Quiet Trading on Merger Monday

123jump.com Staff
09 Oct, 2006
New York City

With the bond market closed for a holiday and no economic data to focus on, investors looked ahead to the coming earnings season. Expectations for another quarter of double digit earnings season are prevalent in among traders. Steel stocks rose as wave of consolidation in the industry is expected to continue. Volatile oil closed higher but energy stocks closed lower. Monster Worldwide CEO resigned on stock option investigation.

[R]4:00PM NY, 10:00PM Germany[/R]

U.S. Bond Market was closed on Columbus Day holiday.

Gold rose 4.5 cents to at $581.3 as the market approached the closing. Silver rose 0.25 cents to at $11.43 and copper increased 0.027 cents to at $3.42.

Oil jumped $1.40 in a highly volatile session but closed up 22 cents to close at $59.97. Heating oil increased 7 cents to at $1.76 as well as gasoline rose 4 cents to at $1.54. Natural gas advanced 32 cents to at $6.75.

Asian markets closed mostly lower, led by South Korea with a decline of 2.41%, followed by Hong Kong with a decrease of 1.27% and Singapore with a drop of 1.05%. The only advancer was Taiwan with an increase of 1.78% but Japan was almost flat, slightly declined with 0.08%. Markets in Japan and Taiwan were closed for public holidays. South Korean stocks dropped on Monday after the underground nuclear weapons test in North Korea.

European markets finished higher, led by Norway with an increase of 0.93%, the U.K. with a rise of 0.49% and Belgium with a growth of 0.32%. The decliners were Spain with a decrease of 0.07% and Germany with a drop of 0.02%. The results in European markets were due to a rise in commodity prices on the back of news that North Korea made its first-ever nuclear test, while media companies were down after a broker warned that advertising growth could slow next year.

Latin America markets finished higher, led by Brazil with a growth of 1.12%, followed by Argentina with an increase of 0.25% and Mexico with a rise of 0.10%. Brazil ended higher, amid the ongoing political developments in the country, while the Canadian stock market was closed for the country's Thanksgiving holiday and Mexico advanced, though blue chips were mostly lower.

[R]12:30PM European shares closed mixed.[/R]
European markets finished mixed, with commodities-related stocks posting solid gains, while media stocks moving notably down. Commodities prices surged and metals producers advanced after North Korea announced a successful underground nuclear test Monday. London FTSE ended up 0.4%, led by a 15% rally in drug maker Shire after the company received tentative approval for its new hyperactivity drug. Oil giants like BP and Royal Dutch Shell ended up 1%, benefiting from higher oil prices, while miner Rio Tinto climbed 4% on stronger gold prices. At the same time, the media sector came under pressure, with television channel ITV, textbook publisher Pearson, and recorded music group EMI Group down between 1% and 2% after Goldman SAX downgraded the sector to neutral from attractive. Among other regional markets, the French CAC 40 ended slightly up at 5,284, while the German DAX 30 inched down to close at 6,084.

Oil prices climbed back over $60 on expectations that the OPEC will cut production levels. Light sweet crude November delivery rose 89 cents to $60.65. Heating oil added 3 cents to $1.7197 a gallon, while gasoline gained 1 cent to $1.5137. Natural gas futures rose 7 cents to $6.500 per 1,000 cubic feet. The U.S. dollar advanced versus major currencies. The euro traded at $1.2592, down from $1.2595. The dollar bought 119.13 yen, up from 118.98. The British pound stood at $1.8655, down from $1.8705. European gold prices moved higher. In London the precious metal traded at $575.70, up from $567.50 per ounce. In Zurich gold traded at $575.25, up from $566.53. Silver closed at $11.30, up from $10.90.


[R]11:30AM Google gained 2% on speculations the company would acquire YouTube.[/R]
Stocks were kept under pressure Monday by North Korea's decision to conduct a nuclear test, as well as by higher crude oil prices. Investors were also focused on a $6 billion deal in the banking sector and a buyout offer for Cablevision's minority shareholders. A day before kicking off the third-quarter earnings season, aluminum giant Alcoa ((AA)) rose 2%, offering support to the Dow. DuPont ((DD)) also moved higher. The biggest drags on the blue-chip index were Boeing ((BA)), General Motors ((GM)) and Verizon Communications ((VZ)).

