Economy Slows in Q4, Stocks Fell

123jump.com Staff
23 Jan, 2008
New York City

UK stocks closed lower after the economic report showed slower growth in the fourth quarter. Growth slowed to 0.6% from 0.7% in the third quarter on weakness in service and retail sectors. FTSE 100 dropped 2.28% or 130.80 to 5,609.3. Of the 102 index stocks, 27 gained, 74 declined, and one was unchanged. Banks rallied after the government indicated that depositors of Northern Rock will be protected in in a private sale, indicating that the lender is not likely to be nationalized.

[R]2:00PM New York, 7:00PM London - U.K economy growth slowed in the fourth quarter on a slowdown in services and retails sales.[/R]

Stocks in U.K. plummeted as economy expanded at slower pace in the fourth quarter ending in December 2007 at 0.6%, lower than 0.7% growth in the third quarter.

In London trading, FTSE100 dropped 2.28% or 130.80 to 5,609.3. Of the 102 FTSE 100 stocks 27 gained, 74 declined, and one was unchanged.

Alliance & Leicester led advancing stocks with a rise of 5.96% on reports that the government plans to rescue depositors funds in Northern Rock through a private sell of the mortgage lender.

Other financial stocks gained on the news. Standard Chartered Bank Plc climbed 3.06%, HSBC Holdings Plc gained 3.04%, and Barclays Bank edged up 1.63%.

The Office of National Statistics reported on its Web site today that GDP increased 0.6% in the three months to December 2007 compared to a 0.7% jump recorded in the third quarter as the total increase in total production output was trimmed by weaker growth in services.

Economy grew at 3.1% in 2007.

Total production output in the fourth quarter surged 0.3% from no growth in the three months to September buoyed by a strong output growth in mining which advanced at 1.1% compared to a 1.1% decline a year ago in the same period.

However, manufacturing growth output was unchanged from the third quarter, while electricity, gas and water edged higher from 0.8% in the quarter to September to 1.7% in the quarter ended December.

According to the statistics office, total service output tumbled from 0.8% to 0.7% in the quarter under review due to weaker growth in business service and finance, which plunged 0.4% in the fourth quarter from 1.3% as growth slowed in computing services and financial intermediation.

The largest growth in total service output was in transport, storage and communication rising 1.9% in the fourth quarter compared to 0.5% the previous month.

Distribution, hotels and restaurants jumped 1.0% from 0.8% in the third quarter with wholesale making the largest contribution while retailing declined.

Construction growth also fell to 0.7% from 0.8% in the third quarter, while agriculture spiked 1.3% in the quarter to December from 0.6% from a quarter earlier.

The Bank of England said today on its Web site the long-term inflation expectations have remained broadly stable, adding that upside risks to inflation from supply side developments had increased because of changes in food, energy prices and the exchange rate.

Of the 102 FTSE 100 stocks Alliance & Leicester led advancing stocks with a rise of 5.96% followed by gains in Carnival Plc of 4.72%, in Experian Group of 3.84%, in British Airways Plc of 3.63%, and in Anglo American Plc of 3.38%.

Financial stocks gained on reports that the government will protect depositors’ funds in Northern Rock by making a private sell of lender, ending speculation that the government had opted to nationalize it.

British Airways climbed after a report from the statistics office showed that air transport made a significant contribution to service sector output.

Kingfisher Plc led decliners in the FTSE100 stocks with a drop of 5.29% followed by declines in Royal Dutch Shell of 5.29%, in British Energy of 4.94%, and in Sage Group of 4.83%.

Retailers also fell on expectations that the economy is slowing. Wolseley Plc shed 3.63% and Tesco plunged 3.58%.

Tullow Oil reported today in its trading update and operational update published on its web site today that working interest production averaged rose 13% from 2006 to 73,100 barrels per day, adding that gross production from Equatorial Guinea assets exceeded 100,000 barrels per day.

However, work interest production is expected to average between 70,000 to 74,000 barrels per day this year. The stock closed down 1.55%.

In 2007 the company drilled 16 exploration wells and nine of which had hydrocarbon sources and the company has contracted two rigs to drill up to seven wells of which the first exploration has already begun.

