While you were sleeping: Oil slides on stockpiles

Friday 8th July 2016

Wall Street fell with the price of oil as investors awaited Friday’s US jobs data to gauge if the Federal Reserve might still lift interest rates this year.

In 2.42pm trading in New York, the Dow Jones Industrial Average declined 0.6 percent, while the Nasdaq Composite Index edged 0.02 percent lower. In 2.27pm trading, the Standard & Poor’s 500 Index slid 0.3 percent.

Declines in shares of Chevron and those of Exxon Mobil, recently down 2 percent and 1.6 percent weaker respectively, led the drop in the Dow. Oil sank following US data showing that US stockpiles shrank less than anticipated.

"Just about everything points to lower prices," Stephen Schork, president of the Schork Group, a consulting company in Villanova, Pennsylvania, told Bloomberg. "At this time of year it’s all about gasoline, not crude, and supplies remain close to record highs even though demand is very strong. This is very bearish."

The US dollar strengthened after an ADP Research Institute report showed US companies added more jobs than expected in June, hiring 172,000 workers.

"Adjusting for the strike, the ADP report suggests that the employment report's private payroll count should be up 207,000," Daniel Silver, an economist at JPMorgan in New York, told Reuters. "That said, the ADP and the government's employment data do not always align very well.”

Investors are eyeing the latest nonfarm payrolls data, due Friday, to gauge if the previous weaker-than-expected month was an aberration, or cause for concern.

"Investors are marking their time ahead of the jobs data," Terry Sandven, chief equities strategist at US Bank Wealth Management, told Reuters. "The wall of worry has been under full construction since the May jobs data, so tomorrow's report will either suggest that the number was an anomaly or provide evidence of a weakening economy."

Bucking Wall Street's trend were shares of Denver, Colorado-based WhiteWave Foods Co, which soared after France's Danone agreed to buy it for about US$10 billion. Paris-based Danone agreed to buy WhiteWave for US$56.25 per share in an all-cash transaction that will double Danone’s US business, it said.

WhiteWave's brands include Silk, the most popular US soy milk, as well as So Delicious, Vega, Earthbound Farm and International Delight.

WhiteWave shares traded 18.5 percent higher at US$56.21 a share as of 1.45pm in New York. Earlier in the session the stock had climbed as high as US$56.82, exceeding the US$56.25 per share Danone has agreed to pay shareholders.

Analysts said WhiteWave may attract other suitors.

“With synergies likely at least as large for other strategics, and with debt financing cheap, we wouldn’t be surprised to see competing bids emerge,” John Baumgartner, an analyst at Wells Fargo, said in a note, Bloomberg reported.

In Europe the Stoxx 600 Index finished the session with a gain of 1.1 percent from the previous close, stemming a three-day drop. Germany’s DAX index rose 0.5 percent and France’s CAC 40 index added 0.8 percent.

The UK’s FTSE 100 index climbed 1.1 percent. Shares of Associated British Foods surged after the company upgraded its annual profit forecast because of a drop in the pound following the UK vote to leave the European Union.

“Following the result of the EU referendum, sterling has weakened further and at these rates we expect a bigger translation benefit in the final quarter with no material transactional effect,” AB Foods said in a statement. “As a result, our outlook for this financial year has improved and we no longer expect a decline in adjusted earnings per share for the group for the full year.”

AB Foods shares closed 8.9 percent higher in London. It was the stock’s biggest one-day gain in 16 years, according to Reuters.

BusinessDesk.co.nz

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