Deals Dominate Trading, Oil fell 3%

123jump.com Staff
08 Oct, 2007
New York City

Stock markets in New York closed mixed. In the U.S., Textron agreed to purchase United Industrial for $1.1 billion. In Europe, SAP agreed to acquire Business Objects for 4.8 billion euros, Vodafone acquired telephony business in Spain and Italy of Tele2 AB of Sweden, Shire Pharmaceuticals sold its eight drugs portfolio to Almirall of Spain. The largest bank takeover, ABN Amro shareholders approved the bid of 72 billion euros or $101 billion from RBS led investor group.

[R]4:30PM New York, 10:30 PM Frankfurt, 2:00AM Mumbai – Monday deals dominated trading sentiment. European markets fell on weak tech and mining stocks. Asian markets closed higher. Australia closed at a record high.[/R]

[R]Markets and Indexes[/R]

Dow Jones Industrial Average fell 22.28 or 0.16% to a record close 14,043.73, S&P 500 declined 5.01 or 0.32% to 1,552.58 from record close on Friday, and Nasdaq Composite Index traded up 7.05 or 0.25% to a close of 2,787.37. In Toronto TSX Composite gained 108.23 or 0.77% to close at a six year high of 14,233.34.

Of the 30 stocks in Dow Jones Industrial Average 23 closed higher, 7 closed lower, and none was unchanged. Boeing led the decliners with a fall of 1.2% followed by losses in Alcoa of 1.1%, in Citigroup of 1.0%, in DuPont of 0.97%, Home Depot of 0.9%. Hewlett Packard led the gainers with a rise of 2.2% followed by increases in Honeywell of 1.37%, and in IBM of 1.34%, and in Caterpillar of 1.3%.

Of the stocks in S&P 500 146 closed higher, 347 fell, and 7 closed unchanged. Eight stocks rose 3% or more and 14 fell 3% or more. Akamai Technology led the gainers with a rise of 8.4% followed by increases in Broadcom of 5.8%, in YUM! Brands of 5.6%, in Sun Microsystems of 4.3%, in Apple of 4%, and in Valero of 3.5%. Ryder Systems led the decliners with a fall of 6.7% followed by declines of 3.9% in CB Richard Ellis, in Pulte Homes of 3.8%, and in CIT Group of 3.7%. Bear Stearns, Tellabs, and Merrill Lynch fell more than 3% for the second day in a row.

In London FTSE 100 Index edged lower by 54.90 or 0.83% to 6,540.90, in Paris CAC 40 index rose 13.84 or 0.24% to close at 5,829.40, and in Frankfurt DAX index decreased 0.35% or 27.81 to close at 7,974.37. In Zurich trading SMI added 0.24% or 21.69 to close at 9,097.04.

In Tokyo, stock markets were closed but on Friday Nikkei 225 index fell 0.16% or 27.45 to close at 17,065.04, in Hong Kong Hang Seng index closed down 0.22% or 61.23 to 27,770.29, in Australia ASX 200 closed up 0.74% or 48.90 to a close of 6,654.30, Sensex fell 281.97 or 1.60% to 17,491.39. In South Korea Kospi index added 0.84% or 16.79 to 2,012.82.

In Latin Markets Mexico led the gainers with a rise of 0.85% followed by increases of 0.8% in Peru, 0.6% in Brazil, and 0.52% in Venezuela. Chile and Colombia fell a fraction.

In Brazil, iBovespa Index closed 0.58% higher or 361.64 to close at 62,680.36 and in Mexico Bolsa index rose 0.84% or 266.49 to close at 31,807.43.

Of the 63 stocks in iBovespa index in Brazil, 36 gained, 26 lost, and 1 closed unchanged. Brasil Telecom led the decliners with a loss of 3% followed by losses in Duratex of 2.7%, in Bradespar of 2.6%, and in Natura of 1.4%. Pao Acucar led the gainers with a rise of 4.6% followed by increases in Embraer of 4.6%, in Vivo of 3.7%.

Bond Yields fell on 10-year U.S. bonds to 4.60% and 30-year bond edged up a fraction to close at 4.871% in Friday’s trading and were closed for trading on Monday.

