Deals and Rate Speculation Lift U.S. and Europe

123jump.com Staff
11 May, 2007
New York City

U.S. stocks rebounded with flat core producer prices and a decline in April retail sales on speculation that next move for rates will be lower. Europe advacned, led by mining and utility shares and on buyout speculation on Societe Generale. Asian stocks declined the most in more than two weeks after metals prices fell. Chicago Merc gained 7% after it raised its offer for Chicago Board of Trade. Chinese April trade surplus doubles to $17 billion.

[R]5:00PM NY; 11:00PM Frankfurt; 2:30AM Mumbai - GLOBAL MARKETS[/R]

Economic reports in the U.S. continued to point weakness in retail sales and rising inflation at wholesale level. U.S. market averages rose in the hope that interest rates may be cut in the coming months. Thomson Corp has agreed to sell its text book and education division for $7.75 billion, $2 billion more than expected, to funds managed by private equity and pension fund management groups Apax and OMERS Capital Partners.

Brazil currency Real rose on lower than expected inflation in April to 0.25%. Pertobras has agreed to sell its oil refineries in Bolivia to local government for $114 million which were valued at $200 million ending one year old crisis between Bolivia and Brazil.

Canada based Magna International has agreed to sell $1.45 billion stake to Russian billionaire Deripaska who is suspected to have ties with organized crime, ahead of its bid for Chrysler division of Daimler Chrysler. European markets advanced and were led by 4% rise in Societe Generale on media speculation that it may be a target of buyout from several companies.

April trade surplus in China rose to $16.9 billion. Indian government sold its remaiing 10.3% stake in local auto maker Maruti Udyog, a joint venture with Suzuki of Japan, to local financial institutions for $582 million.


Yield on 10-year U.S. bond closed at 4.670% and the 30-year U.S. bond closed at 4.849%.

Gold gained $5.30 to close at $672.30 a troy ounce, silver increased 16.5 cents to end at $13.305 a troy ounce and copper declined $159.000 to close at $7943.000 per metric ton.

Oil gained 56 cents to close at $62.370 a barrel and heating oil advanced 1.980 cents to finish at 188.230 cents a gallon. Natural gas increased 17.3 cents to close at $7.899 per MMBtu. Gasoline went up 2.000 cents to end at 234.610 cents a gallon.

Asian markets closed lower with Japanese markets finished down as export-oriented shares declined on renewed concerns about the health of the U.S. economy and a weaker finish on Wall Street. The decliners were led by Hong Kong with a decrease of 1.34%, Indonesia with a loss of 1.21% and Taiwan with a decline of 0.81%. The advancers were Philippines with an increase of 0.67%, South Korea with an advance of 0.24% and India with a gain of 0.18%. Australia declined 0.86%.

European markets finished higher on deal-related gains. Shares of German utility RWE and French bank Societe Generale offset weak earnings from banking group Fortis and steelmaker ThyssenKrupp. The advancers were led by Spain with an increase of 1.10%, Germany with an advance of 0.86% and U.K. with an advance of 0.64%. The decliners were Norway with a decrease of 1.12% and Belgium with a gain of 0.16%.

Latin America markets finished higher like the markets in the U.S. The advancers were led by Argentina and Brazil both with a gain of 1.51% and Mexico with an increase of 1.25%. There were no decliners. Canada advanced 1.00% as the energy and materials groups combined to push the stocks higher.

[R]2:30PM NY, U.S. Market Movers[/R]

Abatix Environmental Corp. ((ABIX)) shares climbed 26.29% after the company posted a first-quarter net profit of $358,638, or 21 cents per share, up from $219,597, or 13 cents per share, in the year-ago period. Revenue climbed to $17.3 million from $16.6 million in the comparable period last year.

Helen of Troy Ltd. ((HELE)) reported fourth-quarter profits ahead of market views as sales of personal-care appliances as well as brush and hair-care accessories in some of its major markets boosted results. The company said it reported net income of $9.7 million, or 30 cents per share, compared with $6.6 million, or 21 cents per share, a year ago. Net sales rose 7% to $143.9 million. As a result, shares of the company climbed 16.7%.

U.S. Auto Parts Network Inc. ((PRTS)), online auto parts retailer, rose after the company's first-quarter earnings beat Wall Street estimates despite a sharp decline. The company said its profit fell 91% from the year-ago quarter, to $235,000, or a penny per share. Sales more than doubled to $43.7 million. Shares climbed 11.7%.

