Rio Tinto Soars on Bid Speculation

Elena
09 May, 2007
New York City

Mining company Rio Tinto Group rose to a record 7.3% in London on speculation of a takeover bid from BHP Billiton Ltd. Rio Tinto said it was not aware of any approach. A union would create the world''s largest copper producer and iron-ore miner.

[R]9:45AM U.S. markets opened lower on weak tech stocks and nervousness ahead of FOMC meeting.[/R]
Wall Street started trading lower, reflecting cautiousness before the FOMC meeting, as well as weakness in the tech sector amid disappointing revenue forecast from Cisco Systems. Investors, who expect that interest rates will remain unchanged, are more concerned about the central bank''s economic assessment statement. The downward trend was also attributed to consolidation of market''s record gains of the last two months.

Technology giant Cisco ((CSCO)) slipped 6% after projecting slowing revenue growth. The company reported a 34% profit rise and 21% revenue rise. Walt Disney ((DIS)) weighed on the Dow, falling 1.2% after posting lower-than-expected revenue. At the same time, the blue-chip average was helped by International Business Machines ((IBM)) which rose 1.3% after Goldman Sachs lifted its rating on the stock to buy from neutral.

In other corporate news, home builder Toll Bros ((TOL)) lost 0.6% after it issued another profit warning, noting that tighter lending standards were affecting affordability at lower price points. Toyota Motor ((TM)) lost 0.6% after it posted a 9% profit rise on 10% revenue growth in Q1, boosted by strong U.S. and European sales.

In early trading, the Dow slipped 14.55, or 0.11%, to 13,294.52. The S&P''s 500 index was down 3.48, or 0.23%, at 1,504.24, and the Nasdaq declined 15.15, or 0.59%, to 2,556.60. Bonds were little changed ahead of the Fed''s decision. The yield on the benchmark 10-year Treasury note slipped to 4.63% from 4.64% late Tuesday.

[R]9:30AM UK benchmark index is lower Wednesday as speculation around Rio Tinto fizzles out.[/R]

The UK benchmark is lower in mid-afternoon trading on Wednesday. The FTSE 100 is 0.18% lower at 6,538.

Advancers

Rio Tinto is still higher, up 6.4%, even though it announced it will refrain from comment on market gossip. Its shares jumped by 11% at one point on the Australian market overnight as the story of a bid from BHP took hold.

Other miners also advanced in sympathy. Kazakhmys gained 3.1%, Vedanta rose 1.8% and BHP itself was 2.2% higher.

Hanson gained 0.7% as it confirmed that HeidelbergCement was considering a bid for the aggregates provider.

Scottish & Newcastle, also seen as a bid target, gained 1.7% after robust figures from its eastern European joint venture BBH. Broker upgrades sent DSG International 3.3% higher.

Decliners

Sage Group, the last remaining technology stock on the FTSE 100, shed 3% after it said it had plans to restructure in the US and said it was looking to make further acquisitions.

Ex-dividends also weighed on the index. Antofagasta retreated 4.8% and Rexam lost 2.5%. Pub operator JD Wetherspoon lost 3.6% after it warned that higher costs in preparing outlets for the upcoming UK smoking ban would take its annual profits marginally below expectations.

EasyJet, the airline, dropped 3.1% despite cutting its interim losses as it announced it had reduced ticket prices further in a competitive market.


[R]9:00AM U.S. stock futures traded lower on rate concerns and Cisco forecast.[/R]
U.S. stock futures moved to the downside on Wednesday amid cautiousness before Fed Reserve’s interest rate policy decision. The Fed is due to announce its interest rate decision today, with the market largely expecting that rates will remain unchanged at 5.25%.

Technology giant Cisco Systems and entertainment company Walt Disney also weighed after posting quarterly results. Cisco ((CSCO)) shares fell 5.1% in pre-open trading after reporting 34% profit rise in Q1 but also predicting slowing revenue growth. Also in the networking sector, Finisar ((FNSR)) dropped 7.1% after the fiber-optic products maker warned that its Q4 revenue would come below previous forecasts. Juniper Networks ((JNPR)) declined 1.5%.

