Europe Gains on Tobacco, Banks

Elena
07 Dec, 2006
New York City

European stocks finished in the green on Thursday, bolstered by rallying tobacco stocks and comments by ECB Jean-Claude Trichet that prompted interest rates might be further increased early next year. The tobacco sector moved notably higher, as Gallaher Group shares soared 21.6% after it said it had received an offer approach. The U.K. FTSE 100 climbed 0.7%, followed by the French CAC 40, up 0.7%, and the German DAX 30, up 0.5%.

[R]1:00PM European markets finished higher, boosted by tobacco and bank stocks.[/R]
European stocks finished in the green on Thursday, bolstered by rallying tobacco stocks and comments by ECB Jean-Claude Trichet that prompted interest rates might be further increased early next year. European gained after the European Central Bank lifted interest rates to 3.5% from 3.25%, and the Bank of England left its key rate unchanged at 5%, in line with expectations. The tobacco sector moved notably higher, as Gallaher Group shares soared 21.6% after it said it had received an offer approach, reportedly by Japan Tobacco. Other tobacco shares benefited from the news, with Imperial Tobacco jumping 10% and shares in British American Tobacco adding 2.3%. Strength in the financial sector also contributed to the broad advance. British bank Barclays added 3% on takeover speculation. Of peers, Deutsche Bank shares climbed 1% and Lloyds TSB shares rose 1.3%. French construction, media and telecoms conglomerate Bouygues gained 2.5% after the company posted a 36% increase in Q3 profit and lifted its sales guidance for the year. The U.K. FTSE 100 climbed 0.7%, followed by the French CAC 40, up 0.7%, and the German DAX 30, up 0.5%.

Crude oil prices hovered round $62 on concerns over oil production cuts and violence in Nigeria. Crude oil January contract fell 19 cents to $62 a barrel. Heating oil slipped to $1.7775 a gallon, while gasoline added to $1.625. Natural gas fell 9 cents to $7.7636 per 1,000 cubic feet. London Brent rose 40 cents to $63.85. The U.S. dollar was mixed against its major currency rivals. The euro was quoted at $1.3297, up from $1.3285. The dollar bought 115.14 yen, up from 115.26. The British pound was quoted at $1.9639, down from $1.9658. European gold prices further declined. In London, gold traded at $626.35 per troy ounce, down from $637.70. In Zurich, the precious metal traded at $625 per ounce, down from $636.95. Silver closed at $13.50, down from $13.79.


[R]11:30AM Market averages erased early gains on weak energy and tech stocks.[/R]
Stock market averages retreated from earlier gains as weakness in energy, consumer discretionary and technology stocks offset the positive sentiment generated by upbeat jobless data. Dow component Exxon Mobile ((XOM)) was one of the average''s weaker components and was down 1.2%. Technology stocks dropped and blue-chip stocks pared gains, with shares of BlackBerry maker Research In Motion ((RIMM)) down 3.7% after brokerage downgrades. Shares of Home Depot ((HD)) slipped 1.1%. Yesterday the home improvement retailer said it had found almost 20 years of option grant backdating. Housing stocks also moved sharply lower on brokerage downgrades. Some weakness was also posted by the gold sector, due to lower prices of the precious metal.

On the other hand, some strength emerged in the tobacco sector, with Gallaher Group ((GLH)) helping to lead the sector higher, up 1.9% on acquisition speculation. Dow component Altria ((MO)) gained nearly 1%. Among stocks driven by analyst comments, Advance Auto Parts ((AAP)) was a notable gainer, with the auto parts retailer rising 4.2% after Citigroup upgraded its rating on the company''s stock to buy from hold. In contrast, shares of Tellabs ((TLAB)) dropped nearly 3% after J.P. Morgan downgraded its rating on the communications equipment maker to underweight from overweight. In late morning trading, the Dow Jones industrial average was up 0.80, or 0.01%, at 12,310.05. The Standard & Poor''s 500 index remained near a six-year high but was down 1.21, or 0.09%, at 1,411.69, and the Nasdaq composite index was down 9.85, or 0.40%, at 2,436.01. Bonds were little changed, with the yield on the benchmark 10-year Treasury note flat at 4.48% from late Wednesday.


