $370.30 in New York trading.



[R]7:00AM New York, 7:00PM Hong Kong – Unemployment rate fell to 4.2% in September as 13,000 people join labor force.[/R]

ASX 200 index in Sydney trading closed at another record of 35 or 0.52% to 6,779.60 on a rise in resource, retail, and banking stocks.

The Australian Bureau of Statistics in Sydney reported that at the end of September that seasonally adjusted employed people increased by 13,000 to 10.527 million dropping the unemployment rate to 4.2% from 4.3% in August. The unemployment rate in September 2006 was at 4.7%. The report also said that the full-time employment decreased by 17,200 to 7.522 million and part-time employment increased by 30,100 to 3.005 million.

The October employment report will be released on November 8th.

The dollar breached the $0.90 mark for the second time this week after trading stronger after the domestic jobless rate fell to a fresh 33-year low. The Australian dollar against the U.S. dollar closed at $0.9010 up from yesterday''s close of $0.8992 after reaching $0.9015.

Of the ASX 200 index shares, Sally Malay Mini led the gainers with a rise of 7.3% followed by increases in Murchison Metals by 6%, in Aquarius by 5.9%, in Perilya Ltd by 4.7%, and in Flight Centre by 4.4%.

Of the ASX 200 index stocks Seek Ltd led the decliners with a fall of 2.6% followed by losses in Transfield Services of 2.8%, Boon Logistics of 3%, Cons Minerals on 3.4% and Independence Group of 4.3%.

In the energy sector Oil Search was up 1.2%, but Santos declined 0.4%. Gold miners also rose on higher metal prices lifting Lihir rose 3%.

The banks were also stronger with ANZ gaining 0.5%, the Commonwealth Bank adding 1.5%, the National Australia Bank adding 0.1% and Westpac edged 0.1% higher.

Retailers were mixed, with Coles Meyer up 0.7%, Harvey Norman 0.8% and Woolworths was down by 0.5%.

In the media sector, News Corp was up 0.4%, Telco Telstra put on 1.3% while Fairfax and PBL were down 0.4% and 0.5% respectively.

National carrier Qantas added 0.3% after it announced that a delay in the delivery of its Boeing 787 Dreamliner aircraft would not materially affect its operations.

Mitsubishi controlled Murchison Metals Ltd, which launched a unsolicited and unconditional bid for Midwest Corp controlled by Sinosteel Corp yesterday, has announced that it will honor the agreement between Sinosteel and Midwest but also pointed out in the release that Sinosteel does not have an immediate or any unconditional right to acquire a 50% interest in the projects the subject of the Sinosteel Midwest joint venture.

Murchison launched its bid for the rival Midwest to eliminate competition in a project to build a port and railways link on Australia''s west coast to ship ore to China and Japan.

The release further added that Sinosteel and Midwest each approve the pre-feasibility and bankable feasibility studies for that project; and Sinosteel and Midwest agree the terms of an operating joint venture agreement for that project. If a project does not progress to an operating joint venture Sinosteel and Midwest are each able to terminate the Sinosteel joint venture. If terminated, Midwest retains the mining tenements.

Midwest has entered into binding exclusive arrangements with Yilgarn Infrastructure Limited in relation to being a foundation user and to assist Yilgarn to progress development of the new rail and port infrastructure as quickly as possible.

Mitsubishi and Murchison''s are to develop Jack Hills mine, along with a port and 490 kilometers of railroad through the Australian hinterlands. The combined output of a merger between Murchison and Midwest will be 4 million metric tons of iron ore a year from next year, and 45 million tons by 2013 according to presentation on the Murchison web site.

Murchison stock gained 6% at the close of trade after edging 2% a day ago while Midwest gained 9.4% after surging 28% in the previous session.

The Bank of Queensland Ltd announced it had increased second-half profit of 54 percent on mortgage lending and a sale of its credit-card unit. The bank''s net income rose to A$81.4 million in the six months ended Aug. 31, from A$52.7 million a year earlier. On the earnings news the stock gained 2.5% to close at A$19.40.


[R]5:00AM New York, 6:00PM Tokyo- Stocks in Tokyo were lifted after the BoJ left the rates unchanged.[/R]

In Tokyo trading Nikkei 225 rose 1.64% or 281.09 to 17,458.98, while the broader Topix index climbed 1.2% or 19.34 to 1,677.52.

Bank of Japan today held the key lending rate at 0.5% by 8 to 1 vote at the conclusion of its two-day meeting. Atsushi Mizuno, the lone dissenter voted for an increase for the fourth time.

According to the bank’s report on recent economic and financial developments released after the meeting, business sentiment has remained favorable although it has become cautious in some sectors. Private consumption also has been leveraged by the moderate rise in household income. Public investment is however projected to be on the downside.

Rating agency Moody’s, upgraded sovereign debt lifting the sentiment in the market. However, Moody’s has come under fire in the U.S. for its questionable practices in the subprime bonds rating. The Finance Ministry has forecasted primary deficit for the current fiscal year to drop to 4.4 trillion yen from 11.2 trillion. The new administration led by the Prime Minister Fukuda has said that he is committed to balancing the budget within five years.

Cabinet Office said today the total value of machine orders received by 280 manufacturers operating in Japan increased by 7.1% to 2.77 trillion yen in August from the previous month on a seasonally adjusted basis when orders had slumped 2.5 trillion-yen. However, private sector machinery orders which can be volatile fell by 7.7% to 1.4 trillion yen. Machine orders for manufacturing sector also fell 8.6% to 447 billion yen, while those from overseas surged 23% in August to 1.2 trillion yen after falling 10.8% in July.

