Gold Down $12, Oil Up

123jump.com Staff
15 Dec, 2006
New York City

Benign November inflation data on Consumer Price index and core CPI sparked a wave of buying in the morning. The reported CPI and core CPI nearly unchanged supported a broad buying in financials, industrial and consumer durable sector. Gold fell $12 on inflation report but oil managed to rise. European markets closed higher on feversih takeover activities. Brazil continued to gain but Mexico settled after closing for eight records in nine days.

[R]4:00PM NY – 10:00PM Frankfurt – 2:30 AM Mumbai[/R]

Bond yield on 10-year U.S. bond closed at 4.58% and 30-year bond closed at 4.705%.

Crude Oil closed 92 cents lower at $63.43 per barrel, natural gas dropped 1.4 cents to close at $7.34 per mBtu and gasoline closed 1 cent lower to close at $1.70 per gallon.

Gold closed $11.10 cents higher to close $619.80 per ounce, silver gained 1.5 cent to close at $12.995 and copper dropped 0.6 cent to close at $3.01 per pound.

European Markets closed higher in the region led by a gain of 0.83% in Norway, a rise of 0.58% in France, 0.55% in Germany and 0.5% in the U.K. Russia closed up 0.71% and reported that its foreign currency reserve rose to $293.8 billion as of the end of last week. Takeover and mergers drove the European Markets to a high for the week. Gallagher, maker of Benson & Hedges cigarettes agreed to be sold to Japan Tobacco for $14 billion. This takeover was the largest foreign company purchase by any Japanese company ever.

Latin American and Canadian Markets closed mixed, market in Argentina closed up 0.8% and in Chile rose 0.9%. Canada lost 1% and Brazil and Mexico dropped 0.4%. Home builder, Homex ((HXM)) rose 5.5% in New York trading on Credit Suisse recommending the stock at setting price target of $64. Oil industry tubing company, Tenaris SA ((TS)) rose another 3% on takeover rumors. Brazilian shares of mining, steel and power companies rose on the general strength in the market. Mexican market has closed eight of the last nine sessions at record level.


[R]1:00PM NY – 7:00 PM Frankfurt – European stocks closed higher led by auto stocks in Germany, telecom stocks in France and bank stock in the U.K.[/R]

European markets closed higher across the region with the market in Norway leading the gainers with a gain of 0.8% followed by a rise of 0.6% in Germany in France and 0.5% in the U.K.

Japan Tobacco agreed to acquire U.K. based Gallagher for $14.8 billion. Aerospace company BAE Systems traded as high as 7% on the news that the U.K. government will drop the investigation into defense contract with Saudi Arabia. The news sent the stock to a three year high.

France Telecom rose more than 2% on the company restating its financial targets for the year 2007 and a decision to cut staff of 17,000 by the end of 2008. The company also said that it plans to invest more than 250 million euros in the next two years to build high speed Internet network in the country.

Chrysler unit of Daimler Chrysler said that it plans to cut its production capacity and eliminate certain production cost as part of its restructuring plan to be released in few weeks.

Fourth largest Austrian lender Bawag PSK will be sold to an American private equity fund Cerberus led consortium for $4.1 billion. The consortium is made of Austrian insurer Wuestenrot and Italian insurer Generali and Austrian Post. The deal was put together to save the bank from financial ruin brought by its involvement in Refco scandal.


[R]11:30AM Market rallied on strong earnings, benign inflation.[/R]
Tame inflation in November and industrial production rise for the first time in two months boosted market averages, with the Dow hitting a record high after consumer price data signaled that the U.S. economy is maintaining growth and inflation is under control. Positive sentiment was also generated by a batch of strong earnings reports in the tech sector, with Adobe Systems ((ADBE)) the most notable gainer on the Nasdaq, up 5%. The optimism about lower interest rates contributed to significant strength in the housing sector, led by forest products companies Weyerhaeuser ((WY)) and Temple-Inland ((TIN)), rising 7.6% and 2.2% respectively.

