Oil Above $59, Alcoa Bid Speculation

123jump.com Staff
13 Feb, 2007
New York City

The Commerce Department reported that the trade deficit rose 6.5% in the year 2006 to $764 billion. Imports rose 12.8% and exports gained 10.4%. Market averages gained on buy out speculations for Alcoa. Materials and energy sectors rose as oil and metals prices climbed. Crude futures rose 2% to close above $59 after the International Energy Agency increased its forecast for global oil consumption this year. KB Homes reported a loss of $64 million compared to a gain of $344 million a year ago.

[R]5:00PM NY; 11:00PM Frankfurt; 3:30AM Mumbai - GLOBAL MARKETS[/R]
Large cap averages S&P 500 and Dow Jones rose on news of buyback from 3M, possible bid for Alcoa and broker comments on GM pension fund.

Yield on 10-year bond closed at 4.815% and the 30-year bond closed at 4.901%.

Gold advanced $1.500 to close at $668.800 a troy ounce, silver gained 20 cents to end at $13.915 a troy ounce and copper declined $110 to close at $5,438 per metric ton.

Oil gained $1.110 to close at $58.920 a barrel and heating oil increased 4.340 cents to finish at 168.880 cents a gallon. Natural gas advanced 18.3 cents to close at $7.409 per MMBtu. Gasoline went up 5.090 cents to end at 160.360 cents a gallon.

Asian markets closed mixed as Japanese shares hit their highest level in more than six years, but Hong Kong stocks fell sharply on investor concerns over possible fund outflows before the Lunar New Year. The decliners were led Hong Kong with a loss of 2.2%, Thailand with a decrease of 0.7% and India with a loss of 0.70%. The advancers were led by Japan with a gain of 0.70% and South Korea with an advance of 0.30%. Australia gained 0.20% as investors remain focused on earnings and merger-and-acquisition activity.

European markets finished higher on Tuesday as gains from car makers, airlines and miners offset a drop from U.K. property firms and earnings-related declines from drug maker Sanofi-Aventis and Swiss bank UBS. The advancers were led by France with a gain of 0.70%, Belgium with an advance of 0.60% and Netherlands with an increase of 0.60%. The only decliner was Switzerland with a decrease of 0.23%.

Latin America markets ended higher led by Brazil with a gain 2.86%, Mexico with an increase of 0.87% and Argentina with an advance of 0.72%. There were no decliners. Canada gained 0.72% as the energy, materials and financial services groups were all posting strong gains.

[R]2:30PM NY, U.S. Market Movers[/R]
Applebee''s International Inc. ((APPB)) shares climbed 10.2% after a Morgan Keegan analyst upgraded the stock amid a flurry of activist shareholder activity in the casual dining sector. The company said it was considering its strategic options and may even sell itself. The announcement followed months of urging by activist shareholder Breeden Capital Management Partners for Applebee''s to change its business practices and deliver more money back to shareholders.

Ceridian Corp. ((CEN)) rose 8% after the human resources and data processing company said that it is exploring strategic alternatives. Ceridian posted fourth-quarter earnings of $49.6 million, or 35 cents per share, on revenue of $404 million compared with the year-earlier period, the company earned $46.7 million, or 32 cents per share, on revenue on $379.5 million. Shares were trading up $2.48 to $33.20.

Cynosure Inc. ((CYNO)), maker of minimally invasive cosmetic surgery systems, reported a fourth-quarter net profit of $1.53 million, or 13 cents per share, down from $2.53 million, or 29 cents per share, last year. Excluding certain items, Cynosure posted earnings of $2.51 million, or 21 cents per share, compared with $1.09 million, or 12 cents per share, last year. Revenue climbed to $24.6 million compared to $16.1 million in the same period a year earlier. Shares were up 10%.

First Advantage Corp. ((FADV)), provides risk mitigation and business solutions, shares gained 16% after the company said that its fourth-quarter net earnings increased to $18.2 million, or 31 cents per share, compared with $16.2 million, or 29 cents per share, last year. Revenue climbed to $206.1 million from $170.1 million a year ago.

