Volatile U.S. Markets, Record Oil Close

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

Stocks in New York caught in volatile trading, closed nearly unchanged after losing 1.5% and rising 0.5%. Record close in oil helped indexes to lose momentum. Sony, Aetna, Motorola, VMware, Black Decker, and Express Script jumped; Cummins, Big Lots, Zimmer Holdings fell after reporting earnings. Mortgage insurers fell for the second day. In Europe telecom stocks rallied after France Telecom lifted sales guidance. Third quarter economic growth in China was reported at 11.5%.

[R]4:30PM New York, 10:30PM Frankfurt, 2:00AM Mumbai[/R]

U.S. markets closed nearly unchanged but were volatile in the day. The popular averages were in a trading range of up 0.8% and down 1.5%. With new U.S. sanctions on Iran and low oil inventories, oil rose to a new high at close. Sony earnings jumped on digital camera and flat panel television sales and Bristol Meyers Squibb reported sharply higher earnings. Motorola earnings fell 94% but reported higher than expected fourth quarter earnings. VMware, recently spun-off from EMC jumped 10% after reporting earnings jumped to three times from a year ago.

U.S. September durable goods orders fell 1.7% and jobless claims at the end of the last week fell 8,000 to 331,000. China reported third quarter economic growth of 11.5%.

In Europe GlaxoSmithKline, Royal Dutch Shell, Home Retail Group, and ABB, and Daimler reported earnings. ABB earnings jumped 86%, Daimler reported let loss of 1.53 billion euro on 2.6 billion euro charges related to Chrysler, and Deutsche Lufthansa earnings jumped 78%. France Telecom reported better than forecast sales. Royal Dutch Shell earnings jumped 16% in the third quarter.

[R]Global Markets Indexes[/R]

Dow Jones Industrial Average closed down 3.33 or 0.02% to a close of 13,671.92, S&P 500 edged lower 0.10% or 1.48 to 1,514.40, and Nasdaq Composite Index traded down 23.90 or 0.86% to a close of 2,750.86. In Toronto TSX Composite rose 36.43 or 0.26% to close at 14,124.94.

Of the 30 stocks in Dow Jones Industrial Average 12 closed higher, 18 closed lower, and none were unchanged.

AIG led the decliners with fall of 3.2% on the rumors of subprime losses followed by declines in General Motors of 2.6%, Disney of 1.74%, and Caterpillar of 1.5%. Microsoft led the gainers with a rise of 2.37% ahead of earnings followed by increases in Coca Cola of 1.9%, Boeing of 1.8%, and in Du Pont of 1.7%.

Of the stocks in S&P 500, 246 closed higher, 250 fell, and 4 were unchanged.

Forty one stocks fell more than 3% and nineteen stocks rose more than 3%.

Cummins led the decliners with a loss of 16.6% followed by losses in Big Lots of 16.3%, Zimmer Holdings of 15.09%, in MBIA of 14.86%, and 12% in Symantec. Comcast dropped 11% followed by MGIC lost 9.3%, and LSI declined 9%. Akamai led the gainers with a rise of 13% followed by increases in Compuware of 12%, in Varian Medicals of 10.35%, and EMC of 8.5%. Black & Decker gained 8.1% and Express Script added 6.4%.

In London FTSE 100 Index closed up 94.30 or 1.45% to 6,576.30, in Paris CAC 40 index fell 30.38 or 1.51% to close at 5,760.30, and in Frankfurt DAX index increased 1.32% or 103.48 to close at 7,932.44. In Zurich trading SMI gained 66.43 or 0.75% to close at 8,917.45. Norway led the region with a gain of 1.8%.

In Tokyo Nikkei 225 index lost 0.45% or 74.22 to close at 16,284.17, in Hong Kong Hang Seng index closed up 1.78% or 520.96 to 29,854.49, in Australia ASX 200 closed down 10.10 or 0.15% to close 6,624.30.

Sensex in India edged higher 1.39% or 257.98 to 18,770.89. In South Korea Kospi Index increased 43.39 or 2.24% to close at 1,976.75 and Indonesia closed up 71.68 or 2.84% to 2,596.66. Philippines added 1.80% to 3,763.47, Singapore gained 1.59% to 3,707.14, and Malaysia increased 1.36% to 1,378.27. Thailand led the region with a gain of 3.2%.

In Latin Markets Argentina led the gainers with a rise of 1.15% followed by increases in Colombia of 0.99%, in Chile of 0.89%, and Peru and Venezuela of 0.2%. Brazil and Mexico lost 0.5%.

Bond Yields edged higher on 10-year U.S. bonds to 4.38% and 30-year bonds gained to close at 4.68%.

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

Crude oil jumped $3.36 to close at $90.46 per barrel for a front month contract, up 44.0% for the year, natural gas increased 22 cents to $7.19 per mBtu, and gasoline futures increased 8.83 cents to close at 223.58 cents per gallon.

