US & World Daily Markets Financial Briefing 05-11-2010

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Stocks Little Changed In Mid-Morning Trading

Stocks are showing a lack of direction in mid-morning trading on Friday, even in the wake of a jobs report that showed an increase in October payrolls that doubled expectations. Yesterday's run-up in stocks lifted the major averages to their best levels since 2008, leading some market participants to believe that today's upbeat jobs number is already be priced into stocks.

The major averages have all seen choppy movement in recent dealing, remaining near the flat line. The Dow is currently up 5.26 points or 0.1 percent at 11,440.10, the Nasdaq is up 1.25 points or 0.1 percent at 2,578.59 and the S&P 500 is up 4.56 points or 0.4 percent at 1,225.62.

Earlier this morning, the Labor Department reported that October payrolls rose by 151,000, well above the 60,000 increase forecast by economists. The unemployment rate remained at 9.6 percent for the third month in a row, in-line with expectations.

"October's U.S. payrolls report is stronger than expected and, at the margin, reduces the risk we will actually see the unemployment rate edge higher over the coming months," said Paul Ashworth, Senior U.S. Economist at Capital Economics.

"Nevertheless, there is still little prospect of any meaningful decline in that unemployment rate, which remains perilously close to 10 percent," he added.

In the early afternoon, the markets will be presented with data on pending home sales for September from the National Association of Realtors. Economists expect the pending home sales index to rise by 2.5 percent after registering an unexpected 4.3 percent increase in August.

At 3:00 p.m. ET, the Federal Reserve will release its report on consumer credit for September. Economists project consumer credit to contract by $3.5 billion for the month.

As earnings season continues to wind down, Beazer Homes Inc. (BZH) posted a loss of $0.81 per share for the fourth quarter. Quarterly revenues fell to $274.77 million from $365.59 million in the previous year but topped forecasts for $255.29 million for the quarter.

After the market closed for trading on Thursday, Dow component Kraft Foods Inc. (KFT) said that its third quarter profit fell 8.5 percent from last year but still edged out estimates, while revenues jumped by 26 percent but missed forecasts.

Coffee retailer Starbucks Corp. (SBUX) reported a fourth-quarter profit that surged from a year ago, helped by strong growth in comparable store sales. Both earnings and revenues for the quarter came in ahead of Street estimates.

Sector News

Banking stocks are extending their rally for the third straight day, lifting the KBW Bank Index up by 4.1 percent to its best intraday level in three months.

Significant strength is also visible among housing and commercial real estate stocks. The Philadelphia Housing Sector Index and the Morgan Stanley REIT Index are up by 3 percent and 1.5 percent, respectively.

The housing index has jumped to a three-month intraday high, while the real estate index has risen to its highest intraday level in two years.

Meanwhile, weakness among tobacco, wireless and software stocks is offsetting some of the aforementioned upside. The NYSE Arca Tobacco Index is down by 1 percent, pulling back off of the all-time high reached at the close of Thursday's session.

Stocks Driven By Analyst Comments

Coeur d'Alene Mines (CDE) is trading higher after being upgraded at RBC Capital Markets from Underperform to Sector Perform. The broker also raised its price target on the stock from $22 to $27. The stock is up by 5.7 percent, setting a fresh eleven-month intraday high.

MetroPCS (PCS) is also on the upside after analysts at Oppenheimer boosted their rating on the stock from Perform to Outperform. Shares are currently up by 4.5 percent, rising to their best intraday level since August of 2009.

On the other hand, RF Micro Device (RFMD) is trading lower after Davenport dropped its rating on the stock from a  firm Buy to Neutral. The stock is down by 1.5 percent, slipping from its best closing price since March of 2007.

Other Markets

Overseas, stock markets in the Asia-Pacific region ended notably higher on Friday. Japan's benchmark Nikkei 225 Index gained 2.9 percent, while Hong Kong's Hang Seng Index advanced by 1.4 percent.

Meanwhile, the major European markets are seeing modest upside. The U.K.'s FTSE 100 Index is up by 0.1 percent, while the German DAX Index and the French CAC 40 Index are both up by 0.3 percent.

In the bond markets, treasuries are trading modestly lower. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is trading at 2.512 percent, posting a gain of 2.8 basis points.

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TSX May Pause After Big Rally

Toronto stocks are likely to open mixed Friday amid flat commodities prices and varied cues from the global equity markets. Traders might realign positions after a big rally in the previous session and ahead of the week end.

