Microsoft Weighs on Pre-Market Mood

Elena
16 Feb, 2007
New York City

U.S. stock futures turned lower on Friday, with Microsoft weighing on sentiment as it cautioned that analysts were too optimistic about the sales of Vista operating system. The stock fell 1.6% in the pre-open. Shares in AMR rose 4% on news that it is a buyout target of a group including Goldman Sachs and British Airways. Boeing and Lockheed Martin are reportedly considering buying U.K. defense companies. Compass Bancshare rose 6% after Spanish BBVA agreed buy the company for $9.6 B.

[R]9:00 AM Market futures pointed lower. Microsoft weighed.[/R]
U.S. stock futures turned lower on Friday, with Microsoft ((MSFT)) weighing on sentiment as it cautioned that analysts were too optimistic about the sales of Vista operating system. The stock slipped 1.6% in the pre-open. On a positive note, shares in AMR ((AMR)), parent of American Airlines, rose 4% on news that it is a buyout target of a group including Goldman Sachs and British Airways. In other deal news, Boeing ((BA)) and Lockheed Martin ((LMT)) are reportedly considering buying U.K. defense companies including Ultra Electronics. In the financial sector, Compass Bancshares ((CBSS)) gained 6% after Spanish Banco Bilbao Vizcaya ((BBV)) agreed to buy the company for $9.6 B.

Among other pre-market highlights, Coca-Cola ((KO)) and Pepsi ((PEP)) were upgraded to buy from neutral at Goldman Sachs. Dow component Honeywell ((HON)) gained 1.7% the pre-open after announcing a new $3 billion stock repurchase program. Goodyear Tire & Rubber ((GT)) dropped 2.4% after the tire maker posted a wider Q4 loss. Investors were also digesting data showing that the producer price index fell 0.6% in January, matching the average economist estimate. Excluding food and energy, core PPI rose 0.2%, also in line with expectations. In another report, U.S. housing starts fell 14% to the a seasonally-adjusted annual rate of 1.408 million, the lowest rate for starts since August 1997, and well below expectations of a 2% decline. S&P 500 futures slipped 1.30 points to 1,458.30 and Nasdaq 100 futures eased 3.50 poins lower to 1,827.50. Dow industrial futures dipped 2 points to 12,785.

[R]Wholesale prices fell in line with estimates.[/R]
Friday morning, the Department of Labor released its closely watched report on wholesale prices in the month of January, showing that prices fell in line with economist estimates amid a steep decline in energy prices. The Labor Department said that its producer price index fell 0.6 percent in January following an unrevised 0.9 percent increase in December. The decrease in prices came in line with economist expectations. The pullback in prices was largely due to a steep decline in energy prices, which fell 4.6 percent in January after rising 2.2 percent in December. A 13 percent decline in gasoline prices contributed to the overall drop in energy prices. However, the drop in energy prices was partly offset by a 1.1 percent increase in food prices.

The increase in January came after a 1.5 percent increase in the previous month and was partly due to a rebound in beef and veal prices. The report also showed that the core producer price index, which excludes food and energy prices, rose 0.2 percent in January, matching the increase in the previous month. The increase also came in with economist estimates. The drop in overall prices and the modest increase in core prices are likely to help offset concerns about the pace of inflation. In Congressional testimony this week, Federal Reserve Chairman Ben Bernanke said that there are signs that inflation pressures are easing. While the wholesale price data may generate some optimism about the possibility of lower interest rates, many are likely to wait for the release of the Labor Department's report on consumer prices next Wednesday before drawing any conclusions.


[R]8:00 AM Banco Bilbao Vizcaya agreed to buy Compass Bancshares for $9.6 B.[/R]
Banco Bilbao Vizcaya Argentaria ((BBV)) agreed to buy Compass Bancshares ((CBSS)) for $9.6 billion. The second biggest bank in Spain said it will swap 2.8 of its own shares for each share in Compass Bancshares, or pay $71.82 a share in cash, representing a 16% premium to the average closing price over the last ten days. BBVA has been continuously expanding in the U.S. since 2004, with the acquisition of Valley Bank, Laredo National Bancshares, Texas Regional Bancshares and State National Bancshares. The acquisition is the latest in a string of deals, as well as the biggest BBVA has ever made, and will launch the Spanish bank into the top 20 U.S. operators. It will provide BBVA with a another 165 branches in Texas, making it the biggest regional player in the state. The deal took analysts by surprise, as they had been expecting the bank to continue its growth plans after the performance of its recent deals in the U.S has been assessed. Shares in BBVA fell 2.4% in midday Madrid trading. Shares in Compass rose around 7.5% on Thursday on speculation the bank was a bid target.


