27/07/07

The Dow Jones tumbled 311.5 points to finish at 13,473.6, the S&P 500 dropped 35.45 points to close at 1,485.65. The Nasdaq fell 48.83 points to end at 2,599.34.

Exxon Mobil led the Dow and S&P lower following a decline in quarterly profits. Shares in the country's largest oil company sank 5.5% to $88.23, wiping $16 billion off the value of the world's largest publicly traded company.

The housing sector was in turmoil again after weak government data and disappointing corporate figures. The Commerce Department reported new home sales that dropped 6.6%. Both DR Horton and Pulte Homes posted huge losses, finishing 1.8% and 3.05% lower respectively. Beazer Homes was one of the worst hit though as it too reported poor results, shares slid 8.7% to $15.56. Home builder WCI Communities said the real estate market downturn was hurting its push to sell itself, sending shares 12.8% lower at $9.87.

Financial shares also weighed heavily, Citigroup Inc closed 2.85% lower at $47.81 while JPMorgan Chase & Co lost 2.6% to end at $44.08.

On a very limited upside, Ford Motor Co shocked everyone by reporting a quarterly profit. The company cited reduced losses in its North American operation, sending shares 1.5% higher to $8.09. 3M was the only Dow component to finish higher after the company reported earnings that topped estimates.

US light crude oil for September delivery had helped send the market lower after rising above $77 a barrel early in the day. But the price of the commodity retreated to finish $0.93 lower at $74.95, in turn helping the market to stem some its losses.

COMEX gold fell $11.40 to close at $675.10 an ounce.

Treasury bonds rallied as investors sought some safety. The yield on the 10 year note saw a massive drop from 4.91% late Wednesday to 4.78%.

The Nikkei suffered its worst day in four months this morning, losing 418.3 points to close at 17,283.8. Companies reliant on heavy US sales were worst hit, including Canon Inc and Honda Motor Co. The turmoil was worsened by a further strengthening of the yen versus the dollar.

The Hang Seng is currently 657.9 points lower at 22,553.8 this morning. Again following the US lower with particular attention to companies with large exposure to the US. Cnooc Ltd declined the most in more than a year after Exxon Mobil said profit fell as oil production decreased.

The FTSE 100 suffered its biggest points fall for five years yesterday as trading screens turned red on renewed fears over the US economy and credit markets, wiping £48bn off shares. Despite early gains by energy stocks, London responded to big opening losses on Wall Street amid persistent fears about the state of the subprime mortgage market and the wider economy. The negative sentiment left the FTSE 100 reeling - 203.1 points adrift at 6251.2 by the close, which was its lowest finish since March this year.

Just three companies finished the day in positive territory as markets also took fright at downbeat results from house builders in the US, lower home sales, and concerns over tighter conditions in credit markets acting as a potential dampener on any M&A activity. The only risers among the blue chips were Resolution - up 15.5p to 631.5p - British Energy - ahead 2.5p to 485p - and National Grid - up 0.5p at 687p.

Legal & General was the biggest faller after it said recent storms would have an impact on its general insurance business. That offset solid half-year results and details of a £1bn share buy-back, as shares fell by more than 8% or 12.4p, to 138.1p. Other insurance firms featuring high on the fallers board included Friends Provident, down 12.6p at 181.5p, an Standard Life, off 19.5p at 295.5p.

As the market tumbled several major firms also suffered despite relatively upbeat corporate results. Rolls-Royce was a big loser, off more than 6% or 34.25p to 496.25p, even though the business beat market expectations with underlying pre-tax profits of £380m and boasted an order book swelling to more than £3bn. Telecoms group BT was also on the back foot despite posting first-quarter figures in line with expectations and revealing higher-than-forecast customer broadband additions. Shares were off 17.25p at 311p, or more than 5%. Among retail shares, home improvement specialist Kingfisher was 6p lower at 210.5p as its second-quarter trading update showed gloomy sales figures for the UK as expected by City forecasts.

In the energy sector, BP and Royal Dutch Shell rose 2% in early trading after oil prices reached nearly $77 a barrel, with sentiment lifted by results from Shell, as strong refining margins lifted second-quarter profits to $7.6bn (£3.6bn). But Shell ended the day 42p off at 1972p, and BP fell 9p to 575.5p. BG Group finished 19.5p lower at 769p.

Drugs giant AstraZeneca began well on the back of decent results but it gave back earlier gains to end down 84p at 2592p, while GlaxoSmithKline, which reported better-than-expected profits yesterday, was off 28p at 1247p. Bus and rail group National Express lost 31p to 1124p in the second tier, despite shrugging off recent a number of recent disappointments in franchise bids to post strong profits growth.

Economics
US GDP (Q2, advance) 1330 BST/0830 EDT

Analysts expect that Q2 GDP rose by 3.2%. With retail sales softening in June, analysts estimate that Q2 consumption growth was 1.4%. Analysts also look for a 10% decline in residential investment, while business fixed investment could rise about 8%. Real export growth strengthened in Q2 and net trade should add about 0.9pp to GDP. After lower inventories in Q1, a return to stockbuilding in Q2 should also help boost GDP growth. Meanwhile, analysts expect the GDP price deflator to slow to 3.3%, from 4.1% in Q1.

US University of Michigan Confidence (July, final) 1500 BST/1000 EDT

The preliminary reading for July Michigan sentiment surprised to the upside at 92.4, likely getting a boost from lower gasoline prices since the end of May, as well as improvement in the stock market. However, the latest IBD/TIPP index was disappointing at 48.2, and gasoline prices have crept a bit higher for the past two weeks. Analysts expect the final reading to be revised down to 91. Five year median inflation expectations rose to 3.1% in the preliminary survey, towards the higher end of the range from recent years.

The details published in this e-mail are intended for information only and should not be construed as advice under the Financial Services and Markets Act 2000. Aventus Capital Management will not accept responsibility for any actions taken (or not taken) on the basis of information published in this e-mail.

Aventus Capital Management is a trading style, "Aventus" is a trade mark and the Aventus logo is a registered trade mark of Rickerbys Solicitors.  Rickerbys is regulated by the Solicitors Regulation Authority.  Authorised and regulated by the Financial Services Authority.