ECB, BoE on Hold; InBev Falls

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

The European Central Bank and the Bank of England left rates unchanged as inflation hovers near or above target level. Unlike the Federal Reserve in the U.S., central banks are hawkish in Europe when it comes to inflation. Recent surge in crude oil price and worldwide food price surge have fueled inflation and fears of wage inflation. InBev, UniCredit and Raiffeisen International fell on earnings. Barclays, Royal Bank of Scotland and Commezbank fell after the rate decision.

[R]10:00PM Frankfurt, 4:00PM New York, 8:00AM Sydney – European markets fell after the ECB and BoE left rated unchanged. InBev, UniCredit and Raiffeisen fell on earnings.[/R]

Global Markets Update

The European Central Bank left its key rate at 5% and warned that inflation may remain elevated before it subsides. The rising food and energy prices have pushed inflation above 3% and wage pressures are rising across the euro area. German transportation workers and other government service unions in France are looking for higher wages. Separately the Bank of England left its rate at 5% and the central bank did not issue any comments with the decision. The inflation in the UK is running near 2.5% and is expected to rise above 3% later in the year.

March German exports fell as rising euro trimmed the order book of several industrial companies.

Assicurazioni Generali SpA, reported first quarter profit increased 27% to 910 million euros from 715 million euros a year ago. Net premium in the quarter were flat at 16.3 billion euros. The insurer derives 66% of its revenue from life insurance sales and the rest from property and casualty insurance. Raiffeisen International reported first quarter profit rose to 254 million euros from 193 million but the stock fell 8% after it missed analysts’ estimate. UniCredit first quarter profit fell 51% on asset write downs related to collateralized obligations.

The beverage giant InBev plunged 6% after it reported 11% decline in profit to 249 million euros from 280 million euros in the first quarter ended in March. The volume of beer sales fell 0.4% and revenue in the quarter rose 4.8% to 3.2 billion euros. Earnings per share declined to 41 euro cents from 46 cents a year ago. Food prices inflation of 11% in Brazil and flood conditions lowered beer volume sales by 1.9%.

U.S. stocks opened higher after the release of jobless data and same store retail sales. Discount retailers led gains in sales in April as families look for ways to save money. Costco, for the twelve months in a row reported same store sales rise above 5%. In April sales rose 6%, excluding gasoline sales. Wal-Mart sales rose 3.2%. The ECB and the Bank of England left rates unchanged at 4% and 5% respectively.

The seasonally adjusted annual rate of housing starts in Canada was 213,900 units in April, down from 243,000 units in March, according to Canada Mortgage and Housing Corporation.

Watson Wyatt surged after it reported revenue rise of 16% to $457.5 million and earnings gain of 26% to $42.5 million. OM Group fell after earnings plunged 93% to $55.2 million. Hedge fund and alternative asset manager Fortress Group fell after it reported a quarterly loss of $69 million. Copa Holdings, operator of Panama based airline fell after earnings fell 18.7%.

Mining stocks in Europe and New York rebounded. BHP Billiton, Vale, Cleveland Cliff, ArcelorMittal and Freeport McMoran led the gainers. Gold resurged after the ECB and the Bank of England left rates unchanged. The ECB left key rates at 4% and the Bank of England left its rate at 5%. German March export fell 0.5%.

Stocks in Japan tracked weakness in the U.S. and closed lower. Financial stocks fell the most on the worries that more losses may have to be taken on the new disclosure requirements from the U.S. regulatory agency SEC. Nikkei 225 index fell 1.3% to 13,943. Toyota Motor reported 9.8% rise in sales and 4.5% in earnings but offered lower sales and earnings outlook for the current year.

Toyota Motor fell in New York trading after it lowered its estimate of sales and earnings for the current fiscal year. For the fiscal year 2008 revenue rose 9.8% and earnings gained 4.5%. Toyota estimates unit sales in the current fiscal year of 8.87 million units compared to 8.69 million units in the year completed in March 2008.

