Gold, Oil Rise; Weak Dollar; Stora Sells Mills

123jump.com Staff
21 Sep, 2007
New York City

Stocks in New York rise on 25% increase in earnings from Oracle. Oil and gold traded near their recent peaks but dollar fell against euro to $1.41. Stora Enso of Finland has agreed to sell its eight paper mills in North America to Cerberus for $2.52 billion. Bausch & Lomb shareholders approved $3.7 billion or $65 cash per share bid from Warburg Pincus. Harmon International said that KKR is not likely to complete its buyout of the company, stock lost 22%. Chinese ADRs listed in New York surged.

[R]4:30PM New York, 10:30PM Frankfurt, 2:00AM Mumbai - Rise in oil and metals prices dominated trading in New York trading for the second day. Oracle earnings and buyback from Texas Instruments helped stock indexes. Dollar fell to three-decade low against Canadian dollar and fell to $1.41 against euro.[/R]

Dow Jones Industrial Average added 53.49 or 0.4% to 13,820.00, Nasdaq increased 16.93 or 0.5% to 2,671.22, and S&P 500 added 6.97 or 0.46% to 1,525.72.

FTSE 100 Index in London gained 27.70 or 0.43% to 6,456.70, in Tokyo markets surged to 16,312.61, down 0.62% or 101.18, and in Brazil, iBovespa Index closed 1.6% higher or 892.35 to 57,798.79.

Bond Yields fell on 10-year U.S. bonds to 4.64% and 30-year bond to close at 4.90%.

Crude oil fell $0.16 to close at $81.62 per barrel for a front month contract but still up 34% for the year so far, natural gas added 7 cents to $6.08 per mBtu, and gasoline futures increased 4.17 cents to close at 213.51 cents per gallon.

Gold fell $1.00 in New York trading to close at $738.90 per ounce but traded at intra-day record of $747.10, silver closed up 15 cents to $13.62 per ounce, and copper for front month delivery in London added $1.00 to $7,920.00 per pound.

Dollar fell to record low $1.41 to a euro and traded at parity with Canadian dollar. Dollar is trading at multi-year low against euro, India rupee, Brazilian real, Norwegian Kroner, and British pound among several other currencies.

Of the 30 stocks in Dow Jones Industrial Average, 5 closed lower, 25 closed higher, and none was unchanged. Home Depot led the decliners for the second day in a row with a loss of 2.3% to $34.51followed by 1.5% loss in American Express, and 0.4% in DuPont. Disney led the gainers with a rise of 1.8% to $34.64 followed by increases of 1.4% in General Motors, 1.3% in Boeings and Verizon. Eight of the 30 stocks gained more than 1% in the index.

Of the stocks in S&P 500, 322 stocks closed higher, 171 fell, and 7 closed unchanged. Nineteen stocks declined more than 4%. Harman International led the decliners with a loss of 21% to $88.80 after the company said that KKR controlled private equity does not intend to close the buyout deal. Other decliners included Tektronix with a loss of 8.3%, Family Dollar with a decline of 4%, and Polo Ralph Lauren with a fall of 3.5%.

In New York traders put asides the inflation concerns after better than expected earnings from Oracle and buy back news from Texas Instruments. Oracle reported 26% increase in earnings. TI offered to buy back $5 billion in stocks and raised its quarterly dividend by 25%. Oracle added 5% and TI increased 2.4%.

Bausch & Lomb ((BOL)) shareholders passed a resolution to a $3.7 billion offer from Warburg Pincus. The $65 per share offer was lower than $75 per share offer from Advanced Medical. The higher offer included $45 in cash and $30 in stock for each Bausch & Lomb stock. The board recommended all cash offer and rejected offer from Advanced when it asked for more time in August. A week ago, the company cited four proxy advisory firms – Institutional Shareholders Services, Glass Lewis & Co, Egan Jones, and Proxy Governance Inc. – and said that Warburg offer was considered the better of the tow offers on the table.

Stora Enso Oyj of Finland has agreed to sell its interest in eight mills located in the U.S. and Canada to NewPage Holding based in Ohio and controlled by Cerberus Capital. The $2.52 billion transaction involves cash of $1.5 billion, 20% equity stake in the newly combine company valued at $370 million, $450 million debt assumed by Cerberus, and $200 million in vendor financing. The sale of loss making mills generated less than expected by several market analysts but the company stock in Helsinki traded 5.6% higher. Finland government owns 10% stake in Stora Enso.