While positive jobs data from the U.S. might lift trader sentiment, profit taking at higher levels may weigh on the market.

On Thursday, the S&P/TSX Composite Index soared 207.68 points or 1.64% to 12,878.79, levels not seen since 2008. Earlier on 10th May 2010, the main index gathered a notable 255 points or 2.18% when the European Union announced a $1 trillion bailout package.

The price of crude oil edged up amid positive jobs data, with Crude for December adding $0.30 to $86.79 a barrel.

The price of gold paused for a breather after gaining $45 in the previous session. Gold for December edged down $1.30 to $1,381.80 an ounce.

In corporate news from Canada, Potash Corp.'s stock rating was raised to a "Buy"from "Hold" at Desjardins Securities, with a price target of C$175. Yesterday, the Canadian government blocked the BHP Billiton's $130 per share hostile takeover bid saying that the proposed transaction is not likely to provide a "net benefit" to the country.

Communication equipment maker JDS Uniphase reported first quarter net income of $44.8 million or $0.20 per share compared to net income of $9.0 million or $0.04 per share in the year ago quarter. Analysts were expecting the company to report earnings of $0.16 per share for the quarter.

Automotive systems company Magna International reported higher third-quarter net income of $241 million or $2.06 per share compared to $51 million or $0.45 per share in the same quarter last year. Analysts were expecting the company to report earnings of $1.51 per share. The company announced a two-for-one stock split of the company's outstanding common shares, which will be implemented by way of a stock dividend. For the full year 2010, the company now expects sales to be between $23.5 billion and $24.0 billion, up from the earlier estimates to be $22 billion and $23 billion.

Telecommunication products provider TELUS Corp. posted lower third quarter net income of C$247 million or C$0.77 per share, compared to C$280 million or C$0.88 per share in the year ago period. Excluding certain items, normalized net income for the quarter was C$0.89 per share, compared to C$0.84 per share in last year period. Analysts were expecting the company to report earnings of $0.75 per share. The company guides fiscal year 2010 earnings per share in a range of C$3.10 to C$3.30, compared to its previous forecast in the range of C$2.90 to C$3.30.

Global asset management company Brookfield Asset Management said it swung to profit in third-quarter, reporting net income of $112 million or $0.16 per share, compared to a loss of $417 million or $0.75 per share in the same quarter last year. The company declared a dividend of $0.13 per Class A common share.

International mineral properties explorer Iamgold Corp. reported lower third quarter net earnings of $40.8 million or $0.11 per share from $64.9 million or $0.18 per share in the third quarter of 2009. Adjusted net earnings were $50.0 million or $0.13 per share, down from adjusted net earnings of $51.7 million or $0.14 per share in the same quarter last year. Analysts were expecting the company to report earnings of $0.21 per share on revenues of $285.71 million for the quarter. Moreover, the company has revised its fiscal 2010 gold production guidance to a range of between 940,000 and 970,000 ounces from a range of between 980,000 and 1.01 million ounces.

Gold miner Centerra Gold  reported lower third quarter net earnings of $17.7 million or $0.07 per share, compared to $20.2 million or $0.09 per share last year. As a result of the completion of the sale of the REN property early in the third quarter, the third quarter results include a gain of $34.9 million.

Oil and gas explorer Fairborne Energy reported a wider third quarter net loss of C$7.60 million or C$0.07 per share compared to C$497 thousand or C$0.01 per share last year.

Industrial equipment dealer Strongco Corp. swung to profit in third-quarter, reporting net income of C$0.7 million or C$0.07 per share, compared to a loss of C$0.5 million or C$0.05 per share in the same quarter last year.

In economic news, Statistics Canada said employment remained virtually unchanged for the second consecutive month in October, as full-time gains offset part-time losses. The unemployment rate edged down to 7.9% and has been around 8% for the past seven months, the agency noted. Economists were expecting job growth of 10,000, following a drop of 6,600 in September.

From the U.S., the Labor Department said the economy generated 151,000 jobs in September, much higher than economists' expectations for addition of 60,000 jobs. Private-sector payroll employment rose by 159,000 from September, as jobs were added in the health care and retail trade sectors. The unemployment rate stood still at 9.6%.