[R]11:30AM New York – Investors remain skeptical of the effectiveness of the Fed rate cut.[/R]

U.S. stocks opened lower and fell more after two hours of trading as investors worried that rate cut alone may not save economy from sliding into a recession. European markets fell after a tough talk on inflation from the European Central Bank. However, Asian markets rallied on the U.S. rate cut.

The U.S. economy has been leveraged on easy credit and low interest rates for the last seven years. The speculation in the housing market and rampant increase in construction spending was fueled by cheap credit and lax loan standards. Rate reduction, the blunt instrument, used by the Fed to stimulate economy is not going to help in unwinding the leverage in the economy.

Consumers and banks are leveraged and lower rates are not going to help in reducing this leverage in the financial system.

In fact, there are significant risks that the rate cut may add fuel to rising inflation in energy and food prices. Dollar could also come under pressure if rate fall any more.

Dow Jones Industrial Average fell 92 to 11,879.56, Nasdaq declined 40.89 to 2,251.34, and S&P 500 lost 15 to 1,295.50.

Apple Inc ((AAPL)) fell 14% or $22.11 to $133.49 after it reported lower than expected earnings forecast for the current quarter and lowered revenue growth to 29% from 35%. Apple reported earnings in the first quarter, which included holiday sales, of $1.58 billion or $1.76 per share compared to $1.0 billion compared to $1.14 per share a year ago. Revenue in the quarter jumped $9.6 billion from $7.1 billion a year ago.

Apple shipped 2.32 million Macintosh computers, representing 44% unit growth and 47% revenue growth over the year-ago quarter. The Company sold 22.12 million iPods during the quarter, representing 5% unit growth and 17% revenue growth over the year-ago quarter. Quarterly iPhone sales were 2.31 million.

“Apple''s revenue grew 35 percent year-over-year to $9.6 billion, an increase of almost $2.5 billion over the previous December quarter''s record-breaking results,” said Peter Oppenheimer, Apple''s CFO.

He added, “Our strong results produced cash flow from operations of over $2.7 billion during the quarter, yielding ending cash balance of over $18.4 billion. Looking ahead to the second quarter of fiscal 2008, we expect revenue of about $6.8 billion and earnings per diluted share of about $.94.”

Motorola ((MOT)) reported sales of $9.65 billion in the fourth quarter of 2007. Net earnings in the quarter were $0.04 per share, which include $0.05 per share from continuing operations and a net loss of $0.01 per share from discontinued operations. Earnings from continuing operations include net charges of $0.09 per share related to a legal settlement, charges associated with previously announced workforce reductions and a write-down of assets, partially offset by tax benefits.

For the full year 2007, sales were $36.6 billion. The net loss was $0.02 per share, which included a net loss of $0.05 per share from continuing operations and earnings of $0.03 per share from discontinued operations. The net loss from continuing operations included net charges of $0.29 per share.

Motorola stock fell 19% or $2.28 to $10.04 after it reported earnings.

Commodities stocks including energy, base metals, minerals and mining companies declined in the session.

CVRD, also known as Vale, ((RIO)) fell $2.55 to $24.28, BHP Billiton ((BHP)) declined $2.03 to $55.77, and Rio Tinto ((RIO)) dropped $8.72 to $322.59. Freeport-McMoran lost $10.41 to $71.10, Southern Copper Peru edged fell $5.81 to $75.

In Tokyo Nikkei 225 Index closed higher 256.01 or 2.04% to 12,829.06, in Hong Kong Hang Seng index increased 2332.54 or 10.72% closed to 24,090.17, in Australia ASX 200 index higher 225.50 or 4.35% to close 5,412.30.

In South Korea Kospi Index increased 19.40 or 1.21% to close at 1,628.42, in Thailand SET index closed lower 0.89 or 0.12% to 740.65, and Indonesia JSE Index edged increased 181.75 or 7.92% to 2,476.28. Sensex index in India increased 864.10 or 5.16% to 17,594.07.


[R]10:00AM New York, 7:30PM Mumbai - Sensex posts a record gain in a single day, Reliance Energy shines.[/R]

Stock markets in India on Wednesday broke the seven-day losing streak with the Bombay Stock Exchange index posting a record one-day gain.

The BSE Sensex advanced 5.2% or 864.13 to 17,594.07. The CNX S&P Nifty surged 6.2% or 304.10 at 5,203.40.

Of the BSE share, 1,401 stocks lost, 1,302 advanced and 23 shares remained unchanged.

