Deals of $11 B in NY; Record Asian Markets

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

U.S. market averages traded higher from the opening. Manufacturing orders in May fell 0.5%, less than expected and home resale index showed a softer than anticipated home market. Deals worth $11 billion were annouonced lifting the averages ahead of July 4th holiday. Goldman Sachs analyst estimated Apple sold nearly 0.7 million iPhone in the launch weekend. Markets in Hong Kong, India, Indonesia and Thailand closed at record high. Taiwan closed at 7-year high.

[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 32 cents to close at $71.41 per barrel, natural gas was closed down 1 cent to $6.75 per mBtu, and gasoline futures gained 1.57 cents to close at 226.44 cents per gallon.

Gold gained $3.80 to close at $655.40 per ounce, silver lost 5 cents to close at $12.69 per ounce, and copper futures gained $166 to close at $7,813 per metric ton.

In New York trading, manufacturing orders, home resale data and buyout worth $11 billion lifted market sentiment in the morning trading. The average rose in the morning trading and continued to move higher with the strength in brokerage, techs, energy and financial stocks.

Teck Cominco, copper miner, agreed to pay $3.89 billion in stocks and cash for Aur Resources. Kraft Foods ((KF)) offered $7.2 billion to purchase biscuits and cookie operations of Group Danone ((DA)). Danaher ((DHR)) sold its power quality business that makes equipment and components for power transmission for $280 million to Thomas & Betts Corp ((TNB)). The division had $130 million in sales.

The Commerce Department reported that May factory orders edged 0.5% lower on account of volatile aircraft and defense orders. National Association of Realtors’ index of home resale fell for the third month in a row indicating that home market is still softer than expected.

Movie Gallery ((MOVI)) fell 65% on the news that it is in violation of its financial covenant with its lenders on lower than expected sales in the second quarter. Wendy’s ((WEN)) jumped 3% on a hostile letter from activist Nelson Peltz contending that his investment company Triarc is a natural buyer. Oracle ((ORCL)) gained a fraction after rival SAP admitted that some software downloads from the company web sites were ‘inappropriate’. Airlines stocks gained after Continental reported higher than expected revenue growth in June. Continental ((CAL)) surged 11% and lifted American Airlines parent AMR ((AMR)) and UAL Corp ((UAUAU)) parent of United Airlines. Ford Motor company dropped 2% on reporting 8.1% decline in sales. Chrysler reported 1% loss in sales and GM sales fell 21%. Caterpillar dropped 3% on downgrade from UBS on rising competition from Komatsu in Japan. Avon jumped 3% on an upgrade from Sanford Bernstein.

Latin American Markets closed higher on the back of firmness in New York trading, rising metals prices and falling yields. Mexico led the region with an advance of 2.2%, followed by 0.8% gain in Chile and 0.6% rise in Brazil. Rising copper, zinc and sugar prices in international markets supported commodities companies. Mexican bonds fell for the second day after S&P revised the country bond rating upwards.

In Mexico City trading, IPC Index climbed on optimistic outlook on economic growth and rating revision on sovereign bonds. The index climbed 2.2%. American Movil ((AMX)) led the index with a rise of 3% followed by 1.5% gain in Telmex ((TMX)). Cemex ((CX)) closed up a fraction but Homex ((HXM)) fell. Coca Cola Femsa ((KOF)) gained 1%.

In Sao Paulo trading, Bovespa Index gained 0.6% led by energy and banking stocks. Petrobras ((PBR)) led the index with a rise of 2.4%. CVRD ((RIO)), iron ore mining fell a fraction on worries that demand from China may decline. Banco Bradesco ((BBD) gained 1% but Itau Holdings ((ITU)) was unchanged. Corporate bonds and asset backed securities sales jumped 17% in the first half in Brazil to $11.5 billion. Ambev, the beverage company, jumped 0.7% but steelmaker Gerdau ((GGB)) was unchanged.

Asian Markets closed higher led by several markets reaching new records. Hong Kong, India, and Indonesia reached a new record close. Taiwan closed at a seven year high, Thailand at 10-year high, and South Korea closed at near record level. Thailand led the region with a gain of 2.63% followed by 2% in Shanghai, 1.93% in South Korea, 1.7% in Hong Kong and Philippines. Rising demands manufactured exports, metals and energy drove several indexes to new highs.

In Tokyo trading, banks, auto and manufacturing companies closed higher. Komatsu gained 1.4% on a recommendation from Merrill Lynch and revised price target of 4,200 yen. Honda and Toyota edged a fraction higher on renewed confidence in U.S. auto sales. Kobe Steel fell 2%, JFE Holdings dropped 0.3%, and Nippon Steel declined 0.5% on worries that rising raw material costs will hurt profit. Ahead of June subscriber data cell phone carriers faced some volatility. Softbank, third largest carrier jumped 3%, KDDI dropped 2.5% and NTT DoCoMo, the largest carrier, fell 0.5%. oil refiners continued their climb led by a higher crude prices in the region. Cosmo Oil jumped 3% and Nippon oil gained 0.5%.

