Deals, Lower Oil, Steady Markets

123jump.com Staff
08 Jan, 2007
New York City

Consumer borrowing rose at three-month high rate ahead of holiday season spending. Consumer debt as a percentage of total in income in Novmber held steady at 21.5% and is down from 22.5% in October. Healthy job market has supported a steady rise in retail sales. Tech and financial sectors advanced. NCR plans to spin-off is data warehousing unit, Teradata. Asian markets closed lower. Latin American markets rebounded on rise in precious metals prices.

[R]4:00PM NY – 10:00PM Frankfurt – 3:30Am Mumbai[/R]
[R]Tech and financial stocks led mild rally in New York trading. Markets in Asia closed lower. Markets in Europe closed mixed but that in Latin America closed higher on a rebound in metals and oil prices.[/R]

Yield on 10-year U.S. bond closed at 4.650% and the 30-year bond closed at 4.745%.

Gold advanced $3.20 to close at $610.10 a troy ounce, silver gained 16.5 cents to end at $12.395 a troy ounce and copper lost 45 cents to close at 253.45 cents per pound.

Oil lost 24 cents to close at $56.070 a barrel and heating oil declined 0.66 cents to finish at 155.92 cents a gallon. Natural gas increased 23.8 cents to close at $6.422 per MMBtu.

Asian markets closed lower led by Japan with a decline of 1.51%, India with a loss of 1.50% and Philippines with a decrease of 1.47%. The only advancer was Thailand with a gain of 0.90%. Asian markets plunged due to strong U.S. jobs report last week which checked expectations that the Federal Reserve will reduce interest rates.

European markets finished mixed as the shares of oil giants and weakness for drug companies offset strength generated by resource stocks, technology and telecommunications companies. The advancers were Belgium with a gain of 0.57%, Germany with an increase of 0.22% and Spain with an advance of 0.12%. The decliners were Switzerland with a decrease of 0.56%, U.K. with a loss of 0.42% and Netherlands with a decline of 0.25%.

Latin America markets ended higher led by Brazil with a gain 1.38%, Canada with an increase of 0.73% and Mexico with an advance of 0.44%. The Latin America markets started to rebound as international oil and commodity prices recovered.


[R]1:00PM European markets closed mixed on volatile oil and weak drug companies.[/R]
European stocks closed mixed on Monday as a reversal in the shares of oil giants and weakness for drug companies offset strength, contributed by resource stocks, technology and telecommunications companies. London FTSE 100 slipped 0.4%, with BP falling 0.8% as volatile oil prices dropped back to $55.10 after reaching as high as $56.36. British Airways shares also retreated from earlier highs to trade down 0.8%. Ireland drugmaker Elan dropped 7% and GlaxoSmithKline fell 2.2%, offsetting gains for metals producers including Lonmin. The German DAX 30 ended up 0.2%, supported by the technology sector, with shares in software provider SAP rising 3.4%. Telecom stocks such as Deutsche Telekom also provided help. The stock rose 1.2%. An auto gainer was luxury-car maker Porsche, climbing 3.2% after it was upgraded to buy at Goldman Sachs. The French CAC 40 ended flat at 5,519.59, helped by PSA Peugeot Citroen, up 1.4%.

Crude oil prices slipped back toward $55 a barrel on mild winter weather and ample supplies. Crude oil February contract fell $1.03 to $55.28 a barrel. Heating oil fell to $1.5515 a gallon, while gasoline fell 4 cents to $1.4570. Natural gas rose 21 cents to $6.392 per 1,000 cubic feet. London Brent slipped $1.01 to $54.63. The U.S. dollar was mixed against its major currency rivals. The euro was quoted at $1.3021, down from $1.3027. The dollar bought 118.49 yen, down from 118.60. The British pound was quoted at $1.9375, up from $1.9301. European gold prices turned mixed. In London, gold traded at $607.10 per troy ounce, down from $609.50. In Zurich, the precious metal traded at $607.50 per ounce, up from $601.95. Silver closed at $12.18, up from $12.17.


[R]11:30AM Market traded lower ahead of Q4 earnings reports.[/R]
Stock averages traded down in late morning trading on cautiousness ahead of Q4 earnings and volatile crude oil prices. Initially, oil rebounded with a surge of more than $1 a barrel, but later dropped back down below the $56. A brokerage downgrade of Wal-Mart Stores and profit warnings also pressured stocks, offsetting the positive influence of merger-and-acquisition activity. Wal-Mart ((WMT)) was downgraded by Goldman Sachs, with the broker cutting its price target to $51 from $53. Shares of the retailer lost 0.6%. Molex ((MOLX)) fell 3.9%, while Schnitzer ((SCHN)) dropped 6.4% as the manufacturers warned quarterly profits might be disappointing. At the same time, RadioShack Corp. ((RSH)) rose 11% after saying its Q4 profit will beat year-earlier levels.

In corporate deals in the energy sector, Forest Oil Corp. ((FST)) rose 3.2% after it said it will buy Houston Exploration Co. ((THX)) for about $1.5 billion in stock and cash. Houston Exploration jumped 4.5%. Elsewhwere, Apple Computer ((AAPL)) rose 1.1% after JPMorgan reiterated an overweight rating on the iPod maker, and boosted its Q1 profit projections. In late morning trading, the Dow Jones industrial average fell 45.18, or 0.36% to 12,352.83. The Standard & Poor''s 500 index was down 3.82, or 0.27%, at 1,405.89, and the Nasdaq composite index dropped 3.53, or 0.15%, to 2,430.72. Bond prices dipped in the absence of any market-moving news, with the yield on the benchmark 10-year Treasury note rising to 4.66% from 4.65% late Friday.


