Morning Market Update
Gates Capital: Why (Free) Cash (Flow) Is King
Gates Capital Management's ECF value fund has earned strong returns for investors since its inception in June 1996. The ECF, or Excess Cash Flow Fund, had returned 12.9% annualized since inception to the end of September 2020. That was compared to 8.9% for the S&P 500 total return index and 7.4% for the HFRI Event-Driven Read More
• US: Dow: 12650.00 (0.64%), S&P 500: 1370.80 (0.81%), NASDAQ: 2557.00 (0.95%)
• Europe: CAC: 3405.77 (1.89%), DAX: 7076.97 (1.79%), FTSE: 5689.98 (1.48%).
• Asia-Pacific: Australia: 4361.40 (0.57%), China: 2016.98 (0.11%), Hong Kong: 21262.06 (0.48%), India: 5571.40 (-0.05%), Japan: 9153.20 (1.41%).
• Metals: Gold: 1724.80 (0.59%), Silver: 32.70 (1.00%), Copper: 3.50 (1.43%)
• Energy: Crude Oil: 88.07 (1.32%), Natural Gas: 3.80 (0.24%)
• Commodities: Corn: 7.36 (0.62%), Soya Bean: 13.98 (-1.60%), Wheat: 8.58 (-0.81%)
• Currency: EUR/USD: 1.2769 (0.20%), GBP/USD: 1.5900 (0.13%), USD/JPY: 81.1800 (-0.17%)
• 10 year US Treasury: 1.611% (0.031)
Financial and Economic News Update
U.S. stock-index futures edge higher: U.S. stock-index futures are pointing to a higher open on Monday, buoyed by President Barack Obama’s remarks on budget talks and strong earnings from home-improvement retailer Lowe’s Cos. Gains were capped by escalating violence in the Middle East between Israel and Hamas militants. Monthly existing home sales data is expected at 10 A.M. ET. Economists have forecast 4.75 million sales in October.
European markets jump: European markets are rallied amid investor optimism that a deal can be struck to avert the so-called fiscal cliff. The German DAX (INDEXDB:DAX) surged 1.8 percent to 7076.97, the FTSE 100 (INDEXFTSE:UKX) added 1.5 percent to 5689.98 and the CAC 40 (INDEXEURO:PX1) gained 1.9 percent to 3405.77. The euro zone blue-chip ESTX 50 PR.EUR (INDEXSTOXX:SX5E) (Euro Stoxx 50) was trading 1.8 percent higher.
Asian markets end modestly higher: Asian markets closed higher on Monday with the HANG SENG INDEX (INDEXHANGSENG:HIS) up 0.5 percent at 21,262.1, while the SSE Composite Index (SHA:000001) (Shanghai Composite Index) reversed earlier losses to end 0.1 percent higher at 2,016.9. Japan’s NIKKEI 225 (INDEXNIKKEI:NI225) climbed 1.4 percent on Monday as the yen fell to a near seven-month low against the dollar. The S&P/ASX 200 (INDEXASX:XJO) index closed 24.6 points higher at 4,361.4. The benchmark Indian 30-share BSE SENSITIVE (INDEXBOM:SENSEX) index ended 0.2 percent higher.
Company News Update
• Home-improvement retailer Lowe’s Companies, Inc. (NYSE:LOW) said third quarter profit jumped 76 percent to $396 million, or 35 cents a share, from $225 million, or 18 cents a share, a year ago. Excluding some items, earnings came in at 40 cents a share. Net sales gained 1.9 percent to $12.07 billion, while same-store sales edged 1.8 percent higher. Analysts had projected earnings of 35 cents a share on revenue of $11.92 billion.
• Tyson Foods, Inc. (NYSE:TSN) reported fourth quarter earnings excluding items of 55 cents a share, 9 cents above the average analysts’ estimate. Sales for the period dropped slightly to $8.37 billion from $8.4 billion, trailing Street expectations for $8.48 billion.
• Citigroup Inc. (NYSE:C) will pay $360 million to the brokerage estate of Lehman Brothers to settle a collateral dispute, according to a Reuters report. Separately, the Wall Street Journal reported that the bank was on track to cut 300 sales and trading jobs this year.
• Cisco Systems, Inc. (NASDAQ:CSCO) has agreed to buy privately held cloud networking company Meraki for about $1.2 billion in cash as part of its efforts to bolster its cloud computing services.
• Facebook Inc (NASDAQ:FB) and Yahoo! Inc. (NASDAQ:YHOO) are in talks to collaborate on search functionality, according to a report in the Sunday Telegraph. Kara Swisher of AllThingsD has however refuted this report saying that that the long standing partnership between Yahoo! and Microsoft Corporation (NASDAQ:MSFT) will make such a union highly unlikely.
• Telecom equipment vendor Nokia Siemens Networks B.V. said it is working with Canada’s Ballard Power Systems Inc. (USA) (NASDAQ:BLDP) (TSE:BLD) to develop mobile networks that can continue to operate during power black-outs.
• Rupert Murdoch’s News Corp (NASDAQ:NWSA) is likely to announce this week a deal to acquire a 49 stake in New York-based sports channel YES Network, according to a Reuters report.
• Monsanto Company (NYSE:MON) said the U.S. Justice Department has ended its anti-trust probe into its soybean genetic traits business.
• Daily-deal website Groupon Inc (NASDAQ:GRPN) launched its first concept store in Hong Kong, which the company said would allow customers to redeem lifestyle products and test them in a physical environment.
• Private equity firm The Blackstone Group L.P. (NYSE:BX)’s real estate arm will buy Australian shopping mall Top Ryde in Sydney for 340 million Australian dollars ($352 million).
