Deal Hopes Lift Financials, Metals Rise

123jump.com Staff
12 Sep, 2008
New York City

Stocks in Europe and London rose after a decline for four days in a row. Rising metals prices and improved sentiment in financial sector lifted broader market averages. Traders pinned their hopes on a possible deal between Lehman Brothers and a consortium led by Bank of America and a possible interest from Barclays. Lehman is seeking to sell the company to a buyer after the troubled mortgage securities dealer reported record quarterly loss.

[R]1:00AM New York, 6:00PM London – Two separate consortiums of international bankers led by Bank of America and Barclays are expected to bid for troubled Lehman Brothers.[/R]

London stock indexes increased on optimism over the takeover of Lehman Brothers and a rebound in metal prices. The benchmark index FTSE 100 rose after a daily decline of four days in a row. Precious metals and base metals rose between 2% and 4% in the session lifting mining companies stocks.

Market Sentiment

In London trading FTSE 100 rose 1.85% or 98.3 to 5.416.70. Of the 102 FTSE 100 stocks 82 rose, 18 declined, and 2 were unchanged. Eurasian Natural led advancers in the index shares with a rise of 9.06% after metal prices increased.

BofA, JC Flowers, CIC Considering Joint Lehman Brothers Bid
The Financial Times reported today that a consortium of Bank of America, JC Flowers & Co and China Investment Co are likely to bid for Lehman Brothers. Barclays plc is also reportedly interested in Lehman. Lehman reported record quarterly loss this week and stock has declined more than 95% in the last eighteen months of trading.

Crude Oil Falls Below $100

Crude oil futures declined below $100 a barrel after OPEC members struggle to agree on production quota limits and price floor. Crude oil futures have fallen 32% from its peak above $147 a barrel in June are likely test $90 a barrel price after the hurricane season is over in the Gulf of Mexico. Transportations, airlines and railroads gained.

Gainers & Losers

Eurasian Natural led advancers in the FTSE 100 index shares with a rise of 9.06% followed by rises in Anglo America of 8.41%, in Rio Tinto of 7.98%, in BHP Billiton of 7.40%, and TUI Travel of 7.33%.

Eurasian Natural and other commodity stocks increased after copper prices for three-month delivery gained 2.6% to $7,110 a ton. Platinum and gold prices also increased as well. Kazakhmys edged up 7.26%, Xstrata soared 7.25%, Antofagasta advanced 6.84%, and Vedanta Resources rose 5.25% as a result.

TUI Travel and other travel companies increased as Dresdner Kleinwort said the failure of XL Leisure Group will benefit industry by slashing supply of U.K package vacations by about 7%.

Financial stocks rose on rising optimism on the takeover of Lehman Brothers. Barclays climbed 3.55% and Royal Bank of Scotland jumped 2.35%.

Wolseley led decliners in the FTSE 100 index shares with a fall of 4.45% followed by losses in Smith & Nephew of 2.33%, in Man Group of 2.25%, in Imperial Tobacco of 1.70%, and HBOS Plc of 1.66%.

Earnings Review

French Connection Group PLC, a fashion apparel retailer said first-half revenues jumped 3% to £112.4 million from £109.4 million a year earlier. Net loss in the first half was £3.0 million or 3.1 pence per diluted share compared to net loss of £1.9 million or 2.0 pence per share, a year earlier.

French Connection Group PLC in the last one year traded as high as 175.50 pence in September 2007 and as low as 57.50 pence in September 2008. Based on the yesterday’s closing price the company has a market cap of £61.36 million.

Melrose PLC, parts suppliers to auto and electronics industries said first-half revenues rose 3% to £177.7 million from £172.9 million a year earlier. Net profit in the first half fell 95.64% to £9.1 million or 6.8 pence per diluted share compared to net profit of £209.1 million or 78.3 pence per share, a year earlier.

Melrose PLC ((MRO)) in the last one year traded as high as 202 pence in October 2007 and as low as 126.25 pence in September 2008. Based on the yesterday’s closing price the company has a market cap of £796.14 million.

Uniq plc, the European chilled convenience food group said first-half revenues increased 7% to £394.5 million from £360.3 million a year earlier. Net profit in the first half was £1.4 million or 1.2 pence per diluted share compared to net loss of £16.1 million or 14.2 pence per share, a year earlier.

Uniq plc in the last one year traded as high as 228.75 pence in November 2007 and as low as 73.75 pence in September 2008. Based on the yesterday’s closing price the company has a market cap of £102.20 million.

BA to Slash 2,000 Managers

British Airways chief executive Willie Walsh in an interview on Bloomberg Television said the company will slash 2,000 managers by offering them incentives to quit. Managers are expected to decide by the end of the year.

The fuel bill at the carrier is expected to rise 50% this year and job reductions will reduce operating costs by £170 million.

Europe Markets Review

In London FTSE 100 Index closed higher 98.30 or 1.85% to 5,416.70, in Paris CAC 40 Index increased 83.59 or 1.97% to close at 4,332.66 and in Frankfurt DAX index higher 55.99 or 0.91% to close at 6,234.89. In Zurich trading SMI increased 144.25 or 2.04% to close at 7,215.50.