Rate Worries Weigh on Pre-Market Mood

Elena
08 May, 2007
New York City

U.S. stock futures indicated a lower opening Tuesday, hurt by cautiousness ahead of the Fed Reserve''s interest rate policy decision on Wednesday. On the economic news front today, March wholesale inventories figures are due out after the open. Among pre-market highlights, Motorola lost 2.1% after it said its shareholders re-elected the company''s board but didn''t elect Icahn who failed to receive support from major investment funds.

[R]9:00AM U.S. stock futures traded lower on interest rate concerns.[/R]
U.S. stock futures indicated a lower opening Tuesday, hurt by cautiousness ahead of the Fed Reserve's interest rate policy decision on Wednesday. On the economic news front today, March wholesale inventories figures are due out after the open. Another drag on the pre-market sentiment was Motorola ((MOT)) which lost 2.1% after it said its shareholders re-elected the company's board but didn't elect Icahn who failed to receive support from major investment funds.

Among other pre-market highlights, AK Steel ((AKS)) soared 19% in the pre-open amid reports that Arcelor Mittal is in talks to buy the U.S. steel producer in a $4.5 billion. Again in M&A action, Reuters ((RTRSY)) and Thomson ((TOC)) confirmed deal talks, releasing details of the possible merger worth $17.4 billion in cash and stock. S&P 500 futures lost 4.80 points to 1,509.50 and Nasdaq 100 futures dropped 8.50 points to 1,898.25. Dow industrial futures shed 36 points to 13,304.


[R]8:30AM Asian markets decline Tuesday with only China bucking the trend and advancing.[/R]

Asian markets mostly declined Tuesday. The 225-issue Nikkei Average in Japan closed 0.1% lower at 17,656.84. Investors took to profit taking on Honda and other large-cap stocks tracking strong gains in the session on Monday after an extended holiday break. Mitsubishi Heavy Industries advanced 1.6%, while Japanese banking shares gained on a rating upgrade by Moody''s. Mitsubishi UFJ Financial Group added 2.3%, while Mizuho Financial Group and Sumitomo Mitsui Financial Group both advacned 1.9%. Export-related shares were mostly lower, as Sony traded unchanged, and Canon retreated 0.4%. Auto shares dipped with Honda Motor shedding 0.5% and Toyota Motor falling 0.4%.

The Shanghai Composite in China reached 3,950.01 following an extended week-long holiday break. Property developers and retailers were in focus on a rise in revenue during the week-long Labor Day holiday which pushed China shares to a record high. Retailers and property developers gained as sales picked up during long holidays. Property developer China Vanke hit the 10% upside limit and Poly Real Estate also surged 10%.

Australian S&P/ASX 200 set an intraday record of 6,341.1 early in the session, but retreated 0.5% to end at 6,301.00. Shares of Australian carrier Qantas Airwayspulled the market lower, falling 3% after the consortium bidding 11 billion Australian dollars, or $9.08 billion, for Qantas conceded that its bid for the airline had failed. BHP Billiton fell 1.3%, while Rio Tinto declined 1.7%.

Hong Kong Hang Seng Index finished 0.9% lower to 20,706.35, a day after finishing at a record high. South Korean Kospi was little changed, declining 0.1% to end at 1,582.65 and Taiwan Weighted Price Index lost 0.2% to end at 8,095.84.


[R]8:15AM Reuters and Thomson confirmed merger talks.[/R]
Reuters Group ((RTRSY)) and Thomson Corp. confirmed on Tuesday that they are in takeover talks, releasing details of the proposed deal which values Reuters at $17.7 billion. On Friday, Reuters said that it had received a bid offer, which sent the media company''s stock 25% higher. Thomson announced Monday that it had launched the bid.

According to the agreement, Thomson would offer 0.16 of its own shares and 352.5 pence in cash for each share in Reuters, which at Monday''s prices would value the company at 697 pence a share, or 8.76 billion pounds ($17.4 billion).

The Thomson family holding company, Woodbridge, would hold 53% of Thomson-Reuters, other Thomson shareholders would control 23% of the combined company and other Reuters shareholders would combine 24% of the firm. The companies would be joined into a single firm called Thomson-Reuters. The Thomson Financial unit would be combined with Reuters financial and media businesses into a single unit under the Reuters name. The combined firms expect $500 million in annual synergies in three years.


[R]8:00AM NY-7:00PM Mumbai Sensex finishes lower on weakness in IT, banking stocks.[/R]

The Sensex on BSE finished 113.79 points, or 0.82%, lower at 13,765.46.

The market-breadth was very weak as there were two decliners for each advancer. As 873 stocks advanced, 1,692 stocks declined and 70 stocks remained unchanged. Of the 30 stocks in the Sensex, only four stocks advanced, 25 stocks declined and one remained unchanged. The turnover on BSE was Rs 4,261 crore, compared to Rs 4,497 crore on Monday. On NSE, the turnover was Rs 9,549.68 crore, higher than Rs 8,657.72 crore on Monday.

