Tech Stocks in U.S., Europe and Asia Rebound

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

First quarter economic growth rate for the U.S. was revised to 0.6% from the previous estimate of 1.3%. The slow down was the slowest since Q4 in 2002. In other economic news in the U.S., construction spending rose 0.1% in April, and jobless claims fell 4,000 to 311,000 at the end of the last week. Wachovia agreed to purchase A.G. Edwards for $6.8 billion, only second to Merrill Lynch in number of brokers. Ceridian agreed to be bought out for $36 $5.3 billion. Dell to eliminate 10% staff.

[R]5:00PM NY, 11:00PM Frankfurt, 2:30AM Mumbai – Global Markets[/R]

Yields on 10-year U.S. bonds closed at 4.9% and 30-year bond closed at 5.021%.

Crude oil rose 71 cents to close at $64.20 per barrel, natural gas fell 1 cent to close at $7.94 per mBtu, and gasoline futures fell 2.13 cents to close at 225.12 cents per gallon.

Gold rose $7.40 to close at $666.70 per ounce, silver gained 25 cents to close at $13.47 per ounce, and copper futures fell $60 to close at $7,270 per metric ton.

Asian Markets closed higher on the rebound in later afternoon trading yesterday in the U.S. The Philippines and South Korea led the region with a gain of 2.3% followed by 1.7% rise in Hong Kong and Japan, 1.4% advance in Indonesia and Thailand and 0.9% increase in India. Shanghai rebounded with a gain of 1.4% after falling 6.5% a day ago. Singapore fell 0.45%. India reported for the fiscal 2007 economic growth rate of 9.4%, fastest in 18 years. Sony in Japan trading rose 1.5%.

European Markets rose across the region led by gains of 1.7% in Norway, 1.5% in Germany, and 1.3% in Spain, and 1% rise in France and Belgium. Norsk Hydro in Norway rose 3% on 13% higher profit. E.On, largest power company in Europe, said that it will increase its dividend between 10% and 20% till the year 2010 and buyback 10% shares. Vallourec, in Paris trading jumped 6% on the speculation that Russian oil company Gazprom may make a bid for the tube and casing maker.

Latin American Markets closed higher led by 8.6% rebound in Peru. Peruvian markets have come under heavy pressure on the worries that volatility in China may affect Peruvian export of commodities to the region. However, investors shrugged of the recent fall and bought stocks today. Local consumption has driven Peru’s economy in the first quarter 7.2% higher on retail sales increase of 9.7%. Argentina gained 1% and Chile rose 0.6%, but Brazil fell 0.5%. Colombian Peso rose 1.5% against dollar and up 18% for the year. Surging peso has hurt textile, shoe and coffee exports from Colombia and government said that it will help coffee farmers if prices fall further in pesos.


[R]1:00PM NY, 5:00 PM Frankfurt European stocks rebounded from Wednesday’s losses.[/R]

European stock markets gained ground on Thursday, posting solid gains which managed to offset the steep declines of the previous trading session. The positive market sentiment was generated by optimistic comments on the U.S. economy, as well as strength posted by utility giant E.On and technology firm ASML.

Germany’s E.On rose 4.1%, reaching a ten-year high. The company said that it plans to buy back up to 10% of its shares by the end of 2008 and increase dividends by 10% to 20% a year on average by 2010. Again in the sector, shares of German RWE rose 3%, while Scottish & Southern added 0.9% in London on strong full-year profit growth.

Technology and resources stocks ASML Holding rose 5% after the chip-equipment maker said it will return 960 million euros to shareholders via a capital repayment and reverse stock split. Among miners, BHP Billiton advanced 1.7%, Norsk Hydro increased 3% on Q1 profit rise, and the French steel-tube maker Vallourec climbed 5.6% on bid speculation.

The German DAX 30 increased 1.5% at 7,883.04, the French CAC-40 rose 1% at 6,104.00, while the U.K.'s FTSE 100 advanced 0.3% at 6,621.40.


