Continental, UAL Rise on Deal Talk

Elena
13 Dec, 2006
New York City

U.S. stock market futures posted solid gains, boosted by strong retail sales and deal talk in the airline sector. Seasonally adjusted retail sales rose 1% in November, well above economist estimate. UAL Corp. and Continental Airlines were reportedly in talks about a possible merger that would create the largest U.S. domestic carrier. Continental shares rose 4.9% and UAL shares gained 5%. Apple shares advanced 1.4% to $87.36 after Morgan Stanley raised its stock price target.

[R]9:15AM Stocks futures rallied on better-than-expected retail sales.[/R]
U.S. stock market futures posted solid gains Wednesday, boosted by strong retail sales and deal talk in the airline sector. Data on business inventories, expected to show continuing growth at 0.4% pace, is also due out today. The dollar gained some ground on the data, rising 0.5% against the yen at 117.38 and 0.5% vs. the euro at $1.3210.

Seasonally adjusted retail sales rose 1% in November, the largest gain since July, coming in well above economist estimate. In corporate news, UAL Corp. ((UAUA)) and Continental Airlines ((CAL)) were reportedly in talks about a possible merger that would create the largest U.S. domestic carrier. Continental shares rose 4.9% and UAL shares gained 5%. Among companies, driven by analyst comments, Apple ((AAPL)) shares advanced 1.4% to $87.36 after Morgan Stanley raised its stock price target. Elsewhere, Cooper Cos. ((COO)) fell 6% in pre- open after the company cut its forecast for 2007 revenue to a range of $920 million to $960 million. S&P 500 futures rose 4.30 points to 1,429.30 and Nasdaq 100 futures added 6.00 points at 1,809.00. Dow industrials futures rose 38 points at 12,450.

[R]Retail sales rose above expectations.[/R]
Wednesday morning, the Department of Commerce released its report on retail sales in the month of November, showing that sales rose much more than economists had expected. The increase was partly due to a rebound in sales at gas stations. The report showed that retail sales rose 1.0 percent in November after a revised 0.1 percent decrease in October. Economists had expected retail sales to increase by a much more modest 0.2 percent compared to the 0.4 percent drop originally reported for the previous month. The stronger than expected sales growth was partly due to a significant increase in sales at electronics and appliance stories, which surged up 4.6 percent in November after coming in unchanged in October.

As mentioned above, a rebound in gas station sales also contributed to the overall sales growth, with gas station sales rising 2.3 percent in November following a 5.3 percent decline in the previous month. The decrease in October reflected a drop in gas prices. The report also showed that sales by motor vehicle and parts dealers rose 0.9 percent in November following a 1.0 percent increase in October. The Commerce Department said that retail sales, excluding sales by motor vehicle and parts dealers, rose 1.1 percent in November after a 0.3 percent decrease in October. The increase in ex-auto sales exceeded economist estimates of 0.3 percent growth.


[R]7:30AM Asian markets finished mixed with Japan up and HK down.[/R]
Asian markets closed mixed on Wednesday. The Nikkei 225 Index in Japan edged higher 0.3% to 16,692.93. Carmakers and other exporter stocks were buoyed by the weaker yen against the dollar. Nissan advanced 1.4% and Sony rose 1.9%. Airline stocks also gained tracking a decline in oil futures prices. All Nippon Airways advanced 1.4%.

Declines in Chinese telecommunications companies in Hong Kong led stocks lower. The Hang Seng Index shed 1.0% to 18,718.19. Fixed-line operator China Telecom fell 3.96% and China Netcom shed 1.65%. China Mobile lost 2.62%. China Unicom finished down 4.12% on dwindling hopes for a near-term deal to break up the company.

The Korea Composite Stock Price Index, or Kospi, advanced 0.5% to 13,83.28. Shinhan, the second-largest banking institution in the country, advanced 1.9% on reports that it had agreed with the creditors of LG Card on the final terms of its acquisition of LG Card.

The S&P/ASX 200 Index in Australia moved up 0.3% to close at 5,488.2. Shares of CSL advanced 7.9%, while Toll Brothers added 4.9%. The blood-products group CSL raised its profit guidance and transport group Toll stated it would spin off its infrastructure assets into a separate unit.

The market in Taiwan dropped 0.1% to 7,450.30. Fubon Financial advanced 2.5% and Cathay Financial gained 2.0%, while Pacific Construction plunged 7%. Singapore Strait Times Index shed 0.3% to 2,884.15 and New Zealand NZX-50 Index inched up 0.4% to 3,945.98. Shanghai Composite Index gained 0.2% to 2,223.45.


[R]6:30AM European markets move slightly higher Wednesday as banks rally.[/R]
European markets were higher on Wednesday. By mid morning, FTSE 100 in London was up 0.1% to 6,160.7, Frankfurt Xetra Dax was flat at 6,476.33, and the CAC 40 in Paris was 0.1% higher at 5,434.65.

Advancers

Inditex, owner of the Zara, Pull and Bear and Massimo Dutti clothing brands, advanced 4.6% as its net income for the first nine months of 2006 grew 22% to 634 million euros as revenue also rose 22%, to 5.67 billion euros.

Raiffeisen International, the Austrian bank with significant operations in central and eastern Europe, including Russia, advanceed 2.6%, after Citigroup upgraded it to buy and raised its price target.

Erste Bank, another Austrian bank which also has substantial holdings in eastern Europe, gained 1%. Dutch bank ABN Amro advanced 3.3% after putting forward impressive strategy for next year.

Fashion retailer Hennes & Mauritz gained 0.6% in Stockholm, while London-listed peer Next advanced 1.9%.

Lagardere, the largest publishing group in France, rose 3.5% in Paris after UBS analysts upgraded their rating on the media company to buy from neutral.

Decliners

Safran, the French aero engine maker, fell 6.4% after reducing its full-year operating profit margin target to 4% from its previous goal of 5.5-6%.

Oil and gold

Crude oil held near a two-week low after the IEA reduced its forecast for Chinese demand. Crude oil for January delivery fell 13 cents to $60.89 a barrel in after-hours electronic trading on the New York Mercantile Exchange in early trading in London. Brent crude fell 31 cents, or 0.5%, to $61.21 a barrel and traded at that price on the ICE Futures exchange in London.

Gold declined in London for a second straight day as oil prices traded close to the lowest in two weeks. Gold for immediate delivery in London fell as much as $1.70, or 0.3%, to $628.35 an ounce.

Currencies

The U.S. dollar traded mixed versus other major currencies in European trading Wednesday. The euro was at $1.3268, down from $1.3277 late Tuesday. The British pound traded at $1.9711, up from $1.9700. The dollar bought 117.08 Japanese yen, up from 116.90.