Banks Lift Pre-Market Sentiment

Elena
16 Apr, 2007
New York City

Wall Street pointed to higher opening, lifted by strong earnings and higher March retail sales. Citigroup posted Q1 profit drop of 11%, due to a big charge related to its restructuring plan. However, excluding that charge, the profit was higher than expected, thanks to an increase in revenue. The banking giant said it earned $1.01 a share vs. $1.12 last year. Wachovia also reported better-than-expected earnings results. T U.S. fourth-largest bank posted 33% profit rise.

[R]9:00AM Wall Street to open higher on strong earnings reports.[/R]
Wall Street pointed to higher opening, lifted by strong earnings and higher March retail sales. Citigroup ((C)) posted Q1 profit drop of 11%, due to a big charge related to its restructuring plan. However, excluding that charge, the profit was higher than analysts expected, thanks to an increase in revenue. The banking giant said it earned $1.01 a share vs. $1.12 last year. Wachovia Corp. ((WB)) also reported better-than-expected earnings results. The nation's fourth-largest bank posted 33% profit rise in Q1.

In otherearnings highlights, Eli LIlly & Co. ((LLY)) reported Q1 earnings drop of 47 cents a share, down from 77 cents a year ago due to charges related to the acquisition of Icos Corp. Excluding charges, the company earned 84 cents a share, exceeding estimates of 79 cents a share. Mattel ((MAT)) said Q1 earnings were 3 cents a share, down from profit of 8 cents a year ago but above analyst expectation of a 5-cent loss.

In corporate news, Sallie Mae ((SLM)) agreed to be sold to two private investment funds and two banks-J.P. Morgan (JPM)) and Bank of America ((BAC)) for $25 billion, or $60 a share. The deal represents nearly 50% premium to Thursday's closing price. Shares of the student-loan firm surged 19% in pre-market trading. Dow futures expiring in June rose 37.00, or 0.29%, to 12,710. Standard & Poor's 500 index futures rose 4.80, or 0.33%, to 1,466.10, and Nasdaq 100 futures rose 5.50, or 0.30%, to 1,837.25.

[R]March retail sales rose 0.7%.[/R]
Monday morning, the Department of Commerce released its report on retail sales in the month of March. The report showed that sales increased by more than economists had expected due in part to strong sales at gas stations. The Commerce Department said that retail sales rose 0.7 percent in March following an upwardly revised 0.5 percent increase in February. Economists had expected sales to increase by a more modest 0.4 percent compared to the 0.1 percent increase originally reported for the previous month. The stronger than expected sales growth was partly due to a notable increase in sales by gas stations, which rose 3.1 percent in March after rising 1.5 percent in the previous month. An increase in gasoline prices contributed to the stronger sales by gas stations.

A rebound in sales by clothing and clothing accessories stores also contributed to the increase in overall sales, with sales rising 2.4 percent in March after falling 1.9 percent in February. While building material and garden equipment and supplies dealers and food services and drinking places also reported strong sales growth, sales by electronics and appliance stores and non-store retailers showed notable declines. The report also showed that sales by motor vehicle and parts dealers rose 0.4 percent in March following a 0.9 percent increase in February. Excluding auto sales, retail sales rose 0.8 percent, slightly better than the 0.7 percent growth that was expected by economists. The Commerce Department added that retail sales rose at an annual rate of 3.8 percent in March, a little faster than the 3.5 percent annual rate of growth seen in the previous month. Sales for the first quarter were up 3.2 percent year-over-year.


[R]8:15AM Sally Mae decided to go private for $25 billion.[/R]
Sallie Mae ((SLM)), student-loan firm, surged 16% after it agreed to sell itself to a group of two private-equity firms and two leading banks for $25 billion, or $60 a share. C. Flowers & Co. and Friedman Fleischer & Lowe LLC plan to take 50.2% ownership in the new firm, with J.P. Morgan and Bank of America each taking 24.9% stakes in the company. The investors would like to provide increased liquidity, stability and financial strength and J.P. Morgan Chase will support the company financially. Sallie Mae has been involved into regulatory investigations over relationships between colleges and student-loan companies. The deal is subject to approval by shareholders and clearances by regulators, is expected to close in late 2007. Sallie Mae will not pay further dividends before the deal closes. On completion of the deal, Sallie Mae''''s current management will continue to lead the company, ensuring that it will continue to adhere to the New York Attorney General''''s Student Loan Code of Conduct. Sallie Mae will continue to originate student loans under its internal brands.


[R]8:00AM NY-7:00PM Sensex surges over 300 points, Reliance hits all-time high.[/R]
The Sensex on BSE closed 311.50 points, or 2.33%, higher at 13,695.58. The market-breadth was strong with more than two advancers for each decliner. For 1,804 stock which advanced, 776 declined and 75 stock remained unchanged. Of the 30 stocks in the Sensex only two declined, while the rest advanced. The turnover on BSE was Rs 4054 crore compared to Rs 4,724 crore on Friday. The turnover on NSE was Rs 8,950.85 crore lower than Rs 9,735.35 crore on Friday.

