Australia''s Macquarie Bank said that one of its funds had a monthly loss of 25% and didn''t have direct exposure to the U.S. subprime market. Bear Stearns is expected to face losses in July in its Asset-Backed Securities Fund fund with about $900 million in mortgage investments. Recently, Bear Stearns shut two hedge funds.

Among companies posting earnings before the opening bell, Time Warner (TWX: chart) edged down after it reported a 5% profit rise, while Mastercard (MA: chart) gained 4% on better-than-expected results. Owens Corning (OC: chart), building products maker, reported 88% earnings jump in Q2, due to weak housing market. Kraft Foods (KFT: chart) said Q2 profit rose 4%.

Rupert Murdoch''s media conglomerate News Corp. (NWS: chart) and WSJ publisher Dow Jones (DJ: chart) attracted attention after signing a formal merger agreement of $5 billion, or $60 a share. In other corporate news Apple (AAPL: chart) added 1% in pre-open trading as Citigroup upgraded the stock to buy from hold. It kept its price target at $160.

S&P 500 futures fell 5.4 points at 1,456.50 and Nasdaq 100 futures declined 5.5 points at 1,940.25. Dow industrial futures fell 55 points.


[R]8:15AM News Corp. and Dow Jones agreed to merge for $5 billion.[/R]

Rupert Murdoch’s News Corp. (NWS: chart) and WSJ publisher Dow Jones & Co. (DJ: chart) announced early Wednesday they signed a definitive merger agreement. Murdoch added one of the great trophies of U.S. journalism to his global media empire in a deal valued at $5 billion. The Bancroft family, which have owned the newspaper for over a century, initially rejected Murdoch''s offer in early May, but then agreed to reconsider.

Bancroft family members and trustees, representing 37% of the company''''s shareholder vote, agreed to support the deal. Another 29% of the vote is held by public shareholders, who are very likely to support Murdoch. The combined percentage will be enough to guarantee passing of the deal.

The deal is expected to expand Murdoch''''s global media and entertainment empire News Corp., which owns the Fox broadcast network, Fox News Channel, the Twentieth Century Fox movie and TV studio, MySpace, newspapers in Australia and the U.K.


[R]8:00AM New York, 1:00PM London – European companies report higher earnings but credit worries in the U.S. affect the trading sentiment.[/R]

European markets fell sharply at the mi-day trading across the region. The high yield fund losses at a subsidiary controlled by Macquarie Bank in Australia and profit declines at banks in Japan contributed to worries in the region. Bear Stearns in the U.S. is limiting high yield funds withdrawal on losses. The indexes in the region traded lower at the opening and quickly fell after four hours of trading.

European markets declines were led by 2.2% loss in France and Norway, 1.7% decline in Italy and the Netherlands, Germany, 1.6% decrease in UK, and 1.2% slide in Spain. Switzerland, the lone gainer in the region, jumped 2.1%.

In London trading, Man Group dropped 3.4% on the worries that earnings in the current quarter may decline sharply in the futures and derivative related funds that it manages. Cadbury Schweppes melted 7% after the first half net income fell nearly 80% to 182 million pounds.

British Air agreed that it colluded with Virgin Air in setting higher fuel surcharges for airline tickets. The UK government agency levied $250 million fine and similar fines are expected from the U.S. agency.

The largest mortgage bank in the UK, HBOS said that its profit for the first half rose to 2.11 billion pounds from 1.76 billion pounds a year ago. Despite the five rate hikes the company has delivered higher profit on higher loans. The bank guided that profit rise in the second half will decline if rates keep rising.

Mining stocks in trading fell nearly 4%. BHP Billiton, Xstrata, and Rio Tinto fell more than 4% on the worries that the credit problems in the U.S. will affect demand for metals.

In Frankfurt trading Deutsche Bank fell 2% after reporting second quarter earnings gain of 31%. The bank net income increased to 1.78 billion euros from 1.35 billion euros from a year ago. The earnings per share increased to 3.60 euros from 2.44 euros. BMW reported second quarter earnings decline of 4.3% to 753 million euros on 11% rise in sales to 14.7 billion euros. The stock lost 5% after the news.

BASF second quarter profit jumped 11% to 1.02 billion euros from 920 million euros on 19% increase in revenue to 14.7 billion euros. The earnings per share increased to 2.08 euros from 1.82 euros. The stock fell after the news more than 2% in the general weakness in the market.

Largest retailer Metro AG reported 60% decline in earnings on 9.7% rise in sales to 15.4 billion euros. The earnings fall, without one time gain in the earlier year, would have been lower. Sales in Germany jumped 5.6% and in the rest of Europe advanced 13%. The revenue in Eastern Europe jumped 24% and 29% in Asia and Africa group.