US & World Daily Markets Financial Briefing 07-01-2011

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Stocks Showing A Lack Of Direction In Early Trading

Stocks are turning in another lackluster performance in early trading on Friday following the release of a mixed jobs report. The major averages initially moved modestly higher but failed to sustain the upward move and are currently mixed.

Traders are digesting the release of the Labor Department's closely watched monthly employment report, which showed weaker than expected job growth in December but also showed a notable drop in the unemployment rate.

The Labor Department said non-farm payroll employment increased by 103,000 jobs in December following an upwardly revised increase of 71,000 jobs in November. Economists had expected employment to increase by about 160,000 jobs.

Although employment increased by less than expected in December, revisions to the data from the past few months reflected a net increase of 70,000 jobs.

Meanwhile, the report also showed that the unemployment rate fell to 9.4 percent in December from 9.8 percent in November. The unemployment rate had been expected to show a much more modest decrease to 9.7 percent.

With the bigger than expected decrease, the unemployment rate fell to its lowest level since a matching rate in May of 2009.

Traders are also likely to keep an eye on Federal Reserve Chairman Ben Bernanke's testimony before the Senate Budget Committee on monetary and fiscal policy, at 10:00 a.m. ET.

At 3:00 p.m. ET, the U.S. Federal Reserve will release its monthly consumer credit report for November. Economists project consumer credit to show an increase of $2 billion for the month.

On the corporate front, shares of Borders Group Inc. (BGP) are in the spotlight as the company is meeting with consultants regarding debt restructuring.

KB Home (KBH) reported fourth-quarter net income of $0.23 per share, topping estimates for $0.17 per share for the period. Revenues totaled $451.0 million, also better than the $441.32 million forecast by analysts.

Oil service stocks are seeing considerable strength in early trading, benefiting from a moderate increase by the price of crude oil. Railroad stocks are also seeing early strength, while most of the other major sectors are showing more modest moves.

The major averages are currently all lingering near the unchanged line, with the Nasdaq posting a modest loss. While the Nasdaq is down 1.60 points or 0.1 percent at 2,708.29, the Dow is up 7.91 points or 0.1 percent at 11,705.22 and the S&P 500 is up 1.09 points or 0.1 percent at 1,274.94.

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Energy Stocks Drag TSX Lower At Open Friday

Toronto stocks opened lower Friday amid selling in energy stocks. The S&P/TSX Composite Index was down 40.38 points or 0.30% to 13,271.29.

The Energy Index lost 0.61%, with Canadian Natural Resources shedding over 4% as it shut its Horizon oil sands project in northeastern Alberta after a fire broke out that injured three people.

Talisman Energy and Birchcliff Energy were down nearly 1% each.

Oil fields services provider Canyon Services Group plummeted over 28%.

Pharmacy retailer Jean Coutu Group  Inc. slipped over 1% even after reporting improved third-quarter net earnings.

Gold stocks were mixed. Agnico-Eagle Mines and Jaguar Mining moved up nearly 1% each, while Kirkland Lake Gold and Aurizon Mines were losing over 1% each.

Among base-metal stocks, Taseko Mines and Inmet Mining gathered close to 1% each.

In the financials space, insurers Manulife Financial and Sunlife Financial edged up around 0.50% each.

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French Market Falls

The French market is falling in afternoon trading Friday, dragged down by construction stocks and banks, as global economic worries returned ahead of the key jobs data from the U.S.

In economic news, Germany's trade surplus fell to EUR 12.9 billion from EUR 14.2 billion in the previous month, the Federal Statistical Office said. Economists had expected it to rise to EUR 15 billion. Meanwhile, the country's retail sales fell 2.4% month-on-month in November following a slight increase of 0.1% in October, missing expectations for an increase of 1%.

Eurozone's third-quarter economic growth was revised down to 0.3% from 0.4%, European Union statistical office Eurostat said. In the second quarter, the economy had expanded 1%. Meanwhile, Eurozone's seasonally adjusted unemployment rate was 10.1% in November, the same as in October. A year ago, the jobless rate was 9.9%.

The CAC 40 index opened lower at 3,893 and has been witnessing volatile trading. The index is currently losing 0.48%.

Cement giant Lafarge is leading the decliners by falling 1.9%. Steel maker ArcelorMittal is dropping 1.6%. Builders Vinci and Bouygues as well as real estate investment trust Unibail-Rodamco are falling.

Among banks, BNP Paribas and Societe Generale are dropping 1.2% each. Credit Agricole and Natixis are each down about 0.7%. Oil & gas services firm Technip is losing 1.6%.

Those making notable gains include beverages firm Pernod-Ricard, Airbus maker EADS as well as carmakers Peugeot and Renault.

Elsewhere in Europe, the UK's FTSE 100 is losing 0.33% and the German DAX is adding 0.07%.

