Europe Continues Winning Streak on Nordic, ABB

Elena
27 Aug, 2007
New York City

European stock markets finished mostly higher Monday, continuing a six-session winning streak. Market gainers were led higher by engineering-services giant ABB as well as Nordic exchange operator OMX. ABB climbed 0.9% after the Swiss-Swedish company agreed to sell its oil and gas division Lummus to Chicago Bridge & Iron Co for $950 million. France closed higher by 0.4%, while Germany finished down 0.3%. London''s market was closed for a bank holiday.

[R]1:00PM NY, 5:00 PM Frankfurt European markets closed mostly higher, boosted by ABB and Nordic.[/R]

European stock markets finished mostly higher Monday, continuing a six-session winning streak. Market gainers were led higher by engineering-services giant ABB as well as Nordic exchange operator OMX. France closed higher by 0.4%, while Germany finished down 0.3%. London''s market was closed for a bank holiday.

ABB climbed 0.9% after the Swiss-Swedish company agreed to sell its oil and gas division Lummus to Chicago Bridge & Iron Co for $950 million. Nordic stock exchange operator OMX rose 1.7% on reports the Nasdaq Stock Market is planning to raise its bid.

In Frankfurt stocks dropped, led by engineering company Siemens and semiconductor Infineon Technologies. The stocks dropped 1.6% and 1%, respectively. Banking shares moved to the downside amid subprime-mortgage concerns, with Allianz posting the biggest loss of 1.3%. Stock-exchange operator Deutsche Boerse fell 1.1% amid speculations that it may buy part of Nasdaq''s 31% stake in the LSE.

On the positive side, tire maker Continental rose 1.1% and Volkswagen added 0.7% amid reports Europe''s largest carmaker plans to assemble six models at its new Russian plant. Balda, maker of plastic casings for mobile phones, surged 20% after winning an order for touch-screen displays.

In Paris stocks gained, led by Renault, BNP Paribas SA and Air France-KLM Group. French second-biggest carmaker, car maker advanced 1.6% amid reports it is considering a partnership with GM’s Opel division which will result in cost. In the financial sector, BNP Paribas added 1%. Elsewhere, airline Air France advanced 0.8%, while Bouygues, the world''s second-largest builder, gained 0.5%.


[R]11:30AM Market averages dropped further lower, pressured by economic growth concerns.[/R]

U.S. stock averages moved further to the downside amid concerns about the economic growth, sparked by signs of growing weakness in the housing sector. A notable decrease in crude oil prices also generated negative market sentiment, sending energy stocks down. Exxon ((XOM)) declined 0.8%, while shares of oil giant Chevron ((CVX)) dropped 0.6%.

Utilities stocks were also notable decliners after last-week strong performance. Shares of big manufacturers, banks and other financial services companies posted the heaviest losses. 3M Co ((MMM)) declined 1.1%, General Electric Co ((GE)) lost 0.9%, while shares of Boeing Co ((BA)) fell 0.7%.

Among financials, shares of the biggest U.S. mortgage lender, Countrywide Financial Corp ((CFC)), dropped 4.8% after Lehman Brothers downgraded its stock. JPMorgan ((JPM)) dropped 1.3%, whereas Citigroup ((C)) slipped 0.9%.

Housing stocks came under pressure, following the release of a report on existing home sales, which showed a modest decline in sales, 0.2%, and a significant increase in inventories of unsold homes. The National Association of Realtors said that inventories of unsold single-family homes climbed 2.2% to 3.85 million in July, sending the inventory in relation to sales to the highest level in 16 years.

Shares of home improvement retailer Home Depot ((HD)) rose 1.8% on news that agreed to sell off its wholesale-supply unit for $8.5 B, which is $1.8 B less than previously planned.

Tech stocks were given a boost by deal news in the sector. Shares of personal-computer maker Gateway ((GTW)) skyrocketted 48% after Taiwan''s Acer agreed to buy the company for 710 million, or $1.90 a share, a 57% premium to Friday''s closing price. On the side of the losers, Apple ((APPL)) dropped 1.8% and EMC Corp. ((EMC)) slipped 2.1%.

In late morning trading, the Dow fell 52.59, or 0.39%, to 13,326.28. The Standard & Poor''s 500 index fell 9.64, or 0.65%, to 1,948.69, and the Nasdaq composite index fell 15.06, or 0.58%, to 2,561.63. Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.60% from 4.62% late Friday.

[R]Existing-home sales fell 0.2% in July.[/R]

Monday morning, the National Association of Realtors released its report on existing home sales in the month of July, showing that existing home sales fell modestly compared to an upwardly revised reading for the previous month. The report showed that existing home sales edged down 0.2 percent to an annual rate of 5.75 million units in July from an upwardly revised pace of 5.76 million units in June. With the decrease, existing home sales were down 9.0 percent year-over-year. Economists had been expecting existing home sales to fall to a 5.70 million unit rate compared to the 5.75 million unit rate originally reported for the previous month.

