While you were sleeping: Stocks higher on Kraft, Citi

Wednesday 20th January 2010

Stocks edged higher overnight, paced by Cadbury’s acceptance of a takeover offer from Kraft Foods and an improving financial outlook for Citigroup. At midday, the Dow Jones Industrial Average was 0.76% higher, the Standard & Poor’s 500 was 0.79% higher and the Nasdaq Composite had advanced 1.04%.

The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street’s ‘fear gauge’ fell 2.4% to 17.48.

Among the biggest movers were healthcare stocks as investors bet the Obama administration’s plan to reform the U.S. health sector could falter after a key Senate election today.

Shares in Humana, Merck & Co and Pfizer all gained. The S&P Healthcare Index was up 2.1%.

McDonald’s got an unexpected boost after its stock was upgraded to “outperform” by Credit Suisse.

Shares in Kraft slid in New York after it secured the approval of Cadbury’s board. Shares in Cadbury climbed in London, to pace both the FTSE 100 and the Dow Jones Stoxx 600 higher on the day.

Citigroup reported a narrower fourth-quarter loss and said that some credit market fundamentals were stabilising, helping to lift the shares by 2.9%.

IBM is the next major U.S. company set to report results after the market closes today. Later this week, results are scheduled from Google, Goldman Sachs Group and American Express.

U.S. shares might surprise on the upside this year after lagging behind 2009’s worldwide stock rally, Garry Evans, head of global equity strategy at HSBC Holdings told Bloomberg Television.

“People have got very high expectations for Asia already,” Evans said on Bloomberg Television. “Contrast that to the U.S. where everyone is so bearish, it can only surprise on the upside.” HSBC has an “overweight” rating for U.S. equities and “underweight” on Asia excluding Japan.

Evans is estimating a rise of 10% for Asian equities. By contrast, U.S. stocks might gain as much as 18% as the economy improved, supported by lower interest rates, he said.

The Dow Jones Stoxx 600 rose 0.8% to 260.27, paced by Cadbury’s board accepting a higher takeover offer from Kraft Foods. Shares in Cadbury ended 3% higher on news of Kraft’s revised 11.9 billion pound offer.

Trading was mixed across Europe with 12 national benchmarks higher and six lower. The FTSE 100 edged 0.4% higher, Germany’s DAX slid 0.9% and France’s CAC 40 increased 0.8%.

Among other active stocks: Burberry gained 6.8% after its results exceeded expectations, Waertsilae surged 13% on a cost-cutting plan and Alstom fell 2.5% after saying its outlook remained uncertain.

Equities appear to be back in favour among the wealthy, according to a Reuters report on a survey by Scorpio Partnership.

Private bank clients allocated 49% of their assets to equities in the fourth quarter of 2009 from 37% in the first, while cutting back on alternatives such as hedge funds and structured products, the survey found.

A slid in German investor confidence and renewed concerns about Greece’s budget woes knocked the euro and bolstered the U.S. dollar. Sterling advanced as the U.K.’s inflation rate jumped by the most since records began in 1997.

The euro slid 0.8% to US$1.4269. The euro dropped 0.3% to 130.18 yen. Japan’s currency depreciated 0.5% to 91.24 per dollar.

The 16-nation euro might extend its decline versus the dollar after falling below its 200-day moving average, according to a Bloomberg report on comments from Ronald Leven, a strategist at Morgan Stanley in New York.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, rose 0.42% to 282.59.

Crude oil fell to the lowest level in three weeks, dropping as much as 1.6% to US$76.76 a barrel. Brent crude dropped by 66 cents to US$76.44 a barrel.

The Organisation of the Petroleum Exporting Countries (OPEC) said on Tuesday that oil inventories were high enough to absorb any increase in winter fuel demand. It also said it cut its forecast for demand for its crude by 20,000 barrels a day.

Copper futures for March delivery rose 1.2% to US$3.407 a pound on the New York Mercantile Exchange’s Comex unit on speculation demand would remain strong in China.

Precious metals advanced. Spot platinum rose to US$1647.50 per ounce, its highest since August 2008. Palladium hit a high of US$461.50 an ounce, a level not seen since July 2008. Gold was bid at US$1132.80 an ounce.

Businesswire.co.nz

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