Across Asia/Pacific, markets had a mixed outing. Australia's All Ordinaries lost 0.40%, Hong Kong's Hang Seng slipped 0.42% and India's BSE Sensex retreated 2.44%. However, China's Shanghai Composite Index gained 0.52% and Japan's Nikkei 225 added 0.11%.

In the U.S., futures point to a mixed open on Wall Street. In the previous session, the Nasdaq ended up 0.3%, the Dow fell 0.2% and the S&P 500 slipped 0.2%.

In commodities, crude for February delivery is adding $0.53 to $88.91 per barrel and gold is sliding $13.1 to $1358.6 a troy ounce.

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Indian Market Tumbles Ahead Of U.S. Data

Lingering rate hike worries before the credit policy review later this month, expensive valuations ahead of the upcoming corporate earnings season and weak global cues prior to the release of a key U.S. employment report due later in the day dragged the Indian market sharply lower on the last trading day of the week Friday.

The U.S. non-farm payrolls report is expected to show that employment increased by about 140,000 jobs in December following the addition of 39,000 jobs in November. The unemployment rate is also expected to edge down to 9.7 percent from 9.8 percent.

If the upcoming data beat expectations, that will signal a broader economic recovery in the world's largest economy, which in turn could impact inflows into emerging markets, analysts said.

Extending losses for a fourth straight session, the benchmark 30-share Sensex lost about 500 points or 2.45% to end near the day's low at 19,692. All 30 of its components closed in the red.

While metal, auto, consumer durable and IT stocks bore the brunt of the selling, heavily-battered banking stocks such as SBI (down 0.97%) and ICICI Bank (down 0.5%) finished with modest losses on short covering.

Among the major decliners, automaker Tata Motors plunged 5.52%, Mahidnra & Mahindra fell over 4% and Maruti Suzuki ended down 2.13%. Metal stocks such as Jindal Steel, Sterlite and Hindalco fell between 2% and 7%. Tata Steel, which is reportedly raising up to $1 billion via a GDR issue, ended down 3.35%.

Telecom operator Bharti Airtel lost 4.12%, diversified business conglomerate ITC declined 3.44%, software exporter Infosys tumbled 3% and property developer DLF ended down 3%.

State-run steel maker SAIL fell 3.30% on follow-on public offering (FPO) reports. However, Hindustan Copper closed 1.12% higher following recent sharp losses on the FPO discount buzz. APW President Systems hit the 5% upper circuit limit after France-based Schneider Electric signed a pact to acquire a 75% stake in the company. State-run oil marketing companies such as HPCL and IOC closed modestly higher after crude prices for February delivery fell over 2% to $88.38 a barrel in New York yesterday.

The 50-share Nifty index fell by 144 points or 2.38% to 5,904, while the BSE mid-cap and small-cap indexes lost 2.49% and 2.86%, respectively. In the broader market, declining shares outpaced gaining ones in the ratio of 3.8:1 on the BSE.

Elsewhere, the other Asian markets closed mostly lower on Friday, European stock markets dropped and the Dow futures suggested a negative opening for Wall Street later in the global day, as caution prevailed ahead of tonight's U.S. non-farm payrolls report that may offer more evidence of a stronger economic recovery.

Gold and silver prices edged lower on strong dollar, while crude prices saw modest gains in Asian trading after falling more than 2% to a three-week low on the New York Mercantile Exchange overnight.

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Dollar Wobbles As Unemployment Drops To 9.4%

The dollar was mixed Friday morning in New York amid the release of government data showing the US unemployment rate dropped to 9.4 percent despite the creation of few jobs than analysts were expecting.

Modest strength was seen against the euro for a third day, and the buck remained away from multi-decade lows against the Swiss franc and aussie dollar.

The Labor Department said Non-farm payrolls rose 103,000 in December, helping to drive the unemployment rate down to a year and a half low of 9.4 percent.

While the headline number on unemployment should give the Obama administration some breathing room, the Federal Reserve will likely focus on the the fact that only 103,000 jobs were generated.

The Fed is widely expected to support the economy with record low interest rates and asset purchases through the first half of 2011.

The dollar held near $1.2990 versus the euro, a gain of 0.15 percent. Versus the yen, the dollar slipped very slightly to Y83.29, having seen strength in the last few sessions.

At the same time, the dollar remained firm against the Swiss franc, improving 0.2 percent to CHF 0.9675. The dollar hit a record low near CHF 0.93 earlier this month.

Eurozone economic growth for the third quarter was downgraded due to bleak investment and weaker-than-expected household spending. The performance of the member countries showed marked divergence, with Germany boosting overall Eurozone growth.

According to the latest report from the European Union statistical office Eurostat, gross domestic product grew only 0.3% in the third quarter, instead of previously estimated 0.4%. GDP growth slowed from second quarter's 1%.

German industrial production dropped more than expected in November, reflecting broad-based declines in all industrial groupings.

The seasonally adjusted industrial production fell 0.7% month-on-month following a revised 3% increase in October, the Federal Ministry of Economics and Technology said Friday.

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