Trade Deficit Declines 5.7%

Elena
12 Jan, 2006
New York City

The Commerce Dept. reported improved trade deficit in November declining by 5.7% to $64.2B after hitting a record of $68.1B in October. Economists had expected a narrower deficit of $66 B. The Labor Dept. said that the number of initial jobless claims rose by 17,000 last week to 309,000 vs. expectations of an increase by 24,000. Guidant said it reached a new deal to be acquired by J & J which bid up $23.2 B. The increased value is still below Boston Scientific''s offer of $25 B.

U.S. MARKET AVERAGES

U.S. stock futures were sitting slightly below the flat line, predicting weaker opening on rising oil prices and brokerage downgrades of Dow industrials components Coca-Cola and J.P. Morgan Chase. On Wednesday stock markets posted modest gains on continued positive sentiment on Wall Street, despite an earnings warning from chemicals company DuPont with the Nasdaq building on gains for the seventh straight session.

Front-month crude traded at $64.66 a barrel, reflecting supply concerns as tension over Iran’s nuclear ambitions escalated.

Goldman Sachs downgraded The Coca-Cola Co. to in-line from outperform and cut Anheuser-Busch Cos. to underperform from in-line.

Dow component J.P. Morgan Chase was downgraded to market perform from outperform by Piper Jaffray, as the broker believes healthy capital markets and synergies from its merger with Bank One are fully figured into the shares.

AT&T Corp was upgraded by Prudential Equity Group to overweight from neutral weight, citing increased SBC and AT&T merger synergies, aggressive share buybacks, and a lowered cost structure.

On corporate news front, Guidant ((GDT)) revealed that it reached a new deal to be acquired by Johnson & Johnson ((JNJ)) as it offered a higher value of $23.2 billion, an increase compared to J&J's previous bid, but still below the $25 billion offered by Boston Scientific ((BSX)).

In economic news, the Commerce Department reported that the trade deficit declined by 5.7% in November to $64.2 billion after hitting a record of $68.1 billion in October.

In other economic news, the Labor Department reported that the number of initial jobless claims rose by 17,000 last week to total 309,000. Economists had been expecting an increase of 24,000. The figures indicate continued strength in the labor market.

S&P 500 futures dipped 1.3 points at 1,298.40 and Nasdaq 100 futures were off 1.5 points at 1,769.50.

ECONOMIC NEWS

Before the start of trading on Thursday, the Department of Commerce released its report on the U.S. trade deficit in the month of November. The report showed that the trade deficit narrowed more than economists had expected.

The Commerce Dept. said that the trade deficit narrowed to $64.2 billion in November from a revised $68.1 billion in October. Economists had expected the deficit to come in at $66.0 billion compared to the deficit of $68.9 billion originally reported for October.

The narrower trade deficit came as the value of exports rose while the value of imports fell. The report showed that exports rose 1.8 percent to $109.3 billion in November, while imports fell 1.1 percent to $173.5 billion.

The increase in the value of exports reflected a rise in exports of goods, particularly capital goods, consumer goods, and industrial supplies and materials. At the same time, imports of goods fell, reflecting decreases in imports of industrial supplies and materials and consumer goods.

Despite the decrease in November, the trade surplus for the first 11 months of 2005 came in at $661.8 billion compared to the annual record of $617.6 billion in 2004. Economists expect that the annual deficit for 2005 will top $700 billion.

INTERNATIONAL MARKETS NEWS

Asian-Pacific benchmarks rallied on strong technology shares, lifted by analyst upgrades and corporate news. China’s Shanghai Composite was the outstanding leader among gainers, surging 1.3% to 1,226.704. The Nikkei hit a new five-year high of 0.5% to 16,445.19, followed by South Korea’s Kospi, up 0.6%, and Hong Kong’s Hang Seng rising for the eighth consecutive session with a gain of 0.4%.

European stocks were mostly lower at mid-day trading on weak telecom stocks, hurt by warning from France Telecom of worse-than-expected sales growth in 2006. the German DAX 30 fell 0.1%, the CAC 40 slipped 0.2%, while London’s FTSE 100 gained 0.1% on oil stocks, rising on the back of higher crude oil.

OIL, METALS, CURRENCIES

Crude oil prices neared a three-month high on supply concerns as tension over Iran’s nuclear ambitions increased. Light sweet crude for February delivery gained 67 cents to $64.61 a barrel. London Brent rose 76 cents to $62.93.

European gold prices retreated from 25-year highs in early Tuesday trading when gold hit $553 per troy ounce. In London gold closed at $541.10 per troy ounce, down from $541.50. In Zurich the precious metal advanced to $540.85 from $541.55. In Hong Kong gold climbed $13.20 to close at $542.

The U.S. dollar dropped against major currencies on speculation that trade deficit will stay near record highs. The euro was quoted at $1.2131, up from $1.2127. The dollar bought 113.75 yen, down from 114.15.

EARNINGS NEWS

LG.Philips LCD Co., ((LPL)), reported that Q4 profit surged to 328 billion won (US$337 million; euro277 million), up from 35 billion won (US$36 million; euro30 million) from a year earlier on strong demand for liquid crystal displays used in televisions. The result was above analysts’ expectations of a net profit of 291.4 billion won (US$299 million; euro246 million).

RadioShack Corp, ((RSH)), consumer electronics retailer, announced Q4 total sales of $1.67 billion versus total sales of $1.59 billion for Q4 in the year-ago period, an increase of 5%. RadioShack''s quarterly comparable store sales grew by 4%.

Fortune Diversified Industries Inc., ((FFI)), telecommunications and human-resources consulting company, reported Q1 net income advanced 20% to 8 cents a share, up from 7 cents a share in the year-ago period on 45% higher revenue. The business-solutions segment, which includes the HR business, was particularly strong in the period.

Schiff Nutrition International Inc., ((WNI)), producer of vitamins and nutritional supplements, reported that Q2 net income fell 56% to 6 cents a share, down from 13 cents in the year-ago period on 20% lower sales. Sales dropped to $35.5 million from $44.3 million. Sales fell as some private-label lines were discontinued and branded-product sales declined.

MGIC Investment Corp. ((MTG)), mortgage insurance company, reported Q4 net income of $1.44 per share, up 3.6% from $1.39 in the same period last year. Q4 total revenues were $370.9 million, down 8.0 % from the comparable period last year. The decline in revenues resulted from a 8.2 % decrease in net premiums earned to $305.1 million. Net premiums written for the quarter were $316.7 million, down from $336.4 million in Q4 last year, a decrease of 5.9 %.