While you were sleeping: Deal talk checks losses

Thursday 10th December 2015

Shares of DuPont surged, helping to offset partially overall negative sentiment, after a Wall Street Journal report that the company was in advanced merger talks with Dow Chemical.

In 12.15pm trading in New York, the Dow Jones Industrial Average inched 0.02 percent lower. In 12.00pm trading, the Standard & Poor’s 500 Index fell 0.3 percent, while the Nasdaq Composite Index dropped 1 percent.

In the Dow, slides in shares of Apple and those of Nike, last trading 1.5 percent and 1.4 percent lower respectively, were checked by a rally in shares of DuPont, last up 12.2 percent. Shares of Dow Chemical last traded 10.5 percent higher.

The chemical juggernauts could announce a merger in the coming days, the Wall Street Journal reported, citing people familiar with the matter. Dow’s Chief Executive Andrew Liveris is expected to be executive chairman of the new company, with DuPont CEO Edward Breen keeping that title.

DuPont and Dow Chemical each have a market capitalisation of about US$60 billion. After the merger, the Journal said, the combined company would split into three businesses—agriculture, specialty chemicals and commodity chemicals.

"I think a deal like this couldn't have happened 3-6 months ago," Sachin Shah, a merger arbitrage strategist at Albert Fried & Co, told Reuters.

Also rising were shares of Chevron and those of Exxon Mobil, last up 1.9 percent and 1.6 percent respectively, helped by a reprieve in oil prices. Crude futures lifted after the US Energy Information Administration said US stockpiles dropped by 3.6 million barrels last week. Analysts had expected stockpiles to edge higher.

Shares of Yahoo dropped, last 3.5 percent weaker, after the company said it had suspended work on plans to spin off its stake in Alibaba Group Holding. Instead it might do a reverse spinoff, transferring Yahoo’s assets and liabilities other than the Alibaba stake to a newly formed company.

"In addition to our efforts to increase value and diminish uncertainty for investors, the ultimate separation of our Alibaba stake will be important to our continued business transformation," Marissa Mayer, CEO of Yahoo, said in a statement. "In 2016, we will tighten our focus and prioritise investments to drive profitability and long-term growth. A separation from our Alibaba stake, via the reverse spin, will provide more transparency into the value of Yahoo's business."

The probability the US Federal Reserve will raise rates next week rose to 90 percent, from 70 percent previously, in the latest Reuters poll of more than 90 economists.

"To be sure, moving now appears more about getting the first hike out of the way and changing the conversation away from liftoff to the shallow path of hikes expected thereafter than it is about the current state of the economy demanding tighter policy," Ellen Zentner, economist at Morgan Stanley, wrote in a note, according to Reuters.

In Europe, the Stoxx 600 Index ended the session with a 0.4 percent decline from the previous close. The UK’s FTSE 100 Index slipped 0.1 percent, while Germany’s DAX Index retreated 0.8 percent, and France’s CAC 40 Index dropped 1 percent.

BusinessDesk.co.nz

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