Weak Sentiment in Global Markets

123jump.com Staff
05 Nov, 2007
New York City

Stocks in the U.S. edged lower under the new mortgage securities related charges from Citigroup. The news did greater damage to market averages in Asia, Europe, and emerging markets of Latin America. Gold and silver rose. Oil fell from the peak but traded near elevated levels. Citigroup decided to write-down between $8 billion and $11 billion in mortgage securities reflecting the correction in values of these loans as of Sept 30th. PetroChina IPO tripled on its first day of trading in Shanghai.

[R]4:00PM New York, 10:00PM Frankfurt, 8:00AM Sydney[/R]

U.S. averages see-sawed in the session with a negative bias after Citigroup reported that it has ousted its chief executive and reported additional losses of between $8 billion and $11 billion in its sub-prime mortgage market exposure.

European markets fell after the weakness in the U.S. trading and weak banks across the region. UK led the region with a loss of 1.1% followed by 0.7% loss in Switzerland.

PetroChina surged to triple on its first day of listing in Shanghai after it offered 4 million shares at Rmb17.60, to cross the market capitalization of $1 trillion, nearly twice as large as that of Exxon Mobil.

Asian markets closed lower across the region led by a sharp decline of 5% in Hong Kong on the worries that capital flows from mainland China may be restricted and 4.5% in Pakistan after its dictator Musharraf broke and imposed emergency rule. U.S. offered a weak response as if it has resigned to the fact that dictator can act with no impunity. Markets in Singapore, Malaysia, India, and Thailand fell as well.

[R]Global Markets Indexes[/R]

Dow Jones Industrial Average closed down 51.37 or 0.20% to a close of 13,543.64, S&P 500 edged lower 0.50% or 7.58 to 1,502.07, and Nasdaq Composite Index traded down 15.20 or 0.54% to a close of 2,795.18. In Toronto TSX Composite lost 94.92 or 0.66% to close at 14,268.96.

Of the 30 stocks in Dow Jones Industrial Average, 12 closed higher, 17 closed lower, and one were unchanged.

Citigroup led the decliners with a loss of 6.3% followed by losses in General Motors of 2.8%, in Home Depot of 2.2%, and in Alcoa of 2.0%. Procter & Gamble led the gainers with a rise of 1.8% followed by increases in AIG of 1.4%, in McDonalds of 1.03%, and in United Tech of 0.8%.

Of the stocks in S&P 500, 164 closed higher, 328 fell, and 8 were unchanged.

Twenty three stocks fell more than 3% and five stocks rose more than 3%.

IAC/InterActiveCorp led the gainers in the index with a rise of 7% followed by increases in Pinnacle West of 6.3%, Entergy West of 4.7%, and in MGIC of 3.3%. SanDisk led the decliners in the index with a sharp fall of 6.5%, followed by declines in CB Richard Ellis of 6.4%, Citigroup of 6.3%, and MBIA of 6.05%. Cardinal Health, Morgan Stanley, Nordstrom, OfficeMax, and Big Lots fell more than 5%.

In London FTSE 100 Index closed down 69.20 or 1.06% to 6,461.00, in Paris CAC 40 Index lost 35.80 or 0.63% to close at 5,684.62, and in Frankfurt DAX index lost 41.94 or 0.53% to close at 7,807.55. In Zurich trading SMI declined 62.64 or 0.71% to close at 8,707.75.

In Tokyo Nikkei 225 Index retreated 248.56 or 1.56% to close at 16,268.92, in Hong Kong Hang Seng index closed down 1,526.02 or 5.01% to 28,942.32, in Australia ASX 200 closed down 114.30 or 1.71% to close 6,582.30.

Sensex in India fell 385.45 1.93% to 19,590.78. In South Korea Kospi Index decreased 14.47 or 0.36% to close at 2,015.76 and Indonesia closed down 58.14 or 2.14% to 2,652.48. Philippines gained 15.84 or 0.42% to 3,774.81, Singapore dropped 45.14 or 1.21% to 3,670.18, and Malaysia decreased 12.75 or 0.91% to 1,384.73. Thailand fell 21.48 or 2.4% to 872.86.66.

In Latin Markets Chile led the decliners with a fall of 2.07% followed by decreases in Mexico of 1.98%, in Brazil and Peru of 1.7%, in Argentina of 1.66%, and in Venezuela of 1.1%.

Bond Yields declined on 10-year U.S. bonds to 4.32% and 30-year bonds fell to 4.62%.

