Insurance and Banks Face More Losses

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

European markets edged lower in a wild week of trading. Markets in Germany fell as banks reported more subprime losses during the week. Stocks on Friday edged lower as worries related to sub-prime loans persisted. Carlsberg and Heineken agreed to pay nearly 11 billion euros for Scottish & Newcastle. Finnish elevator company Kone reported 26% rise in profit in the fourth quarter. French retailer Casino Guichard rose after it reported 19% rise in revenue in the foruth quarter.

[R]10:00PM Frankfurt, 4:00PM New York, 8:00AM Sydney – European stocks declined as investors worried that banks and insurance companies may record more losses from sub-prime loans.[/R]

European Markets

In London FTSE 100 Index closed lower 6.80 or 0.12% to 5,869.00, in Paris CAC 40 Index decreased 37.17 or 0.76% to close at 4,878.12 and in Frankfurt DAX index lower 4.33 or 0.06% to close at 6,816.74. In Zurich trading SMI decreased 4.09 or 0.05% to close at 7,686.88.

North American Markets indexes

Dow Jones Industrial Average fell 171.44 or 1.38% to a close of 12,207.17, S&P 500 closed down 21.46 or 1.59% to 1,330.61, and Nasdaq Composite Index traded down 34.72 or 1.47% to a close of 2,326.20.

In Toronto TSX Composite closed down 7.01 or 0.05% to close at 12,900.26.

Of the 30 stocks in Dow Jones Industrial Average, 5 closed higher, 25 closed lower, and none was unchanged.

AT&T led the decliners in the index with a fall of 4.2% followed by losses in Home Depot o 3.9%, in AIG of 3.6%, in American Express of 3.3%, and in Intel of 3.1%.

Honeywell led the gainers in the index with a rise of 3% followed by increases in General Motors of 0.8% and in McDonalds of 0.7%.

Of the stocks in S&P 500, 103 closed higher, 395 fell, and 2 were unchanged.

Twenty one stocks rose more than 3% and one hundred stocks fell more than 3%.

Freddie Mac led the decliners in the index with a fall of 7.5% followed by losses in Micron Technology of 7.5%, in Fannie Mae of 7.11%, in AMD of 6.3%, and in Schering Plough of 6.1%.

Perkin Elmer led the gainers in the index with a rise of 18% followed by increases in Compuware of 14%, in E*Trade of 8.4%, in Eastman Chemical of 7.5%, and in Consol Energy of 7.1%.

South American Markets Indexes

In Latin Markets Peru led the advancers in the region with a gain of 1.97% followed by increases in Colombia of 1.06%, and in Argentina of 0.83%.

Mexico led the decliners with a fall of 1.7% followed by a loss of0.9% in Chile and 0.8% in Venezuela.

Asian Markets

In Tokyo Nikkei 225 Index closed higher 536.38 or 4.10% to 13,629.16, in Hong Kong Hang Seng index increased 1583.10 or 6.73% closed to 25,122.37, in Australia ASX 200 index higher 279.90 or 5.02% to close 5,860.30.

In South Korea Kospi Index increased 29.41 or 1.77% to close at 1,692.41, in Thailand SET index closed higher 31.14 or 4.27% to 759.72, and Indonesia JSE Index edged increased 103.79 or 4.12% to 2,620.49. Sensex index in India increased 1139.90 or 6.62% to 18,361.66.


Bond Yields decreased on 10-year U.S. bonds to 3.56% and on 30-year bonds fell to 4.27%.

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

Crude oil rose $1.24 to close at $90.65 per barrel for a front month contract, natural gas increased 18 cents to $7.982 per mBtu, and gasoline futures increased 3.42 cents to close at 231.70 cents per gallon.

Gold increased $8.80 in New York trading to close at $914.60 per ounce, silver closed up 19 cents to $16.53 per ounce, and copper for front month delivery increased 1.25 cents to 318.40 per pound and in London copper futures increased $145.00 to $7,049.00.

Dollar edged higher against euro to $1.4672 and gained edged lower yen to 106.7351.


[R]3:00PM New York, 8:00PM London - Homebuilders, financial stocks drag U.K 0.12% down. Kingfisher appoints Ian Cheshire Group Chief Executive[/R]

Stocks in London plunged in the afternoon session led by homebuilders and financial stocks.

In London trading FTSE 100 fell 0.12% or 6.8 to 5,869.00.

