Airlines Gain, Continental Climbs 10%

Elena
03 Jul, 2007
New York City

U.S. stock averages continued to trade higher, as a smaller-than-expected drop in factory orders and fresh merger deals generated positive sentiment. The Commerce Department reported that orders for U.S. factory goods fell 0.5% in May, compared with predictions of a decline of more than 1%. Airline stocks posted significant strength in late morning trading, with Continental, up 10%, leading the sector higher. Other notable gainers included brokerage, networking, and computer hardware stocks.

[R]11:30AM Market averages traded up, supported by deal news. Airlines rallied.[/R]

U.S. stock averages continued to trade higher, as a smaller-than-expected drop in factory orders and fresh merger deals generated positive sentiment. The Commerce Department reported that orders for U.S. factory goods fell 0.5% in May, compared with predictions of a decline of more than 1%.

Airline stocks posted significant strength in late morning trading, with Continental Airlines ((CAL)), up 9.4%, leading the sector higher. Other notable gainers included brokerage, networking, and computer hardware stocks.

In late morning trading, the Dow Jones industrial average rose 45.04, or 0.33%, to 13,580.47. Among blue chips, Caterpillar ((CAT)) dropped 3% after it was downgraded to reduce from neutral at UBS, while Merck & Co. ((MRK)) advanced 0.8%. ow members General Motors ((GM)) and Ford ((F)) declined 2.5% and 0.6%, respectinely ahead of June auto sales data.

The Standard & Poor's 500 index was up 5.01, or 0.33%, at 1,524.44, and the Nasdaq composite index was up 9.47, or 0.36%, at 2,641.77. Bonds fell after the better-than-anticipated factory orders data. The yield on the benchmark 10-year Treasury note rose 5.03% from 4.99% late Monday.


[R]New factory orders dropped 0.5% in May.[/R]
Tuesday morning, the Department of Commerce released its report on new orders for manufactured goods in the month of May, showing that orders fell by much less than economists had been expecting. The report showed that new orders for manufactured goods fell 0.5 percent in May following an upwardly revised 0.5 percent increase in April. Economists had expected orders to fall 1.2 percent compared to the 0.3 percent increase originally reported for the previous month.

The relatively modest decrease in orders for manufactured goods came as a 2.4 percent drop in orders for manufactured durable goods more than offset a 1.6 percent increase in orders for manufactured non-durable goods. The Commerce Department also said that shipments of manufactured goods rose 1.0 percent in May, matching the increase that was seen in the previous month. The report also showed that inventories of manufactured goods edged up 0.3 percent in May after rising 0.4 percent in April. Inventories of manufactured goods have increased in fourteen of the last fifteen months.


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

U.S. stocks opened higher, extending recent advance on the back of more deal news before the Independence Day break. However, gains were modest as investors remained cautious ahead of data on the manufacturing and housing sectors. The latest takeover news included a $7.2 billion bid from Kraft Foods ((KFT)) to buy Danone''s biscuit and cereal unit. Kraft''s shares fell 1.3%.

Automakers are in focus Tuesday, due to the release of June auto sales. Ford ((F)) lost 3.4%, while General Motors ((GM)) dropped 3% as another month of weak sales reports is expected. Ford also said that it is offering a premium to holders of its 5-year-old debt securities to convert them to common stock.

The Dow Jones industrial average was up 9.92 points, or 0.07%, at 13,545.35. Among blue chips, Caterpillar ((CAT)) dropped 3% after it was downgraded to reduce from neutral at UBS, which also cut the company''s price target to $70 from $78. The Standard & Poor''s 500 Index was up 2.33 points, or 0.15%, at 1,521.76. The Nasdaq Composite Index was up 3.38 points, or 0.13%, at 2,635.68.


[R]9:00AM U.S. stock futures pointed higher ahead of Independence Day. Auto sales were in focus.[/R]

U.S. stock futures predicted a higher market opening on Tuesday, a day before the Independence Day break. Among pre-market highlights, automotive stocks attracted attention on June sales data. Sales at Ford Motor ((F)) are expected to fall between 7% and 9% with market share down to 15.9%. General Motors ((GM)) sales are seen falling as much as 13% in June, with its market share down about 3 percentage points to 23.9%. The Chrysler unit of DaimlerChrysler ((DCX)) is expected to report a gain of at least 7%.

