U.S. Housing Starts Rise, Permits Fall; Merkel Comments Calm Investors

Arthi Gupta
16 May, 2012
New York City

U.S. indexes edged higher after housing starts rose in April. GE agreed to acquire Australia-based Industrea in a deal valued at approximately A$700 million and Fairchild International in support of the global expansion of its mining business.

[R]9:15 AM New York – U.S. indexes edged higher after housing starts rose in April. GE agreed to acquire Australia-based Industrea in a deal valued at approximately A$700 million and Fairchild International in support of the global expansion of its mining business.[/R]

U.S. indexes edged higher after housing starts rose in April despite a decline in building permits.

German Chancellor Angela Merkel and new French President Francois Hollande said in their first joint statement that they are willing to help Greece come out of its current economic rut as long as it sticks to the austerity measures.

European Union finance ministers reached an agreement over stricter new banking rules in a bid to avoid future crises and relieve taxpayers from the need to bailout banks.

The EU Presidency will negotiate the proposals with the European Parliament and will aim for adoption of the agreement by around June 2012.

The European indexes edged lower after Greece is expected to set fresh parliamentary election as political parties failed to form a unity government.

Greek President Karolos Papoulias is expected to announce another election either on June 10 or June 17.

The May 6 election failed to give a clear mandate to either of the two leading parties and six rounds of negotiations failed to bring a consensus to form a new government.

Asian markets declined tracking the European indexes and commodities eased after BHP chairman Jacque Nasser said that commodities prices are expected to cool further and the company may cut its five-year expansion plan of $80 billion.

Australian dollar eased to the low in the year and the Nikkei index in Japan fell to a two month low and extended losses to 14% from the peak in March. Market in index in India also dropped 1.8% after inflation was ahead of expectations.

U.S. Housing Starts Rise

Housing starts in the U.S. rose in April, according to a report released by the U.S. Commerce Department today compared to a decline in building permits.

Housing starts rose 2.6% to an annual rate of 717,000 in April from the revised March estimate of 699,000.

Building permits fell 7% to an annual rate of 715,000 in April from the revised March rate of 769,000.

GE Expands Mining Operations

General Electric Co., the diversified conglomerate agreed to acquire two underground mining equipment manufacturers in support of the global expansion of its mining business.

GE agreed to acquire Australia-based Industrea Ltd. in a deal valued at approximately A$700 million. The company will also buy Fairchild International, an independently owned and operated underground mining equipment manufacturer located in Glen Lyn, Virginia. Terms of the agreement were not disclosed.

The combination of the two entities expands GE’s product offering to address approximately 35% of the underground mining value chain.

Facebook Raises IPO Price Range

Facebook Inc. said in an amended form S-1 filing with the U.S. Securities and Exchange Commission on Wednesday that it is boosting its initial public offering size to 421.23 million shares from 337.4 million shares and up 25% from what the company had previously indicated.

Facebook is now expecting to raise up to about $16 billion from the offering.

Earnings Review

Abercrombie & Fitch Co. ((ANF)), the specialty retailer said first quarter net sales grew 10% to $921.2 million from $836.7 million in the prior-year quarter. Total comparable store sales for the quarter decreased 5%.

Net income in the quarter plunged 88% to $3 million or 3 cents per diluted share compared to net income of $25.1 million or 28 cents per share a year ago.

Chico''s FAS, Inc. ((CHS)), the women''s specialty retailer said first quarter net sales soared 21.2% to $650.82 million from $537.16 million in the prior-year quarter. The consolidated comparable sales increase of 9.6% for the first quarter was on top of a 7.7% increase for last year''s first quarter.

Net income in the quarter climbed 17% to $53.6 million or 32 cents per diluted share compared to net income of $45.9 million or 26 cents per share last year.

Deere & Company ((DE)), the farm and construction machinery maker said second quarter total net sales net sales and revenues rose 12% to $10.009 billion compared with $8.910 billion for the same period last year. Net income in the quarter grew 17.2% to $1.06 billion or $2.61 per diluted share compared to net income of $904.3 million or $2.12 per share last year.

J.C. Penney Company, Inc. ((JCP)), the department-store operator said first quarter total sales fell 20.1% to $3.15 billion from $3.94 billion in the same quarter last year. Same-store sales for the quarter slipped 18.9%, while Internet sales for the quarter dropped 27.9% to $271 million.

Net loss in the quarter swung to $163 million or 75 cents per diluted share compared to net income of $64 million or 28 cents per share for the year-ago quarter.