M&A

3 November, 2009

US STOCKS-Wall St to open lower as banks offset Berkshire deal

* Berkshire Hathaway to acquire Burlington Northern

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

* Two-day FOMC meeting to start

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

(Updates prices, adds company and economic news)

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 Burlington Northern failed to offset 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 $26 billion for Burlington Northern Santa Fe Corp (BNI.N). Buffett said thatrailroads are key for U.S. growth and will blossom as the country grows. For details see [ID:nN03483590].

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 and CSX Corp (CSX.N) was up 8.5 percent at $46.50. The iShares Dow Jones Transportation Average ETF (IYT.P) climbed 4.6 percent to $67.24.

But the broader market was hit after Swiss lender UBS AG (UBSN.VX)(UBS.N) posted its fourth consecutive quarterly loss and Britain's 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]

Financials have been a key in the market's recovery, so any developments in the sector are seen weighing on sentiment as investors look for signs the seven-month run-up still has momentum.

"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 traded lower. The Select Sector SPDR Financial ETF (XLF.P) was down 1.1 percent at $14.02.

S&P 500 futures SPc1 fell 7.5 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.

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

Australia's central bank raised interest rates for a second straight month as it withdrew stimulus from an improving economy, but it was careful not to fuel expectations for another hike in December. [ID:nSYD339317]

Raising rates "suggests things are picking up (in the economy), but if it becomes a repeat performance, it is going to be an added stress to financing," said Andre Bakhos, president of Princeton Financial Group in North Brunswick, New Jersey.

The U.S. Commerce Department is to release September factory orders at 10 a.m. EST (1500 GMT). Economists expect orders to rise 0.8 percent, compared with a 0.8 percent fall in the prior month, according to a Reuters poll.

Morgan Stanley downgraded the U.S. semiconductor sector to "cautious" from "attractive," saying fundamentals were peaking. It also cut Intel Corp (INTC.O) to "equal-weight" from "overweight," and the Dow component's shares slipped 1.7 percent to $18.69.

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

Source: http://www.reuters.com