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04.11.2011 08:43

Stocks: Thursday’s review

Asian stocks declined as European leaders withheld aid to Greece after the country said it will hold a referendum on a bailout package and the U.S. Federal Reserve cut its forecast for the world’s biggest economy.

The Federal Open Market Committee yesterday kept policy unchanged, saying they would lengthen the maturity of the Fed’s bond portfolio and hold the benchmark interest rate near zero through at least mid-2013 if unemployment remains high and the inflation outlook is “subdued.”
Australia’s S&P/ASX 200 lost 0.3 percent. Japanese markets were closed today for a holiday. Hong Kong’s Hang Seng Index dropped 2.5 percent as property developers slid after home sales fell. China’s Shanghai Composite Index added 0.2 percent, extending gains for a third day, on speculation the government will accelerate measures to boost the economy after a report on non-manufacturing industries signaled tight monetary policies are hurting businesses.
Financial stocks were the biggest drag on the MSCI Asian gauge as European leaders kept an aid installment of 8 billion euros ($11 billion) for Greece on hold until Greek voters approve the bailout package in a referendum next month.
HSBC Holdings Plc, Europe’s biggest lender, dropped 2.9 percent in Hong Kong on speculation a default by Greece will threaten bank earnings. United Overseas Bank Ltd., Singapore’s No. 3 lender by market value, sank 3 percent after posting profit that missed estimates. Standard Chartered Plc, the U.K.’s second-biggest lender by market value, declined 4 percent to HK$172.80.
Exporters dropped as officials cut their U.S. growth forecasts for next year and predicted unemployment will average between 8.5 percent to 8.7 percent in the final quarter of 2012.
Li & Fung Ltd., a supplier of toys and clothes that counts the U.S. as its biggest market, sank 5.6 percent to HK$14.50. Yue Yuen Industrial Holdings Ltd., a supplier of Nike Inc.’s shoes, fell 2.5 percent to HK$21.60. Compal Communications Inc., the maker of mobile phones that gets more than half of sales from the Americas, slumped 7 percent to NT$40.60 in Taipei.
Property developers in Hong Kong declined after a report showed home sales in the Chinese city fell for a 10th straight month, dropping by half in October from a year ago as buyers put off purchases. The government introduced new housing curbs in June and banks increased mortgage rates in September.
Sun Hung Kai Properties Ltd., the world’s biggest developer by market value, slipped 3.3 percent to HK$103.60. Cheung Kong Holdings Ltd., a real estate company controlled by billionaire Li Ka-shing, sank 3.7 percent to HK$92. Hang Lung Properties Ltd., Hong Kong’s third-largest developer, declined 4.3 percent to HK$26.85.
United Overseas Bank dropped 2.6 percent to S$16.26 in Singapore after a report showed third-quarter net income fell 24 percent from a year earlier, missing analyst estimates.
Australia & New Zealand Banking Group Ltd., the worst performer among Australia’s four largest bank stocks this year, fell 2 percent after posting second-half profit that missed analyst forecasts as volatile markets eroded trading profit.
LG Electronics Inc., the world’s third-biggest mobile phone maker, slumped 14 percent in Seoul as the company is said to plan a 1 trillion won ($885 million) share sale.

European stocks advanced after the euro-area central bank unexpectedly cut the benchmark interest rate and Greek Prime Minister George Papandreou signaled he won’t call a referendum on the latest bailout package.

The ECB unexpectedly cut interest rates as Italian and Spanish borrowing costs soared after euro-area leaders raised the prospect of Greece leaving the monetary union. ECB officials, meeting under the presidency of Mario Draghi for the first time, cut the benchmark interest rate by 25 basis points to 1.25 percent.

Papandreou signaled he won’t call a referendum calling into question Greece’s membership of the euro, saying he will reach out to the opposition about forming a transitional government.

The Greek prime minister said the country belongs in the currency bloc and welcomed support shown by the main opposition New Democracy party for last week’s rescue agreement agreed with EU leaders in Brussels.

National benchmark indexes gained in 17 of the 18 western European markets. France’s CAC 40 rallied 2.7 percent and Germany’s DAX climbed 2.8 percent. The U.K.’s FTSE 100 added 1.1 percent.

National Bank of Greece SA led the country’s lenders higher, it rose 11 percent to 1.80 euros. Alpha Bank SA climbed 15 percent to 1.07 euros. Piraeus Bank SA rallied 10 percent to 23.6 euro cents. Banks rose throughout Europe, with BNP Paribas SA, France’s biggest bank, advancing 7.5 percent to 31.92 euros. Commerzbank AG, Germany’s second-largest lender, added 5.5 percent to 1.75 euros.

Swiss Re Ltd. and Man Group Plc gained more than 2 percent after reporting better-than-expected earnings.

