While you were sleeping: Buffett buys railroad, US factory orders rise, UBS loss

Wednesday 4th November 2009

Berkshire Hathaway Inc., the investment company led by billionaire Warren Buffett, agreed to buy railroad company Burlington Northern Santa Fe Corp. for $26 billion in a deal he says is a bet on US economic growth.

Buffett will pay US$100 per share cash for the 77.4 % of Burlington he doesn’t already own. Shares of the railroad soared 28% to US$97.64 on the announcement. Berkshire will have spent US$44 billion all up for the company.

Berkshire’s shares rose 1.6% to US$100,276.00.

New orders at US factories rose a greater-than-expected 0.9% in September as companies worked down their inventories, according to the Commerce Department. The figures helped stoke optimism that factory output will help underpin economic recovery in the US.

Inventories dropped for a 13th straight month, with a 1% decline in factory stockpiles in the latest month.

Shares on Wall Street slipped after Switzerland’s UBS AG posted a bigger-than-expected loss, weighing on financials, and Morgan Stanley downgraded its rating on Intel Corp.

The Dow Jones Industrial Average fell 0.2% to 9769.56 and the Standard & Poor’s 500 declined 0.2% to 1044.86. The Nasdaq Composite edged 0.06% lower to 2050.42.

Citigroup fell 0.3% to US$3.99, Bank of America gained 0.6% to US$14.74 and Bank of New York Mellon fell 2.3% to US$26.63.

Intel declined 2.8% to US$18.48 after Morgan Stanley lowered its rating on the stock to ‘cautious.’

Black & Decker Corp., the power tool company, soared 24% to US$58.74 after agreeing to be acquired by tool maker Stanley Works for US$3.46 billion in stock. The new company is to be called Stanley Black & Decker and expects to squeeze out annual cost savings of US$350 million.

Stocks fell in Europe after UBS posted a net loss of 564 million francs, about a third worse than expected, sending the shares down 5.8%.

Royal Bank of Scotland tumbled 7% after announcing its second bailout from the UK Treasury, which will inject 25.5 billion pounds into the lender, lifting the government’s stake to 84.4%.

RBS will sell its insurance unit and some branches and put 282 billion pounds of loans and securities into the government’s Asset Protection Scheme.

Lloyds Banking Group rose 2.7% after the lender announced it would raise 21 million pounds in the UK’s biggest rights offer, avoiding having to cede control to the government.

Allied Irish Banks sank 14% and Bank of Ireland slumped 12% after the Lloyds announcement, which may tighten avenues to capital for other lenders.

The banking industry “remains fragile” with further losses predicted for next year, according to the European Commission.

The Dow Jones Stoxx 600 Index fell 1.2% to 254.11. Among national benchmarks, the UK’s FTSE 100 fell 1.3% to 5037.21, France’s CAC 40 declined 1.5% to 3584.25 and Germany’s DAX 30 dropped 1.4% to 5353.35.

Swiss Reinsurance gained 6.4% after the world’s second-largest reinsurer unexpectedly reported a profit for the thirds quarter, reflecting gains in investments.

The dollar rose to the highest in a month against the euro as sinking European bank stocks stoked concern the financial sector has further to travel to recover.

The dollar rose to US$1.4719 per euro from US$1.4775 yesterday. The yen rose to 132.92 per euro from 133.32. The greenback traded at 90.32 yen from 90.21.

The Dollar Index, which measures the greenback against a basket of six currencies, edged up 0.2% to 76.38.

Crude oil climbed more than US$1 a barrel after India’s central bank increased its holdings of gold, underpinning demand for commodities.

Crude oil for December delivery rose 1.3% to US$79.18 a barrel on the New York Mercantile Exchange.

Gold futures for December delivery rose to a record $1,085.30 an ounce in New York after the Reserve Bank of India bought 200 tonnes of gold from the International Monetary Fund.

Copper fell to a two-week low after a gain in stockpiles monitored by the London Metal stoked concern demand for the metal is waning.

Copper for delivery in three months fell 1% to US$6,490 a tone on the LME.

Businesswire.co.nz

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