Mergers and Mixed Markets

Elena
03 Oct, 2005
New York City

Asian-Pacific markets closed mostly down on lower-than-expected tankan survey in Japan with the Nikkei down 0.4%, despite solid gains in exporter issues. European stocks traded in the green at mid-day on merger and acquisition activity. Auto sales and manufacturing index data are expected. NRG Energy has agreed to acquire Texas Genco for $5.8 billion. NTL is to acquire Telewest Global for $6 billion.

U.S. MARKET AVERAGES

U.S. stock futures point to a positive opening, although pre-market trading is run by cautious moves of the investors, awaiting economic data later in the day to cause market activity. In the focus of Monday's session will be two pieces of economic data- the report of ISM and August auto sales report. Investors eagerly await the manufacturing index data for August, as concern about how the consumer will react to high oil prices remains of primary importance to them. In August, the measure dropped to 53.6 from July's level of 56.6, and the price index jumped above the key 50 mark to 62.5.

On the corporate news front a number of merger and acquisition deals can be seen, though most of them coming from Europe.

Standard & Poor's revealed that homebuilder Lennar ((LEN)) will be added to the S&P 500 index in the place of Gillette ((G)), which was acquired by Procter & Gamble ((PG)). Beazer Homes US ((BZH)) has been selected to replace Lennar ((LEN)) in the S&P MidCap 400, S&P said.

NTL ((NTLI)) announced that it has agreed to acquire Telewest Global ((TLWT)) for $6 billion, or $23.93 per share. The transaction is expected to close in the first quarter of 2006.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks finished broadly in the red on economic data release in Japan. The Nikkei declined 0.4% on lower-than-anticipated tankan survey, which shows the index of business confidence among Japanese companies. Although the report prompted buying of steel and other overvalued shares, Nippon Steel fell 1.6%, but exporter issues like Honda Motor and Toyota Motor gained on the back of a sixteen-month high dollar, buying 114.00 yen. Across the region, markets in Hong Kong, South Korea, and Australia ended down.

European markets advanced at mid-day dealings on the back of high merger-and-acquisition activity with two U.K. pharmacy chains announcing a merger deal, and talk that Telefonica is interested in acquiring the Dutch telecom KPN On the first day of the fourth quarter the German DAX 30 rose 0.4%, the French CAC 40 gained 0.5%, while London’s FTSE 100 added 0.4%. The euro traded at $1.1922.

ENERGY, METALS, CURRENCIES

Oil prices slightly advanced on expectations of higher heating oil demand with the approaching winter season for the Northern Hemisphere, and growing concerns over the oil production recovery. Light sweet crude for November delivery rose 4 cents to $66.28 a barrel on the Nymex in electronic Asian trading. Heating oil October contract traded at $2.126 a gallon. Gasoline added 2 cents to $2.1155 a gallon. London Brent gained 15 cents lower at $64.63.

Gold prices tumbled in European trading. In London the precious metal declined to $467.30 per troy ounce from $470.50. In Hong Kong gold slid $9.50 to $464.25. Silver traded at $7.39, down from $7.49.

In European trading the U.S. dollar traded higher against the other major currencies The euro was quoted at $1.1931, down from $1.2018. The dollar changed hands at 114.05 yen, up from 113.60. The British pound was trading at $1.7538, down from $1.7633.

EARNINGS NEWS

The Mosaic Company ((MOS)), fertilizer specialist, reported Q1 earnings of 18 cents a share, up vs. 16 cents a share in the same quarter last year. Sales for the period ended August 31 2005 totaled $1.4 billion, up vs. $720 million. Current earnings and sales figures resulted from the combined operations of the former Cargill Crop Nutrition and IMC Global Inc. Based on these companies’ combined results, the company would have earned 11 cents a share in the same quarter a year ago, on sales of $1.46 billion.

CORPORATE NEWS

NRG Energy ((NRG)) announced it has agreed to acquire Texas Genco ((LLC)) for about $4 billion in cash and $1.8 billion in stock. The deal also includes the assumption of about $2.5 billion in debt.

Exxon Mobil Corp. announced it has started production from the Sakhalin-1 Project in Russia. The first phase of the multiphase project is expected to produce 50,000 barrels a day of oil by the end of 2005 and 250,000 barrels a day at the end of 2006. The oil major also expects the gas production to reach 250 million cubic feet per day by the end of the decade.