Of the 102 FTSE100 stocks, 39 gained, 60 declined and 3 were unchanged. Imperial Tobacco led advancing stocks with a rise of 9.02%, followed by Vedanta Resources gaining 7.21% as oil prices increased and metals rose to record highs.

Merger News

Carlsberg and Heineken announced today that the company Scottish & Newcastle boards have agreed for 7.8 billion pounds merger deal. Under the terms of the deal Carlsberg will assume 54.5% equity, while Heineken will take 45.5%. Scottish & Newcastle close up 2.22%.

The Scotland based brewer will be split along the geographic lines with operations in China, Vietnam, France, and Russia controlled by Carlsberg and in India, UK, US, Portugal, Ireland, and Belgium will be controlled by Heineken.

The deal still needs approval of shareholders.

Old Mutual announced today on its website that discussions are continuing with Royal Bafokeng Holdings Limited concerning the potential sale by Old Mutual to RBH of a controlling stake in Mutual & Federal Insurance Company Limited.

Gold Stocks

Gold prices rose 1.1% to reach a record $922.59 per ounce, while platinum gained 2.8% to $1,655 an ounce after South African power utility Eskom Holding Limited asked mining companies to reduce energy consumption. The companies had agreed on power cuts that could lower the production between 10% and 15%.

AngloGold Ashanti Limited and Gold Fields have stopped production in the country. Xstrata Plc jumped 3.15% and BHP Billiton spiked 2.24% on the news.

Crude oil prices also advanced as investors surmised that U.S. stimulus plan will keep the demand for crude oil and gasoline rising.

Kingfisher

UK retailer, Kingfisher announced today on its Web site that the retailer has appointed Ian Cheshire as Group Chief Executive effective next Monday. Kingfisher’s Chairman Peter Jackson said Cheshire is better placed to spearhead changes to improve returns.

Cheshire however said there is need to ensure that the company’s cash and capital is deployed more productively, while tightening the control of costs.

Other leading retailers also declined. Next Plc shed 3.91%.

Leading Gainers and Losers

Of the FTSE 100 index stocks, Imperial Tobacco led gainers with a rise of 9.07% followed by gains of 7.21% in Vedanta Resources, of 5.74% in British Energy, of 3.92% in Rio Tinto Plc, and of 3.92% in Carphone Warehouse.

Imperial Tobacco rose on reports the company is planning to bid 910 million euros to fully takeover Spanish cigarette company Compania de Distribucion Integral Logista SA.

Persimmon led decliners in FTSE 100 index stocks with a drop of 6.88% followed by losses of 6% in Old Mutual Plc, of 5.94% in Alliance & Leicester, of 5.54% in Taylor Wimpey, and of 5.09% in Anglo American Plc.



[R]2:00PM New York, 8:00PM Frankfurt – S&N board has agreed to a joint bid between Heineken and Carlsberg at 800p.[/R]

A joint bid by Denmark based Carlsberg and Holland based Heineken for Scottish & Newcastle plc was accepted at 800 pence (or $16 per share). The Edinburgh, UK based company has been in discussion with two beer giants for three months and discussion gained momentum after the unsolicited offer was made public.

The joint bid, revised three times values the beer company at 7.8 billion pounds ($15.6 billion) and values S&N operating earnings or EBITDA for the year 2006 at multiple of 14.3.

The Offer of 800 pence per S&N Share represents a premium of 50.7% to the closing price of 531 pence per S&N Share on 28 March 2007, being the date immediately before speculation first arose around a possible offer for S&N.

The offer is at a premium of 25.7% to the closing price of 637 pence per S&N Share on October 16, 2007, last trading day before the public announcement of the merger discussion.

The joint bid was revised three times for S&N which hurt the stock prices of bidders on the worries that the companies may overpay. The first two offers at 720 pence in October and 750 pence in November were rejected by S&N. The jointly controlled Russian BBH was the most sought after in the deal.

Following completion of the Offer, S&N’s share of Baltic Beverages Holdings, as well as the French, Greek, Chinese and Vietnamese operations will be transferred to Carlsberg.

Heineken will continue to hold the remaining businesses, in the UK and Ireland, Portuguese, Finnish, Belgian, US and Indian operations.

Following the merger Heineken will retain its number one position in the UK market and number 2 positions in Portugal, Ireland, Finland, and Belgium. Heineken estimated that the deal will save 120 million pounds by the fourth year annually with 70% resulting from cost savings and 30% from higher revenue.