[R]7:30AM Asian markets declined on Friday with Japan falling on profit-booking.[/R]
Asian market ended mixed on Friday. Tokyo''s Nikkei 225 Index ended 0.1% lower, falling 21.58 points to 17,875.65. Among the advancers in Tokyo, Canon Inc. rose 3.8%. The camera maker announced it plans to spend up to 100 billion yen ($837.98 million) to buy back as many as 17 million shares. Brewery group Sapporo Holdings shares rose 12.6% after U.S. hedge fund Steel Partners announced it planned to spend up to 150 billion yen to raise its stake in the company from 18% to 66.6%. Toyota Motor eased 0.1%, while Honda fell 2.5%. Sony Corp reversed earlier losses to finish up 1.1%.

Hong Kong Hang Seng edged higher 0.14% to 20,567.91. The market was under a little bit of pressure mainly because of weakness in Japan. In the short term, the market is likely to continue to be quite volatile because investors have adopted a relatively short-term trading strategy. Financial markets in Hong Kong will be closed Monday and Tuesday. Around the region, Australia S&P/ASX 200 fell 0.6% to 5,935.5, Singapore Straits Times Index lost 0.5% to 3,236.93, and Thailand SET Index fell 0.8% to 688.

However, South Korean Kospi index gained 0.4%, to 1,448.81, Malaysia KLSE Composite Index added 0.4% and Indonesia Composite Index was up 0.2%. Shanghai Composite Index in China rose 0.2% to a record 2,998.46. The index also had hit an intraday record, at 3,036.35. After the close of trading on Friday, the People''s Bank of China said it raised banks reserve requirement ratio by 0.5%, effective from Feb 21, in an attempt to control better rapid credit growth and surging liquidity.


[R]6:30AM European markets declined on Friday led lower by miners, banks.[/R]
European markets were lower on Friday. In early trade, Frankfurt Xetra Dax fell 0.2% to 6,946.7, the CAC 40 in Paris lost 0.3% to 5,706.71 and London FTSE 100 shed 0.2% to 6,421.5.

Advancers

Gecina, the French property group, gained 7.2% after reporting net profit nearly trebled in 2006 thanks to rising rental revenues and growth in the value of its property portfolio. Michelin, the French tyremaker, surged 5.2% after the previous session restructuring announcement prompted broker upgrades. JPMorgan added Michelin to its focus list and lifted its price target, while Morgan Stanley updated its price target and maintained its overweight rating. Credit Suisse raised its recommendation from underperform to neutral. In corporate news in a relatively quiet session, shares in catering firm Compass Group gained 2.4% after it said that its trading in the first four months of 2007 has been encouraging and marginally ahead of expectations.

Decliners

Shares in Swedish financial services group Swedbank fell 3% despite reporting a better-than-expected increase in Q4 profits. Strong trading revenues drove operating profit 18 % higher in the quarter, but investors were more concerned by rising costs. BBVA, the Spanish bank, fell 4% after it announced the sale of its stake in utility group Iberdrola and plans to issue 196 million new shares to help fund the $9.6 billion acquisition of Texas-based bank Compass Bancshares.

Oil and gold

Crude oil prices slipped Friday on forecasts for warmer weather in the U.S. Northeast, the largest heating oil market in the world. Light, sweet crude for March delivery dropped 5 cents to $57.94 a barrel on the New York Mercantile Exchange. Gold bullion opened Friday at a bid price of $666.30 a troy ounce, down from $667.30 late Thursday on the New York Mercantile Exchange.

Currencies

The dollar was mixed against other major currencies in European trading Friday morning. The euro traded at $1.3122, down from $1.3142 late Thursday. The British pound traded at $1.9483, down from $1.9511. The dollar traded at 119.36 Japanese yen, up from 119.18.