Immunicon Corp. ((IMMC)) surged 38% to $3.65 after the company received clearance for a breast cancer test it makes from the FDA. Among stocks driven by analyst comments, shares of Lowe''s ((LOW)), home improvement retailer, added 1% after Bear Stearns upgraded its rating on the company''s stock to outperform from peer perform. Shares of Monsanto ((MON)) climbed 3.9% after Goldman Sachs upgraded its rating on the agricultural products company to buy from neutral. On the other hand, shares of Patterson-UTI ((PTEN)) dropped 1.5% after Deutsche Bank downgraded its rating on the oil services provider to sell from hold.

In late morning trading, the Dow Jones industrial average was up 56.24, or 0.45%, at 12,473.00. The Dow set a new trading high of 12,486.30, a day after the index rose nearly 100 points and closed above 12,400 for the first time. The Standard & Poor''s 500 index was up 4.98, or 0.35%, at 1,430.47, and the Nasdaq composite index was up 12.02, or 0.49%, at 2,465.87. Bonds rose sharply, with the yield on the benchmark 10-year Treasury note falling to 4.55% from 4.60% late Thursday.


[R]10:30AM The Sensex gained Friday on heavy buying and lower inflation.[/R]
The Sensex on BSE finished 127.36 points, or 0.9%, higher at 13,614.52. The market-breadth was strong. As 1,549 shares advanced on BSE, 1,007 declined and 71 shares were unchanged. For every three advancers there were two decliners. From the Sensex 30 stocks, 23 advanced and the 7 declined. The turnover on BSE was Rs 4,150 crore, lower than Rs 4,415 crore on Thursday. The turnover on NSE was Rs 8,727.03 crore, higher than Rs 8,086.76 crore on Thursday.

Economic news

Weekly inflation decreased to 5.16% for the last week in November comppared to 5.3% a week ago.

Tata Motors and Fiat will invest over Rs 4,000 crore in a joint venture to produce cars and engines and possibly trucks. The yearly capacity is viewed to be more than 100,000 cars and 200,000 engines and transmissions and production will commence from the beginning of 2008.

Most-active stocks

Suzlon was the most-active stock with a turnover of Rs 259 crore followed by Zee Tele and Reliance Communciations.

Advancers

Metal shares rallied supported by a surge in metal prices on London Metal Exchange. Tata Steel soared 5.5% to Rs 459 on 27.3 lakh shares traded on BSE. Hindalco also rallied almost 4% to Rs 177.95, buoyed by firm global copper prices.

Reliance Communications added 4% to Rs 466, on reports that the company is after Hutchison’s India operations. Some IT stocks also gained significantly, on the back of overnight gains in their ADRs. Satyam Computer advanced 3% to Rs 481.70, after its ADR gained 3.6% to $23.79. Infosys added 1.8% to Rs 2,239, as its ADR rose 2.1% to $55.20.

Banks were upbeat on retreating inflation data. Canara Bank soared 9.9% to Rs 291.90, Bank of Baroda gained 4.7% to Rs 246 and Bank of India advanced 4.4% to Rs 193.25. State Bank of India also added 3% to Rs 1,261. The Standing Committee on Finance has endorsed the proposed legislative amendment to reduce State Bank of India shareholding in subsidiaries from 55% to 51%.

Cement stocks were also in focus. ACC rose 2.2% to Rs 1,055. ACC has approved an expenditure of about Rs 1,480 crore to upgrade the capacity of the New Wadi plant, by about 3 million tonnes per annum. Grasim gained 2.9% to Rs 2,741, continuing its recent advance. Gujarat Ambuja Cements was up 0.6% to Rs 139.50 in volatile trade. Gujarat Ambuja Cements announced on Friday that it has approved Rs 1,520 crore to add cement capacity by 3 million tonnes per annum.

Tata Motors advanced 0.5% to Rs 857.60, following its deal with Fiat but auto stocks finished mixed. Cigarette major ITC shed 1.7% to Rs 173.85.

Decliners

The major decliners included NTPC shedding 1.7% to Rs 143, ITC slipping 1.4% to Rs 175 and Wipro declining 1% at Rs 564. Wipro sank, even as its ADR gained 3.2% to $15.60 overnight.

Index heavy Reliance Industries fell 0.7% to Rs 1,252.55, as trading in the stock was quite in volatile. There are reports that Reliance Industries has paid Rs 444 crore towards the third installment of advance tax due 15 December 2006.