Royal Dutch Shell ((RDS)) said that its refinery located in Texas will increase its refinery capacity by 325,000 barrels per day to 600,000 bpd by 2010. The refinery, in equal partnership joint venture with Saudi Arabia, Motiva Enterprises will be the largest refinery in the U.S. after the expansion. The company plans to invest $7 billion in the expansion through earnings, debt, and investments from Saudi Arabia and Royal Dutch Shell. The chief executive in an interview with Dow Jones said that the large and flexible refineries with a capacity to process sour crude will have better financial success.

In Latin Markets trading Brazil led the gainers with a rise of 1.6% followed by increases of 1.0% in Argentina and 0.32% in Mexico. Chile gained 0.2%. Of the 63 stocks in iBovespa index 53 gained, 10 lost, and none closed unchanged. Natura, Net Servicos, and Telemar jumped more than 5%. Brasil Telecom and Telenorte added 4.5%. Online retailer B2W Varejo led the decliners with a loss of 2.6% followed by declines of 2.3% in TAM, and 2.1% in Sadia.

[R]2:00PM New York, 7:00PM London - UK stocks advances as British Energy, Northern Rock stocks gain. Gold price reaches $740 per ounce. Vodafone is in negotiations over $2 billion tax bill.[/R]

In London trading FTSE 100 gained 0.4% or 27.70 to 6,456.70 lifted by gains from British and Energy and resurgent Northern Rock. Of the London stocks, 67 rose, 33 shed while 2 remain unchanged.

Vodafone Group chief executive Arun Sarin said Friday his company is negotiating with the Indian government on tax bill on its acquisition of the majority stake in the country''s cellular company. Early this year, Vodafone paid 5.5 billion pounds for a 52 percent controlling stake in Hutchison Essar, The company is renamed Vodafone Essar from Hutchison Telecom. News reports have said the world’s second largest mobile phone operators had received a $2 billion capital gains tax bill from the Indian tax department.

Gold price reached $740 per ounce on Friday, the highest level in nearly three decades after the U.S. dollar slid to record levels against the euro. The US dollar dropped to a record low of $1.4120 against the euro. Oil price also surged. Gold reached $739 an ounce mid-day London time, the highest level since February 1980. It later traded at between $736.25 and $736.95 an ounce.

The U.K. Treasury said its guarantee on the deposits of Northern Rock Plc will cover renewals as well as existing accounts. The news release on UK Treasury web site “confirmed that the guarantee arrangements for existing deposits in Northern Rock plc would cover all accounts existing at midnight on Wednesday 19 September. This guarantee covers future interest payments, movements of funds between existing accounts, and new deposits into existing accounts. The guarantee will also cover accounts re-opened in the future by those who closed them between Thursday 13 September and Wednesday 19 September, inclusive.”

The Newcastle based bank was bailed out by the Bank of England after it applied for an emergency loan. Northern Rock''s shares rose for the first day in three today after falling 28% on Thursday following the announcement by the Treasury said it won''t guarantee deposits into new accounts.

Northern Rock was considered as acquisition target by Banco Santander according to Guardian newspaper and J P Morgan offer for 500 million pounds of emergency loan according to Daily Telegraph.

Of the FTSE shares, British Energy led the gainers with a sharp rise of 6.6%, Northern Rock jumped 4.48%, Vedanta was up 3.39%, Resolution climbed 2.7% while Rexam put up 2.6%. In the index trading, Kingfisher led the decliners with a fall of 3.5%, with losses of 3.1% in Kelda Group, 3% in Yellow Group, 2.5% in Alliance Leicester, and 2.4% in National Grid.

Kingfisher, home improvement retailer, fell 3.5% after several brokers lowered their price targets and reduced earnings forecast. Lehman lowered its target price to 248 pence from 275 pence and UBS lowered its price to 200p from 235p.
BG Group rose on news that the company may sell its stake in Mahanagar Gas Ltd., the local monopoly for natural gas distribution in Mumbai, India. Mahanagar is owned 49.75% each by BG and Gas Authority of India. BG stake may be valued at $530 million.

[R]10:00AM New York, 7:30PM Mumbai – Reliance group of companies dominated trading. Foreign investment in India surges to a record level.[/R]

Sensex in Mumbai recovered in the afternoon session to reverse the morning losses. The 30-share BSE Sensex was up 1.5% or 252.2 to 16,564.23 at the end of the morning session. Heavy buying in index stocks lifted the Sensex. Reliance group of companies dominated the market advance. The CNX Nifty 50 surged 2.1% or 100 to 4,847.55. Of the BSE shares, 615 shares rose, 1,149 lost, while 51 remained unchanged.

