U.S. Stocks Trim Gains; Merger Deals of $7 Billion

Bikram Pandey
05 Dec, 2011
New York City

U.S. stocks trimmed gains as European leaders prepared for a summit on Friday that may accelerate the fiscal integration in the euro zone. Italy and Ireland propose austerity measures as bond yield edge lower in the region. In merger news $7 billion of deals were announced.

[R]4:35 PM New York – U.S. stocks trimmed gains and investors sharpened focus on the euro zone. European leaders prepared for a summit on Friday that may accelerate the fiscal integration in the euro zone. Italy and Ireland propose austerity measures as bond yield edge lower in the region. In merger news $7 billion of deals were announced.[/R]

The U.S. indexes opened higher after positive developments in Europe but later in the day trimmed gains after unconfirmed media reports suggested that a rating agency may put all euro zone nations on a credit watch.

The market indexes soared more than 1% at the opening after Italy unveiled austerity measures and yields on Italian bonds edged lower. The positive sentiment was bolstered after German and French leaders agreed on a master plan to accelerate the fiscal integration in the euro zone ahead of the key summit on Friday.

The Italian Parliament is expected to approve €30 billion of spending cuts and measures that were proposed by the Prime Minister Mario Monti. The measures will delay the retirement age, cut local and region government spending and also add new taxes including property tax.

The indexes lost most of their gains in early afternoon on the unconfirmed media report that a rating agency Standard & Poor’s Corp was likely to downgrade highest rating of six euro zone nations.

In corporate news, Equity Residential agreed to acquire 26.5% stake in Archstone for $1.3 billion. Alexander & Baldwin plan to separate in to two independent publicly traded companies. Dollar General said third quarter net soared 34% to $171.2 million. Entergy Corp. agreed to merge its electricity transmission business with ITC. SuccessFactors agreed to be acquired by Germany based SAP’s U.S. subsidiary for $3.4 billion.

In other news across the Atlantic, Germany sold €2.675 billion of 6-month Treasury debt at a lower yield. Euro-zone retail sales rebounded but Spanish industrial production fell in October. Euro area investor sentiment weakened in December and private sector economy contracted in November. Finland said gross domestic product rose 0.9% in the third quarter.

The UK indexes climbed on euro area optimism. The UK service sector growth improved in November and manufacturing industry association lowered its estimate for the growth in the sector to 0.9% from the previous forecast of 2.2%. Aberdeen Asset Management Plc fiscal year 2011 net surged 83%.

Stocks in Japan extended gains of the last week. Investors bid up export sensitive stocks on the hopes that the European leaders will devise a plan to expand the rescue fund. Fast Retailing Co jumped 4.5% after November same store sales declined 1% from a year ago.

Australian stocks extended rally for the sixth day and lifted indexes to a gain of 8%. Market sentiment was positive ahead of the Reserve Bank’s meeting tomorrow. Aston Resources confirmed it is in merger talks with Whitehaven Coal that may be valued at $5 billion. Aquila Resources won an approval to build a rail line to transport iron ore in the Pilbara region.

Commodities, Bonds and Currencies

U.S. bonds yield on 10-year U.S. bond closed down to 2.03% and 30-year bond decreased to 3.02%.

The U.S. dollar rose 0.08% at $1.338 to one euro and closed higher against the Japanese yen to 77.77.

Immediate delivery futures of Texas crude oil decreased $0.17 to $100.79 a barrel and futures of natural gas decreased 12 cents to $3.45 per mbtu and gasoline prices decreased 1.35 cents to 260.27 cents a gallon.

In metals trading, copper decreased 3.5 cents to $3.55 per pound, gold fell $26.10 to $1,725.20 per ounce and silver fell $0.75 to $31.94.