US & World Daily Markets Financial Briefing 26-02-2007

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Dow, Nasdaq advance in early trading

NEW YORK - Stocks were mostly higher Monday after a proposed takeover of Texas electric utility TXU Corp. gave investors another dose of optimism about the pace of acquisitions this year.
   
The company said before the opening bell it agreed to be bought by a consortium of private equity firms led by Kohlberg Kravis Roberts & Co. and Texas Pacific Group. The deal, worth $45 billion with the assumption of debt, marks the biggest leveraged buyout in U.S. corporate history.
   
Also lending support to stocks was Station Casinos Inc., which agreed to be bought by a private equity firm started by the company's founding family. Temple-Inland Inc., a conglomerate that offers everything from packaging material to financial services, announced it plans to separate itself into three standalone public companies.
   
The takeover activity injected confidence into the market, and snapped a three-day slide in the Dow Jones industrials. Last year, the amount of mergers and acquisitions surpassed the $4 trillion level for the first time and helped power the Dow into record territory.
   
In the first hour of trading, the Dow rose 13.06, or 0.10 percent, to 12,660.54. The Russell 2000 index of smaller companies was up 1.96, or 0.24 percent, at 828.60.
   
Broader stock indicators were narrowly mixed. The Standard & Poor's 500 index was up 4.03, or 0.28 percent, at 1,455.22, and the Nasdaq composite index dipped 0.71, or 0.03 percent, to 2,514.39.
   
Bonds continued to recover from last week's sell-off, with the yield on the benchmark 10-year Treasury note falling to 4.64 percent from 4.68 percent late Friday. Bonds had been weaker amid concerns that subprime lenders would be forced to take write-downs if consumers defaulted on mortgage payments.
 
Stocks in focus
   
TXU rose $7.82, or 13 percent, to $67.84 after it agreed to be bought by private equity firms. Directors of the electric utility voted Sunday night to recommend that shareholders approve the sale, which values its stock at a 15 percent premium.
   
Station Casinos rose $3.49, or 4.2 percent, to $86.79 after it agreed to go private in a $5.4 billion, which represents an 8 percent premium over its closing price on Friday. The deal still allows Station to solicit acquisition proposals from third parties for 30 days.
   
Temple-Inland rose $6.95, or 12.7 percent, to $61.90 after it agreed to spin off its real estate and financial services arms, and sells its timberland business. The decision come days after activist shareholder Carl Icahn said he'd wage a proxy fight to seize control of the board.

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Australian, Canadian dollars boosted by higher oil, gold prices

LONDON - The Australian and Canadian dollars were both firm, helped by higher oil and gold prices.
   
At 2.00 pm GMT, the Australian dollar was trading at 0.7929 against its US counterpart, having earlier hit a one-month high of 0.7934 usd. Meanwhile, the US dollar remained just below the 1.16 level against the Canadian dollar at 1.1594 cad, after hitting a two-month low of 1.1563 on Friday.
   
"Gold prices are firm and yields continue to be attractive for the Australian dollar, while the rise in oil prices has coincided with the recovery in the Canadian dollar," said Steve Barrow, currency analyst at Bear Stearns.
   
The two currencies belong to a group of so-called 'commodity currencies' which are typically sensitive to volatility in commodity prices.
   
Oil prices have risen back above 61 usd per barrel, pressured by concerns over cold weather in the US and geopolitical concerns, as Iranian President Mahmoud Ahmadinejad remains determined to pursue his country's nuclear ambitions. Geopolitical tensions and a weaker dollar meanwhile have left gold prices close to nine-month highs hit on Friday.
   
Barrow noted that both currencies are likely to continue making small gains against the dollar, though within their recent relatively narrow ranges, until either central bank starts raising the possibility that interest rates are set to fall.
   
"Barring any significant movements in resource prices, it would take one or both of the (Canadian and Australian) central banks to indicate that they are at the end of the rate hiking cycle," he said.
   
This looks unlikely for the time being, however, especially in Australia after Reserve Bank of Australia governor Glenn Stevens said last week that the central bank has not considered cutting interest rates and there is no indication inflation is likely to fall below its target.