Of the Sensex 30-share index, 19 gained while the rests slid. The BSE net turnover surged to 8,192 crore rupees ($2.2 billion) from 7,212 crore rupees a day ago. Trading on the National Stock Exchange soared to 16,687.13 crore rupees ($4.2 billion) from 14,770.97 core rupees on Thursday.

Foreign fund flows reached $10.5 billion at the end of July with flows of record $5.75 billion in the month alone. Total foreign investment in the year 2006 was $8.8 billion. Number of foreign institutions registered in India jumped to 1,063 from 934 according to market regulators.

The World Bank former president has said developed countries were ill-prepared to deal with the ''tectonic shift'' in economic power towards developing nations, in particular to India and China. James Wolfensohn told a financial forum in Hong Kong that wealthy nations were still giving development countries a colonial treatment.

Wolfensohn said that while developing countries made up just 10 percent of global GDP in 1950, they would make up 65 percent of the total by 2050.

He said the economic growth particularly in China would result in the Asian economic powerhouse overtaking the United States as the world''s richest country by 2040, with India in third place by 2050. Wolfensohn noted that power was already shifting away from developing countries. He cited African countries are directly engaging with China and India bypassing Western nations.

Exports by Indian small to medium business reached 50 billion dollars in fiscal 2007, accounting for 40 per cent of the country''s total exports. The products exported include garments, chemicals and pharmaceuticals, engineering goods, processed foods, leather products and marine products. India has 12.5 million small to medium businesses employing 30 million people.

Of the Sensex 30 stocks, Reliance Energy led the gainers adding 2.5% to 1,012 rupees on 12.32 lakh shares. NTPC led the decliners with a fall of 2.5% to 184 rupees on 62.13 lakh shares.

Reliance group of companies dominated the trading. Reliance Petroleum led the group with a surge of 11% followed by 10% rise in Reliance Infrastructure, 9.2% in Adlabs, 5% in IPCL, and 2% in Reliance Communication and Reliance Capital. The total domination of the group was also seen in the daily turnover accounting for more than 20% of trading volume and 35% of trading value on the BSE.

Ambuja Cements advanced 2% to 149 rupees on sharp rise in trading volume of 7 crore shares with four blocks trades each of 1.6 crore shares at 149.50 rupees per share.

Reliance Industries gained 4.6% to 2,292 rupees on 8.70 lakh shares on news that the company has discovered oil deposits in its D4 block in the Krishna Godavari Basin. RIL completed the technical testing in the block KG (D4). ONGC, government controlled energy giant is seeking price increase for its natural gas to 4,500 rupees per thousand cubic meter from 3,200 rupees. The price increase if approved will help company to add revenue by 2,000 crore rupees.

State Bank of India gained 4% to 1,830 rupees, Bharti Airtel surged 3.5% to 922.25 rupees, and Hindustan Unilever added 3.13% to 220.85 rupees.

Financial Technologies added 0.5% to 2,705 rupees after it received approval to launch electronic exchange for electricity and energy trading. The exchange named Indian Energy Exchange will facilitate trading of surplus electricity among power producers.

Satyam Computers was down 0.3% to 420 rupees, Infosys Technologies ADR slipped 4.59% to $47.02. Other IT ADRs in New York trading also edged lower. Wipro slid 2.7% to $ 13.83, Patni Computer systems shed 2.3% to $ 23.28, and Satyam Computers retreated 3.70% to $24.76.

Other looser in the Sensex index were ITC which plunged 2.20% to 190 rupees, Hindalco eased 1.3% to 160 rupees, and Cipla lost 0.9% to 168 rupees.

[R]9:00 AM New York – Stocks are expected to open higher. Oil is trading lower. Gold is at elevated level. One euro buys $1.41.[/R]

Market futures in pre-market trading are indicating 0.3% higher opening for Dow, S&P 500, and Nasdaq.

Oracle ((ORCL)) reported revenue rise of 26% and earnings gain of 25%. Stock is up 20 cents to $21.50. Total revenue in the first quarter was up 26% to $4.5 billion. The database and middleware license were up 23% and application licenses were up 65%. Earnings in the quarter were up 25% to $840 million and net profit margin held steady at 19% for the quarter.