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

Crude oil fell $1.76 to close at $94.17 per barrel for a front month contract, up 44.0% for the year, natural gas decreased 44 cents to $7.98 per mBtu, and gasoline futures decreased 5.84 cents to close at 238.11 cents per gallon.

Gold edged higher $2.30 in New York trading to close at $810.80 per ounce, silver closed up 19 cents to $14.785 per ounce, and copper for front month delivery lost 2.30 cents to $330.20 per pound and in London trading closed down $70 to $7,442.00

Dollar edged higher against euro to $1.4469 and higher to 114.37 yen.


[R]2:15PM New York – IAC/IntreActiveCorp, a media and web conglomerate breakup to unlock values.[/R]

IACI/InterActiveCorp the convoluted conglomerate of Internet and media properties finally revealed a break-up plan that investors had long sought after. The IAC ((IACI)) rose as high as 10% after the break-up news.

IAC will be split into five companies to reflect various businesses core focus. The much ballyhooed synergies between the companies acquired in the last twelve years never delivered the earnings and revenue growth that investors were led to believe. IAC pursued the path of web properties acquisition with no clear direction and ended up a hodgepodge of internet businesses that are loosely related.

IAC in its latest acquisition of Ask.com tried to emulate Google advertising revenue model with lackluster results. In separate news, IAC agreed to sell Google Ads on its Ask.com and related properties in a five-year deal which the company says will bring early $3.5 billion.

IAC will retain all the web properties including Ask.com, CitiySearch, Math.com, and its current investment in various video and web transaction related properties.

HSN, the television and web based shopping channel will be the second company, Ticketmaster, the online concert and performance ticket seller will be the third company, Interval international, time-share seller, and LendingTree including RealEstate.com and Domania and iNest will be the fifth company.

IAC stock has struggled in the last three years as it has lagged in delivering revenue and earnings growth similar to Google, Yahoo, and several properties controlled by News Corp.

Last week IAC reported third quarter revenue growth of 7% to $1.5 billion and net income decline of 4.2% to $71.80 million or earnings per share fall of 1% to 24 cents. Retailing revenue struggled in the quarter and rose 2%, transaction revenue declined 1%, media and advertising revenue surged 40%, and membership and subscription revenue increased 19%.

IAC and its largest shareholder Liberty Media, controlled by John Malone, in the recent months have sparred to unlock shareholder value. Even though Liberty Media is the largest shareholder in the company, it assigned its voting rights to Barry Diller, chief executive of IAC, years ago. The two media moguls have locked horns in the recent years as the aimless acquisition of web properties failed to deliver critical competitive position in many categories. While Ticketmaster, online concert reservation business, and formerly controlled Expedia, online travel agency, thrived in the early stages of their lives, however, recently both have faced declining economics and rising competition.

Barry Diller, Chairman and Chief Executive Officer of IAC said, ''One of the reasons we''ve stayed with some of our more transactional businesses is that we needed their earnings to allow us to invest in emerging Internet businesses.

Now that we have real scale in the pure Internet units, it makes nothing but sense to me to reorganize the whole. Each of these spun-off businesses is in fact a distinct business sector, and each will benefit from standing on its own, with its own capital structure.”

In the last 52-weeks IAC stock has traded between $25.08 and $41 and recently traded near $29.

[R]10:30AM New York – Market averages opened lower on losses from Citigroup and market volatility in Asia and Europe.[/R]

Market averages fell after one hour of opening on the worries of further losses in mortgage securities. Dow, Nasdaq, and S&P 500 fell nearly 0.5%.

Banks and brokerages fell sharply in the morning trading after Citigroup announced “retirement” of its chief executive Charles Prince and declared further deterioration in its sub-prime portfolio.

Citigroup said that it will take a further charge in its fourth quarter beginning on October 1, 2007 to reflect the weakness and lower valuations in the mortgage securities market.

In the statement released on November 4th, Citi said, “at the present time, the reduction in revenues attributable to these declines ranges from approximately $8 billion to $11 billion (representing a decline of approximately $5 billion to $7 billion in net income on an after-tax basis).

The $55 billion in U.S. sub-prime direct exposure as of September 30, 2007 consisted of approximately $11.7 billion of sub-prime related exposures in its lending and structuring business, and approximately $43 billion of exposures in the most senior tranches (super senior tranches) of collateralized debt obligations which are collateralized by asset-backed securities.”

European markets fell across the region on the weakness in Asian markets and weak market opening in the U.S.

UK led the decliners with a loss of 1.6% followed by losses in Italy of 1%, 0.9% in the Netherlands, France, and Switzerland.

