Geopolitical Worries Overwhelm Investors; GM Sells Ally Stake

Arthi Gupta
23 Mar, 2011
New York City

U.S. indexes fell on concerns in Libya, Europe and Japan. U.S. mortgage and refinancing activity increased. GM sold Ally preferred shares for $1 billion. Louis Dreyfus sold its midstream assets business for $1.93 billion. Colgate-Palmolive agreed to acquire Unilever''s Sanex brand for $940 million.

[R]9:30 AM New York – U.S. indexes fell on concerns in Libya, Europe and Japan. U.S. mortgage and refinancing activity increased. GM sold Ally preferred shares for $1 billion. Louis Dreyfus sold its midstream assets business for $1.93 billion. Colgate-Palmolive agreed to acquire Unilever''s Sanex brand for $940 million.[/R]

Asian markets traded mixed after the Japanese Cabinet Office said on Wednesday that the economy is turning to pick up, but it is only weakly self-sustaining. Japan has also priced the damage from the recent earthquake and tsunami at over $300 billion and estimated a 0.5% impact on growth this year.

European markets gained on upbeat economic data.

Portugal''s Parliament holds a crucial vote today to cut its budget deficit. The Portuguese Parliament is expected to vote against Prime Minister Jose Socrates'' deficit-reduction plan, which is designed to avert the need for an international bailout.

The Portuguese government wants to raise taxes and cut welfare spending.

The U.S. Treasury Department on Tuesday officially identified 14 subsidiary companies of the Libyan National Oil Corporation as subject to a ban on U.S. businesses, prohibiting any dealings with them.

Office of Foreign Assets Control Director Adam Szubin also called on other countries to similarly freeze the assets of Libya''s National Oil Corporation and its subsidiaries.

""The Libyan National Oil Corporation has been a primary funding source for the Qadhafi regime,"" said Szubin. ""Consistent with UN Security Council Resolution 1973, all governments should block the National Oil Corporation''s assets and ensure that Qadhafi cannot use this network of companies to support his activities.""

U.S. Mortgage Applications Rise

Demand for home mortgages in the U.S. rose slightly last week, according to a Mortgage Bankers Association survey for the week ending March 18.

The Market Composite Index, a measure of mortgage loan application volume, increased 2.7% on a seasonally adjusted basis from one week earlier.

The average contract interest rate for 30-year fixed-rate mortgages increased to 4.80% from 4.79%.

Refinancing increased 2.7%, while new purchase applications rose at the same pace.

GM Prices $1 Billion Sale of Ally Preferred Shares

General Motors Co. said on Tuesday it sold all of its preferred stock in its former finance arm Ally Financial Inc. in a registered public offering for $1 billion. The company noted that the sale will strengthen and simplify its balance sheet.

Anadarko Acquires Wattenberg Plant

Anadarko Petroleum Corporation agreed to purchase BP America Production Company''s 93% interest in the Wattenberg Processing Plant for approximately $575.5 million.

The Wattenberg Plant, located in Adams County in northeast Colorado, has the capacity to process approximately 195 million cubic feet per day of natural gas and 15,000 barrels per day of natural gas liquids and gas condensate.

Wilmington Trust Stockholders Approve Merger

Wilmington Trust Corp., the financial services holding company announced that its shareholders have voted to approve its acquisition by M&T Bank Corp. Wilmington Trust agreed in early November to be acquired by M&T Bank in a stock-for-stock deal valued at about $351 million.

Louis Dreyfus Sells Midstream Assets Business

Louis Dreyfus Highbridge Energy agreed to sell its Midstream Assets business segment, LDH Energy Asset Holdings LLC to ETP-Regency Midstream Holdings, LLC, a joint venture owned by Energy Transfer Partners, L.P. and Regency Energy Partners LP for approximately $1.925 billion in cash.

As per the terms of the Joint Venture, at closing, ETP will contribute $1.35 billion for a 70% stake in the joint venture, while Regency will fund $578 million and control the remaining 30% interest.

Colgate-Palmolive Acquires Sanex Brand

Colgate-Palmolive Co. announced a deal to purchase Unilever Plc''s Sanex personal care brand for €672 million or about $940 million. Colgate agreed to sell its laundry detergent business in Colombia to Unilever for $215 million in connection with the Sanex acquisition.

Earnings Review

Adobe Systems Incorporated ((ADBE)), the publishing and design software maker said first quarter revenue rose 20% to $1.03 billion from $858.70 million in the same quarter last year. Net income in the quarter surged 84% to $234.6 million or 46 cents per diluted share compared to net income of $127.2 million or 24 cents per share for the year-ago quarter.

Cintas Corporation ((CTAS)), the identity uniforms provider Tuesday reported third quarter total revenue rose 8.8% to $937.83 million from $861.81 million a year ago. Net income in the quarter rose 20.6% to $59.07 million or 41 cents per diluted share compared to net income of $48.98 million or 32 cents per share in the previous year.

Discover Financial Services ((DFS)), the direct banking and payment services company reported first quarter net income was $459 million or 84 cents per diluted share compared to a loss of $122 million or 22 cents per share in the previous year. Net interest income for the quarter rose 2.6% to $1.17 billion from $1.14 billion last year.

General Mills, Inc. ((GIS)), the manufacturer and marketer of consumer foods reported third quarter net sales rose 1.6% to $3.65 billion from $3.59 billion a year ago. Net earnings in the quarter increased 18% to $392.1 million or 59 cents per diluted share compared to net earnings of $332.5 million or 48 cents per share last year, mainly on mark-to-market gain and strong international sales growth.

Jabil Circuit, Inc. ((JBL)), the provider of worldwide electronic manufacturing services and solutions said second quarter net revenue increased 31% to $3.93 billion from $3.0 billion a year earlier. Net income in the quarter soared 86% to $55.4 million or 25 cents per diluted share compared to net income of $29.8 million or 14 cents per share a year before.