Dow component Walt Disney & Co. ((DIS)) lost 2.1% on lower-than-expected revenue increase, although its 27% profit rise beat expectations. Again on the Dow, International Business Machines ((IBM)) rose 1% after it was upgraded to buy from neutral at Goldman Sachs after, following the tech giant''s buyback move. In other earnings news, Toyota Motor ((TM)) reported a 9% profit rise on 10% revenue growth in Q1 on strong U.S. and European sales.

Among metals stocks, Rio Tinto ((RTP)) climbed 5.6% in pre-market trading on speculation that miner BHP Billiton ((BHP)), launched a takeover offer. BHP shares added 1.7%. S&P 500 futures lost 2.50 points to 1,509.70 and Nasdaq 100 futures declined 5.50 points to 1,900.00. Dow industrial futures gave up 16 points to 13,330.


[R]8:30AM Asian stocks end mostly higher on Wednesday with Shanghai setting a new record high.[/R]

Asian markets closed mostly higher on Wednesday.

In China, the Shanghai Composite Index ended up 1.6% at 4013.09, a new record high. The Shenzhen Composite Index rose 0.3% to 1111.29, also a record close. The Shanghai index more than doubled last year and has increased another 50% so far this year. Drawn by the robust performance of the stock market and the potential for high investment returns, retail investors have been flooding the market in the past months. Industrial & Commercial Bank of China rose 5.5% and Bank of China gained 7.8%. Baoshan Iron & Steel added 4.7% and China Yangtze Power advanced 2.9%.

The 225-issue Nikkei Average in Tokyo closed 0.5% higher at 17,748.12. Olympus surged 3.3% after the company raised its net profit forecast for the current fiscal year. Bucking the trend, Softbank shed 3% after UBS Securities recommended investors to sell the share on concerns its valuation is above the brokerage price target.

Hong Kong Hang Seng Index added 0.7% to end at 20,844.78 and Australian S&P/ASX 200 climbed 0.6% to close at 6,341.00, buoyed by talk of a possible takeover in the global-resources sector. Bid target Rio Tinto soared 6.7% in Sydney on speculation the miner may have been approached by BHP Billiton. Shares of BHP Billiton gained 1.1%.

South Korean Kospi Index gained 0.7% at 1,593.42. bucking the uptrend, Taiwan Weighted Price Index lost 0.5% to finish at 8,052.70.


[R]8:15AM Legg Mason Q4 profit beat estimates.[/R]
Legg Mason Inc.''s ((LM)) said its Q4 net income rose 15% to $172.5 million, or $1.19 a share, compared with $150.1 million, or $1.03 a share a year earlier. The asset manager said that quarterly revenue increased 8.5% to $1.14 billion from $1.05 billion as the company had more average assets under management. Company’s fourth-quarter financial results exceeded expectations of earnings of $1.17 a share on revenue of $1.13 billion. Legg Mason''s total assets under management climbed 12% to $968.5 billion from $867.6 billion a year earlier


[R]8:00AM NY-7:00PM Mumbai Sensex ends higher on a rally in banking stocks.[/R]

The Sensex on BSE finished 16.05 points, or 0.12%, higher at 13,781.51.

The market-breadth was negative as 1,122 stocks advanced, while 1,407 stocks declined and only 104 stocks remained unchanged. Of the 30 stocks in the Sensex, 17 advanced, while the rest declined. The market was highly volatile and traded in the range of 194 points. The turnover on BSE was Rs 3,937 crore, lower than Rs 4,280.65 crore on Tuesday. On NSE, the turnover was Rs 8,394.44 crore, lower than Rs 9,549.68 crore on Tuesday.

Economic news

The Indian government fixed a floor price of 850 rupees a share for selling its remaining 10.27% stake in car maker Maruti Uduog. Suzuki Motor Corp owns 54.2% of Maruti.

Global mobile company Vodafone announced Wednesday it has formally acquired the controlling stake in Hutch-Essar from Hong Kong-based Hutchison Telecommunications International for $10.9 billion.

