Market Updates

U.S. Stocks Struggle, Shanghai Surges

123jump.com Staff
23 May, 2007
New York City

    Merger news in aluminum industry dominated early hours of trading in the U.S. Alcan recommended shareholders to reject offer from Alcoa and was rumored to be in talks with BHP. Russia based Norilsk Nickel mounted an offer of $6.25 billin for Canadian LionOre Mining. Payless ShoeSource agreed to buy Stride Rite for $800 million. Crescent Real Estate agreed to be bought by private equity group of Morgan Stanley for $6.5 billion. Shanghai rose nearly 2% and yuan surged to two-year high.

[R]4:00PM NY, 10:00PM Frankfurt, 2:00AM Mumbai – GLOBAL MARKETS[/R]

Yield on 10-year U.S. bond closed at 4.86% and 30-year bond closed at 5.012%.

Crude Oil rose 26 cents to close at $65.77 per barrel, natural gas fell 4 cent to close at $7.75 per MmBTU and gasoline rose 0.4 cent to close at 231.04 per gallon.

Gold futures rose $2.70 to close at $662.60 per troy ounce, silver closed up 11 cents to close at $13.105 per ounce and copper fell $147 to close at $7,309 per metric ton.

Asian Markets closed mostly lower led by 1.1% fall in Philippines and smaller losses in India and Sri Lanka. Shanghai rose 1.8% on the speculation that currency will surge against dollar led by property and banking stocks. Yuan responded to the latest trade talks between the U.S. and China and rose to a new high of 7.6547 against dollar and is likely to keep rising in the coming months. India fell after steadily rising for three days led by an advance in rupee and rise in Tata Steel.

European Markets closed higher across the region led by 1% rise in Germany and Spain and 0.8% gain Switzerland. All other major markets in the region closed higher. Italy, France and Belgium rose nearly 0.5%. Wireless carriers led the rise on speculation that consolidation in the sector is likely. Vodafone Group rose nearly 4%, Deutsche Telekom and KPN gained 3%, and France Telecom advanced 2%.

Latin American Markets were led by a gain of 1.6% in Chile and 0.6% rise in Argentina and 0.3% advance in Mexico. Chilean economy expanded at 5.8% in the first quartet up from 4.3% in the fourth quarter in 2006. Higher prices of copper export, growing investments and rising industrial production contributed to the economic growth. Mexican market continued its rise and its currency peso reached seven month high against the dollar. Brazil is likely to sell more dollar denominated bonds in the international markets.


[R]1:00PM NY, 5:00 PM Frankfurt European stocks finished higher, helped by telecoms and auto makers.[/R]

European stock markets gained ground on Wednesday, reaching new multi-year highs with the help of strong telecom and automotive shares. Deal speculation in the Dutch mobile market boosted telecoms, with KPN rising 2.8%, Vodafone, climbing 3.7%, Deutsche Telekom, adding 2.9%, and France Telecom rising 2.1%. Telecom equipment maker Alcatel-Lucent shares advanced 2.8%.

Automotive stocks posted strength, led by shares in DaimlerChrysler which climbed 3.8% after Morgan Stanley reiterated its overweight rating. Shares of potential merger partners Volkswagen jumped 4.9% and Porsche rose 2.8%. Peugeot turned lower 4.6% after the company said that it wants to cut costs by around 30% by 2010.

Mining stocks were also in the spotlight. LionOre Mining International rose 3.9% after Norilsk Nickel topped Xstrata with a new $6.25 billion offer for the Canadian nickel miner. The German DAX Xetra 30 advanced 1% at 7,735.88, the French CAC-40 climbed 0.5% to 6,120.20, and the U.K.''s FTSE 100 added 0.2% at 6,616.40.

[R]11:30AM Market rallied on deal news. Dow crossed 13,600.[/R]

Another flurry of deal news fueled U.S. market rally, sending the Dow Jones to a new record high of over 13,600. The blue-chip average was boosted by gains for Caterpillar ((CAT)), up 2.1%, Home Depot ((HD)), Hewlett-Packard ((HPQ)) and Disney ((DIS)), each rising above 1%. The metals sector was in the spotlight amid deal speculations after Alcan ((AL)) rejected Alcoa''s ((AA)) $27 billion hostile bid. Alcoa rose 4.5%, while Alcan shares added 4.2%.

