[R]4:15PM Merger in steel, metals mining and healthcare dominated Monday news.[/R]

-Dow closed up 56.19 points, Nasdaq gained 12.21 and S&P 500 rose 6.06.
-Yield on 10-year bonds closed at 5.24% and 30-year bond closed at 5.266%.
-Crude oil price gained 93 cents to close at $71.80 per barrel.
-Gold fell 30 cents to close at $587.70 per ounce.

-Asian markets diverged at closing led by a gain of 1% in Taiwan and Singapore and led by a decline of 3.6% in India and 1% in Philippines.
-European markets closed lower across the region led by a decline of 0.5% in the Netherlands and 0.3% decline in France and Germany.
- South Africa lost 1% but Russia gained 0.3%.
-Latin American markets closed lower except Argentina advancing 1.8%.

Merger news dominated trading sentiment. Arcelor board unanimously recommended $34 billion offer from Mittal Steel. Phelps Dodge is involved in a three way merger with Inco and Falconbridge for $40 billion and Johnson & Johnson agreed to pay $16.6 billion for consumer health products division of Pfizer.

Trading averages rose in the early morning but lost momentum in the early afternoon. However at close averages rebounded near its best level of the day. For every three stocks advancing, two stocks declined on 1.7 billion share volume on the New York Stock Exchange. On Nasdaq trading, ten stocks advanced for every six stock declining on trading volume of 1.3 billion shares.

Commerce Department reported that May new home sales rose to 1.234 million from 1.118 million in April, a gain of 4.6%. Home builders stocks advanced on the news. Lennar (LEN: chart) reported earnings gain but lowered earnings guidance for the fiscal year.

Apparel retailer chain Chico’s (CHS: chart) lost 72 cents at close or 2.6% to $26.87. Nordstrom (JWN: chart) lost 48 cents or 1.3% at close.

Merger related stocks were in the limelight. Phelps Dodge (PD: chart) dropped 8% but Inco Inc. (N: chart) rose 10% and Falconbridge (FAL: chart) gained 5%. In Paris trading Arcelor, steel giant, gained 8% and in New York trading Mittal Steel (MT: chart) lost 2.4%.

[R]12:30PM European markets closed down on oil stocks.[/R]
European markets closed in the negative as weaker oil and gas stocks erased gains from merger-and-acquisition activity. Oil majors like BP and Royal Dutch Shell posted declines as crude oil futures traded lower. Auto stocks also posted losses as the euro showed strength against the dollar. Mining stocks like BHP Billiton and Rio Tinto provided some boost to the market sentiment after Phelps Dodge agreed to buy Canadian miners Inco and Falconbridge for $40 billion. The German DAX 30 dropped 0.3%, the French CAC 40 lost 0.3%, and London FTSE 100 declined 0.2%.

Oil prices declined, despite threats from Iran’s oil minister to disrupt world’s supply. Light crude July delivery fell 19 cents to $70.68 a barrel. London Brent dropped 16 cents to $69.77. The dollar lost ground versus most major currencies. The euro traded at $1.2547, up from $1.2515. The dollar bought 116.35 yen, down from 116.49. The British pound stood at $1.8178, down from $1.8188. European gold prices moved higher. In London the precious metal traded at $579.20, up from $578.40 per ounce. In Zurich gold traded at $578.70, up from $578.05. Silver closed at $10.10, down from $10.25.


[R]11:30AM Housing stocks advanced on new home sales data.[/R]
Stocks continued to trade in the positive, lifted by several multibillion-dollar merger deals. An unexpected rise in May new home sales gave a boost to the housing sector, with the Philadelphia Housing Sector Index up 1.9%. The Commerce Department reported that new home sales rose 4.6% to a seasonally adjusted annual rate of 1.234 million units in May from a downwardly revised rate of 1.180 million units in April. Economists had expected sales to fall to an annual rate of 1.145 million units compared to the 1.198 million unit rate originally reported for April.

