The modest decrease in energy prices was partly offset by an increase in housing costs, which rose 0.4 percent in November after coming in unchanged in the previous month. Medical care and recreation costs also showed modest increases. At the same time, the report showed that transportation prices fell 0.9 percent in November after showing even more significant declines in the two previous months. Apparel, food, and education and communications prices also fell. The Labor Department added that its core consumer price index, which excludes food and energy prices, also came in unchanged in November following a 0.1 percent increase in October. The core index had also been expected to increase by 0.2 percent.


8:00AM Japan Tobacco to buy Britain’s Gallaher for $19 billion.
Japan Tobacco Inc. is considering acquisition Britain''s Gallaher Group PLC in a deal worth 2.25 trillion yen ($19.1 billion). The world''s third-largest tobacco company, which announced its plans on Friday, will finance the takeover of Gallaher with its own capital and a Merrill Lynch loan.

If the transaction completes, this will be the largest-ever corporate acquisition by a Japanese company. The takeover bid exceeds Softbank Corp.''s buyout of Vodafone Group PLC''s Japanese mobile-phone operations for $15.6 billion.

The move comes as Japan Tobacco, maker of Mild Seven brand cigarettes and overseas distributor for U.S. brands Winston, Camel and Salem, tries to bolster earnings by expanding outside of Japan. The purchase would also boost Japan Tobacco''s share of the European tobacco market to 23% from 10%. JT''s global market share would increase by 3.1% to about 11%.The combined company would have annual global production of 600 billion cigarettes.

Japan Tobacco shares rose 3.1% to close at 597,000 yen ($5,068) in Tokyo Friday, while shares in Gallaher bslipped 0.5% Friday to 1,149.5 pence.


7:30AM Asian stocks advanced on Friday supported by a strong finish in Japan.
Asian markets closed higher on Friday. Japanese Nikkei 225 Stock Index gained 0.5% to close at 16,914.31. The tankan sentiment index for large manufacturers advanced to 25, up one point from the September figures and matching expectations. Shares of Japan Tobacco advanced 3.1% after saying it has agreed in principle to buy British cigarette maker Gallaher Group in a deal standing at $14.8 billion.

The Hang Seng Index in Hong Kong advanced 1% to 19,110.65. IPO led the gainers. Neo Neon advanced 30% and China Communication Construction surged 38%. Mainland China oil producers gained as oil prices advanced after the OPEC announced it plans to reduce production. PetroChina added 1% and Sinopec gained 2%.

The Korea Composite Stock Price Index, or Kospi, in South Korea, moved 0.25% higher to 1,421.87. Kookmin Bank, the largest lender by assets in South Korea, gained 2% on foreign buying. Posco advanced 2.1% after reaching a new high during the session on expectations of higher dividends and positive earnings for next year.

Other markets around the region also gained with Australia S&P/ASX 200 rising 0.1% to 5,557.00. Singapore Straits Times Index rose 0.5% to 2,931.29 and Taiwan Weighted Price Index gained 0.8% to 7,538.82.


6:30AM European stocks advanced on Friday in quiet trading with M&A bids.
European markets gained on Friday. The FTSE 100 started the day 0.3% higher at 6,246, while the German Xetra Dax added 0.4% at 6,577.18 and the French CAC 40 advanced 0.5% to 5,534.64.

Corporate news

Japan Tobacco, the third-largest cigarette maker in the world, agreed to buy Gallaher in the biggest overseas takeover of the nation.

Advancers

Altadis SA led advancers as tobacco companies after Japan Tobacco Inc. agreed to buy Gallaher Group Plc for 7.5 billion pounds ($14.7 billion). Altadis, the largest tobacco company in Spain, added 1.1%. Citigroup Inc. upped a recommendation on the shares to `buy'' from hold, announcing the company is a possible target as takeovers in the industry continue.

Swedish Match AB, the second-largest producer of smokeless tobacco products in the world, advanced 0.8%.

France Telecom rose 1.9% after it reiterated its financial targets for 2006. Altana firmed 0.9% after Deutsche Bank upgraded the chemicals company to buy from hold and lifted its price target.