In Shanghai trading, CSI 300 Index climbed 2% after falling 7% in the last three sessions. The yuan dipped below 7.60 against dollar for the first time since July 2005 lifting bank and property stocks. China Vanke, largest real estate operator, rose 4.1% and China Merchants Bank gained 2.3%.

In Hong Kong trading, China Shenhua soared 6.6% on the company statement that it plans to raise $6.3 billion in public offering, largest ever offering in China. The operator of Hong Kong Stock Exchange, Hong Kong Exchanges & Clearing Ltd surged 7% to a record high on optimism that the July 5th announcement from government will expand investment from China boosting stock market turnover.

In Mumbai trading, Sensex 30 gained 1% on lower than expected inflation data and news in the telecom sector. Bharti Airtel placed order worth $900 million to Nokia Siemens. Spice Telecom IPO of $120 million was oversubscribed 37 times. Larsen Toubro plans to sell its entire stake of 11.5% in UltraTech cement. Cement and banking stocks gained during the session.

European Markets closed higher across the region on improved earnings outlook, rising markets in the U.S., and buyout news. Germany led the region’s gain with 1.2% followed by 0.9% rise in Italy and Belgium, 0.7% advance in UK and France and 0.6% increase in Switzerland and the Netherlands.

In Frankfurt trading, DAX index closed up 1.2%. SAP fell on company admission that it may have inappropriately downloaded software code from Oracle. SAP fell 2.1%. Broker upgrades of several stocks in Germany including MAN, Siemens and Scania and Nokia in Nordic markets lifted local averages. MAN jumped 4%. Deutsche Bahn, German railroad workers staged a strike this morning disrupting services in most cities. The union members are demanding higher wages. The Bahn is targeted for privatization by the government in the next two years. Volkswagen sales in the U.S. jumped 15% in the month of June. Deutshce Wohnen dropped 6% on Berlin based Behag GmbH acquisition valued at 1.84 billion euros. Heidelberger Druckmaschinen jumped 6% on the news that the buyout fund Centaurus Capital based in London holds 5% stake in the company.

In Paris trading, Carrefour rose 3% on local news reports indicating that some members of controlling family may want to sell shares. Group Danone gained 1.3% on the news that it is in talks to sell its cookie and biscuits division to Kraft Foods. Vivendi added 1% on the news the company CEO of its mobile unit bought stocks worth 16 million according to regulatory filings. Business Objects ((BOBJY)) jumped 2.3% on an upgrade from UBS and target price revision to 37 euros.

In London trading, FTSE 100 Index closed higher 0.8%. Rising metal prices, positive outlook on second quarter earnings, broker upgrades and regional buyout news lifted the averages. Copper miners led the advancing issues. Anglo American gained 2.1%, Xstrata rose 1.5%, and Rio Tinto increased 0.7%. British Airways increased 1.4% on the news that it has been awarded rights to fly from U.S. cities to European destinations. The possible cities in Europe that the airline is considering are Paris, Amsterdam and Milan. Greene King surged 8% on the news that the company will buyback $200 million of its stock and create a real estate unit for its pub locations. Home Retail Group jumped 3% on unsubstantiated buyout rumors. Software developer Autonomy jumped 13% after company said that its second quarter sales will be higher than estimated.


[R]1:00PM NY, 5:00 PM Frankfurt European markets gained ground, supported by U.S. gains.[/R]

European stock markets posted solid gains to close in the positive territory, helped by strength on Wall Street. Weaker shares of the German SAP failed to hurt sentiment.

The tech sector was in focus after the software giant admitted to ‘inappropriate downloads’ in response to a lawsuit by Oracle. SAP lost 2.5%. Still in the sector, Nokia added 2.2% after its 50-50 venture with Siemens, Nokia Siemens Networks, won a $900 million contract from India's Bharti. Among tech stocks gainers, Getronics surged 19%, while Business Objects rose 2.3% after UBS upgraded the firm to buy from neutral.

In deal news, French food giant Danone rose 1.25% after it agreed to sell its biscuit business to U.S. rival Kraft Foods for 5.3 billion euros ($7.2 billion) in cash. The U.K. FTSE 100 rose 0.68% at 6,635.10, the German DAX climbed 1.16% at 8,050.64 and the French CAC-40 gained 0.71% at 6,069.84.


[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%. Dow members General Motors ((GM)) and Ford ((F)) declined 2.5% and 0.6%, respectively 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.