Merger Deals Drive U.S., Europe Indexes Higher

Nigel Thomas
17 Aug, 2010
New York City

U.S. stocks advanced after unsolicited $39 billion merger proposal from BHP Billiton for Potash Corp and Pactiv Corp agreed to a buyout of $6 billion. Positive earnings from Home Depot, Wal-Mart and the TJX Companies lifted sentiment. European markets traded higher and Asian markets closed mixed.

[R]4:00 PM New York – U.S. stocks traded higher after unsolicited $39 billion merger proposal from BHP Billiton for Potash Corp and Pactiv Corp agreed to a buyout proposal of $6 billion. Positive earnings from Home Depot, Wal-Mart and the TJX Companies lifted sentiment. European markets traded higher and Asian markets closed mixed.[/R]

U.S. stocks rose on better-than-estimated earnings from Wal-Mart and Home Depot. Producer Prices rose 0.2%, larger gain than expected and housing starts increased 1.7% in July but homebuilder confidence fell in August. Potash Corp. board rejected BHP Billiton''s $130 per share proposal.

Larger-than-expected increase in industrial production lifted energy and resource producers and steelmakers. Pactiv Corp rose 5% after it agreed to a buyout. Potash Corp gained after BHP Billiton offered $130 in cash per share.

The European indexes gained on positive earnings. China holdings of U.S. Treasury bonds fell for the second month. Euro-zone current account deficit narrowed in June. German economic sentiment fell. Aegon agreed to repay €2 billion aid by the end of June 2011.

The UK indexes climbed after a rise in mining and banking stocks. The BoE Governor Mervyn King warned inflation to remain above 2% till 2011. RBS agreed to sell €1.4 billion of senior loans to ICG. Compass Group agreed to buy Tirumala Hospitality Services.

Stocks in Japan fell further dropping below the lows of July 1. Prime Minister contemplates additional stimulus. Kawasaki Kisen orders seven new midsize cargo vessels. The government plans to build new jumbo nuclear reactors and also look for exports sales.

Stocks in China gained for the third day after Shanghai industrial production expanded at 23.7% and international investments increased 20% in the first seven months. China cut is U.S. Treasury debt holdings. Overseas mergers and acquisitions by China based companies in first half surged 50%.

Stocks in Mumbai closed nearly flat after fluctuating through the day. Exports in July grew at the slowest pace in six months and trade deficit widened to $13 billion. Sakthi Sugar will export sugar to Pakistan through Paris-based Sucden.

Stocks in Australia rallied on earnings optimism. RBA said it is comfortable with its interest rate policy as economic growth and inflation are within its target range. Coal Exports from Newcastle Port drops in the week ended August 16. Woodside discovers two new gas finds offshore of Western Australia.

Commodities, Currencies and Yields

Dollar edged lower against euro to $1.288 and fell against the Japanese yen to 85.49.

Crude oil increased $0.48 to $75.72 a barrel for a front month contract, natural gas edged higher 4 cents to $4.27 per mBtu and gasoline increased 3.02 cent to 195.45 cents.

Gold increased $1.80 in New York trading to close at $1,228.00 per ounce, silver increased $0.13 to $18.61 per ounce and copper for the front month delivery increased 6.20 cents to $3.36 per pound.

Yields on 10-year U.S. bonds increased to 2.63% and on 30-year U.S. bonds yields increased 3.76%.