Carlsberg hopes to benefit from its strong position in France and gain access to two of the fastest growing markets in the world, China and Russia. Carlsberg and S&N own equal stake in BBH, with presence in Russia, Ukraine and other Central European nations. Carlsberg in a presentation to analysts suggested that beer volume in the Eastern European markets is expected to rise annually by 30% in the next four years.

Baltic Beverages Holdings AB was sought after by Carlsberg to tap into the rising demand for beer in Russia. Russia has managed to transform its command control economy to consumer based economy on the rising exports of minerals, crude oil and gas. Russian consumers have developed a taste for Western quality products and retail sales of imported automobiles, to expensive clothes, to food and beverages are growing.

Carlsberg is holding leading market position in France but its market share has declined in a highly regulated market from 41% in 2001 to 36% in 2007. Carlsberg expects beer volume in Western Europe to decline annually by 1% in the next five years. Carlsberg has number two position in Greece with 10% market share and expects the market to grow in the longer term.

Carlsberg owns 17.5% in Chonquin Beer Company in China which is ranked fifth in market share in the country. Heineken will now control 39% stake controlled by S&N in Kingfisher, the Indian market leader.

Carlsberg and S&N are still contesting shareholder agreement in an arbitration court on the ownership of Russian and Central European market leader, BBH. If shareholders of S&N fail to approve proposed offer, S&N is likely to pursue Carlsberg for breaking the shareholder agreement that prohibits it from making offer for S&N.

Heavily leveraged Carlsberg is likely to face a rating downgrade from rating agencies if the deal goes through. Carlsberg plans to pay for the deal by issuing rights and a debt offering. Carlsberg has new bank facilities totaling of Danish Kroner 29 billion and will issue equity rights offering of no more than DKK 31.5 billion.

The directors of S&N, were advised by Deutsche Bank, Rothschild and UBS, consider the terms of the offer to be fair and reasonable.

In London FTSE 100 Index closed lower 6.80 or 0.12% to 5,869.00, in Paris CAC 40 Index decreased 37.17 or 0.76% to close at 4,878.12 and in Frankfurt DAX index lower 4.33 or 0.06% to close at 6,816.74. In Zurich trading SMI decreased 4.09 or 0.05% to close at 7,686.88.


[R]10:30AM New York – U.S. stocks edge higher on earnings, stimulus package, and rally in global markets.[/R]

U.S. stocks in the morning trading edged higher after a rally in Asia and Europe. Earnings from Caterpillar, Honeywell, Microsfot, and Juniper Networks, and Harley Davidson dominated trading sentiment.

Investors took a comfort as leading lawmakers in Congress and Whitehouse acted to enact $150 billion package. Several fund managers expressed their lack of enthusiasm for the size of the package and effect of it on consumer spending.

Microsoft reported surge in revenue and earnings on rising sales of Xbox and Vista. The positive guidance for the quarter and the year lifted tech stocks in the morning.

Caterpillar ((CAT)) reported fifth straight year of record sales and revenues and the fourth consecutive year of record profit.

For 2007, sales were $44.958 billion, up 8%, and earnings per share were $5.37, up 4% from 2006.

The company also reported record fourth-quarter sales and revenues of $12.144 billion, 10% higher than the fourth quarter of 2006, and earnings per share of $1.50, up 14% from a year ago.

Honeywell ((HON)) today announced full-year 2007 sales increased 10% to $34.6 billion from $31.4 billion in 2006. Earnings per share were up 25% to $3.16 versus $2.52 in the prior year.

Fourth quarter sales were up 12% to $9.3 billion versus $8.3 billion in 2006. Earnings per share increased 26% to $0.91 versus $0.72 in the prior year fourth quarter. Cash flow from operations was up 16% to $1.4 billion versus $1.2 billion in the prior year, and free cash flow was up approximately 20% to $1.1 billion versus $0.9 billion in the fourth quarter of 2006.

[R]10:00AM New York, 7:30PM Mumbai - A record gain for Sensex, annual inflation rise.[/R]

Stock markets in India rebounded of Friday with the benchmark index, Sensex recording the record one-day increase only two days after creating a one-day record gain.

The markets were subdued in the early session but later recovered, lifted by the global market rally. Global markets surged on Friday on strong corporate sentiment in Germany and the return of confidence in the United States economy on the fiscal stimulus package.

The 30-share BSE Sensex surged 6.6% or 1,139.92 to 18,361.66 while the broader CNX S&P Nifty climbed 7% or 349.90 to 5383.35.

Of the stocks traded on the BSE, 1,558 shares advanced, 1,164 declined, and 36 stocks remained unchanged.