[R]11:30AM Market averages posted gains, buoyed be deal news.[/R]

U.S. market averages posted gains Thursday morning, buoyed by another wave of takeover deals which helped offset weaker-than-expected economic growth in Q1. Better-than-expected data on jobless claims and construction spending also generated positive sentiment.

Brokerage stocks stood out among gainers, led by A.G. Edwards ((AGE)) which advanced 14% after Wachovia ((WB)) agreed to buy the company for $6.8 billion. In another deal, Ceridian ((CEN)) said late Wednesday it will be bought out by investment firm Thomas H. Lee Partners LP and insurance provider Fidelity National Financial for $5.3 B. Morgan Stanley ((MS)) announced that it bought Australia's Investa Property Group for $3.9 B.

Metals miners and networking stocks also moved to the upside, while oil services, biotechnology and internet shares declined. Yahoo ((YHOO)) limited the downward trend for internet stocks by posting a gain of 1% on broker upgrade. Retail stocks traded mixed, with Sears Holding ((SHLD)) falling 2%, while Costco ((COST)) and Tiffany Co. ((TIF)) moved slightly up.

In late morning trading, the Dow Jones industrial average gained 8.13, or 0.06%, to 13,641.21, after reaching a new trading high of 13,673.07. The Standard & Poor's 500 index advanced 0.64, or 0.04%, to 1,530.87, after soaring to a record close Wednesday for the first time since March 2000. The tech-heavy Nasdaq composite index added 7.92, or 0.31%, rising to 2,600.51. Bonds fell on the strong manufacturing data. The yield on the benchmark 10-year Treasury note rose to 4.91% from 4.87% late Wednesday.

[R]Construction spending in April came in line with estimates.[/R]
Thursday morning, the Department of Commerce released its report on construction spending in the month of April, showing that spending growth came in line with economist estimates following an upwardly revised reading for the previous month. The report showed that construction spending edged up 0.1 percent in April following an upwardly revised 0.6 percent increase in the previous month. Economists had expected spending to increase 0.1 percent compared to the 0.2 percent increase originally reported for March.

The modest increase in construction sending came as an increase in spending on public construction more than offset a decrease in spending on private construction. The report showed that public construction spending rose 0.7 percent in April, as spending on educational construction rose 0.7 percent and spending on highway construction rose 0.3 percent. At the same time, spending on private construction edged down 0.1 percent in April. The decrease came as a 1.0 percent drop in spending on residential construction more than offset a 1.5 percent increase in spending on non-residential construction.

[R]Initial jobless claims unexpectedly declined.[/R]
The Department of Labor released its report on initial jobless claims in the week ended May 26 on Thursday, showing that jobless claims unexpectedly fell compared to an upwardly revised reading for the previous week. The report showed that jobless claims fell to 310,000 from the previous week's revised figure of 314,000. Economists had been expecting jobless claims to rise to 315,000 compared to the 311,000 originally reported for the week ended May 19.

At the same time, the Labor Department also said that the less volatile four-week moving average rose to 304,500 from the previous week's revised average of 303,500. Additionally, the report showed that continuing claims in the week ended May 19 fell to 2.472 million from the preceding week's revised level of 2.524 million. The unexpected drop in weekly jobless claims may generate some optimism about the May employment report that is due to be released on Friday. The report is expected to show that non-farm payrolls increased by about 135,000 in May.


[R]9:45AM U.S. stocks opened higher, helped by merger-and-acquisition news.[/R]

Wall Street opened in the positive on Thursday, as a multibillion-dollar takeover deal in the brokerage sector helped offset lower-than-expected economic growth. First-quarter growth was revised down to 0.6% from an initial estimate of 1.3%. The market welcomed news that Wachovia ((WB)) agreed to buy brokerage A.G. Edwards ((AGE)) for $6.8 billion. Shares of A.G. Edwards surged 14% in early trading. In other merger deals, Morgan Stanley ((MS)) rose 0.8% on news that it bought Australia's Investa Property Group for $3.9 billion.

