Weak Durable Goods Orders Weigh

Elena
27 Sep, 2006
New York City

Stock market futures turned lower Wednesday, erasing earlier gains with the Dow nearing a new all-time high. Market sentiment was hurt by an unexpected decline in orders to U.S. factories for big-ticket manufactured goods. The Commerce Department reported that durable goods orders dropped 0.5% last month to $209.7 billion, reflecting a decrease in demand for computers and other electronic products.

[R]09:00AM Stock market futures turned lower on weak data.[/R]
Stock market futures turned lower Wednesday, erasing earlier gains with the Dow close to a new all-time high after closing at its highest level of the year on well-received consumer confidence data. Market sentiment was hurt by an unexpected decline in orders to U.S. factories for big-ticket manufactured goods. The Commerce Department reported that durable goods orders dropped 0.5% last month to $209.7 billion, reflecting a decrease in demand for computers and other electronic products. Recovering oil prices also weighed on pre-market sentiment, with crude-oil futures up cents to $61.58 a barrel ahead of weekly petroleum data.

Of companies in the spotlight, rivals Intel Corp. ((INTC)) and Advanced Micro Devices ((AMD)) are likely to be in focus after a federal judge limited AMD's antitrust suit against the world's biggest chipmaker. Intel rose 1.5% to $20.24 in pre-open trading, while AMD added 1%. Red Hat Inc. ((RHAT)), a provider of open-source software, said quarterly sales could come in below analyst forecasts. Although Red Hat posted Q2 profit declined 34%, the earnings drop was above analyst estimates. Red Hat shares tumbled 19% to $21.35 in the pre-open. Electronic contract maker Jabil Circuit ((JBL)) jumped 10% after forecasting higher Q1 revenue and reporting a 45% rise in Q4 sales. S&P 500 futures slipped 2.60 points to 1,344.10 and Nasdaq 100 futures eased 3.00 points to 1,670.50. Dow industrial futures shed 22 points to 11,726.


[R]Durable goods orders dropped unexpectedly in August.[/R]
Wednesday morning, the Department of Commerce released its report on durable goods orders in the month of August, showing that orders fell unexpectedly after showing a significant decline in the previous month. The report showed that durable goods orders fell 0.5 percent in August following a revised 2.7 percent decline in July. Economists had expected orders to increase by about 0.5 percent compared to the 2.5 percent drop originally reported for the previous month. The Commerce Department said that the decrease in orders was partly due to a steep drop in orders for computers and electronic products, which fell 4.7 percent in August after rising 5.1 percent in July. At the same time, a rebound in orders for transportation equipment helped to limit the overall decline in orders. Excluding a 3.7 percent increase in orders for transportation equipment, overall orders fell 2.0 percent in August. The report also showed that shipments of durable goods rose 1.9 percent in August following a 1.3 percent decrease in July. With the increase, shipments rose to the highest level since the series was first stated on a NAICS basis in 1992. Inventories of durable goods extended a recent upward move, rising 0.2 percent in August after a 1.1 percent increase in July. The continued increase was partly due to a notable increase in inventories of primary metals.


[R]8:00AM Germany’s E.On raised its bid for Endesa to $47 billion.[/R]
Endesa ((ELE)) received an improved bid offer from Germany''s E.On ((EON)) which raised its initial offer for the Spanish utility by 38% to $47 billion (37 billion euros). E.On upped its all-cash offer for Endesa to 35 euros a share vs. a previous bid of 25.40 euros a share.

The company’s move aims at reducing the attractiveness of rivals’ proposals and ensuring that they don''t end up owning the company. It comes after Acciona disclosed Monday that it bought a 10% stake for 32 euros a share, or 3.39 billion euros, suggesting that the Spanish government was urging the conglomerate to buy a stake in order to keep Endesa out of German reach. The Spanish government has been against an E.On acquisition of Endesa for a long time, first trying to block it and then imposing several conditions on a deal. Another Spanish company, Gas Natural, has a hostile cash-and-shares offer that at Monday''s close was worth 21.42 euros a share.

