MarketWatch.com - Pre-Market Indications

Tuesday, August 24, 2010

Indications: U.S. stocks poised to open higher on M&A talk

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By Aude Lagorce and Nick Godt, MarketWatch

An earlier version of this story incorrectly stated the size of Campbell Soup's mulled offer for part of United Biscuits.

NEW YORK (MarketWatch) -- U.S. stock futures rose on Monday, boosted by the latest evidence of a surge in M&A activity as Hewlett-Packard Co. made a $1.6 billion counterbid for 3PAR Inc.

Futures on the Dow Jones Industrial Average rose 20 points to 10,222 and S&P 500 futures added 3.5 points to 1,073.80. Nasdaq 100 futures gained 8.25 points to 1,833.75.

Hewlett-Packard /quotes/comstock/13*!hpq/quotes/nls/hpq (HPQ 39.04, -0.81, -2.03%) is bidding $24 a share in cash for data storage specialist 3PAR /quotes/comstock/13*!par/quotes/nls/par (PAR 26.09, +8.05, +44.62%) . The bid represents a 33% premium on Dell Inc.'s /quotes/comstock/15*!dell/quotes/nls/dell (DELL 11.94, -0.13, -1.08%) offer for the company. 3PAR shares rallied nearly 40% in premarket trade.

The news came as the market prepared for what looked like an uneventful session.

Australian markets confused by elections deadlock

If there's anything markets hate, it's uncertainty and Australia's voters have delivered that by the bucket load. Dow Jones Newswires' Sam Holmes reports.

"With no major announcements due out of the U.S. and the earnings calendar looking almost empty, we could be in for a quiet session here," said David Jones, chief market strategist at IG Index.

"Overall, stock markets remain under some pressure, so it would not be surprising to see these early gains eroded, as markets struggle for any real reason to build on the short-term positive momentum," Jones said in a note to clients.

Deal activity provided one reason for modest optimism, with no major economic data scheduled for release.

Shares of Potash Corp. of Saskatchewan Inc. /quotes/comstock/13*!pot/quotes/nls/pot (POT 150.20, +0.53, +0.35%) gained 1.8% in premarket trade after its board recommended that shareholders reject the hostile bid of mining giant BHP Billiton Ltd. /quotes/comstock/13*!bhp/quotes/nls/bhp (BHP 67.13, -0.31, -0.46%) to acquire the firm for $130 a share. Potash also said it's been approached by third parties and is in talks over possible alternatives.

Signs of renewed M&A activity gathered pace over the weekend, with the Sunday Times of London reporting that SABMiller /quotes/comstock/23s!a:sab (UK:SAB 1,882, 0.00, 0.00%) /quotes/comstock/11i!sbmry (SBMRY 29.20, +0.28, +0.97%) , the world's second-largest brewer, is mulling a $10.9 billion bid for the beer operations of Foster's Group /quotes/comstock/22x!e:fgl (AU:FGL 6.00, -0.26, -4.15%) .

Campbell Soup Co. /quotes/comstock/13*!cpb/quotes/nls/cpb (CPB 36.90, +0.26, +0.71%) is reportedly considering a 1.5 billion pound ($2.3 billion) offer for part of United Biscuits.

HSBC Holdings PLC /quotes/comstock/23s!a:hsba (UK:HSBA 639.20, 0.00, 0.00%) /quotes/comstock/13*!hbc/quotes/nls/hbc (HBC 49.44, +0.14, +0.28%) announced it's in talks to buy up to 70% of South Africa's Nedbank Group (ZA:NED 13,110, -90.00, -0.68%) . Read more about Nedbank talks.

U.S. stocks fell Friday, with the Dow Jones Industrial Average /quotes/comstock/10w!i:dji/delayed (DJIA 10,174, -39.21, -0.38%) posting losses for a second week, after a slew of disappointing economic data fueled fears that the economic recovery is losing steam.

"The markets are still extremely nervous about the prospects for the U.S. economy and if anything the downturn in U.S. indicators in the past two months or so has been the key driver of global markets over that period," said Philip Shaw, chief economist for Investec Securities in London. Tuesday's home sales data would be key, he said.

On the corporate front, Bank of America Corp. /quotes/comstock/13*!bac/quotes/nls/bac (BAC 12.87, 0.00, 0.00%) will be in focus after Fitch Ratings raised late Friday its preferred stock rating to an investment grade of BBB- from BB-.

Sanderson Farms Inc. /quotes/comstock/15*!safm/quotes/nls/safm (SAFM 45.80, +2.64, +6.12%) reported declines in quarterly profit and revenue, as lower prices for poultry products hurt its bottom line.

Europeans stocks rose on the back of deal talk, with the Stoxx Europe 600 index /quotes/comstock/22c!sxxp (ST:SXXP 253.76, +1.61, +0.64%) up 0.6% in intraday trading. Investors shrugged off data showing that the euro-zone economic recovery slowed in August.

Australia's benchmark stock index closed marginally lower, as traders digested the implications of weekend elections that failed to produce a clear winner. Other Asian markets finished broadly in the red.

The euro /quotes/comstock/21o!x:seurusd (EURUSD 1.2635, -0.0011, -0.0870%) was stable at $1.2703 against the U.S. dollar after selling off sharply on Friday when German central bank chief Axel Weber said the European Central Bank would pursue relaxed monetary policies into 2011.

The dollar index /quotes/comstock/11j!i:dxy0 (DXY 83.37, +0.24, +0.29%) , which tracks the performance of the greenback against a basket of other major currencies, fell 0.1% to 82.97.

Oil futures gained 43 cents to $74.25 a barrel in electronic trading on Globex.

Aude Lagorce is a senior correspondent for MarketWatch in London. Nick Godt is MarketWatch's markets editor, based in New York.

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