M&A

3 November, 2009

US STOCKS-Futures off as Europe banks offset Burlington deal

* Berkshire Hathaway to acquire Burlington Northern

* Two-day FOMC meeting to start

* UBS posts qtrly loss; RBS, Lloyds, agree to shake-up

* For up-to-the-minute market news, click [STXNEWS/US]

(Recasts, adds quote, byline, updates prices)

By Rodrigo Campos

NEW YORK, Nov 3 (Reuters) - U.S. stock index futures fell on Tuesday as the deal by Warren Buffett's Berkshire Hathaway to buy railroad company Burlington Northern was offset by poor results from Swiss lender UBS and a shake-up at two big British banks.

In its largest-ever acquisition, Berkshire Hathaway Inc (BRKa.N) will pay $100 for each share of Burlington Northern Santa Fe Corp (BNI.N). For details see [ID:nN03483590] and [ID:nN03486190].

In premarket trade, Burlington shares surged 29 percent to $98.04. Among its peers, Union Pacific Corp (UNP.N) gained 8.1 percent to $59.50, CSX Corp (CSX.N) was up 8.5 percent at $46.50, and the iShares Dow Jones Transportation Average ETF (IYT.P) climbed 5 percent to $67.50.

Higher-than-expected accounting charges pushed UBS AG (UBSN.VX)(UBS.N) into its fourth consecutive quarterly loss, while Britain's two largest retail lenders, Royal Bank of Scotland Plc (RBS.L) and Lloyds Banking Group Plc (LLOY.L), agreed to sell hundreds of branches and key businesses to appease European Union concerns over state aid and competition. [ID:nL2713325] and [ID:nL3638494]

"The European bank news is going to affect us to a large degree. That negative news has the dollar getting stronger, and that's going to mean a weaker market," said Tom Schrader, managing director of U.S. equity trading at Stifel Nicolaus capital Markets in Baltimore.

"Right now we're getting a little bit of help from Berkshire. M&A activity is always a good sign. But today, it's not going to be enough to overshadow the negative news coming out from the banking sector."

Shares of top U.S. banks Citigroup Inc (C.N), Bank of America Corp (BAC.N), JPMorgan Chase & Co (JPM.N) and Wells Fargo & Co (WFC.N) all fell more than 1 percent.

The Federal Open Market Committee begins a two-day meeting on interest rate policy and is expected to keep interest rates close to zero.

S&P 500 futures SPc1 fell 7.1 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures DJc1 dropped 64 points, and Nasdaq 100 futures NDc1 fell 8 points.

(Additional reporting by Ryan Vlastelica; editing by Jeffrey Benkoe)

Source: http://www.reuters.com