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Top Stories in Europe at 11.05 GMT

Stockholm - LM Ericsson AB said it has bid 106 nkr per share in cash for Norway's Tandberg Television ASA, and that it already holds 11.7 pct of the Norwegian firm and has "irrevocable" acceptances for a further 13 pct of the shares. Ericsson said the bid is a "significant step toward (a) world leadership position in IPTV", and that Tandberg will expand its customer base to include cable and satellite operators as well as broadcasters.

Paris - French reinsurer Scor SA said it is launching an offer of half of one of its shares plus 4 sfr in cash per Converium Holdings share, with a view to acquiring the 67.1 pct it doesn't already own in its Swiss rival. The offer is worth 21.1 sfr per Converium share, a 27 pct premium to Converium's share price on Jan 4 before news of Scor's interest, the bidder said.

Madrid - Grupo Ferrovial SA said net profit soared 242.8 pct to 1.425 bln eur in the full-year to December from a year earlier, mainly due to the impact of one-time items. Excluding these items, net profit would have risen 35.5 pct to 458.1 mln eur, the builder said in a statement.

Gas Natural SDG SA said net profit increased 14.1 pct to 854.5 mln eur in the full year to December from 749.2 mln a year earlier, in line with analysts' forecasts for 628-945 mln. In a statement, Gas Natural said full year EBITDA grew 25.9 pct to 1.912 bln eur from 1.518 bln, also meeting market expectations.

Amsterdam - TNT NV presented in-line fourth quarter earnings, while its 2007 outlook for the mail division came in lower in terms of analysts' operating margins expectations. Net profit was 189 mln eur, up from 108 mln eur year-on-year, and at the low end of 187-234 mln eur pencilled in by analysts.

Getronics NV said it has agreed to sell 70 pct of its Japanese operations to NTT Data Corp, and will form a strategic partnership with the company. Financial details were not disclosed and the deal is expected to be completed in the second quarter.

Frankfurt - The GfK market research institute said its consumer climate index for Germany is forecast to fall to 4.4 points in March, from an upwardly revised 4.9 points in February. The March figure fell short of the 4.9-point forecast of economists polled by AFX News. Last month, GfK had forecast the October index to be at 4.8 points.

London - Sodexho SA is planning to make a bid of around 137 usd per share for real estate company Jones Lang LaSalle Inc, sources at the French catering and facilities management company quoted La Lettre de L'Expansion as saying. The company plans to make the 5 bln usd bid this year, and will finance it via a mixture of debt and equity, the financial newssheet added.

DaimlerChrysler is considering taking a minority stake in General Motors as payment for Chrysler if a deal between the two carmakers goes ahead, the Financial Times reported. According to people familiar with the situation, the German-American carmaker is weighing this all-share option. Other possibilities include a cash sale of Chrysler to private equity or industry investors or a flotation of the lossmaking unit, the newspaper said.

Zurich - Swiss cement maker Holcim Ltd announced it will make a 36.50 cad per share cash offer for all outstanding shares of Canada's St Lawrence Cement Group Inc (SLC) it does not already own, valuing the total minority share capital at 571 mln cad (607 mln sfr). The offer applies for all outstanding SLC class A subordinate voting shares as well as class 1 special shares, Holcim said.

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Asian stocks close mostly higher, new records reached on modest gains

HONG KONG - Stocks across the Asia-Pacific region closed mixed, with slight gains taking Australia and Seoul to new records but Hong Kong falling sharply on profit taking.
   
Tokyo shares ended modestly higher, as investors weighed caution about the course of the US economy and stock markets against hopes that the Japanese economy will continue to recover steadily. The blue-chip Nikkei 225 Stock Average reached a new seven-year closing high for the third straight session and the TOPIX index of all first-section shares closed at a new 15-year high.
   
The Nikkei closed 26.93 points or 0.15 pct higher at 18,215.35, off a peak of 18,300.39, its highest intra-day level for seven years. The TOPIX closed 2.01 points or 0.11 pct higher at 1,816.97, having touched 1,823.46.
   
In the morning session, a broader variety of shares made gains but these were eroded in the afternoon as some Japanese institutions locked-in profits.
   
A trader at a European institution said: "Profit-taking was inevitable after the Nikkei and the TOPIX had advanced into territory not reached for so many years, while some players also sought to determine whether recent fears about inflation in the US will set the tone for trading on Wall Street in the near term."
   
