US & World Daily Markets Financial Briefing 04-01-2011

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Stocks May Rise Ahead Of Durable Goods, Fed Minutes

Stock futures point to a modestly higher open ahead of the bell on Tuesday, with Wall Street looking to extend gains for the second consecutive session amid optimism about economic recovery.

The markets are currently awaiting numbers on durable goods orders and the minutes from the latest Fed meeting to get a read on the latest economic outlook from the nation's central bankers.

The major index futures are all in positive territory, with the Dow futures up by 31 points.

On the economic front, the Commerce Department will release its report on factory goods orders for November at 10:00 a.m. ET. Economists estimate factory good orders for the month to slip by 0.3 percent, following an unexpected 0.9 percent decline recorded in October.

At 2:00 p.m. ET, the Federal Reserve is scheduled to release the minutes of its December Federal Open Market Committee meeting. Traders will look to the report to gain a perspective of central bankers' latest economic assessment with the second round of quantitative easing underway.

From the corporate sector, individual automakers are scheduled to release their monthly U.S. sales results for December during the course of the trading session.

Bookstore chain Borders Group Inc. (BGP) announced the resignation of two senior executives in a regulatory filing Monday. Following the announcement, the company's stock dropped more than 8 percent in after-hours trading.

Oil giant BP Plc (BP) is also in focus after The Daily Mail reported that Royal Dutch Shell considered a bid for the firm amid the oil spill in the Gulf of Mexico. The move for BP seemed to be tempered by speculation over legal liability connected to the spill.

Stocks saw substantial gains to open the 2011 trading year on Monday after upbeat reports on manufacturing sector activity and construction spending. The move also came on strong volume as most market participants returned to trading, waking the markets from a two-week lull.

The Dow advanced by 93 points to 11,671, the Nasdaq jumped by 39 points to 2,692 and the S&P 500 rose by 14 points to 1,272.

In overseas trading, markets across the Asia-Pacific region ended uniformly higher on Tuesday. Japan's benchmark Nikkei 225 Index rose by 1.7 percent, while Hong Kong's Hang Seng Index moved up by 1 percent.

The major European markets are varied gains. The U.K.'s FTSE 100 Index is up by 2.2 percent, while the French CAC 40 Index and the German DAX Index are up by 0.8 percent and 0.2 percent, respectively.

In commodities trading, the price of oil is up by $0.38 to $91.93 a barrel, while the price of gold is down by $14.30 at $1,408.60 an ounce.

Among the currencies, the U.S. dollar is down at $1.3411 against the euro and is down to $1.5622 against the pound. Versus the yen, the buck has moved up to 82.12 yen.

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TSX Poised For Positive Open After Long Break

Bay Street stocks are poised for a higher open Tuesday, the first trading session of 2011, in a catch up play with the U.S. markets that posted decent gains Monday.

A host of income trust funds, which have announced conversion into a dividend paying corporations, may be in play today.

While base-metals stocks may be in play amid steady copper prices, gold stocks may be under pressure as the yellow metal plummeted below $1,400, shedding recent gains amid a mixed U.S. dollar.

U.S. stock futures were pointing to a higher open. U.S. stocks greeted the new year with a rally on Monday

On Friday, the S&P/TSX Composite Index closed flat, adding 8.81 points or 0.07% to 13,443.22. The main index had a gathered around 14% in 2010, moving up to a fresh 2-year peak.

The price of crude oil edged down as traders await cues from today's economic data from the U.S. After the markets close today, the API will release its weekly U.S. crude oil inventories data. Analysts expect the report to show 1.7 million barrels drop in crude oil inventories. Crude for February edged down $0.28 to $91.20 a barrel.

The price of gold was moving down for the first time in three sessions Tuesday morning amid a mixed U.S. dollar. Gold for February was down $28.90 to $1,394.00 an ounce.

In corporate news from Canada, Nunavut Iron Ore Acquisition Inc. on late Friday raised its hostile offer for Baffinland Iron Mines Corp. to C$1.45 per share, just hours after steel giant ArcelorMittal sweetened its offer for Baffinland to C$1.40 per share in cash.

Health and nutrition products company Atrium Innovations announced the acquisition of Ontario-based Seroyal International, which commercializes premium dietary supplement brands, for $110 million.

Construction and infrastructure development company Aecon Group Inc. said it divested its 25% interest in the Cross Israel Highway concessionaire, Derech Eretz Highways Ltd. The sale is expected to generate cash proceeds of $65 - $70 million and an after tax gain of about $30 to $35 million.

Oil and gas explorer Petrobank Energy said it has entered into a new three-year C$200 million credit agreement with a syndicate of lenders effective January 4, 2011.