Economic news

Finance Minister P Chidambaram said on Tuesday that the government is still discussing restrictions on foreign direct investment in few retail store formats. He clarified that the foreign investment is permitted in cash and carry, wholesale and single brand retail store formats only.

The Reserve Bank of India has given three months to all banks to comply with the directive to limit borrowing charges and fees for housing and other consumer loans.

Trading highlights

ICRA was the most-active stock with a turnover of Rs 260.70 crore followed by Indiabulls and Tech Mahindra.

Advancers

ACC led the advancers, surging 2.7% to Rs 886 on reports that Holcim bought 60 lakh shares, or 3.5% equity of the company, at approximately Rs 900 per share. Grasim also advanced 0.7% to Rs 2,489 and Tata Steel edged 0.2% higher to Rs 553. L&T gained nearly 0.2% to Rs 1,697.

Decliners

Hero Honda tumbled over 3.5% to Rs 680, while SBI lost 3.4% to Rs 1,082. Other banks also lost. Bank of Baroda dipped 2% to Rs 189, Vijaya Bank lost 2% to Rs 48, Bank of India retreated 2% to Rs 189, and Bank of Baroda was off 1.5% to Rs 237.

Dr.Reddy dropped 1.8% to Rs 691. An overnight decline in the American Depository Receipts of the company stocks listed in New York and a surging rupee affected IT large-cap Infosys. The stock was off 1.8% at Rs 2002. On Monday, Infosys ADR shed 3.6% to $51.92. Other IT stocks also plunged. Wipro shed 1.5% to Rs 546, TCS was down 0.7% to Rs 1,268, and Satyam Computer shed 0.8% to Rs 456. Reliance Energy slipped 1.4% to Rs 506.

Auto stocks also lost. Bajaj Auto shed 1.3% to Rs 2,533, Maruti Udyog shed 1% to Rs 797 in volatile trade. Telecom stocks declined on profit-taking. Bharti Airtel shed over 1% to Rs 810 and Reliance Communications lost also over 1% to Rs 460. Index heavy Reliance Industries shed 0.8% to Rs 1,592.

Tech Mahindra slumped 4.6% to Rs 1,550. Tech Mahindra reported consolidated net profit growth of, excluding exceptional items, 120% in fourth quarter of 2007 at Rs 196.1 crore compared with Rs 89.1 crore a year earlier. Revenue advanced 108% to Rs 874.5 crore compared with Rs 421.2 crore in the fourth quarter of the previous year.


[R]6:30AM European markets fall on Tuesday on profit-taking, weak earnings.[/R]
European markets declined on Tuesday. By mid morning, Frankfurt Xetra Dax shed 0.5% to 7,490.63, the CAC 40 in Paris lost 0.4% to 6,047.72 and London FTSE 100 fell 0.4% to 6,578.7. National benchmarks fell in all 17 markets in western Europe that were open except for Denmark.

Decliners

Shares of KPN dropped 2.6%. The company reported that net income fell 18 % to 313 million euros on sales of 2.92 billion euros, down from 3 billion euros a year earlier. KPN had been estimated to report net income of 351 million euros. Sales had been projected at 2.98 billion euros.

Clariant, specialty chemical maker, fell 2%. First-quarter profit slid 10% to 86 million francs or $71 million on increased energy and raw material costs.

Swiss Re lost 1.6%. Premium income increased 23%. That fell short of the 8.56 billion-franc median estimate. Net income rose 54% to 1.33 billion Swiss francs, compared with a 1.3 billion-franc prediction.

Advancers

Reuters Group climbed 4.4%. Thomson is in talks to buy Reuters for 8.77 billion pounds, or $17.5 billion, to gain a global news service.

Shares of William Morrison jumped 3.4% after reports that the fourth-biggest U.K. supermarket company may soon get a 9 billion-pound bid from private equity firms or property specialists.

Commodities

Crude oil rose the most in more than a week after a militant group attacked pipelines in Nigeria, Africa biggest crude producer. Crude oil for June delivery was up 13 cents at $61.60 a barrel on the New York Mercantile Exchange in early trading in London. The contract had advanced as much as 43 cents or 0.7% to $61.90, the biggest gain since April. 27. Brent crude oil for June settlement rose as much as 86 cents, or 1.3 %, to $65.30 a barrel on London ICE Futures exchange.

Platinum for immediate delivery dropped $9.50 to $1,331.50 an ounce, after gaining $55, or 4.3%, since April 30. Palladium rose 50 cents to $377.50 an ounce, the fifth straight gain. Gold fell as a rebound in the dollar against the euro may erode investor demand for precious metals as an alternative investment. Gold dropped $2.45, or 0.4%, to $686.30 an ounce, while silver fell 3 cents to $13.475 an ounce.

Currencies

The dollar was mixed against other major currencies in European trading Tuesday morning. The euro traded at $1.3575, down from $1.3603 late Monday in New York. The British pound traded at $1.9935, up from $1.9931. The dollar fetched 119.90 Japanese yen, down from 120.11.