Europe Gains Ground on Property, Oil Stocks

Elena
11 Sep, 2007
New York City

European stock markets finished notably higher Tuesday, gaining ground after recent decline on hopes for U.S. interest-rate cuts as well as continuous strength in the tech sector. Commodities shares also posted strength. BHP Billiton and Rio Tinto Group led mining shares higher, moving up about 4% each. Across the region, the U.K. surged 2.4%, France climbed 1.7% and Germany rose 1.1%.

[R]1:00PM NY, 5:00 PM Frankfurt European markets gained ground, boosted by U.S. rate-cut optimism and strong property and oil stocks.[/R]

European stock markets finished notably higher Tuesday, gaining ground after recent decline on hopes for U.S. interest-rate cuts as well as continuous strength in the tech sector. Across the region, the U.K. surged 2.4%, France climbed 1.7% and Germany rose 1.1%.

In Frankfurt the upward move was led by Merck KGaA, with the drug maker rising 5.9% after it said a Phase III study of Erbitux with chemotherapy improved survival in patients with advanced non-small-cell lung cancer. Among other notable advancers, MAN AG rose 1.3% on increased demand for its vehicles increased. Porsche jumped 3.3% after the carmaker said it had higher sales in fiscal 2006-2007. DaimlerChrysler shares gained 1%. Stock-exchange operator Deutsche Boerse also contributed to the overall strength, moving up 3%.

In Paris oil companies moved significantly higher, benefiting from rallying crude oil price. Oil refiner Total gained 1.5%, while CGGVeritas, the world''s biggest surveyor of oil and natural-gas fields, jumped 2.7%. Among metals stocks, Vallourec, a maker of steel tubes to carry oil and gas, climbed 4.2%. Elsewhere, Alstom jumped 6.5% on deal speculations with Areva whose shares added 2.6%.

In London property companies British Land and Land Securities paced gains, both of them rising over 3% each. Shares of Barclays climbed 4.7% on optimism of better chances of acquiring Dutch bank ABN Amro. Hedge-fund manager Man Group also provided support with a gain of over 3%. Among commodities stocks, BHP Billiton and Rio Tinto Group led mining shares higher, moving up about 4% each. Oil and natural-gas giant BG Group climbed 3.4%, while Royal Dutch Shell added 1.3%. Elsewhere, U.K. clothing chain Next advanced 4.3% after it reported a stronger-than-forecast 11% rise in pretax profit in the first half.


[R]11:30AM U.S. market averages sustained early gains on rate-cut optimism.[/R]

U.S. stock futures continued to post solid gains, boosted by interest rate optimism, as Fed Reserve Chairman Ben Bernanke gave no clues about possible rate cuts next week. In his speech before the German central bank, Bernanke pointed out the need for international cooperation toward economic stability.

The Nasdaq was boosted by strength in the biotechnology sector after drug makers ImClone Systems ((IMCL)) and Bristol-Myers Squibb ((BMY)) said their drug Erbitux improved the survival rate of lung cancer patients.
ImClone shares traded up 21% in late morning trade.

Various other sectors showed strong upward moves, with considerable strength in the steel, wireless, computer hardware, and financial sectors. In the disk drive sector, Western Digital ((WDC)) rose 5.5% after raising its Q1 earnings and revenue forecast.

Countrywide Financial ((CFC)) attracted attention again, as the U.S. largest mortgage lender entered talks to negotiate another multi-billion investment. McDonald''s ((MCD)) helped to lead the Dow higher with a gain of 4.3% on the back of higher same-store sales for August.

Crude oil rose 4 cents to $77.53 a barrel. The dollar weakened vs. the euro and British pound, while gold advanced. The Dow Jones rose 103.24, or 0.79%, to 13,231.09. The S&P''s 500 index rose 9.93, or 0.68%, to 1,461.63, while the Nasdaq rose 20.64, or 0.81%, to 2,579.75. Bonds fell as investors withdrew money to buy stocks, pushing the 10-year Treasury note''s yield up to 4.33% from 4.27% late Monday.


[R]10:00AM New York - 7:30PM Mumbai – Power Ministry is looking for ways to allow utilities companies to borrow in the international markets. Motilal Oswal IPO jumped 19%.[/R]

Sensex in Mumbai trading lost 54 or 0.35% to close at 15,542.77. CNX Nifty fell 10.8 or 0.24% to close at 4,497.05. Rupee recovered to 40.60 against dollar from 40.65 in Friday trading.

Of the stocks trading on BSE, 1,410 gained, 1,356 declined, and 65 closed unchanged. Daily turnover on the exchange declined to 4,935 crore rupees from 4,070 crore rupees in Monday’s trading. In trading on National Stock Exchange volume declined to 10,856 crore rupees from 8,908 crore rupees a day ago.