Gold edged higher $5.40 in New York trading to close at $765.60 per ounce, silver closed up 31 cents to $13.91 per ounce, and copper for front month delivery in London lost $106.00 to $7,715.00 per pound.

Dollar edged lower against euro to $1.4328 from $1.4260 and higher to 114.21 yen from 114.17 yen.


[R]1:00PM New York, 6:00PM London - UK stock advanced. Scottish and Newcastle snubs Heineken, Carlsberg offer.[/R]

The UK shares rose lifted by gains by Vodafone and Intercontinental, which led the gainers on the FTSE 100. Shell rose after reported a surge in profits for the third quarter. Financial shares led the decliners. Scottish and Newcastle retreated on news that it had rejected Heineken and Carlsberg buyout offer.

In London trading, FTSE 100 index advanced 1.4% or 94 at 6,576.30. Of the index shares, 86 advanced, 12 declined, and 4 remained unchanged.

Scottish & Newcastle on Thursday rejected a 6.8 billion pounds or $14 billion joint offer from Heineken and Carlsberg. Scottish & Newcastle said the offer, worth 720p a share in cash, was highly conditional"""" and substantially undervalues the brewery. Carlsberg with 54% stake in the joint offer and Heineken will own 46%.

The consortium of two companies said in a joint-statement released today, “The Consortium intends that, following closing of any offer, 50% of BBH, the French and Greek operations as well as the participation in the Chinese business will be transferred to Carlsberg. Heineken would hold the remaining businesses, principally the UK & Irish, Portuguese, Finnish, Belgian and US operations as well as the participation in the Indian business.”

""""This unsolicited and derisory proposal is an effort to get S&N''s unique portfolio of businesses on the cheap,'''' Scottish & Newcastle chairman Brian Stewart said Thursday in a statement. He added: """"We will continue to take all actions to maximize shareholder value.''''

Shares of Scottish & Newcastle slipped 0.5% at 758.5 pence in afternoon trade.

Oil prices surged after an unexpected fall in U.S. crude stockpiles. U.S. light sweet crude added $1.62 to $88.72. Earlier it had reached $89 nearing a peak reached earlier in the week at $90.07.

UK Brent crude surged by $1.59 to $85.96 and neared the peak of $86.28.

The ongoing tensions along the Iraqi border between Turkey and Kurdish rebels have also been instrumental in the skyrocketing of oil prices.

Of the FTSE 100 shares, Vodafone led the advancers with a rise of 6.5% followed by increases in Intercontinental of 6%, Home and Retail and Old Mutual of 5%, and Prudential of 4.6%.

Of the FTSE 100 Index shares, Capita group led the losers. It fell 5.5% followed by Alliance of 3%, Barratt Development of 1.8% while Centrica closed weaker at 1.3%

Royal Dutch Shell PLC reported on Thursday third quarter profit increase of 16% despite a decline in production from $5.94 billion recorded in the same period last year to $6.92 billion. Sales climbed $90.7 billion from $84.3 billion.

Earnings from refining and marketing increased 70% to $1.65 billion but operating margins declined.

BP PLC on Tuesday reported a 29% drop in earnings to $4.4 billion on refineries problems and lower productions.

Shell production of oil and gas fell 3.4% from 3.25 million barrels of oil or equivalents per day to 3.14 million. That led to a 6% drop in production earnings to $3.51 billion. The share rose 0.6%.

Standard Life has made a conditional takeover approach for insurer Resolution, valuing its smaller rival at around 4.9 billion pounds. The stock declined1.25%.

[R]11:30AM New York – U.S. stocks lost early lead on weaker than expected durable goods orders.[/R]

Stocks in New York climbed after durable goods orders and earnings from Sony, Honda, Nintendo, Royal Dutch Shell, Bristol Meyers Squibb, and Aetna.

The Commerce Department reported that September durable goods orders fell 1.7% after August orders were revised to a drop of 5.3% from 4.9%. New home sales in the month increased 4.8% to annual rate of 770,000 and August month sale were lowered to 735,000. The median price of home sold increased to $238,000 in September from a year ago.

Aetna ((AET)) reported third quarter revenue rise of 11% to $6.9 billion, operating income increased 9% to $507 million, net income increased $496.7 million, and earnings per share increased to 97 cents compared to 84 cents, 12% increase from a year ago.

The company guided for the fourth quarter earnings of 87 cents and for the year earnings of $4.00 per share.

Recently listed company VMware ((VMW)) reported third quarter revenue of $358 million compared to $188 million, net income of $65 million from $19.2 million or 18 cents per share from 6 cents a year ago. VMware stock increased $12 to $114.31.

Aegean Marine Petroleum Network ((ANW)) fell 9% after it said the controlling shareholders plan to sell 6.75 million shares in a secondary offering.

