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Total Forms Joint Venture with Chesapeake; Manufacturing Index Jumps; Cold Snap Drives Oil Higher; Car Sales Surge in December; Kraft Advances Bid for Cadbury; New BofA CEO Optimistic for U.S. This Year, But Krugman Shows Caution; WSJ: Banned Chinese Companies Continued to Do Business With U.S. Firms
Total SA (NYSE ADR: TOT) will pay up to $2.25 billion for a 25% stake in Chesapeake Energy Corp.'s (NYSE: CHK) assets in the Barnett Shale natural gas field in North Texas, Total said yesterday (Monday). Total will pay $800 million for the stake, and up to $1.45 billion for as long as six years by funding 60% of Chesapeake's costs in the field. The Barnett Shale field is the biggest producer of natural gas in the United States and accounted for 52% of Chesapeake's third-quarter output.
The Institute for Supply Management's (ISM) manufacturing index expanded in December at the fastest pace since 2006, topping off a late-2009 global factory rebound that helped pull the world out of its economic malaise. The U.S. manufacturing factory index rose to 55.9, the highest level in three years, according to the Tempe, Ariz.-based group. Readings greater than 50 signal expansion. "Manufacturing was picking up speed as we moved into the end of 2009, and we expect growth will be picking up further." Dean Maki, chief U.S. economist at Barclays Capital Inc. (NYSE ADR: BCS) in New York told Bloomberg News.
A cold snap battering the United States from the upper Midwest to the East Coast yesterday (Monday) sent crude oil prices up by $2.15 to settle at $81.51 a barrel in New York trading, its highest close in nearly 15 months. In London, Brent crude climbed $2.19 to settle at $80.12. "Cold temperatures in the [United States], part of a global cold front, and a weak dollar are driving oil prices higher," Phil Flynn of PFGBest in Chicago told Reuters. The frigid temperatures were expected to boost U.S. heating demand to 21% above normal, with heating oil consumption in the U.S. Northeast, the largest heating oil market, up 11% above average levels. The cold snap follows the coldest U.S. December in nine years.
A recovery in late December car sales is easing fears of a repeat of the disastrous plunge in the U.S. auto market in 2009. Sales have been gaining in recent days, as auto makers stepped up incentive programs and took advantage of customers willing to buy without the aid of the government rebates that helped sales last summer. "We are seeing an increase across the board," Michelle Krebs, a senior analyst at car-buying Web site Edmunds.com told The Wall Street Journal. The December surge appears to be aided in part by General Motors Corp.'s late-month dealer incentive program to clear out thousands of leftover vehicles from Saturn and Pontiac. Carmakers are set to release December sales data today (Tuesday).
The European Commission (EC), the European Union's (EU) executive board, is expected to conditionally approveKraft Foods Inc.'s (NYSE: KFT) hostile $16 billion takeover bid for Cadbury PLC (NYSE ADR: CBY), Reuters reported, citing a source familiar with the situation. The EU is reviewing the U.S. food group's takeover plan after the maker of Oreo cookies last month offered concessions to ease competition concerns. Under EU merger regulations the EC usually carries out a 25-day review of a takeover or acquisition. The EU can launch an in-depth investigation if it feels there are competition concerns with the deal. A decision is due by tomorrow (Wednesday).
Bank of America Corp.'s (NYSE: BAC) new Chief Executive Officer Brian Moynihan says the U.S. recession's impact is fading, but Nobel prize-winning economist Paul Krugman cautioned there's still a one-in-three chance of a double-dip recession in the second half of the year, both men said in separate interviews with Bloomberg News. "We have to help lead the economic recovery," Moynihan said. "At the same time, we have to be responsible lenders." Meanwhile, Krugman called the odds of contraction returning "not a low probability event, 30% to 40% chance." Like many economists, Krugman sees U.S. growth slowing as the U.S. Federal Reserve ends its debt purchases, the Obama administration's $787 billion stimulus program winds down and companies stop replenishing depleted inventories.
Chinese companies that were banned from doing business in the United States for allegedly selling missile technology to Iran are still engaging in "brisk" trade with American companies, an analysis of shipping records by The Wall Street Journal showed. Almost 300 illegal shipments to U.S. firms has been made by state-owned China Precision Machinery Import-Export Corp. (CPMIEC), since a ban was imposed on the company and its affiliates in mid-2006. Among the U.S. companies named in the report were auto shop equipment maker American Forge & Foundry Inc. and Textron Inc. (NYSE: TXT) unit Greenlee Textron Inc. The Journal says the firms were likely unaware they were doing business with banned entities.