Of the 30 stocks in the Sensex, 20 fell and 10 gained. Wipro led the decliners in the index with a fall of 2.4%.

Jindal Steel & Power soared 5% to 4,150 rupees after the Bolivian senate approved the deal between the country’s government and Jindal to develop iron ore mine and build steel plant. Jindal has said to invest $2.3 billion in the project over the next ten years.

Rallies India jumped 3% to 325 rupees after the news that it is exploring a deal to purchase Arysta LifeScience Corp from private equity company Olympus Capital. The other bidder, United Phosphorus added 1.8% to 345 rupees. Four international companies in addition to two India companies are bidding for the Japanese company. The life science and crop protection company is valued at $2 billion or nearly 9,000 crore rupees.
Blue Dart Express increased 2.5% to 622 rupees on the news that it plans to spend 1,000 crore rupees to expand its fleet of aircraft, material handling equipment, and ground handling facilities.

Auto makers declined after a steep rise in the last week of trading. Maruti Suzuki led the decliners with a loss of 2% to 859 rupees followed by 1.5% loss in Tata Motors to 691 rupees. Mahindra & Mahindra fell 0.7% to 696 rupees.

Reliance Industries fell 6.40 rupees to 1,980 after reaching a new high of 2,007 rupees. The company agreed to acquire assets of Malaysian polyester company Hualon a day ago.

Weak U.S. trading and concerns of economic slowdown hurt software exporters again. Infosys fell 2.3% to 1,828 rupees, Wipro declined 2.5% to 455 rupees, and Satyam Computers lost 2.3% to 432 rupees.

Motilal Oswal priced its offering at the high end of its filing range to 825 rupees and valuing the company at 31 times earnings. The offering is oversubscribed by 27 times. The stock closed in BSE trading at 977.45 rupees, up 19% from its offering price. Other brokerage companies fell. JRG securities fell 6.6% to 53 rupees and Emkay Shares & Stock Brokers declined 8% to 142 rupees.

HDFC gained 2% to 2,145 rupees and reached intraday high of 2,153 rupees.
Nitco Tiles increased 4% to 239 rupees after the news that the company is venturing to distribute cement from Pakistan via MMTC. The government sole import agency Minerals and Materials Trading Company acts as sole import and export entity for most commodities import in India.

In other trading, NTPC, the domestic leader in power generation, gained 2.3% to 195 rupees after adding 2.5% on Monday. The Ministry of Power has asked government to relax conditions for borrowing funds in international markets in foreign currency.


[R]09:45AM Wall Street advanced at opening. Dow was led higher by McDonald’s.[/R]

Wall Street rallied at opening ahead of Fed Reserve Chairman Ben Bernanke''s speech, with investors looking for clues about a possible interest-rate reduction. In addition, market welcomed an in-line-with expectations trade deficit report. The Commerce Department said the U.S. trade deficit narrowed 0.3% to $59.2 billion in July on record exports of farm goods, autos and other products.

The Dow industrials rose nearly 100 points boosted by fast-food giant McDonald''s Corp. ((MCD)) Company''s stock jumped 3% on a strong rise in August sales. Dow component Wal-Mart Stores ((WMT)) also contributed to the strength posted by the blue-chip average. The stock rose 0.4% after the retailer cut its Q2 profit by $153 million, due to expenses from selling its German retail operations.

Among companies driven by analyst comments, PepsiCo ((PEP)) rose 1.3% after it was upgraded to buy from hold at Goldman Sachs, citing improving fundamentals and reasonable valuation. The broker also upgraded the beverage sector to neutral from attractive.

The upward trend was limited by Countrywide Financial Corp. ((CFC)) which fell 1% in reports that the U.S. largest mortgage lender had hired Goldman Sachs to line up another multi-billion investment in the company. A few weeks ago Bank of America ((BAC)) invested $2 billion in the financial firm.

The Dow Jones industrial average rose 73.73, or 0.56%, to 13,201.58. The Standard & Poor''s 500 index rose 7.45, or 0.51%, to 1,459.15, and the Nasdaq composite index rose 16.44, or 0.64%, to 2,575.55.

[R]09:00AM U.S. stock futures pointed to a higher opening ahead of Ben Bernanke speech.[/R]

U.S. stock futures were pointing higher Tuesday, benefiting from gains in overseas equity markets. Investors remained focused on interest-rate cuts, awaiting a speech from Federal Reserve Chairman Ben Bernanke. Bernanke will be speaking to the German central bank on global imbalances. Although the subject will not be monetary policy, any clues about the U.S. central bank''s intentions will be searched for.

Among pre-market highlights, Wal-Mart Stores ((WMT)) said late Monday it reduced its reported Q2 profit by $153 million due to expenses from selling its German retail operations. Take-Two Interactive ((TTWO)), video-game publisher, gained 3% in pre-open trade after it narrowed its quarterly loss. Among companies driven by analyst comments, PepsiCo ((PEP)) was upgraded to buy from hold at Goldman Sachs, citing improving fundamentals and reasonable valuation.

