Europe Gains on Banks, Airlines and Miners

123jump.com Staff
29 Mar, 2007
New York City

Seven of the nine majors stock markets in Europe advanced more than 1% at close led by airlines, miners and banks. Market opened higher and registered solid gains on revised GDP grwoth rate for the U.S. Mining stocks rose on expectations that metal prices will improve in coming months. Airlines rose price cutting news from Air France and Iberia hiring bankers to advise on merger related issues. In Geramny SAP fell 1% but KarstadtQuelle gained more than 2% on first annual profit since 2003.

[R]1:30PM NY – 6:30PM Frankfurt – European markets closed sharply higher across the region with several indexes up 1%.[/R]

Of the nine major markets in Europe, seven gained more than 1% led by 1.4% rise in Italy, and 1.2% advance in France, Germany and Switzerland. U.K. gained 0.9%.

Banks, airlines and auto stocks led the charge in the region. Air France-KLM, British Air, and Deutsche Lufthansa rose more than 1.5% despite higher oil prices. French magazine reported that Air France is looking to cut cost of more than one billion euros, stock rose 2.4% to 34.1 euros. Iberia, Spanish airlines, said that it has hired Goldman Sachs and Morgan Stanley for merger related work. The stock gained 3% to 4 euros.

Mining stocks in the UK trading registered another day of gain on revised economic growth rate in the U.S. Final read on the economic growth rate for the fourth quarter was revised to 2.5% from 2.2%. BHP Billiton ((BHP)), Rio Tinto ((RTP)) and Arcelor Mittal ((MT)) gaining.

In Germany, government agency reported fall in unemployment of 65,000 during this month. SAP AG, German software maker fell 1% on the rumors that its chief technology officer and board member is likely to step down at the end of this week. The company is also embroiled in a dispute with Oracle involving customer data and software technology.

KarstadtQuelle rose 2.0% to 27.7 euros after reporting its first annual profit since 2003 on operating margin improvement and asset sales.

Raiffeisen International, Austrian bank, rebounded after dropping yesterday on earnings report. The bank reported earnings of 700 million euros falling short of analyst estimates. However, market focused on the reported earnings growth and ignored the guidance issued for the current fiscal year.


[R]12:30PM NY – Markets in New York trim earlier gains and Nasdaq turn negative. Initial claims of unemployment fell by 10,000 in the U.S. and Germany registered a fall in unemployment by 65,000.[/R]

Market averages rose in the early morning trading on revised GDP growth rate, lower inflation index and buy-out deals. However, by Mid-day gains in market averages were trimmed by half and Nasdaq turned negative.

U.S. Steel said that it has agreed to acquire for $2.1 billion Lone Star Technologies, oil field tubular products maker, at a 39% premium to closing price of yesterday. The stock jumped 37% to $66.

Commerce Department reported that the final read on the fourth quarter GDP growth rate was estimated to 2.5%, revised from previous read of 2.2%. Inflation report along with the GDP report showed that core prices, excluding food and energy, rose at 1.8% lower than the previous estimate of 1.9% and better than 2.2% in the third quarter of 2006.

Department of Labor reported that at the end of last week, initial claims of unemployment fell 10,000 to 308,000 beating estimates of 320,000 claims.

Weekly report on oil inventory showed that crude oil inventory declined for the seven week in a row. Crude oil inventories declined 0.9 million barrels, gasoline inventories fell by 0.3 million barrels and distillate inventories edged lower by 0.7 million barrels at the end of last week. The EIA reported today that natural gas inventories fell by 22 billion cubic feet at the end of last week.

Oil continued to climb on the inventory report and tensions in the Middle-East. Oil rose 52 cents to trade at mid-day at $64.60 per barrel, new six-month high and gasoline price at gas stations are up 20% for the year and averaging at $2.603 per gallon.


[R]11:15AM NY – CarMax profit rises 15% missing the analyst estimates.[/R]

CarMax ((KMX)) reported fourth quarter fiscal 2007 earnings of 19 cents per share compared to 17 cents per share a year ago on revenue rise of 16% to $1.9 billion. The company reported earnings of $42.1 million in the fourth quarter compared to $36.7 million a year ago. Consensus estimate for the earnings was 20 cents, according to analysts surveyed by 123jump.com.