Himax Technologies ((HIMX)) was higher on mounting fourth-quarter profits. Income came to $29.4 million, or 15 cents per share, compared with $17 million, or 9 cents per share, a year ago. The company said revenue rose 26% to $220.9 million from $177.3 million a year ago. The company expects first-quarter earnings of 8 cents to 9 cents per share and revenue to decline about 16% to 18%. Shares climbed 13.3%.

Priceline.com Inc. ((PCLN)) jumped after the discount travel Web site doubled its fourth-quarter income and hurtled past fourth-quarter Wall Street estimates. Earnings came to $22.4 million, excluding several items, or 58 cents per share, compared with $11.4 million, or 28 cents per share, a year ago. Sales were up 27.5% year over year to $260.1 million, topping projections by 24.1 million. Shares gained $2.77, or 11.6%, to $48.70.

Shanda Interactive Entertainment Ltd. ((SNDA)) jumped 9% after the online gaming concern posted better-than-expected fourth-quarter results. The company earned $30.8 million, or 42 cents per American depository share, on revenue of $60.3 million. Excluding items, the company earned $22.2 million, or 30 cents a share. Analysts anticipated earnings of 23 cents a share, before items, on revenue of $57.8 million. A year earlier, Shanda recorded a loss of $66.8 million, or 90 cents a share, on revenue of $44.7 million. Shares were up 9.6%.

En Pointe Technologies Inc. ((ENPT)) shares fell 27.5%, after the information technology product provider posted fiscal first-quarter results that disappointed investors. The company earned $272,000, or 4 cents per share, versus a net loss of $997,000, or 14 cents per share, during the same period a year earlier. Revenue fell 4% to $75.6 million from $78.7 million. En Pointe saw product sales decline 6.4% to $63 million, while service revenue rose 11% to $12.7 million.

Interactive Intelligence Inc. ((ININ)), business communications software maker, said that its fourth-quarter net earnings fell to $1.56 million, or 8 cents per share, compared with $1.77 million, or 10 cents per share, in the year-ago period. Revenue climbed to $23.9 million versus $17.5 million in the same period a year earlier. Shares fell 18.6%.

Knot Inc. ((KNOT)), publisher of wedding-related content, said that its fourth-quarter net profit increased to $14.6 million, or 45 cents per share, compared with $1.48 million, or 6 cents per share, last year. The results for the fourth quarter of 2006 included a non-cash income tax benefit and a gain from the settlement of a legal action. Revenue jumped to $21.7 million versus $12.8 million in the same period a year earlier. Shares fell 12.1%.

Liquidity Services Inc. ((LQDT)) said it plans to offer nearly 5.6 million shares in a secondary public offering. The Washington-based company said it would issue and sell 100,000 shares itself. Shareholders that the company did not identify will sell the remaining shares. The company has 27.6 million shares outstanding, according to Thomson Financial. Shares of Liquidity Services were down 13%.

R&G Financial Corp. ((RGF)) said it would file its 2005 results after the April 3 deadline set by the New York Stock Exchange, but expects to file its restated 2004 results in the first quarter of 2007. Shares were down 24%.

[R]1:00PM European markets closed higher, lifted by miners, car makers and airlines.[/R]
European stocks finished Tuesday session in the positive, boosted by gains from carmakers, airlines and miners which were strong enough to offset a drop from U.K. property firms, drug maker Sanofi-Aventis, and Swiss bank UBS. Speculation in the mining sector that BHP Billiton and Rio Tinto are considering a bid for U.S. aluminum producer Alcoa lifted the mining sector. Rio Tinto and BHP Billiton gained about 2.2% each. Among carmakers, Porsche rallied 4%, and among airlines Ryanair Holdings gained 2.9% after it was approved for admission to the Nasdaq 100 index. On the side of the losers, shares of French drug giant Sanofi-Aventis lost 1.5% after the company reported a 5% decrease in Q4 net income. Property stocks were also lower. British Land shares fell 3.6%, Land Securities dipped 1.3% and Liberty International lost 2.7%. UBS shares lost 1.7% after the banking giant reported a 47% drop in Q4 profit. The French CAC-40 advanced 0.7% at 5,682.69, the U.K.''s FTSE 100 rose 0.5% at 6,381.80, and the German DAX 30 added 0.5% at 6,895.34.