Aviza Technology Inc. ((AVZA)), which manufactures semiconductor production equipment, shares fell 20.3% after the company said that it achieved to a second-quarter net profit of $1.36 million, or 7 cents per share, compared with a net loss of $5.31 million, or 52 cents per share, in the year-ago period. Revenue increased 70% to $61.6 million. The company reduced its 2007 earnings forecast and said that it expected less than $500,000 for the year.

Distributed Energy Systems Corp. ((DESC)) shares plunged 46.4% after the company reported a first-quarter net loss of $14.6 million, or 37 cents per share, against a net loss of $7.35 million, or 20 cents per share, in the year-ago period. Revenue climbed to $8.42 million versus $7.64 million in the same period a year earlier.

Opteum Inc. ((OPX)), real estate investment trust, shares fell 17.8% after the company posted a first-quarter net loss of $78.1 million, or $3.14 per Class A share, compared with a net loss of $8 million, or 34 cents per Class A share, in the year-ago period. Opteum said its results were impacted by operations at its Opteum Financial Services LLC subsidiary, with $37.4 million of its net loss attributable to a valuation allowance on OFS's deferred tax assets.

Pope & Talbot ((POP)), a maker of lumber products, said that its first-quarter loss more than doubled as lumber prices fell sharply in response to the U.S. housing slump. The company posted a loss of $18.6 million, or $1.15 per share, versus a loss of $8 million, or 49 cents per share, in the year-ago period. Revenue fell to $200.5 million from $223 million last year. Lumber prices dropped 21% to $320 per thousand board feet, sending revenue from wood products down 23%. As a result shares fell 9.3%.

World Fuel Services Corp. ((INT)) shares fell 14.6% after the specialty fuels distributor said weak jet fuel prices drove first-quarter profit below Wall Street's expectations. World Fuel Services said its quarterly profit fell 1% to $14.8 million, or 51 cents per share, despite revenue rising 7% to $2.7 billion from $2.53 billion a year earlier.

[R]1:00PM NY, 5:00 PM Frankfurt European stocks advanced on deal-related gains.[/R]
European stock markets posted gains on Friday, boosted by merger activity, involving German utility RWE and French bank Societe Generale. He deal-related gains managed to offset negative sentiment, generated by weak earnings from banking group Fortis and steelmaker ThyssenKrupp. In France, Societe Generale rose 4.7% on speculations that the bank is a target for eight different groups. Deal hopes also boosted utility shares, with RWE rising 6% on reports that France's EdF plans to buy RWE.

Among other notable gainers, French-U.S. telecom-equipment maker Alcatel-Lucent gained on upgrade by Credit Suisse and an upbeat sales outlook. Truck maker Volvo jumped 11% after it reported a 5.7% slip in profit, but predicted that demand will grow to normal levels by 2008. On the side of the losers, Belgian-Dutch bank and insurer Fortis fell 1.9% after it reported a 12% quarterly profit decline. The German DAX 30 closed up 0.9% at 7,479.34, the French CAC-40 added 0.6% at 6,050.63, and the U.K.'s FTSE 100 rose 0.6% at 6,565.70.


[R]11:30AM Retreating inflation concerns supported market averages.[/R]
The U.S. market indexes rebounded on Friday on the back of upbeat key economic data. Tame core inflation and an unexpected drop in retail sales generated optimism about the outlook for interest rates. The Labor Department reported its producer price index rose to 0.7% in April in line with expectations. The core PPI, which excludes food and energy, remained unchanged for the second month in a row. Another report showed that retail sales unexpectedly fell 0.2% in April, indicating weakness in the economy at the start of the second quarter.

The networking sector moved notably higher, helped by 3.8% rise for Alcatel-Lucent ((ALU)) which reported a Q1 loss but released a positive forecast about the second half of the year. Resource stocks also gained amid an increase in commodities prices. Housing stocks also moved to the upside. Home builder KB Home ((KBH)) advanced 3.8% after it said it received a takeover bid for its controlling stake of a French builder, Kaufman & Broad, valued at 582 million euros ($788 million).

In late morning trading, the Dow Jones industrial average rose 104.34, or 0.70%, to 13,319.47. The Standard & Poor's 500 index was up 8.31, or 0.56%, at 1,499.78, and the Nasdaq composite index rose 13.20, or 0.52%, to 2,546.94. Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.62% from 4.64% late Thursday.


