US & World Daily Markets Financial Briefing 06-01-2011

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Stocks Turning In A Lackluster Performance In Early Trading

Stocks are showing a lack of direction in early trading on Thursday, as traders are reluctant to make any significant moves ahead of tomorrow's monthly employment report. The major averages are lingering near the unchanged line after ending the previous session at multi-year closing highs.

Traders have largely shrugged off the Labor Department's report on weekly jobless claims, which showed that first-time claims for unemployment benefits saw a modest rebound in the week ended January 1st.

The report showed that initial jobless claims rose to 409,000 from the previous week's revised figure of 391,000. Economists had expected jobless claims to increase to about 412,000 from the 388,000 originally reported for the previous week.

Jobless claims bounced off the more than two-year low that was set in the previous week, although they remain at a relatively low level.

Peter Boockvar, equity strategist at Miller Tabak, said, "Bottom line, holidays and weather likely impacted the data over the past few weeks but the trend in firings is still clearly down."

Also this morning, most major retail chains reported that December sales expanded at stores open at least one year, confirming widespread speculation of a robust holiday shopping season. Despite the sales growth, some retailers still missed expectations.

Most of the major sectors are showing only modest moves, although early strength is visible among health insurance stocks, with Centene (CNC) leading the sector higher. On the other hand, gold stocks are extending a recent downward move.

The major averages have moved to the downside in the past few minutes and are currently posting modest losses. The Dow is down 8.02 points or 0.1 percent at 11,714.87, the Nasdaq is down 1.48 points or 0.1 percent at 2,700.72 and the S&P 500 is down 1.71 points or 0.1 percent at 1,274.85.

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TSX Poised To Open Marginally Higher

Toronto stocks may edge up at open Thursday amid flat commodities prices and mixed cues from global equity markets. Asian markets ended mixed, with Japan up over 1% amid a weak yen. Meanwhile, major European indices are trading higher.

U.S stock futures were pointing to a higher open.

On Wednesday, the S&P/TSX Composite Index eased 6.32 points or 0.05% to 13,395.99.

The price of crude oil was holding on to its previous session's gains. Yesterday, oil prices reversed early losses to climb back above $90, after U.S. government data revealed a big draw in crude inventories. Crude for February edged down $0.27 to $90.03 a barrel.

The price of gold edged down as traders await cues from tomorrow's unemployment data to gauge the strength in the recovery of the world's largest economy. Gold for February was down $2.60 to $1,371.10 an ounce.

BlackBerry maker Research In Motion said it will preview the upcoming, highly-anticipated BlackBerry PlayBook tablet at the 2011 Consumer Electronics Show from January 6 to 9.

In corporate news from Canada, copper miner Quadra FNX Mining announced that it sold 56.46 million of its common shares of Gold Wheaton Gold Corp. to Franco-Nevada for aggregate gross proceeds of C$262.5 million or C$4.65 per share.

Meanwhile, Franco-Nevada said it would buy Gold Wheaton common shares that it does not already own for $5.20 per share.

Food products company Canada Bread Bakery said it plans to close its frozen bakery facility in Quebec on March 31, 2011.

Communications and media company Rogers Communications said it has acquired Atria Networks LP, owner and operator of one of Ontario's largest fibre-optic networks.

Factory automation services provider ATS Automation Tooling Systems said it acquired majority of Assembly & Test Worldwide Inc.'s US-based and German automation and test systems businesses for $18.50 million.

GPS vehicle tracking and telematic solutions provider WebTech Wireless said it won a three-year contract extension for its Quadrant fleet management solution from the Port of Long Beach, California.

In economic news from south of the border, the U.S. Labor Department said that initial jobless claims rose to 409,000 from the previous week's revised figure of 391,000. Economists had expected jobless claims to increase to about 412,000 from the 388,000 originally reported for the previous week.

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French Market Rises

The French market is higher in afternoon trading Thursday, led by carmakers and banks. Sentiment was influenced by encouraging economic data and positive closing in Japan.

In economic news, German factory orders increased 5.2% month-on-month in November, much better than the 1% increase economists' had predicted, the Federal Ministry of Economics and Technology said. On an annual basis, factory orders were up 20.6%, also above the expected rise of 15.9%.

Economic sentiment indicator for the Eurozone climbed to 106.2 in December from a revised 105.1 recorded in November, results of a monthly survey conducted by the European Commission showed. Economists had forecast an increase to 105.8.

Meanwhile, Eurozone retail sales fell 0.8% month-on-month in November after staying flat in October, data from Eurostat said. Economists had expected a 0.2% rise for November.

The UK's seasonally adjusted Markit/Chartered Institute of Purchasing & Supply Purchasing Managers' Index for the service sector fell to 49.7 from 53 in November. The reading was forecast to ease to 52.8 in December.

The CAC 40 index opened slightly higher at 3,911 and has been on the rise. The index is adding 0.72%.

Insurer Axa is leading the gainers by adding 3.7%. Carmakers Renault and Peugeot are gaining 3.6% and 3.1%, respectively. Airbus maker EADS is rising 3.6% and chipmaker STMicroelectronics is adding 3.1%.

Among banks, Societe Generale is adding 1.2% and BNP Paribas is rising 1%. Natixis is moderately up, while Credit Agricole is losing 0.7%.

Those making notable gains include metal fabrication firm Vallourec, drugmaker Sanofi-Aventis, hotel group Accor, oil giant Total and France Telecom.