Australian shares closed at new record levels with major resource stock BHP Billiton winning support on continued firmness in metals prices. Investors brushed aside weakness on Wall Street last Friday and a number of blue-chip stocks going ex-dividend.
   
The S&P/ASX 200 closed up 7.9 points or 0.13 pct at a fresh record finish of 6,044.0, beating Friday's previous record close of 6,036.1. The broader All Ordinaries index gained 12.6 points to close at 6,021.9, also surpassing Friday's record finish of 6,009.3.
   
Hong Kong shares were down nearly 1 pct in mid-afternoon trade as index heavyweight China Mobile succumbed to profit-taking following strong gains last week. Investors were generally cautious ahead of the settlement of February futures contracts tomorrow and results announcements by some big companies next week. At 3.25 pm the Hang Seng Index had fallen 186.98 points or 0.90 pct at 20,524.67.
   
In mainland China, where markets had been closed for the lunar new year holiday all last week, A-shares in Shanghai and Shenzhen shrugged off early weakness to close higher supported by strong follow-through buying with steel and telecom stocks in favor. About 100 companies closed up their daily limits of 10 pct.
   
The Shanghai A-share Index was up 44.41 points or 1.41 pct at 3,193.20 and the Shenzhen A-share Index was up 19.44 points or 2.47 pct at 807.22, a new all time high.
   
Seoul shares closed little changed but the main index managed to end at another record, with sustained foreign support helping offset heavy sell offs by investment trust firms. The market changed course several times during the session before finishing in positive territory as hopes for further gains contended with strong profit-taking opportunities, they added.
   
The KOSPI index closed up 0.15 points or 0.01 pct at 1,470.03, after moving between 1,462.19 and 1,470.95. After rising through its previous record of 1,464.70 on Thursday, the main index has extended its record-breaking rally.

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Nickel strikes new all-time high, copper hits year-high

LONDON  - Nickel struck a fresh all-time as market players refused to sell the metal while stocks are still at dangerously low levels.
   
Copper also hit a new year-high since late December last year as Chinese participants resumed trading after a week-long holiday.
   
At 2.30 pm, LME nickel for three-month delivery was up at 41,250 usd a tonne having risen 1,900 usd to settle at 40,800 usd on Friday. Nickel struck an intra-day high of 41,300 usd. LME copper for three-month delivery was up at a high of 6,360 usd a tonne, having settled at 6,306 usd on Friday.
   
"The critically low level of LME nickel stocks continues to give underlying support to prices," said Barclays analysts.
   
While nickel stocks stored in LME warehouses rose slightly by 18 tonnes today to total 3,500 tonnes, cancelled warrants rose to 1,600 tonnes, leaving only 1,900 tonnes available to the market. Cancelled warrants represent pledges to take delivery of the metal. Nickel stockpiles are equivalent to less than one day's global consumption.
   
Copper prices rose on strong Asian demand as Chinese buyers returned to the market after celebrating the Lunar Year last week. A drop in daily LME stocks of the metal of 1,625 tonnes to 210,750 tonnes also supported prices.
   
Most analysts expect metals prices to remain highly volatile this week as most of Asia returns from week-long holidays and ahead of a heavy US data calendar.
   
In other metals, aluminium was up at 2,895 usd having settled at 2,885 usd on Friday.
   
Aluminium eased earlier in the session amid reports of an end to a general strike in Guinea which has disrupted aluminium supply of late. The strike is expected to end on Tuesday after President Lansana Conte agreed to demands to choose a new prime minister from a list proposed by opponents, West African mediators said on Sunday.
   
Lead was up at 1,948 usd against 1,920 usd, having struck a new record high earlier in the session of 1,955 usd. Daily lead stocks in LME warehouses fell 100 tonnes to 31,900 tonnes.  Zinc was also up at 3,631 usd from 3,600 usd seen at Friday's close.  Tin was down at 13,450 usd against 13,475 usd at Friday's close.

At 12.08 pm GMT, spot gold was quoted at 684.60 usd an ounce, up from the 682.90 usd level seen at Friday's close. Silver was at 14.55 usd an ounce against 14.58 usd in late New York trades Friday, platinum was at 1,238 usd against 1,230 usd while palladium was at 350 usd against 354 usd.

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