Berlusconi Returns, Banks Fall Again

123jump.com Staff
14 Apr, 2008
New York City

European markets fell across the region on new worries related to the banking sector. Wachovia Corp, the fourth largest bank in the U.S., reported $2 billion in asset write down and forced to raise $7 billion. Banks in Germany, France, and UK fell. Royal Philips reported earnings of 219 million euros, lower than expectations. Volkswagen first quarter sales increased 7% on sharp rise in sales in China and Brazil. Berlusconi leads in the race to be the next Prime Minister.

[R]10:00PM Frankfurt, 4:00PM New York, 8:00AM Sydney – European markets fell after the fourth largest bank reported a large loss, cut its dividend. Royal Philips dropped after its earnings were below expectations. Berlusconi returns to power in Italy.[/R]

Global Markets Update

European markets fell after banks and technology stocks declined. A large loss and dividend cut at fourth largest bank, Wachovia Corp left banks trading lower. Leading banks in the region fell between 2% and 4%. British Airways fell after a rating cut and reports that it is looking to file a legal claim against Heathrow airport operator, BAA controlled by a Spanish consortium.

Private economic research institute cut its forecast for Germany’s economic growth to 1.6% from 2.2% matching the revised estimate from the IMF and the European Commission.

Royal Philips Electronics reported first quarter sales increase of 0.5% to 5.96 billion euros and earnings of 219 million euros or 21 cents per share. In the prior year the Dutch electronics and healthcare company reported net income of 875 million euros or 80 cents on the account of stake sale in Taiwan Semiconductor and generated a gain of 650 million euros. Emerging market sales increased 17%. The company increased its return on invested capital target between 12% and 13% by 2010 and expects to improve earnings before interest, taxes, and amortization between 10% and 11%.

Philips fell 3% to 23 euros in Amsterdam trading.

Manitowoc ((MTW)) agreed to pay a premium to purchase UK based food equipment maker in Enodis Plc for 950 million pounds. The Enodis stock closed at 241 pence, lower than the offer price per share of 258 pence. Manitowoc, crane and food equipment maker hopes to gain a foothold in ice and refrigeration equipment business and food services business.

Volkswagen AG reported first quarter 2008 global sales rose 7% to 1.57 million on rising sales in China and Brazil. March sales increased 2% to 620,000 units. Sales in China surged 32% to 268,000 and in Brazil increased 23% to 148,000.

U.S. stocks edged lower after Wachovia cut its dividend by 41% and proposed to raise as much as $7 billion through convertible preferred stock offering. Wachovia also reported a loss in the first quarter and asset write down of $2 billion. UK media reports suggested that Citigroup is likely to write down assets of $12 billion and Merrill Lynch of $3 billion. Blockbuster proposed $1 billion in cash buyout for Circuit City.

The UK statistics agency, the ONS reported that the output price index for domestic sales of manufactured products rose 6.2% in the year to March, compared with the rise of 5.9% in the year to February. The rising prices at producer level took the stocks sharply lower in UK. FTSE 100 stocks fell 1.08% or 63.9 to 5,831.60. Whitbread led advancers in the FTSE 100 index shares with a rise of 2.4% followed by increases in SABMiller of 1.7% and in HBOS of 1.2%. Friends Provident and Carphone Warehouse led decliners.

Stocks in Japan and Asia fell after the release of world economic outlook from a meeting of policy makers at the IMF and World Bank. The gloomy near term outlook added to the rising loss estimates at Citigroup and Merrill Lynch. Media reports in the UK suggested that two financial firms are likely to report losses in the quarter and a write-down of $15 billion. Nikkei 225 index in Tokyo fell 3% and Topix declined 2.5%.

China’s foreign currency reserves jumped to $1.68 trillion at the end of the first quarter, 40% rise from a year ago. The sharp rise in foreign reserves is lifting inflation and attracting speculative capital to China. Investors have to come to believe that China will have to strengthen its currency against dollar and increase interest rate to slow down economic expansion. In Hong Kong trading the Hang Seng Index fell 3.47% or 856.59 at 23,811.20.

