Commodities Lift Stock Futures

Elena
08 Jan, 2007
New York City

U.S. stock futures moved slightly higher Monday, boosted by investor optimism about corporate profits ahead of the release of Q4 financial results. The pre-market sentiment was also helped by recovering commodity prices, as well as several acquisition deals. GE agreed to buy Vetco Gray for $1.9 B, while Forest Oil agreed to buy Houston Exploration for $1.5 B in cash and stock. Further in deal news, Caremarx rejected a $26 B offer from Express Scripts in favor of a stock swap with CVS for $21 B.

[R]9:00AM Market futures traded higher, helped by commodities.[/R]
U.S. stock futures moved slightly higher on Monday, boosted by investor optimism about corporate profits ahead of the release of fourth-quarter financial results. The pre-market sentiment was also helped by recovering commodity prices, as well as a number of acquisition deals. Oil prices started rising back after steep declines last week, following Saudi Arabia's promise to fully implement the production cuts it had agreed to in previous OPEC meeting. Shares in leading European oil and metals companies like BHP Billiton ((BHP)) and BP ((BP)) advanced. Dow component Exxon Mobil ((XOM)) also gained, rising 1% in pre-open trading. Again in the energy sector, General Electric ((GE)) agreed to buy the supplier of drilling and production equipment Vetco Gray for $1.9 billion, while Forest Oil ((FST)) agreed to buy Houston Exploration for $1.5 billion in cash and stock.

Further in deal news, Caremark Rx ((CMX)) rejected a $26 billion offer from Express Scripts ((ESRX)) in favor of a stock swap with CVS ((CVS)) valued at $21 billion. United Surgical Partners ((USPI)) said it agreed to be acquired by UNCN Acquistion Corp. for $1.8 billion, or $31.05 a share, including debt assumption. Seattle Genetics ((SGEN)) surged 28% after it said it entered into a license agreement with Genentech ((DNA)). In other corporate news, blue chip retailer Wal-Mart ((WMT)) fell 1.3% after Goldman Sachs downgraded the world's largest retailer, citing weaker sales. At the same time, UBS upgraded IBM ((IBM)) to buy from neutral, citing improving fundamentals in its core businesses. S&P 500 futures rose 3.30 points at 1,419.70 and Nasdaq 100 futures added 2.75 points at 1,800.00. Dow industrial futures rose 15 points to 12,465.


[R]8:00AM General Electric agreed to buy Vetco Gray for $1.9 billion.[/R]
General Electric Co. ((GE)) announced on Monday an agreement to purchase oil services company Vetco Gray for $1.9 billion from a group of private equity funds including Candover Partners Ltd., 3i Group PLC & JP Morgan Partners LLC.

GE is a diversified conglomerate with interests in industrial operations, finance and media, whereas Vetco Gray provides drilling, completion and production equipment for oil and gas fields. Vetco has 5,000 employees in more than 30 countries, with key centers in Houston in the U.S., Britain, Norway and Singapore. The acquisition will enable GE to grow faster in a rapidly expanding global business. The transaction is subject to governmental and regulatory approval and is expected to complete in early 2007.


[R]7:30 AM Asian markets plunged on Monday on strong US job report.[/R]
Asian markets finished lower on Monday. Markets were closed in Japan. The Hong Kong Hang Seng Index finished the day 0.9% lower at 20,030. Advances in property developers failed to keep the benchmark index in positive territory, as mainland large-caps declined after China again lifted commercial banks reserve requirement ratio to control liquidity growth. Bank of Communications shed 3.7%, China Construction Bank lost 3.4%, Industrial Commercial Bank of China fell 3.4% and Bank of China shed 3%.

The Kospi Index in South Korea fell 1.1% to 1,371. Samsung Electronics, slated to report its fourth-quarter earnings Friday, declined 2.2%, an indication of investor pessimism over its earnings. The Shanghai Composite Index surged 2.5% to 2,707. Institutional buying in power generators and coal producers pushed shares up, with the market largely ignoring the plan of the central bank to raise the reserve requirement ratio. SDIC Huajing Power rose by the maximum 10%, Huadian Power International gained 7.8%, Guizhou Panjiang Refined Coal surged 4.1% and Shanxi Antai Group hit the 10% upside limit.

Australia S&P/ASX 200 declined 1.3% to close at 5,502. Metal prices and falls on US markets weighed on the stock market, as Zinifex dropped 6.1%, Minara lost 4.9%, Copper and gold producer Oxiana shed 4.8% and major gold miner Newcrest slipped 3.9%.


[R]6:30AM Europe higher on Monday on firm software, auto and aerospace shares.[/R]
European markets advanced on Monday. By mid-morning, the U.K. FTSE 100 index rose 0.3% to 6,240.30, while the German Xetra Dax added 31.4 points or 0.5% at 6,624.5 and the French CAC 40 rose 25.3 points or 0.5% at 5,542.7.

Advancers

Saint-Gobain led gainers with a rise of 2.8 % after Exane BNP Paribas raised its price target and reiterated an outperform recommendation. Safran rose 2.6% in spite of a downgrade for the French aerospace company from Citigroup which reduced its price target and reiterated a sell recommendation.

SAP added 2.3% ahead of the German software giant fourth quarter sales figures with an upbeat buy note from ABN Amro helping to boost sentiment.

British Airways shares climbed 1.1% after it said that its unions have agreed to recommend changes to its pension scheme. Budget airline EasyJet rose 1.8% after it said that the number of passengers it carried in December rose 11.2% to 2.6 million from the same point a year ago

Volkswagen said over the weekend that it sold 5.73 million vehicles in 2006, up 9.3% from the previous year. It shares rose 1.7%. Peugeot Citroen shares rose 1.3% early Monday after it estimated 2007 demand would come in at least at the same level as in 2006 and said sales in markets outside Western Europe continue to increase, led by the launch of new Peugeot and Citroen models. Luxury-car maker Porsche rose 2.6% after it was upgraded to buy at Goldman Sachs.

Decliners

There were no notable decliners in early European trade.

Oil and gold

Light, sweet crude for February delivery rose 27 cents to $56.58 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude for February delivery rose 43 cents to $56.07 a barrel on the ICE Futures exchange in London.

Purchases from jewelers and investors lifted the price of gold on Monday. Gold hit a low of $606.20 an ounce before rebounding to hit an intraday high of $609 an ounce

Currencies

The British pound rose versus the euro last week after reports showed house-price inflation at an 18-month high, mortgage approvals at the highest in three years, and service industry growth at the fastest in a decade. Against the euro, the pound was at 67.32 pence in early trade in London from 67.38 pence on Jan. 5. It also traded at $1.9326, from $1.9296. The dollar slipped 0.1% to $1.3016 against the euro.

The yen rose for a third day against the dollar on speculation central bank chiefs from the Group of 10 nations meeting in Basel, Switzerland today will say Asia and Europe are able to withstand a slowdown in the U.S. The yen traded at 118.45 against the dollar in London, from 118.63 late on Jan. 5 in New York.