Laundry and linen services provider K-Bro Linen Income Fund announced the closing of the conversion of the fund into K-Bro Linen Inc., and issued common shares of K-Bro Linen for its trust units of the fund on a one-for-one basis. K-Bro Linen Inc. common shares are expected to commence trading on the TSX on or about January 4, 2011.

Energy sector focused investment trust Enerplus Corp. said it has converted itself into a corporation on January 1, 2011 and will now continue as "Enerplus Corp.". Shares in Enerplus Corp. will begin trading on the TSX on or about January 10, 2011.

Oil and gas industry focused investment trust Pengrowth Energy said that it completed its conversion from an income trust to a corporation, with effect from December 31, 2010. Shares of Pengrowth Energy Corp. will commence trading on or about January 7, 2011.

Zargon Oil & Gas said that it completed its conversion from an income trust to a corporation and Zargon Oil & Gas Corp. will commence trading on the TSX later this week.

Conventional oil and gas firm ARC Resources Ltd. Tuesday said ARC Energy Trust has completed its conversion to a dividend paying corporation from an income trust. Holders of trust units of the Trust received one common share of ARC Resources for each unit and will receive the cash distribution of $0.10 per unit declared to be payable on January 17, 2011.

FP Newspapers Income Fund said it has converted itself from an income trust to a corporate structure and the common shares of FP Newspapers Inc. are expected to commence trading on the TSX on or about January 7.

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French Market Rises

The French market is rising in afternoon trading Tuesday, led by banks, ahead of data deluge from the U.S. Steady crude prices and firm cues from Asia helped influence sentiment.

In economic news from the country, the consumer confidence index slipped to a seasonally adjusted -36 in December from -33 in the previous month, statistical office INSEE said. The decrease marks the first fall in consumer sentiment in six months.

Meanwhile, German unemployment rose for the first time since June 2009, as a freezing winter decreased employment in the construction industry, data released by the Federal Labor Agency showed. The seasonally adjusted number of unemployed rose by 3,000 in December following a revised decline of 8,000 in November. The jobless rate remained at 7.5% for the third straight month.

UK manufacturing activity expanded strongly in December, Markit Economics said Tuesday. The Markit/Chartered Institute of Purchasing & Supply Purchasing Managers' Index for the manufacturing sector rose to 58.3 in December from 57.5 in November, marking the highest reading since 1994.

Separately, figures released by the Bank of England revealed that the number of loans secured for housing purchases in the UK rose slightly to just over 48,000 in November. In value terms, mortgages rose to 6.8 billion pounds from 6.7 billion pounds in October.

The CAC 40 index opened slightly higher at 3,908 and has been in positive territory for most of the session. The index is currently rising 0.86%.

Insurer Axa is leading the gainers by adding 3%. Banks Societe Generale, Credit Agricole, BNP Paribas and Natixis are adding between 3% and 2.1%.

Carmakers Renault and Peugeot are gaining 1.9% and 1.3%, respectively. Airbus maker EADS is rising 1.2% after low-cost airline easyJet Plc announced new orders for Airbus A320 Aircraft.

Those making notable gains include oil giant Total, grocery retailer Carrefour, utility EDF and drugmaker Sanofi-Aventis.

Steel giant ArcelorMittal is losing 1.4% and luxury goods firm LVMH is falling 1.1%. Builder Bouygues, Suez Environnement, department stores operator PPR and building materials maker Saint Gobain are declining.

Elsewhere in Europe, the UK's FTSE 100 is adding 2.32% and the German DAX is rising 0.27%.

Across Asia/Pacific, most major markets ended above the flat line. Australia's All Ordinaries gained 0.05% and China's Shanghai Composite Index surged 1.6%. Hong Kong's Hang Seng and Japan's Nikkei 225 rose 1% and 1.65%, respectively. However, India's BSE Sensex lost 0.30%.

In the U.S., futures point to a slightly higher open on Wall Street. In the previous session, the Dow advanced 0.8%, the Nasdaq jumped 1.5% and the S&P 500 rose 1.1%.

In commodities, crude for February delivery is adding $0.36 to $91.91 per barrel and gold is dropping $14.1 at $1408.8 a troy ounce.

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Indian Market Snaps 4-day Rally

Snapping a four-day rally, the Indian market ended a volatile session modestly lower on Tuesday, with banking, realty, consumer durable, public sector and auto stocks leading the declines. However, FMCG stocks rose on defensive buying, oil/gas stocks such as Reliance advanced on account of firmer oil prices and healthcare stocks  witnessed stock-specific buying activity.

With investors pausing for breath after recent strong gains, the benchmark 30-share Sensex pared its early gains to end about 60 points or 0.30% lower, while the 50-share Nifty eased 0.18%. In the broader market, declining shares narrowly outpaced gaining ones.

Banks closed mostly lower after announcing increases in deposit rates. SBI lost over 3%, ICICI Bank declined 3.5% and HDFC Bank fell 2%, while mortgage lender HDFC ended little changed.

