Market to Open Lower on Shanghai Drop

Elena
04 Jun, 2007
New York City

U.S. stock futures pointed lower on Monday as investors digested another steep decline in Chinese stock prices. Although Shanghai plunged 8%, global markets were not seriously hurt. In corporate news, a number of merger deals were announced early Monday. Health Care Properties agreed to buy U.S. biotech real estate from British Segro for $2.9 billion. Qiagena greed to acquire Digene in a deal worth $1.6 billion.

[R]9:00AM U.S. stock futures pointed lower amid steep Shanghai drop.[/R]

U.S. stock futures pointed lower on Monday as investors digested another steep decline in Chinese stock prices. Although Shanghai plunged 8%, global markets were not seriously hurt.

In corporate news, a number of merger deals were announced early Monday. Real-estate investment trust Health Care Property Investors ((HCP)) agreed Monday to buy Slough Estates USA from the U.K.'s Segro Plc for $2.9 billion, including the assumption of about $1.2 billion in debt.

In another deal, contract electronics manufacturer Flextronics International ((FLEX)) said it will buy contract electronics maker Solectron ((SLR)) in a cash-and-stock deal worth about $3.6 billion. Solectron will become a subsidiary of Flextronics, with Solectron shareholders holding a stake of between 20% to 26%. Flextronics expects the deal to add at least 15% to its earnings. The deal is expected to close by the end of the year with the approval of shareholders and regulators.

Among other companies in focus, Wal-Mart ((WMT)) rose 2% in pre-open trading, following upgrades from J.P. Morgan and Morgan Stanley. Onyx ((ONXX)) climbed 9% amid reports of improved survival from patients taking a liver cancer drug. Dow Jones industrial futures expiring in June fell 36, or 0.26%, to 13,653. Standard & Poor's 500 index futures fell 5.60, or 0.36%, to 1,534.00. Nasdaq 100 index futures declined 9.00, or 0.47%, to 1,923.25.


[R]8:00AM Dominion agreed to sell most of its natural gas and oil exploration and production operations for $6.5 B.[/R]

Energy and power producer Dominion ((D)) announced Monday an agreement to sell the biggest part of its U.S. onshore natural gas and oil exploration and production operations in two separate transactions for a total of about $6.5 billion.

Dominion''s Permian Basin operations will be bought by Loews Corp. ((LTR)) for $4.025 billion, while Dominion''s operations in the Rocky Mountains will be taken over by XTO Energy ((XTO)) for $2.5 billion.

The operations include 3.51 trillion cubic feet equivalent of proved natural gas and oil reserves as of Dec. 31, 2006. XTO said in a statement that it is planning to set up a $500 million limited partnership.


[R]7:30AM NY-6:30PM Mumbai Sensex finishes lower on selling pressure in late trading.[/R]

The Sensex on BSE ended Monday 74.98 points, or 0.51%, lower at 14,495.77.

The market-breadth turned negative in late session. As 1,182 stocks advanced, 1,388 declined and 84 remaned the same. Of the 30 stocks in the Sensex, 10 advanced, while all the rest declined. The turnover on BSE was Rs 3,745 crore, compared with Rs 4,709 crore on Friday. On NSE, the turnover was Rs 8,543 crore, lower than Rs 9,872 crore on Friday.

Economic news

Indian companies reported the best net earnings results in fiscal 2007 in three years on mostly higher sales. Almost 1,700 companies have reported their results so far with an increase of 47% over the same period a year earlier.

The President of Brazil, Luiz Inacio Lula da Silva, came to a visit to India in order to strengthen and expand economic ties. In addition to their robust economic relationships, Brazil and India have formed a common position on major global issues, as part of the G20 group of developing countries.

Trading highlights

Reliance Capital was the most-active stock with a turnover of Rs 143.80 crore followed by MIC Electronics and Indiabulls Real.

Advancers

Following robust global coppe prices, Hindalco rallied to a high of Rs 156 also on talks of a likely takeover. The stock eventually pared gains and finished 4% higher at Rs 147. Hindalco is holding talks with Sterlite Industries to offer separate bids for Alcan of Canada.