Leveret International Inc., which is controlled by Aegean''s founder, Dimitris Melisanidis, is expected to offer 6,500,000 shares of common stock and John P. Tavlarios, Director, is expected to offer 250,000 shares of common stock. The selling shareholders also intend to grant the underwriters of the secondary offering an option to purchase up to an additional 1,012,500 shares of common stock for purposes of covering over-allotments.

Following the offering, the share ownership of Leveret International Inc. is expected to be 15,928,000 shares and the share ownership of John P. Tavlarios is expected to be 1,151,750 shares. The share ownership of the Company''s Chairman, Peter Georgiopoulos, is expected to remain unchanged at 4,205,250 shares. The Company will not receive any proceeds from the shares of common stock sold by the selling shareholders.

Sony ((SNE)) reported earnings after the market close in Japan on higher sales of electronic gadgets including digital cameras and flat panel television sets. PlayStation 3 game console and Bravia line of TV sets reported wider than anticipated losses.

Net income for the fiscal 2008 second quarter increased to 3.7 billion yen from 1.7 billion yen a year ago on 12% increase in revenue to 2.083 trillion yen from 1.854 trillion yen.

Net income per share increased to 73.50 yen from 1.68 yen. Sony stock in New York trading increased $3.01 to $48.30.

Electronic sales increased 21% or 17% in local currency on higher sales of Bravia LCD television and Vaio laptop computers, and Cyber-shot digital cameras. PS3 PlayStation contributed to 42% rise in game console sales. New releases helped 6.4% rise in sales in film division.

Royal Dutch Shell ((RDS)) reported third quarter revenue increase of 7.7% to $90.7 billion and earnings rose 16% to $6.92 billion. Earnings per share increased to $1.10 from 93 cents. Earnings were hurt by 24% decline in profit at refining and marketing division to $1.65 billion.


[R]9:00AM New York – ICBC earnings surges 76%. China’s third quarter economic growth increased to 11.5%.[/R]

Asian markets climbed higher, a familiar pattern of market rise supported by economic growth and rising exports.

China reported 11.5% economic growth in the third quarter prompting worries that interest rates may have to be revised, sooner than expected. China has raised interest rates for six times in the last eighteen months but rate increases have not curbed a sharp rise in asset prices in the real estate and stock markets.

Rising trade surplus, low interest rates on bank deposits, and currency controls have created asset price bubble in China. The structural problem of asset price spiral is not likely to be curbed by interest rate increases. This fuels pressures on Chinese currency to revalue against dollar and euro and other Asian currency.

Interest rates for one year deposit at 3.8% are substantially lower than inflation rate of above 6%. China reported sharp increase in trade surplus of 70% lifting the cash circulation in the economy.

ICBC, Industrial & Commercial Bank of China Ltd, reported 76% increase in earnings of 22.46 billion yuan or $3.1 billion.

ICBC, the largest bank in China and most valued bank in the world, serves 2.4 million corporate customers and 170 million individual customers with 17,000 branches.

The net loans issued in the quarter increased 11.4% to 3.94 trillion yuan. Net securities investment stood at RMB3,110,540 million, an increase of RMB249,742 million or 8.7% over 31 December 2006. Of the net securities investment, the face value of US sub-prime mortgage-backed securities held by the Bank was USD1,228 million (equivalent to RMB9,226 million), all of which were backed by first-lien loans and with a credit rating of AA or above (by Standard & Poor’s).

As of 30 September 2007, the fair value of such securities was RMB1,624 million lower than their amortized cost, of which RMB1,154 million was recorded in equity as fair value changes and RMB429 million was charged to the current period’s income.

The Group’s outstanding non-performing loans (“NPLs”) were RMB123,851 million in accordance with the 5-tier classifi cation standard, with an NPL ratio 3.06%, registering a decrease of RMB13,894 million and 0.73 percentage points when compared with 31 December 2006. The allowance to NPL was 88.12%, an increase of 17.56 percentage points over 31 December 2006.

The Group’s core capital adequacy ratio was 11.20% and capital adequacy ratio was 12.97%.


During the nine months ended 30 September 2007, the Group achieved net interest income of RMB159,705 million, an increase of 34.6% over the corresponding period of last year.

The net fee and commission income was RMB24,284 million and net profit after tax was RMB64,074 million, an increase of 104.7% and 66.0% over the corresponding period of last year respectively. RMB63,499 million of the profit after tax was attributable to equity holders of the Bank, an increase of 66.3% over corresponding period of last year. The cost-to-income ratio was 31.26%.

Net income per share increased to Rmb 0.07 from Rmb 0.04 or net income increased to Rmb 22.46 billion from Rmb 12.8 billion.

