Merger of $70 B, Google Down 4%

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

Mergers worth $70 billion ruled the trading sentiment today. Stat Oil agreed to purchase off-shore exploration unit of Norsk Hydro forming the fourth largest energy company in Europe. Caremark surged 10% after getting a higher bid from Express Script. Realogy rose 20%, owner of Century 21 and Coldwell Bankers, jumped on a bid from Apollo Management. Harrahs gained on a higher offer of $16.7 billion. Joy Global reported 60 cents per share, stock up 8%. Goolge dropped on valuation worries.

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

Yield on 10-year bond closed at 4.609% and the 30-year bond closed at 4.726%.

Gold lost 10 cents to close at $619 a troy ounce, silver declined 42.5 cents to end at $12.555 a troy ounce and copper increased 2.05 cents to close at 302.650 cents per pound.

Oil declined $1.240 to close at $62.190 a barrel and heating oil lost 5.97 cents to finish at 177.550 cents a gallon. Gasoline was down 2.41 cents to end at 166.220 cents a gallon. Natural gas decreased 33.4 cents to close at $7.075 per mBtu.

Asian markets closed higher led by Taiwan with a gain of 1.14%, Singapore with an increase of 1.10% and India with an advance of 0.86%. The decliners were Thailand with a decline of 0.78% and Indonesia with a decrease of 0.25%. Asian stocks finished higher lifted by a strong close to U.S. markets on Friday, yen''s weakening against the dollar.

European markets finished lower led by Spain with a decline of 0.49%, U.K. and France both with a decrease of 0.20% and Netherlands with a loss of 0.15%. The advancers were Switzerland with an advance of 0.43%, Belgium with an increase of 0.29% and Germany with a gain of 0.13%. European stocks ended lower as gains from the energy sector failed to offset weakness in the mining sector and a decline in shares of British companies BT Group and Tate & Lyle Plc.

Latin America markets closed lower led by Canada with a decline of 0.77%, Argentina with a decrease of 0.44% and Brazil with a loss of 0.20%. The only advancer was Mexico with an increase of 0.34%.

[R]1:00PM European markets closed mostly lower on weak mining stocks.[/R]
European stocks finished largely in the negative on Monday, despite gains from the energy sector on the back of a big merger deal in which Norwegian Statoil agreed to buy the oil and natural-gas division of Norsk Hydro. Norsk Hydro surged 21%, while shares in Statoil fell 1.7%. Regional markets declined amid weakness in the mining sector and a heavy losses for British companies BT Group and Tate & Lyle Plc. Telecoms operator BT Group lost 0.6%, while the biggest drag on the FTSE 100, sugar producer Tate & Lyle, fell 5.5% after it released an update on its pricing position. Shares of mining companies Rio Tinto Plc and BHP Billiton also weighed on the U.K. index. Rio Tinto shares closed down 1.6% and BHP Billiton shares lost 1.1%. In Germany, Bayer shares rose 0.9% after the German pharmaceutical company agreed to sell its Wolff Walsrode division to Dow Chemical Co. The German DAX 30 increased 0.1%, while the French CAC-40 index eased 0.2%, and London FTSE 100 index also closed down 0.2%.

Crude oil prices retreated from recent highs but kept trading over $63. Crude oil January contract lost 32 cents to $63.11 a barrel. Heating oil fell to $1.7667 a gallon, while gasoline added to $1.6999. Natural gas futures slipped 22 cents to $7.190 per 1,000 cubic feet. The U.S. dollar extended gains against its major currency rivals. The euro was quoted at $1.3063, down from $1.3078. The dollar bought 118.17 yen, up from 118.16. The British pound was quoted at $1.9446, down from $1.9503. European gold prices declined. In London, gold traded at $613.17 per troy ounce, down from $622.83. In Zurich, the precious metal traded at $610.45 per ounce, down from $621.47. Silver closed at $12.56, down from $13.59.


[R]11:30AM The Dow and the S&P 500 rallied.[/R]
U.S. stocks shot higher Monday as several multibillion-dollar merger deals and an upgrade of Citigroup provided a boost for an ongoing year-end rally. The Dow hit an all-time high of 12,490.70, while the S&P 500 reached a six-year high. Takeover deals totaling $77 billion added to the total sum of $3.6 trillion, related to mergers in 2006, a record for any year. The M&A news included Express Scripts'' ((ESRX)) offer to acquire Caremark ((CMX)) for $26 billion as well as news that Biomet ((BMET)) agreed to be taken private for $10.9 billion. Private equity firms Apollo Management and Texas Pacific Group were close to reaching an acquisition deal with Harrah''s Entertainment ((HET)), the world''s largest casino operator.

