Rio Tinto (NYSE: RTP), an international mining company, rejected a buyout proposal from BHP Billiton (NYSE: BHP), the world's largest mining company on November 6. BHP has until Feb. 6 to make a formal bid or walk away for at least six months, according to a U.K. takeover panel review.

Alcoa (NYSE: AA) and Aluminum Corp of China announced a 9% stake in RTP on February 1.

RTP overall option implied volatility of 64 is above its 26-week average of 53 according to Track Data, suggesting larger movement.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

MAJOR PAPERS:

• The Wall Street Journal reported that U.S. and European antitrust regulators are expected to carefully scrutinize Microsoft Corporation's (NASDAQ: MSFT) $44.6B bid for Yahoo! Inc (NASDAQ: YHOO), which could possibly delay a completed deal for up six months.

OTHER PAPERS:

• Google Inc (NASDAQ: GOOG) is seeking to torpedo Microsoft's bid for Yahoo!, sources reported. The New York Times said Google has offered to help Yahoo! defeat the bid by creating a partnership between the two search engine giants
• Aluminum Corporation of China, Chinalco, and Alcoa Inc (NYSE: AA) have teamed up to complicate BHP Billiton Limited's (NYSE: BHP) courtship of Rio Tinto Plc (NYSE: RTP), Globe and Mail reported.

WEB SITES:

• According to sources, Tech Crunch reported that News Corporation (NYSE: NWS) may be putting together a "syndicate" in order to make a counter offer for Yahoo!.

MAJOR PAPERS:

• Australian resources firm BHP Billiton Limited (NYSE: BHP) is unlikely to up its $99.22B bid to acquire mining company Rio Tinto PLC (NYSE: RTP), according to the Wall Street Journal.
• Ten years after taking the reins at eBay Inc (NASDAQ: EBAY), CEO Meg Whitman is making plans to retire, reported the Wall Street Journal. Company president John Donahoe is the leading candidate to replace her.
• According to the Financial Times, Biogen Idec Incorporated (NASDAQ: BIIB) CEO Jim Mullen said the company could make a "large-scale acquisition" this year after it failed to sell itself.

WEB SITES:

• Finance companies including Citigroup Incorporated (NYSE: C) could sell proprietary investments in India as they struggle to shore up their capital after suffering losses in the subprime sector in the U.S., LiveMint.com reported.

Selling in Europe accelerated throughout the day. The fuel behind the drop appeared to be fear of a global slowdown and the impression that the Bush package to stimulate the economy would be too little, too late.

Watching the big markets in Europe left the impression of a simple and blind panic without a specific trigger. Investors simply wanted out, goaded by concerns that stocks have much further to fall. By the last hour of trading, the lemmings were running in force.

The German DAX was hit hardest, plunging 7.2% to 6,790. Shares in global mega-conglomerate Siemens (NYSE: SI) dropped 8.5%.

In the UK, the FTSE sold off 5.5% to 5,578. But there was real carnage among metal and mining companies. Both Rio Tinto (NYSE: RTP) and BHP Billiton (NYSE: BHP) dropped over 10%, killing over $25 billion in market cap. A recession would probably slow demand for commodities, driving the profits out of these companies. BHP has also talked about taking on tens of billions of dollars in debt to buy RTP. Such talk is not popular in times of tight credit.

The large banks in France, lead by BNP Paribas, fell through recent trading lows.

Hardly a single stock was spared.

Douglas A. McIntyre is an editor at 247wallst.com.

MAJOR PAPERS:

• According to the Wall Street Journal's "Heard on the Street," bears believe it may be too early to bargain hunt among financial stocks, as they think there may be more bad news to come after Citigroup Incorporated (NYSE: C) announced it took an $18B write down in Q4.
• Analysts who follow China's telecom sector believe there are a few prime picks, including China Unicom Limited (NYSE: CHU) and China Mobile Limited (NYSE: CHL), but are advising investors to think long term, the Wall Street Journal reported.

OTHER PAPERS:

• Iron ore talks with China's Baosteel have come to a halt after the company and its peers said price demands from miners BHP Billiton Limited (NYSE: BHP), Rio Tinto PLC (NYSE: RTP) and Companhia Vale do Rio Doce (NYSE: RIO) were "far too high," the Australian Financial Review said.