[R]9:45AM U.S. markets opened higher on hopes of interest rate cuts.[/R]
Wall Street opened in the positive on Friday, boosted by upbeat news on wholesale inflation and weak retail sales. Rate-sensitive financial services stocks were among the leading gainers. Goldman Sachs Group ((GS)) added 1.4%, while and Merrill Lynch ((MER)) rose 1.7%. Significant gains were also posted by energy stocks, benefiting from rising oil futures. Shares of Exxon Mobil ((XOM)) were the top-weighted gainer on the S&P, rising 1.6%. Rival ConocoPhillips ((COP)) added nearly 2%, Tesoro Corp. ((TSO)) gained 2.5%, and Valero energy ((VLO)) rose 2.03%.

The Dow was pushed higher by Honeywell International ((HON)), up 1.4%, AT&T ((T)), up 1.2%, and DuPont ((DD)), up 1%. Amgen ((AMGN)) weighed on the Nasdaq after it dropped 4.1% following downgrades by both J.P. Morgan and Citigroup on the back of a decision from the FDA. Tech stocks were supported by 2.4% rise for chip equipment maker Applied Materials ((AMAT)) which was upgraded by UBS.

In corporate news, Chicago Mercantile Exchange Holdings ((CME)) rallied 4.5% after it lifted its takeover bid for CBOT Holdings ((BOT)), sending its shares up 1.5%. The Dow Jones industrial average was up 44.86 points, or 0.34%, at 13,259.99. The S&P's 500 was up 5.23 points, or 0.35%, at 1,496.70. The Nasdaq Composite Index was up 6.61 points, or 0.26%, at 2,540.35.


[R]9:30AM FTSE 100 recovers on Friday afternoon from initial losses.[/R]

The UK market is trading higher on Friday afternoon. By early afternoon, the FTSE 100 was was up 7.6 points at 6,531.7.

Advancers

Standard Chartered, the bank focused on Asia, led the advancers in large-cap stocks, up 4.2 per cent amid bid talk. Northern Rock gained 4.3 per cent as the mortgage bank was buoyed by positive comments from Cazenove.

The main talking point, though, was Rio Tinto, which advanced 3.8 per cent as bid speculation would not die down. Other mining stocks also advanced in sympathy. Antofagasta rose 2.3 per cent.

Among mid-caps, chemical firm Elementis, up 10.1%, announced it is to sell its global pigments business to Rockwood Specialties for $140 million in cash. It expects to post a pre-tax gain of 20 million pounds from the sale of the business, which makes synthetic iron oxides.

Lehman Brothers is helping Standard Chartered, 4.5% higher, with a rise in its price target and an overweight stance.

Decliners

Property stocks lost ground as some of the bid speculation that had pushed the sector higher in the previous session faded. Hammerson, linked to a possible bid from KKR, fell 1 per cent.

Friends Provident also retreated 1 per cent despite reports that Axa of France and JC Flowers of the US were mulling a bid for the life assurer.

In the mid-caps, Autonomy lost 3.4 per cent as UBS stated it was seeking to place up to 9.5 million shares in the search technology group.


[R]9:00AM U.S. stock futures traded advanced on core inflation and retail data.[/R]
U.S. stock market futures were pushed higher on Friday by hopes for interest rate cuts, raised by flat core producer prices and lower retail sales. The Labor Department said that higher energy prices lifted wholesale prices by 0.7% in April, but core inflation was tame again. U.S. retail sales had their worst performance in 7 months, falling a worse-than-expected 0.2% in April. Market also digested the latest assessment from ex-Fed Reserve Chairman Alan Greenspan who reportedly said that the odds are two-to-one against a U.S. recession, buoyed by improving prospects around the world.

Among pre-market highlights, American International Group ((AIG)) posted a 29% profit increase, as its property and casualty insurance business avoided big losses and after it maintained premium growth. Nvidia ((NVDA)) rose 4.6% in pre-open trade on better-than-expected 44% profit rise on 24% revenue growth. Alcatel-Lucent ((ALU)) rose nearly 3% after it posted Q1 profit decline and forecast higher Q2 sales. Credit Suisse upgraded the stock to outperform from neutral.