Stocks in the 30-stock Sensex index shares surged.

Turnover on the BSE was at 7,099 crore rupees while the National Stock Exchange posted turnover of 19,267 crore rupees.

Reliance Natural Resources led the most active stocks on the BSE trading with turnover of 465.92 crore rupees followed by Reliance Petroleum,, Reliance Industries, ICICI Bank, and Reliance Energy.

Trade Minister Kamal Nath said on Wednesday that there is no economy in the world that can be fully insulated from a recession in the U.S., but India will have a limited impact. Kamal Nath was speaking at a gathering of business leaders during the annual World Economic Forum in Davos, Switzerland.

He added that domestic demand has been driving India''s recent growth.

Of the BSE shares, Reliance Energy surged 16.8% to 2,004 rupees. It led the advancers in the Sensex index.

Reliance Energy announced that it had won a railway project worth 2,500 crore rupees from the Delhi Metro Rail Corporation, in consortium with Spain''s CAF.

Reliance Industries surged 8.5% to 2,558 rupees.

National Thermal Power Corporation climbed 13.3% to 222.75 rupees on news reports that the company is intending to invest 1,729 crore rupees for development of the Jharkhand coal mine.

Satyam Computers gained 10.3% to 391 rupees, TCS advanced 7.5% to 859 rupees, Infosys surged 2.9% to 1417 rupees while Wipro galloped 1.4% to 435 rupees.

Banking and financial shares surged on hopes of a rate cut from the Reserve Bank of India following rate cuts in the U.S. and Hong Kong.

Housing Development Finance Company climbed 3.2% to 2,560 rupees. ICICI Bank, gained 4.9% to 1179.7 rupees, and State Bank of India 8.6% to 2,344 rupees.

HDFC Bank jumped 6.8% to 1,538 rupees. On Monday, HDFC Bank reported 45.2% rise in net profit to 429.36 rupees on 59.7% rise in total income to 3,405.79 crore rupees during the third quarter of December 2007 over the third quarter of 2006.

Grasim Industries rose 4.8% to 2,996 rupees. The company during trading hours on Tuesday reported 34.6% rise in net profit to 553.79 crore rupees on 15.9% rise in total income to 2,694.96 crore rupees during the December 2007 third quarter over December 2006 third quarter.

Tata Motors rose 1.8% to 669.80 rupees on reports that the company has signed a development contract with Chrysler LLC for developing electric vehicles.

[R]6:00AM New York, 6:00PM Hong Kong - Hong Kong stock index surged 10% in record one day rise. Analysts predicted that the rally may falter in the weeks ahead.[/R]

Hong Kong stock indexes soared on record one-day rise led by financial and realty stocks after the U.S. Federal Reserve slashed its benchmark interest rate. The magnitude of the rate cut surprised the market. The sharp rise in the market averages may not sustain in the coming weeks if the U.S. economy continues to weaken.

In Hong Kong trading Hang Seng Index climbed from a two-day 14% decline to close up 11% or 2,332.54 to 24,090.17, the steepest ascent since 1998, while the Hang Seng China Enterprises Index rose 11% or 1,367.62 to 13,279.53, the most since September 1998.

Daily turnover on the main-board was HK$156.4 billion compared to HK$155.8 billion yesterday.

All stocks on the 43-member Hang Seng Index advanced.

Hong Kong Monetary Authority today cut its key rate to 5% from 5.75% in tandem with the U.S. Federal Reserve which slashed its benchmark rate o 3.5% from 4.25%.

HSBC Holdings, Standard Chartered Bank and the Bank of East Asia also cut rates by 75 basis points to 6%, sparking expectations that this will encourage economic growth.

Analysts at Credit Suisse and Celestial Asia Securities Holdings said today’s rally may be short-lived.

Realty stocks rose on expectations that demand for real estate in Hong Kong will rebound after the cut in the base rate by the U.S. Federal Reserve. Sun Hung Kai soared 9.3% to HK$154.90, Cheung Kong Holdings Limited climbed 10% to HK$130 and Hang Lung gained 9.9% to HK$29.50.

Financial stocks also rallied. Bank of Communications surged or 13% to HK$8.90 after reporting today that profit rose more than 60% in 2007, and earnings growth to Rmb 12.55 billion in 2006.