Citigroup ((C)) was the leading gainer on the Dow, rising 2.1% after Merrill Lynch upgraded the stock to a buy from a neutral, citing the stock''s attractive valuation. Among other movers today, Joy Global ((JOYG)), mining technology company, rose 11% after reporting Q4 net income rise of 71 cents a share, up from 45 cents a year earlier, beating estimates of 66 cents a share. The company posted sales increase of 21% to $689.3 million from $568.2 million. Terex Corp. ((TEX)) was actively traded on Monday after the stock replaced Navistar in the S&P 500 on Friday. Company’s shares gained 7%. However, a decline in crude oil prices weighed on energy shares, limiting gains for the broader market.


[R]10:30AM The Sensex closed higher Monday on strong large-caps performance.[/R]
The Sensex on BSE finished 116.57 points higher, or 0.9%, at 13,731.09 on Monday. After weakness at the start, the market breadth turned positive, as buying intensified for small-cap and mid-cap stocks. As 1,321 shares advanced 1,213 declined and 79 shares remained unchanged. From the 30-issue Sensex stocks, 19 advanced while the rest declined. The turnover on BSE was Rs 3,772 crore lower than Rs 4,174 crore on Friday. The turnover on NSE was Rs 8,222.2 crore, compared to Rs 8,727.03 crore on Friday.

Economic news

RBI, on December 15th, issued new capital market exposure norms for banks becoming effective from April 1, 2007. The new guidelines state that the exposure of a bank to the capital market cannot surpass 40% of its net worth as on 31 March of the previous year.

The Initial Public Offering of Cairn India Ltd. will be at the lower end of its pricing range at Rs160. Investors are concerned over valuation and how the company intends to transport its oil. The Indian unit of London-listed Cairn Energy Plc would bring up $1.9 billion at the lower end of the price band of Rs160-190 per share.

Most-active stocks

i-Flex was the most-active stock with a turnover of Rs 128.65 crore followed by Reliance Communications, SBI and Reliance Industries.

Advancers

Oil exploration large-cap ONGC led the gainers, up 4.44% to Rs 852.60 on high volumes of 9.30 lakh shares, on reports of the discovery of a gas find in the Bay of Bengal, with initial estimates of likely reserves of about 21 trillion cubic feet.

Ranbaxy Laboratories gained 4.27% to Rs 390.80. Ranbaxy made a collaborative agreement with the Department of Science & Technology, Government of India, New Delhi, in the area of New Drug Discovery Research in which the Department of Science & Technology will give financial aid by way of s loans to the company.

Tata Motors advanced 3.74% to Rs 889.90 following its statement on Monday it had made a joint venture with Thonburi of Thailand to produce pick-up trucks. Wipro gained 3.85% to Rs 586, TCS rose 2.41% to Rs 1,184 and Hero Honda added 1.74% to Rs 743.30.

Index heavy Reliance Industries staged a strong performance, up 3.29% to Rs 1,294.80 on 8.10 lakh shares. Reliance has paid advance tax of Rs 444 crore for the third installment bringing its total remittance this fiscal year to Rs 1102 crore higher than Rs 848 crore paid in the same period a year ago. Report suggest that Reliance is in talks with Gazprom of Russia to invest in Russian refinery and petrochemical industry.

Tata Power Company soared 6.73% to Rs 595.25 on reports that it had won a bid for building a 4,000 megawatt coal-fired plant at Mundra in western India.

UltraTech Cement surged 5.20% to Rs 1,075 on the news that it had paid advance tax of Rs 96 crore for the third installment of 15 December 2006.

Decline

BHEL led the decliners, 4.54% lower to Rs 2,383. Other decliners included NTPC,, falling 1.82% to Rs 140.50 Reliance Energy down 1.27% to Rs 533.15, Gujarat Ambuja shedding 0.96% to Rs 138.70 and Hindalco losing 0.87% to Rs 176.40. Hindustan Zinc declined 4.69% to Rs 852 after it reduced zinc and lead prices by 0.35% and 0.22% respectively.


