03/09/10 - 01:30
UK Research Team, IG Group
Wall Street fluctuated between gains and losses as mixed economic data gave little impetus for equities to move in either direction this afternoon. Investors may remain on the sidelines ahead of the US employment data due for release tomorrow.
There was a series of economic data released in the US this afternoon that gave plenty of information for investors to digest. On the positive side, initial jobless claims fell over the last week by 6,000 to 472,000. This was less than economists had forecasted and resulted in the four-week moving average decreasing to 485,000 claims from 488,000 the prior week. The housing sector also received a much needed boost after the number of contracts taken out to purchase an existing home (also called pending home sales) unexpectedly rose in July. The median forecast from economists surveyed by Bloomberg pointed to a 1% reduction in pending home sales, when in fact sales rose by 5.2%.
The positive data was somewhat overshadowed by a less-than-expected rise in factory orders in July and a rise in unit labour costs. Productivity in the non-farm sector also declined by 1.8% stoking concerns over the health of the US employment sector ahead of tomorrow's non-farm payroll data.
Investors also mulled over ECB President Jean-Claude Trichet's comments following the central bank's latest interest-rate decision. Rates were kept on hold at 1%, while Mr Trichet confirmed that the ECB liquidity lines for banks will be kept open until January 2011. Mr Trichet also raised the growth forecast for the region to between 1.4% and 1.8% this year, up from the 0.7% to 1.3% forecasted in June. Despite the upgrade, Mr Trichet did assert that the recovery would still continue at a moderate pace with uncertainty still prevailing.
The words were reassuring enough for investors with European and US equity markets trading above their previous close at 4pm (London time). The Dow Jones Industrial average had gained 21.19 points (+0.21%) to 10290.66, the S&P 500 rose 6.15 points (+0.57%) to 1086.44 and the Nasdaq 100 advanced 13.16 points (+0.72%) to 1833.21.
Burger King today agreed to a $4 billion takeover offer from investment firm 3G Capital. The deal prices the hamburger chain at $24 a share, or a 46% premium before talks of a possible takeover surfaced two days ago. Burger King's performance has been struggling the past few years as the recession has hit their target market the hardest. 3G will be hoping to turn the restaurant chain around so that it can keep up with rival McDonald's, which has continued to innovate its menu offering to appeal to more customers.
HP is refusing to give up on 3PAR, upping its bid once again for the data-storage provider. The latest bid from HP values 3PAR at $33 a share, up from the $32 a share that Dell was offering. Shares in 3PAR rose 4.74% to $33.60 on the open, more than HP's offer, suggesting that investors were expecting Dell to make yet another higher offer. However, hours into the trading session Dell confirmed that it would not be making any further offers, sending 3PAR's share price to $32.79. Prior to Dell's first approach on 16 August, 3PAR was trading around $9.60 a share. In just over two weeks the stock has jumped around 333.33%.
Sterling was one of the worst performing currencies today, dropping 0.32% against the US dollar, 0.51% against the euro and 0.32% against the Aussie dollar. Sterling came under pressure this morning after UK house prices fell for another month and the PMI for construction fell by more than expected. EUR/USD was 0.15% higher at $1.2820 following Mr Trichet's remarks this afternoon.
Equity markets may see limited gains ahead of tomorrow's non-farm payroll data. Consensus estimates are pointing to a 100,000 decline in jobs following the completion of the US census data collection. Economists are expecting the private sector to have added 42,000 jobs in August.
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