Swiss Re rose 6.1 percent to 49 Swiss francs. The world’s second-biggest reinsurer said third-quarter profit more than doubled to $1.35 billion. That beat the $539 million average estimate of nine analysts surveyed by Bloomberg.

Man Group gained 2.4 percent to 144.7 pence. The biggest publicly traded hedge-fund manager reported a smaller-than- forecast decline in pretax profit in the fiscal first half. Pretax profit dropped to $195 million in the six months through September from $227 million in the year-earlier period, the London-based company said. Man forecast pretax profit of $185 million.

Cable & Wireless Communications jumped 7.8 percent to 39.33 pence. The company said first-half net income before exceptional items rose 9 percent to $163 million. The company also said restructuring is ahead of schedule.

Aker Solutions ASA surged 10 percent to 67.15 kroner. Norway’s biggest oil platform maker said third-quarter net income more than tripled to 1.12 billion kroner ($200 million) as it booked a gain after separating out Kvaerner ASA.

ING Groep NV rallied 9.4 percent to 6.18 euros. The biggest financial-services company in the Netherlands said it plans to cut 11 percent of the jobs at its Dutch bank and posted third- quarter earnings that surpassed analysts’ estimates.

Tenaris SA soared 15 percent to 12.85 euros. The world’s largest maker of seamless pipes said third-quarter profit rose 7 percent on higher demand in the U.S. and Europe and increased prices.

Rheinmetall AG tumbled 7.6 percent to 35.12 euros. The maker of KS Kolbenschmidt engine pistons and a partner in Germany’s Puma battle tank said it won’t stage an initial public offering of its automotive unit, citing stock-market declines. Rheinmetall’s third-quarter earnings before interest and taxes rose to 76 million euros, missing analyst estimates.

U.S. stocks advanced, sending the Standard & Poor’s 500 Index higher for a second straight day, as Greece moved closer to accepting a bailout and the European Central Bank unexpectedly lowered interest rates.
Greek Finance Minister Evangelos Venizelos, speaking to party lawmakers in Parliament in Athens today, said the nation won’t hold a referendum. Just hours after saying Greeks need to decide on whether their future is in the euro, Papandreou said the country belongs in the currency bloc.
Global stocks also rose as ECB officials unanimously lowered the benchmark interest rate by 25 basis points to 1.25 percent. ECB President Mario Draghi said the rate cut happened partly because “what we’re observing now is slow growth heading toward a mild recession.”
Earlier today, benchmark gauges erased a rally as a report showed that service industries in the U.S. expanded at a slower pace and consumer confidence plunged, supporting Federal Reserve Chairman Ben S. Bernanke’s forecast yesterday that the economic recovery will be “frustratingly slow.” A Labor Department report today showed first-time claims for unemployment benefits declined last week to a one-month low of 397,000. Employment probably cooled in October, indicating the U.S. recovery remains too weak, economists said before a report tomorrow.
All 10 groups in the S&P 500 rallied as energy and industrial shares had the biggest gains, adding at least 2.4 percent. Gauges of utility, health care and consumer staples companies advanced less than the benchmark gauge.
Qualcomm Inc. jumped 7.5 percent as the biggest maker of mobile-phone chips forecast sales that beat analysts’ projections. The company, which gets most of its profit from licenses on technology used in so- called 3G phones, is benefiting as more consumers switch to the technology -- especially in developing countries.
Kraft Foods Inc. (KFT) added 3.3 percent after raising its earnings estimate. Food companies such as Kraft, Sara Lee Corp. and General Mills Inc. have raised prices on many products this year to make up for higher costs for ingredients such as corn, coffee and sugar.
Estee Lauder jumped 18 percent, the biggest advance in the S&P 500, to $118.92. The company said it will split its common stock 2-for-1 in January, and raise the annual dividend to $1.05 a share. Sales in the fiscal first quarter gained 18 percent, helped by stronger demand in all of the company’s markets and a weaker U.S. dollar that aided results overseas.
Jefferies Group Inc. lost 2.1 percent to $12.01, paring an earlier decline as it said it has no “meaningful net exposure” to European sovereign debt. Its shares plunged as much as 20 percent, triggering stock-market circuit breakers. Egan-Jones Ratings Co. cut the firm’s credit grade, citing a “changed environment” after the collapse of MF Global Holdings Ltd. and concern that Jefferies’s $2.7 billion in “sovereign obligations” on Aug. 31 is large relative to equity.
Abercrombie & Fitch Co. tumbled 20 percent, the most in the S&P 500, to $59.26. The New Albany, Ohio-based teen-clothing retailer reported a slowing trend for same-store sales in Europe, including flagship stores that had declines. Japan and Canada same-store sales also dropped.

Market Focus

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  • Earnings Season in U.S.: Major Reports of the Week
  • German private sector output growth slowed for the second month running in July
  • ECB's Mersch says as conditions normalise, it is unlikely that uncoventional policies will remain necessary
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