Global Sell-Off in the Making

Elena
29 Aug, 2005
New York City

Futures are lower and U.S. stocks are poised to decline at opening Monday. Hurricane Katrina and record oil prices are likely to be the main focus during the pre-market hours combined with some fresh corporate news. Intelsat is to buy PanAmSat for around $3.2 billion. Per-Se Technologies Inc. and Wolters Kluwer agreed to acquire NDCHealth Corp in a deal valued at $1 billion. No major earnings or economic releases are scheduled Monday.

U.S. MARKET AVERAGES

U.S. stock-index futures were lower Monday morning as Hurricane Katrina pushed oil prices above $70 a barrel overnight, hitting oil refineries along its way. A number of energy producers have already shut facilities producing about half a million barrels oil per day.

Katrina is the No. 11 storm so far this season and provoked concerns on the market of the impact the hurricane activity will have on the U.S. oil and refining region.

Energy companies, insurers and hotel operators are in focus. Oil and natural-gas futures contracts could climb further fueled by the impact of Katrina, which is forecasted to produce a 20-foot storm surge.


INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks finished in the red, dragged down by surging crude-oil prices to $70.80 a barrel as hurricane Katrina advanced toward the heart of the U.S. oil and natural-gas industry. Japan’s Nikkei lost 1.04% on exporter-issues selling with electronics makers NEC and Sony among the losers, followed by auto makers Honda and Toyota. Hong Kong’s Hang Seng dropped 1% on futures-related selling in China Mobile. Taiwan’s stocks fell 1.4% on tech shares sell-off; stocks in Indonesia slid 5.2%.

European markets declined in mid-day trading, hurt by new record-high crude-oil futures of over $70 a barrel and U.S. markets seven-week low close on Friday. Insurers Allianz, Aegon, ING were among the losers as U.S. storm damage fears dragged them down, while French oil major Total added 0.7%. The German DAX 30 lost 0.5%, the French CAC 40 slipped 0.2%, U.K.’s market was closed for a holiday.

ENERGY, METALS AND CURRENCIES MARKETS

Crude-oil futures tested $70 a barrel for the first time Monday as the category 4 Hurricane Katrina moves toward the center of U.S. oil and refinery operations in the Gulf of Mexico, making redundant an estimated one million barrels of refining capacity.
Light, sweet crude for October delivery on the NYME soared $4.67 a barrel in electronic trading to strike $70.80 a barrel during the Asian trading day, before subsiding to $68.95 a barrel by midday in Europe, but still up $2.082 from its close on Friday. Brent crude wasn't trading Monday as London's International Petroleum Exchange was closed for a bank holiday.

Gold rose in Asian trading on the back of soaring crude-oil prices. Gold for immediate delivery gained $3 to $440.70 per troy ounce. December contract rose $3.20 to $445.30 on the Nymex in after-hours electronic trading. In India gold October delivery added 0.3% to $446.00 on the Multy Commodity Exchange of India.

The dollar bought 110.28 yen on the Tokyo foreign exchange market late Monday, up 0.49 yen vs. late Friday and the 110.20 yen it traded later that day in New York. The euro dropped to $1.2318 against $1.2326 late Friday.

EARNINGS NEWS

Kana Software, software solutions provider, announced its net loss for 2004 was 75 cents a share on revenue of $48.9 million. The company revised its 4Q 2004 revenue to $13.6 million, vs. the $13.5 million as previously said. Kana Software announced last week, after closing bell, that it has filed its Form 10-k for fiscal year 2004 with the Securities and Exchange Commission.

Pizza Inn, restaurants operator, posted a 4Q net loss of a penny a share, down vs. a profit of 6 cents a share in the year-ago period on revenue decline, with same-store sales for the current quarter down 1.5%.

BabyUniverse, online retailer of brand name baby, toddler, and maternity products, posted that 2Q net loss was 11 cents per share, down from a net loss of 3 cents per share in the year-ago period despite stunning 91% sales growth for the current quarter.


CORPORATE NEWS

Nokia announced that it has reached an agreement with Mobilkom Austria for the delivery of a Push-to-Talk over Cellular network solution. The provision of PoC services is also included in the contract and Nokia will operate the PoC platform. The services would be available for Mobilkom Austria customers in Austria.

Nokia has struck a settlement in its financial claims against the Turkish network operator Telsim contingent on the successful sale of Telsim's assets. The terms of the arrangement with Telsim and the Turkish Savings and Deposit Insurance Fund, entitle Nokia to receive a settlement payment on the completion of the sale of Telsim's assets.

Novartis announced that the FDA has given priority review to Femara in the ancillary treatment of postmenopausal women with hormone receptor-positive early breast cancer. Femara significantly improved efficacy in comparison to tamoxifen in women with node-positive disease and those who take chemotherapy treatment. If the go-ahead for this new indication is given, Femara would become the only breast cancer treatment approved in the US.

Intelsat Ltd. and PanAmSat Holding Corp. ((PA)) said they have completed a merger agreement, under which Intelsat would buy PanAmSat for $25 per share in cash, or $3.2 billion. Under the agreement, Intelsat would acquire all outstanding common shares of PanAmSat, and would either refinance or assume approximately $3.2 billion in debt of PanAmSat Holding Corp. and its subsidiaries.

Per-Se Technologies ((PSTI)) has agreed to buy NDCHealth ((NDC)), the companies said Monday. NDCHealth’s shares are valued at $19.50 per share, with at least $13 to be paid in cash and up to $6.50 in stock. The acquisition is projected to be earnings and cash flow accretive in the first year.