Crude oil prices jumped above $58 after IEA forecasted strong global oil demand. Light, sweet crude March delivery rose 80 cents to $58.61 a barrel. Heating oil gained 3 cents to $1.67, while gasoline rose 4 cents to $1.5932. Natural gas jumped 10 cents to $7.324 per 1,000 cubic feet. London Brent gained 38 cents to $56.98. The U.S. dollar lost ground against its major currency rivals. The euro was quoted at $1.3011, up from $1.2962. The dollar bought 121.30 yen, down from 121.92. The British pound was quoted at $1.9424, down from $1.9470. European gold prices gained. In London, gold traded at $664.30 per troy ounce, up from $661.20. In Zurich, the precious metal traded at $661.90 per ounce, up from $661.85. Silver closed at $13.86, up from $13.55.


[R]11:30AM U.S. stock markets rallied led by metals stocks. Nasdaq profit tripled.[/R]
Wall Street rallied, led by metals-mining stocks with Alcoa ((AA)) rising 8% amid reports that mining companies BHP Billiton and Rio Tinto are considering bids to buy the company for $40 billion. The auto sector was given a lift by a brokerage upgrade of GM ((GM)), sending its shares up 3%. DaimlerChrysler ((DCX)) gained 2.7%. In earnings news, KB Home ((KBH)) rose 1% after it swung to a loss in the Q4, citing an oversupply of new and resale homes in the second half of 2006. Nasdaq Stock Market ((NDAQ)) said its Q4 profit tripled on robust trading volumes. The electronic equities exchange fell 9% as its bid for LSE failed. Meanwhile, Marsh & McLennan Companies Inc. ((MMC)), the nation''s largest insurance brokerage, reported six-fold increase in quarterly profit on strong revenue growth in its insurance, risk and consulting businesses. Company’s stock lost 0.3%.

Oil service stocks advanced, benefiting from the increase by the price of oil. National Oilwell Varco ((NOV)) rose 1.9% and Cooper Cameron ((CAM)) added 1.1%. Shares of Grant Prideco ((GRP)) traded up 3.2% after Banc of America upgraded its rating on the company''s stock to Buy from Neutral. Real estate investment trusts, transportation and insurance stocks were among the few declining sectors. In late morning trading, the Dow rose 63.77, or 0.51%, to 12,616.32. The Standard & Poor''s 500 index rose 5.34, or 0.37%, to 1,438.71, and the Nasdaq composite index rose 3.91, or 0.16%, to 2,454.29. Bonds were little changed after the Commerce Department reported that the trade deficit grew wider than analysts expected in December. The yield on the benchmark 10-year Treasury note was at 4.81% Tuesday, the same as late Monday.


[R]9:45AM U.S. stocks opened higher, lifted by speculations about Alcoa buyout.[/R]
U.S. stock markets posted solid advance at opening on well-received news that Alcoa may be the focus of two separate takeover bids, an upgrade of General Motors and news of a large stock buyback by 3M Co. Alcoa ((AA)) surged 7% on reports that BHP Billiton ((BHP)) and Rio Tinto ((RTP)) are considering buyout bids for the aluminum producer. GM ((GM)) rose 3.3% after Merrill Lynch upgraded its stock, while Ford ((F)) fell 2.4% on downgrade. 3M ((MMM)) rose 2.6% after it announced plans to buy back up to $7 billion of its own shares.

Again on the merger-and-acquisition front, casual dining chain Applebee''s International ((APPB)) surged 10.4% after it said it is looking into a possible sale of the company. Drugstore operator CVS Corp. ((CVS)) dropped 1.4% after it said it increased the value of its proposed acquisition of Caremark Rx Inc. ((CMX)), sending its shares up 2.7%.

