Market Futures Point Lower

Elena
05 Feb, 2007
New York City

U.S. stock markets looked poised for lower opening Monday on profit-taking after last-week solid gains and ahead of key economic data. The ISM report is expected to show that the services sector is expanding at a higher rate. Wal-Mart Stores was in focus as the world''s biggest retailer warned that it will deliver the lowest annual same-store sales growth in more than 25 years after posting 2.2% rise in January same-store sales.

[R]9:00AM Market futures pointed lower ahead of key economic data.[/R]
U.S. stock markets looked poised for lower opening Monday, as investors tried to lock in profits after solid gains posted the previous week. The market awaited an economic report from the Institute of Supply Management, expected to show that the services sector is expanding at an increasing rate. Wal-Mart Stores ((WMT)) was a pre-market highlight as the world's biggest retailer warned that it will deliver the lowest annual same-store sales growth in more than 25 years after posting 2.2% rise in January same-store sales. At the same time, the results topped analyst predictions that sales in U.S. stores open for at least one year would rise annually by 1% to 2% in the five-week period, ending Feb. 2.

Several merger-and-acquisitions deal also attracted attention. In the financial sector, Investors Financial Services Corp. ((IFIN)) climbed 35% before the opening bell after the company agreed to be acquired by State Street Corp. ((STT)) for about $4.5 billion. In another deal, Triad Hospitals Inc. ((TRI)) accepted a takeover bid from private equity buyers in a deal worth $6.4 billion, including about $1.7 billion of debt. The stock jumped 15% in pre-market trading. Herbalife ((HLF)) said it received an acquisition offer of $2.7 billion from Whitney V L.P. and its affiliates. The offer represents a 14.8% premium to the Herbalife's closing share price Friday of $33.10. Company's shares traded up 19% in pre-open. Hanover Compressor ((HC)) and Universal Compressor ((UCO)) agreed to swap stock in a $3.8 billion deal. Hanover's stock rose 8%, while Universal Compressor gained nearly 5%. S&P 500 futures slipped 2.80 points at 1,450.30 and Nasdaq 100 futures dropped 3.00 points at 1,804.25. Dow industrial futures fell 21 points at 12,668.


[R]8:30AM NY-7:30PM Mumbai - Sensex rallies on the back of strength in telecom and auto stocks.[/R]
The Sensex on BSE ended the session on Monday 112.13 points, or 0.78%, higher at 14,515.90. The market-breadth was strong as mid-cap and small-cap companies also took part in the rally. For every three advancers, there were two decliners. As 1,529 shares advanced on BSE, 1,135 declined and 60 shares were unchanged. Of the 30 stocks in the Sensex, 21 advanced, while the rest declined. The turnover on BSE was Rs 4,691 crore, lower than Rs 5,433 crore on Friday. On NSE, the turnover amounted to Rs 9,185.62 crore, lower than Rs 10,257.56 crore on Friday.

Economic news

Indian Finance Minister P Chidambaram said earlier on Monday that India’s increased credit rating will be beneficial to foreign fund inflows. Investors hope that the finance ministry will pay special attention to agriculture and infrastructure in the budget.

Trading highlights

Shree Ashtavinayak was the most-active stock with a turnover of Rs 314.80 crore followed by Auto Industries and Reliance Communications.

New issue, First Source is oversubscribed 47 times according to baking sources.

Advancers

Reliance Communications led the advancers, surging 5% to Rs 515.75. Mobile services companies rallied today on the decision of the Telecom Regulatory Authority of India to reduce termination charges. Bharti Airtel also advanced 1% to Rs 779.40. Auto stocks rallied on investor expectations that in the upcoming budget excise and sales tax may be lowered on small cars. Largest auto maker Maruti Udyog gained 2% to Rs 965, while Tata Motors added 1% to Rs 920. Bajaj Auto advanced 1.7% to Rs 2,827 and Hero Honda edged 1.2% higher to Rs 724.90.

Strong demand for housing loans helped HDFC to gain 4%, to Rs 1,818 while Reliance energy surged 2.8% to Rs 549 on reports that it will bid for Globeleq, a British power investment company. Tata Steel advanced 1.7% to Rs 471. Index heavy Reliance Industries gained 1.3% to Rs 1,390 and The State Bank of India edged 1.2% to Rs 1,196 on the news that the company plans to raise $700 million by the end of this quarter. Indiabulls Financial Services surged 2.3% to Rs 452.25, as the company reported it was considering restructuring and separating its financial brokerage and consumer finance business to a separately listed company.