In the high-beta realty sector, DLF, Godrej Properties, Orbit Corp, Sobha Developers, Indiabulls Real Estate and HDIL fell between 1% and 3%. However, Peninsula Land climbed 6.60% on the buzz that it will spend over Rs 2500 crore on buying land in the next 12 months.

Among metal stocks, Hindustan Zinc, Sesa Goa, Hindalco, Tata Steel and JSW Steel fell by 1%-2%, but NALCO gained 1.66% and Sterlite advanced 0.55%. SAIL added 0.35% after it reportedly hiked product prices.

In the IT sector, Wipro, which is reportedly building India's fastest super computer for Indian Research Space Organization ( ISRO), closed up 0.30% and bellwether Infosys closed up 0.44%, while TCS eased 1.36%.

Suzlon Energy rose 2.58% after the wind turbine manufacturer termed stake sale reports as speculative in nature and inaccurate. Patni Computer Systems slipped 0.28% amid reports about a delay over a deal between the company's founders and U.S. firm iGate.

In the healthcare sector, Dr Reddy's Laboratories which has recently formed a manufacturing partnership with R-Pharma to strengthen its position in Russia, gained 1.33%. Pfizer lost 0.35% after it reportedly took Dr Reddy to court in an effort to delay the latter's plan to launch the low cost version of atorvastatin. Other drugmakers such as Lupin, Cipla and Sun Pharma which have presence across major therapeutic segments ended up between 0.5% and 1.65%.

With investors taking some profits after recent gains on urea decontrol buzz, fertilizer stocks closed on a mixed note. Chambal lost a percent and Nagarjuna Fertilizers declined around 2%, while RCF edged up 0.19% and National Fertilizers advanced 2.72%

Hindustan Construction Company fell 2.57% ahead of a scheduled site visit by environment ministry officials to its proposed 25,000-acre hill station township project near Pune, later this week. GE Shipping added 1.2% on fund raising reports. Ramco Systems (up 5%) and Pratibha Industries (up 3%) closed firm on bagging new orders.

In the auto sector, carmaker Maruti Suzuki edged up 0.11% despite posting a sequential fall in its December auto sales. However, Tata Motors lost half a percent, Mahindra & Mahindra declined 0.87% and Bajaj Auto tumbled over 3%.

Aviation stocks such as Kingfisher, Jet Airways and Spice Jet ended down between 1% and 2% after state-run oil marketing firms hiked jet fuel prices by 2%. Oil explorer Reliance Industries gained 2.12% due to a recent spike in crude prices. In the FMCG sector, Hindustan Unilever closed up 2.54% and ITC added 1.78%.

Elsewhere, most Asian stocks closed higher on Tuesday, copper climbed to a record high and crude prices held steady near 27-month highs, as encouraging manufacturing data coming out of Europe and the United States boosted investor appetite for riskier assets. European stocks gained after a mixed start and the Dow futures signaled yet another positive session on Wall street following yesterday's rally.

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Dollar Fights Back Versus Aussie, Swiss Franc

The dollar was mixed Tuesday morning in New York, gaining traction against the surging Swiss franc and aussie dollar ahead of the latest news on the manufacturing sector.

Significant weakness in the final weeks of 2010 drove the greenback to a record low against the franc and a nearly three-decade low versus the resource-backed Australian dollar.

The dollar was also on defense against other majors, dropping toward a 15-year low against the yen before finding support this morning.

The dollar rebounded to CHF0.9470 from an all-time low near CHF 0.9300. The aussie dollar bought US$1.008.

Modest overnight gains took the dollar to Y82.20 versus the yen, up from a 2-month low near Y80.90. A move to Y80.22 would take the dollar back to November's 15-year low.

The dollar drifted slightly lower to $1.34 versus the euro, nearing a 3-week low set on Friday.

Eurozone annual inflation breached the European Central Bank's target for the first time in more than two years.

The harmonized consumer price index, or HICP, rose 2.2% year-on-year in December, a preliminary estimate from the European Union statistical office Eurostat showed Tuesday.

UK manufacturing activity expanded at the strongest pace in 16 years in December, reflecting production and new order growth, a closely watched survey showed Tuesday. At the same time, cost pressures continued to build up in the economy.

The Markit/Chartered Institute of Purchasing & Supply Purchasing Managers' Index for the manufacturing sector came in at 58.3 in December, up from a downwardly revised 57.5 in November.

The U.S. Commerce Department reports this morning on factory orders in November. Economists estimate factory good orders to remain unchanged, following an unexpected 0.9% decline in October.

The U.S. Federal Reserve Board will publish the minutes of its latest rate-setting meeting, and ABC News/Washington Post release the ABC consumer confidence index for the week ending January 2.

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