Builders Vinci and Bouygues are marginally lower. Cement giant Lafarge, building materials maker Saint-Gobain and real estate investment trust Unibail-Rodamco are on the falling side.

Elsewhere in Europe, the UK's FTSE 100 is gaining 0.40% and the DAX index is adding 1.09%.

Across Asia/Pacific, major markets had a mixed outing. Australia's All Ordinaries added 0.21%, Hong Kong's Hang Seng gained 0.12% and Japan's Nikkei 225 rose 1.44%. However, China's Shanghai Composite Index retreated 0.51% and India's BSE Sensex lost 0.57%.

In the U.S., futures point to a slightly higher open on Wall Street. In the previous session, the Dow advanced 0.3%, the Nasdaq moved up 0.8% and the S&P 500 rose 0.5%.

In commodities, crude for February delivery is sliding $0.33 to $89.97 per barrel and gold is slipping $2.0 to $1371.7 a troy ounce.

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Indian Market Extends Losses

Data showing a surge in food inflation for a fifth consecutive week and the accompanying rate hike fears which dragged rate-sensitive banking, realty and auto stocks sharply lower, weighed on the Indian market on Thursday. Extending its loss for a third straight session, the benchmark 30-share Sensex ended 116 points or 0.57% lower at 20,185, with 20 of its components declining.

India's food inflation for the week ended December 25 jumped 18.32% from 14.44% in the previous week, led by a sharp rise in prices of food articles such as onion, vegetables, fruits and milk, government data released today showed. The fifth straight week of rise in food inflation rate, based on wholesale prices, raised fears about further monetary tightening, when the RBI reviews its credit policy on January 25.

After keeping rates unchanged in its December mid-quarter review, the central bank cautioned that its measures should not be interpreted as reversal of tight monetary stance, since inflation still continues to be a major concern.

The 50-share Nifty index fell by 32 points or 0.52% to 6,048 and the BSE small-cap and mid-cap indexes lost over a percent each. In the broader market, declining shares outpaced gaining ones in the ratio of 1.86:1.

Banking stocks such as SBI and ICICI Bank lost around 2% each, while HDFC Bank ended up 0.89%. Axis Bank eased 0.26% on a brokerage downgrade. In the realty sector, DLF, Indiabulls Real Estate and Unitech fell between 2% and 5%.Two-wheeler manufacturer Bajaj Auto tumbled 3.60%, extending its recent losses. Tata Motors fell 1.82%, Mahindra & Mahindra slipped 0.15% and Maruti Suzuki lost 3%.

In the FMCG sector, Hindustan Unilever fell 1.72%, snapping a six-day rally. ITC shed 0.69% on profit taking after two sessions of gains. In the metal sector, copper producer Sterlite plunged nearly 4%, while aluminum maker Hindalco touched a record high of Rs.251.90 earlier in the session before ending up 1.70% at Rs.250.75. Steelmaker Tata Steel also closed in positive territory with a modest half-a-percent gain.

Reliance Infrastructure added 0.33% after the Anil Ambani-controlled company convened a board meet on January 7 to allot shares on a preferential basis to a promoter company, pursuant to exercise of options attached to warrants issued in July 2009.

Among IT stocks, TCS rose 1.39% and Infosys added 0.24% on strong U.S. economic data, but Wipro closed unchanged with a negative bias. Heavyweight Reliance Industries added a percent after it reportedly hired advisers to help plan an expansion. In the telecom space, Bharti Airtel gained a percent and Idea Cellular rose 0.22%, while Reliance Communication ended down 0.14%.

 Tata Coffee declined 1.21% on going ex-dividend. Hindustan Copper slumped 5%, extending its recent losses, on the FPO price discount buzz.

Lupin added half a percent, a day after it signed a strategic agreement with Brazil's PSU Farmanguinhos. Jindal Poly Films gained 1% on reports that it is seeking private equity investment in its subsidiary Jindal India Thermal Power.

Fertilizer stocks such as GSFC, Zuari Industries, RCF, Chambal, National, Nagarjuna and FACT fell between 2% and 8% after a group of ministers (GoM) headed by finance minister Pranab Mukherjee on Wednesday deferred its decision on freeing urea prices.

Elsewhere, most Asian stocks rose on Thursday after a weak start and crude prices were steady on renewed optimism over the outlook for the U.S. economy ahead of Friday's key employment report. The dollar retreated from a two-week high against the yen, as investors locked in some profits.

European stocks gained and the Dow futures were up modestly, as a surprise jump in U.S. private sector jobs and solid growth in the service sector indicated the world's largest economy is on a steady path to recovery.

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Dollar Firms Ahead Of Jobless Claims

The dollar was stronger Thursday morning, as Wall Street braced for the latest jobless claims numbers ahead of tomorrow's all-important monthly employment  report.

Economists expect the Labor Department to report jobless claims rose back above 400,000 from the 2-year low of 388,000 reported for the week before Christmas.

The dollar continued its comeback versus the euro, improving to $1.3090, having gained 3 cents from last Friday's 3-week low.

The buck was flat against the yen at Y82.80, and slightly stronger at CHF 0.9650 versus the Swiss franc.

In economic news from across the Atlantic, German factory orders increased 5.2% month-on-month in November, the Federal Ministry of Economics and Technology said Thursday. That was much better than the 1% increase economists' had predicted.

China is willing to buy as much as 6 billion euros of Spanish debt to aid the eurozone country's efforts to restore financial stability, El Pais newspaper reported on Thursday.

The pledge came during Chinese vice premier Li Keqiang's three-day visit to the country, the paper said citing government sources.

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