Current Account Deficit Widens

Elena
18 Sep, 2006
New York City

Stock markets opened in the negative, reversing from recent gains with investors awaiting Wednesday

[R]9:45AM Stocks opened in the negative on interest rate worries.[/R]
Stock markets opened in the negative, reversing from recent gains with investors awaiting Wednesday’s FOMC monetary meeting and seeking details of an incident that caused police to close the U.S. Capitol in Washington D.C. The market seemed nervous about whether the Fed will keep the benchmark interest rate at 5.25% as readings of economic growth and inflation remain mixed. In economic news, the Commerce Department reported that the nation's current account widened in the second quarter to more than $218 billion, the second-highest gap in history. Optimism over gains in overseas markets and a $17.6 billion deal to buy Freescale Semiconductor ((FSL)) proved insufficient to boost market sentiment. Shares of Freescale jumped 6.4%.

The auto sector moved lower after a news report that General Motors Corp ((GM)) and Ford Motor ((F)) had discussed a possible alliance. The Wall Street Journal online reported that the two auto makers have abandoned the possibility after brief discussions. Among other companies in focus, rural telecom services provider Citizens Communications ((CZN)) lost 0.7% after it announced a cash and stock deal to buy Commonwealth Telephone Enterprises for more than $1.1 billion. Applied Materials ((AMAT)) rose 2.6% on repurchasing 145 million shares of its common stock for roughly $2.5 billion as part of an accelerated buyback. In the first hour of trading, the Dow Jones industrial average fell 13.21, or 0.11%. The Standard & Poor's 500 index fell 0.41, or 0.03%, and the Nasdaq composite index fell 0.72, or 0.03%. Bonds fell, with the yield on the 10-year Treasury note at 4.81%, up from 4.79% Friday.


[R]09:00AM Stock futures gained on European gains and a multibillion-dollar deal.[/R]
U.S. stock market futures slightly advanced Monday, supported by solid European gains and a multibillion-dollar deal. Freescale Semiconductor Inc. ((FSL)) was set to gain after agreeing late Friday to be acquired by a private-equity consortium for $17.6 billion, or $40 a share. UBS lowered its rating on Freescale Semiconductor Inc. to ''neutral'' from ''buy''. In other news, shares of Ford Motor Co. ((F)) rose 1% in electronic trading after industry newspaper Automotive News reported that senior executives at Ford and General Motors Corp. ((GM)) discussed a merger or alliance. Among other companies in focus, Cigna ((CI)), healthcare company, said it had increased its stock buyback program by $500 million to the total amount of $722 million.

BP ((BP)) rose 1.4% in London on reports that the oil giant will launch a root-and-branch review of its global operations in response to last year''s Texas City refinery blast. In broker moves, Air France-KLM ((AKH)) gained 0.7% in Paris after being upgraded to buy from reduce at UBS, citing strong revenue. Dow Jones futures were recently up 12 points, S&P 500 futures added 1.1 points, and Nasdaq futures were up 3.5 points.


[R]8:00AM Citizens Communications agreed to buy Commonwealth Telephone for $1.6 B.[/R]
Citizens Communications Co ((CZN)) agreed to acquire Commonwealth Telephone Enterprises Inc. ((CTCO)) in a deal worth $1.16 billion, or $41.72 a share. The cash and stock deal represents a 17% premium to Commonwealth''s closing share price of $35.60 on Sep. 8. After the completion of the transaction, the combined company will become the seventh largest local telephone exchange company in the U.S., with pro forma annual revenues of around $2.4 billion and operations across 23 states. According to estimates, Citizens will achieve annual cash synergies of around $30 million from the deal, mostly from eliminating corporate overheads, overlapping functions and operational efficiencies.


[R]7:30AM Asian markets finished higher, led by Taipei tech stocks.[/R]
Asian markets finished higher on Monday. Markets in Japan were closed for a national holiday. Taiwan Weighted Price Index surged 201.39 points, or 3%, to 6,882.5. Domestic demand-related shares led the advancers, as investors expect to benefit from an easing of political tension. Tech companies also tracked advancers, as Hon Hai Precision Industry increased 3.8%, after a newspaper reported it plans to buy a 30% stake in Sunfar Computer.

Hong Kong Hang Seng Index advanced 0.87% to close at 17387.21. Shares were led higher by property stocks after the U.S. released moderate inflation data Friday that signaled the Federal Reserve will leave interest rates untouched when it meets Wednesday. Hang Lung Properties advanced 2%, Henderson Land gained 2% and Sino Land added 1.7%.

The Kospi Index in South Korea rose 0.97% to 1374.30. Samsung Electronics advanced 2.6% and Hynix Semiconductor added 2.6% on increasing memory-chip prices. Shipbuilders moved ahead on a solid earnings outlook through 2009 amid full order books. Samsung Heavy Industries jumped 2.9% and Daewoo Shipbuilding & Marine Engineering rose 1%.

In China, the benchmark Shanghai Composite Index rose 0.7% to close at 1732.99 The Beijing Olympics led the advancers in China. Retailer Beijing Xidan Market advanced 4.9%, China Sports Industry gained 4.6% and Beijing Urban Construction rose 4.4%.

Australia S&P/ASX 200 ended 0.72% higher at 5072.80. The stock market rebounded from early weakness to finish strongly, as most sectors finished in positive territory. BHP Billiton rose 0.8%. Oil stocks were higher with Woodside Petroleum up 2.4%, Santos rising 3.1% and Oil Search adding 2.7%. Banks were the strongest contributor to the strength in the market, with National Australia Bank increasing 1.6% and Commonwealth Bank ahead 1.2%.


[R]6:30AM European markets were slightly higher Monday on Scania, commodities.[/R]
European markets were slightly higher by mid-morning on Monday. The U.K. FTSE 100 index gained 0.1% at 5,880, the German DAX Xetra 30 index was unchanged at 5,938 and the French CAC-40 index edged up 0.1% at 5,150. Merger and acquisition activity was also a focus in the auto sector after German truck maker Man AG said that it made a 9.6 billion euro ($12.2 billion) offer for Swedish counterpart Scania, a move Scania rejected. Man shares dipped 2.6%, while Scania gained 5.5%.

Oil company BP advanced 0.7% following a report on the Web Site of the Financial Times newspaper said that the company is set to launch a root and branch review of its global operations. French car maker PSA Peugeot Citroen slipped 0.6% after it announced that it has signed a letter of intent with Proton to consider possible co-operation between the companies. J.P. Morgan upgraded French software firm Atos Origin overweight from underweight on valuation, with the company''''s shares down over 25% since the start of the year. Atos Origin shares gained 2.8%.

Oil prices edged higher for a second day on Monday, struggling to end their steepest slump in more than a decade. October delivery was up 2 cents at $63.35 a barrel in Globex electronic trading. Brent crude rose 14 cents to $63.47.

Gold traded on Monday at $580.80 an ounce, down $2.80 an ounce from Friday close of $578.00. The euro rose slightly against the U.S. dollar on Monday. In morning European trading, the euro climbed to $1.2684, up from $1.2658 late Friday in New York. The British pound advanced to $1.8836 from $1.8798. The dollar rose to 117.76 yen from 117.59 yen on Friday.