Markets & Finance

Europe and Asia Lower


European stock markets were lower on Wednesday. In London, the Financial Times Stock Exchange 100 lost 56.10 points, or 1.16%, to close at 4789.40. The FTSE plunged 1.16%, with oil and gas and retail stocks among the main culprits. WTI drops to $53 per barrel after U.S. EIA data showed an unexpectedly high build in crude stocks: BP and Shell dropped 2.03% and 1.68%, respectively. Wall Street trades lower with weak durable goods data and disappointing earnings from Amazon weighing on sentiment. At home, retailers suffered as Kingfisher said it anticipates first-quarter like-for-like down by 6%, while reported retail profit is expected to drop by around 15%. This followed a fall in U.S. consumer confidence yesterday, while today the German consumer confidence index also posted a decline. Dixons also dropped as it announced plans to expand its PC City network in France to up to 100 stores, and to open new stores in Poland and Portugal. The gloom spread across the retail sector. Tobacco stocks provided brighter news after U.S. group Reynolds America beat first-quarter forecasts: Gallaher and BAT gained 1.31% and 0.62%, respectively. Legal & General said worldwide sales were up 43% in first-quarter to 307 million pounds. Glaxo was among the main gainers, while AstraZeneca was sold off ahead of first-quarter results tomorrow.

Germany's Dax lost 44.74 points, or 1.06%, to close at 4189.02. Frankfurt lost further ground today after a fall in German GfK consumer confidence left investors jittery. A mixed bag of earnings reports on both sides of the Atlantic did not provide much in the way of reassurance. The fall in the GfK index, to 4.9 in April from a revised 5.1 in March, came on top of yesterday's fall in the Ifo business climate index. A sub index measuring shoppers' willingness to make large purchases fell to the lowest level since October, raising concerns a recovery in Europe's largest economy seems as far off as ever. A decline in U.S. durable goods and disappointing results from Amazon added to the pessimism. On the corporate news front, Siemens posted second-quarter results confirming what most already suspected, that the group's capital goods sector is performing well while its mobile phone unit continues to rake up losses. Net income fell to 781 million euro after a one-time gain was not repeated, while its Mobile Netz unit posted a loss of 138 million euro, higher than forecast. Infineon fell after several broker cuts to price targets and peer STMicroelectronics issued a second-quarter sales warning. MAN dropped after disappointing results from Scania. Thyssen fell after industry consultant MEPS said production growth will halve this year. Deutsche Telekom traded ex-dividend.

In France, the CAC 40 lost 65.36 points, or 1.64%, to close at 3927.68. The CAC40 ended sharply lower on Wednesday as weaker-than-expected U.S. durable orders put pressure on Wall Street and triggered a European sell-off. The climate in France was already jittery after French business climate index for April fell to an 18-month low of 97, taking the market by surprise. Analysts had expected the index to come in at 101. Total knocked over 14 points off the CAC40 as crude prices eased as WTI oil for June delivery fell below $53 per barrel, losing $1.75, after U.S. crude stocks showed a build of 5.4 million barrels, vs. Platts' forecast of 975,000 and gasoline stock drew 1.0 million barrels, vs. 1.2 million estimated. Local earnings reports compounded equity aversion. France Telecom wiped 3.3 points off the index ahead of first-quarter results due tomorrow. STMicroelectronics printed the heaviest losses on the benchmark after swinging into a loss in first-quarter and guiding for second-quarter sales to decrease by 1% quarter-on-quarter or grow by 7% maximum. Carrefour also felt the pressure. Michelin skidded on uninspiring first-quarter sales of 3.6 billion euro, below market expectations of 3.69 billion euro. Saint Gobain fell after first-quarter sales came in lower-than-expected.

Asian markets were lower Wednesday. In Japan, the Nikkei 225 lost 30.41 points, or 0.28%, to close at 11,005.42 due to overnight losses in the U.S., as well as poor earnings outlook issued by domestic firms. Major automaker Honda Motor lost 1.73% to 5,100 yen on the back of firm's earnings warning for 2005/2006 as a result of stiff competition in China. NEC Electronics fell 4.11% to 4,900 yen, after the firm reported a 41% fall in group operating profit last business year, and said it expects further decline in 2005/2006. Cosmetics firm Shiseido shed 3.25% to 1,338 yen on the back of firm's losses last year, and its forecast of lower-than-expected profit for this year. On the upside, Nippon Steel jumped 2.72% to 264 yen, as the firm's net profit surged more than three times for the business year ended March. Seiko Epson gained 1.65% to 3,690 yen, cheered up by a 17.5% gain of group's operating profit to 90.97 billion yen last business year, and better-than- expected operating profit for 2005/2006.

In Hong Kong, the Hang Seng Index inched down 19.94 points, or 0.14%, to close at 13,839.64. Huadian Power lost 2.17%, after the company reported first-quarter net profit of 232 million yuan under the PRC GAAP, accounting for 22.4% of S&P Equity Research's full-year forecast under IFRS.

Canada's benchmark TSX/S&P lost 97.20 points, or 1.03%, to close at 9,330.45.


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