U.S. Markets Reverse to Close Up 0.8%, BP Banned from U.S. Contracts

Bikram Pandey
28 Nov, 2012
New York City

U.S. indexes rebounded from early losses of 1% and managed to close up 0.8% after President Obama and Speaker Boehner sounded optimistic on the budget compromise. BP plc was banned from U.S. federal contract temporarily and may be forced to settle $20 billion civil litigation.

[R]4:05 PM, New York – U.S. indexes rebounded from early losses of 1% and managed to close up 0.8% after President Obama and Speaker Boehner sounded optimistic on the budget compromise. BP plc was banned from U.S. federal contract temporarily and may be forced to settle $20 billion civil litigation.[/R]

U.S. indexes rebounded to close 0.8% higher after President Barack Obama and Speaker of the House John Boehner sounded optimistic on the budget compromise.

Market indexes dropped as much as 1% in the first hour of trading but slowly recovered and managed to close higher. Speaker Boehner sounded a positive note and said lawmakers “can avert crisis sooner rather than later.”

Separately, President Barack Obama said at a White House briefing that he is optimistic that a deal may be struck “before Christmas.”

In corporate news, Costco November net sales rose 9% to $8.15 billion and declared a special dividend of $7 a share ahead of possible increase in tax rate in 2013. Ann third quarter net climbed 26% and Analog Devices net dropped 2%. Express profit declined 38% to $17.4 million and revised outlook. Jos. A. Bank Clothiers third quarter net dropped 11% and Fresh Market net climbed 19%.

Across Atlantic, the European Commission approved restructuring plans of four Spanish banks. Italy raised €7.5 billion in bond sale at lower yields. Euro zone broad monetary aggregate M3 rose and Spanish retail sales fell in October.

BP plc was banned temporarily from bidding for new U.S. contracts by the Environmental Protection Agency. The EPA said BP and all its affiliates are banned for new federal contracts until the company demonstrates “business integrity.” The ban was the follow up after the company agreed to a criminal misconduct in the Gulf of Mexico disaster, the largest oil spill disaster in U.S. history.

The ban, if extended across all branches of government, could have a material impact on BP’s business. BP produces 20% of its global oil production and generates one third of its pre-tax profit in the U.S.

BP is also facing civil litigation brought by the U.S. governments and states that could total as much as $20 billion.

BP agreed to sell package of central North Sea assets to Taqa for $1.1 billion. Smith & Nephew agreed to acquire Healthpoint Biotherapeutics for $782 million. Swiss Life estimates net profit in double-digit millions and Thomas Cook loss widens for the full year.

Nikkei in Tokyo fell 1.2% and the Topix declined 1.3% after indexes rallied for four days as the yen weakened in the last two weeks. Sakurada plunged 92% after the company filed for bankruptcy proceedings. Kawasaki Kaisen postponed fleet expansion on a global glut.

Stocks in Sydney decreased after commodities prices fell and trading sentiment wavers in Asian markets. Australian dollar traded near 3-month high as commodities held firm after the Greek debt negotiations were resolved for now.

Commodities, Bonds and Currencies

U.S. treasury yield on 10-year bond fell at 1.63% and on 30-year bond declined to 2.78%.

The U.S. dollar inched lower to $1.294 to a euro and decreased against the Japanese yen to 81.86 yen.

Immediate delivery futures of Texas crude oil decreased 93 cents to $86.21 a barrel and Brent crude fell 89 cents to $108.98, futures of natural gas decreased 0.13 cents to $3.65 per mbtu and gasoline traded down 2.75 cents to 270.51 cents a gallon.

In metals trading, gold decreased $22.80 to $1,722.00 per ounce and silver decreased 28 cents to $33.81 and copper closed down 1.1 cents to $3.54 a pound.