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European Markets Lose Early Gains

The European markets are trading in negative territory in afternoon trading Friday, reversing early gains, ahead of the U.S. employment report for October. After welcoming firm cues from Asian economies in the early trade, which rallied on positive sentiment unleashed by the Quantitative Easing in the U.S., investors became wary of the employment numbers from the world's largest economy.

Crude for December delivery is trading higher by $0.10 at $86.59 per barrel and gold is advancing $0.5 to $1383.6 an ounce.

Among major economic reports, the Office for National Statistics said U.K. output price inflation grew to 4% in October from a downwardly revised 3.8% in September. Economists had forecast output price inflation to log 4.4%. On a monthly basis, output prices rose 0.6% in October after stagnating in September.

Eurozone retail sales fell 0.2% month-on-month in September, following a revised 0.2% drop in August, Eurostat said. Economists had forecast a 0.1% increase.

Germany's overall construction activity increased in October from the previous month, a report by the Markit Economics showed. The seasonally adjusted construction purchasing managers' index rose to 50.7 in October from 49.9 in the previous month. The latest reading was highest since February 2008 and above the long-run series average of 44.9.

The UK's FTSE 100 opened at 5,863 and was in the green in early part of the session, but erased those gains later.

The German DAX opened slightly higher at 6,744 and witnessed some choppy trading that saw the index move across either side of the unchanged line.

The French CAC 40 opened higher at 3,928 and followed its counterparts in the other two economies by reversing those gains later.

The FTSE 100 is currently losing 0.11%, compared to the DAX slipping 0.03% and the CAC 40 shedding 0.14%.

In London, Defence and aerospace contractor Cobham is declining 3.7%. Cobham said Thursday that it is experiencing delays and deferrals in the award of certain U.S. defense and security contracts. Asset manager Man Group, which Thursday reported a fall in first-half profit, is sliding 3.5%.

Among lenders, Royal Bank of Scotland is slipping 3.5% after forecasting a challenging fourth quarter. HSBC is dropping 1.3%. The company said third-quarter profit before tax was well ahead of the previous year, reflecting lower loan impairment charges. Lloyds Banking Group and Barclays are down 0.7% each.

Among miners, Kazakhmys is down 2.2%. BHP Billiton, Anglo American, Xstrata and Antofagasta are moderately down. Vedanta Resources and Eurasian Natural Resources are notably higher. Smith & Nephew, which reported a higher profit in the third quarter, is advancing 6.4%.

In Germany, carmaker Daimler is declining 1.6%. However, BMW and truckmaker MAN are rising 0.6% each. Sports goods giant Adidas is down 1.5%. Deutsche bank is slightly down, while Commerzbank is adding 0.4%.

Lenders are witnessing downside in France. Credit Agricole is losing 3.7% and Societe Generale is dropping 2.3%. BNP Paribas and Natixis are losing 1.3% and 0.9%, respectively.

Machinery & equipment maker Alstom is losing 3.4% and cement giant Lagarge is dropping 2.6%.

Carmaker Renault is up 1.8% and Peugeot is slightly up. Hotel group Accor and steel giant ArcelorMittal are seeing notable upside.

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Asian Markets End In Positive Territory, Lifted By Wall Street Cues

Asian markets open for trading on Friday, the last day of the trading week, ended in positive territory, taking cues from Wall Street where the major averages ended sharply higher gaining more than 1.5% to the highest levels since 2008 led by commodities and weaker dollar. Excluding South Korea which ended in negative territory and the markets in India and Singapore, which were closed for a holiday, the other markets ended with modest gains led by commodities amid optimism about global economic recovery,

In Australia, the benchmark S&P/ASX200 Index surged up 55.30 points, or 1.17%, and closed at 4,801 points, while the All-Ordinaries Index ended at 4,873, representing a gain of 55.40 points, or 1.15%.

Resource related stocks led the gains in the market on higher commodity prices in the international market triggered by weak US dollar. BHP Billiton climbed 3.55%, Rio Tinto surgd up 4.81%, Fortescue Metals advanced 1.94%, Gindalbie Metals gained 2.75%, Iluka Resources was up by 3.95%, Macarthur Coal rose 2.65%, Mincor Resoruces advanced 3.01%, and Oz Minerals was higher by 4.85%. Murchison Metals, however, bucked the positive trend and plunged 8.33%.