Banks across the region fell after the Citigroup chief executive Charles Prince “retired” and replaced by Robert Rubin as chairman and Win Bischoff as interim chief executive.

Asian markets closed sharply lower across the region. Hong Kong led the decliners with a fall of 5% followed by losses in Pakistan of 4.6%, in Thailand of 2.4%, in Indonesia of 2.2%, India of 1.9%, and Australia of 1.6%.

Hong Kong markets suffered its worst single-day decline this year after the Chinese Premier Wen Jiabao made cautious remarks on the investment in Hong Kong market mainland investors. After a sharp run up in the last three months Hang Seng Index had jumped 57% at the end of October and Shanghai Composite index had more than doubled for the year so far. Investors used this opportunity to take profit.

Banks in China fell sharply in the session. Bank of China led the decliners in the sector with a loss of 10% followed by losses in Bank of Communications of 8% and China Construction Bank of 6%.

PetroChina stock nearly tripled on its first day in trading in Shanghai listing. The oil explorer and refiner reached value of $1 trillion at close, surpassing other energy companies including Exxon Mobil, British Petroleum, and Total.

PetroChina initial public offering was listed at Rmb16.70 and closed at Rmb43.96 in the public offering in Shanghai and raised Rmb67 billion ($9 billion) and offered 4 million shares, in the largest public offering in mainland China.

ICBC bank raised $22 billion in its IPO in Hong Kong in October 2006. There are at least three other offerings in Hong Kong that are likely to raise more than $3 billion each in the next three months.

Hong Kong listed H-shares of PetroChina values the oil company at a market capitalization of $49 billion, sharply lower than its value when calculated using the Shanghai traded A-shares.

[R]8:00AM New York, 6:30PM Mumbai- Sensex dropped on renewed worries of global credit crisis.[/R]

Sensex in Mumbai, India dropped on Monday as other markets in Asia fell. Investors are worried about the residual effects of the U.S. inflicted credit crisis. Banks fell in sympathy with sector weakness in China, Hong Kong, and Europe. ICICI Bank, HDFC Bank and State Bank of India traded weaker.

Asian markets closed sharply lower across the region. Hong Kong led the decliners with a fall of 5% followed by losses in Pakistan of 4.6%, in Thailand of 2.4%, in Indonesia of 2.2%, India of 1.9%, and Australia of 1.6%.

Sensex declined 1.9% or 385.45 to 19,590.78 and CNX Nifty slid 1.4% or 85.1 to 5,847.3. Daily trading on the Bombay Stock Exchange was recorded at 9,011 crore rupees and on the National Stock Exchange was at 22,800 crore rupees.

Of the 30-share Sensex index, four gained while the rest declined. Of the BSE shares, 1,403 closed higher, 1,320 traded lower, and 354 remained unchanged. ONGC led the decliners in the Sensex index with a plunge of 4.91% to 1,299.05 rupees.

The Delhi Consumer Commission fined ICICI Bank 50 lakhs rupees for using violent methods and employing criminals to collect late payments on loans. The bank has used heavy handed tactics to collect loans and interest and at times used criminal gangs operating as collection or recovery services. Despite heavy criticism by consumers and local governments, the bank has continued such collection practices.
Mundra Port initial public offering is oversubscribed seven times according to a filing with the Bombay Stock Exchange. After third day of the offering, the Adani group controlled company has received bids for 30 crore shares for an offering of 4 crore shares. The offering is expected to be priced between 400 rupees and 440 rupees.

Empee Distilleries Limited reported that its offering was fully subscribed on the third day of its offering. The distillery is expected to be priced between 350 rupees and 400 rupees and raise between 160 crore rupees and 190 crore rupees.

Reliance Natural Resources surged 25.7% to 178.55 rupees on the news reports that the company has responded to the offer made by Reliance Industries to resolve the KG Basin gas conflict.

Reliance Natural surged on heavy volume of 7.96 crore shares on BSE. The move follows a recent Bombay High Court order, which gave both parties a four months ultimatum to resolve their differences. Reliance Industries declined 1.8% to 2,663.65 rupees.

Infosys Technologies slid 2.7% to 1.856.35 rupees.

Tata Group bid for Ford Motor subsidiary Land Rover and Jaguar appears to be gaining grounds according to reports in the local media. Tata Motors traded lower at 2.1% to 739.55 rupees.

Mahindra & Mahindra fell 1.7% to 742.85 rupees, Hero Honda Motors shed 1.6% to 663.90, Maruti Suzuki India fell 2.5% to 995.45 rupees while Bajaj Auto lost 1.2% to 2,394.9 rupees.