Among companies reporting earnings news, adult entertainment company Playboy Enterprises ((PLA)) said its Q4 earnings dipped 20% to $3.7 million, or 11 cents per share, versus $4.6 million, or 14 cents last year, missing estimates by a penny. A weak earnings report from KB Home ((KBH)) attracted little attention. The homebuilder said it swung to a quarterly loss as the recent housing slowdown forced the homebuilder to offer price concessions and sales incentives. However, the stock rose 2.4%. In early morning trading, the Dow Jones industrial average rose 74.75, or 0.60%, to 12,627.30. The Standard & Poor''s 500 index rose 6.65, or 0.46%, to 1,440.02, and the Nasdaq composite index rose 13.69, or 0.56%, to 2,464.07. Bonds rose slightly after the Commerce Department reported that the trade deficit grew wider than analysts expected in December to $61.2 billion, pushing the gap to its fifth consecutive annual record in 2006. The yield on the benchmark 10-year Treasury note slipped to 4.80% from 4.81% late Monday.


[R]9:30AM NY-2:30PM London FTSE 100 advanced Tuesday on easing inflation.[/R]
The UK market was higher on Tuesday. By mid-day, the FTSE 100 was 13.7 points higher at 6,367.1.

Advancers

Mining stocks were among the big advancers as the copper price was higher. Antofagasta gained 1.6% and BHP Billiton added 1.3%. BHP Billiton and Rio Tinto are reported to have worked out plans separately for a possible $40 billion takeover of Alcoa, one of the largest aluminium groups in the world. InterContinental Hotels Group continued to benefit from takeover talks, up a further 1.1%. Mobile operator Vodafone has been left as a buy at Nomura. The broker added that the price paid for Hutchison Essar was not as pricey as some insisted. Vodafone advanced 0.2%.

Decliners

The property group British Land declined 2.2% as it posted a fall in net asset value to 16.10 pounds, from 16.24 pounds three months ago on a weak performance from its shopping centres and a higher-than-anticipated cost of converting to a real estate investment trust. The rest of the sector declined in sympathy. Slough Estates shed 2.3%, Liberty International fell 2.1% and Land Securities Group gave up 1.6%. British Energy lost a further 2% as the power group invited potential partners to submit plans to build new nuclear power stations and announced that repairs to its existing facilities would be completed by the end of March.


[R]9:00 AM Alcoa, General Motors and 3M led market to higher opening.[/R]
U.S. stock futures advanced on Tuesday, boosted by reports of a possible buyout bid for aluminum producer Alcoa, a buyback program announced by 3M and an upgrade of General Motors. Alcoa ((AA)) jumped 7% on news that BHP Billiton ((BHP)) and Rio Tinto ((RTP)) are considering separate bids. 3M ((MMM)) gained 1.2% after the company said it plans to buy back up to $7 billion in shares over the next two years, its biggest buyback plan ever. GM ((GM)) gained 3.5% after Merrill Lynch upgraded the automaker to buy from sell. At the same time, Merrill downgraded auto maker Ford Motor ((F)) to sell from neutral, citing valuation. The stock fell 2% in the pre-open.

On the earnings news front, Priceline.com shares ((PCLN)) surged 6.4% in pre-open trading after the online travel bookings provider said quarterly earnings more than doubled. Marsh & McLennan ((MMC)) reported better-than-expected Q4 earnings increase. In economic news, the U.S. Commerce Department said the trade deficit widened 5.3% to $61.2 billion, above the average economist estimate of $59.5 billion, as imports rose faster than exports. S&P 500 futures rose 2.10 points to 1,440.00 and Nasdaq 100 futures advanced 3.25 points 1,788.75. Dow industrial futures climbed 34 points to 12,618.