Among other companies in focus, Motorola ((MOT)) lost 1.2% after the mobile phone maker announced a decision to cut 4,000 jobs, due to slower mobile phone sales. Online portal Yahoo ((YHOO)) gained 1%, following an upgrade to overweight from neutral at J.P. Morgan. The biggest advancers on the Dow included United Technologies ((UTX)), up 1.4% and DuPont ((DD)), rising nearly 1%.

In earnings-related news, Costco ((COST)) added 0.6% after the retailer reported a 5% drop in net profit that was in line with analyst expectations. In the first hour of trading, the Dow Jones industrial average rose 13.98, or 0.10%, to 13,647.06. The Standard & Poor's 500 index was up 2.32, or 0.15%, at 1,532.55, and the Nasdaq composite index was up 8.08, or 0.31%, at 2,600.67.

[R]First-quarter GDP grew an annual rate of 0.6%.[/R]
Thursday morning, the Department of Commerce released its preliminary report on first quarter gross domestic product, showing that the pace of GDP growth in the quarter was downwardly revised more than economists had been expecting. The report showed that GDP grew an annual rate of 0.6 percent in the first quarter compared to the advance reading showing 1.3 percent growth. Economists had expected a somewhat more modest downward revision to 0.8 percent. The Commerce Department said that the downward revision to the pace of GDP growth primarily reflected a downward revision to private inventory investment and an upward revision to imports.

However, the downward revision was partly offset by an upward revision to consumer spending growth, which was revised up to 4.4 percent from 3.8 percent. The downwardly revised first quarter GDP growth compares to the 2.5 percent growth reported for the fourth quarter. The deceleration compared to the fourth quarter reflects an upturn in imports, downturns in exports and in federal government spending, and a deceleration in consumer spending on nondurable goods. The Commerce Department also said that its closely watched index of consumer prices, excluding food and energy prices, showed an unrevised 2.2 percent increase.


[R]9:30AM FTSE 100 in London advances Thursday on robust miners and Johnson Matthey.[/R]

By mid-day, the FTSE 100 index in London advanced 36 points at 6,337.8.

Advancers

Johnson Matthey leads the advancers, 4.5% higher, after broker Citigroup lifted its rating on the stock from hold to buy. DSG International advanced 2.9% on change of chief executive, John Clare, who would retire in September and facilitate in this way a likely takeover of the company.

Scottish & Southern Energy gained 2% as the company posted an increase of 23.5% in full-year profit before tax and put forward a new programme to reward its customers for energy efficiency.

Mining stocks advanced, supported by a recovery in Chinese and higher metals price. Anglo America gained 3.7%, while BHP Billiton rose 1.3%.

Decliners

Vodafone ended its long rally, as the large-cap lost 0.3%. Shares of the company increased 18% in the last month. Kingfisher was another one of the few decliners on the market, shedding 3.2%, although the company posted a 6.7% rise in first-quarter same-store sales.

Credit Suisse lowered its rating on pizza group Northern Foods from neutral to underperform on Northern Foods’ full year results announced yesterday. Shares in Northern Foods lost 4.6%.


[R]9:00AM U.S. stock futures pointed modestly higher, reflecting mixed economic data.[/R]

U.S. stock futures were indicating a slightly higher opening on Thursday, reflecting merger activity and mixed economic data. The Commerce Department said that Q1 GDP advanced 0.6%, lower than the 1.3% projected in April and lower than analyst estimates of 0.8%. However, the Labor Department reported positive news, saying that the number of U.S. initial jobless claims dropped last week for the sixth time in seven weeks. On Wednesday, global markets suffered notable weakness, due to a sharp drop if Chinese stocks. However, the Shanghai Composite Index rebounded Thursday, rising 1.4%.

On the deal news front, banking company Wachovia ((WB)) agreed to acquire A.G. Edwards ((AGE)) for $6.8 billion in cash and stock. In another deal, payroll processor Ceridian ((CEN)) said late Wednesday it will be bought out by investment firm Thomas H. Lee Partners LP and insurance provider Fidelity National Financial for about $5.3 billion.