Of companies drivren by analyst comments, Amgen ((AMGN)) dropped 2.8% following two downgrades. J.P. Morgan cut its rating on the stock to neutral from overweight. Citigroup downgraded Amgen to sell from hold. S&P 500 futures rose 3.7 points at 1,502.70 and Nasdaq 100 futures climbed 4.5 points at 1,891.00. Dow industrial futures rose 35 points.

[R]PPI rose 0.7% in April. Core inflation remained flat.[/R]
Friday morning, the Department of Labor released its closely watched report on wholesale prices in the month of April. The report showed that prices rose a little more than economists had expected, although core prices were unchanged. The Labor Department said that its producer price index rose 0.7 percent in April following a 1.0 percent increase in the previous month. The increase came in slightly above economist estimates of a 0.6 percent increase. The bigger than expected increase in prices was largely due to another significant increase in energy prices, which rose 3.4 percent in April after rising more than 3 percent in each of the two previous months.

Higher prices for gasoline, liquefied petroleum gas, home heating oil, residential electric power, residential natural gas, and diesel fuel contributed to the continued increase in energy prices. At the same time, the report showed a slowdown in the pace of growth in food prices, which rose 0.4 percent in April compared to a 1.4 percent increase in March. Prices for fresh and dry vegetables, beef and veal, and dairy products rose less than they had a month earlier. The report also showed that the core producer price index, which excludes food and energy prices, was unchanged for the second consecutive month. Economists had been expecting core prices to increase by 0.2 percent. The Labor Department added that wholesale prices rose at an annual rate of 3.2 percent in April. Core prices were up 1.5 percent year-over-year.


[R]8:30 AM Asian markets finished lower Friday with Japan ending down on export-oriented stocks.[/R]

Asian markets finished lower on Friday. The 225-issue Nikkei Average ended 1.3% lower at 17,553.72. Canon eased 2%, while Sony gave up 1.8%. Nikon dropped 2.3% after the company announced Thursday that its net profit increased to 54.82 billion yen in the fiscal year through March, nearly double that of the previous year. Konica Minolta shed 7.2% on profit-taking tracking recent share price advances and a brokerage downgrade from Mizuho Securities. Automakers bucked the downtrend, with Toyota Motor adding 1.4% while Nissan Motor gaining 1.1%.

Hong Kong Hang Seng Index ended 1.3% lower at 20,468.21. Mobile operator China Mobile declined 2% and in China, the Shanghai Composite Index closed down 0.7% at 4,021.67, easing from a record close in the previous session.

Australian S&P/ASX 200 closed down 0.9% at 6,297.40. Mining stocks were lower, pulled down by drops in natural-resource prices and increasing skepticism of an imminent takeover bid by BHP Billiton for Rio Tinto. Shares of BHP Billiton shed 2.9%, while Rio Tinto fell 1.4%.

Elsewhere around the region, South Korea bucked the trend and advanced. The benchmark index, Kospi, edged up 0.2% to close at 1,603.56. Taiwan leading index, the Weighted Price Index, ended down 0.8% at 8,031.54.


[R]8:00AM NY-7:00PM Mumbai Sensex ends higher in volatile trading. Bajaj Auto surges.[/R]

The Sensex on BSE finished 24.93 points, or 0.18%, higher at 13,796.16.

The session was extremely volatile as the index traded within a range of 301.23 points. The market-breadth ended almost even, as 1,268 stocks advanced while 1,276 declined and only 82 remained unchanged. Of the 30 stocks in the Sensex, 11 advanced, while the rest declined. The turnover on BSE was Rs 4,429 crore, slightly higher than Rs 4,304.80 crore on Thursday. On NSE, the turnover was Rs 9,404.94 crore, compared with Rs 9,225.37 crore on Thursday.

Economic news

Mayawati-led Bahujan Samaj Party has a great lead over the ruling Samajwadi Party and the Bharatiya Janata Party as the latest trends in the 403-member Uttar Pradesh assembly polls suggested. Out of 304 seat vote counting available at the state election headquarters, BSP was leading in 145 seats while the SP and BJP followed with 70 and 45, respectively. UP elections are keenly watched for voter preferences and indicator of national trend.

Wholesale inflation rate in India slowed for a second week as prices of fruits, vegetables and spices declined. The key wholesale price index was 5.66% in the week ended April 28, from 5.77% in the previous week. Analysts forecast inflation at 5.75%.

A government report showed that industrial production in India advanced 12.9% annually in March 2007, from a year earlier, higher than the annual growth of 10.8% in February on strong manufacturing output. Analysts had forecast annual industrial output growth of 10.40%.

