U.S. Extends World Markets Rally on European Agreement

Arthi Gupta
29 Jun, 2012
New York City

U.S. indexes extended global rally after European leaders agreed to emergency steps and extend direct lending to Spanish banks and pass stimulus measures. Research in Motion planned to slash 5,000 jobs after it reported sales decline, losses and worsening cash position.

[R]11:30 AM New York – U.S. indexes extended global rally after European leaders agreed to emergency steps and extend direct lending to Spanish banks and pass stimulus measures. Research in Motion planned to slash 5,000 jobs after it reported sales decline, losses and worsening cash position.[/R]

U.S. indexes extended world markets rally after European leaders agreed to pass several short term measures to shore up confidence and deepen banking and fiscal union.

The surprise agreement to offer emergency measures to stabilize the sovereign bonds of Spain and Italy lifted market sentiment around the world and investors quickly shifted focus to the next meeting of the European Central Bank.

The euro gained 1.5% against the dollar after the leaders agreed to provide direct lending to Spanish banks and Germany relented from demanding preferred status on the credit to Spanish banks.

The leaders agreed to a conditional lending but relaxed the demand for more austerity and also finalized to set up a region wide banking authority.

Markets in Germany soared more than 3.5% and in France added more than 4% and the UK indexes jumped more than 2%. The indexes in Asia also soared after the EU decision.

The indexes in India and Hong Kong gained more than 2% and the Nikkei in Japan jumped 1.5% for the second day in a row.

In economic report, U.S. consumer spending in May was flat and April spending was revised down to an increase of 0.1% from the earlier estimate of 0.3% rise.

Separately, Micron Technology, Inc. agreed to buy bankrupt Japanese chipmaker Elpida Memory, Inc. for an estimated price of 200 billion yen or $2.52 billion, the Nikkei business daily reported on Thursday.

Coty Inc, the perfume maker filed for a public offering to raise as much as $700 million. The company recently pursued the cosmetic maker Avon Products Inc and offered $10.7 billion.

AB InBev Acquires Remaining Stake in Modelo

Anheuser-Busch InBev NV/SA, the Belgian brewer reached an agreement to acquire the remaining stake in Grupo Modelo S.A.B. de C.V. that it does not already own for $9.15 per share in cash or about $20.1 billion.

Earnings Review

Nike, Inc. ((NKE)), the athletic shoes and apparel maker said fourth quarter revenues rose 12% to $6.5 billion. Net income in the quarter fell 8% to $549 million or $1.17 per diluted share compared to $594 million or $1.24 per share for the year-ago quarter.

Revenues for fiscal 2012 were up 16% to $24.1 billion. Net Income for the year increased 4% to $2.2 billion and diluted earnings per share increased to $4.73.

Research In Motion Ltd. ((RIMM)), the Canadian smartphone maker said first quarter revenue slumped 43% to $2.8 billion. Net loss in the quarter was $518 million or 99 cents per diluted share compared to net income of $695 million or $1.33 per diluted share in the same quarter last year.

The company shipped 7.8 million BlackBerry smartphones, and 260,000 tablets in the quarter and also plans to cut 5,000 employee by fiscal year 2013 representing about 30% of workforce to cut $1 billion in annual costs.

RiM also said it delay the release of its tablet computer by one more quarter as the company battles falling sales and struggles with cash flow.

TIBCO Software Inc. ((TIBX)), the infrastructure software provider reported second quarter total revenue rose 14% to $247.4 million. Net income in the quarter rose 26% to $26.5 million or 16 cents per diluted share compared to $21.0 million or 12 cents per diluted share last year.