Better-than-expected quarterly earnings also contributed to the upside move. Medtronic ((MDT)) climbed 5.2%, while Target Corp. ((TGT)) advanced 3.5%. Metals mining stocks were the leading gainers, followed by oil service stocks and broker/dealers. Among notable movers, Freeport-McMoRan Copper & Gold ((FCX)) rose 4.2%. Semiconductors and software shares posted losses. Energy prices wouldn''t decline on data showing that U.S. gasoline inventories rose by 1.5 million barrels last week, nearly twice what the market expected.

In late morning trading, the Dow Jones industrial average rose as high as 13,609.76, then edged back slightly to 13,591.72, up 51.77, or 0.38%. The Standard & Poor''s 500 index advanced 6.17, or 0.40%, to 1,530.29. The Nasdaq composite index gained 8.34, or 0.32%, to 2,596.36. Bonds fell slightly, with the yield on the benchmark 10-year Treasury note rising to 4.84% from 4.83% late Tuesday.


[R]9:45AM U.S market averages opened up, helped by deal news and strong retail earnings.[/R]

Wall Street opened higher amid deal speculations in the metals and media sectors. Alcan ((AL)) rose 3.4% after it rejected the $27 billion hostile offer from Dow-component Alcoa. Alcoa ((AA)) gained 2.9%. BHP Billiton ((BHP)) added 2.4% on speculations that it is in talks with Alcan. Further in M&A action, Russia''s Norilsk Nickel made a new $6.25 billion offer for Canadian miner LionOre, outbidding Xstrata''s offer by 10%. In the media sector, the Bancroft family, which controls Dow Jones (DJ)) are reportedly due to discuss the News Corp. ((NWS)) takeover bid at a meeting.

Retailers posted gains on strong earnings. Target ((TGT)) advanced 3.3% after the retailer posted better-than-expected Q1 earnings of 75 cents a share and revenue of $14.04 billion which came in below analyst estimates. Medtronic ((MDT)) rose 5.2% after it said Q4 earnings and revenue beat expectations. The Medical device maker said quarterly profit rose 10% to 70 cents per share on 7% revenue increase, despite sluggish sales of implantable heart devices.

On the side of the losers, Analog Devices ((ADI)) dropped 8.6% after reporting a 14% profit decline and projecting current quarter earnings below market estimates. The Dow Jones was up 47.79 points, or 0.35%, at 13,587.74. The Standard & Poor''s 500 was up 6.05 points, or 0.40%, at 1,530.17. The Nasdaq Composite was up 8.64 points, or 0.33%, at 2,596.66.


[R]9:30AM China rallies Wednesday, Japan, South Korea advance, HK declines.[/R]

Asian markets mostly advanced on Wednesday. Chinese Shanghai Composite index ended at 4,173.70, 1.5% higher. Among the advancers in Shanghai were China Vanke, the largest property developer by market value in the country, surged 4.9%, while Shanghai Lujiazui Finance & Trade Zone Development soared 4.6%. Financial firms rose on expectations of strong earnings. The Bank of China ended up 1.2% and Citic Securities gained 1.3%.

Chinese Shanghai Composite index ended at 4,173.70, 1.5% higher. Among the advancers in Shanghai were China Vanke, the largest property developer by market value in the country, surged 4.9%, while Shanghai Lujiazui Finance & Trade Zone Development soared 4.6%. Financial firms rose on expectations of strong earnings. The Bank of China ended up 1.2% and Citic Securities gained 1.3%.

In Japan, the Nikkei 225 added 0.1% to end at 17,705.12. Banks rose again after Tuesday gains tracking a strong earnings forecast from Sumitomo Mitsui Financial Group, with Mitsubishi UFJ Financial Group increasing 4.4% and Sumitomo Mitsui 4.5% higher after 5.7% jump on Tuesday. Among exporters, Toyota added 1.2% on expectations of a recent weakness in the yen which would improve its earnings.

Hong Kong Hang Seng index closed down 0.2% at 20,798.97. Other indices finished higher. Australian S&P/ASX 200 closed 0.3% higher at 6,355.10, Seoul Kospi edged up 0.2% to 1,646.59 and Singapore Straits Times index gained 0.5% to 3,559.01.

[R]9:00AM Stock futures pointed to a higher opening, supported by deal speculations.[/R]

U.S. stock market futures moved higher on Wednesday after, boosted by speculations that Canada''s Alcan may involve rival aluminum producer Alcoa into a bidding war. Alcan is reportedly in talks with global mining concern BHP Billiton after rejecting an unsolicited takeover bid from Alcoa on Tuesday and said it is in discussions with third parties. Alcoa ((AA)) gained 2.7% before the bell, while U.S.-listed shares of Alcan ((AL)) were up 3.7%. In other deal news, Payless ShoeSource Inc. ((PSS)) said it had agreed to acquire Stride-Rite Corp. ((SRR)) for $800 million.

