Oil to Drive Early Trading

albena
30 Nov, -0001
New York City

Futures are higher Wednesday morning and stocks seem poised to continue the Fed rally from Tuesday, shrugging off weaker-than-expected outlook from tech bellwether Cisco and rising oil. In mid-morning, the government is due to release its weekly petroleum inventory statistics, which is likely to affect the oil market.

U.S. AVERAGES

U.S. stock futures were higher in early trading Wednesday, pointing to a further rise in stocks at opening, after the Fed statement Tuesday afternoon said that inflation appears to be well contained, and that spending and the labor market have strengthened.

The Fed as expected lifted short-term interest rates a quarter percentage point. Stocks rose as a result of the Fed statement, and despite the pullback in the afternoon, major indexes closed higher Tuesday.

Cisco posted gains in 4Q earnings and revenue, but forecast that 1Q guidance sales would stay unchanged to slightly below 4Q revenue sent the company’s stock down in after-hours trading Tuesday. Shares shed nearly 4% in Frankfurt trading early Wednesday.

Oil prices were up ahead of the weekly report on U.S. fuel inventories.

Mortgage giant Fannie Mae confirmed Monday that it will miss the deadline this week for filing its 2Q earnings report with the SEC. The company’s top executives will host a conference call Wednesday at 8:30 a.m.

In earnings news Walt Disney outpaced profit forecasts, as did insurer AIG, another Dow member that posted a strong jump in earnings.

Walt Disney's 3Q profit rose 41% on growth in the company's media networks business and parks and resorts segment. Separately, a Delaware judge Tuesday exonerated its directors in a long-running lawsuit over the hiring and firing of former President Michael Ovitz.

ECONOMIC NEWS

The economic calendar is fairly light Wednesday, with investors focising their attention back toward oil. The government is due to release its weekly petroleum inventory statistics in the mid-morning.
INTERNATIONAL MARKET NEWS

Asian-Pacific markets closed mostly up with the Nikkei among the leading gainers, rising 1.66% on optimism for the Japanese economy and strong gains on Wall Street after the Fed Reserve raised interest rates in line with expectations. In Tokyo all sectors gained with export-related issues in the lead. Among the other gainers in the regional markets, Hong Kong’s Hang Seng added 1.98% and South Korea’s Kospi rose 0.5%. The dollar was trading at the upper end of 111-yen.

European markets traded mostly higher at mid-day, supported by data of slowing inflation pace in the U.S., increased U.S. interest rates to 3.5%, bullish Japanese equity markets and upbeat results in the regional stocks from insurer Allianz and airline Lufthansa. The German DAX 30 gained 0.6%, the French CAC 40 added 0.4%, while London’s FTSE 100 lost 0.1%, hurt by stocks trading without rights to dividend payments. The euro and the pound gained 0.2% to trade at $1.2382 and $1.7904 respectively.

ENERGY, METALS AND CURRENCIES MARKETS

Global crude-oil prices rose ahead of the latest weekly U.S. inventory data. Light sweet crude for September delivery gained 54 cents to trade at $63.61 a barrel. London Brent advanced 75 cents to $62.73.

Gold futures rose on falling dollar in early European trading. Gold in London traded at $436.30 per troy ounce, up from $433.35. In Hong Kong gold gained 90 cents too close at $435.65. Silver opened at $6.98, up from $6.96.

The U.S. dollar was mostly lower against its major counterparts in the morning European trading. The euro was quoted at $1.2406, up from $12366. The yen stood at 110.90, down from 111.96. The British pound was traded at $1.7946, up from $1.7864.

Treasury prices were higher, cutting the yield on the 10-year note to 4.37% from the 4.39% level late Tuesday.

EARNINGS NEWS

Cisco Systems’s 4Q net income rose 11.6% to 24 cents a share vs. 20 cents a share a year ago. Sales at the network equipment maker rose 11.1% to $6.58 billion.

Walt Disney Co. reported a 41% jump in earnings to 41 cents a share vs. 29 cents a share a year ago. Revenue was $7.72 billion vs. last year's $7.47 billion.

Panera Bread’s 2Q net earnings rose 61% to 33 cents a share vs. 21 cents a share, in the year-ago period, meeting analysts’ forecasts. The company expects a 3Q per-share profit of 34 - 35 cents, and 4Q net earnings of 46 - 47 cents a share. For 2005, Panera forecast net earnings of $1.57 - $1.59 a share and comparable sales growth of 6.2% - 7.8%

ECost.com, online discount retailer, reported a 2Q net loss of 54 cents a share vs. breakeven last year, citing cited additional operating costs and increased public company costs from its spinoff from PC Mall Inc., as well as a $6.5 million non-cash tax provision.

AIG Inc., posted 2Q profit of $1.53 per share vs. $1.01 per share last year, attributing the increase to large accounting gains booked during the quarter. Analysts expected the New York-based insurer to earn $1.21 per share during the period.

Allianz AG, insurer, said 2Q net income, adjusted for goodwill amortization, climbed 65% to 846 million euros, with revenue up 6.6% to 23.7 billion euros, beating the company’s expectations.

Lenovo Group, PC maker, said 4Q earnings rose 6% to HK$357 million ($46 million), with revenue up 234% to HK$19.6 billion.

Lufthansa, airline company, said it reversed to a 2Q profit of 116 million euros as operating profit rose 87.2% and revenue was up 4.3% on increased sales and better average fares.

CORPORATE NEWS

Tupperware Corp. ((TUP)) is near a deal to buy the direct-selling unit of Sara Lee Corp. ((SLE)) for between $500 million and $600 million, according to reports Wednesday.

Unocal Corp.'s shareholders vote today on Chevron Corp.'s $17.8 billion cash and stock acquisition offer. Cnooc Ltd., China's largest offshore oil producer, last week abandoned a months-long effort to buy Unocal, blaming the political atmosphere in Washington.

SES AMERICOM and Comcast Media Center, a unit of Comcast Cable revealed a joint marketing and services agreement that focuses on providing centralized solutions to support the cable industry delivery of advanced services offerings, such as HD, VOD, and VoIP.

Questerre Energy disclosed the receipt of regulatory approval for the re-entry program at the Beaver River Field in British Columbia. The company targets production from shallow Mattson sands and expects production from the wells in early 2006. Apace Petroleum Inc., the company's farm-in partner, intends to start the first phase of the program in September 2005. It would work on re-entry, perforation and testing of two existing wells, with two additional re-entries scheduled for the winter, and fracture stimulation, if required. Apace Petroleum would fund 100% of the costs of the initial program and would receive 50% interest in the wells for the Mattson and Questerre would retain the remaining 50% interest.

OTHER NEWS

China disclosed for the first time Wednesday the composition of the basket of currencies used to set the yuan's value, saying it mainly includes the U.S. dollar, euro, Japanese yen and Korean won. The currencies of Singapore, Britain, Malaysia, Russia, Australia, Canada and Thailand are also considered in setting the yuan's foreign-exchange rate. Zhou Xiaochuan, the central bank governor didn’t mention Hong Kong dollar or Taiwan dollar in his statement though these are the currencies of two of China's important trading partners. There was no information about the weighting of each currency in the basket.