Suzlon Energy declined 0.70% to Rs 1,302, even after three block deals were cut in the stock on BSE.


[R]9:45AM Stocks rallied on economic data.[/R]
U.S. stocks opened higher, extending rally on tame inflation in November and industrial production increase. The Labor Department showed that consumer prices unexpectedly came in unchanged in November. Another government report showed that industrial production rose 0.2% in November, the first increase in two months, amid increased output by automobile makers. The economic data prompted that the economy is slowing at a reasonable pace and that inflation was in check.

In early trading, significant strength emerged in the housing sector, lifted by optimism that the inflation data could lead the Fed Reserve to cut interest rates early next year. Lowe’s Companies ((LOW), home improvement retailer, gained 1% as it was upgraded to outperform from peer perform at Bear Stearns. Among tech stocks, Adobe Systems ((ADBE)) rose 5% after it posted Q4 earnings in line with estimates, while revenue was above expectations. Ciena Corp. ((CIEN)) rose 4% after Deutsche Bank upgraded the stock of the telecommunications-equipment provider to buy from hold. The upgrade came a day after the company posted its first quarterly profit in five years.

Among other movers, E-Trade Financial Corp. ((ET)) gained 2% after it projected earnings for 2007 in line with estimates. The company also said it will move its stock market listing to Nasdaq from the NYSE. On the losers'' side, Black & Decker ((BDK)) dropped 6% after forecasting Q4 earnings below estimates. In the first hour of trading, the Dow Jones industrial average was up 38.85, or 0.31%, at 12,455.61. The increase comes a day after the Dow rose nearly 100 points, closing above 12,400 for the first time. The Standard & Poor''s 500 index was up 4.26, or 0.30%, at 1,429.75, and the Nasdaq composite index was up 13.20, or 0.54%, at 2,467.05.


[R]Industrial production gained 0.2% in November.[/R]
Friday morning, the Federal Reserve released its report on industrial production and capacity utilization in the month of November, showing that industrial production increased modestly while capacity utilization came in unchanged. The report showed that industrial production rose 0.2 percent in November after a downwardly revised unchanged reading for October. Economists had expected production to come in unchanged compared to the 0.2 percent increase originally reported for the previous month. The modest increase in industrial production was partly due to an increase in manufacturing production, which rose 0.3 percent in November after falling 0.5 percent in October. A sharp rise in the production of motor vehicles and parts contributed to the increase in manufacturing production. At the same time, mining and utilities output fell 0.2 percent and 0.1 percent, respectively, with the decrease in utilities output coming after it rose 4.3 percent in October. The report also showed that the capacity utilization rate came in at 81.8 in November, unchanged from the previous month downwardly revised reading. Economists had expected capacity utilization to come in at 82.1.


[R]9:30AM The London benchmark index gained Friday on firmer oil stocks.[/R]
In mid-afternoon, the FTSE 100 benchmark index traded 0.5% higher to 6,261.6 above the previous five-year high in November of 6,256.0.

Advancers

News of the OPEC plans to reduce crude production by 500,000 barrels a day boosted oil companies. BP was 0.5% higher and Royal Dutch Shell advanced 0.4 %.

As the Serious Fraud Office of the UK yielded to political pressure to end its investigation of corruption allegations focused on Saudi defence contracts and the Al Yamamah oil-for-arms contracts with BAE, the company gained 5.5 %.

The tobacco shares also increased after Gallaher confirmed its agreement to be acquired by Japan Tobacco for 11.40 pounds per share, valuing it at 7.5 billion pounds. Expectations of a wider consolidation lifted Imperial Tobacco by 0.5% and British American Tobacco by 0.7%.

Prudential benefited from Merrill Lynch decision to raise its price target on the stock. Shares in the insurer were 2.8%.

Decliners

On the opposite end was Corus declining 1.2 % on worries that Tata Steel could be about to withdraw from the bidding war for the Anglo-Dutch steelmaker, paving the way for its acquisition by CSN of Brazil.

Gallaher bucked the trend in tobacco stocks and fell 0.4%, moving toward the offer price after a stronger run in anticipation of the deal and little talk of a counter offer.


[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.