US & World Daily Markets Financial Briefing 24-07-2006

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Stocks climb on acquisitions, earnings

NEW YORK - Stocks rallied in early trading Monday as Wall Street welcomed multibillion-dollar acquisitions from HCA Inc. and Advanced Micro Devices Inc. and a pair of upbeat earnings reports from pharmaceutical companies.
   
Solid earnings from drugmakers contributed to the market's momentum. Dow Jones industrial Merck & Co. said its second-quarter earnings more than doubled to top Wall Street estimates, while Schering-Plough Corp. swung to a profit and also beat expectations.
   
In the first hour of trading, the Dow Jones industrial average gained 63.16, or 0.58 percent, to 10,931.54.
   
Broader stock indicators were also higher. The Standard & Poor's 500 index was up 6.53, or 0.53 percent, at 1,246.82, and the Nasdaq composite index rose 17.59, or 0.87 percent, to 2,037.98. Bonds slipped, with the yield on the 10-year Treasury note edging up to 5.05 percent from 5.04 percent late Friday.

Merger Monday
   
Hospital operator HCA Inc. is in advanced talks to sell itself for $21 billion, or $51 a share, with the assumption of $10.6 billion in debt taking the total value of the deal narrowly past what was paid for RJR Nabisco in 1989. According to reports in The Wall Street Journal and The New York Times, Bain Capital, Kohlberg, Kravis Roberts & Co and Merrill Lynch are combining to buy the firm.
   
Three sets of venture capital groups - including one led by KKR - are in talks to buy Philips Electronics' semiconductor unit for more than $10 billion, The Journal reported.
   
And KKR on Monday was in exclusive talks to buy France Telecom's 54% stake in directories unit PagesJaunes for about 3.3 billion euros.
   
Not all the M&A news was related to buyout firm KKR, however. Advanced Micro Devices, Intel's arch-rival, confirmed reports it has agreed to buy Canada's ATI Technologies Inc. for $5.4 billion. Terms call for ATI, a maker of chips for graphics cards, to receive $4.2 billion in cash and 57 million ATI shares, valuing ATI at $20.47 each. ATI closed Friday at $16.56; AMD tumbled to a one-year low of $18.26.
   
Hamilton Beach/Proctor-Silex Inc., known for its blenders and array of household appliances, confirmed a merger with Applica Inc., a maker of appliances under the Black & Decker and other brand names. Hamilton Beach will first be spun off from Nacco Industries, which will receive a $110 million special dividend from Hamilton. Hamilton will then buy Applica, with Applica holders getting 25 percent of the new firm.
   
Britain's Wolseley said it has agreed to buy DT Group, the Nordic region's leading building materials distributor, from CVC Capital Partners for 1.5 billion euros ($1.9 billion) in cash and the assumption of 484 million euros of net debt.
   
Vodafone Group still has no intention to sell its 45 percent stake in U.S. operator Verizon Wireless, Chief Executive Arun Sarin said in a conference call on Monday. Vodafone separately said its customer base rose 9.5% and that a top executive was leaving.

Verizon Wireless is majority owned by Verizon Communications, which has publicly expressed its desire to take control of the mobile operator.

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Dollar steady following earlier gains

LONDON - The dollar was steady against the euro, having recovered some of last week's losses earlier in the session.   
   
A dearth of data on both sides of the Atlantic has kept volumes low today. Currency watchers said more activity is likely tomorrow when US consumer confidence and existing home sales are published.
   
Towards the latter part of the week, the monthly Ifo survey into German business sentiment and US GDP data will also attract attention. The US data will be particularly important as the market's main focus of attention remains the Fed rate-setting meeting on Aug 8.
   
The US currency drifted lower towards the end of last week in the wake of relatively dovish comments from Fed chairman Ben Bernanke. He expressed concerns about moderating US economic growth, while indicating that inflation remains relatively well-contained.
   
His testimony to US lawmakers reduced expectations of another quarter point rate hike from the Fed in August from 80 pct to 65 pct as well as the probability of any further rate hikes. The Fed has raised its key Fed funds rate a quarter point on 17 consecutive occasions to 5.25 pct.
   
Earlier this month, ECB president Jean-Claude Trichet hinted that the central bank will hike rates by a quarter point at its early-August meeting to 3.00 pct. He said the central bank will continue to exercise "strong vigilance" with regard to potential inflationary risks in the euro zone as economic recovery gathers pace and oil prices remain high.
   