E.On said that to be successful, its offer needs the approval of investors holding more than 50% of Endesa''s shares. Endesa''s Madrid-listed shares jumped 6.5% to 34.61 euros. E.On shares slipped 1.4% in Frankfurt.


[R]7:30AM Asian stocks advanced sharply Wednesday tracking U.S. market gains[/R]
Asian markets closed higher on Wednesday. The Nikkei 225 index advanced 390.42 points, or 2.51%, to 15947.87. Canon Inc and Nikon Corp were leading advancers, rising respectively 3.2% and 2.4%. Sony Corp spurted, advancing 3%.

Shares of Softbank Corp rose 0.9%, adding to sharp gains that the Internet conglomerate registered Tuesday after announcing a refinancing plan. Sumitomo Mitsui Financial Group Inc gained 4.4% following reports that the banking group will repay 695 billion yen ($5.9 billion) in bailout aid it owes to the government earlier than expected.

Hang Seng Index in Hong Kong rose 213.43 points, or 1.2%, to 17521.51. Among the banks, BOC Hong Kong rose 5.3%, becoming the biggest blue-chip advancer on the day, and banking company HSBC Holdings rose 0.9%. Shares in Taiwan finished higher, led by construction and property firms after the Taipei City government began allowing certain unused land-development rights to be sold. The Weighted Price Index of the Taiwan Stock Exchange rose 44.52 points, or 0.7%, to 6946.27.

S&P/ASX 200 index in Australia ended up 103.6 points, or 2.1%, at 5093.2. Australian Pharmaceutical Industries soared 19% after confirming it had received takeover approaches and Vision Systems rose 10%. Resource large-caps BHP Billiton and Rio Tinto both gained 3.7%, respectively.

Shares in South Korea also rallied, lifted by banks. The main Korea Composite Stock Price Index, or Kospi, gained 1.2%, or 16.06 points, to 1360.03.


[R]6:30AM European stocks rise on Wednesday helped by M&A and mining shares.[/R]
Europe was higher by mid morning on Wednesday. The U.K. FTSE 100 index rose 0.6% at 5,907, the German DAX Xetra 30 index rose 0.5% at 5,991 and the French CAC-40 index climbed 0.5% at 5,242.

M&A

Eon, the German utility at the centre of the battle for Spanish company Endesa, raised its offer for the Spanish company by 38%. This would make it the largest ever utilities takeover should the deal go through.

Advancers

Gas Natural, which still showed an interest in acquiring Endesa and failed in a hostile bid earlier this year, gained 5.5%. Also receiving a boost from the moves in Spain was EDP, power generator in Portugal. Its shares gained 4.4%.

Hennes & Mauritz, the Swedish fashion retailer, gained 4.5% after it reported a forecast-beating rise in third-quarter pre-tax profit, boosted by a 5% rise in like-for-like sales.

Decliners

E.On wasn''t performing so well, down 1.7% after raising its offer for Endesa. French insurer CNP Assurances fell 5.6% after its 16.6% rise in first-half net profit failed to impress.

Corporate news

Aer Lingus, the Irish airline, debuted on the Dublin bourse on Wednesday after its initial public offering was nearly four times oversubscribed. The stock was priced at 2.20 euros, the lower end of the pricing range, but in early trade it stood at 2.39 euros.

Oil and gold

Oil prices rose Wednesday amid lingering uncertainty about OPEC production plans. By mid-afternoon Wednesday, light, sweet crude for November delivery had rebounded 35 cents to $61.36 in on the NYME. November Brent crude on London ICE futures exchange rose 14 cents Wednesday to $60.26 a barrel. Gold traded in London at $595.10, up from $591.10 late Tuesday.

Currencies

The U.S. dollar was mostly higher against other major currencies in European trading Wednesday morning. The euro bought $1.2692, up from $1.2691 late Tuesday in New York. The British pound traded at $1.8889, down from $1.8949. The dollar bought 117.29 Japanese yen, up from 117.10.