Stock trading turnover on the BSE amounted to 5,199 crore rupees while turnover on the National Stock market was 13,402 crore rupees.

Reliance Capital led the most active stocks with a turnover of 255.68 crore rupees. Reliance Energy, Reliance Natural Resources, GMR Infrastructure and Reliance Industries were the other most active stocks.

Of the BSE shares, Hindalco, Reliance Energy and ICICI Bank and Reliance Industries advanced.

Banks advanced on the hope that the Reserve Bank in India will lower interest rate after the rate cut in the U.S. Bank of India and State Bank of India gained on the expectations.

Reality and metal stocks closed higher.

India''s annualized wholesale price index marginally rose 3.83% for the week ending on January 12, 2008, from 3.8% a year ago during the similar period. Annual inflation rate was 6.2% during the comparative week in the previous year.

Of the BSE shares, Reliance Industries surged 4.8% to 2,609.55 rupees.

Hindalco Industries climbed 14.01% to 173.35 rupees, Reliance Energy soared 11.8% to 2030.25 rupees and Larsen & Toubro surged 10% to 3,890.4 rupees.

NTPC was up 9.1% to 222.25 rupees and Mahindra & Mahindra jumped 7.8% to 674.2 rupees.

Banking shares advanced ahead of the announcement of the Reserve Bank monetary policy statement next week on Tuesday. ICICI Bank surged 11.2% to 1,259.25 rupees.

State Bank of India rose 2.5% to 2,405 rupees after reporting 69.8% rise in net profit to 1,808.64 crore rupees and 33.1% increase in operating income to 1,5364 crore rupees in quarter 3 of December 2007 over quarter 3 December 2006.

Unitech surged 17.8% to 439 rupees, Indiabulls Real Estate soared 13.8% and DLF rose 5.9% to 945.1 rupees.

Among the metal stocks, Hindalco Industries soared 14% to 173.35 rupees while Tata Steel moved up 6.4% to 714.1 rupees. Sterlite Industries rose 4.9% to 786.75 rupees.

[R]6:00AM New York, 6:00PM Hong Kong – Hong Kong stocks gain led the rally in the Asia on fiscal stimulus package in the U.S. Crude oil and metal prices rose.[/R]

Hong Kong stock indexes traded in positive territory after calm returned to the financial markets as the U.S. Congress and the Bush Administration agreed on the stimulus plan. Commodities, metals, and energy prices surged higher.

While investors pushed stocks higher in the wake of fiscal stimulus, lower interest rate in the U.S. is likely to weaken dollar and push up prices of metals and crude oil. The move by the U.S. could be inflationary in China, India, and most countries around the world.

In Hong Kong trading Hang Seng Index gained 6.7% or 1,583.10 to 25,122.37, declining 0.3% for the week, while the China Enterprises Index of H shares rose 8.4% or 1,082.55 at 14,015.75, falling 3.8% for the week.

Daily trading turnover on the main-board was HK$126.7 billion compared to HK$142.4 billion yesterday.

Xinhua News Agency reported today that Shanghai Mayor Han Zheng said today at the first annual session of the municipal’s People Congress that the city aims to increase its Gross Domestic Product to Rmb 2 trillion by 2012.

Zheng added that the city will consolidate its position as a global financial and logistics center.

In 2007 Shanghai’s GDP was recorded at Rmb 1.2 trillion or Rmb 65,000 per capita.

The U.S. Congress and White House yesterday agreed on a fiscal economic stimulus package that will provide tax rebates of at least $600 per household with taxable income of less than $150,000. The rebate is likely to help consumer spending and help businesses to invest more in the business.

Businesses suffering losses can now reclaim taxes previously paid amounting to $70 billion.

Financial stocks rose as a result of renewed confidence in the global markets. China Construction Bank soared 9.8% to HK$6.19, China Life gained 8.4% to HK$33.50, Industrial & Commercial Bank of China spiked 8.1% to HK$5.2 and Bank of Communications jumped 11.6% to HK$9.89.

Bank of Communications also rose after Morgan Stanley increased the rating of the stock from “neutral” to “overweight”.

HSBC Holdings rallied 4.4 % to HK$120.5.

Energy stocks gained as well after crude oil prices from March delivery rose by $2.42 to $89.41 per barrel. Sinopec jumped 11.2% to HK$9.37 on the news.

Technology stocks also gained after Microsoft Chie Executive Steve Ballmer forecasted that annual sales will top $60.5 billion lifting Lenovo stock 15%.


