Financials Drag U.S., European Stocks

123jump.com Staff
10 Jul, 2008
New York City

Dow Chemical offer to buy Rohm & Haas at 75% premium lifted U.S. market averages but financial stocks continued drift lower. The comments from the former Fed President took another toll on Fannie Mae and Freddie Mac as both declined to near 15-year lows. European markets closed lower on the weakness in financial stocks. Rising tensions in the Middle East lifted crude oil $5 a barrel.

4:30PM New York, 10:30PM Frankfurt, 6:30AM Sydney[R]– Financial stocks and mortgage lenders dropped on the worries capital adequacy at Fannie and Freddie Mac. Crude oil rebounded.[/R]

Global Markets

Dow Chemical agreed to pay 74% premium to acquire specialty chemical maker Rohm & Haas valued at $15.3 billion. Berkshire Hathaway will invest $3 billion and Kuwait Investment Authority will purchase $1 billion of convertible preferred securities. The rest of the deal will be funded with debt arranged by Merrill, Citigroup and Morgan Stanley. Rohm & Haas will operate as an independent division with sale of $13 billion after the merger.

U.S. market averages scaled higher on the back of deal between two large chemical companies. Financial stocks declined again on comments from former Fed President Poole that questioned financial health of two government chartered agencies Fannie and Freddie. Freddie Mac plunged 21% and Fannie plummeted 14%. Lehman Brothers lost 14% to 83% loss from its peak in 2005.

UK home prices fell 6.1% in June from a year ago and fell 2% from May. Home prices declined to 15-year low on tighter credit, falling disposable income and stagnant wages. Separately, FTSE 100 index dropped 2.2% as investors worried that record fuel prices and falling home values will drag economy in recession. In addition, the Bank of England left its key lending rate unchanged at 5%. Retailers fell after Goldman Sachs lowered outlook on leading retailers.

Japan wholesale prices rose at a faster pace in June than in May on rising fuel and energy prices. The price index rose 5.6% in the month. The index rose sharpest in nearly three decades. Tokyo stocks rose marginally after BNP Paribas SA agreed to purchase 30 billion yen convertible bonds from realtor Urban Corp. The deal lifted the real estate developers. Financial stocks rebounded after speculators returned to the sector.

North American Markets indexes

Dow Jones Industrial Average increased 81.58 or 0.73% to a close of 11,229.02, S&P 500 closed up 8.70 or 0.71% to 1,253.39, and Nasdaq Composite Index increased 22.96 or 1.03% to close at 2,257.85. In Toronto TSX Composite closed up 133.04 or 0.98% to 13,743.88.

Of the 30 stocks in Dow Jones Industrial Average 18 stocks gained and 12 declined.

AIG led the decliners in the Dow Jones Index with a fall of 8.2% followed by decreases in General Motors of 6.7%, in Home Depot of 2.41%, in Coca-Cola of 1.7%, in Hewlett Packard of 1.7% and in McDonalds Corp of 1.4%.

Alcoa led the gainers in the Dow Jones Index with a rise of 9.5% followed by increases in Intel Corp of 3.7%, in IBM of 2.2%, in Chevron Corp of 1.9% and in AT&T Inc of 1.81%.

Of the stocks in S&P 500 index, 281 increased, 216 declined and 3 was unchanged. Of the index stocks 42 stocks rose more than 3% and 54 fell more than 3%.

MGIC Investment Corp led the decliners in the S&P 500 index with a loss of 23% followed by declines in Freddie Mac of 21.1%, in Lehman Brothers of 14.4%, in Fannie Mae of 14.1%, in WaMu Inc of 10.5% and in XL Capital Ltd of 10.4%.

Rohm & Haas led the gainers in the S&P 500 index with a rise of 64.8% followed by gains in Alcoa Inc of 9.3%, in Southwestern Energy of 7.21%, in Chesapeake Energy of 6.5%, in Fifth Third Bancorp of 6.4% and in Range Resources of 5.7%.

South American Markets Indexes

Venezuela led the decliners in the Latin American markets with a loss of 1.6% followed by losses in Mexico of 0.8%, in Argentina of 0.39%, in Colombia of 0.36%.

Peru led the gainers in the region with a rise of 1.6% followed by increases in Brazil of 1.20% and in Mexico of 0.59% and 0.46% in Jamaica in the Caribbean region.

European Markets Indexes

In London FTSE 100 Index closed lower 122.80 or 2.22% to 5,406.80, in Paris CAC 40 Index decreased 108.10 or 2.49% to close at 4,231.56 and in Frankfurt DAX index lower 81.46 or 1.28% to close at 6,305.00. In Zurich trading SMI decreased 118.37 or 1.71% to close at 6,803.07.

Asian markets

The Nikkei 225 Index in Tokyo closed higher 15.08 or 0.12% to 13,067.21, Hang Seng index in Hong Kong increased 15.97 or 0.07% closed to 21,821.78. ASX 200 index in Australia decreased 74.50 or 1.49% to close 4,937.40. The KL Composite index in Malaysia decreased 4.32 or 0.38% closed to 1,135.49.

The Kospi Index in South Korea increased 18.05 or 1.19% to close at 1,537.43, SET index in Thailand closed higher 0.73 or 0.10% to 721.86 and JSE Index in Indonesia decreased 9.80 or 0.43% to 2,276.23. The Sensex index in India decreased 38.02 or 0.27% to 13,926.24.

Commodities, Metals, and Currencies

Crude oil increased $5.44 to close at $141.49 a barrel for a front month contract, natural gas closed up to 41 cents to $12.42 per mBtu and gasoline futures increased 11.92 cents to close at 350.00 cents per gallon.

Gold increased $13.40 in New York trading to close at $942.00 per ounce, silver closed up 14.50 cents to $18.32 per ounce, and copper for front month delivery decreased 2.05 cent to $3.71 per pound.

Wheat futures decreased 7.750 cent in Chicago trading and closed at $8.18 per bushel. Sugar decreased 25 cent to $13.61 per pound. Soybean future closed up 30.00 cents to $15.87 a bushel.

Dollar edged lower and traded near record low against euro to $1.5784 and fell against yen to 107.07.

Yields on U.S. bonds decreased to 3.80% with 10 years of maturities and decreased to 4.41% with 30-year of maturities.