[R]10:30AM The Sensex nudged higher on Thursday in a volatile trading session.[/R]
The Sensex on BSE finished 23.03 points, or 0.17%, at 13,972.03. The market-breadth, was almost even. As 1,286 shares declined on BSE, 1,283 shares rose and 68 stocks were unchanged. From the 30-share Sensex group, 17 advanced while the rest declined. The turnover on BSE was Rs 3,787 crore, lower than Rs 4,561 crore on Wednesday. The turnover on NSE was Rs 7,480.37 crore, lower compared to Rs 8,702.49 crore on Wednesday.

Economic news

Airbus on Thursday said it plans to invest some $1 billion in India, setting up an engineering facility and a pilot training school. The European airplane maker had committed to investing in India as part of a deal with the government, which is purchasing 43 Airbus aircraft for the state-run Indian Airlines in a deal valued at $2.25 billion.

J.P. Morgan Chase & Co. said that it had invested $60 million in a Mumbai luxury residential property as part of a growth plan in the country. This is the largest investment ever made in a Mumbai real estate firm, prompting the growing importance of India to financial institutions worldwide.

Most active

Reliance was the most active stock with a turnover of Rs 147 crore followed by Indiabulls, Parsvnath, Jaiprakash and Tech Mahindra.

Advancers

Reliance Industries gained 1.4% to Rs 1,298.45. A report by brokerage CLSA said, Reliance Industries recently submitted revised field development plan indicated potential crude reserves of 1.6 billion barrels in the block. Also, there were unconfirmed reports that the company is close to acquiring Adani Retail. Adani has retail infrastructure that may help Reliance in its network of stores in Gujarat. Adani Enterprises jumped 5% to Rs 232.50.

Hindalco Industries rose 3% to Rs 183.30. The stock advanced for the second day in a row following reports that Chinese aluminium imports are rising. NTPC rose 2.3% to Rs 151.50. In a recent report dated 5 December 2006, Merrill Lynch has raised the price target on the stock.

Tata Motors gained 1.2% to Rs 892 in the last one hour of trade after being subdued for the most part. BHEL added 1.6% to Rs 2,665. The stock after reaching intra-day record high 2,668. HDFC Bank rose 1% to Rs 1,100. ICICI Bank advanced 0.3% to Rs 874. ICICI Bank today said its international assets will grow to 25% of its total assets, from the current 16%. State Bank of India also edged higher 0.4% to Rs 1,343.90. The bank could raise fresh equity capital in the fiscal year starting next April, once the banking law is amended.

Gujarat Ambuja Cements moved 1% higher to Rs 141.50. Holcim, the world second-largest cement maker, is looking to raise its stake in Gujarat Ambuja Cements, said a Holcim official in a report.

Decliners

Infosys shed 1.1% to Rs 2,220. Reliance Communications shed 1.6% to Rs 455. It added 1.35 million new subscribers in November (CDMA plus GSM based). Automakers were under pressure. Hero Honda lost 2.2% to Rs 750 and Bajaj Auto slipped 0.6% to Rs 2,692.

Housing finance large-cap HDFC shed 1.4% to Rs 1,566. Great Eastern Shipping lost 1.2% to Rs 227.05. It said on Thursday, it had signed a contract to buy a product tanker of 29,998 dead-weight tonnage. Marico lost 0.6% to Rs 546.50. A block deal of 1 lakh shares was executed in the stock on BSE, at Rs 550 per share.


[R]9:45AM Stocks opened higher, boosted by jobs report.[/R]
Stock markets opened higher, bolstered by a bigger-than-expected drop in jobless claims, easing concern about weakness in the job market ahead of November employment report tomorrow. A decline by the price of oil also helped generate positive mood. Crude oil prices fell 42 cents to $61.77 on expectations of milder weather and higher refinery capacity use.

In corporate news, shares of drug maker Eli Lilly ((LLY)) dropped nearly 1% after its 2007 earnings forecast fell short of estimates. Fannie Mae ((FNM)), the largest U.S. mortgage-finance company, rose 2.8% after it said it overstated earnings by a much lower figure than expected. Boeing Co. ((BA)) shares were top gainers on the Dow, rising 0.8% after Delta Air Lines Inc. said it would order 10 Boeing 737-700 aircraft but would sell others. In addition, Boeing said British carrier First Choice Airways had ordered two more Boeing 787-8 Dreamliner planes.

In the first hour of trading, the Dow Jones industrial average rose 43.74, or 0.36%, to 12,352.99. The Standard & Poor''s 500 index was up 4.35, or 0.31%, at 1,417.25, and the Nasdaq composite index was up 5.56, or 0.23%, at 2,451.42. Bonds fell, with the yield on the benchmark 10-year Treasury note rising to 4.49% from 4.48% late Wednesday.