[R]9:45AM Stocks rallied at opening on merger deals and brokerage upgrade of Citigroup.[/R]
U.S. stocks advanced at opening Monday, as a number of takeover deals raised hopes of continued corporate confidence at the end of the year. Pharmacy benefits manager Express Scripts ((ESRX)) confirmed its hostile $26 billion bid for larger rival Caremark RX. Express Scripts fell 2.3%, while Caremark rose over 10.3%. In another deal, Realogy ((H)) agreed to be acquired by private equity firm Apollo Group for about $6.65 billion. Realogy shares surged 21.8%. Again in the merger-and acquisition news, Harrah''s Entertainment ((HET)) is reportedly close to accepting an improved offer from private equity firms Apollo and Texas Pacific Group. Harrah''s shares climbed 2.8%.

Dow component Citigroup ((C)) rose 0.7% after Merrill Lynch upgraded its stock to a buy from neutral. In early trading, significant strength emerged in the disk drive sector, with SanDisk ((SNDK)) posting a notable gain on news of a $300 million stock buyback. The semiconductor, networking, and airline sectors also showed strength. In the first hour of trading, the Dow Jones industrial average rose 27.48, or 0.22%, to 12,473.00. The Standard & Poor''s 500 index was up 3.17, or 0.22%, at 1,430.26, and the Nasdaq composite index added 9.37, or 0.38%, to 2,466.57. Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.57% from 4.60% late Friday.


[R]9:30AM The FTSE 100 traded unchanged near six-year high on Monday.[/R]
The FTSE 100 in London traded unchanged in mid-afternoon down 1.40 points, or 0.02%, at 6,258.60.

Advancers

Smith & Nephew leads the advancers on a broker upgrade, up 8.8% despite reports it is not the favourite to win the race for US group Biomet, with private equity groups now said to be in ahead. Marketmen are suggesting that Smith & Nephew could be a target once the Biomet auction is dealt with. Merrill Lynch upgraded Smith & Nephew to buy and raised its price target.

Petrofac, the oil services company, announced its profits would be towards the top end of current market expectations. Its shares rose 3.7%.

Drug developer SkyePharma, 6.90% higher, announced the US Food and Drug Administration had approved modifications to its asthma treatment Foradil Certihaler.

National Express reported it is trading ahead of forecasts. The trains division witnesses a better second half with strong passenger growth.

Decliners

BT Group declined as the telecommunications group unveiled plans to resolve its huge pension deficit. BT is ready to pay 500 million pounds into the fund this month followed by another 280 million pounds per year between 2009 and 2015 in a bid to address its 3.4 billion pounds deficit. Its shares shed 2.1%.

Software group nCipher was lower 10.00%, giving a warning that its recent acquisition Abridean has turned out a disappointment and that it will now take longer than thought before for Abridean to make a profit.


[R]9:00AM Stock futures pointed to a strong opening on merger activity.[/R]
U.S. stock market futures looked ready to extend the year-end rally, boosted by takeover activity and upgrade for Citigroup. Harrah''s Entertainment ((HET)) is close to being sold to private equity firms Apollo Management and Texas Pacific Group for at least $90 a share. Two Norwegian oil companies agreed on a takeover deal. Statoil agreed to buy the oil and natural-gas division of Norsk Hydro in a deal that will create the world''s largest offshore operator. And in broker moves, Citigroup ((C)) was upgraded to buy from neutral at Merrill Lynch , citing expectations of accelerating growth in 2007.

In corporate news, Dell Inc. ((DELL)) said after Friday''s closing bell that it received a letter from Nasdaq pointing that the company is not in compliance with continued listing requirements due to delayed Q3 results. Three executives at Time Warner ((TWX)) are reported to consider quitting as part of a reorganization plan. On Monday software maker Oracle ((ORCL)) is expected to post higher quarterly profit and sales. Other companies scheduled to report earnings were Morgan Stanley ((MS)), Circuit City Stores Inc. ((CC)), and FedEx ((FDX)). Dow Jones futures were recently up 20 points, S&P 500 futures gained 3.3 points and Nasdaq futures rose 8.5 points.


[R]8:15AM Express Scripts to offer $26 billion for Caremark.[/R]
Pharmacy-benefit manager Express Scripts Inc. ((ESRX)) announced a $26 billion cash-and-stock acquisition bid for Caremark Rx Inc ((CMX)), making an effort to break up the already existing company''s takeover deal with drug chain CVS Corp. Pharmacy-benefit managers control the flow of medications through retail stores and health institutions.