Hong Kong reported 0.9% decline in foreign reserves in April to $160 billion and China will issue Rmb 28 billion or $4 billion of government bonds with 30 year maturity that will trade next week. Hang Seng fell 0.6% to 25,449 and CSI 300 in Shanghai trading lost 2.7% to 3,921. Refiners and airlines continue to decline as crude oil trades at a record high in the international markets.

European Markets indexes

In London FTSE 100 Index closed higher 9.80 or 0.16% to 6,270.80, in Paris CAC 40 Index decreased 19.73 or 0.39% to close at 5,055.58 and in Frankfurt DAX index lower 4.35 or 0.06% to close at 7,071.90. In Zurich trading SMI decreased 53.01 or 0.69% to close at 7,586.15.

North American Markets indexes

Dow Jones Industrial Average rose 52.43 or 0.41% to a close of 12,866.78, S&P 500 closed up 5.11 or 0.37% to 1,397.68, and Nasdaq Composite Index increased 12.75 or 0.52% to close at 2,451.24. In Toronto TSX Composite closed up 236.46 or 1.65% to 14,607.99.

Of the 30 stocks in Dow Jones Industrial Average, 20 closed higher, 10 closed lower, and none was unchanged.

Alcoa led gainers in the Dow Jones index with a rise of 4.1% followed by rises in Chevron of 2.2%, in DuPont of 1.6%, in United Technologies of 1.4% and in Exxon Mobil of 1.2%. Home Depot led decliners in the Dow Jones with a loss of 2.2% followed by losses in AIG of 2%, in Bank of America of 1.7%, in Coca-Cola of 1.3% and in General Motors of 1.1%.

Of the stocks in S&P 500 index, 292 stocks increased, 204 declined, and 4 were unchanged. Of the stocks in the index, 18 stocks fell more than 3% and 23 gained more than 3%.

Barr Pharmaceuticals led decliners in the S&P 500 index with a loss of 23% followed by losses in Tesoro of 1.5%, in Dillard’s of 5.6%, in First Horizon of 4.95%, in Fannie Mae of 4.9% and in Fifth Third Bancorp of 4.35%. National Oilwell Varco led gainers in the S&P 500 index with a rise of 9% followed by rises in Rowan Companies of 6.9%, in Peabody Energy of 6%, in Cameron International of 5.5%, in Manitowoc of 4.9% and in El Paso Corp of 4.65%.

South American Markets Indexes

Brazil led gainers in the Latin American markets with a rise of 1.02% followed by increases in Argentina of 0.38% and in Venezuela of 0.25%, and in Peru of 0.07%. Colombia fell 1.02%, Chile declined 0.09% and Mexico lost 0.03%.

Asian Markets

In Tokyo Nikkei 225 Index closed lower 159.22 or 1.13% to 13,943.26, in Hong Kong Hang Seng index decreased 160.42 or 0.63% closed to 25,449.79. In Australia ASX 200 index higher 54.80 or 0.97% to close 5,723.20. In Malaysia KL Composite index decreased 6.80 or 0.53% closed to 1,280.35.

In South Korea Kospi Index decreased 6.01 or 0.32% to close at 1,848.00, in Thailand SET index closed higher 1.46 or 0.17% to 850.17 and Indonesia JSE Index edged decreased 5.77 or 0.24% to 2,376.93. Sensex index in India decreased 258.66 or 1.49% to 17,080.65.

Commodities, Metals, and Currencies

Crude oil increased $1.04 to close at $124.57 a barrel for a front month contract, natural gas decreased 4 cents to $11.29 per mBtu, and gasoline futures increased 3.36 cents to close at 315.18 cents per gallon.

Gold increased $10.90 in New York trading to close at $882.10 per ounce, silver closed up 17 cents to $16.87 per ounce, and copper for front month delivery decreased 4.65 cents to $3.78 per pound.

Wheat futures increased 14.50 cents in Chicago trading and closed at $8.22 per bushel. Sugar decreased 27 cent to $11.46 per pound. Soybean future closed up 1.00 cents to $13.10 a bushel.

Dollar edged higher and traded near record low against euro to $1.5392 and edged lower against yen to 103.75.

Yields on U.S. bonds decreased to 3.77% with 10 years of maturities and decreased to 4.54% with 30-year of maturities.