Elsewhere, the markets are on alert to any developments in Lebanon following the arrival of US Secretary of State Condoleezza Rice in Beirut at the start of her mission to end the conflict between Israel and the Hezbollah.
   
The Rice mission has prompted speculation of a possible ceasefire and that has pushed oil prices lower. Concerns that the violence could have spread to major crude-producing nations in the Middle East saw oil prices soar to  all-time highs above 78 usd earlier this month.
   
Meanwhile, the pound remained well-supported on mounting talk of an imminent rate hike from the Bank of England.
   
Expectations of a quarter-point rate hike next month have mounted in recent days as official figures showed inflation in June rising further above the central bank's target and economic growth in the second quarter accelerating.

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The European Markets at 11.30 GMT

London - UK blue chips continued their rise at midday as a rebound in PartyGaming and strong gains from Vodafone and AstraZeneca offset a disappointing Q2 from BG Group, and ahead of an expected higher open on Wall Street, dealers said.
   
At 11.45 am, the FTSE 100 index traded 53.2 points higher at 5,772.9, with the FTSE 250 index also in positive terrain, up 75.1 points at 9,189.3.

Frankfurt - Shares were higher in midday trade, bouncing back from Friday's sharp decline, as oil prices dipped, the euro weakened against the dollar, and US stock futures pointed to gains on Wall Street this afternoon, dealers said.
   
At 12.10 pm, the DAX 30 index was 49.70 points or 0.91 pct higher at 5,500.71, having moved between 5,460.12 and 5,507.86 so far this session.

Paris - Shares were higher in very thin midday trade, as some investors returned to the market in search of bargains over-sold on Friday and looked ahead to the flood of first-half corporate reports due out this week, amid easing oil prices and a weakening euro, dealers said.
   
At 12.47 pm, the main CAC-40 index was trading 27.20 points or 0.56 pct higher at 4,845.75, in very light volume of 885 mln eur.

Amsterdam - Shares were broadly higher around midday, led by technology and temporary staffing stocks, while financials also put in their weight as US futures pointed to a higher opening of Wall Street, dealers said.
   
At 12.19 pm, the AEX was up 3.43 points or 0.79 pct to 439.73 after opening at 437.51.

Madrid - Share prices were broadly higher midday in light volume, in line with the broad European trend, with constructors and media issues leading the gainers, dealers said.
   
At 12.55 pm, the IBEX-35 index was up 107.7 points at 11,441.7, after trading in a range of 11,337-11,456 on turnover of about 1.129 bln eur.

Milan - Share prices were higher in thin midsession trade, with Fiat leading the way after announcing a series of joint ventures and before its quarterly figures later today, while ASM Brescia was boosted by hopes of a merger with AEM, dealers said.
   
At 12.45 pm, the Mibtel index rose 0.62 pct to 27,474 points and the S&P/Mib was up 0.75 pct at 35,860, while volumes stood at 911 mln eur.

Stockholm - Shares remained in positive territory in midday trade, strengthening from morning levels as bargain hunting, supported by the firming dollar and hopes of a solution in the Middle East continued, dealers said.
   
At 12.15 pm, the OMX Stockholm index was up 1.19 pct at 298.29, while the OMX Stockholm 30 index was up 1.32 pct at 926.66. Turnover was 5.36 bln skr.

Helsinki - Helsinki shares were higher in midday trade, in line with other European markets, and led by forestry stocks on bargain-hunting ahead of the release of second-quarter earnings figures this week, dealers said.
   
At 11.55 am, the OMX Helsinki 25 was 0.79 pct higher at 2,429.11 and the OMX Helsinki was up 0.46 pct at 8,483.29. Turnover was 130 mln eur.

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Asian shares close mostly lower on Wall St, oil price fears

HONG KONG - Share prices across the Asia Pacific region closed mostly lower after a slide on Wall Street on Friday and concerns about oil prices and higher interest rates, dealers said.
   
Tokyo share prices finished lower, tracking Wall Street, and with many investors reluctant to make aggressive bets until they see the outcome of some key corporate quarterly results, dealers said.
   
They said the Chinese central bank's latest credit-tightening measures announced on Friday and concern about oil prices and the Middle East conflict also weighed on sentiment.
   
The Nikkei 225 Stock Average closed 26.76 points or 0.2 pct lower at 14,794.50, after moving between 14,560.67 and 14,851.91.
   
The TOPIX index of all first-section issues fell 1.31 points or 0.1 pct to 1,514.22. The index moved between 1,491.59 and 1,519.30. 
       