[R]Initial jobless claims dropped more than expected.[/R]
Thursday morning, the Department of Labor released its report on initial jobless claims in the week ended December 2, showing a decrease in jobless claims that came roughly in line with economist estimates. The report showed that jobless claims fell to 324,000 from the previous week''s revised figure of 358,000. Economists had expected jobless claims to fall to 325,000 from the 357,000 originally reported for the previous week. At the same time, the Labor Department said that the less volatile 4-week moving average rose to 328,750 from the previous week''s revised average of 325,250. The report also showed that continuing claims in the week ended November 25 rose to 2.524 million from the preceding week''s revised level of 2.467 million. The data may attract some attention ahead of the release of the Labor Department''s report on employment in the month of November on Friday. Economists expect the report to show that the U.S. economy added around 100,000 jobs in November.


[R]9:30AM The FTSE 100 was higher Thursday on bid speculation in tobacco shares.[/R]
The FTSE 100 was in positive territory by midday after a slightly weaker start. It moved 27.8 points, or 0.5%, higher at 6,118.7.

Advancers

Shares in the group, which makes Benson & Hedges and Silk Cut cigarettes, jumped 19.1%. Shares in both the other London-listed tobacco companies rallied on the news. Imperial Tobacco climbed 5.9% while British American Tobacco added 3.1%.

Barclays shares advanced 3.8% on talk of a bid approach as traders cited talk of Spanish or US interest. The banking sector moved higher on the rumours with Royal Bank of Scotland up 1.5%, HBOS 2.1% stronger and Lloyds TSB 1.8% higher.

Bradford & Bingley shares were higher after it announced the acquisition of up to 4 billion pounds of mortgage portfolios from GMAC-RFC over the next three years. Shares in the UK mortgage lender firmed 1.7%

Capita Group shares were higher by 1.3% after UBS upgraded the stock from neutral to buy, raising its price target.

Decliners

Severn Trent lost 2% after first-half profits following the demerger of Biffa fell 5.7%. The water utility said annual costs were expected to be around 15 million to 20 million pounds higher than last year due to higher energy prices.

Commercial broadcaster ITV shed 1.1% as Credit Suisse cut its rating from neutral to underperform with a lower price target.

Rank Group lost 3.9% after it announced the disposal of its Hard Rock business for $965 million.


[R]9:00AM Stocks futures were mixed ahead of payrolls data.[/R]
U.S. stock market futures were lackluster in early trading ahead of November unemployment report due out on Friday. The Labor Department report is expected to provide clues about the strength of the economy and direction of U.S. interest rates. On Thursday, the ECB raised interest rates a quarter percentage point to 3.5%, in line with expectations.

Shares of Eli Lilly and Co. ((LLY)) added 0.7% in pre-market trading after the drug maker said it is on track to meet its 2006 growth forecast. It also projected slower profit growth for 2007. For 2007, the company expects sales increase, with earnings of $3.25 to $3.35 per share on a reported and adjusted basis. Analysts forecast earnings per share of $3.39 in 2007. In other corporate news, Home Depot Inc. ((HD)), the largest home improvement retailer, said it had unrecorded expenses from errors tied to stock option grants. Fannie Mae ((FNM)), the largest U.S. mortgage-finance company, said it overstated earnings by a much lower figure than expected. Standard & Poor''''s 500 futures were up 0.40 point, about even with fair value. Dow Jones industrial average futures were up 4 points, and Nasdaq 100 futures were up 1.25 points.


[R]8:30AM News Corp. is nearing a deal with Liberty for $11 billion.[/R]
News Corp. ((NWS)) is reportedly close to a deal with its second-biggest shareholder Liberty Media Corp. to buy back Liberty''s ((LCAPA)) $11 billion stake in the media company. In return, Liberty would receive News Corp.''s 39% stake in the satellite-TV firm DirecTV Group Inc. ((DTV)), as well as cash and other assets. The deal will return Liberty to a powerful position in the media sector and solidify News Corp. Chairman Rupert Murdoch''s control of his company.
The two sides have been discussing a deal for several months, with the biggest bone of contention being the soaring stock price of DirecTV. It has risen more than 20% to above $23 since news of the talks broke in mid-September. That values News Corp.''s stake in DirecTV at $10.9 billion, roughly the same value as Liberty''s stake in News Corp. Shares of DirecTV rose1.6%, to $23.53 in 4 p.m. composite trading on the NYSE. News Corp. shares fell 1.1%, to $21.74, also on the NYSE.

