Wall Street Opens Lower as Chinese Inflation Turns Negative

Arthi Gupta
09 Jul, 2012
New York City

U.S. indexes declined as Asian economic data highlight slowing global growth. WellPoint agreed to acquire Amerigroup for $4.9 billion and Campbell Soup agreed to buy Bolthouse Farms for $1.55 billion. Boeing won $7.2 billion worth Air Lease order. Germany sold 6-month bills at negative yields.

[R]10:00 AM New York – U.S. indexes declined as Asian economic data highlight slowing global growth. WellPoint agreed to acquire Amerigroup for $4.9 billion and Campbell Soup agreed to buy Bolthouse Farms for $1.55 billion. Boeing won $7.2 billion worth Air Lease order. Germany sold 6-month bills at negative yields.[/R]

U.S. stocks traded lower after the latest economic data from China and Japan and weak readings in the euro zone and investors digested two merger announcements.

The latest inflation data from China confirmed the slowing economy and prices declined in June and government restricts lending to curb housing market speculation. Also, volatile machinery orders in Japan fell and current account surplus shrank for the fifteenth month in a row.

In the euro zone, bond yields of Spain and Italy rose as Germany sold bonds at negative yields highlighting the persistent stress in the sovereign bond market.

On the U.S. economic calendar this week investors are looking ahead at weekly jobless claims, consumer sentiment, trade balance, import and export price indexes.

Alcoa, Inc., the aluminum producer is scheduled to kick start earnings season with the release of earnings after the close.

European markets were on the edge after Spanish and Italian yields jumped and finance ministers gathered in Brussels for the last time before the summer break.

Ministers are expected to finalize the terms of bailout for Spain, Cyprus and may look for ways to offer concession to Greece after the latest meeting of international creditors with the newly formed government.

Greek government won a vote of confidence in parliament on Sunday that paved for the way for the bailout negotiations with troika. Greece is looking to extend the payment terms, loosened austerity measures and the release of more funds to pay for government expenses.

The yields on Spain’s benchmark 10-year bonds rose 15 basis points to 7.10%.

Germany’s exports increased more than expected in May, the latest data from the Federal Statistics Office showed today.

Exports increased 3.9% on a monthly basis in May following a 1.7% drop in April and imports surged 6.3% on a monthly basis in May following a 4.9% slump in April.

Germany sold €3.29 billion of the 6-month paper due January 2013 at an average yield of -0.0344% compared to 0.007% at the previous sale on June 11, the Bundesbank said today. The bid-to-cover ratio rose to 1.7 from 1.2 in June.

Asian markets closed lower after machinery orders in Japan plunged and China reported consumer price index turned negative in June. The softness in the inflation confirmed the weak price trend and a larger slowdown in the economic growth in China.

China''s consumer price index eased to a 29-month low of 2.2% on an annual basis in June from 3% in May, the National Bureau of Statistics said today. On a monthly basis, and unadjusted for seasonality, prices declined 0.6% in June.

Separately, Chinese producer prices contracted 2.1% on year in June, after falling an annual 1.4% in May.

Japan’s machine orders plunged a seasonally adjusted 14.8% in May from a month ago, the biggest drop since comparable data collected in 2005.

WellPoint to Acquire Amerigroup

WellPoint, Inc., the health insurer agreed to acquire Amerigroup Corp. for $92 per share in an all-cash deal valued at about $4.9 billion. The acquisition is expected to close in the first quarter of 2013 and is expected to be accretive to WellPoint’s earnings per share in 2013, including one-time transaction and integration costs.

After the merger, WellPoint, with its affiliated Medicaid plans, will serve more than 4.5 million beneficiaries of state sponsored health care programs.

Campbell Soup to Buy Bolthouse Farms

Campbell Soup Co. agreed to acquire Bolthouse Farms from a fund managed by Madison Dearborn Partners, LLC, a private equity firm, for $1.55 billion in cash.

Bolthouse, the leader in packaged fresh carrot and premium beverages, reported sales of $689 million in the fiscal year that ended March and earnings before interest and taxes of $92 million. Sales in the last two years increased at an annual rate of 7% and Bolthouse employs 2,100 people.

Campbell plans to integrate Bolthouse with its V8 juice business and on a combined basis it will have revenues of $1.2 billion.

Campbell said in a statement that earnings are expected to increase between 5 cents and 7 cents a share in 2013 after the acquisition and plans to keep Bolthouse as a separate division.

Boeing Secures Air Lease Order

Boeing Co. announced a firm order for 60 737 MAX 8 and 15 737 MAX 9 airplanes from Air Lease Corp. with reconfirmation rights for 25 additional 737 MAXs. The order has a list-price value of $7.2 billion.

Thomson Reuters Agrees to Acquire FX Alliance

Thomson Reuters Corp., the financial news and information provider agreed to acquire 100% of FX Alliance Inc., the electronic foreign exchange trading solutions provider for $22 a share in cash.

The company expects to close the acquisition in the third quarter.

Earnings Review

Advanced Semiconductor Engineering, Inc. ((ASX)), the independent semiconductor manufacturing provider services announced its unaudited consolidated net revenues for June and the second quarter of 2012.

Net revenues in June rose 0.9% to $516 million from a year ago and for the second quarter net revenues dropped 3% annually to $1.55 billion.

AptarGroup, Inc. ((ATR)), the dispensing systems producer anticipates second quarter earnings per share to be in the range of 60 cents to 62 cents per share

Qlik Technologies Inc. ((QLIK)), the business intelligence solution provider estimated second quarter revenue in the range of $84 million to $86 million or around 14% to 16% year-over-year growth.