U.S. Stocks Decline, Rio Tinto Surges

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

U.S. stocks fell in the early morning trading as investors faced a barrage of news. Same store sales declined in October with Wal-Mart reporting 0.4% rise. Nordstrom, J C Penney, and Limited sales fell. Cisco reported rising sales and earnings but warned a weakness in financial services sector. Ford reported lower losses but North American automotive segment remained weak. AIG and Morgan Stanley reported losses in loan portfolio. China, Hong Kong and Jpan fell sharply.

[R]10:00AM New York – Elevated oil, gold and falling dollar heightened the investor nervousness from sub-prime losses at the U.S. market opening.[/R]

World markets remained worries on the widening losses in sub-prime lending portfolio of U.S. financial institutions. Many, only few months had flatly rejected the notion of holding these securities and denied any losses in the financial instruments. Morgan Stanley, the latest institution, reversed its earlier projections, and wrote down $3.7 billion in mortgage related securities. AIG, the leading insurance agency, reported loss as well.

The news of the write-down sent Asian and European markets sharply lower. Stock markets in Japan dropped 2% and in Hong Kong fell 3% on the news.

In the pre-market trading crude oil fell a fraction to $96.78 per barrel and gold jumped $1.50 to $835.10.

Rio Tinto ((RTP)) surged 26% to $450.60 in the New York trading after BHP Billiton ((BHP)) confirmed that it had approached Rio Tinto for a friendly merger. Rio Tinto rejected the overtures. BHP opened $3 higher bit fell quickly by $3.42 to $76.94 in the opening trading in New York.

After the market close on Wednesday, AIG and Cisco reported earnings. Cisco earnings jumped sharply but the worries that the sales in the financial services sector may affect earnings. Cisco ((CSCO)) fell $1.77 to $30.97. AIG reported 27% decline in profit on $2.7 billion losses in loan portfolio. AIG fell $2.01 to $55.90 in the morning trading.

Ford Motor ((F)) reported third quarter loss of $380 million or 19 cents per share compared to loss of $5.2 billion and $2.79 per share a year ago. The total revenue including financial unit increased 11% to $37.1 billion of which automotive sales increased 12% $36.3 billion. Ford stock increased 25 cents to $8.45.

U.S. retailers reported lower than expected same store sales for October. Sales rose at Wal-Mart 0.4%, at Costco 9%, at Target 4%. Apparel retailers reported declining same store sales. Sales declined at Nordstrom by 2.4%, at Macy’s 1.5%, J.C. Penney 1.8%, Kohl’s 3.8%, and at Limited Inc 6%. Chico’s FAS same store sales in October declined 10.6% and total sales in the four weeks ended November 3rd fell 4.1% to $121.2 million.

In European markets, Belgium led the decliners with a loss of 3.3% followed by losses in Italy of 1.5%, the Netherlands of 1.3%, and Switzerland of 1.2%. U.K., Germany, Spain, and Norway edged higher.

Asian markets fell sharply ahead of the U.S. market opening. Shanghai led the decliners with a loss of 4.9%, followed by losses in Taiwan of 3.9%, in Hong Kong and Korea of 3.2%, in Philippines and Australia of 2.5%, in Japan of 2%, in India and Indonesia of 1.2%.


[R]6:00AM New York, 7:00PM Tokyo - Exporters, financial stocks drag Tokyo down 2% on weakening dollar and heightening concern over credit market losses. Machinery orders decline 7.6% in September.[/R]

In Tokyo trading Nikkei 225 declined 2.02% or 325.11 to 15,771.57, while the broader Topix Index fell 39.75 to 1,516.94.

Of the Nikkei 225 stocks, 20 gained, 202 shed, and 3 were unchanged. Chiyoda Corp led the decliners in the index falling 14.1%, followed by losses in Nippon Mining House of 13.94% on a sharp decline in profit of 30%.

In the first section of the Tokyo Stock Exchange 10.9 billion shares valued at 1.3 trillion yesterday compared to 8.5 billion yen worth 1 trillion traded yesterday and in the second section 339 billion shares valued at 6.2 billion changed hands.

The Cabinet Office’s Economic and Social Research Institute announced today the total orders received by 280 manufacturers operating in Japan slumped by a seasonally adjusted 14.5% to 2.37 trillion yen in September from August and in the fiscal second quarter ending in September 2007 orders fell 3.6% or 7.7 trillion yen compared to the previous quarter ending in June 2007.

Private sector machinery orders, excluding volatile orders from shipping and electrical power utilities, fell a seasonally adjusted 7.6% or 958 billion yen, but increased 2.5% to 3.1 trillion yen in the quarter ending in September.

According to the report, total manufacturing machinery orders increased 5.7% in September at 473 billion yen and added 2.7% in the quarter ending in September to 1.41 trillion yen. Orders are forecasted to increase 5.9% in the three months to December to 1.49 trillion yen. For non-manufacturing companies, excluding volatile orders, September orders fell 14.1% to 487 billion yen, while orders in the quarter ending in September rose 1.6% to 1.71 trillion yen and in the quarter to December orders are expected to rise 1.1% to 1.73 trillion yen.

The Cabinet Office also reported government orders in September slumped 18.6% to 198 billion yen, while in the quarter ending in September, orders fell 26.2% to 670 billion yen and are projected to increase 19.1% to 798 billion yen in the quarter to December. In addition, overseas orders plunged 7.8% in September to 1.1 trillion yen and 2.2% or 3.3 trillion-yen in the July-September quarter, but orders are forecasted to grow 4.8% to 3.4 trillion yen in the quarter ending in December.

Of the Nikkei 225 index shares, Alps Electric Company Limited paced gainers rising 2.96%, followed by gains of 2.34% in Konami Corp, 2.17% in Shinsei Bank Limited, 2.14% in Nippon Paper Group and 1.75% in Olympus Corporation.

Chiyoda Corp led decliners, slumping 14.09%, followed by losses in Nippon Mining House of 13.94%, in Dainippon Sumitomo of 8.73%, in Kubota Corp of 7.26% and Pioneer Corp of 7.11%.

Financial stocks declined, weighed down by losses declared in sub-prime portfolio of the U.S. securities firm Morgan Stanley and weak earnings from General Motors and AIG.

Morgan Stanley wrote down its portfolio by $3.7 billion. Separately, American International Group reported third quarter earnings plummeted 27%. General Motors Corp also announced a $39 billion quarterly loss, worst quarterly loss ever.

Mitsubishi UFJ Financial Group slipped 3.21%, Mizuho Financial Group, slumped 3.43% and Sumitomo Mitsui Financial Group fell 2.92%.

The yen firmed against weak dollar at 112.52 from 112.54 against the dollar. Exporters fell on weak dollar led by a loss in Sony Corp of 2.36%. Toyota Motor slipped 4.19% but Honda Motor climbed down 2.91%.

Brewer Kirin Holdings announced has agreed to acquire National Foods, Melbourne, Australia based dairy and fruit juice unit owned by San Miguel Corporation, for 294 billion yen, inclusive of a 200 billion yen debt.

National Foods, with 19 plants located in Australia of the total of 24 plants it owns, sells dairy products branded Pura Milk, Beri juices, King Island Dairy, Farmers Union and has Australian rights to Yoplait yoghurt.

National Foods generated revenue of A$1.84 billion and generated A$0.17 billion in the fiscal year 2006 ending in December and employs 3,500 people.

Kirin is trying to diversify its reliance from beer sales as younger population is increasingly opting for healthier alternative to beer. Kirin Holdings revised downwards its full year profit first year profit forecast by 3.6% to 54 billion yen.