[R]Commodities, Metals, and Currencies[/R]

Crude oil fell $2.22 to close at $79.02 per barrel for a front month contract, up 30.3% for the year, natural gas fell 22 cents to $6.84 per mBtu, and gasoline futures decreased 4.9 cents to close at 200.02 cents per gallon.

Gold declined $8.50 in New York trading to close at $738.70 per ounce, silver closed down 13 cent to $13.36 per ounce, and copper for front month delivery in London gained $9.00 to $8,260.00 per pound.

Dollar edged higher against euro to $1.4048 from $1.4135 and higher to 117.34 yen from 116.9 yen.

[R]Deal News[/R]

RBS led group of investors 72 billion euro bid for ABN Amro received shareholder approval. The deal was priced at three times the book value of the bank and is the largest ever takeover of a bank. Earlier La Salle, a U.S. based unit of ABN Amro was sold to Bank of America for $21 billion. The consortium pitched aggressive battle and paid a top price that many analysts say that company may face challenges to justify the high price tag.

SAP Ag agreed to pay 4.8 billion euros for Business Objects SA. SAP stock fell 5% and that of Business Objects gained 16% on the news. Textron ((TXT)) agreed to acquire United Industrial ((UIC)) for $1.1 billion. Vodafone agreed to pay $1.07 billion to acquire telephone business of Tele2 AB of Sweden in Spain and Italy.

Shire Pharmaceuticals agreed to sell eight of its drugs to Laboratorios Almirall, S.A. for $213 million or 151 million euros. The portfolio acquired consists of two dermatology products and six others for the treatment of pain, gastrointestinal and inflammatory diseases, which together generated sales in 2006 of US$53.8 million (€38.1 million), around 70% of which were in the UK, with the remaining 30% in Germany, France, Spain, Ireland and Italy.

[R]U.S. Earnings Watch[/R]

Ryder ((R)), the trucking and supply management company based in Miami, Florida lowered its earnings estimate for the third quarter to a range of $1.12 and $1.14 from the earlier forecast between $1.20 and $1.23 per share. For the year the company also lowered the guidance in the range of $4.10 and $4.15 from $4.30 and $4.35 per share. The stocks fell 8.5% on the news. The company also said that it will lay-off around 300 people from its staff of 28,600 and take one time restructuring charge of $12 million. The company blamed weakness in housing and construction sector to the weakness in freight traffic.

[R]2:00PM New York, 7:00PM London – UK stocks fell led by weak mining stocks. RBS led group received shareholder approval for 72 billion euro bid.[/R]

Royal Bank of Scotland led group received shareholder approval to purchase ABN Amro at 71.9 billion euros. Banco Santander and Fortis were the other two partners in the bid and plan to carve out the bank in three separate groups.

The bid received 86% of vote in the favor of the deal however several analysts have said that the acquisition may prove to be difficult to digest and expensive to operate. The group plans to save 4.3 billion in costs by the 2010 and eliminate 19,000 jobs to pay for the purchase and plans to raise $40 billion to pay for the acquisition.

The largest takeover in the banking sector cost RBS 72 billion euros comes after three years when J P Morgan Chase purchased Bank One from $588 billion for 2.7 times book value and Bank of America paid $47 billion Fleet Boston. RBS led group of investors agreed to pay three times the book value of ABN Amro.

Among the investment group, Santander has agreed to pay 19.9 billion to acquire ABN Amro units in Brazil and Italy, Fortis will get Dutch banking units for 24 billion, and RBS will control the banks investment banking unit and Asian branch networks and other businesses. LaSalle, based in Chicago was sold to Bank of America for $21 billion.

In London trading FTSE 100 lost 0.8% or 54.9 to 6,540.9 spurred by gains recorded financial stocks. Northern Rock, Scotland Newcastle and ICAP were the major gainers in the UK stocks. Resource shares

Kazakhmys, Vedanta Resources and Xstrata led the decliners. Of the FTSE 100 index stocks 24 gained, 76 fell, and 2 were unchanged.

