Earnings Highlights: ACI, BDK, CB, DOV, EXC, FO, IR, KEP, NJ, SLB, & SYT
Asian Markets Continue Bull Run
By Shani Raja and Jonathan Burgos
July 24 (Bloomberg) — Asian stocks rose for a ninth day, driving the MSCI Asia Pacific Index to its longest winning streak since 2004, as South Korea’s economic growth accelerated and brokerages upgraded Panasonic Corp. and Quanta Computer Inc.
Murchison Metals Ltd. surged 17 percent after saying Chinese groups were interested in helping develop an iron-ore project. Panasonic, the world’s No. 1 manufacturer of plasma televisions, climbed 8.3 percent in Tokyo. Notebook computer maker Quanta added 5.6 percent in Taipei. Samsung Electro- Mechanics Co., which makes electronic parts, rose 2.4 percent to a seven-year high as a brokerage raised its stock estimate.
The MSCI Asia Pacific Index added 0.9 percent to 107.97 as of 7:16 p.m. in Tokyo, its best week in two months. The gauge has gained 10 percent in the past nine days, the longest winning streak since August 2004, amid growing speculation the global economy is recovering.
“The rally has gone on longer than expected,” said Pearlyn Wong, an investment analyst at Bank Julius Baer & Co. in Singapore, which manages $350 billion. “We’ve probably seen the worst in terms of earnings but we’re still quite cautious. Valuations have priced in a recovery.”
Hong Kong’s benchmark Hang Seng Index briefly climbed above the 20,000 level for the first time since the September collapse of Lehman Brothers Holdings Inc. It closed 0.8 percent higher. Japan’s Nikkei 225 Stock Average rose for an eighth day, gaining 1.6 percent. South Korea’s Kospi Index advanced 0.4 percent.
Consumer Stocks
Australia’s S&P/ASX 200 Index gained 0.6 percent. Nufarm Ltd., the country’s biggest supplier of farm chemicals, climbed 9.2 percent and New Zealand Refining Co. jumped 3.5 percent in Wellington on takeover speculation.
Consumer-staple shares were the only industry group of the MSCI Asia Pacific Index’s ten to fall amid speculation a possible tobacco tax will hurt profit at Japan Tobacco Inc. and as JPMorgan Chase & Co. downgraded Australia’s Woolworths Ltd.
Futures on the Standard & Poor’s 500 Index added 0.3 percent. The gauge climbed 2.3 percent yesterday, as EBay Inc. and Ford Motor Co. posted better-than-estimated results. Sales of existing U.S. homes advanced 3.6 percent last month from May, surpassing the 1.5 percent gain estimated by economists.
The increased sales fanned speculation demand for resources will recover, lifting prices for metals and oil. A gauge of six metals in London rose for a ninth day yesterday, the longest winning streak since December 2005. Crude oil in New York jumped 2.7 percent yesterday to a level not seen in three weeks.
Improving Sentiment
“Global market sentiment continues to rise,” said Ben Potter, an analyst at IG Markets in Melbourne. “The collapse of the housing market started this whole crisis and its recovery is certainly needed for any sustained economic improvement.”…….
European Markets Rise on Recovery & German Business Confidence
By Adria Cimino
July 24 (Bloomberg) — European stocks climbed for a 10th day, extending the Dow Jones Stoxx 600 Index’s longest winning streak since 2006, as German business confidence rose more than forecast and Vodafone Group Plc reported increased sales.
Vodafone, the world’s largest mobile-phone company, advanced 2.4 percent. TeliaSonera AB jumped 6.8 percent after increasing its margin forecast. Panasonic Corp. surged 8.3 percent in Tokyo after JPMorgan Chase & Co. recommended the shares. Merck KGaA plummeted 12 percent after European Union regulators rejected its Erbitux drug for a form of lung cancer.
The Stoxx 600 added 0.4 percent to 220.72 at 11:17 a.m. in London, having earlier dropped as much as 0.5 percent. The benchmark index for European equities is heading for a 4.8 percent gain this week, extending the rally since July 10 to 12 percent as results from Goldman Sachs Group Inc. to Johnson & Johnson and Apple Inc. topped analysts’ estimates.
“The rebound is impressive and it seems we’ve exited the crisis,” said Benoit de Broissia, an analyst at KBL Richelieu Gestion in Paris, which oversees $2 billion. “Companies have been proactive to preserve their margins. Economic statistics are encouraging.”
German business confidence increased for a fourth month in July, suggesting Europe’s largest economy is shaking off its worst recession since World War II. The Ifo institute in Munich said its business climate index, based on a survey of 7,000 executives, rose to 87.3 from 85.9 in June. Economists expected a reading of 86.5, the median of 32 forecasts in a Bloomberg News survey showed.