Among pre-market highlights, discount retailer Costco Wholesale ((COST)) posted Q3 profit drop of 4.9%, while jewelry seller Tiffany & Co. ((TIF)) reported a 15% rise in Q1 profit, indicating that consumer demand for big-ticket items remains strong. Retailer Sears Holdings ((SHLD)) reported 20% quarterly earnings increase, but said its U.S store sales decreased. Dow futures expiring in June rose 19, or 0.14%, to 13,675, after a strong 111-point gain Wednesday. Standard & Poor's 500 index futures rose 2.80, or 0.18%, to 1,536.70. Nasdaq 100 index futures rose 5.50, or 0.29%, to 1,928.00.


[R]8:30AM Asian markets advance on Thursday with Shanghai, Tokyo and HK rebounding form earlier lows.[/R]

Asian markets finished higher on Thursday. The Shanghai Composite Index gained 1.4% to settle at 4,109.65. The market opened with a negative bias Thursday, but recovered in the afternoon. China Petroleum & Chemical and Shanghai Pudong Development Bank advanced to the daily 10% limit and Industrial & Commercial Bank of China rose 3%, while Aluminum Corp. of China surged 7.4%.

Japanese Nikkei 225 index advanced 1.6% to 17,875.75. Matsushita Electric Industrial Co ended 0.4% higher, bouncing back after declning in early trading. The company had announced Wednesday its plans to take back about 3 million microwave ovens, refrigerators and dryers because of a fire hazard. Nintendo also advanced 2.8%.

Hong Kong's benchmark index rose 1.68% to end at 20,634.47. China Petroleum & Chemical Corp. rallied 9.7% in Hong Kong, while Australian benchmark S&P/ASX 200 finished 1.1% higher at 6,341.80. Investa Property Group gained 15.2% on reports that Morgan Stanley has struck a deal to buy the company for $3.9 billion in cash and debt. BHP Billiton aslo advanced 1.5%. South Korean benchmark index Kospi closed 2.3% higher at 1,700.91.


[R]8:15AM Wachovia agreed to acquire A.G.Edwards for $6.8 billion.[/R]

Wachovia Corp. ((WB)) announced early Thursday it agreed to acquire A.G. Edwards Inc. ((AGE)) in a cash-and-stock deal worth $6.8 billion to form one of the largest U.S. retail stock brokerages. The takeover bid values A.G. Edwards at $89.50 per share based on Wednesday's closing prices, a 16% premium. A.G. Edwards shareholders will get 0.9844 Wachovia shares and $35.80 in cash for each A.G. Edwards share held.

The combined company will have more than 3,300 brokerage locations across the United States, more than $1.1 trillion in client assets and nearly 15,000 financial advisers. The deal is expected to close in the fourth quarter of 2007, whereas full integration of A.G. Edwards with Wachovia Securities is expected to be completed by early 2009.

Daniel J. Ludeman, president and chief executive of Wachovia Securities unit, will keep these positions at the combined brokerage unit, while A.G. Edwards Chairman and CEO Robert Bagby will be chairman of the brokerage.


[R]8:00AM NY -7:00PM Mumbai Sensex advances Thursday on a rally in tech and banking stocks.[/R]

The Sensex on BSE rallied today, finishing 133.08 points, or 0.92%, higher at 14,544.46, which is its highest close since February 9 2007.

The market-breadth was strong as 1,333 stocks advanced, while 1,154 declined and 78 stocks remained unchanged. Of the 30 stocks in the Sensex, 22 advanced, while the rest declined. The turnover on BSE was Rs 4,430 crore, lower than Rs 5,303 crore on Wednesday. On NSE, the turnover was Rs 11,963 crore, higher than Rs 11,123 crore on Wednesday.

Economic news

Indian GDP growth is the fastest in 18 years and stood at 9.4% in the fiscal 2007, ended March, topping government estimates of 9.2%. In the January-March period the GDP growth was 9.1% with services, exports and manufacturing developing most rapidly.