On the earnings news front, Target Corp. ((TGT)) rose 3.7% before the bell after the discount retailer reported better-than-expected earnings. Medtronic ((MDT)) rose 2.6% after the company posted quarterly earnings and revenue above analyst estimates. Analog Devices ((ADI)) reported a 14% profit decline and projected current quarter earnings would come below market estimates. Abercombie & Fitch ((ANF)) and Limited Brands ((LTD)) are also due to report quarterly results. S&P 500 futures were up 6 points. Dow Jones industrial average futures rose 51 points, and Nasdaq 100 futures gained 6 points.


[R]8:15AM Crescent Real Estate Equities agreed to be acquired by a unit of Morgan Stanley for about $6.5 billion including debt.[/R]

Real estate investment trust Crescent Real Estate Equities Co. ((CEI)) announced on Tuesday it agreed to be acquired by a unit of Morgan Stanley for about $6.5 billion including debt. The real estate investment firm, Morgan Stanley Real Estate will buy the company for $22.80 per share, according to Crescent, which has about 102.8 million shares outstanding. The deal includes the assumption and refinancing of about $3.1 billion of the company''s outstanding and unconsolidated debt and redemption of some $440 million in preferred shares. Crescent said the purchase price is a 12% premium over its prior 30-day average closing share price and a 6% premium to Tuesday''s closing price of $21.62. The transaction is expected to complete by the third quarter.


[R]8:30AM NY-7:30PM Sensex ends lower Wednesday on selling pressure in large-caps.[/R]

The Sensex on BSE finished Tuesday 90.46 points, or 0.63%, lower at 14,363.26.

The market-breadth was sharply negative with almost two decliners for every advancer. As 928 stocks advanced, 1,638 declined and only 76 stocks remained unchanged. Of the 30 stocks in the Sensex, 11 advanced, 18 declined and one stock remained unchanged. The turnover on BSE was Rs 5,290 crore, compared to Rs 5,180 crore on Tuesday. On NSE, the turnover was Rs 10,715.85 crore, lower than Rs 11,375.26 crore on Tuesday.


Economic news

Finance Minister P Chidambaram announced today that the new Direct Tax Code Bill is to be proposed in Parliament by this December.

For the third time this month and second day in a row, the Reserve Bank of India intervened in the forex market at the end of trade to prevent the rupee from advancing above the 40.50-mark against the dollar.

Trading highlights

Reliance Capital was the most active stock with a turnover of Rs 205 crore followed by Educomp Solutions and HDFC.

Advancers

Tata Steel soared 5% to Rs 659 on high volumes of 25.85 lakh shares in anticipation of firm prices. Tata Steel has received permission from government of Vietnam to work with Vietnam Steel Corp on a $3.5 billion steel complex in the country.

Reliance Energy surged 3.5% to Rs 570. Hindustan Lever rallied over 2% to Rs 198. BHEL advanced 1.5% at Rs 2,718, and Hero Honda added 1% to Rs 694. Housing finance large-cap HDFC gained 0.32% to Rs 1,800.25 on high total volumes of 10 lakh shares. Two block deals were traded on BSE. One block deal of seven lakh share was struck at Rs 1,818 per share, while the other of one lakh shares was executed at Rs 1,785 per share.

Decliners

Reliance Communications shed 2.5% to Rs 511, led the decliners. Bharti Airtel was also down 1.13% to Rs 849. on reports that it would also announce price cuts within the next couple of days.

Maruti shed 1.8% to Rs 815. Gujarat Ambuja, ONGC lost around 1.5% each to Rs 115, Rs 913, respectively. ITC, and Ranbaxy slipped 2.5% each to Rs 166 and Rs 390, respectively. Bajaj Auto slumped for the fifth straight day as selling pressure continued. It lost 0.8% to Rs 2,177, after staying firm throughout the day.

Index heavy Reliance Industries declined around 1% to Rs 1,758 on 6.18 lakh shares. It hit a record high of Rs 1,785 in opening trade. There are reports that Reliance Industries is in talks with rig manufacturers for the purchase of a deepwater rig to drill for oil at a depth of around 12,000 feet.

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