Reviving Demand
Europe’s manufacturing and service industries shrank more slowly in July as reviving demand helps the region recover from its worst recession in more than half a century. A composite index of both industries for the 16 euro nations based on a survey of purchasing managers by Markit Economics advanced to 46.8, from 44.6 in June. A reading below 50 indicates a contraction.
Even so, the U.K. economy shrank more than twice as much as economists forecast in the second quarter. Gross domestic product fell 0.8 percent from the first quarter, the Office for National Statistics said today. Economists had predicted a 0.3 percent drop, according to the median of 32 forecasts in a Bloomberg News survey. From a year earlier, the economy contracted 5.6 percent, the most since records began in 1955.
‘Beaten Expectations’
The Standard & Poor’s 500 Index yesterday recovered 50 percent of the losses suffered after the September collapse of Lehman Brothers Holdings Inc., as a record number of U.S. companies beat analysts’ earnings estimates. Among S&P 500 companies that have posted second-quarter results, 74 percent beat the average analyst forecast, according to data compiled by Bloomberg. That would be the highest full-quarter figure on record, Bloomberg data going back to 1993 show……
Oil Stays Steady Despite Reserves Being Full Up
Oil prices held above $67 a barrel Friday, adding to gains made overnight, as world stock markets rallied on signs of improvement in the U.S. economy.
By midday in Europe, benchmark crude for September delivery was up 11 cents to $67.27 a barrel in electronic trading on the New York Mercantile Exchange. On Thursday, the contract added $1.76 to settle at $67.16.
Evidence that the recession-hit U.S. economy is strengthening has bolstered investor optimism and triggered a rally from $58.78 a barrel two weeks ago. While crude demand hasn’t rebounded yet, traders have begun to have more faith that consumption will eventually pick up.
“We haven’t seen demand increase yet, but all the good news about the economy seems to be adding fuel to the fire,” said Gerard Rigby, an energy analyst with Fuel First Consulting in Sydney. “Just the fact that things are improving is enough to change the sentiment of a lot of people.”
Investors were cheered by a National Association of Realtors report Thursday that said sales of previously occupied homes rose for the third month in a row. The last time that happened was in the middle of the housing boom in early 2004.
The Dow Jones industrial average rose 2.1 percent Thursday to above 9,000 for the first time since January. The Dow is up 11 percent in the last nine days, while on Friday stock markets in Asia and Europe were mostly higher.
“If the current optimism lifting shares is totally unfounded then the current strength in oil will probably not hold,” said Olivier Jakob of Petromatrix in Switzerland. “But if the global destruction of the economy has indeed bottomed … then so should have the oil markets.”
Most second quarter corporate results have beaten analyst expectations, but reports late Thursday from Microsoft Corp., American Express Co. and Amazon.com disappointed investors, suggesting the recovery could be bumpy.
“I wouldn’t say the current fundamentals support oil at $65 to $70,” Rigby said. “A lot of countries aren’t out of the woods yet.”
“It’s putting the cart before the horse, but that’s what the market does.”
Rigby said he expected oil to rise over the next few weeks and test an eight-month high of $73.23 a barrel reached on June 30.
According to JBC Energy in Vienna, while oil demand continues to be weak, “extremely volatile oil prices will hardly manage to buck overall sentiment” and are likely to follow the current rally in the stock markets.
“In Japan, crude imports fell by almost 20 percent in June as oil demand is evaporating,” JBC said. “Refiners in the world’s third-largest oil consuming country ran their facilities at about 71 percent of capacity, according to latest official figures.”
In other Nymex trading, gasoline for August delivery rose 0.29 cent to $1.9161 a gallon and heating oil gained 0.75 cent to $1.7719. Natural gas for August delivery jumped 4.7 cents to $3.597 per 1,000 cubic feet.
In London, Brent prices rose 23 cents to $69.48 a barrel on the ICE Futures exchange.
By Ilaina Jonas – Analysis
NEW YORK (Reuters) – For the past six months or so, Wall Street has been bracing for what many fear may be the next shoe to drop on the already battered U.S. economy: a U.S. commercial real estate bust that could rival the housing market collapse.
Yet, lenders have been keeping that shoe in the closet — forestalling foreclosures by extending loans, despite rapidly rising mortgage default rates.
“In today’s environment, it’s obviously not very attractive to foreclose on a borrower,” said Matthew Anderson, co-founder of real estate consulting services firm Foresight Analytics.
The U.S. commercial real estate sector has been grappling with a credit crisis that has dried up some of its most important sources of lending. That has left many borrowers unable to refinance maturing mortgages. Even when they can obtain financing, borrowers are often obtaining much less than they need.
Lending is based on a percentage of a property’s value and prices are off 34.8 percent from their peak in October 2007. Many see the decline reaching 45 percent.
But banks have been loathe to foreclose on the mortgages and are extending them.