Trading highlights

Page Industries was the most-active stock with a turnover of Rs 300 crore followed by Reliance Industries and Reliance Communications.

Advancers

Bajaj Auto soared over 4% to Rs 2,719 ahead of the board meet on May 17 to consider a proposal for demerger. Transferring some of the Rs 6,500 crore cash will improve the finance and insurance businesses, chariman Rahul Bajaj had announced earlier.

Reliance Communications surged nearly 3% to Rs 478 and NTPC rallied 2.5% to Rs 155.
SBI and TCS advanced around 2% each to Rs 1,149 and Rs 1,253, respectively.
Infosys and Ranbaxy were up over 1% each at Rs 2,000 and Rs 391, respectively.

Index heavy Reliance Industries rose 0.6% to Rs1,590, after rebounding from its low of Rs 1,555.05. On BSE, a high 13.25 lakh shares were traded.

Decliners

ACC led the decliners, plunging 4% to Rs 840. Grasim and Hindustan Lever dropped around 2.5% each to Rs 2,425 and Rs 185, respectively. Hindalco Industries lost 1.02% to Rs 145.10, after Novelis said its shareholders have approved acquisition by Indian aluminum producer.

Maruti Udyog slipped 0.20% to Rs 793. The government sold its remaining stake in Maruti for Rs 2,360 crore to a number of financial institutions led by Life Insurance Corporation. The government had offered 2.96 crore shares in the company, representing 10.27% stake.

Gujarat Ambuja, Cipla, and HDFC slipped around 1.5% each to Rs 119, Rs 205, and Rs 1,656, respectively. Tata Steel ended 1.3 lower at Rs 569, while Reliance Energy and Wipro were down over 1% each to Rs 509 and Rs 546, respectively.


[R]6:30AM European markets decline Friday on weak banking stocks.[/R]

European markets were lower on Friday. National benchmarks decreased in all of the 17 western European markets that were open. By mid morning, Frankfurt Xetra Dax shed 1.2% to 7,330.17, the CAC 40 in Paris lost 1.2% to 5,938.62 and London FTSE 100 slid 0.9% to 6,467.4.

Advancers

Bucking the negative trend Capitalia of Italy, which gained 1.3% after chief executive Matteo Arpe announced his bank would not stand still during the wave of consolidation in the banking sector.

German utility RWE raliied 5.5% on rumours French rival Electricite de France was interested in a takeover. RWE said it had not received an offer. Shares in EdF gained 0.6%.

B shares of Volvo, the Swedish truckmaker, added 3.9% after topping forecasts with its first-quarter net profit.

Decliners

Banks led the decliners. Shares in Fortis fell 3%, while Santander eased 0.3% and RBS lost 1.2%. ABN shares fell 0.3%.

U.S. export-oriented companies dropped. ABB fell for the first time in three days, shedding 2.1%. The Americas accounts for about a quarter of ABB revenue.

Shares of BASF slipped 1.5%. North America is the second-biggest market for BASF. Oil company BP, which generated more than a third of its sales in the U.S. in 2006, slid 1.4%.

Commodities

Crude oil gained on concern the U.S. supply of gasoline would be threatened by refinery halts and latest disruptions of production in Africa. Crude oil for June delivery rose 37 cents, or 0.6%, to $62.18 a barrel in after-hours electronic trading on the New York Mercantile Exchange. Brent crude oil for June settlement rose 62 cents, or 0.9%, to $66.41 a barrel in electronic trading on the ICE Futures exchange.

Gold advanced in London after some investors judged that prices, which ended at a five-week low yesterday, no longer reflect expectations for a third consecutive year of declining supply. Gold for immediate delivery gained $2.38, or 0.4%, to $668.03 an ounce. Silver dropped 2 cents to $13.015 an ounce, heading for a fourth weekly decline.

Currencies

The euro and the pound retreated from recent highs against the dollar in morning trading Friday, as lack of surprise over interest rate moves in Britain, Europe and the United States boosted the U.S. currency. The euro bought $1.3477 in morning European trading, compared with the $1.3508 it bought in New York late Thursday. The British pound slipped to $1.9784 from $1.9823 the night before even though the Bank of England lifted its key interest rate by a quarter of a per cent to 5.5%. The dollar rose to 119.86 Japanese yen from 120.44 yen the night before.