U.S. Stocks Slide; BP Containment Costs Rise

Arthi Gupta, Mayank Mehta and Sanjay Barot
12 Jul, 2010
New York City

U.S. stocks fall ahead of the earnings season. Hewitt Associates to merge with Aon Corp. MRC Technology enters into an exclusive license agreement with Genentech. BP Plc oil spill containment costs rise to $3.5 billion.

[R]9:35 AM New York – U.S. stocks fall ahead of the earnings season. Hewitt Associates to merge with Aon Corp. MRC Technology enters into an exclusive license agreement with Genentech. BP Plc oil spill containment costs rise to $3.5 billion.[/R]

U.S. stocks slip ahead of earnings season and Asian and European markets rose after better-than-expected economic data from China.

China reported a record trade surplus of $20 billion for June, with exports surging up 4.2% and imports growing at a slower pace of 0.9% month-over-month.

BP Plc is looking to sell some of its assets, including its Alaskan assets, to Apache Corp. The company revealed that costs related to the oil spill at Deep Horizon has surpassed $3.5 billion.

In a significant progress in containing the gush of crude oil from the ruptured oil well in the Gulf of Mexico, oil giant BP plc''s underwater robots are steadily assembling a tighter Capping Stack to the Deepwater Horizon blowout preventer after removing a defective cap.

British Petroleum claims that the stop-gap measure launched on Saturday will capture almost all of the oil spewing from its blown-out well in the Deepwater Horizon platform, preventing further economic and environmental damage on and off the U.S. southern coasts.

U.S. media quoted Coast Guard Commander Thad Allen, who is coordinating the government response to the Gulf oil spill, as saying on Monday that ""Significant progress"" has been achieved in efforts to recap the leaking oil well.

Aon Corp. and Hewitt Associates Inc. announced today that their boards have approved an agreement by which Hewitt will merge with a subsidiary of Aon.

The aggregate consideration is valued at $50 per Hewitt share representing a 41% premium to Hewitt''s closing stock price on July 9, 2010, the last trading day prior to the announcement of the deal. The aggregate fully diluted equity value of the transaction is about $4.9 billion, consisting of 50% cash and 50% Aon stock.

Aon expects the transaction to be accretive on a GAAP EPS basis in 2012 and on an adjusted EPS basis in 2011. Aon expects the transaction to be significantly accretive to cash earnings in 2011.

The transaction is expected to close by mid-November, subject to customary closing conditions, regulatory approvals, as well as approval by both Aon and Hewitt stockholders.

In addition, Russ Fradin, chairman and chief executive officer of Hewitt, will serve as chairman and chief executive officer of Aon Hewitt, reporting to Greg Case, chief executive officer, Aon Corporation.

MRC Technology announced that it has entered into an agreement with Genentech Inc., a wholly owned member of the Roche Group for an exclusive license to a series of small molecule drug candidates for the potential treatment of neurological disease. Full financial terms and the target of the small molecule project have not been disclosed.

Under the terms of the agreement, MRC Technology will receive an upfront payment and is eligible to receive clinical development milestone payments and royalties on sales.

Dr Dave Tapolczay, Chief Executive Officer of MRC Technology, said, ""We are delighted that we have been able to partner this program with Genentech, and extremely pleased that the terms of our agreement reflect the value of the small molecule drug discovery program and support our innovative business model.""

""When the resulting clinical candidate is subsequently licensed, both parties will not only accomplish their translational research aims, but also share in its commercial success going forward."" Tapolczay added.

Commodities, Currencies and Yields

Dollar increased against euro to $1.2571 and decreased against the Japanese yen to 88.52.

Crude oil decreased $0.38 to $75.71 a barrel for a front month contract, natural gas edged lower $0.04 cents to $4.40 per mBtu and gasoline decreased 1.200 cents to 205.80 cents.

Gold decreased $3.50 in New York trading to close at $ 1,206.30 per ounce, silver closed lower $0.038 to $18.03 per ounce and copper for the front month delivery decreased 3.450 cents to $3.01.

Yields on 10-year U.S. bonds increased to 3.02% and on 30-year U.S. bonds traded at 4.01%.

Stock Movers

Air Products and Chemicals, Inc. rose 1.4% after the industrial-gases producer is attempting a takeover of Airgas Inc.

Alliance Data Systems Corporation fell 2.8% or $1.62 to $58.20 after the card processor said shares, which closed at $58.20 on the New York Stock Exchange on Friday, appear to be worth less than $30 per share, financial newspaper Barron''s reported in its July 12th edition.

Arch Coal, Inc. rose 2.8% after the coal producer said it will suspend work at its Dugout Canyon mine in Carbon County, Utah.

Bank of America Corporation fell 0.6% after the bank admitted to hiding billions of dollars in debt from its balance sheet. The company did this by making six transactions known as “repos” in efforts to meet financial targets.

Jefferies Group, Inc. rose 3.1% after the securities and investment banking firm, has appointed Amy Smith as a managing director and co-head of global cleantech investment banking.

Earnings Review

Lawson Software, Inc. ((LWSN)), the software maker said fourth quarter revenues rose 6% to $197.0 million from $186.2 million a year ago. Net income in the quarter fell 70% to $2.6 million or 2 cents per diluted share compared to net income of $8.6 million or 5 cents per share a year ago.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 37.21 or 0.39% to 9,548.11, Hang Seng index in Hong Kong increased 88.77 or 0.44% to 20,467.43 and CSI 300 index in China higher 29.11 or 1.10% to 2,676.22. ASX 200 index in Australia increased 13.60 or 0.31% to 4,409.90. The FTSE Bursa KL Composite index in Malaysia closed higher 2.43 or 0.18% to 1,326.74.

The Kospi Index in South Korea increased 11.04 or 0.64% to close at 1,734.05. SET index in Thailand closed lower 0.99 or 0.12% to 819.61 and JSE Index in Indonesia increased 14.90 or 0.51% to 2,958.79. The Sensex index in India increased 103.66 or 0.58% to 17,937.20.

Europe Markets Review

In London FTSE 100 Index closed higher 10.37 or 0.20% to 5,143.31, in Paris CAC 40 Index increased 2.91 or 0.08% to 3,552.89 and in Frankfurt DAX index traded higher 12.15 or 0.20% to 6,077.39. In Zurich trading SMI decreased 12.86 or 0.21% to 6,197.63.