The modest decrease in existing home sales was due in large part to a 2.2 percent drop in sales in the Midwest, which was partly offset by a 1.8 percent increase in sales in the West and a 1.0 percent increase in sales in the Northeast. The report also showed that the national median existing-home price for all housing types was $228,900 in July. The median price was down 0.6 percent from July of 2006, when the median was $230,200, the highest monthly price on record. NAR added that total housing inventory rose 5.1 percent to 4.59 million existing homes available for sale at the end of July. This represents a 9.6-month supply at the current sales pace, up from an upwardly revised 9.1-month supply in June.


[R]11:00AM New York, 8:30PM Mumbai – Traders in Mumbai focused on local news and lifted the index.[/R]

Sensex soared 2.89% or 417.51 to 14,842.38 after sharp rise in Asian market. In Mumbai, as in the rest of Asia, indexes rebounded on the optimism sparked by the housing report in the U.S. Weak credit markets in the U.S. led to volatility in the global markets and sharp declines in market averages around the world. CNX Nifty advanced 112.45 or 2.68% to 4,302.60.

Of the stocks traded on the Bombay Stock Exchange, 2,050 stocks gained, 629 declined, and 54 were unchanged. Daily turnover declined to 3,489 crore rupees from 3,632 crore rupees. The turnover on the NSE rose to 8,896 crore rupees from 8,133 crore rupees. Of the 30 stocks in the index 28 gained and two stocks declined.


Offerings

The initial public offering of Take Solutions jumped 27% to 926 rupees from its price of 730 rupees. The 57 times oversubscribed IPO opened at 876 rupees and quickly reached its high for the day to 943 rupees.

Mecator Lines increased 2.3% to 54.75 rupees on the news that it plans to sell 30% stake in its Singapore subsidiary.

Gainers

State Bank of India led the gainers in the index with a rise of 6.6% to 1,563 rupees. The bank has agreed to acquire one of its seven affiliated banks State Bank of Saurashtra. ICICI Bank jumped 6% to 883 rupees. Smaller banks participated in the market rally as well. Federal Bank jumped 5.4% to 323.80 rupees and Kotak Mahindra increased 4.8% to 680 rupees. Indian Bank jumped 15% to 151 rupees.

Tata Steel jumped 3.7% to 604 rupees on the news that it plans to increase its steel production by 35 million tons to 61 million by the year 2015. L&T increased 3.9% to 2,539 rupees after the board approved international offering to raise $700 million.

Bajaj Auto jumped 2.8% to 2,295 rupees. The company plans to shift its production to Waluj from Akurdi location to take advantage of lower operating costs and sales tax. Tata Motors increased 3.4% to 680 rupees after the company Chairman Ratan Tata confirmed its interest in purchasing Jaguar and Land Rover divisions from Ford. Maruti Udyog jumped nearly 6% in the rally to 835 rupees.

NTPC added 2.4% to 167 rupees on the news that the company plans to sell 4.75% of its stake and increase public float of the company. Reliance Industries jumped 3.4% to 1,835 rupees. GMR infrastructure jumped 4% to 749 rupees after its subsidiary received order to build power project in Himachal Pradesh.

Real estate stocks jumped after trading volatile in the last two weeks. Parsvnath Developers gained 4.8% to 293 rupees after winning land development order for BEST, the local bus transportation operator in Mumbai.

Indiabulls Real Estate soared 11.5% to 497 rupees, Peninsula Land increased 11% to 464 rupees, and Unitech added 7.6% to 491 rupees.


[R]09:45AM Wall Street opened lower ahead of housing data.[/R]

Wall Street opened Monday session in the negative ahead of existing-home sales report, expected to show continuous slow-down in the housing market.

Dow member Home Depot ((HD)) rose 1.8% on news that owing to a slashed price it managed to salvage the takeover of its supply unit. The home improvement retailer agreed to sell off its wholesale-supply unit for $8.5 billion, which is $1.8 billion less than previously planned, signaling a harsh financing climate.

Another blue-chip stock, Altria Group ((MO)), climbed 2% amid speculations that it is considering spinning off the overseas division of its cigarette business. At the same time, General Motors ((GM)) weighed, posting a decline of 1.3%.

A decline in crude oil prices also weighed on sentiment, dragging energy companies down. Exxon ((XOM)) declined 0.5%, leading both the Dow and S&P 500 down. Shares of oil giant Chevron ((CVX)) dropped 0.7%.

Merger-and-acquisition news was in the spotlight again, helping to offset some of the negative sentiment. Gateway ((GTW)) soared 52%, boosted by news that Taiwan''s Acer will acquire the company for 710 million to create the world''s No.3 PC maker. Further on the deal news front, Chicago Bridge & Iron Co. ((CBI)) agreed to buy Lummus Global from engineering-services company ABB ((ABB)) for $950 million.

The Dow Jones industrial was down 40.64 points, or 0.30%, at 13,338.23. The Standard & Poor''s 500 fell 6.02 points, or 0.41%, at 1,473.35. The Nasdaq Composite dropped 6.41 points, or 0.25%, at 2,570.28.