Larsen & Toubro lost 3.9% to 4,287.3 rupees on news that the company has entered into a joint venture agreement with Mitsubishi Heavy Industries to manufacture steam turbine and generator in India. Total investment in the company is estimated near 880 crore rupees.

Sterlite Industries retreated 3.5% to 991 rupees, Hindalco Industries was down 2.1% to 183.6 rupees, Steel Authority of India shed 1.6% to 255.7 rupees and Tata Steel slid 1.7% to 879.1 rupees.

Bharti Airtel rose 5.3% to 942.2 rupees. The share had fallen more than 11% in the last two sessions on worries about allocation of additional spectrum. Separately brokers raised target price for Bharti near 1,200 rupees.

Satyam Computer gained 0.4% to 463.95 rupees, NTPC jumped 0.9% to 236.8 rupees, and Cipla edged higher at 1.8% to 176.80 rupees.



[R]4:00AM New York, 12:00PM New York - The Australia index fell 1.7% as major stocks led by banks traded weaker[/R]

ASX 200 index lost 1.7% or 114.3 to close at 6,582.30. Banks led the index lower reflecting worries in the region on further fallout from new losses declared at Citigroup.

Commonwealth Bank led the decline in the sector with a loss of 1.8%, National Australia Bank lost 1.4%, the Australia & New Zealand Banking Group Ltd lost 0.6%, and Westpac Banking slid 1.1%.

China National Chemical Corp, known as ChemChina, made a A$3 billion cash offer for Nufarm Ltd in partnership with two private equity groups. The agro-chemical company plans to expand its operations around the world with this acquisition. The offer values Nufarm, the Melbourne, Australia based company at A$17.99 per share. ChemChina also plans to pay 30 cents a care dividend as a part of the deal. On the news, Nufarm rose 11% to close at A$17.34.

Nufarm has manufacturing operations in 14 nations and sells its products in 100 countries. It sells 36 percent of its products, herbicides used to protect crops, in North and South America and 32 percent in Australia, according to information on its website.

Commenting on the proposal Nufarm’s Chairman Mr. Kerry Hoggard said “we acknowledge the Consortium’s proposal which may lead to a transaction which realises fair value for Nufarm shareholders.”

Nufarm will remain headquartered in Melbourne under Managing Director Doug Rathbone, who is the company''s largest shareholder with a 17 percent stake.

The board of the Reserve Bank of Australia (RBA) meets tomorrow and is widely tipped to lift the interest rate to 6.75% from 6.5% on Wednesday. If the rate is increased, it will be the tenth increase in the last five years.

NIB Health Funds today became the first private health insurer to lists on the Australian stock exchange, marking its debut at a premium of almost 30% at $1.14 a share. The offering priced 100 million shares at 85 Australian cents. The company after the offering will be held 85% by the policy holders and the rest will be controlled by institutional investors.

Normal trading is expected to commence on November 8. NIB Health Funds is Australia''s sixth largest health fund with a market share of 6.6%, with 328,784 policyholders.

Revenue from premiums grew 8.8% to A$666 million for the year and investment income rose 74 per cent to A$32 million. Consolidated profit declined 18% to A$52 million.

The Australian dollar traded in the range between $0.9204 and $0.9208, up from Friday''s close of $0.9160. During the session, it traded between a low of $0.9186 and a high of $0.9218.

Of the ASX 200 Index shares, Nufarm led the gainers with a rise of 11.1% followed by increases in Macmahon Holdings by 3.6%, in Santos by 2.7%, in Straits Resource Limited by 2.5%, and in Newcrest Mining by 2.1%.

Of the ASX 200 index stocks Bradken led the decliners with a fall of 4.9% followed by losses in Henderson-CDI of 5%, Macquarie Group by 5.2%, in Spotless Group by 5.7%, and 6.5% in Mt Gibson Iron.

In other stocks, BHP Billiton was down 2.9% and Rio Tinto eased 2%. In the energy sector stocks gained after U.S. crude oil prices soared by $2 a barrel on Friday to end above $95 for the first time.

In the oil and gas sector, Woodside Petroleum edged 0.3% higher, Santos added 2.7%, and Australian Renewable Fuels Ltd dropped 71% after it stopped producing bio-diesel at its two plants on higher agricultural feedstock cots.

The retailers were mixed as Harvey Norman added 1.2%, Woolworths slid 1.3%, Coles Meyer lost 2.3%, and David Jones lost 2.5%.

Media stocks were down, with Fairfax losing 1.6%, News Corp down 3.3%, and PBL slid 0.9%.