Economic news

India and Azerbaijan have come to an agreement to cooperate in the oil and gas sector as Indian companies are set to play a greater role in the development of rapidly expanding oil and gas industry in the latter.

The government and steel companies may clash today since some steel companies are expected to hike prices which the government had warned them against. Steel Minister Ram Vilas Paswan stated that though the government will look into the justification for the price increases, it knows how to cope with any hike.

Earnings news

Indiabulls Financial Services Ltd. reported a 95% rise in its consolidated net profit to 1.57 billion rupees for the quarter ended March 31, fueled mainly by its consumer lending business. The total revenue for the full year to March 2007 was 12.44 billion rupees against 6.13 billion rupees a year ago, while net profit rose 75% to 4.43 billion rupees.

Trading highlights

ICRA was the most-active stock with a turnover of Rs 303.65 crore followed by Orbit Corp and Tata Steel.

Advancers

Cement stocks surged today as expectations of strong fourth-quarter earnings results based on higher prices, also aided the recovery. ACC soared over 5% to Rs 787. Grasim surged nearly 4% to Rs 2,375, and Gujarat Ambuja added over 3% to Rs 112. ACC unveils March 2007 quarter results on 19 April 2007, followed by Gujarat Ambuja Cements on April 20 2007.

Tata Steel rallied over 4% to Rs 533, ahead of its board meeting on April 17 2007, to consider the proposal for raising equity funds to finance its investment in a special purpose vehicle for the acquisition of Corus Group.

Reliance Industries advanced 3.5% to Rs 1460. hitting a high of Rs 1465, which is also an all-time high. Mukesh Ambani, said on Monday that Reliance Industries envisages robust demand for petrochemicals over the next 12-18 months.

Hindustan Lever gained 3% to Rs 214, on reports that the annual June-September monsoon rains were expected to be close to 100% of the long-term average this year. Oil exploration major ONGC surged 3.6% to Rs 903.75.

IT stocks continued their advance from Friday. Wipro gained 3% to Rs 587, Infosys rose 2% to Rs 2,128 and i-flex solutions advanced 4% to Rs 2,336. Infosys, on Friday gave a strong guidance for fiscal year 2008 in dollar terms. TCS rose 1.2% to Rs 1,279, ahead of its Q4 results due later today. BHEL and Bharti Airtel ended up 2.7% each to Rs 2,547 and Rs 802, respectively.

Decliners

There were only two decliners in the Sensex stocks. HDFC Bank slipped 0.8% to Rs 972 and Satyam lost 0.5% to Rs 479.


[R]7:00AM European markets gained on M&A activity including ABN Amro.[/R]
European markets advanced on Monday. National benchmarks advanced in all of the 17 western European markets that were open except Luxembourg. The U.K. FTSE 100 index rose 0.5% at 6,487.20, the German DAX Xetra 30 index added 0.7% at 7,252.88 and the French CAC-40 index advanced 0.6% at 5,822.51.

Advancers

ABN Amro rallied 5.5%. The bank, which started last month exclusive talks with Barclays, announced late April 13 that it received a letter from Royal Bank of Scotland, Santander Central Hispano and Fortis, asking for exploratory talks and saying they may offer to buy ABN Amro.

Royal Bank of Scotland advanced 3.5%, and ING, the biggest Dutch financial-services company, climbed 1.6%. Barclays shares rose 0.9%.

Philips gained 3.6 %, the highest since June 2002. First-quarter profit jumped to 875 million euros from 160 million euros a year earlier on a gain from the sale of a stake in Taiwan Semiconductor Manufacturing Co.

Miners also climbed. BHP Billiton Ltd., the biggest mining company, added 1.4%, while Rio Tinto Group, the third- largest, climbed 1.4%.

Swedish clothing retailer Hennes & Mauritz rose 2.8% after announcing that comparable sales rose 17% in March, lifted by warmer weather.

Decliners

Eiffage SA, third-biggest builder in France, lost 2.2%. The stock market regulator of the country, the Aurorite des Marches Financiers, has forced Eiffage to let worker shareholders dispose freely of their shares..

Oil and precious metals

Crude oil gained above $64 a barrel in New York on expectations of higher gasoline demand this summer in the U.S. Crude oil for May delivery rose 39 cents to $64.02 a barrel in after-hours electronic trading on the New York Mercantile Exchange in early trade in London. Brent crude for June settlement gained 37 cents to $69 a barrel in electronic trading on the ICE Futures exchange.

Gold surged to a nine-week high on speculation that rising commodity costs and a decline in the dollar will boost demand for the metal as a hedge against inflation. Silver also gained. Gold for immediate delivery gained $2.13, or 0.3%, to $687.65 an ounce in London. Platinum for immediate delivery rose $11.50, or 0.9%, to $1,282.50 an ounce after earlier climbing to $1,286.50, the highest since Nov. 21. Silver advanced 1.5 cents to $14.085 and palladium gained 50 cents to $377.50.

Currencies

The U.S. dollar was mostly lower against other major currencies in European trading Monday morning. The euro traded at $1.3561, up from 1.3539 late Friday in New York. The British pound traded at $1.9936, up from $1.9870. The dollar bought 119.33 Japanese yen, up from 119.12.