The Office for National Statistics reported that the UK''s manufacturing output rose 0.4% in August. The sector accounts for about 14.7% of the UK economy. Analysts had predicted 0.3% growth. The manufacturing index is now running at 103.5, six-year high. The increase in manufacturing output over the month was driven by a 1.7% rise in output in the chemicals industries in August from July, ONS said. No significant decreases were recorded. On a year-on-year basis, output was up 0.6% lower that July''s rise of 0.8 pct, but above expectations for a gain of 0.4%.

Of the FTSE 100 stocks, Northern Rock led the gainers followed by gains in Scotland Newcastle of 2.05%, ICAP of 1.73%, Intercontinental of 1.71%, and Aviva Plc of 1.58%.

Royal Dutch Shell says it will buy Bharat Petroleum Corp Ltd''s of India 49 per cent stake in lubricant marketing firm Bharat Shell Ltd for 145.80 crore rupees. Shell has a 51% control stake in BSL. The stock lost 0.6%.

Of the index stocks Kazakhmys led the decliners with a loss of 5.9% followed by declines in Vedanta Resources of 4.3%, Xstrata of 3.25%, in British Land of 2.85% and in Alliance & Leicester of 2.64%.

Kazakhmys fell 6% to 1,502p after the mining company from Kazakhstan said that production at copper mines is likely to be lower for few weeks. The company is yet to recover from a month ago flooding in South Mine.

Vodafone will spend 537 million pounds on businesses in Spain and Italy. Vodafone is buying the divisions - which provide fixed-line telephone and broadband services - from Sweden''s Tele2 AB. Combined, the Spanish and Italian units have about three million customers. Vodafone dropped 1.6%.

Carphone Warehouse dropped 1.5% to 344p after the report in London Times that subscribers to its broadband services may have declined to 95,000 at the end of Sept from 126,000 at the end of June.

Northern Rock rose on news that Citigroup Inc. plans to lend the company as much as 10 billion pounds. The shares gained 8.3% after the news report in Sunday Times.

[R]11:00AM New York, 8:30PM Mumbai - Sensex retreated 1.6% as political disagreement between Communists parties and the Congress party on the nuclear accord with the U.S. dominated the news.[/R]

Sensex in Mumbai opened the week weaker for the third day in a row on the political worries.

The ruling party coalition led by Congress party president Sonia Gandhi said on Sunday that her party was ready for the polls and blamed opponents of the nuclear deal with the U.S. against peace and development. She said that the country has to maintain a rate of growth in the power generation to support economic growth. In a joint statement issued by three parties CPI, CPI – M, and RSP said that “the nuclear deal with the United States is against the interests of India. Those who advocate the deal should know that India is capable of developing nuclear energy primarily on a self-reliant basis. We need not surrender our vital interests to America on this plea.”

BJP, the largest party in parliament, and not part of the ruling coalition opposes the agreement with the U.S. as well.

Investors are worried that early election may derail the economic reform and lower the economic growth and hurt company earnings.

The Sensex lost 1.6% or 282 to 17.491.39. The CNX Nifty closed down at 1.9% or 100.6 to 5,085. Of the shares traded on BSE 450 gained, 2,252 fell while 371 remained unchanged.

The BSE has announced that DLF will be included in the Sensex, from November 19th. In a circular, BSE said DLF would replace Dr Reddy''s on the Sensex.

Of the Sensex 30-shares 7 socks were up while the rest declined. The BSE net turnover fell to 7,206 crore rupees. The NSE clocked a turnover of 15,996.36 crore rupees.

Reserve Bank of India governor on Monday said India remains vulnerable to oil shocks and shortages are increasing grain prices. He added that India is not in a position to create currency stabilization fund. Several economists have suggested that India should use its large foreign exchange reserves to create a fund smooth the fluctuations in rupee value.

The governor also added that India current sharp rise in foreign currency reserves reflects flow of funds into the country and is not the wealth of the nation that the government can use. India''s foreign exchange reserves touched a record $247.8 billion on Sept. 28, up nearly $12 billion from the week earlier it was the fifth-largest foreign exchange reserves holder in the Asian region.