[R]09:00AM U.S. stock futures pointed to flat opening ahead of housing data.[/R]

U.S. stock futures were trading near the unchanged mark on Monday, reflecting positive mood generated by takeover activity and cautiousness ahead of housing data. Acquisition deals were announced in the steel and personal computer sectors. U.S. Steel ((X)) agreed to buy Canada''s Stelco for about $1.1 billion, while Taiwan''s Acer said it will acquire Gateway ((GTW)) for $710 million, creating the world''s No.3 PC maker.

Among other pre-market highlights, Home Depot ((HD)) rose 1.8% on news it tentatively agreed to sell its wholesale distribution business to a private equity group for $8.5 billion, which is $1.8 billion less than previously planned. The news suggested that struggling credit markets had tightened control over financing of deals. In deal speculations, Wal-Mart ((WMT)) is reportedly interested in acquisitions in the U.S.

In economic news, investors will focus on existing-home sales report, searching for clues on whether the Fed will cut interest rates in the short term. Existing-home sales are expected to have fallen to 5.70 million in July from 5.75 million in June. S&P 500 futures fell 2.3 points. Dow Jones industrial average futures slipped 11 points, and Nasdaq 100 futures fell 5 points.


[R]8:15AM U.S. Steel agreed to acquire Canada’s Stelco for $1.04 billion.[/R]

United States Steel Corp. ((X)) announced an agreement to acquire Canada''s Stelco, continuing the global consolidation in the steel industry. The deal is worth C1.1 billion ($1.04 B), or C$38.50 a share. The transaction represents 43% premium over Stelco''s Friday close of C$26.93. The deal is expected to strengthen U.S. Steel’s position as a supplier of flat-rolled steel products in North America.

Under the terms of agreement, the U.S. steelmaker will assume Stelco''s $730 million of net debt. U.S. Steel expects that the deal will generate more than $100 million of pre-tax synergies by the end of 2008 and will contribute to earnings increase on an adjusted basis for 2008. The deal, which is expected to complete this year, is subject to antitrust review in the U.S. and Canada. J.P. Morgan is a financial advisor of U.S. Steel, while CIBC and UBS advised Stelco.


[R]7:00AM New York, 8:00PM Tokyo-Japanese shares rose on fresh economic growth prospects. New finance minister is appointed. Japan debt jumps to 836,521 billion yen. Mitsubishi UFJ units to buy Australia firm, Challenger Financial Services Group Ltd.[/R]

Japanese shares moved higher marginally after US reports indicated subprime mortgage market worries had not stopped home sales gaining 2.8% in July. At close Tokyo climbed 0.32% after early gains of over 1.5% with exporters leading. Of the 225 Nikkei index stocks, 109 gained, 94 dropped and 22 were unchanged. Ten stocks rose above 2% while bottom 30 dropped over 1%.

In Tokyo trading Nikkei 225 advanced 0.32% or 52.42 to 16,301.39 pushed firmer by motor, electric and energy stocks. Shares rose after July new home sales rose in the face of tightening credit market. The yen firmed marginally to 116.26 per one American dollar from 116.46 last week, as exporting firms bought. The Finance Ministry said Japan’s debt swelled to 836,521.3 billion yen in the period of June 30, up 2,143 billion yen at the end of March 31. Of the total, government bonds stood at 671,797.5 billion yen, down 2,324.6 billion yen from three months earlier.

Prime Minister Shinzo Abe announced Monday appointment of Fukushiro Nukaga, as new finance minister. The Financial Services Agency said today it’s intensifying monitoring high-risk bank investments to guard against losses in derivative and leveraged loans markets. Hedge and private investment funds will be closely monitored, the Agency said. Several key Japanese financial firms have invested large amounts of money into U.S. and European securities, in which a variety of securities using mortgages as collateral are incorporated.

Of the Nikkei 225 stocks, exporters, electric and energy and related shares rose. Japan Airlines led the gainers rising 4.74%, helped too by easing global oil prices. Nikon Corp followed gaining 4.45 % and NTT Docomo Inc up 3.51% while Yahoo Japan added 3.5%. Credit Saison rose 3.45%. Japan Tobacco, Honda Motor Co, Mitsumi Electrical, Tokyo Electron all rose over 2% against a firming yen. Of the stocks, G Yuasa Corp led decliners losing 3.04% followed by AEON Co Ltd down 2.84% and Mitsui $ Co fell 2.78%. Sojitz Corp and Nisshin Oil dropped 2.7% and 2.52% respectively.

Australian asset manager, Challenger Financial Services Group Ltd announced Monday Mitsubishi UFJ Ltd. and Mitsubishi UFJ Securities Co. subsidiaries to Mitsubishi UFJ will buy some 40 million Challenger shares at A$5.20. Bank of Tokyo has also been offered shares, as the Australian company seeks to spread influence in Asia. Mitsubishi UFJ shares closed unchanged at 1.3 million yen in Tokyo.

Japan Post said today some 26,000 ATMs would be de-activated by September 30 to pave way for privatisation, which commences October 1. All postal ATMs installed at post offices and other locations across Japan need to be suspended so as to confirm the amount of cash Japan Post holds on the last day as a public corporation, it said. ATMs operated by financial institutions and convenience stores tied up with Japan Post will not be affected.