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After showing a lack of direction throughout the previous session, stocks are turning in another lackluster performance in early trading on Wednesday. The major averages are showing only modest moves after ending the previous session mixed. The choppy trading comes as traders remain reluctant to make any significant moves ahead of the release of the Labor Department's monthly employment report on Friday. Trading activity also remains subdued following the long holiday weekend. Most of the major sectors are showing only modest moves, although considerable weakness has emerged among banking stocks. The KBW Bank Index is currently down by 1.3 percent, pulling back further off last Friday's one-month closing high. The weakness among banking stocks comes on the heels of news that China's central bank raised interest rates for the third time this year in its latest move to combat rising inflationary pressures. Semiconductor and wireless stocks are also seeing early weakness, while strength has emerged among electronic storage stocks. Hutchinson Technology (HTCH) is leading the storage sector higher after reporting preliminary third quarter revenues that exceeded analyst estimates. The major averages are turning in another mixed performance in early trading, with the Dow up 9.49 points or 0.1 percent at 12,579.36, while the Nasdaq is down 2.56 points or 0.1 percent at 2,832.21 and the S&P 500 is down 2.72 points or 0.2 percent at 1,335.16. |
European Market Reports |
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European Markets Fall On Debt Worries
The European markets are modest to moderately lower in afternoon trading Wednesday, as sovereign debt worries re-emerged with Moody's Investors Service downgrading Portugal's - credit rating to junk status. U.S.index futures are lower and banks are particularly under pressure.
Moody's downgraded Portugal's long-term government bond ratings to Ba2 from Baa1 and assigned a negative outlook, citing growing risks the country will require a second round of official financing as it cannot meet its deficit reduction and debt stabilization targets.
The Euro Stoxx 50 index of eurozone bluechip stocks is losing 0.80 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, is sliding 0.42 percent.
The German DAX is losing 0.42 percent and the French CAC 40 is falling 0.48 percent. UK's FTSE 100 is sliding 0.73 percent and Switzerland's SMI is declining 0.76 percent.
Among the DAX components, Commerzbank is declining 2.7 percent and Deutsche Bank is falling 1.7 percent.
Those making notable losses include detergent maker Henkel, drugmaker Merck, insurers Allianz andMunichRe as well as sports goods giant Adidas.
RWE is falling 0.8 percent. HSBC cut its price target on the stock to 37 euros from 39 euros.
BMW, Volkswagen and MAN are modestly lower, while Daimler is adding 0.2 percent.
Outside the main index, Praktiker is falling 2.8 percent. Unicredit raised the home & garden retailer to "Hold" from "Sell," but reduced the price target to 4.75 euros from 7.10 euros.
Biotechnology firm Qiagen is gaining about 1 percent. Merrill Lynch initiated the stock with a "Buy" rating and a price target of 17 euros.
In Paris, lenders Credit Agricole, Natixis, Societe Generale and BNP Paribas are losing between 3.6 percent and 1.4 percent.
Retailer Carrefour is falling 2.4 percent.
Axa is down 0.8 percent. Exane BNP raised the insurer's price target to 19 euros from 16 euros.
Alcatel Lucent is adding 1.7 percent. Schenider Electric and Vallourec are up 1.1 percent each.
In London, Lloyds Banking Group is dropping 1.6 percent and Barclays is losing 2.7 percent. Royal Bank of Scotland is declining 3.2 percent.
BP is falling 1.2 percent. BG Group is down 0.6 percent, although Goldman Sachs raised its price target on the stock to 1.760 pence from 1.610 pence.
easyJet is falling about 1 percent after the low-cost airline reported a 9.1 percent growth in passengers for June on a load factor that grew 1.1 percentage points.
In economic news, factory orders in Germany increased for a second consecutive month in May, data from the Federal Ministry of Economy and Technology showed. Orders rose a seasonally and calendar adjusted 1.8 percent month-on-month in May, slower than the revised 2.9 percent increase in April. Economists had expected a 0.5 percent fall for the month.
Across Asia/Pacific, Australia's All Ordinaries added 0.14 percent and Japan's Nikkei 225 gained 1.1 percent. China's Shanghai Composite Index and Hong Kong's Hang Seng dropped 0.21 percent and 1.01 percent, respectively.
In the U.S., futures point to a lower open on Wall Street. In the previous session, the major averages bounced back and forth across the unchanged line before ending the session on a mixed note. While the Nasdaq rose 0.4 percent, the Dow slipped 0.1 percent and the S&P 500 edged down 0.1 percent.
In the commodity space, crude for August delivery is slipping $0.67 to $96.22 per barrel and August gold is sliding $1.7 to $1511 a troy ounce
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| Asia Market Reports |
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Indian Market Ends Choppy Session Modestly Lower
The Indian market ended a choppy session modestly lower on Wednesday, weighed down by mixed Asian cues and a drop in European equities after ratings agency Moody's downgraded Portugal's government debt to junk status on Tuesday, rekindling fears of contagion effects in the eurozone.
After moving in both directions, the benchmark 30-share Sensex ended down 18 points or 0.09 percent at 18,727, with 18 of its components declining. The broader Nifty index eased 7 points or 0.12 percent to 5,625, while the BSE small-cap and mid-cap indexes closed in positive territory with modest gains.
Banking, healthcare, power and IT stocks were among those that fell, while consumer durable, capital goods,auto and realty stocks attracted stock-specific buying, limiting the downside.
