Oil Jump Lowers the Market

Elena
29 Aug, 2005
New York City

U.S. stocks made a weak opening Monday, hurt by crude-oil prices sent above $70 a barrel by raging hurricane Katrina. Oil-sensitive airline companies declined together with automakers Honda, Toyota and insurers like Allianz and Aegon. In the Gaming space Pinnacle Entertainment and Isle of Capri Casinos also dropped. No major earnings or economic releases are scheduled Monday.

U.S. MARKET AVERAGES

U.S. stock-index futures steadied during the first trading hour after a lower opening Monday morning, caused by advancing Hurricane Katrina which pushed oil prices above $70 a barrel overnight, hitting oil refineries along its way and shutting down 1 million barrels of refining capacity.

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.

MOVERS AND SHAKERS

Oil stocks were among the best performers in the early trading, fueled by the rising oil prices. Chevron Corp. ((CVX)) advanced 1%, while ExxonMobil added 1.1%.

Home Depot ((HD)) was up 1.4% and Lowes Companies ((LOW)) added 1.2% as the home improvement retailers benefited form the predictions that Katrina is likely to compel Gulf Coast consumers to buy goods to make their homes safer.

Insurance stocks were under pressure ahead of early damage reports from Katrina. Renaissance Re ((RNR)) was last down 2%, Everest Re ((RE)) lost 1.5%, while Allstate ((ALL)) dropped 1%.

PanAmSat added 21% after Intelsat Ltd. said it would acquire PanAmSat Holding Corp. for $3.2 billion, or $25 a share, to form the world's largest commercial-satellite fleet.

Per-Se Technologies Inc. ((PSTI)) and Wolters Kluwer agreed to acquire NDCHealth Corp. ((NDC)) in a $1 billion deal and as a result NDC shares gained 6.3


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.

Volatile crude-oil prices weigh on the U.S. dollar and the Japanese yen on worries that higher energy costs would hinder U.S. and Japanese economy growth. In Asian trading he euro was quoted at $1.2313, up from $1.2291. The dollar bought 110.32 yen, up from 110.17. The British pound traded at $1.8048, up from $1.8000.

EARNINGS NEWS

Bodisen Biotech, manufacturer of environmentally friendly bio fertilizer products said its common stock started trading on the American Stock Exchange under the stock symbol: BBC. The company posted 18 cents a share, a rise of 50% over the year-ago period on 99% revenue growth for the same quarter last year. Bodisen is serving the needs of China's 900 million farmers.

XPEL, electronic delivery of top automotive aftermarket productscompany, reported that 2Q revenue was $824,398, 31% up from 1Q $631,344 of 2005. The revenue growth came as a result of a 33% increase in Design Access Program fees, a 41% increase in Other income, consisting of training revenues and third-party enabling equipment such as plotters and a 25% growth in Kit and material sales. XPEL is publicly traded on the Canadian Trading and Quotation System Exchange.

Rally Energy, Canadian oil company, posted 2Q net income of 1 cent a share, up vs. a net loss of 1 cent a share in the 1Q of 2005. Revenue was up 64% for the same period and sales increased 26.6% from the first quarter. Cash flow from operations amounted to $3.23 million 4 cents a share, up 278% from $0.86 million, or 1 cent a share in the first quarter of 2005.

Global Entertainment, an integrated event and entertainment company, reported revenue for fiscal year ended May 31, 2005, increased 157% compared with fiscal 2004. Income from operations was $902,253 for fiscal 2005, up 7% vs. $843,760 for the fiscal 2004. Net income for the quarter was 8 cents per share compared to net income of 20 cents per share for the period of the fiscal year-ago. The decrease in net income was due to tax expense in fiscal year 2005 that was not part of fiscal year 2004 when loss carryforwards were available.

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 asset.

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.

KPMG LLP, the U.S. No.4 accounting company, signed a settlement agreement with prosecutors. Under the settlement the company is to pay $456 million in penalties, according to reports.

OTHER NEWS

The European Union took steps to relieve the backlog of Chinese textile imports held up by a quota dispute at EU frontiers. Produce worth millions of U.S. dollars has been blocked by EU customs officials after Chinese exporters quickly exceeded the agreed quota, set to protect European textile producers.

The central bank of China does not plan more unexpected changes to the yuan, according to reports Monday. The announcement comes ahead of a G20 meet due on Thursday. A revaluation of the yuan on July 21, helped it climb to 8.11 to the dollar from the previous exchange rate of 8.27 and also unpegged the yuan from the U.S. dollar, linking it to a basket of currencies of China’s main trading partners. The yuan finished at 8.0965 against the greenback on Friday, its highest level since July 21 on some speculation of another possible revaluation.