Record Increase in Wheat, Stocks Struggle

123jump.com Staff
08 Feb, 2008
New York City

U.S. stocks traded in a tight range in the morning after the release of wholesales inventories report. Inventories rose 1.1% in December and sales at wholesalers fell 0.7%. Autos inventories rose 3.5%. wheat prices rose to the daily record limit for the fifth session in a row after the USDA projected 40% less inventories from a year ago or 7% lower than its latest projection in the last month. Gold and oil jumped higher as well.

[R]11:30AM New York – Wheat prices in Chicago trading soar on a sharply lower inventories projection from the USDA.[/R]

U.S. market averages traded in a tight range after the release of wholesales inventories data, earnings from Weyerhaeuser, Alcatel Lucent, Brush Engineered Metals, Cott Corporation and Lubrizol.

Wheat Prices Soar

Wheat prices rose to a record rise after the U.S. Department of Agriculture estimated that the wheat inventories will be at 60-year low of 272 million bushels. The latest projection shows a 7% decline from the earlier projection in January and 40% lower from a year ago. Wheat futures rallied to the daily limit of 30 cents for the fifth session in a row and closed up 16% for the week. Wheat prices at mid-day were trading at $10.93 per bushel, up 30 cents in Chicago and in Kansas were up 30 cents to $11.4025 per bushel.

The World Agricultural Supply and Demand Estimates report released today by U.S. Dept of Agriculture noted the following.

“Projected U.S. wheat ending stocks for 2007/08 are lowered 20 million bushels this month as a reduction in feed and residual use is more than offset by higher projected exports.

At 272 million bushels, this year's ending stocks are the lowest since 1947/48. Ending stocks as a percentage of use (stocks-to-use) at 12 percent would be the lowest since 1946/47. Feed and residual use is projected 5 million bushels lower as high prices and tight supplies reduce the expected residual.

Exports are raised 25 million bushels with hard red spring wheat increased 20 million and soft red winter wheat increased 5 million. The season-average farm price projection is unchanged at $6.45 to $6.85 per bushel, well above the record of $4.55 per bushel in 1995/96.”

Wholesales Inventories Rise

December 2007 sales of merchant wholesalers were $376.6 billion, down 0.7% from the revised November level and were up 10.6% from the December 2006 level. The November preliminary estimate was revised downward $1.1 billion or 0.3%.

Total inventories of merchant wholesalers were $411.6 billion at the end of December, up 1.1% from the revised November level and were up 6.1% from a year ago. The November preliminary estimate was revised upward $0.8 billion or 0.2%.

End-of-month inventories of durable goods were up 0.9% from last month and were up 1.9% from last December. Inventories of motor vehicle and motor vehicle parts and supplies were up 3.5% from last month, and inventories of metals and minerals, except petroleum, were up 1.7%.


[R]9:00AM New York, 6:30PM Mumbai – Stocks in India fell after inflation rose, weakness in retail investors, and jittery IPO market.[/R]

Market Sentiment

India markets closed flat on Friday with the benchmark index Sensex declining 0.4% or 62.04 to 17,464.89. In the broader market, Nifty was down 0.3% or 12.9 at 5,120.35.

Reliance Industries and State Bank of India rebounded from the lows of the day. Realty, metal and consumer durable stocks dropped. Hindustan Unilever and ITC rose.

Of the BSE shares, 506 stocks advanced, 2,259 declined, and 37 stocks remained unchanged. Among the Sensex index shares, 16 stocks gained while the rest fell.

IT stocks rebounded while real estate, metal and banking stocks fell. HCL tech, Satyam Computers, Roltas India, and Infosys advanced more than 4.7% each.

HDFC, ICICI Bank, DLF, HDFC Bank, L&T and Tata Steel led the decliners in the index.

Of the National Stock Exchange CNX Nifty 50 stocks, VSNL, SAIL, Tata Power Company, Cairn India and Reliance Energy declined more than 4.3% each.

Realty developers Kolte-Patil, Purvankara Projects, Omaxe, Parsvnath Developers and Housing Development Infra fell more than 2.8% each.

IPO News

Emaar MGF Land pulled its offering after Wockhardt Hospitals withdrew its offering yesterday.

Daily turnover of the BSE stood at 6,334 crore rupees and on the National Stock Exchange was at 13,650 crore rupees.

Reliance Natural Resources led the most active with a turnover of 573.83 crore rupees on BSE followed Reliance Energy, Reliance Industries,, Reliance Petroleum and Reliance Communications.