The company guided for the fiscal 2008 earnings per share between $1.03 and $1.14 and expects same store sales growth to be between 3% and 9%, lower than 13% growth in fiscal 2007. Net profit in the fourth quarter declined to 2.2% from 2.3% from a year ago.

The company expects to open 13 stores in the fiscal 2008 and plans to spend $300 million up from $192 million from the fiscal year. Comparable unit store sales 12% for the fourth quarter and 9% for the fiscal year 2007.

The auto finance unit revenue rose in the quarter 1.7% to $32 million and up 1.8% to $133 million for the fiscal year 2007. Gross profit per vehicle declined $60, to $2,651 in the quarter, from the previous year.

[R]10:30AM NY – U.S. Steel buys Lone Star Technologies for $2.1 billion.[/R]

Lone Star Technologies ((LSS)) has agreed to be acquired by U.S. Steel ((X)) for $67.50 per share, 39% premium from yesterday’s close. The Lone Star stock jumped $17.92 or 37% at the opening. Total purchase price estimated at $2.1 billion.

U.S. Steel, with this acquisition, will be the largest oil pipes and tubes manufacturing company in the North America manufacturing 2.8 million tons of tubular products, according the company.

U.S. Steel is known for its seamless steel oil tubes manufacturing and Lone Star is known for its welded tubular products and services. The combined operation will strengthen the tubular products portfolio of U.S. Steel and strengthen its position in the oil field service sector. The company projects that combined operations will save $100 million per year before taxes by the year 2008.

Luxembourg based Tenaris S.A. ((TS)), largest maker of seamless oil tubes and products last month completed acquisition of Hydril Corp, maker of valves and metering equipment for oil flows and completed purchase of Maverick Tube Corp in October for $ 2.8 billion.

High level of oil drilling activity around the world is likely to continue for at least three years, however, the oil exploration and drilling costs have risen considerably in the last four years.

[R]9:15AM NY – U.S. stocks are expected to open higher on upward revision of fourth quarter GDP growth.[/R]

Stocks in New York trading are likely to open higher with futures indicating 25 to 30 points premium at the opening. Fourth Quarter GDP growth rate was revised to 2.5% from the previous estimate of 2.2% by the Commerce Department.

Crude oil in London trading is up 15 cents to $64.23 per barrel. European stocks are trading higher across the region on expectations that the U.S. market will rebound in the morning trading. Italy, France, Germany and the UK are trading 1% higher at mid-day trading. Airlines and auto stocks led the rebound.

In overnight trading in Asian markets gained led by a small rise in Japan. Hong Kong led the region with a gain of 1.37% and India advanced 0.74%.

[R]5:00AM Gold advances on Wednesday supported by a surge in oil prices.[/R]
June gold advanced $4.10 to $672.90 a troy ounce on the New York Mercantile Exchange and May silver also gained 17.5 cents to finish at $13.455 an ounce. July platinum rose $5.80 to close at $1,257.80 an ounce, while June palladium gained $1.85 to finish at $357.85 an ounce. The most-active May copper contract added 0.50 cent to settle at $3.0625 per pound.

The front-month May crude oil contract advanced $1.15, or 1.8%, to finish at $64.08 a barrel, the highest settlement for a front-month contract since Sept. 11, 2006. April heating oil also gained 4.1 cents, or 2.3 percent, to end at $1.8274 a gallon. April reformulated gasoline blend stock for oxygenate blending fell 1.58 cents, or 0.8%, to finish at $2.0572 a gallon. April natural gas futures finished 5.5 cents higher at $7.558 a million British thermal units, the highest front-month settlement price since Feb. 23.

Futures on raw sugar in foreign ports were aided by short covering, and the May contracts finished 0.01 cent higher at 10.12 cents a pound. Arabica coffee futures ended slightly higher with May coffee closing 0.25 cent higher at $1.1270 a pound.