Euro Rises, Stocks Decline

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

European markets were cautious after a surprise plan by Royal Bank of Scotland to raise 12 billion. On the news banks traded lower. Euro reached another record high against dollar as talks of inflation fight circulated. Havas jumped 2.5% in Paris trading after it reported sales rise. Saint Gobain, building materials maker reported a decline in sales on the weakness in the North America.

[R]10:00PM Frankfurt, 4:00PM New York, 8:00AM Sydney – European stocks declined on the continued worries on banking sector health. Royal Bank of Scotland after denying for months said that it will raise £12 billion.[/R]

Global Markets Update

Euro edged to a record high against dollar as talks of high interest to fight nascent inflation in the region intensified. Crude oil jumped to a record high in dollar on continued disruptions in Nigerian oil supply.

European markets declined in the region on strong euro, rising commodities prices, and sharp losses in banks. Royal Bank of Scotland plans to raise $24 billion to cover the rising loan losses and pay for expensive acquisitions. Akzo Nobel NV fell 6% to 53.35 after it said that market conditions are difficult and sales are hurting in the U.S. and Europe.

Havas SA, advertising agency reported first quarter sales rise of 7.4% to €345 million euros or up 2.5% on a constant currency rate. Net new business for the first quarter was €510 million, 33% higher than the quarterly average in 2007. Havas stock in Paris trading surged as much as 7% but closed up 2.6% to €2.75.

Revenue in the first quarter in Europe rose 7.9% from 4% rise a year ago, in North America added 6% compared to a decline of 0.8% a year ago and in the rest of the world increased 11.2% compared to 16.7% a year ago.

Saint Gobain SA reported first quarter sales decline of 1.4% to €10.3 billion compared to year ago on 3 fewer days in the quarter. Sales were up 0.9% for the same number of days and added 1.5% on constant currency. Sales in North America fell 14% to €1.26 billion. The building maker company with 190 plants in the U.S will cut 800 jobs as sales decline on the housing market slow down. Stock fell 1.5% to €49.76.

U.S. stocks traded sideways after more banks report losses from risky loans and growing worries related to losses from the consumer banking. For now, banks are taking losses only in the residential mortgage loans but rising charges in the consumer and retail loans are expected to be just as bad. Fifth Third and Sun Trust reported sharp rise in net charge offs and loans loss provisions. Royal Bank of Scotland in London is forced to raise $24 billion in UK.

Royal Bank of Scotland today announced its plan to sell assets, raise capital and cut costs. The battered bank vastly overpaid for its recent acquisition of investment banking and Asian operations of ABN Amro. The bank now suffering from losses in mortgage loans and slow down in investment banking business has seen its Tier 1 capital ratio as low as 6%. RBS plans to raise £12 billion in the largest rights issue ever in London, but will not cut its dividend for now.

The bank has been rumored for months to raise between £4 and £8 billion but its chairman had insisted that the bank does not need additional capital. Home builders in the UK slumped after Merrill Lynch lowered its estimate of unit sales for 2008 and 2009. In the trading session, energy and mining stocks rose and banks and home builders declined.

Stocks in Japan continue to trade volatile and in the shadow of the U.S. market average trading. Nikkei 225 fell 1.1% to 13,547 after earnings from Bank of America and Texas Instruments dragged tech and financial stocks. Analysts also lowered outlook on Sony on the ongoing volatility in yen. More international companies are looking to issue bonds in yen. Bank of Canada was the latest in its samurai bonds. For the year nearly 1 trillion in yen bonds were issues by foreign companies.

Hong Kong stock indexes advanced after a surge in afternoon trading on rising speculation that Beijing will take additional steps to protect oil companies from rising crude oil prices. In Shanghai trading CSI 300 Index rose 0.9% to 3,296.28 and in Hong Kong trading Hang Seng added the same to 24,939. PetroChina advanced 6.5% and Sinopec increased 5.1%.