Economic News

Annual inflation based on the wholesale price index rose to 4.11% in the week ended 26 January 2008 from 3.93% in the week ended 19 January 2008.


Gainers and Decliners

Hindustan Unilever rose 6.1% to 211.75 rupees, ONGC rose 0.9% to 997.25 rupees, ITC surged 2.5% to 196.95 rupees while Ranbaxy Laboratories rose 2.3% to 382.3 rupees.
HDFC fell 4.47% to 2,796.20 rupees.

Infosys traded up 4.8% to 1,551.35 rupees, Satyam Computer Services surged 4.9% to 410 rupees, Tata Consultancy Services climbed 1.9% to 899.95 rupees and Wipro jumped 3.1% to 422.45 rupees.

Steel Authority of India fell 4.6% to 200.6 rupees, Sterlite Industries was down 2.8% to 737.55 rupees, Tata Steel shed 2.7% to 750.40 rupees and Hindalco Industries slumped 1.7% to 160.5 rupees.

ICICI Bank declined 3.5% to 1,066.7 rupees, HDFC Bank fell 3.1% to 1,445.95 rupees. State Bank of India rose 1.7% to 2,191.45 rupees.

Bharat Heavy Electricals declined 0.3% to 2,013.70 rupees despite winning a contract worth 3,390 crore rupees.

Bharti Airtel rose 2.1% to 880.8 rupees.

Reliance Group Update

Reliance Industries declined 0.1% at 2,421.75 rupees and Reliance Communications declined 1.6% to 633.7 rupees. Reliance Infratel, the tower subsidiary of Reliance Communications will build 56,596 telecom towers by financial year 2010, increasing the total number of towers to 100,000.

Reliance Natural Resources clocked the highest volume of 3.79 crore shares on BSE.

Deals

Larsen & Toubro Limited has received orders worth 1,107 crore rupees from SAIL for the turnkey construction of coal & coke handling plant in West Bengal. ECC, Engineering & Construction Company will execute this project with a deadline of 26 months.

Larsen & Toubro stock fell 2.8% to 3,527.3 rupees.

Suzlon Energy rose 0.9% to 310.10 rupees. Suzlon Energy, through its wholly owned subsidiary company, SE Drive Technik, Germany is in joint venture with REpower Systems AG, Germany has established a new company Renewable Energy Technology Centre. Both the firms hold 50% stake each in the new company.

International Markets

In Tokyo Nikkei 225 Index closed lower 189.91 or 1.44% to 13,017.24, in Australia ASX 200 index increased 61.30 or 1.10% to close 5,658.00. Markets in Hong Kong were closed today and will reopen on Tuesday. Tokyo markets will reopen on Tuesday.

Thailand SET index closed higher 13.27 or 1.67% to 806.44. Sensex index in India decreased 62.00 or 0.35% to 17,464.89. Market of South Korea and Indonesia were closed today and will reopen on Tuesday.


[R]5:00AM New York, 7:00PM Tokyo – The computer malfunction on the TSE leads to cancellation of all Topix futures trades done in the morning session. Japan’s private sector machinery orders drop a seasonally adjusted 3.2% in December. Isuzu Motors and Japan Airlines profit exceeds expectations.[/R]

Trading Halts

The Tokyo Stock Exchange suffered another computer related malfunction this time in the trading of Topix index March futures on the new trading system modules launched on Jan 15th of this year. The problem occurred near the end of the close of the morning session prompting officials to cancel all the trades on the futures in the morning. Other futures contracts were not affected by the computer system problems.

The problem was discovered in the early afternoon when the system failed to calculate and appropriate proper values to the futures contracts and match and process order flow received in the morning. The cause of the malfunction is still not known according to local media reports.

Market Sentiment

In Tokyo trading Nikkei 225 stocks fell 1.44% or 189.91 to 13,017.24, and the broader Topix Index shed 1.4% or 17.94 to 1,287.14.

In the first section of the Tokyo Stock Exchange shares 11.6 billion shares worth 1.4 trillion yen changed hands and in the second section 314 million shares valued at 2.6 billion yen were traded.

The Tokyo Stock Exchange suspended trading of the March 2008 TOPIX futures after computer systems glitch during the morning session.

Of the Nikkei 225 stocks 56 rose, 163 declined, and 6 were unchanged. Isuzu Motors led advancers with a rise of 7.28% after sales in Russia and South Africa helped boost net income by 12%.