On the merger-and-acquisition news front, Kraft Food ((KFT)) said ot agreed to acquire the global biscuit business of Groupe Danone ((DA)) for $7.2 billion. Further in deal news, Teck Cominco ((TCK)) agreed to buy Canadian listed copper miner Aur Resources for $3.9 billion cash and stock.

U.S. stock markets will close at 1 p.m. and bond markets will close at 2 p.m. Eastern for the holiday break. S&P 500 futures rose 4.3 points at 1,535.30 and Nasdaq 100 futures advanced 6.25 points at 1,978.25. Dow industrial futures rose 33 points.


[R]8:15AM Kraft Foods agreed to buy Groupe Danone biscuit division for $7.2 B.[/R]

Kraft Foods Inc. ((KFT)) announced Tuesday that it launched a bid of 5.3 billion euros ($7.2 billion) in cash to acquire the biscuit division of French food company Groupe Danone SA. The biscuits and cereal division includes brands LU, Petit Dejeuner, Tuc, Mikado and others. The offer does not include Danone stakes in biscuit businesses Bagley in Latin America and Brittannia in India. Kraft believes that the purchase will expand its presence in the snacks business and help transform company’s international business.

French food giant Groupe Danone agreed to sell its biscuit business to U.S. rival Kraft Foods and said in a statement that its board is considering the bid on an exclusive basis. The transaction, which is subject to regulator approval, is expected to complete by the end of the year.


[R]6:30PM Mumbai, 9:45 AM New York – Sensex reaches new record for the second day in a row. Telecom and consumer stocks power the rally.[/R]


Sensex in Mumbai trading jumped 1% or 142.25 to a record close at 14,806.51. Cement, engineering and textiles stocks lifted the index. The 14-month low inflation data reported on Friday, kept positive momentum at the opening. Banks, construction and telecoms stocks gained in the trading. Of the 30 stocks in the Sensex Index, 20 advanced and 10 declined.


IPO News

Spice Communications Ltd, joint venture between Telekom Malaysia and B.K. Modi Group, completed its initial public offering. The company raised 520 crore rupees ($128 million) by offering 113.1 million shares at Rs 46 per share. The company operates mobile phone network in states of Punjab and Karnataka. In the next two years company plans to build a national network and spend 700 crore rupees. The company stock is likely to start trading on July 19th or 20th. Modi Group will own 41% and Telekom Malaysia will control 39% after the offering.

According to industry estimates, at the end of March 2007, India had 166 million cell phone subscribers, a jump of 72 million in twelve months, and more than 6 million new subscribers are added every month.

Company News

Bharti Airtel has signed a two year contract with Nokia Siemens to enhance its fixed and wireless network, telecom in eight of the 23 telecom circles for $900 million. The joint venture between Nokia and Siemens is also likely to invest $100 million in India to support this contract. Bharti, has signed a similar contract late last year with Ericsson for $1 billion to expand its network in rural markets.

Gainers

Larsen & Toubro gained Rs 24.05 or 1.1% to close at 2,258.95 on the news reported in Times of India that company plans to sell its entire stake of 11.5% in UltraTech cement. Separately UltraTech reported 2.2% rise in June cement sales from a year ago.

Grasim Industries gained Rs 84.05 or 3.2% to close at Rs 2,702. Aditya Birla Group controlled companies Grasim and UltraTech reported 2.2% June cement sales increase to 2.53 million tons.

State Bank of India gained 3% on heavy volume of 10 lakh shares (1 million) to close at Rs 1,577. The bank is planning to enter seven new business ventures through its new subsidiary ICICI Bank gained 1.5% followed by 0.5% gain in HDFC and 0.3% rise in Bank of India. Private sector bank UTI advanced 2.3%.

Bharti Airtel jumped 3.5% or Rs 29.25 to close at Rs 866.60. A day after Morgan Stanley raised company rating; Company CEO Manoj Kohli estimated that industry is likely to add 7 million monthly new subscribers.

Declining inflation lifted stocks of consume products companies. Hindustan Lever and Colgate Palmolive jumped 3%, Britannia and ITC gained 1.5% and Tata Tea and increased 0.8%.

Reliance industries increased Rs 21 or 1.2% to close at Rs 1,705.45 on general positive sentiment.

Decliners

Reliance Energy Ltd dropped Rs 10 or 1.6% to close at Rs 614.30. The stock declined after Reliance Industries, supplier of gas to the utility company, said that it plans to appeal a recent court ruling that requires it to sell gas at a fixed price agreed several years ago.