Reliance Communication led the decliners in the Sensex pack, falling 2.5 percent, while Sterlite, Wipro,Hindustan Unilever, ONGC, SBI, Jaiprakash Associates, Hero Honda Motors, ICICI Bank and Tata Power fell by 1-2 percent.
Among those that gained, Bajaj Auto, Reliance Industries, Larsen & Toubro, Hindalco, HDFC and Tata Motorsclosed up between 0.4 percent and 1.5 percent.
SKS Microfinance pared early gains and ended modestly lower after the auditors of the company identified 156 cases of alleged cash embezzlement by some of its employees. Canara Bank fell 2.5 percent and Hindustan Media Ventures lost 1.4 percent on turning ex-dividend.
Aviation stocks like Kingfisher, Jet Airways and Spice Jet fell by 1-2 percent after global crude prices climbed to a three-week high in New York overnight. Shares of state-run oil marketing companies such as BPCL, HPCLand IOC also closed subdued.
Reliance Industries rose 0.8 percent after a report stated that the oil ministry has referred the $7.2 billion Reliance-BP deal to the Cabinet Committee on Economic Affairs for approval. Godrej Consumer Products gained 1.5 percent after a report that it may end its joint venture with U.S.-based Hershey Co. and enter the chocolates category on its own.
Select fertilizer stocks gained ground after the much-awaited report of the task force headed by Nandan Nilekani on direct transfer of subsidies submitted its recommendations to the finance ministry. Chambal Fertilizers gained 1.5 percent, Nagarjuna Fertilizers rose 0.4 percent, Zuari Industries climbed 3.3 percent andCoromandel Fertilizers jumped 4.9 percent.
HDFC added 1.2 percent ahead of its quarterly results due on Friday, Infosys and TCS closed flat on opposite sides of the unchanged line ahead of their first-quarter results scheduled to be released next week.
Idea Cellular advanced 1.8 percent after it received interim relief from paying a hefty Rs.250-crore penalty to the department of telecommunication. Mahindra Satyam edged up 0.1 percent on the buzz that it is likely to sign a large global deal with Formula 1 at the forthcoming Indian Grand Prix scheduled to be held in Greater Noida in October.
Tea manufacturers such as Jay Shree Tea, Duncans Industries, Mcleod Russel rose between 1.5 percent and 2.8 percent after the industry urged the government to increase the rate of subsidy paid to plantation companies under the Special Purpose Tea Fund.
On the global front, the other Asian markets swung between gains and losses before finishing on a mixed note Wednesday, as investors made cautious moves amid funding concerns in Portugal and worries over - credit quality of Chinese banks.
European stocks were broadly lower in early trading and the Dow futures pointed to a negative street on Wall Street after a mixed session on Tuesday. Crude futures were subdued after rallying to a three-week high in New York overnight.
Late in the evening, the Chinese central bank raised its interest rates for the third time this year to tame stubbornly high inflation. The People's Bank of China raised the benchmark deposit and lending rates for financial institutions by 25 basis points. It was the fifth such adjustment since October last year. |
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China Raises Interest Rates To Battle High Inflation
The Chinese central bank raised its interest rates for the third time this year on Wednesday, its latest move to combat rising inflationary pressures.
The People's Bank of China (PBoC) raised the benchmark deposit and lending rates for financial institutions by 25 basis points. It was the fifth such adjustment since October last year.
The interest rate on one-year loan was raised to 6.56 percent from 6.31 percent. The one-year deposit rate was increased to 3.50 percent from 3.25 percent. The new rates are effective July 7.
The announcement could add to growing concerns that policymakers are tightening too much and that efforts to control inflation will push China's economy into a hard landing, said Capital Economics Senior China Economist Mark Williams. However, the economist expects higher borrowing costs from banks to make little difference in practice.
"Benchmark lending rates are still low relative to the pace of economic growth," Williams said. "The constraint on credit growth is the amount that banks can lend rather than the rates they charge."
In its battle against stubbornly high inflation, the central bank lifted its reserve requirement for banks six times this year. The ratio for the large banks is 21.5 percent.
Inflation rose to a 34-month high of 5.5 percent in May from 5.3 percent in April. The figure is widely expected to have risen above 6 percent in June.
The rate hikes come as no surprise. On Monday, Chinese policy makers said inflationary pressures remain at a high level and vowed to maintain prudent monetary policy. They also stressed the need for paying close attention to the current international and domestic economic and financial situation.
The National Development and Reform Commission expects the rate to moderate in the second half of the year. According to the think tank, the main reason behind the high inflation rate this year is the carry-over effects from the sharp growth in prices in the second half of the last year.
Capital Economics suspect that appetite for further tightening will nonetheless wane in response to evidence that the economy is slowing. Recent survey data from Markit Economics showed that growth in China's private sector slowed in June from May's four-month high, primarily due to a decline in manufacturing output for the first time in almost a year.
"We expect no more rate moves, but continue to expect two further 50bp increases in the required reserve ratio, reflecting the PBoC's continued efforts to mop up currency inflows and its reliance primarily on quantitative measures to control credit growth," Williams said.
In the first quarter, the Chinese economy grew 9.7 percent year-on-year and 2.1 percent from the previous three months. The International Monetary Fund has forecast 9.6 percent growth for this year and 9.5 percent for 2012.
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