Deals Worth $65 Billion; Oil Above $71

123jump.com Staff
02 Jul, 2007
New York City

U.S. market averages climbed lifted by deals worth $65 billion and postive news on manufacturing survey. The three popular averages climbed nearly 1% and closed at high for the day. Schwab announced a stock buy back plan of $3.5 b. Crude oil jumped above $71. The dollar fell to 26-year low against pound ahead of rate decision in the U.K. Shanghai led the world markets with a gain of 87% and Venezuela closed with a loss of 24%. Germany led the European markets with 21% gain.

[R]4:00PM NY, 10:00 PM Frankfurt, 1:30AM Mumbai – Global Markets[/R]

Yields edged lower on 10-year U.S. bonds and closed at 5.01% and 30-year bond rose to close at 5.12%.

Crude oil advanced 41 cents to close at $71.09 per barrel, natural gas was unchanged and closed at $6.78 per mBtu, and gasoline futures gained 0.59 cents to close at 224.87 cents per gallon.

Gold gained $8.30 to close at $659.20 per ounce, silver gained 29 cents to close at $12.76 per ounce, and copper futures gained $26 to close at $7,647 per metric ton.

In New York trading, manufacturing survey lifted market sentiment in the morning trading supported by several deal related news. The average rose in the morning trading but faced heavy selling pressure at mid-afternoon and recovered as market neared close as bond yields fell. Multi-billion dollars worth of deals were announced in utilities, telecom, media and consumer products.

A private read on manufacturing orders suggested that orders in June rose showing that manufacturing is likely to remain robust and help the economic growth to maintain steady pace. The ISM manufacturing index in June rose to 56 from 55 in May.

Bell Canada, widely known as BCE agreed to be acquired by a group of investors led by Ontario Teachers Pension Plan for $48.5 billion including minority shareholders, preferred stocks and debt of $15.9 billion. The offer per share is Canadian $42.5 per share. AT&T agreed to buy Dobson Communications, a mobile telephone service operator, in $2.8 billion. Carlyle Group is reported to offer at least $33 per share for Virgin Media. The British cable operator has been rumored for an acquisition for months now but no deal had emerged. Reddy Ice Holdings ((FRZ)) for cash of $1.1 billion or $31.25 per share. Dominion Resources agreed to sell its oil and natural gas exploration in Mid-Continent basin to Linn Energy for $2.05 billion and completed its gulf of Mexico operations to Italian energy company Eni for $4.73 billion.

Industrial companies led the market rally in the hope of better than expected earnings. Caterpillar ((CAT)) jumped $$2.19 or 2.8%, United Technologies rose $1.40 or 2%, and Honeywell ((HON)) gained 81 cents or 1.44%. Charles Schwab ((SCHW)) jumped 7% on the news that the company plans to buyback $3.5 billion of its own stock. Broker upgrades of Archer Daniels Midland ((ADM)) and Costco ((COST)) lifted stocks.

Latin American markets closed higher led by 2% gain in Argentina followed by 1.8% rise in Brazil and 0.9% advance in Mexico and Chile. Latin market jumped on the strength in the New York trading and falling U.S. bond yields. Mexico debt rating was revised to positive from stable lifting the currency, bond and stock market. Separately Pemex assigned the first oil drilling contract to a private company to halt falling oil production.

In Mexico City trading, stocks advanced on positive market mood in New York and countrly outlook revision from Standard’s & Poor. A day after large companies faced a wave of sell-off on the worries that a presidential plan is likely to boost taxes for Cemex and Groupo Televisa. Cemex and American Movil gained nearly 1% but Homex, Telmex and Grupo Televisa jumped a fraction. Wal-Mart de Mexico jumped nearly 1.5%.

In Sao Paulo trading, stocks gained 1.8% led by miners, banks and local home builders. Petrobras led the gainers with a rise of 4% after trading on split adjusted basis in New York trading. CVRD advanced a 3.5%. TAM recovered with a gain of 2% and GOL Airlines dropped a fraction on oil crossing $71 per barrel.

Asian Markets closed higher led by 2% rise in Thailand followed by 1.6% gain in South Korea and 1.2% increase in Indonesia. Pakistan closed up 1% after rallying 37%, second best performing market in the world for the first half 2007 on steady foreign direct investments.

In Japan trading, export houses led by 3% surge in Mitsui helped Tokyo to recover from losses in real estate stocks. Tokyo closed up 0.04%. Tankan quarterly survey of businesses released by Bank of Japan showed a desire to increase capital spending by corporations. Japan Steel Works surged 5% and Sumitomo Heavy Industries gained 3.3% on the news. Mitsubishi Estate fell UFJ Financial Corp and Mizuho Financial group raised mortgage rates by 0.25%.

In South Korea trading, brokerage and construction industries stocks led the charge on optimistic economic outlook released by government. Posco, Korean steelmaker, jumped 3% on the news that the company is seeking technology and operational alliance with Arcelor Mittal. Daewoo Securities and Samsung Securities jumped 11%.