WEB SITES:

• MiningMx.com reported that BHP Billiton has reached an "impasse" with South Africa's government over the conversion of the company's exploration leases to new order mining rights.

While big metals company Rio Tinto (NYSE: RTP) is trying to prevent being taken over by larger rival BHP Billiton (NYSE: BHP), it appears that another bid may be coming from China. According to The International Herald Tribune, "China's biggest steelmaker, Baosteel Group, is considering joining with others in the industry in a bid for mining giant Rio Tinto."

Rio Tinto has been scrambling to show the markets that it is better off alone. It has discussed selling $15 billion in assets. The company has also said that the economies of scale in a BHP deal are much less than the bidding company has indicated.

All of that may be well and good, but the market has actually moved RTP shares down since it rejected the BHP Billiton offer, a sign that traders do not think long-term value is going to be enhanced by the company staying independent.

While the BHP offer is for a stock transaction, it is possible that the bid from Baosteel could have a cash component, money from the Chinese government. And that might change the view of a lot of RTP shareholders.

Douglas A. McIntyre is an editor at 247wallst.com.

MAJOR PAPERS:

• In a move to capitalize on its Hollywood franchise, JP Morgan Chase & Co (NYSE: JPM) is expected to announce plans today to invest $200M of its own money into the entertainment industry, the Wall Street Journal reported.
• The WSJ also reported that while stocks like Countrywide Financial Corporation (NYSE: CFC) may face big discounts to book value, signs of the turmoil in the credit market are beginning to appear elsewhere causing analysts to remain cautious on jumping back in to banking stocks.

OTHER PAPERS:

• With the recent news of a 3-for-1 share proposal for Rio Tinto Plc (NYSE: RTP) by BHP Billiton Limited (NYSE: BHP), rumors have been flying of another potential merger between Anglo American Plc (NASDAQ: AAUK) and Xstrata, the Guardian reported.

WEBSITES/MAGAZINES:

• Fortune has learned that Liz Claiborne Inc (NYSE: LIZ) has received at least two final round bids for nine of its apparel brands, but the outcome is in doubt as some of the potential suitors dropped out.

China Investment Corp, which manages China's foreign exchange reserves, and China steel companies Baosteel Shougang Group and Angang Steel are said to be working on a bid for Rio Tinto (NYSE: RTP), Forbes reported Monday, citing China Business, the state-owned Chinese weekly. Rio denied receiving an approach from Chinese investors, Agency France Presse reported.

Deal talk had sent Rio's shares up about 7% in Australia early Monday. However, in the U.S., there was little follow through: Rio's shares fell $2.20 to $433.85 in mid-day Monday trading.

Earlier this year Rio rejected an offer from BHP Billiton (NYSE: BBL), saying BHP's offer undervalued the company. Two subsequent requests for talks by BHP were also turned down.

Sector/Deal Analysis

Anglo American PLC ADR (NASDAQ: AAUK) shares are soaring in response to BHP Billiton (NYSE: BHP)'s bid to buy Rio Tinto (NYSE: RTP). Analysts have speculated that if BHP is successful in its attempt to become the first super-major mining company, it would draw the heat of government regulators, forcing it to sell off some of its assets to competitors like AAUK. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on AAUK.

After hitting a one-year high of $36.23 in July, the stock hit a one-year low of $23.38 in August. AAUK opened this morning at $36.93. So far today the stock has hit a low of $36.67 and a high of $38.08. As of 11:00, AAUK is trading at $37.41, up $4.89 (15.0%). The chart for AAUK looks bullish and steady, while S&P gives the stock a negative 2 STARS (out of 5) sell rating.

Mining giant BHP Billiton (NYSE: BHP)'s $110 billion offer for Rio Tinto (NYSE: RTP) has been rejected by the latter, with Rio indicating that the all-share offer was too low.

Further, talk on Wall Street Thursday tended to side with BHP making a better offer for Rio, amid chatter that Rio may seek an alternate offer from Brazilian rival, Vale.

BHP's shares fell $2.70 to $77.65 Thursday morning, while Rio's surged $94.70 to $452.20.

Analysts had projected that a BHP/Rio deal could have become the largest acquisition in history. Thursday's offer, however, was not high enough for Rio's directors apparently.

Is Rio worth more?