“They’re taking loans that don’t have a cash-flow problem, but definitely have a valuation problem, and they’re pushing those out to the future,” Anderson said.
About 4.5 percent of bank commercial real estate loans were 30 or more days delinquent in the second quarter, up from 3.6 percent in the first quarter, according to Foresight Analytics. Nonaccrual — or the percentage of the loan balances that banks believe borrowers will fail to repay — rose to 2.6 percent in the second quarter from 2 percent the prior quarter.
Banks account for about $1.7 trillion, or half, of U.S. commercial mortgages outstanding. The delinquency rates have been increasing since the second quarter 2007, when they were 1.2 percent, according to Foresight.
Yet foreclosed loans as a percentage of nonaccruals has been declining, down to 19.7 percent in the first quarter from over 30 percent three years ago, according to the most recent statistics from Foresight.
The practice of extending loans has become so prevalent, it has earned its own catch phrases — “push-outs,” “kicking the can down the road” and “a rolling loan gathers no loss.”
THE PERVERSE LESSON
Banks have many reasons not to foreclose…..
One Sign Things Are Getting Better
Great chart here showing just how low the quality of the earnings are so far in Q2:
Rail Traffic Shows a different picture
Singapore Posts First Drop In Output in The Last 3 Months
By Shamim Adam
July 24 (Bloomberg) — Singapore’s industrial production fell for the first time in three months in June as electronics and chemicals output dropped and a surge in pharmaceuticals manufacturing eased.
Manufacturing, which accounts for about a quarter of Singapore’s economy, declined 9.3 percent from a year earlier following a revised 2.1 percent gain in May, the Economic Development Board said today. The median forecast in a Bloomberg survey of nine economists was for a 6.4 percent drop.
The government said this week the recent improvement in drugs and electronics output may falter, preventing a quick recovery from the country’s deepest recession since independence 44 years ago. Singapore raised its 2009 economic forecast July 14, after the manufacturing industry posted its best performance in five quarters in the three months to June.
“The decline in June manufacturing activity reflects the lingering concern of sustainable recovery of demand for the overall manufacturing sector,” said Alvin Liew, an economist at Standard Chartered Bank in Singapore. “Pharmaceuticals output is still a key support for manufacturing as electronics remain weak.”
Singapore’s manufacturing slid 2.4 percent in the second quarter, more than the 1.5 percent decline estimated by the government last week, today’s report showed.
Industrial production fell a seasonally adjusted 9.2 percent in June from the previous month, when it slid a revised 1.8 percent.
Gradual Recovery
Demand for goods from the world’s biggest economies in the U.S., Europe and Japan is still weak, and any pick-up in trade will be “bumpy,” Trade Minister Lim Hng Kiang said this week.
“We have to wait for a more general demand recovery, especially in the developed countries, for Singapore’s economy to be on a sustained growth path,” Lim said. “We should not expect a V-shaped sharp recovery. We’re looking at a more gradual recovery.”
Electronics production plunged 20.4 percent from a year earlier last month, following a revised 22.9 percent decline in May. Electronics make up about 26 percent of total manufacturing output, and shipments of such products have dropped every month for more than two years.
Pharmaceutical production, which accounts for about 20 percent of manufacturing, climbed 14 percent after surging a revised 139 percent in the previous month. Excluding biomedical manufacturing, production contracted 14.6 percent in June, after shrinking a revised 17.6 percent in May.
South Korea’s Economy Grows @ The Fastest Pace
By Seyoon Kim
July 24 (Bloomberg) — South Korea’s economy expanded at the fastest pace in almost six years last quarter as exports and household spending jumped.
Gross domestic product rose 2.3 percent from the first quarter, when the nation skirted a recession by growing 0.1 percent, the Bank of Korea said today in Seoul. That was better than the 2.2 percent growth estimated by economists.
Samsung Electronics Co. today joined exporters Hyundai Motor Co. and LG Electronics Inc. in reporting profit surged last quarter, helped by a weaker currency and demand fed by $2.2 trillion in stimulus worldwide. Consumer spending climbed 3.3 percent from the first quarter, the most in seven years, fueled by interest rates at a record-low 2 percent.
“Exports have improved more than expected while domestic demand got a big boost from the fiscal and monetary policy steps,” said Lee Sang Jae, economist at Hyundai Securities Co. in Seoul. “I expect Korea to remain on a recovery path” even after the boost from the stimulus measures wanes, he said.
The Kospi stock index rose 0.4 percent today in Seoul, taking the year’s gains to 34 percent after a 41 percent drop in 2008. The won rose 0.2 percent to 1,249.55 per dollar.
Last quarter’s expansion was the fastest since the economy grew 2.6 percent in the last three months of 2003. Exports gained 14.7 percent, also the biggest advance in almost six years. From a year earlier, GDP shrank 2.5 percent.