[R]5:00AM New York, 7:00PM Tokyo – Japanese stocks surged on Asiawide rally. Unemployment in December fell to 5% and consumer price index rose 0.2% in December.[/R]

Stocks in Japan participated in stockmarket surge across Asia as the U.S. stimulus plan positively influenced investor sentiment.

In Tokyo trading Nikkei 225 soared 4.1% or 536.38 to 13,629.16, down 1.7% for the week, while the broader Topix Index rose 4.7% or 60.32 to 1,344.77.

In the first section of the Tokyo Stock Exchange 11 billion shares worth 1.3 trillion yen were traded and in the seond section 429 million shares valued at 5.6 billion yen changed hands.

Of the Nikkei 225 stocks, 218 rose, and 6 declined. Mizuho Financial Group led advancers with a rise of 10.89% after confidence returned in the market as the Bush administration and Congress agreed on the stimulus plan.

Other financial stocks gained as well. Mitsubishi UFJ Financial Group climbed 7.88% and Resona Holdings jumped 7.69%.

The Statistics Bureau announced in Tokyo today that the Japan’s consumer price index rose 0.2% in December from the previous month and gained 0.7% in the month from a year ago.

Food prices rose 0.3% from previous month and 0.9% for the year and housing edged up 0.1% from previous month and year. Fuel, light and water charges also rose 1.2% from the previous and 3.6% from a year ago, while furniture and household prices declined 0.2% and 1.7% from previous month and year respectively.

Furthermore, clothing and footwear slumped 0.4% from November and gained 0.6% on the year. However, transport and communication 0.9% from November and 2.6% year on year.

On the overall general prices, excluding fresh food jumped 0.3% from November and 0.8% from last year.

Statistics in the Ku-area of Tokyo, which is used to gauge prices in Japan, reveal that the consumer price index in January fell 0.4% from December, but rose 0.2% from last year. Food prices gained 0.5% on the month but were unchanged for the year. However housing prices remained unchanged for both the month and the year.

Fuel, light, and water charges gained 1.0% from the previous month and 1.5% from last year. Also furniture and household utensils declined 0.1% from December and fell 2.3% for the year. Clothes and footwear slumped 7.2% from the previous month and 0.4% from last year.

According to the Statistics Bureau, the number of employed persons in November rose 0.4% from the precious year at 64.33 million while the number of unemployed fell 5% year on year to 2.46 million.

The unemployment rate on a seasonally adjusted basis declined 3.8% in November.

In addition the family income and expenditure survey showed the average monthly consumption pattern per household in November fell 0.6% from a year ago in real terms to 282,836 yen, while for worker’s households the amount of monthly income per household plummeted 2.1% in real term from the previous year at 435,640 yen.

Of the Nikkei 225 index stocks Mizuho Financial Group led advancers with a rise of 10.9% followed by gains in Hino Motors Limited of 10.88%, in Chiyoda Corp of 10.02%, in Sumitomo Osaka of 9.84%, and in Komatsu Limited of 9.38%.

Commodity stocks also rose as crude oil prices for March ddelivery spiked by $2.42 to $89.41 per barrel.

Chipmakers also gained as Microsoft led gainers on Wall Street after increasing its annual sales forecast to $60.5 billion. Advantest Corporation closed up.

Kao Corporation led decliners in the Nikkei 225 index stocks with a drop of 3.66% followed by declines in Nippon Light Metals of 3.30%, in Nissan Chemical Industries of 2.24%, in Fast Retailing of 0.73%, and in Comsys Holdings of 0.47%.

KDDI Corporation announced today that third quarter net income soared to 69 billion yen from 55 billion yen a year ago, while sales rose 5.5% to 904.4 billion after the company grew its subscriber base.

Operating profit also gained 40% to 121.4 billion yen and s further expected to rise 6.2% from the October forecast.

Asian Markets

In Tokyo Nikkei 225 Index closed higher 536.38 or 4.10% to 13,629.16, in Hong Kong Hang Seng index increased 1583.10 or 6.73% closed to 25,122.37, in Australia ASX 200 index higher 279.90 or 5.02% to close 5,860.30.

In South Korea Kospi Index increased 29.41 or 1.77% to close at 1,692.41, in Thailand SET index closed higher 31.14 or 4.27% to 759.72, and Indonesia JSE Index edged increased 103.79 or 4.12% to 2,620.49. Sensex index in India increased 1139.90 or 6.62% to 18,361.66.