Petroleum refineries and import companies around the region gained on oil trading at $70 per barrel. PTT in Thailand gained 3%, Caltex in Australia gained 1.8%, and Singapore Petroleum jumped 1%.

In Shanghai trading, CSI 300 index fell 0.2% on a report that showed a decline in new brokerage account opening in May and June. Average daily new accounts openings have fallen to 147,000 from 440,000 in May according to China Securities Depository and Clearing Corporation.

In Mumbai trading, Sensex 30 rose a fraction to close at a record high of 14,664. The broker upgrade of Bharti Telecom and Reliance Communication helped the telecom sector stocks. Trade deficit in May grew to $6.22 billion from $4.26 billion in April on 26% rise in exports and 18% increase in imports. Kamal Nath, Minister of Commerce and Industry, said that country is likely to receive $30 billion in foreign investment in the fiscal 2007 on strong fund flows in stock market and property investments. Maruti reported 24% rise in automobile sales, sixteenth monthly gain, on new auto models lifting company stock 6%. Tractor and utility vehicle maker, Mahindra & Mahindra reported 52% rise in sales, lifting the company stock 1.8%.

[R]1:00PM NY, 5:00 PM Frankfurt European markets lost ground amid weakness in the travel and auto sector.[/R]
European stock markets lost ground at the start of the third quarter, weighed down by weakness among oil-sensitive airlines and autos and Britain's terror-alert level raised to ‘critical’. Of airlines, shares of British Airways lost 1.4%, easyJet declined 1.9%, while Air France-KLM shares fell 0.7%. In the automotive sector, Renault and BMW each lost more than 0.5% as oil prices neared $70 a barrel. Daimler shares slipped 0.3%.
Ahead of interest-rate decision by the ECB and the BoE later this week, the U.K.'s biggest property developers, British Land dropped 1.9% while shares in German insurance giant Allianz fell 2.1%.
On the positive side, French food group Danone rose 1.6% amid speculation that it is planning to sell its biscuit and cereal lines. The U.K. FTSE 100 lost 0.3% at 6,590.60, while the German DAX declined 0.6% at 7,958.24 and the French CAC-40 fell 0.5% at 6,026.95.

[R]11:30AM Market averages rallied, supported by strong manufacturing growth in June and deal news.[/R]

U.S. stocks rallied in a light trading session, as data showing faster growth in the manufacturing sector as well as fresh merger news generated positive sentiment at the start of Q3. Following the upbeat report, shares of large industrial companies Caterpillar and Honeywell rose 2% each.

A number of sectors advanced, with the steel sector posting notable gains. Rio Tinto ((RTP)), Steel Dynamics ((STLD)), and Worthington ((WOR)) moved to the upside after the ISM said the manufacturing sector unexpectedly expanded in June. Rate-sensitive real estate investment trusts and utilities stocks also moved higher amid a decrease by treasury yields. Among utilities, Exelon ((EXC)) and PSEG ((PEG)) advanced 2.6% each.

Shares of Research In Motion ((RIMM)) jumped 5.7% to lead gainers on the Nasdaq. Bank of New York Mellon ((BK)) boosted the S&P 500 with an advance of 8.5%. Och-Ziff Capital Management Group LLC filed an IPO with the SEC to sell up to $2 billion in Class A shares on the NYSE under the symbol OZM.

Among other stocks in focus, Dobson Communications ((DCEL)) jumped 12% after the wireless communications services provider agreed to be acquired by AT&T ((T)) for $2.8 billion. The Dow Jones industrial average was up 97.31 points, or 0.73%, at 13,505.93. The Standard & Poor's 500 Index was up 12.22 points, or 0.81%, at 1,515.57. The Nasdaq Composite Index was up 22.96 points, or 0.88%, at 2,626.19.


[R]9:45AM Market opened higher, boosted by multibillion-dollar takeover deals.[/R]

Wall Street opened higher on the first day of the third quarter, boosted by enthusiasm over new merger deals, including a multibillion-dollar takeover of Canadian telecom carrier BCE. Economic data that showed faster manufacturing growth in June also helped generate positive sentiment. The ISM's index advanced 56% last month, which was above 55.0% in May and economists' forecast for a 55.1% reading.

A group led by the Ontario Teachers Pension Plan, including two U.S. private-equity houses, agreed to buy BCE ((BCE)) for $48.5 billion, sending its shares up 3.5%. Further in M&A action, AT&T Inc. ((T)) on Friday agreed to buy Dobson Communications ((DCEL)) for $2.8 billion. Carlyle Group offered $11.1 billion to acquire telecommunications company Virgin Media ((VMED)).

The Dow Jones industrial average was up 91.78 points, or 0.68%, at 13,500.40. The blue-chip average was supported by Caterpillar ((CAT)) and Honeywell International ((HON)), each rising 2%. The Standard & Poor's 500 Index was up 12.32 points, or 0.82%, at 1,515.67. The Nasdaq Composite Index was up 22.82 points, or 0.88%, at 2,626.05.