China, Singapore
South Korea joins China and Singapore in leading a regional rebound, marking a turnaround for an economy whose currency tumbled 26 percent last year on concern companies would be unable to repay foreign debt.
President Lee Myung Bak’s approval rating plunged by more than half in the wake of the financial turmoil. To counter the crisis, in January he sacked his finance minister and created an economic war room in an underground bunker.
He also pumped money into the banking system, boosted fiscal spending by 67 trillion won ($54 billion) and set up funds to replenish banks’ capital. The central bank formed a dollar-swap agreement with the U.S. and cut interest rates.
“The economy got help from various stimulus measures and the second-quarter numbers show the steps worked,” said Kim Seung Hyun, head of research at Taurus Investment Securities Co. in Seoul. “A weaker currency helped the nation’s exporters gain competitiveness.”
Samsung’s Profit
Samsung Electronics, which alone accounts for 15 percent of the country’s exports, today reported net income rose 5.2 percent to 2.25 trillion won in the three months ended June, the biggest quarterly profit in more than two years.
U.K. Economy Shrink Twice Expectations
By Jennifer Ryan
July 24 (Bloomberg) — The U.K. economy shrank more than twice as much as economists forecast in the second quarter as a record annual slump in construction, banking and business services kept Britain mired in the recession.
Gross domestic product contracted 0.8 percent from the first quarter, the Office for National Statistics said today in London. Economists predicted a 0.3 percent drop, according to the median of 32 forecasts in a Bloomberg News survey. From a year earlier, the economy shrank 5.6 percent, the most since records began in 1955.
Prime Minister Gordon Brown’s Labour Party trails the opposition Conservatives in polls less than a year before an election as the recession drives up unemployment. Bank of England policy maker Andrew Sentance said yesterday that the British economy may start to pick up in the second half of the year.
“It’s a very sizeable recession indeed,” said George Buckley, chief U.K. economist at Deutsche Bank AG in London. “I think we’ve seen the worst, but what will the post-recession environment look like? There is a risk in the medium term that growth will be weaker than we’re used to.”
The pound dropped as much as 0.5 percent against the dollar after the report. The U.K. currency traded at $1.6468 as of 11:18 a.m. in London.
IMF Forecasts
Today’s report is the first among the Group of Seven nations for the second quarter. The International Monetary Fund forecasts the U.K. will contract 4.2 percent this year, compared with 4.8 percent in the euro area and 2.6 percent in the U.S.
Brown said today that the Group of 20 nations need to take steps to revive the world economy.
“We are at a point where banks have been stabilized, but we don’t yet have a strategy for a return to growth,” Brown said at the opening of a meeting in his office in London.
Brown, who must call a general election by June, has trailed David Cameron’s Conservatives in every opinion poll this year. A July 19 survey by Ipsos-Mori Ltd. showed the ruling party lagging the biggest opposition party by 16 points.
“Today’s figures are fresh evidence of the sheer scale of the global downturn we’re fighting,” said Liam Byrne, a junior Treasury minister. “But they also show the pace of slowdown is easing compared to the winter, which is why we remain cautious but confident that growth will return towards the end of the year.”
Economic Contraction
The data show the economy has now shrunk by 5.7 percent since the recession began last year. That compares with a total 6 percent slump in the recession period that ended in 1981, the statistics office said.
Construction fell 2.2 percent on the quarter and 14.7 percent from a year earlier, which was the biggest annual drop since records began in 1948. Business services and finance slumped 0.7 percent on the quarter and had a record annual decline of 4.4 percent, the statistics office said.
While the government has committed as much as 1.4 trillion pounds ($2.3 trillion) to revive lending and rescue banks such as Royal Bank of Scotland Group Plc, it hasn’t stopped joblessness from increasing.
Unemployment in the quarter through May increased by 281,000, the most since records began in 1971. The jobless benefit roll has reached 1.56 million, the most in 12 years.
BOE Vote
Policy makers unanimously voted on July 9 to keep the key interest rate at a record low of 0.5 percent and said they’ll review the size of their 125 billion-pound plan to print money in August, when they publish forecasts on growth and inflation.
The bank will “make a judgment about whether we need to add further to that stimulus” once the new quarterly predictions are available, Sentance said yesterday in an interview. “The economy is already benefiting from a big monetary stimulus as we go into the second half of this year and next year.”
Former policy maker David Blanchflower said in an interview on Bloomberg Television yesterday that the economy may not be through the worst, and the central bank risks stifling the recovery were it to raise rates or reverse the bond purchase program prematurely.
“My worry is that the tightening comes too soon and people kill off any recovery that’s coming,” he said. “It’s very early days to say that you know the endgame is even in sight.”
Words Of Caution From Rosenburg
” Thats the way it is “…..Enjoy your weekend folks !