Alcoa (NYSE: AA) shares are rising this morning after BHP Billiton (NYSE: BHP) disclosed it had made a bid for rival miner Rio Tinto (NYSE: RTP). According to financial analysts, BHP's willingness to pay a premium for Rio and a rise in BHP's stock were bullish signals that demand for commodities was strong. This eased financial worries in the commodities sector, which in turn lifted AA. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on AA.

The stock hit a one-year high of $48.77 in July after reaching a one-year low of 27.69 last November. AA opened this morning at $39.00. So far today the stock has hit a low of $38.29 and a high of $39.35. As of 10:40, AA is trading at $38.60, up $1.20 (3.2%). The chart for AA looks bullish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

First Solar (NASDAQ: FSLR) moving up 30% on strong earnings. Rio Tinto (NYSE: RTP) up 28% on takeover bid from BHP Billiton (NYSE: BHP). Also moving up NetSol Tech (NASDAQ: NTWK) spiking 19% on earnings news.

Moving down by 13%, Sotheby's (NYSE: BID) on failure to sell Van Gogh. And Cisco Systems (NASDAQ: CSCO) falling 7% on weak guidance.

Stocks may not open the same as their pre-market indications.

Douglas A. McIntyre is an editor at 247wallst.com.

BHP Billiton (NYSE: BHP) says it has made an offer to buy rival Rio Tinto (NYSE: RTP).

Quoted by MarketWatch: "BHP Billiton now confirms that it recently wrote to the board of Rio Tinto outlining a proposal in relation to a potential combination with Rio Tinto on terms incorporating a premium, reflecting its confidence in the benefits for both sets of shareholders of such a transaction. In preparing its proposal, BHP Billiton has examined in detail the regulatory issues and other practicalities of a combination."

Word is that Rio Tinto has rejected the offer.

Douglas A. McIntyre is an editor at 247wallst.com.

BHP Billiton Ltd. (NYSE: BHP) shares are trading higher today after a Peruvian mining strike called Monday by Peru's National Federation of Mining, Metallurgy and Steel Workers failed to draw large numbers of workers. Operations at BHP's Tintaya mine in Peru were normal on Monday, according to company officials. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on BHP.

This stock has risen steadily over the past year, hitting a one-year high of $87.43 in October. BHP opened this morning at $82.33. So far today the stock has hit a low of $82.32 and a high of $83.35. As of 10:55, BHP is trading at $82.57, up $2.99 (3.8%). The chart for BHP looks bullish and steady, while S&P gives the stock a negative 2 STARS (out of 5) sell rating.

MOST NOTEWORTHY: Air France, BHP Billiton, AstraZeneca, Broadcom and Savvis were today's noteworthy downgrades:

• Goldman removed shares of Air France (NYSE: AKH) from its Conviction Buy List due to the increase in the price of fuel and the possibility of an economic slowdown.
  
• Goldman downgraded BHP Billiton (NYSE: BHP) to Neutral from Buy and removed the stock from its Pan-Europe Buy List due to valuation.
  
• Merrill Lynch downgraded shares of AstraZeneca (NYSE: AZN) to Sell from Neutral to reflect increased competition from generic-drug makers, a poor pipeline and slow earnings growth.
  
• Wachovia downgraded shares of Broadcom Corporation (NASDAQ: BRCM) to Hold from Buy to reflect valuation and the company's lower than expected Q3 results. Shares were also lowered to Hold from Buy at Deutsche Bank.
  
• Stanford lowered Savvis (NASDAQ: SVVS) to Hold from Buy and notes that the company's Q3 results and Q4 revenue guidance brings the company's 2007 revenue outlook $15M below the consensus, and advises investors to remain on the sidelines. The firm believes the company's strategy is sound, but that its execution has been slow.

OTHER DOWNGRADES:

• Blockbuster (NYSE: BBI) and Akzo Nobel (OTC: AKZOY) were downgraded to Neutral from Overweight at JP Morgan.
  
• Friedman Billings downgraded the E&P sector, including Brigham Exploration Company (NASDAQ: BEXP), Mariner Energy (NYSE: ME) and Nobel Energy (NYSE: NBL) to Market Perform from Outperform.
  
• Baird downgraded Plantronics (NYSE: PLT) to Neutral from Outperform.
  
• Goldman downgraded Boston Scientific (NYSE: BSX) to Neutral from Buy.