Thailand led the region with a rise of 3.2% followed by increases of 2.8% in Indonesia, 2.2% in Korea, 1.8% in Hong Kong, 1.6% in Singapore, 1.4% in India, Taiwan, and Malaysia.

[R]6:00AM New York, 7:00PM Tokyo - Subprime losses and strong yen lead Japan down 0.45%. Japan attracts real estate investments from international investors.[/R]

In Tokyo trading Nikkei 225 slipped 0.45% or 74.22 to 16,284.17, while the broader Topix Index lost 1% or 15.79 to 1,548.07.

Of the Nikkei 225 stocks 87 rose, 131 fell and 7 were unchanged. 19 stocks shed 2%. Daiichi Sankyo led decliners, falling 10.29%, after it suspended two studies on its anti-clotting drug. Exporters also fell on rising yen. Canon declined 2.62%, Komatsu slid 2.62% and Toyota Motor Corporation tumbled 1.49%.

In the first section of the Tokyo Stock Exchange 17.4 billion shares worth 2.5 trillion yen changed hands and 299 million shares valued at 7.9 billion yen were traded in the second section.

Financial stocks fell again on the worries that banks are likely to face more losses and the full extent of the ongoing correction in the U.S. housing market is still not over. Investors are only now realizing that the correction in the housing market may take more than two to three years.

U.S. brokerage firm Merrill Lynch &Co yesterday reported largest quarterly loss in its 93-year history. Subprime loans and exposure to leverages loans losses totaled $8.4 billion in the third quarter.

Separately, September existing U.S. home sales fell 8% to 8-year low to annual rate of 5.04 million.

Nomura Holdings plunged the most in four years after reporting today that U.S. mortgage investments weighed the company down to a net loss of 10.5 billion yen from net income of 43.5 billion yen a year before for the three months ended September 30th. Nomura reported a loss of $620 million after trading $1.8 billion of subprime mortgage securities. Revenues declined from 464.5 billion to 469.2 billion yen. Nomura shed 1.19% at the close to 1,833 yen.

Mizuho Financial Group fell 24,000 yen or 4% to 588,000 yen to a two year low after Asahi news reported that the company is likely to report a loss in the U.S. subprime securities and still meet its earlier earnings target. The news report did not cite any source which company later declined to comment on.

Consultancy firm Jones Lang LaSalle reported yesterday first half property investment in Japan jumped 16% to $30 billion. It also added that Japan accounted for almost 55% of the total transaction volume for the first six months of the year, and overall cross-border volume in Japan’s property market tripled to $15 billion, compared to the overall $28.2 billion of investments in the Asia Pacific region.

Jones Lang LaSalle head of research Jane Murray told a news conference yesterday that there was heightened competition in Japan’s real estate sector. Commented Murray: “We will see further increased competition from local investors, which means that cross-border investors are going to have to be more creative in their strategies and consider value-added and opportunistic plays.”

According to the consultancy firm, Tokyo’s cap rate, which a yield on property investments and the five- year swap rate, stood at 1.56%. However, the cap rates are negative for Paris, London, Frankfurt and New York.

Commercial land prices in Japan rose for the first time in 16 years, while prices in Tokyo were up 24%, in Nagoya increased 18%, and in Osaka soared 14%.

Of the Nikkei 225 index shares, Shiseido Company Limited led the gainers, with a rise of 4.83% followed by rises in Konami Corp of 4.15%, in Alps Electric Company Limited of 3.27%, in Tokyo Dome of 3.2% and Oki Electric Industries of 3.11%

Realty stocks advanced after Jones Lang LaSalle reported investments in the property sector grew 16% in the first half of the year. Heiwa Real Estate Company firmed 1% and Tokyo Dome climbed 3.2%.

Of the stocks in the Nikkei 225 index, Daiichi Sankyo led the declining stocks tumbling 10.29%, followed losses of 9.09% in Nippon Suisan, 8.96% in Yahoo Japan Corp, 6.70% in Sumco and 5.42% in UBE industries.

Daiichi Sankyo slumped heaviest since September 2005 after reporting in a statement that tests of the anti clotting effects of their prasugrel drug and Bristol-Myers Squibb Company’s Plavix were dropped. The drug is developed with Eli Lilly &Company. The company is currently seeking approval in the U.S. to sell the drug in the first quarter of 2009.

Yahoo Japan Corp also fell after reporting net income in the second quarter declined 4% to 13 billion yen compared to a year ago and 19.4% from the previous quarter. However, in the first half net sales rose 17.2% to 117.7 billion yen, while operating income surged 21.9% to 57.9 billion yen.

Nintendo, the maker of Wii Console games, reported today first half net profit to September 30th soared 132.4 billion from 54.3 billion yen a year earlier, boosted by increases in sales to 694.8 billion yen from 299 million yen a year ago. The company revised its annual profit outlook to 275 billion from 245 billion yen estimated in July of this year.