Futures Gain on Tame CPI

Elena
15 Dec, 2006
New York City

Stock futures advanced Friday, lifted by tame report on consumer inflation which helped ease concerns of further interest-rate spikes. The Labor Department reported that consumer prices were flat in November, even better than the increase of 0.2% analysts had been expecting. Prices fell in the three consecutive months because of sharply lower gasoline and other energy costs.

[R]9:00AM Stock futures advanced on tame CPI data.[/R]
Stock futures advanced Friday, lifted by tame report on consumer inflation which helped ease concerns of further interest-rate spikes. The Labor Department reported that consumer prices were flat in November, even better than the increase of 0.2% analysts had been expecting. Prices fell in the three consecutive months because of sharply lower gasoline and other energy costs. The data sent bond prices higher, and yields tumbling. The yield on the benchmark 10-year Treasury note fell to 4.536%.

In corporate news, Apple ((AAPL)) said in a filing with the SEC that it is unable to file its 10-K form because of its ongoing stock option investigation. In addition, it said it will restate certain historical financial statements. Among companies in focus, Adobe Systems ((ADBE)) reported Q4 net earnings rise of 16% to 30 cents a share. Revenue rose to $682.2 million from $510.4 million. Analysts had forecast earnings of 33 cents a share on revenue of $671 million. Company's shares rose 6% in pre-open trading. Again after the bell yesterday, E-Trade Financial ((ET)) projected earnings for 2007 coming in line with estimates. It sees earnings of $1.65 to $1.80 a share on revenue of $2.75 billion to $3 billion. The company also said it will move its stock market listing to Nasdaq from the NYSE. The stock rose 2.2% ahead of the open. S&P 500 futures shot up 6.00 points to 1,444.20 and Nasdaq 100 futures surged 20.75 points to 1,846.25. Dow industrial futures ran up 43 points to 12,552.


[R]Consumer price index came in flat in November.[/R]
The Department of Labor released its report on consumer prices in the month of November on Friday, showing that prices came in unchanged after showing notable decreases in the two previous months. The report showed that the consumer price index came in unchanged in November after falling 0.5 percent in each of the two previous months. Economists had been expecting prices to edge up 0.2 percent. The unchanged reading came as the pace of decline in energy prices slowed considerably compared to the two previous months. Energy prices edged down 0.2 percent in November after falling 7.0 percent in October and 7.2 percent in September.

The modest decrease in energy prices was partly offset by an increase in housing costs, which rose 0.4 percent in November after coming in unchanged in the previous month. Medical care and recreation costs also showed modest increases. At the same time, the report showed that transportation prices fell 0.9 percent in November after showing even more significant declines in the two previous months. Apparel, food, and education and communications prices also fell. The Labor Department added that its core consumer price index, which excludes food and energy prices, also came in unchanged in November following a 0.1 percent increase in October. The core index had also been expected to increase by 0.2 percent.


[R]8:00AM Japan Tobacco to buy Britain’s Gallaher for $19 billion.[/R]
Japan Tobacco Inc. is considering acquisition Britain''s Gallaher Group PLC in a deal worth 2.25 trillion yen ($19.1 billion). The world''s third-largest tobacco company, which announced its plans on Friday, will finance the takeover of Gallaher with its own capital and a Merrill Lynch loan.

If the transaction completes, this will be the largest-ever corporate acquisition by a Japanese company. The takeover bid exceeds Softbank Corp.''s buyout of Vodafone Group PLC''s Japanese mobile-phone operations for $15.6 billion.

The move comes as Japan Tobacco, maker of Mild Seven brand cigarettes and overseas distributor for U.S. brands Winston, Camel and Salem, tries to bolster earnings by expanding outside of Japan. The purchase would also boost Japan Tobacco''s share of the European tobacco market to 23% from 10%. JT''s global market share would increase by 3.1% to about 11%.The combined company would have annual global production of 600 billion cigarettes.

Japan Tobacco shares rose 3.1% to close at 597,000 yen ($5,068) in Tokyo Friday, while shares in Gallaher bslipped 0.5% Friday to 1,149.5 pence.


[R]7:30AM Asian stocks advanced on Friday supported by a strong finish in Japan.[/R]
Asian markets closed higher on Friday. Japanese Nikkei 225 Stock Index gained 0.5% to close at 16,914.31. The tankan sentiment index for large manufacturers advanced to 25, up one point from the September figures and matching expectations. Shares of Japan Tobacco advanced 3.1% after saying it has agreed in principle to buy British cigarette maker Gallaher Group in a deal standing at $14.8 billion.

The Hang Seng Index in Hong Kong advanced 1% to 19,110.65. IPO led the gainers. Neo Neon advanced 30% and China Communication Construction surged 38%. Mainland China oil producers gained as oil prices advanced after the OPEC announced it plans to reduce production. PetroChina added 1% and Sinopec gained 2%.

The Korea Composite Stock Price Index, or Kospi, in South Korea, moved 0.25% higher to 1,421.87. Kookmin Bank, the largest lender by assets in South Korea, gained 2% on foreign buying. Posco advanced 2.1% after reaching a new high during the session on expectations of higher dividends and positive earnings for next year.

Other markets around the region also gained with Australia S&P/ASX 200 rising 0.1% to 5,557.00. Singapore Straits Times Index rose 0.5% to 2,931.29 and Taiwan Weighted Price Index gained 0.8% to 7,538.82.


[R]6:30AM European stocks advanced on Friday in quiet trading with M&A bids.[/R]
European markets gained on Friday. The FTSE 100 started the day 0.3% higher at 6,246, while the German Xetra Dax added 0.4% at 6,577.18 and the French CAC 40 advanced 0.5% to 5,534.64.

Corporate news

Japan Tobacco, the third-largest cigarette maker in the world, agreed to buy Gallaher in the biggest overseas takeover of the nation.

Advancers

Altadis SA led advancers as tobacco companies after Japan Tobacco Inc. agreed to buy Gallaher Group Plc for 7.5 billion pounds ($14.7 billion). Altadis, the largest tobacco company in Spain, added 1.1%. Citigroup Inc. upped a recommendation on the shares to `buy'' from hold, announcing the company is a possible target as takeovers in the industry continue.

Swedish Match AB, the second-largest producer of smokeless tobacco products in the world, advanced 0.8%.

France Telecom rose 1.9% after it reiterated its financial targets for 2006. Altana firmed 0.9% after Deutsche Bank upgraded the chemicals company to buy from hold and lifted its price target.

Carmakers were in great demand. Fiat rallied 2.6% after its European market share jumped to 7.6% from 6.5%. Renault SA gained 1.2 %. Porsche AG surged 1.2%. Separately, WestLB AG raised its recommendation to hold from reduce and lifted its price estimate for the shares by 27%.

Decliners

Ahold fell 1.1%, erasing some gains on Thursday, which were prompted by talk of a bid talk for the Dutch retailer from KKR, the private equity group. Sources close to KKR have played down the prospects of it making an offer.

Oil and gold

Crude oil for January delivery advanced 36 cents, or 0.6%, to $62.87 a barrel in after-hours electronic trading on the New York Mercantile Exchange. The contract traded at $62.72 a barrel in early trading in London.

Gold for immediate delivery was at $625.45 an ounce today. It is little changed this week, after dropping 3.2% last week.

Currencies

The euro bought $1.3166 early Friday, up from $1.3152 in New York the previous day. The British pound also gained on the dollar at $1.9627, up from $1.9611 in New York overnight. The dollar remained strong against the Japanese yen, buying 117.97, up from 117.86 on Thursday.