In corporate news, Google ((GOOG)) rose 2% on a report saying that the company could announce a deal to acquire YouTube.com for about $1.6 billion after the closing bell. AT&T Inc. ((T)) rose nearly 1% after Citigroup raised its rating on the telecom operator to buy from hold on the belief the company will release stronger earnings than its rival Verizon Communications ((VZ)). McDonald's Corp. ((MCD)) added slightly after Morgan Stanley upgraded the fast-food giant to overweight from equal-weight due to improving results in Europe. In morning trading, the Dow Jones industrial average fell 21.14, or 0.18%, to 11,829.07. The Standard & Poor's 500 index fell 1.65, or 0.12%, to 1,347.93, and the Nasdaq composite index fell 0.26, or 0.01%, to 2,299.73. The U.S. bond market was closed for Columbus Day.


[R]10:30AM The Sensex ended almost flat in a volatile trading session.[/R]
The Sensex on BSE finished 6.98 points lower, at 12,365.83. The benchmark index traded in a range of 141.35 points. The market-breadth was strong with 1,643 shares that advanced, 861 which declined and 65 shares were unchanged. Turnover on BSE was Rs 3,337 crore, lower than Rs 3,686 crore on Friday. The turnover on NSE was Rs 5,767.87 crore.

Union Finance Minister P Chidambaram announced on Monday that Indian economic growth rate stood at 8% and the trend was expected to continue for the next 30 month period. The Finance Minister Palaniappan Chidambaram also said that India needs to reforms its pension and insurance sectors and develop a corporate debt market to raise long term funds of $50 billion annually from domestic markets to improve its rickety infrastructure.

Commerce and Industry Minister Kamal Nath said that the government is targeting $12 billion of foreign direct investment in the current fiscal year, a 44% jump in fund flows from $8.3 billion in the previous year. In the first four months between April and July of this fiscal year, country has attracted $2.9 billion compared to $1.5 billion a year ago in the same period.

Most active

Recently-listed Atlanta surged 19.51% to Rs 261.60, on strong buying momentum on a huge volume of 59.32 lakh shares on BSE. Atlanta was also the most-active stock on BSE, with a turnover of Rs 149.82 crore. Hindustan Zinc (Rs 92.42 crore), Tata Steel (Rs 88.27 crore) and Action Construction Equipment (Rs 75.72 crore) followed close.

Advancers

Drug maker, Cipla, led the advancers, up 2.36% to Rs 262 on a strong volume of 2.39 lakh shares. Other gainers included L&T which added 2.09% to Rs 1,293, Grasim that gained 1.54% to Rs 2,559.75, and Gujarat Ambuja which jumped up 1.44% to Rs 123.70.

Software large-cap Infosys rose from a low of Rs 1,850, to end 1.23% higher, at Rs 1,895 on 2.46 lakh shares. The stock had surged to Rs 1,919, a 52-week high on better than expected results. Other IT stocks, such as Wipro (up 0.27% to Rs 515) and TCS (up 0.90% to Rs 1,002) also gained.

Tata Motors gained 1.71% to Rs 909. The company has lifted the market price of buses and trucks by up to 2%, because of increasing costs of key inputs like steel and tyres.

Decliners

Satyam led the decliners down 49.88% to Rs 406.50, HDFC fell 2.56% to Rs 1,395, Reliance Energy was down 2.23% to Rs 469. Satyam Computer ended the session at Rs 406.65, on a volume of 4.31 lakh shares, compared to Friday closing of Rs 811.05. The stock turned ex-bonus (for 1:1 bonus) today.

Tata Steel shed 1.81% to Rs 527.20, on 16.69 lakh shares. The steel company had lined up $6.5 billion to stave off any takeover bid for the Anglo-Dutch steel maker. Tata Steel said last week it may bid for the steel conglomerate.

NTPC lost 1.20% to Rs 129.10 on 2.31 lakh shares. There are reports that the company has offered Qatar (government) 40% stake in a gas-fired power project in Kerala.

Index heavy Reliance Industries shed 0.84%, to Rs 1,153.25, on a volume of 5.58 lakh shares. It traded in a narrow range of Rs 1,166.70 - Rs 1,152. Faced with strong political protest, Reliance Energy Ltd. has deferred the proposed hike in electricity tariff for its 25 lakh consumers in Mumbai.


[R]9:45AM Market opened lower on geopolitical news and rising oil.[/R]
Stocks opened weak as investors turned to profit taking amid geopolitical news and rising oil prices. North Korea announced it had successfully carried out underground nuclear test Monday, sending South Korean stock market down 2.4%. The U.S. dollar rallied against the Korean won, slightly gained versus the yen, and was little changed versus the euro. In early trading, oil service stocks benefited from the increase by the price of oil. Semiconductors also showed strength, while some housing stocks like Beazer Homes ((BZH)), Centex ((CTX)), and Vulcan Materials ((VMC)) moved notably down.

