While you were sleeping: US refiner Valero eyes NZ Refining stake; Dow tops 9000

Friday 24th July 2009

US-listed refining company Valero Energy Corp is reported to be considering a bid for all or part of the New Zealand Refining Co, operator of the country’s only oil refinery.

Bloomberg is reporting the San Antonio-based refiner, the largest in the US, is in the market for foreign market assets, and is focused on the fact that around 36% of NZ Refining is currently for sale or reported to be.

Shell NZ announced earlier this year it wished to quit its 17% stake and is well into an expressions of interest process, while Exxon Mobil’s 19% share in the Marsden Point refinery has been unofficially on the block for months.

On world markets, stronger than expected results from US automaker Ford Motor Co., online retailer EBay and telecommunications giant AT&T pushed the Dow Jones Industrial Average above 9000 for the first time since January in trading in the US overnight.

The pattern repeated in European trading, with the FTSEeurofirst 300 – a measure of top European stocks – rising to an eight month high on optimism generated by positive earnings numbers from key banks Credit Suisse, Royal Bank of Scotland and the Spanish Banco Santander.

The CAC 40 rose 2.08% to 3373.72 and the FTSE 100 was up 1.47% to 4559.8. German stocks bucked the positive trend, with the DAX 30 benchmark index coming off 2.45% to 5247.28.

Unexpectedly strong US housing resales partly underpinned positive sentiment in major markets, although a leading economist who predicted the credit crunch issued a research note suggesting a “double-dip” world recession was possible.

Nouriel Roubini, of New York University, warned that without clear plans to unwind the recent upsurge in government borrowing for fiscal stimulus and with oil prices rising, the emerging world recovery could be blown back into recession in 2010 and 2011.

“It is getting more likely unless a clear exit strategy from the massive monetary and fiscal stimulus is outlined even before it is implemented once a more sustained global recovery is achieved,” Roubini said.

Mirroring the Dow’s moved up 2.12% to end unofficially at 9069.29, the S&P 500 rose 2.33% to 976.29, while the Nasdaq rose 2.45% to 1973.60.

“There is an increased sense of a need to participate,” said Michael Shinnick, a funds manager for Wasatch Advisors Inc, told Bloomberg. “Cash on the sidelines is coming off the sideline.”

Against the trend was Microsoft Corporation, which reported fourth quarter revenue of US$13.1 billion, 17% down on the previous quarter and well below analysts’ expectations, sparking a swift sell-off in late trading, with the software maker’s shares falling 8% on the announcement.

The world’s largest online retailer, Amazon, also disappointed with a 10% drop in quarterly profit to US$142 million per share, in part owing to major impacts on revenue from exchange rate fluctuations but also reflecting lower than forecast activity and a large legal settlement.

By contrast, online auctioneer EBay revised estimated revenues up sharply, which saw its shares gain 11% to US$21.52, while Ford – the only US carmaker not to take a federal government bail-out – reported a second quarter loss that gave markets comfort that its balance sheet woes are coming under control.

AT&T rose 2.6% to US$25.48 after beating analysts’ earnings estimats for its second quarter earnings.

Meanwhile, in bond markets, the US Treasury announced the largest ever sale of long dated bonds – a US$115 billion programme of sales in two, five and seven year regular and Treasury Inflation Protected Securities (TIPS) will occur next week. The size of the sale, which is to help fund federal borrowing to reflate the US economy, caught buyers by surprise, depressing yields.

The sale outstrips the previous record of US$104 billion, in June. Gold prices rallied further to a five year high of US$949.85 per ounce, Brend crude oil was largely unchanged at US$68.32 per barrel, while copper prices were little changed at US$2.5240 a pound for September delivery after earlier hitting a nine month high of US$2.5385 in Asian trading, reflecting expectations that China will lead global recovery.

Businesswire.co.nz

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