Futures point up on Bear offer, financial shares

By Justin Grant

NEW YORK (Reuters) - Stock futures pointed to a higher opening on Monday following news that JPMorgan Chase & Co was in talks to quintuple its offer to buy Bear Stearns Cos, while a further decline in commodity prices eased inflation concerns.

Investors warmed to prospects of a higher offer for Bear as it would avert a lengthy battle with disgruntled shareholders and allow JPMorgan to close the transaction sooner. Bear shares shot up more than 50 percent in pre-market trading.

JPMorgan's original agreement on March 16 to pay $2 per share was considered a fire-sale price for the 85-year-old Wall Street investment bank which collapsed in a liquidity crisis after suffering large losses on soured subprime mortgage debt.

JPMorgan is in talks to lift its offer for Bear to $10 per share, a person familiar with the situation told Reuters, in a deal which would value the company at more than $1 billion.

"The big story today is whether there will be a higher offer for Bear Stearns," said Peter Cardillo, chief market analyst and chief strategist at SW Bach and Co in New York.

"We had a major sell-off in commodities and as we see commodity prices remain stable from last week's close ... that could give some wiggling room for stocks."

Financial shares, meanwhile, are poised to rise between 10 percent and 20 percent in the next year as panic over the global credit crisis recedes and earnings improve, according to the March 24 edition of the financial weekly Barron's.

"The financials have been knocked down so much, there is going to be some good fundamental buying out there for some of these companies," said Stephen Carl, principal head of U.S. equity trading at The Williams Capital Group LP in New York.

"We'll see some kind of a turnaround."

In another move aimed at easing the housing crisis, the U.S. Federal Home Loan Bank system will be allowed to expand their holdings of Fannie Mae and Freddie Mac securities by more than $100 billion under a plan endorsed by their regulator on Monday.

U.S. Treasuries slipped in Asia as investors withdrew funds from the safety of government debt while many stayed on the sidelines to see the effectiveness of the Federal Reserve's efforts to free up inter-bank lending before next week's month- and quarter-end.

In earnings news, shares of upscale jeweler Tiffany & Co climbed more than 11 percent in pre-market trading after it posted an unexpectedly high quarterly profit and saw robust growth in markets outside the United States and Japan.

S&P 500 futures were up 13.30 points, above fair value, a formula to evaluate pricing taking into account interest rates, dividends and time to expiration on contract. Dow Jones industrial average futures rose 97 points, and Nasdaq 100 futures gained 17.0 points.

Last week, commodity prices fell across the board as metal and oil investors took profits after a series of record peaks this year. Investors had previously piled into gold, which emerged as a safe haven after U.S. stocks slumped due to recession fears and the global credit crunch.

The economic agenda includes February existing home sales from the National Association of Realtors at 10 a.m. EDT.

(Editing by James Dalgleish)

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