Oil related stocks also ended in the green on sharp gains in crude oil prices in the international market. Woodside Petroleum advanced 1.92%, Santos Ltd gained 1.79%, ROC Oil Ltd added 1.15%, Origin Energy gained 1.42% and Oil Search Ltd rose 2.15%.

Mixed trading was witnessed among financial stocks on profit taking. ANZ Bank slipped 1.03%, Commonwealth Bank of Australia shed 0.53%, and National Australia Bank edged down 0.12%. However, Westpac Banking Corp. bucked the losing trend and ended in positive territory with a gain of 0.04%. Investment banker Macquarie Group ended in positive territory with a sharp gain of 3.80%.

In Japan, the benchmark Nikkei 225 Index rose 267.21 points, or 2.9%, to 9625.99..while the broader Topix index of all First Section issues also rose 18.65 points, or 2.3%, to 834.98

On the economic front, the Bank of Japan left its key interest rate unchanged as expected. The Policy Board voted to hold the uncollateralized overnight call rate at around 0 to 0.1%. The board also decided to buy Japan real estate investment trusts that are rated AA or higher and for which there are no concerns regarding their creditworthiness. Also, it will buy exchange-traded funds whose prices track the Tokyo Stock Price Index or the Nikkei 225 Stock Average.

Taking positive cues from Wall Street where the major averages ended at a new high since 2008 on quantitative easing measures and optimism about sustaining economic recovery, almost all the stocks in the Nikkei 225 index surged higher and ended with moderate gains.

Resource stocks led the rally on weaker US dollar and higher commodity prices. Automotive stocks, exporters and banks also ended in positive territory.

As many as 217 of the total 225 stocks in Nikkei 225 index ended in positive territory. The market in India was closed for regular trading on the eve of Diwali festival.

Among the other markets in the region, China's Shanghai Composite Index gained 42.56 points, or 1.38% to close at 3,129, Hong Kong's Hang Seng Index surged up 341.19 points, or 1.39%, to 24,877, Jakarta Composite Index in Indonesia advanced 26.26 points, or 0.72%, to close at 3,655, and Taiwan Weighted Index was higher by 91.49 points or 1.09% to close at 8,449. However, the Kospi Index in South Korea bucked the overall trend and ended in negative territory with a modest loss of 3.54 points, or 0.18% at 1,939.

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Dollar Steadies Versus Euro Ahead Of Jobs Report

The dollar was slightly stronger Friday morning, paring steep recent losses against the euro ahead of the US government's crucial monthly jobs report.

A dramatic decline to yearly lows for the dollar was brought on by the Federal Reserve's plan to bolster the economy with another $600 billion in asset purchases. The move was announced on Wednesday, but the buck had been falling since June as the Fed signaled its intentions.

The Labor Department will release its non-farm payroll report for October at 8.30 a.m. ET. Economists expect that the US economy added 60,000 new jobs during the month, after losing 95,000 jobs in the previous month. Economists, however, expect the unemployment rate to remain elevated at 9.6%.

The dollar improved to $1.4100 versus the euro, having touched a 10-month low of $1.4281 on Thursday.

Eurozone retail sales unexpectedly fell for a second consecutive month in September signaling that households in the currency block remain reluctant to increase their spending. According to data released by Eurostat on Friday, the volume of retail sales fell 0.2% month-on-month in September.

The buck was also steady versus the sterling, trading at $1.6230 after hitting $1.6298 -- its lowest since mid-January.
Versus the yen, the dollar barely budged near Y80.80. The dollar hit a 15-year low of 80.20 earlier in the week, but has managed to steady through the mid-term elections and Fed's QE announcement.

The buck edged slightly higher to C$1.0050 after coming withing a whisker of parity against its Canadian counterpart.
Canada's unemployment rate edged slightly lower in October, but the nation's economy generated only 3,000 new jobs, official data revealed Friday morning.

Statistics Canada said employment remained virtually unchanged for the second consecutive month, as full-time gains offset part-time losses. The unemployment rate edged down to 7.9% and has been around 8% for the past seven months, the agency noted.

In addition to the monthly jobs report from the US, traders will be treated to the National Association of Realtors Pending Home Sales for September. Economists expect that the pending home sales index rose 2.5% for the month, after registering an unexpected 4.3% month-over-month increase in the previous month.

At 3.00 p.m. ET, the Federal Reserve will release its report on consumer credit for September. Market analysts expect that consumer credit contracted by $3.5 billion for the month.

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