[R]10:30 AM NY – 9:30 PM Mumbai The Sensex sheds 208 points on large-cap sell-off.[/R]
The Sensex on BSE finished 208 points, or 1.5% lower at 13,652.15. Despite sharp fall in indexes, market-breadth was strong with 1,731 shares advancing on BSE, 929 declining and 45 shares remaining unchanged. For every three advancers there were two decliners. The turnover on BSE was 3,716 crore, compared to Rs 4,545 crore on Friday. The turnover on NSE was Rs 7,619.67 crore, lower than Rs 8,771.98 crore.

Economic news

Arun Sarin, CEO of Vodafone may visit India on January 10. Vodafone is beginning the study of the books of its acquisition target Hutch Essar. India organized retail sector is undergoing a rapid change. The county’s industry based association now projects the retail sales in the organized sector to rise from $7 billion or Rs 35,000 crores in 2005 to $21 billion or Rs 100,000 in 2010. Several regional chains have been recently acquired by larger conglomerates to build a national presence.

In trade today

Infosys led stocks active in trading volume based on market cap with a turnover of Rs 148 crore followed by Pyramid Saimira and Tech Mahindra.

Advancers

ONGC led the few gainers. It advanced 2.5% to Rs 919 on the rise in oil price of 1% to $56.90 a barrel on Monday. Ranbaxy gained 1.2% to Rs 418.80, extending its rally on expectations of strong Q4 December 2006 results. Dr Reddy Lab also gained 0.1% to Rs 810.05 on expectations of strong Q3 December 2006 results.

Decliners

IT shares lost on profit-taking. Infosys shed 3% to Rs 2,205. Satyam Computer shed 3% to Rs 486, while Wipro lost 2.8% to Rs 582. In New York trading ADRs of Satyam fell 3% and Wipro dropped 2.8%.

Car large-cap Maruti Udyog plunged 4% to Rs 896. Bajaj Auto shed 2.6% to Rs 2,709. Tata Motors declined 1% to Rs 923 in volatile trade. Tata Motors ADR dipped 3.4% on Friday to $20.86.

Cement leader ACC lost 3% to Rs 1,022. Reliance Communications was down 2.8% to Rs 434.40 extending its decline of 3.7% from Friday. Hindalco shed 2.4% to Rs 167 and Sterlite Industries dropped 2.4% to Rs 530 on weakness in copper prices.

State Bank of India lost almost 3% to Rs 1,210. State Bank of India announced on Saturday that interest rates on domestic term deposits between Rs 15 lakh and Rs 1 crore, will be 8.25% on all maturities of one year and more. ICICI Bank finished flat at Rs 910. ICICI Bank dollar-denominated, three-tranche debt offering was well-received by the market.

Index heavy Reliance Industries lost 1% to Rs 1274.50 on 7.4 lakh shares traded on BSE.


[R]9:45AM Market opened lower amid rising oil prices.[/R]
Wall Street opened lower, as profit-taking ahead of Q4 earnings season and a rebound by oil prices contributed to the negative market mood, offsetting earlier gains made on the back of several merger deals. A barrel of light sweet crude rose $1.31 to $57.62 in trading on the New York Mercantile Exchange. Oil and gas shares opened higher as oil and natural gas prices rose on news that Saudi Arabia will fully implement previously announced production cuts. Copper and gold futures were also rebounding lifting mining shares. Again in the energy sector, General Electric Co. ((GE)) slightly declined after it agreed to acquire oil and gas fields equipment supplier Vetco Gray for about $1.9 billion.

Tech stocks traded down, although IBM ((IBM)) added 1.1% after UBS upgraded the stock. In the retail sector, Wal-Mart Stores ((WMT)) fell 0.6% on downgrade at Goldman Sachs. Limited Brands ((LTD)) also pressured retail stocks, falling 1.2%. However, home furnishings retailer Bed Bath & Beyond ((BBBY)) rose 2% after Goldman Sachs upgraded its rating on the company''s stock to buy from neutral.

Drug stocks were mixed as shares of Seattle Genetics ((SGEN)) surged 23% on news that it entered into a licensing agreement with Genentech ((DNA)) for its cancer drug candidate SGN-40. In addition, shares of United Surgical Partners ((USPI)) climbed 13% after the company agreed to be acquired by Welsh Carson for about $1.8 billion. Pharmacy benefit manager Caremark Rx Inc. ((CMX)) dropped 1.6% as it announced late Sunday it rejected a $26 billion takeover bid from rival Express Scripts Inc. in favor of a $22.2 billion offer from drug store chain CVS Corp. ((CVS)). In the first hour of trading, the Dow Jones industrial average fell 37.01, or 0.30%, to 12,351.00. The Standard & Poor''s 500 index was down 2.72, or 0.19%, to 1,406.99, and the Nasdaq composite index dropped 5.71, or 0.23%, to 2,428.54.


[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 Acquisition 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.