Among housing stocks, Lennar (LEN: chart) posted a gain of 3.4%, even though the home builder lowered its full year earnings guidance due to a slowdown in new orders. Some mining stocks made strong performance on news of a three-way combination of Phelps Dodge (PD: chart), Inco (N: chart), and Falconbridge (FAL: chart) to create one of the world''s largest mining companies. The total value of the acquisition of the combined Inco and Falconbridge is about $40 billion. Inco surged 12.9%, Falconbridge rose 6%, while Phelps Dodge dropped 7%. Some strength was visible in the telecommunications, semiconductor, and retail sectors. Retailers Lowe''s (LOW: chart), Dillard''s (DDS: chart), and J.C. Penney (JCP: chart) posted notable gains. At the same time, airline stocks showed weakness in morning trading, with the Amex Airline Index falling down 1.5%. A decrease by the price of oil contributed to weakness in the energy sector.


[R]10:30AM Indian Sensex falls sharply in the last hour of trade.[/R]
The Sensex in India finished lower 370.87 points, or 3.5% to end at 10,042.06. The turnover on BSE was Rs 3,020 crore, down from Friday’s Rs 3,356 crore. The market-breadth was quite weak as 2,021 stocks declined and 390 advanced, while 40 shares remained unchanged. Market lost 5% last week after falling 22% since May 10th of this year. Despite trading higher at the market opening, steel shares slumped sharply after Mittal Steel on Sunday succeded in taking over European steelmaker, Arcelor. Steel stocks had run up ahead of the news. Tata Steel lost 7.5% to Rs 492 and SAIL declined 7% to Rs 75.95. The acquisition is expected to spark further consolidation in the sector globally, and better prices for producers.

Auto shares dipped on selling pressure. Car maker Maruti Udyog plunged 6% to Rs 728, Tata Motors lost 5.3% to Rs 734, Hero Honda plunged 5% to Rs 726, and Bajaj Auto slipped 4% to Rs 2,596. IT shares were subject to profit-taking. Satyam Computer shed 5% to Rs 670.50, TCS lost 4% to Rs 1,631, Infosys dived 3.4% to Rs 2,886 and Wipro lost 1.7% to Rs 467. Reliance Industries shed 2.7% to Rs 979, down from a session’s high of Rs 1,023.75, before its annual meeting of shareholders on Tuesday. A total of 3.2 million trading volume. Housing finance large-cap, HDFC, shed nearly 6% to Rs 1,038 on a higher than normal volume. Ambika Cotton Mills reported third quarter profit rose 62% on 30% higher sales. The company has expanded spindle capacity to 14,000 spindles and will add another 10,000 spindles by the end of third quarter 2006.

Cement shares declined as well. Grasim slumped 6% to Rs 1,750, ACC shed 4.8% to Rs 744, UltraTech Cement lost 2.1% to Rs 685 and Gujarat Ambuja Cements was off nearly 2% to Rs 94. Among the few gainers was Tata Coffee advancing 1.1% to Rs 329.25. But the stock pulled sharply back from a higher level in a weak market. Tata Coffee announced during the weekend, it had agreed to buy US-based Eight O''Clock Coffee Company for $220 million from private equity firm Gryphon Investors.


[R]9:45AM Stocks opened in the negative.[/R]
Stock markets advanced at opening. The positive market sentiment was generated by mergers-and-acquisition activity, which helped offset nervousness ahead of Fed Reserve meeting on Thursday. Gains by metal stocks contributed to the initial upward move, with shares of Inco (N: chart) and Falconbridge (FAL: chart) moving higher on the heels of news that Phelps Dodge (PD: chart)agreed to buy both companies in a three-way merger valued at $56 billion. The deal follows Anadarko Petroleum''s move on Friday to buy two oil producers for $21.1 billion in cash. Dow component Pfizer (PFE: chart) moved higher by 1.7% after the company agreed to sell its consumer healthcare business to Johnson & Johnson (JNJ: chart) for $16.6 billion in cash.

Mittal Steel and Arcelor ended a five-month takeover battle after Mittal agreed to pay $34 billion to combine the world''s top two steelmakers. The merge saga may not be over yet, as Severstal is likely to revise its bid for Arcelor. In the opening minutes, the Dow Jones industrials were up 9.21 points at 10,998.30, the Nasdaq Composite climbed 4.99 points at 2,126.46, and the S&P 500 gained .38 of a point at 1,244.88. Bonds were little changed after last week''s record-setting selloff, with the yield on the 10-year Treasury note steady at a four-year high of 5.23% from late Friday.