Of the Sensex stocks Reliance Energy led the decliners with a loss of 4.67% to 1,379 rupees, ACC slid 5.2% to 1,115 rupees, Ranbaxy Laboratories fell 4.8% to 412.30 rupees and NTPC lost 4.8% to 204.7 rupees.


Metal companies stocks were active led by a rise in steel companies. Tata Steel slump 5.3% to 789 rupees, SAIL retreated 5% to 192.40 rupees JSW Steel closed weaker at 5.6% to 804.2 rupees, Sterlite Industries edged down 2.7% to 742 rupees and Hindalco Industries declined 4.5% to 161.6 rupees. Jai Balaji gained 5%, daily upper limit, after the company signed an agreement with the West Bengal government to build a steel, cement, and power plant complex.

Reliance Industries lost 2.7% to 2,416 rupees.

Reliance Power Ltd announced it is planning to borrow 76,472.80 crore rupees to fund its 12 capital projects. Already, Reliance Power has courted Macquarie India Advisory Services, ABN Amro Bank and Deutsche to arrange syndicated loans of $2 billion each.

Bharti Airtel shed 0.8% to 984.8 rupees on reports that it may sell around 10% stake in its infrastructure division to U.S. based private equity companies for $1.1 billion.

Among the stock which gained in the Sensex, Infosys which was up 0.5% to 2,000.45 rupees, TCS climbed 0.8% to 1,078.5 rupees, Satyam Computer Services gained 2.5% to 455.55 rupees and Wipro closed firmer at 1.8% to 469.65 rupees. Bharat Heavy Electrical rose 1.7% to 2,190.75 rupees.

Patni Computer Systems was up 4.8% to 480.05 rupees on reports that two of its directors Gajendra Patni and Ashok Patni will resign from the board effective October 1st, 2007. iGate Global Solutions surged 10% to 264 rupees ahead of its second quarter results on Wednesday.

Rajesh Exports fell 0.7% to 879 rupees after it reported earnings rise of 156% in the second quarter ending at the end of Sept.

Kotak Mahindra closed 5% lower to 912 rupees after the news that the bank is exploring to sell a stake in the company to raise $400 million.

[R]8:30AM New York – Stocks in New York are indicating a lower opening.[/R]
Market Averages futures in the pre-market New York trading are indicating weak opening with a negative bias. Dow Jones Industrial Average is down 25 to 14,131, Nasdaq futures are edging lower 6.3 to 2,773, and S&P 500 is down 4 to 1,553.

On the deal front three deals were reported in Europe. SAP Ag, German software developer has agreed to acquire French database application developer Business Objects for $6.8 billion in cash. SAP stock fell 5% in Frankfurt trading after the news but Business Objects stock gained 17% in Paris trading.

Vodafone Group agreed to acquire Italian and Spanish telecom business from Tele2 AB for $1.1 billion. Shire, pharmaceutical company agreed to sell dermatology products and six products in the development stages to Almirall of Spain for $213 million.

Oil in London trading fell 60 cents to $80.60 per barrel and is likely to go lower as spreads prices between crude oil and gasoline widens.

Traders are focuses on earnings season with Alcoa, General Electric, and Yahoo to release earnings in the next two weeks. Alcoa is expected to report earnings between 69 cents and 71 cents. Several banks are scheduled to release earnings in the next two weeks including Citigroup, Wachovia, Bank of America, and Fifth Third.

Yum brands ((YUM)) operator of fast food joints including Pizza Hut, KFC, and Taco Bell, is scheduled to report earnings 45 cents after the close in New York today.

In Asian markets trading Philippines led the region with a rise of 2.6% followed by gains in Pakistan of 1.9%, Thailand 1.3%, Taiwan 1.1%, and in Indonesia 1.0%.

Japanese markets were closed on Monday. Markets in Shanghai gained 2.5% after a week of holiday but banks led the gainers. China Life Insurance and ICBC jumped 10%, daily trading limit, and Bank of China surged 6%.

Australia closed to a record high of 6,654.30 after reaching a new intra-day record high. India fell 2.5% after two weeks of daily new record highs.

European markets at mid-day trading are slightly lower after led by UK and Spain with losses of 0.4%.