Reliance Industries in India fell after it reported 24% rise in earnings to 3,912 crore rupees. The earnings rose on higher crude oil refining margins and higher sale across various chemical segments. Tata Consultancy reported sequential profit decline on a marginal rise in revenue. The information services provider also issued a cautious guidance. TCS fell 10% and led decliners in the Sensex index.

European Markets indexes

In London FTSE 100 Index closed lower 18.30 or 0.30% to 6,034.70, in Paris CAC 40 Index decreased 37.71 or 0.77% to close at 4,872.64 and in Frankfurt DAX index lower 58.25 or 0.86% to close at 6,728.30. In Zurich trading SMI decreased 66.09 or 0.89% to close at 7,328.85.

North American Markets indexes

Dow Jones Industrial Average lost 104.79 or 0.82% to a close of 12,720.23, S&P 500 closed down 12.25 or 0.88% to 1,375.94, and Nasdaq Composite Index decreased 31.10 or 1.29% to close at 2,376.94. In Toronto TSX Composite closed down 54.82 or 0.38% to 14,266.34.

Of the 30 stocks in Dow Jones Industrial Average, 7 closed higher, 23 closed lower, and none was unchanged.

DuPont led decliner in the Dow Jones index with a fall of 4% followed by losses in American Express of 3.9% in General Motors of 3.6%, in Merck of 2.8%, and in AIG of 2.7%.

Chevron led gainers in the index with a rise of 1.4% followed by Johnson & Johnson of 1%, and in JP Morgan of 0.9%.

Of the stocks in S&P 500 index, 75 stocks increased, 422 declined, and 3 were unchanged. Of the stocks in the index, 76 stocks fell more than 3% and 13 gained more than 3%.

CIT Group led decliners in the S&P 500 index with a loss of 16% followed by declines in BJ Services of 14.70%, in Meredith Corp of 13.8%, in Tellabs of 13.79%, in Dillards of 10.67%, in Novellus of 9.9%, and in United Health of 9.6%.

Fifth Third Bancorp led gainers in the S&P 500 index stocks with a rise of 8% followed by gains in Medco of 5.6%, in Parker Hannifin of 5.3%, in Sprint Nextel of 5.22%, in Waters of 5% and in Hudson City Bancorp of 4.46%.

South American Markets Indexes

Venezuela led decliners in the South American trading with a fall of 3.90% followed by decreases in Argentina of 2.5%, in Chile of 1.47%, in Colombia of 0.31%, and in Mexico of 0.17%. Brazil edged up 0.75% and Peru added 0.50%.

Asian Markets

In Tokyo Nikkei 225 Index closed higher 220.10 or 1.63% to 13,696.55, in Hong Kong Hang Seng index increased 523.89 or 2.17% closed to 24,721.67. In Australia ASX 200 index higher 170.60 or 3.14% to close 5,600.30. In Malaysia KL Composite index increased 12.35 or 0.97% closed to 1,280.00.

In South Korea Kospi Index increased 28.58 or 1.61% to close at 1,800.48, in Thailand SET index closed lower 3.42 or 0.40% to 841.98 and Indonesia JSE Index edged decreased 13.38 or 0.57% to 2,335.89. Sensex index in India increased 258.13 or 1.57% to 16,739.33.

Commodities, Metals, and Currencies

Crude oil increased $0.87 to close at $117.56 a barrel for a front month contract, natural gas decreased 18 cent to $10.55 per mBtu, and gasoline futures increased 3.75 cents to close at 301.00 cents per gallon.

Gold increased $7.60 in New York trading to close at $925.20 per ounce, silver closed up $0.35 cents to $17.824 per ounce, and copper for front month delivery increased 9.20 cents to $3.958 per pound.

Wheat futures increased 6.5 cents in Chicago trading and closed at $8.66 per bushel. Sugar increased 36 cent to $12.95 per pound. Soybean future closed up 18.40 cents to $13.89 a bushel.

Dollar edged lower and traded at a record low against euro to $1.5992 and edged lower against yen to 103.03.

Yields on U.S. bonds decreased to 3.69% with 10 years of maturities and decreased 4.44% with 30-year of maturities.