Bank of China added 8.1% to HK$3.33 after dismissing reports in The South China Morning Post newspaper that the bank may post a loss due to investments in subprime mortgages, adding that profits rose last year.

HSBC reversed a three-day 12% decline to close up 11% to HK$116.20.

Jiangxi Copper Co. plunged 19% to HK$16.60, its biggest drop since January 1998, after the shares ended a week-long suspension. The Company halted trading last week to announce a plan to sell Rmb 6.8 billion of bonds with warrants.

China Unicom surged 15% to HK$17.04 after Goldman Sachs lifted its rating on the stock from ``neutral,’’ to “buy. China Mobile, the world''s largest cellular operator rose 10.5% to HK$120.3

New World Development Co.''s public works and transportation arm, added 4.1% to HK$19.80. PetroChina Co Limited closed up17.5% to HK$11.


[R]5:00AM New York, 7:00PM Tokyo - Financial stocks, shipping lines and carmakers lift Tokyo up 2.04%.[/R]

Stocks in Tokyo recovered from their worst two-day decline in more than a decade buoyed by emergency rate cut in the U.S.

In Tokyo trading Nikkei 225 rose 2.04% or 256.01 to 12,829.06, while the broader Topix soared 29.98 to 1,249.93. Both benchmarks tumbled 5.7% yesterday and lost more than 10% in a two-day sell-off.

In the first section of the Tokyo Stock Exchange 10.3 billion shares worth 1.1 trillion yen were traded and in the second section 527 million shares worth 6 billion yen changed hands.

Of the Nikkei 225 stocks 187 gained, 30 declined, and 7 were unchanged. Bridgestone led gainers with a rise of 8.07% followed by Mitsubishi Corp rising 6.90% on rising metal prices.

The U.S. Federal Reserve cut the benchmark interest rate to 3.5% from 4.25% at an unscheduled meeting yesterday. The emergency rate cut of 0.75% was done in response to the slowing economy and global stock market plunge for two days ending on Tuesday.

It was the first time since 2001 the monetary authorities reduced the interest rate at an unscheduled meeting. The Federal Reserve was scheduled to meet on January 29-30.

Bloomberg news reported today that Obic net income in the nine months to December 31 rose to 8.5 billion yen, while sales jumped 6.5% to 35 billion yen on strong sales of accounting systems that accompanied the change of Japanese standards for booking depreciation and leases.

Of the Nikkei 225 index stocks, Bridgestone Corporation led advancers with a rise of 8.07% followed by rises in Mitsubishi Corp of 6.90%, in Fuji Electric House of 6.78%, in Marubeni Corp of 6.61%, and in Sumitomo Corp of 6.47%.

Mitsubishi Corp rose as metal prices gained. Copper gained 2.2% and zinc climbed 3.6%.

Other commodity stocks gained as well. Nippon Mining House increased 5.42% and Sumitomo Metal Industries soared 2.07%.

Shipping lines also gained on expectations that the aggressive emergency rate cut by the U.S. Federal Reserve will lead to a soft landing of the economy. Mitsui O.S.K. Lines gained 5.66%, Kawasaki Kisen rose 6.17% and Mitsui Engineering & Shipbuilding advanced 4.19%.

Toyota Motor Corporation surged 6.03% and Honda Motor Company increased 3.26%.

Casio Computer led decliners in Nikkei 225 index shares with a drop of 4.72% followed by losses in Clarion Company Limited of 4.10%, in KDDI Corporation of 2.92%, in Secom Company Limited of 2.81%, and in Sony Corporation of 2.74%.

Casio and other exporters fell after the yen strengthened from 106.41 to 106.43 against the dollar.

Takeda Pharmaceutical rose the most in five years after Citigroup raised its recommendation of the stock to “buy” on expectations that earnings will rise in the short to medium term.

The pharmaceutical company is currently seeking regulatory approval from the U.S. Food and Drug Administration on two development drugs with initial trial data are expected in May and June 2008.

Takeda is seeking a drug to replace Actos, which generated 2.86 billion yen in the year ended March 31, 2007. The stock closed up 6.33%.

Nikkei news online reported today that Nippon Yusen and Mitsui O.S.K. Lines will transform their crude oil tankers into iron ore carriers in preparation of a planned implementation of an international ban in using single-hull containers in transporting oil. Nippon Yusen rose 3.99% and Mitsui O.S.K. Lines surged 5.66%