Ministry of Finance said today the current account surplus for August soared for the eighth month by 42.1% to 2.081 trillion from a year earlier on firm exports to Asia and Europe.

Merchandise trade surplus surged 185.2% to 892.2 billion yen as exports increased 14% to 6.7 trillion yen at a higher rate than imports increase of 4.3% to 5.7 trillion yen. Imports were mainly spurred by steel and automobile exports after the July 16 earthquake in Niigata Prefecture that had caused supply disruptions to industry.

Balance of trade in goods and services rose 316% to 684 billion yen from last year, while income surplus increased 7.3% to 1.4 trillion yen on rising interest income and dividends from overseas investments.


Of the Nikkei 225 stocks 168 gained, 49 slipped, and 8 traded unchanged. Hitachi Zosen led the gainers with a rise of 7.02% on increases in freight charges of metals and commodities.

Daily trading volume on the first section was reported at 8.5 billion shares valued at 1.21 trillion yen compared to 1.7 billion shares in the previous session. In the second section trading volume was 574 million shares worth 37 billion yen compared to 80 million shares a day ago.

Crude oil prices firmed for the second day, jumping 1% to $81.30 per barrel. Mitsubishi Corp added 4.26%, Nippon Oil Corp climbed 2.14% and Inpex Holdings edged up 3.31%.

Metal prices also gained as nickel copper rose 1.5%, nickel jumped 2.6% and zinc soared 2.3%. Nippon Mining Holdings gained 2.21% and Sumitomo Metals Mining firmed 4.09 as a result.

Of the index shares Hitachi Zosen led gainers, rising 7.02% followed by gains in Mitsumi Electric Co Limited of 6.08%, in NGK Industries of 5.96%, in Yahoo Japan Corp of 5.94% and Marubeni Corp of 5.75%.

Hitachi Zosen and other ship builders soared as freight charges of metals and commodities increased. The Baltic Dry Index, which measures the price increases, edged up 3.6%, gaining 130% this year. Nippon Yusen climbed 5.11% and Mitsui Engineering & Shipbuilding Company Limited gained 1.60%.

Nippon Suisan led declining shares, slipping 3.86%, followed by losses of 3.64% in Casio Computer, 3.62% in Matsushita Electric Works, 2.99% in Chugai Pharmaceutical Company and 2.67% in T&D Holding Inc.

Mitsubishi Heavy Industries and Kawasaki Heavy Industries fell 1.24% and 2.20% after Boeing announced today a six-month delay in initial deliveries of 787 Dreamliner due to parts shortages and integrating various assemblies. Mitsubishi supplies parts and assemblies for wings worth $6 billion for the Dreamliner project.

Sony Financial Holdings gained 4% on the first trading day today in the largest initial public offering for the year in Japan. The offering was priced at 400,000 yen and raised 320 billion yen. The stock jumped to 424,000 yen at its peak but settled at 415,000 yen at close. The financial company offers life and auto insurance and operates an online bank. The rival insurance company T&D Holdings, the only other insurance company traded on the exchange is trading at twice the market value of Sony Financial but is growing at a slower pace than Sony Financial.





October 11, 2007
Bank of Japan

Monthly Report of Recent Economic and Financial Developments October 2007 (The Bank''s View)

Japan''s economy is expanding moderately.

Public investment has been sluggish. Meanwhile, exports have continued to increase. Corporate profits have been high, and business sentiment has remained generally favorable although it has become cautious in some sectors. Under these circumstances, business fixed investment has also continued to trend upward. Housing investment has fallen lately. Private consumption, however, has been firm in a situation where household income has continued rising moderately. With the rise in demand both at home and abroad, production has continued to be on an increasing trend.

Japan''s economy is expected to continue expanding moderately.

Exports are expected to continue rising against the background of the expansion of overseas economies as a whole. Domestic private demand is likely to continue increasing against the background of high corporate profits and the moderate rise in household income. In light of these increases in demand both at home and abroad, production is also expected to follow an increasing trend. Public investment, meanwhile, is projected to be on a downtrend.

On the price front, the three-month rate of change in domestic corporate goods prices has been positive, mainly due to the rise in international commodity prices. The year-on-year rate of change in consumer prices (excluding fresh food) has been around zero percent.
Domestic corporate goods prices are likely to continue increasing for the time being, although the pace of increase is expected to slow. The year-on-year rate of change in consumer prices is expected to be around zero percent in the short run. From a longer-term perspective, however, it is projected to continue to follow a positive trend, as the output gap continues to be positive.

As for the financial environment, the environment for corporate finance is accommodative. Credit demand in the private sector has been more or less flat. However, the issuing environment for CP and corporate bonds has been favorable, and the lending attitudes of private banks have continued to be accommodative. Under these circumstances, the amount outstanding of lending by private banks has been increasing moderately, and the amount outstanding of CP and corporate bonds issued has been above the previous year''s level. Funding costs for firms have risen slightly. Meanwhile, the year-on-year rate of change in the money stock is around 2 percent. As for developments in financial markets, in the money markets, the overnight call rate has been at around 0.5 percent, and interest rates on term instruments have been around the same level as last month. In the foreign exchange and capital markets, long-term interest rates and stock prices have risen compared with last month, while the yen has depreciated against the U.S. dollar compared with last month.

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http://www.boj.or.jp/en/type/release/teiki/gp/gp0710.htm