India’s oilmeal exports increased in April more than 8% to 432,950 tons from a year ago on improved sales of rapeseed meal. India exported 399,225 tons of oilmeal in April 2006.

Trading highlight

ICRA was the most-active stock with a turnover of Rs 250.14 crore followed by Indiabulls and new-issue Fortis.

Advancers

Late buying interest in bank stocks helped the rally. SBI soared 3.8% to Rs 1,123 and privately owned ICICI Bank was up 0.9% at Rs 849, while HDFC Bank was up 0.71% to Rs 997. Other gainers included Hero Honda, which rallied 3.2% to Rs 701, and Reliance Energy surging 2.7% to Rs 519. Tata Steel gained 1.6% to close at Rs 562 and Bajaj Auto added 1.2% to Rs 2,564.

Ranbaxy Laboratories settled 1.1% higher to Rs 393. The pharmaceutical company is intending to invest around Rs 60 crore to upgrade the recently acquired Be-Tabs Pharma units in South Africa. Index heavy Reliance Industries rose 0.27% to Rs 1,598 on 6.38 lakh shares. It recovered from a low of Rs 1,577.

Decliners

IT large-cap TCS led the decliners, shedding 2.5% to Rs 1,237. Hindustan Lever and Cipla dropped 1.8% each to Rs 191 and Rs 208, respectively. ONGC slipped 1.4% to Rs 909. ACC and Infosys declined over 1% each to Rs 876 and Rs 1,981, respectively.

New issue Fortis Healthcare finished at Rs 100, lower than the IPO price of Rs 108 per share. The stock opened at Rs 105 and rallied to a high of Rs 109.10. Its low for the day was Rs 97.90.


[R]6:30AM European markets gain Wednesday as miners lead on merger talk.[/R]
European markets are higher on Wednesday. By late morning in London, Frankfurt Xetra Dax added 0.4% to 7,468.53, the CAC 40 climbed 0.3% to 6,054.42 and London FTSE 100 gained 0.3% to 6,571.4. National benchmarks gained in 12 of 18 western European markets except Iceland.

Advancers

London-listed miners led gainers amid rumours BHP Billiton was ready to make a takeover offer for Rio Tinto. Rio shares added 5.8% and BHP gained 3%, while expectations of consolidation within the sector drove Kazakhmys 3.1% higher and Xstrata climbed 2.4%.

Financial sector gains were led by BNP Paribas of France, which added 3.8% to a record high after posting forecast-topping first-quarter profit, lifted by investment banking and asset management gains. Credit Agricole rose 3.1% as takeover speculation continued to drift among the banking stocks.

Decliners

Aegon slipped 3.7%. The second- biggest Dutch insurer announced first-quarter profit fell 23% to 485 million euros, missing analyst estimates of 619 million euros, as one-time gains were not repeated.

Technology shares declined after the quarterly sales forecast of Cisco Systems, the world biggest maker of computer-networking equipment, missed estimates for the first time in a year.

Alcatel-Lucent, supplier of telecommunications equipment, slid 0.9%. Infineon Technologies AG, Europe second-largest maker of semiconductors, slipped 0.4%.

Commodities

Crude oil traded little changed in New York, near $62 a barrel, after Chevron said four contractors were kidnapped in Nigeria, raising concern supplies from the largest producer in Africa would be disrupted. Crude oil for June delivery was trading at $62.16 a barrel, down 10 cents, in after-hours trading on the New York Mercantile Exchange. Gasoline for June delivery was up 0.12 cents at $2.2057 a gallon in after-hours trading in New York.

Gold for immediate delivery was little changed at $685.62 an ounce in early trade in London . Silver dropped 1 cent to $13.495 an ounce.

Currencies

The dollar was mixed against other major currencies in European trading Wednesday morning. The euro traded at $1.3542, down from $1.3545 late Tuesday in New York. The British pound traded at $1.9918, up from $1.9889. The dollar bought 119.93 Japanese yen, down from 119.95.