India refused to buy 1 million tons of wheat from the world market and will wait for a better price to come from future harvests in U.S., EU and Australia. India is expected to buy around 5 million tons of wheat, which will amount to a huge difference even considering a small change of price of a few dollars.

The government today put off issuing an approval for trade and economic zone controlled by Mukesh Ambani, Chairman of Reliance Industries. The decision was postponed over a controversial issue connected with purchase of five villages.

Trading highlights

MIC Electronics was the most-active stock with a turnover of Rs 252.30 crore followed by India Infoline and Unitech.

Advancers

Hero Honda rallied 5% to Rs 733. Hero Honda promoted eight new models last fiscal year and will continue with this policy this fiscal year. HDFC Bank soared 3.2% to Rs 1,140. Other banks also joined the rally. ICICI Bank was up 0.99% to Rs 920 and the State Bank of India advanced 2.1% to Rs 1,352.

Maruti surged 2.6% to Rs 824. Tata Motors and Bharti Airtel surged around 2% each to Rs 758 and Rs 848, respectively. IT stocks advanced today on a new buying interest after they declined in the previous sessions. Wipro moved up 1.6% to Rs 545. Cipla added 1.4% to Rs 218.

Decliners

Engineering large-cap BHEL went ex-bonus today, opening at Rs 1,400, but then declining to a low of Rs 1,351. The stock surged to a high of Rs 1,435, before ending at Rs 1,380. Bonus ratio stood at 1:1. BHEL was the worst performing stock on BSE today.

Other decliners included Gujarat Ambuja shed 1.7% to Rs 113, and NTPC slipped 1.2% to Rs 158. Dr Reddy’s declined 0.8% to Rs 649 and ACC lost 0.7% to Rs 856.


[R]6:30AM European markets advance in early trade Thursday on E.On, Iberdrola.[/R]

European markets advanced on Thursday. In early trading, the German DAX Xetra 30 index added 1% to 7,844.36, the U.K. FTSE 100 index gained 0.7% at 6,645.10, while the French CAC-40 index advanced 0.7% at 6,084.08. National benchmarks advanced in all 17 western European markets open except for Ireland.

Advancers

German utility giant E.On traded 5.5% higher the highest in ten years time after announcing late Wednesday that it intends to buy back at least 10% of its own shares by the end of 2008. It also intends to raise dividends by 10%-20% a year on average by 2010.

Iberdrola advanced 3.2% after Albert Frere announced he had purchased 5 % sake of second- largest power company in Spain. Frere investment companies stated late yesterday they paid 2.2 billion euros for the stake.

Scottish & Southern also advanced 1.7% as the supplier of electricity and natural gas announced full-year profit increased 29%, topping estimates. Credit Suisse Group also upped its rating on the stock to outperform from neutral.

ASML gained 5.2% after the maker of semiconductor equipment stated it intends to pay 960 million euros in cash to its shareholders.

Decliners

There were no major decliners in early trade on Thursday.

Oil and gold

A report which the market awaits to show that U.S. gasoline supplies have advanced for a fourth week makes investors shun buying crude oil futures. Crude oil for July delivery was at $63.22 a barrel, down 27 cents on the New York Mercantile Exchange. Brent crude, the benchmark for Europe, was trading at $67.69 a barrel, down 15 cents, on the London-based ICE Futures exchange.

Gold gained in London on talks that inflation will lure investors into buying the precious metal in search of a hedge against increasing raw material prices. Gold gained $4.02, or 0.6%, to $657.47 an ounce, while silver rose 9 cents, or 0.7%, to $13.27 an ounce.

Currencies

The U.S. dollar was virtually unchanged against the euro on Thursday. The euro fetched $1.3437 in early European trading, up from the $1.3436 it bought in New York late Wednesday. The British pound dipped to $1.9744 from $1.9761. The dollar advanced to 121.62 Japanese yen from 121.58 yen on Wednesday.