[R]U.S. trade deficit widened 5.3% in December.[/R]
Tuesday morning, the Department of Commerce released its report on U.S. international trade in goods and services in the month of December, showing that the U.S. trade deficit widened more than economists had been expecting. The report showed that the trade deficit widened to $61.2 billion in December from $58.1 billion in November. Economists had expected the surplus to widen to $59.5 billion compared to the $58.2 billion deficit originally reported for the previous month. The wider trade deficit came as an increase in the value of imports outpaced an increase in the value of exports. The Commerce Department said that the value of imports rose 2.1 percent to $186.7 billion, while the value of exports rose 0.6 percent to $125.5 billion. An increase in the price of oil contributed to the rise in the value of imports, as the average price of a barrel of oil rose 3 percent to $53.84 in December. The price increase more than offset a 2 percent decline in the volume of imported oil and petroleum products. The report also showed that the trade deficit for the full year rose to a record $763.6 billion, representing a 6.5 percent increase from the previous record of $716.7 billion set in 2005.


[R]8:30AM Asian markets closed mixed with Japan ending up, while HK down.[/R]
Asian markets ended mixed Tuesday. The Nikkei Index ended 0.7% higher at 17,621, after Japanese markets were closed on Monday. Mitsubishi Estate advanced 3.9%, Sumitomo Realty & Development gained 6.4% and Mitsui Fudosan, which Friday revised its profit outlook upwards for the fiscal year to March, surged 6.8%. The Hong Kong Hang Seng Index shed 2.2% to 20,132. Declines were led by China-related firms and property developers. Hang Lung Properties dipped 4.9%, Sino Land lost 3.9% and Cheung Kong also declined 3.9%.

South Korean Kospi Index gained 0.3% to 1,418. The benchmark index was given a boost following news of an agreement on the six-nation talks with North Korea on its nuclear disarmament. Hyundai Merchant Marine advanced 3.3% and Hyundai Elevator jumped 3.5%. The Shanghai Composite Index in China added 0.9% to end at 2,832. Airline, railway and taxi companies advanced on expectations of strong earnings from holiday traffic. Air China gained 6.3%, Daqin Railway rose 4.8% and bus and taxi operator Shanghai Bashi Industrial advanced 3.8%. Australia S&P/ASX 200 ended 0.2% up at 5,937. Merger and acquisition activities lifted the market. Alumina rose 5.9% after the Times of London reported that BHP Billiton and Rio Tinto separately had plans to buy Alcoa.


[R]8:00 AM Shares in Alcoa rose 7% in pre-market trading on new it’s a bid target.[/R]
Alcoa ((AA)) climbed 7% in pre-market trading following news that mining giants BHP Billiton and Rio Tinto are separately considering bids for the aluminum producer, but haven''t approached Alcoa''s board yet. According to the report, the metals giants want to boost production with aluminum prices hitting records. Shares in the Dow component rose 10% in Frankfurt trading to $36.32. Shares of BHP Billiton ((BHP)) and Rio Tinto ((RTP)) each advanced 1.3% in midmorning London trading. It was also reported that BHP executives feature prominently on Alcoa''s own wish-list for a new chief executive, including departing BHP Billiton CEO Chip Goodyear. Alcoa''s own Helmut Wieser also is a candidate for Alcoa''s CEO. Alcoa''s current CEO is due to retire next year.


[R]7:30AM NY-6:30PM Mumbai Sensex ends 100 points lower on inflation concerns.[/R]
The Sensex on BSE finished 99.72 points, or 0.70%, lower at 14,090.98. The session was extremely volatile as the market traded within a range of 400 points. The market-breadth was negative, of the 2,605 stocks traded, 1,484 declined, 1,056 advanced and 68 were unchanged. Of the 30 stocks in the Sensex only nine advanced, while the rest 21 declined. The turnover on BSE was Rs 4,875 crore, higher than Rs 3,266 crore on Monday, while on NSE, the turnover was Rs 9,995.7 crore, also higher than Rs 8,908.45 crore on Monday.

Economic news

Petroleum Minister Murli Deora stated on Tuesday that the government is considering a cut in excise duty in gasoline by one rupee to curb the rising inflation. He, however, ruled out any reduction in gasoline and diesel prices till the international prices came down to $50 per barrel. Separately, World Bank expressed confidence that India will be able to control the rising inflation and maintain current growth rate.