Machinery Orders Fall

The Cabinet Office reported today that total machinery orders from 280 manufacturers declined by a seasonally adjusted 6.8% to 2.4 trillion yen in December from the previous month, but rose 2.5% to 7.9 trillion in the quarter to December compared to the previous quarter.

Total machinery orders from January to March are forecasted to rise 10.2% to 8.7 trillion yen. Private sector machinery orders, excluding volatile ones, fell a seasonally adjusted 3.2% in December to 1 trillion yen and increased 0.9% to 3.1 trillion yen in the quarter to December. Overall private sector orders fell 4% in 2007.

Orders are also forecasted to jump 3.5% to 3.2 trillion yen in the three months to March.

Machinery orders for the non-manufacturing sector declined 5.2% in December to 541 billion yen and edged down 2.7% to 1.66 trillion yen in the quarter ended December 31st.

In 2007, non-manufacturing orders fell by 4%. However, orders in the sector are expected to rebound 3.1% to 1.7 trillion yen between January and March.

Government orders rose 8.8% to 729 billion yen, in the three months to December, while during the quarter to March orders are expected to soar 19.6% to 872 billion yen. In December 2007 orders declined 19% to 218 billion yen.

Cumulatively, government orders declined 1.1% in 2007.

Overseas orders plummeted 4.9% to 1 trillion yen in December and rose 1.3% in the quarter to December, but rose 1.3% between October and December 3.3 trillion yen. Orders are forecasted to rise 17.9% to 3.9 trillion yen in the three months to March.

Overall, overseas orders rose 7.2% in 2007.

Tokyo Office Vacancies Fall

The Japan Times online edition reported today that Miki Shoji Co. said yesterday in a report Tokyo office vacancies dropped for the first time in six months in January to a seven-year low as vacancy rates in five central wards fell to 2.55% in January from 2.65% in December.

According to the report, despite the slowing economic growth, rents continue to increase on shortages of Grade A offices.

Office rents in the five main business districts in Chiyoda, Chuo, Minato, Shinjuku and Shibuya wards rose to 22,452 yen per tsubo in January from 21,998 yen the previous month.

In addition, developers and landlords are expected to add 220,000 ""tsubo"" or 726,000 square meters of new space this year.

Spring Wage Negotiations Begin

The Nikkei online news edition reported today that companies and labor unions have begun wage talks and major steel makers, shipbuilders and heavy machinery workers are asking for an upward review in wages.

Japan Engages EU on Tariffs

Separately, the Nikkei online edition also reported that Japan is proposing the removal of tariffs on passenger cars and consumer electronic goods in a draft report that is expected to constitute a pact for a possible Japan-European Union Free Trade Area.

Gainers and Losers

Isuzu Motors led advancers in the Nikkei 225 Index shares with a rise of 7.28% followed by rises in Hokuetsu Paper of 6.62%, in Kirin Holdings of 4.69%, in Kikkoman Corp of 4.14%, and in Asahi Brewers of 3.88%.

Isuzu Motor rose after 12% rise in third quarter net income on the back of increased sales in Russia and South Africa.

Sumitomo Heavy led decliners in the Nikkei 225 index shares with a fall of 11.44% followed by losses in Okuma Corp. of 10.58%, in Sumitomo Realty of 8.45%, in Kawasaki Kisen of 7.61%, and Komatsu Limited of 6.76%.

Industrial companies fell after a government report showed that private sector machinery orders declined by a seasonally adjusted 3.2% in December.

Exporters also fell after the yen firmed 0.77% from 107.31 to 107.29 against the dollar. Canon fell 2.93%, Toyota slid 0.84% and Sony Corp. shed 1.49%

Earnings Update

Japan Airlines Corp. reported third quarter net income rose to 13.1 billion yen from 10.9 billion yen a year earlier as the company increased profits on international routes and cut costs through a staff restructure.

In the quarter, customers for international trip rose 1.6% to 3.36 million customers, while domestic customers fell 6.5% to 10.5 million customers. The company plans to tap from high growth markets such as China, India and Vietnam.

Japan Airlines stock rose 2.72%.

Inpex Holdings revised upwards its full-year profit forecast to 153 billion yen in the year through March from 127 billion yen forecasted in November. Sales are also projected to rise to 1.165 trillion yen from an earlier estimate of 1.02 trillion yen on rising crude oil prices.