SBI and ITC surged 2% each to Rs 1,407 and Rs 165, respectively. SBI rallied on a likely government decision to buy from RBI 59.7% stake of the Reserve Bank in SBI in a deal worth Rs 40,000 crore.

Other banks also advanced in sympathy. ICICI Bank finished 0.6% higher at Rs 933 and HDFC bank ended over 1% higher at Rs 1,165. NTPC and Dr.Reddy''s gained 1% each at Rs 160 and Rs 655, respectively.

Decliners

Tata Motors lost nearly 5% to Rs 711.The company announced that sales were down 4% to 42,558 units May 2007 and commercial vehicle sales dipped to 20,675 units in May 2007 from 21,903 units in May 2006. Passenger vehicle sales declined 3% at 17,580 units in May 2007. Grasim lost 3.2% to Rs 2,440 and BHEL shed 3% to Rs 1,372.

IT stocks dipped on the sustained rupee appreciation. Satyam lost 2.3% to Rs 467, TCS was down 1.2% to Rs 1,204 and Infosys was off 1% to Rs 1,916. Index heavy Reliance Industries lost 0.6% to Rs 1,750.


[R]6:30AM European markets are higher Monday on Segro and Vodafone.[/R]

European markets are higher on Monday. By mid-day, the German DAX Xetra traded up 0.2% at 8,005.18, a high not reached since March 2000, the French CAC-40 index lost 0.2% at 6,158.41 and the U.K. FTSE 100 index added 0.1% at 6,684.20.

Advancers

U.K. real estate investment company Segro, known before as Slough Estates, supported the U.K. index with a 1.1% share increase, after it said that it is selling Slough Estates USA, a life sciences real estate business, to Health Care Property Investors.

Vodafone Group, the world largest mobile-phone company, climbed 0.5% also helping the market. The German group ThyssenKrupp rose 2% and helped German XetraDax to rise.

Decliners

Insurance company AXA lost 0.1% after it said that it intends to withdraw form the Netherlands market by selling its operations there to SNS Reaal for 1.75 billion euros, or $2.35 billion.

J.P. Morgan downgraded the European investment banking sector to underweight from neutral and also reduced Deutsche Bank to underweight from neutral and BNP Paribas to neutral from overweight. Deutsche Bank shares shed 0.6%, while BNP Paribas lost 0.7%.

Commodites

Crude oil fell in New York, breaking three days of gains, on speculation the U.S. will have enough gasoline to meet summer demand. Crude oil for July delivery fell 55 cents, or 0.9%, to $64.53 a barrel in after-hours electronic trading on the New York Mercantile Exchange. Brent crude for July settlement fell 18 cents to $68.89 a barrel on the ICE Futures Exchange.

Gold for immediate delivery dropped $1, or 0.2%, to $670.75 an ounce. Silver fell 2.5 cents, or 0.2%, to $13.675 an ounce after advancing 52.5 cents the two previous trading sessions.

Currencies

The dollar fell slightly against the euro Monday, with traders looking to interest rate decisions in Frankfurt and London. The euro bought $1.3447 in morning trading compared with $1.3443 in New York late Friday. The British pound rose to $1.9835 from $1.9821 with sentiment gaining that the Bank of England would keep its rate unchanged from 5.25% when it meets Thursday. In Japan, the dollar fell to 122 Japanese yen from 122.06 late Friday.


[R]5:30AM NY-4:30PM Mumbai Sensex trades in the red on Monday on selling pressure.[/R]

In early afternoon deals, the Sensex on BSE is trading 28 points down at 14,543.

Advancers

Hindalco has soared 5% to Rs 148, following robust global copper prices. SBI has surged 2.6% to Rs 1,414. ITC has surged over 2% to Rs 165, and Dr.Reddy''s has advanced 1.5% at Rs 658. Reliance Comms has rallied over 1% to Rs 512, while HDFC is also 1% higher to Rs 1,884.

Decliners

Tata Motors is the worst performing stock in the Sensex and has plummeted 4.6% to Rs 713. Tata Motors sales fell 4% to 42,558 units May 2007. BHEL has shed 2.5% to Rs 1,380. Satyam and Cipla have lost around 2% each toRs 469 and Rs 220, respectively. Wipro has lost around 1.4% to Rs 536. Infosys was down 0.8% to Rs 1,925.