[R]9:00AM Wall Street to open higher on takeover deals.[/R]

U.S. stock futures moved to the upside on Monday on the first day of the third quarter. Pre-market sentiment was lifted by several takeover deals, which managed to offset rising oil prices and overseas terrorism worries. A group led by the Ontario Teachers Pension Plan, including two U.S. private-equity houses, agreed to buy BCE ((BCE)) for $48.5 billion, sending BCE shares up 3%.

In other deal news, Carlyle Group reportedly offered between $33 and $35 a share for British cable operator Virgin Media. The offer values all of Virgin Media's equity at up to $11.7 billion. Virgin Media stock jumped 17% in pre-market trading. AT&T ((T)) agreed to buy mobile operator Dobson Communications ((DCEL)) in a deal worth $2.8 billion.

On the economic news front, the Institute of Supply Management is due to release its manufacturing sentiment for June, which is largely expected to be unchanged from May. On Monday before the bell, Dow futures expiring in September were up 22.00, or 0.12%, at 13,539 while S&P 500 futures rose 5.00, or 0.33%, to 1,524.40. Nasdaq 100 index futures rose 6.50, or 0.33%, to 1,962.50.



[R]6:00AM – New York, 4:30 PM Mumbai – Sensex in Mumbai trading close at record on rising auto sales, rupee and May trade deficit.[/R]

Sensex 30 in Mumbai trading increased 13.75 or 0.1% to close at a record high of 14,664.26. Broker upgrades, monthly trade deficits and strong auto sales affected trading sentiment. The rupee traded as high as 40.66 against dollar hurting software exporters. Trading turnover on BSE was rupees 4,303 crore compared to 4,855 crore on Friday.

Economy News

May month trade deficit was recorded at $6.22 billion, a rise of nearly 50% on larger that expected rise in import. Rupee has advanced to 8% in the current year lifting imports of machinery, technologies and consumer products from China, Japan and European nations. Exports in the month gained 18% to $11.86 billion and imports gained 26.4% to $18 billion. India registered trade deficit of $7.2 billion, record level, in April 2007. Minister of Commerce and Industry, Kamal Nath, expects foreign fund flows of $30 billion in the fiscal 2007.

Economy and Trade minister of Japan, Akira Amari, in a joint press conference with Kamal Nath said that Japan is keen to invest in dedicated freight rail line between Delhin and Mumbai and upgrading airports and seaport in Maharashtra and Gujarat states. Mr. Nath estimated that India needs nearly $450 billion to build and improve infrastructure by 2012.

Gainers

Maruti Udyog reported 24% rise in automobile sales, sixteenth monthly gain, on new auto models lifting company stock 6%. Tractor and utility vehicle maker, Mahindra & Mahindra reported 52% rise in sales, lifting the company stock 1.8%. Tata motors gained 2.2% and Hero Honda increased 0.5%.

Morgan Stanley lifted ratings on Bharti Airtel and Reliance Communications. Mobile telecom subscriptions are still growing at a steady pace of above 5 million new subscribers as carriers invent new ways to attract customers. Bharti jumped 0.2% or rupees 1.40 to 837.50 and Reliance gained 12.65 rupees to close at 529.70. Morgan Stanley raised its target price to 655 for Reliance and 1,056 for Bharti.

Larsen & Toubro jumped 1.8% or 38 rupees to 2,234 on the news in Economic Times that the company is selected as second source for power equipment by the government.

IFCI Ltd. surged 8% to close at 60 rupees with heavy trading volume of 2 crore shares after company scheduling a board meeting to invite strategic investor bid.

Welspun Gujarat Stahl Rohren jumped 7% to 237 rupees on the news that company plans to build a manufacturing plant in the U.S.A.

GMR Infrastructure rose 2.2% after company board approved plans to split its stock face value from 5 rupees to 2 rupees face value. The company also reported fourth quarter net income of rupees 12.37 crores on revenue of rupees 22.75 crores. For the year the company earnings plunged 96% in fiscal 2007 to rupees 2.88 crores on net revenue declie of 42%.

Decliners

Indian Petrochemicals Corp, known as IPCL, lost 1.8% or 6.30 rupees to 336.75 on the news that company will spend nearly $110 million or 400 crores rupees to pay for voluntary retirement of 2,600 employees. The company earnings dropped to $4 million, or 94% on retirement cost.

Bajaj Auto fell 0.1% after reporting scooter sales decline of 12% to 1,87,624 in June from a year ago.

Software export companies fell on rising rupees and worries on wage hikes in the industry. Tata Consultancy Services fell 1.3% or rupees 14.65 to close at 1,134. Wipro ((WIT)) declined 1.1% or rupees 5.50 to 512, however Infosys gained 0.6% to 1,940.

Cement stocks fell after rallying for a week. Grasim dropped 0.6% and Gujarat Ambuja fell 2% on profit taking.