Vodafone on Tuesday said its brand new acquisition, Hutch-Essar, would soon become the number one or two mobile operator in India. Hutchinson has agreed in principle to sell its 67% stake in Hutchinson Essar to Vodafone. The regulatory and shareholder approval is expected by the end of the second quarter. Vodafone has paid thirty times operating earnings for its stake, a substantial premium to the market expectations. The company is plans to share its mobile network infrastructure with Bharti Airtel to reduce capital expenditure.

Trading highlights

Akruti Nirman was the most active stock with a turnover of Rs 218 crore followed by Reliance Communications and Global Broadcast.

Advancers

Bajaj Auto, Bharti Airtel and ONGC were leading the gainers in the large-caps.

Bajaj Auto gained 3.5% to Rs 3,046, Bharti Airtel was up 2.3% to Rs 745.65. Bharti Airtel signed an infrastructure sharing agreement with Vodafone, which will allow both operators to share nearly 70,000 mobile towers across the country.

ONGC rose 2.5% to Rs 887.90. ONGC is about to strike the first asset swap deal with Italy’s ENI on Wednesday. ONGC had also initiated talks with Brazilian Petrobras for offering each other a stake in their respective oil & gas blocks.

Reliance Industries gained 1.1% to Rs 1,372 and helped the barometer index to recover in late trading. Ranbaxy advanced 1.8% to Rs 617.70, as it launched a generic form of Lipitor in Denmark and compete with current global market leader Pfizer for cholesterol drug.

Decliners

Hindalco led the decliners, down 4% to Rs 143, continuing the sharp drop on concerns that it will not profit from the $5.9 billion Novelis purchase.

Engineering & construction large-cap L&T lost 3% to Rs 1,609. Tata Steel gave up 2.5% to Rs 432.55. Infosys shed 1.7% to Rs 2,310 in volatile trading and Reliance Communications slipped over 3% to Rs 441.


[R]6:30AM Europe advances Tuesday on strong gains in auto and airline stocks.[/R]
European markets were higher on Tuesday. By mid morning, Frankfurt Xetra Dax gained 0.4% to 6,882.86, the CAC 40 in Paris added 0.4% to 5,664.97 and London FTSE !00 climbed 0.2% to 6,366.4.

Advancers

Automaker Peugeot shares were up 1.1% and airline Ryanair Holdings shares 2.2% higher in the transport segment as crude for March delivery closed down $2.08 at $57.81 a barrel on the New York Mercantile Exchange on Monday. Norway Renewable Energy Corp gained 4.5% after reporting a better-than-expected 86% jump in Q4 core earnings. French telecoms and construction group Bouygues gained 1.4% after reporting a 10% rise in 2006 revenues, beating expectations, helped by sales growth at its telecoms unit.

Decliners

Sanofi-Aventis, the French drugmaker, fell 1.9% despite beating expectations with its Q4 operating profit and forecasting further growth for 2007. UBS shares lost 0.8% after the banking company reported a 47% drop in Q4 net profit but also said that it would buy back up to 10% of its shares. British Land shares fell 2.1%, Land Securities shares dipped 1.6% and Liberty International shares lost 2.2%.

Oil and gold

Oil slipped below $58 a barrel on Tuesday, extending a $2 drop from the previous day on signs that OPEC will refrain from further oil supply cuts when it meets in March. U.S. crude was off 23 cents at $57.58 a barrel. London Brent crude slipped 12 cents to $56.48 a barrel. Gold traded at $665.90 an ounce on Tuesday, up $1.30 an ounce from its close of $664.60 on Monday.

Currencies

The euro advanced after a report showed German economic growth unexpectedly quickened in Q4, underpinning expectations the European Central Bank will keep raising interest rates. The euro gained to $1.300 in early trade in London from $1.2966 in New York yesterday. It was also at 157.75 yen from 158.13. The yen traded at 121.34 against the dollar from 121.94 late in New York yesterday.