• The U.S. justice department has filed an anti-trust lawsuit against eBay Inc (NASDAQ:EBAY), alleging that the online shopping company entered into an illegal agreement not to recruit or hire employees from Intuit Inc. (NASDAQ:INTU).
• Bill Gates’ Cascade Investments has raised its stake in waste management company Republic Services, Inc. (NYSE:RSG) to about 24 percent.
• Westlake Chemical Corporation (NYSE:WLK) declared a special dividend of $3.75 per share, payable on December 12, 2012, to stockholders of record on November 26, 2012.
• Online brokerage E Trade Financial Corporation (NASDAQ:ETFC) will close its British unit as it shifts focus to its U.S. operations, the Wall Street Journal reported.
• Chinese e-commerce company Alibaba Group is planning to buy a stake in Sina Corp (NASDAQ:SINA)’s popular micro-blogging service, Weibo, according to a Reuters report.
• Diamond Foods, Inc. (NASDAQ:DMND) is down 8 percent in early morning trade after it was lowered to “underperform” from “hold” by analysts at Jefferies.
• Computer Sciences Corporation (NYSE:CSC) was raised to “buy” from “hold” at Deutsche Bank.
• Dean Foods Company (NYSE:DF) jumped 3 percent in pre-market trading after analysts at Goldman Sachs upgraded the stock to “buy” from “neutral.”
• BP plc (ADR) (NYSE:BP) (LON:BP) gained 2.3 percent in London following a report that the oil major was planning a 3.7 billion pound ($5.9 billion) buyback of its shares, after selling its stake in its Russian joint venture TNK-BP to Rosneft’ NK OAO (MCX:ROSN).
• Dutch bank ING Groep N.V. (ADR) (NYSE:ING) (AMS:INGA) added 2 percent after the European Commission extended the company’s deadline to sell its insurance operations in the region.
• Asset manager Guggenheim Partners is in exclusive talks to buy the U.S. unit of insurer Aviva Plc (ADR) (NYSE:AV) (LON:AV), according to a report in The Sunday Telegraph.
• Xstrata PLC (LON:XTA) shareholders are set to meet this week to seal a planned $66 billion merger with commodity trader Glencore International Plc (LON:GLEN), according to a report in The Financial Times.
• German construction firm Hochtief AG (ETR:HOT) (FRA:HOT) jumped 5 percent after the company said chief executive officer Frank Stieler will step down, leading to speculation that the company will be split up.
• Electric utility Electricite de France SA (EPA:EDF) is part of a consortium which has bid to acquire Total S.A. (ADR) (NYSE:TOT) (EPA:FP)’s gas network and storage business, TIGF, French daily Les Echos reported on Monday.
• SAS AB (STO:SAS), Scandinavia’s biggest airline, surged 24 percent after reaching a deal with unions on wage and pension cuts.
• Dutch oil-services company Fugro N.V (AMS:FUR) lowered its full-year profit outlook to 280 million euros ($358 million), and said Arnold Steenbakker will step down as chairman of the board.
• British online grocer Ocado Group PLC (LON:OCDO) soared 27 percent after extending a 100 million-pound credit line by 18 months until July 2015.
• Barclays PLC (ADR) (NYSE:BCS) (LON:BARC) gained 4 percent in London after analysts at Goldman Sachs upgraded the bank to “buy” from “neutral.”
• Ping An Insurance (Grp) Co of China Ltd. (HKG:2318) (SHA:601318) slid 1.9 percent in Hong Kong after HSBC Holdings plc (ADR) (NYSE:HBC) (LON:HSBA) said it is in talks to sell its $9.3 billion stake in China’s second-largest insurer, as part of a plan to shed non-core assets.
• Billabong International Limited (ASX:BBG) soared 10 percent after the Australian surfwear company said the head of its U.S. division, Paul Naude, was considering a leveraged buyout of the company.
• Japan Tobacco Inc (TYO:2914) jumped 6.5 percent after the Japanese government said it would postpone the sale of its 50 percent stake in the cigarette maker.
• Sun Hung Kai Properties Limited (HKG:0016), Hong Kong’s largest property developer by market value, fell 0.5 percent as the stock began trading without rights to dividend.
• Honda Motor Co Ltd (ADR) (NYSE:HMC) (TYO:7267) gained 0.4 percent in Tokyo amid a Nikkei business daily report that the automaker had raised its full-year Japanese sales target by 16 percent.
• Kunlun Energy Company Limited (HKG:0135) jumped 3.1 percent following news that the Chinese natural gas provider controlled by PetroChina Company Limited (ADR) (NYSE:PTR) (HKG:0857) (SHA:601857), will become the 50th component of the benchmark Hang Seng Index from December 10.
• Japanese construction equipment maker Komatsu Ltd (TYO:6301) and China’s Sinomach are locked in a battle to acquire German machine tool maker MAG Group, Reuters reported.
• Australian agri-business firm Elders Ltd (ASX:ELD) tumbled 3.3 percent despite reporting a full-year underlying profit of $13.2 million compared with $9 million in the same period last year.
• Sydney-based APN News and Media Limited (ASX:APN) is planning to sell some small New Zealand media assets as part of efforts to maximize profits and value for shareholders, Reuters reported.
• Japanese insurer NKSJ Holdings, Inc. (TYO:8630) will cut 4,800 jobs, or about 15 percent of its work-force at its non-life insurance subsidiaries, Kyodo News reported on Monday.
Economic Calendar for Monday, November 19, 2012:
10:00 A.M. ET: Existing Home Sales (MoM) (October)
10:00 A.M. ET: Existing Home Sales Change (October)
10:00 A.M. ET: NAHB Housing Market Index (November)
11:30 A.M. ET: 3-Month Bill Auction
11:30 A.M. ET: 6-Month Bill Auction