In the pharmaceutical sector, ImClone Systems ((IMCL)) surged 28%and Bristol-Myers Squibb ((BMY)) rose 1.3% after the two companies announced that a Phase III study of the drug Erbitux in combination with chemotherapy increased the survival rate of lung cancer patients in a late-stage study. Again in the sector, Genentech ((DNA)) dropped 3.6% on concerns about its Avastin drug.

In economic news, the Commerce Department said the U.S. trade deficit narrowed 0.3% $59.2 billion in July as higher foreign oil prices were offset by record exports of farm goods, autos and other products. However, the deficit with China reached its second-highest level of all time. S&P 500 futures rose 5.6 points at 1,460.90 and Nasdaq 100 futures gained 11.5 points at 1,979.75. Dow industrial futures rose 47 points.


[R]8:30AM ImClone Systems and Bristol-Myers Squibb released positive results for Erbitux in lung cancer.[/R]

ImClone Systems ((IMCL)) and Bristol-Myers Squibb ((BMY)) announced Tuesday that a Phase III study of the drug Erbitux along with chemotherapy increased the survival rate of lung cancer patients in a late-stage study. In the month of July, the two pharmaceutical companies said the drug failed a separate late-stage study focusing on lung cancer, with Erbitux combined with taxane and carboplatin.

The drug, already approved to treat colon cancer and head and neck cancer, was given to patients with advanced non-small cell lung cancer in combination with chemotherapy treatment including vinorelbine and cisplatin. The study compared the combination to chemotherapy alone. Erbitux is co-promoted in North America with Bristol-Myers.


[R]7:00AM New York, 8:00PM Tokyo - Property stocks lead marginal Japanese rebound. Japan machinery orders jump 17% in August. Ministries want 88.9 trillion yen for 2008 budget.[/R]

Stocks in Tokyo recovered from Monday losses on increased buying in real estate sector. Japan closed up 0.71% ending a six-day losing streak that peaked with a loss of 2.22% yesterday. Of the 225 stocks in the index, 146 stocks gained, 73 fell and 6 traded unchanged. Of the index shares, 41 stocks gained between 2% and 6.5%.

In Tokyo trading Nikkei 225 moved up 0.71% or 112.7 to 15,877.67, as bargain hunters returned for property shares that had fallen sharply in recent days.

Government announced Tuesday Japan’s core private sector-machinery orders surged 17% in August, the biggest climb in four years. The orders are considered a leading indicator of corporate capital expenditure. The highest surged stood at 17.2% in October 2003.

Finance Minister Fukushiro Nukaga said today ministries had made submissions of up to 88.9 trillion for fiscal 2008 budget, which is 7.3% higher than what government had budgeted for fiscal year 2007. Of the cumulative figure, 50.5 trillion yen relates to core policy outlays versus a spending limit of 47.4 trillion yen set by Cabinet for 2008 budget. At least 22.2 trillion yen was requested for debt servicing while that for domestic tax grants stood at 16.2 trillion yen. Nukaga said Tuesday: ""We need to cut around 3 trillion yen to curb the total budget within the upper limit.""

Japan media reported that the government was evaluating the prospect of eliminating the corporate tax on dividend income from subsidiaries abroad to help spur local investment. The current tax system levies domestic corporate tax on income of overseas Japanese firms’ units.

Of the Nikkei 225 shares, real estate stocks gained most. Nippon Suisan led gainers surging 6.1% followed by oil producing firm, Inpex Holdings ending up 5%. Mitsubishi Estate Co lifted higher 4.3%, Nikon Corp rose 4.2% while Taiyo Yuden Co gained 4.18%. Property stocks Sumitomo Realty advanced 4.11% shedding yesterday’s losses, Tokyu Land Corp pushed up 3.9%. Heiwa Real Estate and Mitsui Fudosan gained 3.8% and 3.5% respectively.

In the index, pharmaceutical stocks fell. Hitachi Zosen paced decliners falling 4.5% followed by Sumitomo Osaka down 2.9% and Hino Motors lost 2.85%. Daiichi Pharmacy Co and Chugai Pharmacy Co dropped each 1.9%. Astellas Pharmacy fell 1.5%, Takeda Pharmaceutical shed 1.2% and Shin ETSU Chemicals eased 1.6%.

On Monday, Japanese government consented to the proposed privatization of the Japan Post Corp, the culmination of a 10-year privatization process to start effectively October 1. Under the process, Japan Post Corp will be split into four stock units-savings, insurance, mail and over-the counter services. The holding company with 26,000 ATMs would be de-activated by September 30 to pave way for privatization. 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, Japan Post has said. ATMs operated by financial institutions and convenience stores tied up with Japan Post will not be affected.