...Federal Reserve won't raise interest rates beyond
the quarter percentage .../
U.S. Stocks in Europe: Banks, Computers Gain on Rate Rise Hope
By Susan Marshall
London, Aug. 23 (Bloomberg) -- U.S. stocks rose in Europe on
optimism the Federal Reserve won't raise interest rates beyond
the quarter percentage point expected at tomorrow's policy
meeting. Banks and computer-related stocks, including Citigroup
Inc. and International Business Machines Corp., led the gains.
``It's becoming clear that it was wrong to fear a series of
U.S. rate rises this year,' said Patrick Legrand, who helps
manage about $300 million at International Capital Gestion in
Paris. ``That's good for stocks.'
September futures on the S&P 500 Index climbed 4.6 points to
1344.8. That's 0.3 percent above ``fair value,' taking into
account dividends, cost of money and number of days till
expiration. September futures on the Dow Jones Industrial Average
gained 23 to 11,175 and Nasdaq 100 futures added 5.5 to 2335.0.
The Federal Reserve meets tomorrow to decide on the
direction of interest rates in the world's largest economy. A
Bloomberg News survey of banks and securities firms that trade
directly with the Fed shows 29 out of 30 expect a quarter-point
increase in the target rate for overnight loans between banks to
5.25 percent.
Computer-related stocks led the rally as a series of
interest-rate increases would make investors less willing to bet
on the future earnings of companies, such as those in the
technology and telecommunications industries, that demand a
premium because of their growth prospects.
Vigor
IBM, the world's biggest computer maker, rose 1/2 to 122
3/8, according to Madoff Securities International Ltd. Oracle
Corp., the world's largest database software maker, rose 1/8 to
37 1/8 and AT&T Corp., the largest U.S. long-distance phone
company, rose 5/16 to 47 1/8.
``If we get a 25 basis point hike and the Fed maintains its
neutral stance, we should see a little more vigorous rally in
growth stocks,' said Barry Hyman, a senior market analyst at
Ehrenkrantz King Nussbaum.
Hyman expects the Standard & Poor's 500 Index and Nasdaq
Composite Index to outperform the Dow Jones Industrial Average
because they are both heavily weighted with technology-related
stocks, whose high price-earnings multiples make them ``growth'
stocks.
Banks are also sensitive to higher rates because they deter
borrowing and also reduce the value of large bond portfolios
banks typically hold. Today, the yield on the benchmark 30-year
bond was unchanged at 5.99 percent, matching a four-week low
reached Wednesday.
Citigroup, the world's largest financial-services firm, rose
7/16 to 46 3/4, according to Madoff. J.P. Morgan & Co., the No. 4
U.S. bank, gained 1/2 to 133 5/16.
Copper Combo
Cyprus Amax Minerals Co. climbed 2.9 euros to 16.4 and
Asarco Inc. rose 3.1 euros to 20.6 in German trading after Phelps
Dodge Corp. raised its offer for the rival copper producers to
$2.66 billion in stock. That was after the companies rejected a
lower bid and refused to enter negotiations.
Phelps, now the world's No. 4 copper producer, would become
the biggest if Cyprus and Asarco accept the offer, which values
their shares at about 30 percent more than their closing prices
on Thursday. Cyprus, which agreed last month to a $2.2 billion
merger with Asarco that would form the No. 2 producer, said it
will consider Phelps's bid. Phelps rose 1.5 euros to 56.
Among other gainers, Oracle rose after Chief Executive Larry
Ellison said the company is on track to meet fiscal first-quarter
earnings estimates, just days after its shares fell on profit
concerns. Oracle's first quarter ends Aug. 31.
Walt Disney Co. gained 0.85 euros to 28.35. Disney's
Internet arm, The Buena Vista Internet Group, agreed to buy 60
percent of Soccernet from the U.K.'s Daily Mail & General Trust
Plc to boost coverage of soccer, the world's most popular sport,
on its ESPN sports web sites.
Soccernet, which is the world's most visited soccer web site
with more than 20 million page views per month, will be
redesigned by Buena Vista and will become the base for the
international expansion of ESPN.com, the world's most visited
sports site. The value of the transaction wasn't disclosed.
Among decliners, Red Hat Inc. slid 2 euros to 65.5. Shares
in the software maker, which is betting it can popularize the
free Linux computer-operating system that competes with Microsoft
Corp.'s Windows, could tumble in the next few months as the
novelty of the first publicly traded Linux company wears off,
analysts said.
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