Nike ((NKE)) reported first quarter revenue increase of 11% to $4.2 billion and earnings surge of 51% to $569.7 million. Diluted earnings per share increased to $1.12 from $0.74. In the quarter revenue in the U.S. increased 2%, in Europe gained 16%, in Asia Pacific rose 22%, and in the Americas added 15%. Sales in the U.S. reached $1.63 billion and in Europe were $1.48 billion. Asia Pacific sales reached $630 million and in the Americas sales were $279 million.

Gross margin in the quarter declined to 44.8% from 44.1% a year ago.

Euro rises against dollar and now trades at $1.41.

[R]6:00AM New York, 7:00 Tokyo, Japan trades in negative territory closing 0.62%. Commodity and energy stocks continue on bullish streak.[/R]

Japan traded in negative territory after the U.S. Federal Reserve Chairman Bernanke intimated that prospects of a housing and economic recession in the U.S. are real, Japan’s prime export market. Of the Nikkei 225 stocks, 80 rose, 136 declined and 9 remained unchanged.

In Tokyo trading, the Nikkei 225 lost 101.18 or 0.62% to 16,312.61, while the broader Topix index shed 0.94% to 1,552.07. For the week Nikkei 225 index advanced 1.2% and Topix gained 0.5%.

Japan’s benchmark 10-year yield jumped to a five-week high of 1.7000%, tracking a surge in U.S. yields on the inflation worry. The Bank of Japan will be waiting for the Tankan survey, which measures business activity, to be released on October 1. A solid Tankan, will assure the BOJ that a 0.75% rate hike is possible.

A government survey on Thursday showed that companies planned to increase spending on capital equipment by 7.5% this year, compared. Japanese businesses increased investment by 10% in 2006, the fastest in 16 years. Also economists are pessimistic that the new Japanese premier to be elected on Sunday, widely tipped to be Yasuo Fukuda, will have the flexibility to carry out significant economic reforms.

Mitsui Fudosan Co., Japan''s biggest real estate company, is in advanced talks with Cerberus Capital Management to purchase 33% stake in Imperial Hotel Ltd for 90 billion yen. The Japanese government said yesterday commercial land prices gained 1% overall, the first increase since 1991. Imperial Hotel jumped 18% or 1,000 yen to 6,590 yen at the close of trading.

Sharp Corp and Pioneer Corp are in a deal to extend cross holding between two companies. Sharp will acquire 14% stake in Pioneer at 41 billion yen and Pioneer will purchase 0.9% stake in Sharp. Pioneer fell 2.2% to 1,370 on the news, earlier the stock had jumped nearly 3%.

Financial stocks decliners with Mitsubishi UFJ Nicos leading the Nikkei 225 index stocks shedding 32 yen or 13.4% on forecasts of a net loss of 111.8 billion yen for the year ending March 31 against projections of a 15.5 billion yen profit. The parent company Mitsubishi UFJ fell 4% to 1 million yen.

Resona Holdings fell 15,000 yen or 7.98%, followed by Credit Saison, which tumbled 170 or 6.31%. Movie and motion picture maker Toho Corporation declined 5.03% while Terumo Corporation fell 2.60 or 4.46%. Mitsubishi UFJ Financial Group fell 3.81% after saying it will take full ownership of an unprofitable credit card unit.

Leading export companies declined as they bore the brunt of a weakening dollar. Toyota lost 1.94%. The sell-off also affected Honda, Canon and Sony, which plunged 3.10%, 2.23% and 1.84% respectively.

Commodity stocks led the advancers as on rising metal and oil prices improved earnings sentiment. Tokyo Dome Corp gained 78 yen or 15%, followed by Sumitomo Metal Industries, which gained 6.33% on increased steel prices. A measure of six metals traded on the London Metals Exchange, jumped 4.6% on Thursday. Nickel led the gainers with a rise of 10% followed by sharp rises in zinc and copper.

Sumitomo Metal Mining and Sumitomo Chemical led the top five gainers firming 5.12% and 3.53% trekking the upward movement of commodities on the market.

Japanese biggest oil refiner Inpex firmed 2.5%. Crude oil prices surged for the seventh straight day on front month contract closing at a new record of $83.32 per barrel.

Canon plans to invest about 80 billion yen to build a factory in northern Japan to make ink cartridges for printers and photocopiers.

Casio Computer Company expects a 10 billion yen investment in new telephone models to return a profit in the first year, helped by sales of handsets equipped with its Exilim camera and G-Shock watch technologies, the company said. Casio close down 1.1%.