[R]7:30AM Asian stocks finished mostly lower on Thursday, Japan bucks trend.[/R]
Asian markets closed mostly lower on Thursday. Japan''s benchmark Nikkei 225 stock index rose 0.62% to finish at 16473.36. Japan Tobacco, the third-largest tobacco company in the world, surged 4.75% on news that it may bid for British competitor Gallaher Group, which owns the Benson & Hedges and Silk Cut brands.

Elpida Memory inched up 0.18% on news that it plans to triple its DRAM chip production capacity. Other advancers included electronics and machinery stocks, with Canon gaining 3.09% and Kyocera adding 1.94%.

The Hang Seng Index in Hong Kong shed 1% to 18,842.99. The placement of China Mobile shares sparked the fear that more long-term investors will sell down their portfolios. It may mean that long-term investors think upside is quite limited. HSBC Holdings also dragged the index down, falling 0.7%, as some investors cut positions for a second day.

South Korean shares declined, pushed down by exporters as the Korean won struck a fresh nine-year high against the dollar. The Korea Composite Stock Price Index, or Kospi, fell 0.2% to 1,410.30. Samsung Electronics, the largest corporation and major exporter in South Korea, fell 1.4%. Korea Exchange Bank fell 1.1% to 13,350 won after South Korean prosecutors said they have preliminarily concluded that U.S. private-equity group Lone Star Funds colluded with government and bank officials to purchase the bank for less than its fair value.

The Weighted Price Index of the Taiwan Stock Exchange lost 0.1% to end at 7686.52. Local fund managers and retail investors were reluctant to chase stocks further, as they fear foreign investors may slow buying in local stocks as they head for Christmas holidays. In Australia, the benchmark S&P/ASX200 index eased 0.03% to 5465.2. It is no surprise as metal prices were 1% to 2% weaker overnight and there was some pullbacks in BHP Billiton, which fell 1.2% and Rio Tinto, which shed 0.9%.


[R]6:30AM European markets advanced Thursday on bid activity in tobacco stocks.[/R]
European markets gained on Thursday. In early trade, the FTSE 100 London climbed 0.4% to 6,112.5, Frankfurt Xetra Dax added 0.2% to 6,380.6, and the CAC 40 in Paris was fractionally higher at 5,351.93.

Advancers

Gallaher Group, the UK tobacco company that owns the Benson & Hedges and Silk Cut brands, buoyed the sector after receiving a bid approach from Japan Tobacco. Shares in Gallaher rose 19.3%, as speculation mounted about a counterbid, possibly from Philip Morris of the US.

Altadis, the Franco-Spanish group, climbed 6% as takeover speculation spread through the sector. Imperial Tobacco, gained 7.3%.

Banks were in positive territory, led by KBC Group in Belgium which announced a 3 billion euros share buyback plan and raised its targets for the next three years. KBC shares were up 4%.

Barclays, the UK bank, gained 3% on rumours that a US banking group was interested in making an approach. Anglo Irish Bank meanwhile, continued to rise after better-than-expected full-year profits posted onWednesday, up another 2.4%.

Alcatel-Lucent, the telecoms equipment manufacturer, gained 2.6% after Goldman Sachs added the stock to its pan-Europe conviction buy list.

Decliners

Other companies updating investors were in negative territory with Bradford & Bingley shares down 2% after recent strong gains. Northern Rock shares dipped 0.3% in London. Rank Group shares slipped 1.7% after it concluded its auction of the Hard Rock Café chain of restaurants, selling them to the Seminole Tribe of Florida for $965 million.

Oil and gold

Oil prices gained slightly on Thursday after U.S. government data showed that domestic inventories of crude oil, gasoline and heating oil fell last week. Light, sweet crude for January delivery rose 23 cents to $62.42 a barrel in electronic trading on the NYME.

Gold opened Thursday at a bid price of $631.29 a troy ounce, down from $637.70 late Wednesday.

Currencies

The euro continued to hover around 20-month highs on Thursday as the European Central Bank met to decide if it should continue its campaign of rate hikes for a sixth time in a year. In morning European trading, the euro stood at $1.3287, up from $1.3285 in New York late Wednesday.

The British pound last week reached a 14-year high against the dollar. However, it has since fell, and traded at $1.9683, up from $1.9658, its peak on Tuesday. The dollar fell to 114.88 Japanese yen from 115.26 yen.