Blue-chip companies including Sharp Corp, Canon Inc, Matsushita Electric Industrial Co Ltd, Sony Corp, NEC Corp and Nissan Motor Co are scheduled to announce this week their results for the first quarter to June.
   
Australian shares closed lower with investor sentiment weakened by the fall on Wall Street and concerns about higher interest rates, dealers said.
   
They said a 1.6 pct surge in local producer inflation data for the June quarter raised inflation worries ahead of Wednesday's release of the Consumer Price Index (CPI) for the second quarter.
   
Dealers said the PPI and CPI measures come on top of other measures indicating inflationary pressure is building within the Australian economy, which will likely prompt the Reserve Bank of Australia to hike interest rates by 25 basis point on Aug 2.
   
The S&P/ASX 200 lost 26.2 points or 0.53 pct to close at 4,934.4. The benchmark indicator closed off the day's low of 4,901.7 and below a high of 4,946.5.
   
Hong Kong shares were lower in afternoon trade after a negative lead from Wall Street and China's new credit tightening measures prompted investors to lock in profits in some blue chips and H-shares, dealers said.
   
At 3:28 pm the Hang Seng Index was down 16.43 points or 0.10 pct at 16,447.75.
   
In mainland China, A-shares in Shanghai and Shenzhen closed marginally higher amid fresh worries over liquidity pressure with food stocks snapped up in particular, dealers said.
   
The Shanghai A-share Index added 0.65 points or 0.04 pct to 1,751.35 and the Shenzhen A-share Index was up 0.07 points or 0.01 pct at 446.80.
   
Seoul shares ended lower for a second trading day as foreign investors continued to unload their shareholdings following Wall Street's retreat and higher oil prices, dealers said.
   
The market stayed negative throughout the session, with many investors sitting on the fence ahead of key US economic data, which may give more clear signals to future US rate decisions, they added.
   
The KOSPI index closed down 7.98 points or 0.63 pct at 1,263.35, after trading between 1,267.63 and 1,246.31.

Asian Bourse Round-Up

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Oil prices dip as Rice heads to Mideast calling for 'urgent' ceasefire

LONDON - Oil prices were lower as US Secretary of State Condoleezza Rice headed to the Middle East calling for an "urgent" ceasefire in the deadly conflict between Israel and Hezbollah militants in Lebanon.
   
September crude oil contracts edged 75 cents lower to $73.68 a barrel after closing up 3 cents at 73.75 usd on Friday. Meanwhile, August-dated US light crude futures were down 62 cents at 73.80 usd.
   
Oil prices have lost some 8 pct since striking all time record highs above 78 usd a barrel last week on hopes the Israel-Lebanon crisis will not spill over into a wider regional conflict, nor drag in major crude producer Iran.
   
Oil prices came under pressure last week after US Fed chairman Ben Bernanke suggested US economic growth was moderating, which should curb demand in the world's biggest energy-consuming nation.
   
Adding to the pressure was US data showing gasoline supplies on the rise, as well as nervousness among some market observers that retail gasoline prices near 3 usd a gallon could begin to cut into demand.

Gold falls amid US diplomatic efforts to end fighting in Israel, Lebanon

LONDON - Gold prices edged lower, extending Friday's falls, as the dollar recovered and as safe-haven buying faded amid growing US diplomatic efforts to end the fighting in Israel and Lebanon.
   
At 12.15 pm, spot gold, which earlier hit a low of 611.80 usd an ounce, was quoted at 615.00 usd against 620.25 usd at the time of the COMEX market close in New York on Friday.
   
Other precious metals traded mixed. Spot silver edged up to 10.81 usd against 10.80 usd, platinum was down at 1,203.00 usd against 1,205.00 usd while palladium edged up to 307.00 usd against 305.00 usd.
   
Gold hit a two-month high of 676 usd last Monday on safe-haven buying as violence between Israel and Hezbollah militants in Lebanon raised fears of a wider, regional conflict.
   
Market speculation the conflict in Lebanon will remain localised led gold sharply lower by the end of the week, however. Meanwhile renewed diplomatic efforts to end the fighting have pressured the metal further today.
   
US Secretary of State Condoleezza Rice today called for a ceasefire in the deadly conflict that has killed hundreds of Lebanese and dozens of Israelis, as she headed to Israel for talks.
       
A stronger dollar makes precious metals such as gold, which is traded in dollars, costlier and decreases the safe-haven asset's appeal as a hedge against inflation.

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