Strong Start Expected

Elena
03 Jan, 2006
New York City

Asian-Pacific benchmarks closed higher Tuesday on economic optimism and strong performance in 2005, led by Taiwan Weighted index, up 1.4%. Japan, China and New Zealand were still closed for the New Year holiday. European stocks were also strong at mid-day, lifted by oil and gas companies, and upbeat German employment data. Walgreen, drugstore chain, posted 5% profit rise in the first quarter on higher generic drugs sales.

U.S. MARKET AVERAGES

U.S. stock futures pointed to a sharply higher start in 2006 after the extended holiday weekend. Following the weak close of 2005, traders seemed ready for some bargain hunting at the beginning of the new year ahead of the release of Federal Open Market Committee minutes. The health-care sector is likely to be in the spotlight after an upgrade of Johnson & Johnson and another biotech pact signed by Wyeth.

Dow component Johnson & Johnson was upgraded to overweight from neutral by J.P. Morgan, with the broker expecting 2006 guidance to be a positive catalyst for the stock.

J.P. Morgan also upgraded Baxter International Inc. to overweight from neutral. Separately, Baxter agreed to license Innovata's Adept adhesion reduction biomaterial for an undisclosed sum.

Wyeth agreed to develop and market antibody-like drugs from privately-held Trubion Pharmaceuticals in a deal worth up to $800 million. Wyeth, which signed two biotech pacts in December, will pay $40 million upfront with milestones potentially reaching $800 million. Wyeth also agreed to take a stake in Trubion if the company goes public.

Affiliated Computer Services Inc. is reportedly close to selling itself to a consortium of private equity investors for $8 billion in a deal that may close by the end of the week.

Dow Jones futures were recently up 71 points, S&P 500 futures climbed 6.8 points, and Nasdaq 100 futures rose 9.5 points.

INTERNATIONAL MARKETS NEWS

Asian-Pacific benchmarks advanced Tuesday, boosted by economic optimism and continuing momentum in last-year outperforming benchmarks. Taiwan’s Weighted index led the gainers, rising 1.4%, followed by Singapore’s Straits Times, up 0.6% on greater-than-expected GDP Q4 growth. South Korea’s Kospi reversed from early gains to close higher by 0.4% after reaching an all-time high. Japan, China and New Zealand were closed for the New Year holiday.

European stocks traded higher at mid-day dealings, lifted by gains in oil and gas companies on the back of higher oil prices, as well as upbeat employment data in Germany. The German DAX 30 rose 0.6%, the French CAC 40 climbed 0.6%, and London’s FTSE 1000 rose 0.7%.The euro gained 0.5% to $1.1875.

OIL, METALS, CURRENCIES

Crude oil prices rose above $61 a barrel on supply concerns, raised by Russia-Ukraine conflict over natural gas price. Light sweet crude for February delivery gained 31 cents to $61.35 a barrel. London Brent rose 34 cents to $59.32.

European gold traded higher Tuesday. In London gold rose to $520.75 per troy ounce, up from $513. In Zurich the precious metal advanced to $520.75 from $516.55. In Hong Kong gold rose $5.40 to close at $519.80. Silver opened at $8.91, up from $8.59.

The U.S. dollar fell against other major currencies. The euro was quoted at $1.1886, up from $1.1828. The dollar bought 117.14 yen, down from 117.78. The British pound traded at $1.7298, up from $1.7179.

EARNINGS NEWS

Watsco, Inc ((WSO)), distributor of air conditioning, heating and refrigeration equipment, has declared regular quarterly cash dividends of 20 cents per share on both its Common Stock and Class B Common Stock. The cash dividends are payable on January 31, 2006 to shareholders of record as of January 13, 2006. Watsco’s goal is to build a national network of locations that provide the finest service and product availability for HVAC contractors, assisting and supporting them as they serve the country's homeowners and businesses.

Walgreen Co ((WAG)), drugstore chain, announced that Q1 of 2006 profit advanced to 34 cents per share, up from 32 cents per share in the same time last year on strong demand for prescriptions and the growth of higher-margin generic drug sales. The company missed the analysts’ expectations by a penny. Earnings in the most recent quarter were reduced by 2 cents a share for employee stock option expenses.