Decliners

The decline in base metal stocks on the London Metal Exchange brought metal shares down. Hindustan Zinc shed 5.7% to Rs 653.50, Sterlite Industries lost 6.6% to Rs 485.50 and Hindalco plunged nearly 3% to Rs 177.80. Wipro declined 1.3% to Rs 635.


[R]8:00AM State Street agreed to buy Investors Financial Services for $4.5 B.[/R]
State Street Corp. ((STT)) announced an agreement to buy Investors Financial Services Corp. ((IFIN)) in a deal worth about $4.5 billion in stock. In terms of the deal, Investors Financial shareholders will receive 0.906 shares of State Street common stock for each share held, based upon the closing price of State Street common stock on February 2. The average number of State Street common shares issued in the transaction will be 62 million. The transaction is expected to be dilutive to State Street''s operating earnings in 2007, neutral to earnings in 2008 on an operating basis. Ii is also anticipated that the deal will boost earnings in 2008 on a cash basis and lift operating earnings in 2009, based on anticipated pre-tax cost savings of approximately $345 million to $365 million in the first two years following closing. State Street expects to take restructuring charges of between $625 million to $675 million. On completion of the deal, State Street will possess more than $14 trillion in assets under custody.


[R]7:30AM Asian market finished mixed on Monday with Japan down on Nissan.[/R]
Asian markets finished mixed on Monday. The benchmark index Nikkei 225 Index in Japan finished 1.2% lower at 17,344.80. Nissan Motor slumped 8.4% after it reported a 23% decrease in Q3 net profit and reduced its full-year guidance. Toyota and Honda also declined 1.6% and 3.6% respectively. Inpex Holdings, the leading Japanese oil producer also shed 0.4%, but Nippon Oil, the largest refiner in Japan advanced 1.7%. Consumer-electronics company JVC gained on rumors that its parent firm Matsushita Electric Industrial is considering selling its stake in the JVC to a private-equity group.

In South Korea, the Kospi index edged up 0.3% to 1,417.95. Hyundai Motor declined 0.8% as its chairman was sentenced to three years in prison on fraud. In HK, the benchmark index Hang Seng Index finished 0.5% lower at 20,455.62 as traders took profits in China Mobile and HSBC. HSBC finished 0.6% lower, while China Mobile shed 0.3%. Apparel retailer, Esprit Holding bucked the trend and gained 3% after Citigroup and UBS lifted their target prices on the share. China Shanghai Composite continued its losing streak and dipped 2.3%, Australian S&P/ASX 200 shed 0.2%, while New Zealand NZSX-50 gained 0.1% and Taiwan Weighted Price Index ended 0.1% higher.


[R]6:30AM European markets traded flat on Monday on weakness in banks, autos.[/R]
European markets were flat on Monday. By mid morning, FTSE 100 in London was marginally 0.1% higher at 6,314.3, Frankfurt Xetra Dax dipped 0.2% to 6,874.6 and the CAC 40 in Paris was flat at 5,674.98.

Advancers

Irish airline company Ryanair surged 6.1% on an upbeat figures of Q3 results. The company posted a surprising 30% increase in Q3 net profit, contrary to analysts’ expectations. Oil companies gained as the price of crude oil was firm around $59 in early trading. French Total advanced 0.7%, while BP added more than 1.3%. Property groups were also stronger with Unibail of France leading the sector higher, rising 4.8% on an update to overweight from neutral by JP Morgan.

Decliners

The leading decliners were Credit Suisse, falling 1% and pulling the sector lower as ING lowered its recommendation on the stock and reduced its rating from buy to hold, which led to profit-profit. Faurecia, the largest maker of auto interior in Europe plunged 5.6% after it said its loss widened after writing down assets for a second year in a row. Faurecia led other major companies lower like Renault, down 1% and DaimlerChrysler AG, off 0.4%. Of the stocks in focus, Endesa lost 2.8% after German utility Eon submitted its renewed bid for acquiring the Spanish company, which was lower than Endesa closing price on Friday.

Oil and gold

Oil prices declined on Monday below $59 and were down 15 cents for light, sweet crude for March delivery at $58.87 a barrel on the New York Mercantile Exchange. Brent crude for March delivery on the ICE Futures exchange dipped 31 cents to $58.10 a barrel. A report of losses at metals-trading hedge fund Red Kite Management Ltd sent gold futures lower on Monday. Gold for immediate delivery fell $1.37 an ounce, or 0.2%, to $646.48.

Currencies

A decision on European interest rates later this week weighed on the euro and the 13-nation currency lost to the US dollar. The euro fetched $1.2940 in morning European trading, down from $1.2967 in New York late Friday. The British pound also declined to $1.9591 from $1.9673, while the dollar retreated to 120.74 Japanese yen from 121.07 yen.