In merger-and-acquisition news, shares of Mercantile Bankshares Corp. ((MRBK)) surged 20% after the PNC Financial Services ((PNC)) agreed to buy the company for $6 billion in cash and shares. Among stocks, driven by analyst comments, Advanced Micro Devices ((AMD)) gained 1.8%, helping to lead the semiconductor sector after UBS upgraded it rating on the chip maker to Neutral from Reduce, citing valuation. Shares of Caremark Rx ((CMX)) dropped 4.7% after UBS downgraded its rating to Neutral from Buy. UBS also downgraded fellow PBMs Express Scripts ((ESRX)) and Medco Health Solutions ((MHS)), saying that the companies' earnings are likely to disappoint on lower drug prices. In the first hour of trading, the Dow Jones industrial average fell 11.45, or 0.10%, to 11,838.76. The Standard & Poor's 500 index fell 1.17, or 0.09%, to 1,348.41, and the Nasdaq composite index fell 2.37, or 0.10%, to 2,297.62.


[R]9:30AM The FTSE 100 climbs by mid-day as oil and mining stocks firm up.[/R]
The FTSE 100 was 38.5 points higher, at 6,039.7, by 12.05 pm GMT.

Advancers

Rio Tinto jumped 3.78%, Xstrata gained 3.55%, Antofagasta added 3.27%, Vedanta Resources 4.54%. Oils weren't far behind on the FTSE 100 risers board, with BP 1.27%, and Royal Dutch Shell 0.62% higher.

Shire stood out with a gain of 10.78% on news that the firm collaborative partner, New River Pharmaceuticals Inc has received an approvable letter from the US FDA for its NRP104 compound for the treatment of paediatric Attention-Deficit/Hyperactivity Disorder.

GlaxoSmithKline was 1.04% after news that the firm will this week file for approval in the EU for a radical new breast cancer drug, Tykerb, which can be taken in tablet form.

Decliners

Online gaming group Partygaming was down 0.67% continuing its plunge after news that the US Congress had passed an anti-internet gaming bill, will be demoted to the mid caps.

British Airways also slipped 2.22% hit by news that its commercial director has resigned over the joint UK OFT/US Department of Justice investigation into alleged cartel activity in relation to long-haul passenger fuel surcharges.

ITV dipped 1.71% knocked by news of a downgrade to neutral from buy by UBS in a cautious review of the UK advertising market.

Other news

Evidence that inflationary pressure is fading away behind the scenes in British companies fell away on Monday as factory gate inflation dropped to its lowest level since April 2004. The Office for National Statistics said that manufacturing output price inflation fell from 2.8% in August to 1.8% in September as companies cut prices aggressively in the month on the back of falling oil prices. The monthly change was - 0.3%.


[R]09:00AM Stock futures pointed to a weaker start amid North Korea’s nuclear test.[/R]
Stock market futures traded lower Monday, as investors seemed likely to lock in profits due to concerns about North Korea's nuclear test and climbing oil prices. Following news that North Korea had successfully carried out an underground nuclear test, the yen dropped to an eight-month low against the dollar, gold and oil prices moved significantly higher and moderately weighed on global stock markets. Crude oil for November delivery climbed nearly 1%t in electronic trading to $60.30 a barrel, as members of the OPEC came closer to the agreement to reduce production. As a result, energy shares advanced, with Exxon Mobil Corp. ((XOM)), up 0.6% in European trading.

In deal news, the Dolan family that controls Cablevision Systems Corp. ((CVC)) offered to buy out the cable operator's public shareholders in a deal worth about $7.9 billion. Cablevision shares rose 11% before the bell. Shares of PNC Financial Services Group Inc. ((PNC)) slightly advanced in European trading, as the company agreed to buy Mercantile Bankshares Corp. ((MRBK)) for $6 billion in cash and stock. Trading on Wall Street is expected to be light as the bond market is closed for the Columbus Day holiday. Standard & Poor's 500 futures were down 3.3 points, just below fair value Dow Jones industrial average futures were down 25 points, and Nasdaq 100 futures were down 6.5 points.