Express Scripts is a small company with a market capitalization of $9.3 billion, and debt of around $1.6 billion. It said it would pay $29.25 in cash and 0.426 shares in Express Scripts for each share of Caremark. The deal would value Caremark at $58.50 a share. The transaction awarded no premium to Caremark''s shareholders. On Friday, Caremark''s shares closed at $50.30 on the NYSE. The offer could start struggle for Caremark at a time when the company''s deal with CVS was gaining credibility in the market. For the first six months of the year, Caremark reported net income of $483.9 million on revenue of $18.35 billion.


[R]7:30AM Asian markets rose on Monday, helped by gains in Japanese exporters.[/R]
Asian markets advanced on Monday. The Nikkei 225 Index in Japan advanced 0.3% to 16,962.11. Exporter Honda advanced 2.6%, while camera and chip-equipment maker Nikon gained 1.2%. Toyota also added 1.5% after the a newspaper report claimed the auto maker plans to build 9.45 million vehicles world-wide in 2007, a rise of 400,000 over 2006. Toshiba jumped 1.3% after a weekend announcement that its U.S.-based Westinghouse Electric unit cut a deal to build four nuclear power plants in China.

The Hang Seng Index in Hing Kong advanced 0.4% to 1919,2.91. China Mobile gained on speculation that China will soon issue 3G wireless licenses. It finished 1.9% higher. China Life, surged 10.2% after Merrill Lynch lifted its price target. Hutchison Whampoa restricted the market gains, shedding 0.8% as speculation it would sell its 3G wireless operations in Europe faded away.

Australia S&P ASX/200 gained 0.3% to 5,591.50, despite miners being broadly lower, tracking falls in industrial metals prices. Shares of BHP Billiton shed 1.4%, while the other large-cap Rio Tinto declined 1.1%. Share indexes in South Korea gained 0.8%, while New Zealand NZX-50 Index fell 0.01% to 3,991.88. Taiwan Weighted Price Index advanced 1.1% to 7,624.62, and Singapore Straits Times Index advanced 1.1% to 2,963.44. China Shanghai Composite Index also gained 2.6% to 2,332.43.


[R]6:30AM European markets gained on Monday supported by Norsk and Statoil deal.[/R]
European markets were broadly higher on Monday. By mid morning, the FTSE 100 in London was flat at 6,259.3, Frankfurt Xetra Dax gained 0.2 % to 6,599.51 while the CAC 40 in Paris retreated 0.1 % to 5,535.67.

Advancers

Norsk Hydro of Norway gained 24.2% and Statoil gained 3% after the companies agreed to merge their oil and gas activities, creating a national champion with combined production of 1.9 million barrels a day. The merged company would become the largest offshore energy producer in the world.

Italian carmaker and industrial group Fiat advanced 2.2% after official of the company stated that it would pursue international alliances. Volkswagen advanced 1.6% as the battle for control of the German carmaker heated. Press reports revealed the state premier of Lower Saxony is to meet leading institutional investors to gauge whether to oppose a likely decision by Porsche, largest shareholder of VW. Shares in Porsche rose 1%.

Atlas Copco rose 2.5% after Deutsche Bank announced it was resuming coverate of the stock with a buy. Dutch computer services company Getronics gained 4.2% after it was reported that Telefónica, the Spanish telecoms group, was considering a bid approach.

Decliners

BT Group declined 2.1% following its statement that under more conservative valuation standards, its pension scheme deficit at Dec. 31, 2005, was 3.4 billion pounds. Also, Tate & Lyle dipped 3% after it said that sugar pricing is unlikely to recover in Europe in 2007. Irish banks declined as investors took profits after a recent strong trading. Allied Irish shed 1.6%, while Bank of Ireland lost 1.4%.

Oil and gold

Oil prices declined from highs last week but was above $63 a barrel in early Monday trading. Light sweet crude oil for January delivery fell 29 cents to $63.14 as traders cashed in on gains last week. February Brent crude at London ICE Futures exchange retreated 24 cents to trade at $63.25 a barrel.

Gold traded in London at $617.50 per troy ounce, down from $622.83 late Friday. In Zurich, gold traded at $615.60, down from $621.70.

Currencies

The U.S. dollar was broadly down against other major currencies in European trading Monday morning. The euro traded at $1.3089, up from $1.3078 late Friday. The British pound traded at $1.9489, lower from $1.9503. The dollar bought 117.72 Japanese yen, down from 118.16.