Weak Commodities, Oil Drag U.S. Stocks

123jump.com Staff
24 Mar, 2009
New York City

U.S. markets trade lower after the best one-day performance this year. Commodities and stocks decline in the early trading. UK inflation accelerates. ArcelorMittal launches 1.1 billion euros convertible debt offering. Asian stocks surged on the back of a rise in New York.

[R]10:50AM New York – U.S. markets trade lower after a best single day performance this year.[/R]

The U.S. stocks declined in the morning trading on the weakness in commodities prices and stocks in the sector. Crude oil futures declined $1.31 to $52.49 and gold fell $30.60 to $921.90.

The surge of 7% in yesterday’s trading took many investors by surprise. The U.S. Treasury plan hopes that private-public partnership will attract private capital to tune of $100 billion matching the TARP fund of $100 billion and loans from various government agencies and FDIC of $600 to $900 billion. The plan still relies on the fact that the investing entities will be leveraged as high as six to one and will walk away with all the profit and will not participate in any losses more than the loss of the equity.

Teradyne Inc ((TER)) dropped 2% after it estimated higher than expected first quarter adjusted loss. The company now estimates the loss of 42 cents per share.

Newell Rubbermaid Inc ((NWL)) plunged 9% to $6.55 after it lowered its quarterly sales guidance and cut its dividend.

The UK inflation in February rose at 3.2% rate from a year ago and accelerated from 3% in January. However, the Bank of England Governor Mervyn King suggested that a decline in inflation is likely to resume. Energy prices are still low and base metal prices have fallen sharply from their highs in 2008.

The unexpected rise in inflation is attributed to the fall in pound against all major currencies and has forced several local industrial companies to raise prices. Ford Motor increased average sale price for its models by 3.75%. However, utility companies have lowered prices of as much as 10%.

ArcelorMittal, the largest steelmaker increased its convertible bond offering to 1.1 billion euros from the previous offering size of 750 million euros. The bond will yield between 7.25% and 7.75% and converts to equity if ArcelorMittal stock gains between 27% and 32% higher than the conversion price still to be determined.

ArcelorMittal cut its dividend in half after it reported fourth quarter loss of $2.63 billion on one-time charge of $4.4 billion related to inventories. Sales declined 21% to $22.1 billion.

Asian Markets Rally, Banks Lead the Charge

Asian markets rallied on the back of a surge in U.S. markets. Banks in Tokyo, Shanghai and Hong Kong and Sydney rallied on the hopes that the U.S. Treasury public-private partnership plan will strengthen the global banking system.

In Tokyo trading, Mizuho Financial Group Inc surged 5% to 231 yen and Mitsubishi UFJ increased 4.5% to 535 yen.

In Hong Kong, HSBC Holdings Plc soared nearly 10% to HK$45.80 and banks in Shanghai surged too.

KB Financial Group Inc in Seoul, South Korea added 4.5% to 35,050 won and in Sydney, Macquarie Countrywide Trust soared 9.5%.

Vietnam widened its trading band for the currency dong as the State Bank of Vietnam takes advantage of a fall in inflation. Vietnam central bank relaxed the trading band to 5% of the fixed rate 16,980 dong to a dollar. The dong fell in trading to as low as 17,894 and in the parallel market dropped to 18,000.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 272.77 or 3.32% to 8,488.30, Hang Seng index in Hong Kong increased 462.92 or 3.44% closed to 13,910.34, CSI 300 index in China higher 12.39 or 0.51% closed to 2,451.78. ASX 200 index in Australia increased 29.70 or 0.84% closed to 3,580.00. The KL Composite index in Malaysia lower 0.38 or 0.04% closed to 877.92.

The Kospi Index in South Korea increased 22.20 or 1.85% to close at 1,221.70. SET index in Thailand closed lower 0.01 or unchanged to 438.16 and JSE Index in Indonesia increased 29.47 or 2.09% closed to 1,436.12. The Sensex index in India increased 47.02 or 0.50% closed to 9,471.04.

Europe Markets Review

In London FTSE 100 Index traded lower 38.98 or 0.99% to 3,913.83, in Paris CAC 40 Index increased 6.37 or 0.22% to 2,875.94 and in Frankfurt DAX index traded higher 13.94 or 0.33% to 4,190.31. In Zurich trading SMI increased 3.80 or 0.08% to 4,934.87.