[R]8:30AM The Dolan family offered to take Cablevision private for $7.9 billion.[/R]
Cablevision Corp.'s founding family offered to take the cable-television operator private in a deal valued at $7.9 billion, or $27 for each Cablevision ((CVC)) share they do not already own. The offer represents about a 13% premium to the stock's closing price Friday of $23.93 on the New York Stock Exchange. The Dolans would also assume $11.3 billion in debt as part of the leveraged buyout. The New York Times reported that the deal is valued at $19.2 billion, which includes the assumption of debt. The offer comes about 16 months after the Dolans made a bid to buy the company's cable unit and spin off its other assets. Company’s shares climbed 12% in premarket trading.


[R]8:00AM The PNC Financial Services agreed to buy Mercantile Bankshares for $6 B.[/R]
The PNC Financial Services ((PNC)) agreed to buy Mercantile Bankshares ((MRBK)) in a deal worth $6 billion, or $47.24 a share, in cash and shares. Mercantile shareholders will receive 0.4184 shares of PNC common stock and $16.45 in cash for each share they own. Citigroup and Goldman Sachs are financial advisors of PNC, while Sandler O'Neill & Partners advised Mercantile. PNC hopes that the takeover will contribute to earnings growth in 2008, and that it has an estimated internal rate of return of approximately 15%. The banks predict the reduction of over $100 million of operating expenses through the elimination of operational and administrative redundancies.

[R]7:30AM South Korean stocks fell in the wake of N. Korean nuclear test.[/R]
Asian markets finished lower on Monday. The benchmark Korea Composite Stock Price Index, or Kospi, fell as low as 1,303.62, or 3.6%. Markets in South Korea have long been considered vulnerable to potential geopolitical risks coming from the North.

In Hong Kong, the Hang Seng Index ended 1.27% lower at 17,675.24. Straits Times Index in Singapore fell 1.2% to 2,618.05 in afternoon trading. Share prices in Sydney, Jakarta and Manila were lower; Australia S&P/ASX 200 index dropped 0.2% to 5,209.00. Japan and Taiwan was closed for a holiday.

China bucked the downward trend. Banks led the stock market to a five-year high on expectations Industrial & Commercial Bank of China will make a strong debut late this month. The benchmark Shanghai Composite Index ended up 1.9% at 1,785.39, its highest closing level since it settled at 1,793.88 on Sept. 25, 2001.


[R]6:30AM European stocks declined Monday morning on geopolitical concerns.[/R]
European markets were broadly lower by mid-morning on Monday. Frankfurt Xetra Dax shed 0.5% to 6,058.62 and the CAC 40 in Paris lost 0.3% to 5,265.38. London FTSE 100, however, added 0.3% to 6,017.8, buoyed by its greater weighting in oil and mining stocks, as crude and metals prices rallied.

Advancers

Shire, the drugs company, gained 9.1% after getting the go-ahead in the US for a new attention deficit drug. Oil companies advanced. Austria OMV gained 2.4%, Italy Eni added 1% and Norway’s Statoil climbed 2%.

TeliaSonera, the Nordic region largest telecoms operator, gained 2.9% after Cevian, the activist fund bought 72 million shares to become the fourth-largest shareholder.

Decliners

Volkswagen fell 1.1% after the Financial Times reported MAN would drop its bid for Scania, its rival truckmaker, so the three companies can enter negotiations to enter a three-way alliance.

Investor, the Swedish fund manager and second-largest shareholder in Scania, fell 2.5%. Renault shares slipped 0.4% as expectations of a tie up with General Motors faded. Peugeot, shed 2% after Morgan Stanley downgraded the stock from overweight to equal weight.

Banking stocks gave back some of their recent, M&A-driven gains. Austria Erste Bank fell 1.9%. It is awaiting judgement today from Romanian lawmakers on its intended acquisition of the country top bank BCR. Raiffeisen, Erste domestic rival, and competitor in high-growth eastern European markets, fell 1.5%.

Oil and gold

Crude oil for November delivery rose 51 cents to $60.27 a barrel in electronic trading on the NYME. In London, November Brent gained 38 cents to trade at $60.21 a barrel on the ICE Futures exchange.

Gold rose after North Korea carried out its first nuclear-weapons test and as higher base metals prices boosted purchases of commodities as a basket. Gold for immediate delivery rose $5.63, or 1%, to $579.72 an ounce.

Currencies

The euro was barely changed Monday against the U.S. dollar, while the Japanese yen was slightly lower after North Korea claimed to have tested a nuclear weapon. The euro bought $1.2601 in morning European trading, compared with $1.2595 late Friday in New York. The British pound slipped to $1.8678 from $1.8705. The dollar rose to 119.12 yen from 118.98 yen.