In Australia, ANZ launches an internal inquiry to review its securities lending business and its relationship with the collapsed Opes prime broker. Virgin Blue plunged 22% to a record low after its controlling shareholder Toll Holdings Ltd decided not to sell its stake on lack of investor interest. Virgin Blue last week slashed its net income forecast to less than $140 million for the year ending in June 30, down from $216 million a year earlier. Of the ASX 200 index stocks, Toll Holdings Ltd led decliners.

European Markets indexes

In London FTSE 100 Index closed lower 63.90 or 1.08% to 5,831.60, in Paris CAC 40 Index decreased 31.44 or 0.66% to close at 4,766.49 and in Frankfurt DAX index lower 49.08 or 0.74% to close at 6,554.49. In Zurich trading SMI decreased 119.41 or 1.65% to close at 7,139.55.

North American Markets indexes

Dow Jones Industrial Average dropped 256.56 or 2.04% to a close of 12,325.42, S&P 500 closed down 27.72 or 2.04% to 1,332.83, and Nasdaq Composite Index decreased 61.46 or 2.61% to close at 2,290.24. In Toronto TSX Composite closed down 219.81 or 1.09% to 13,689.77.

Of the 30 stocks in Dow Jones Industrial Average, 14 closed higher, 16 closed lower, and none was unchanged.

Citigroup led the decliners in the Dow Jones index with drop of 4.2% followed by losses in Bank of America of 3.7%, in Alcoa of 3.4%, in JP Morgan Chase of 2.7%, and in General Motors of 2.7%.

Coca Cola led the gainers in the index with a rise of 1.3% followed by increases in IBM of 1.28%, in Caterpillar of 1% and in ExxonMobil of 0.9%.

Of the stocks in S&P 500 index, 245 stocks increased, 250 declined, and 5 were unchanged. Of the stocks in the index, 36 stocks fell more than 3% and 15 gained more than 3%.

Wachovia Corp led the decliners in the S&P 500 index with a loss of 9.6% followed by losses in First Horizon of 9.3%, in E*Trade of 8.5%, in National City Corp of 8.1%, and in Fifth Third Banc of 7.2%. SunTrust, Huntington Banc, Zions Bancorp and Regions fell more than 5%.

Hess Corp led the gainers in the S&P 500 index with a rise of 10% followed by increases in Noble Corp of 4.9%, in Transocean of 4.7%, in Consol Energy of 4.8%, and in Murphy Oil of 4.7%.

South American Markets Indexes

Brazil led the decliners in South American trading with a loss of 1.38% followed by decreases in Colombia of 0.95%, in Argentina of 0.90%, and in Mexico of 0.73%. Venezuela fell 0.35% and Chile gained 0.5%.

Asian Markets

In Tokyo Nikkei 225 Index closed lower 406.22 or 3.05% to 12,917.51, in Hong Kong Hang Seng index decreased 856.59 or 3.47% closed to 23,811.20. In Australia ASX 200 index lower 96.90 or 1.78% to close 5,342.40. In Malaysia KL Composite index decreased 13.36 or 1.07% closed to 1,233.43.

In South Korea Kospi Index decreased 33.00 or 1.85% to close at 1,746.71, Indonesia JSE Index edged decreased 31.45 or 1.37% to 2,272.48. Market of Thailand and India were closed today.

Commodities, Metals, and Currencies

Crude oil increased $1.66 to close at $111.80 a barrel for a front month contract, natural gas increased 17 cent to $10.07 per mBtu, and gasoline futures increased 1.42 cents to close at 282.15 cents per gallon.

Gold increased $1.70 in New York trading to close at $928.70 per ounce, silver closed up $0.10 cents to $17.69 per ounce, and copper for front month delivery decreased 4.80 cents to $3.89 per pound.

Wheat futures increased 1 cent in Chicago trading and closed at $9.105 per bushel. Sugar increased 17.00 cent to $13.11 per pound. Soybean future closed up 40 cents to $13.89 a bushel.

Dollar edged higher and traded near a record low against euro to $1.5804 and edged higher against yen to 101.08.

Yields on U.S. bonds increased to 3.50% on 10-year bonds and rose on 30-year bonds to 4.29%.