US & World Daily Markets Financial Briefing 07-02-2011

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Stocks Adding To Last Week's Gains In Early Trading

After showing a strong upward move last week, stocks are seeing some further upside in early trading on Monday. The major averages have moved modestly above the unchanged line, building on last Friday's multi-year closing highs.

The early strength in the markets comes as traders react to the latest batch of earnings news as well as news on the merger-and-acquisition front. However, a lack of significant U.S. economic news may keep trading activity somewhat subdued.

Shares of Beckman Coulter (BEC) have shown a notable move to the upside in early trading after the company agreed to be acquired by Danaher (DHR) for $83.50 per share in cash. The deal is valued at about $6.8 billion, including assumed debt and net of cash acquired.

In earnings news, toymaker Hasbro (HAS) posted fourth-quarter earnings of $0.99 per share, which was better than the $0.95 per share forecast on Wall Street. At the same time, the company reported net revenues of $1.28 billion, which was short of expectations for $1.31 billion.

Health insurer Humana Inc. (HUM) reported fourth quarter net income that fell to $0.63 per share from $1.48 per share a year ago, reflecting higher expenses. Analysts had expected the company to earn $0.73 per share.

Humana said its revenues rose to $8.35 billion from $7.63 billion in the prior-year quarter, coming in just under estimates for $8.36 billion. Earnings guidance for the first quarter and the full year 2011 was also short of estimates.

Property insurance firm Loews (L) announced net income of $1.12 per share for the fourth quarter, topping expectations for $0.88 per share Quarterly revenues declined to $3.72 billion from $3.82 billion in the same quarter a year earlier.

On the economic front, the U.S. Federal Reserve is scheduled to release its monthly consumer-cedit report at 3:00 p.m. ET. Consumer-credit for December is forecast to show an increase of $2.0 billion after seeing an increase of $1.3 billion in the previous month.

Oil service stocks are seeing notable strength in early trading, With Rowan Cos. (RDC) helping to lead the sector higher. Airline, natural gas, and electronic storage stocks are also seeing early strength, while most of the major sectors are showing more modest moves.

The major averages have continued to move higher in recent trading, reaching news highs for the young session. The Dow is up 49.76 points or 0.4 percent at 12,141.91, the Nasdaq is up 10.69 points or 0.4 percent at 2,779.99 and the S&P 500 is up 5.75 points or 0.4 percent at 1,316.62.

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TSX May Open Higher On Commodities

Bay Street stocks may open marginally higher Monday amid flat commodities prices and positive cues from the global equity markets after civil unrest in Egypt appeared to have subsided.

Traders will look to a host of corporate earnings releases this week, with Teck Resources reporting Tuesday.

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

On Friday, the S&P/TSX Composite Index edged down 49.50 points or 0.36% to 13,791.85. Last week, the main index advanced over 350 points after hitting a fresh 2-year peak of 13,841.

While oil and gold were little changed, copper advanced to a fresh record high.

The price of crude oil edged down Monday morning even as risk appetite improved after the U.S. Labor Department said Friday that the economy added significantly fewer than expected jobs in January, but the unemployment rate unexpectedly fell to a 21-month low. Crude for March was down $0.47 to $88.56 a barrel.

The price of gold was steady above $1,350 amid a marginally higher U.S. dollar. Gold for April edged up $4.10 to $1,353.10 an ounce.

In corporate news from Canada, natural gas distribution company Pacific Northern Gas said it would sell its 50 percent interest in the Pacific Trail Pipelines Limited Partnership for $50 million.

Cancer therapy focused bio pharmaceutical company Helix BioPharma said it has received approval for its investigational new drug application from the U.S FDA to perform its planned U.S. Phase I clinical safety and tolerability study of its lung cancer drug candidate L-DOS47.

Bio pharmaceutical company ProMetic Life Sciences said it achieved a pivotal milestone for the in-house manufacturing of plasma-derived proteins at commercial scale.

Pharmaceutical industry services provider Patheon announced the appointment of James Mullen as its CEO, effective immediately.

Base-metals miner Kent Exploration said it would spin off its elf to create a new company - Archean Star Resources Inc, and would be listed in TSX Venture Exchange.

In economic news from Canada, Statistics Canada said the value of building permits increased 2.4 percent to $5.7 billion in December 2010. Economists expected an increase of 2.9 percent from the previous month, when building permits dropped 11.2 percent to its lowest level since November 2009.

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French Market Rises, Led By Banks

The French market is rising in afternoon trading Monday, led by banks and construction stocks. Sentiment was influenced by easing of tensions in Egypt and mostly higher closings in Asia/Pacific along with Friday's gains in the U.S.

In economic news, factory orders to Germany decreased 3.4 percent month-on-month in December following the 5.2 percent increase in November, the Federal Ministry of Economics and Technology said. Economists had forecast a decline of 1.9 percent.

Meanwhile, an indicator of investor sentiment in the Eurozone rose to the highest level in three-and-a-half years in February, a new survey showed. The Sentix investor sentiment index, an indicator of confidence around 900 investors, rose to 16.70 in February 10.6 in January.

The CAC 40 index opened at 4,056, up from the prior close of 4,047. The index has been following the other two major indices of the region and is currently advancing 0.83 percent.

Credit Agricole is leading the gainers by adding 3.2 percent. Societe Generale, BNP Paribas and Natixis are gaining between 2 percent and 1.3 percent.

Cement giant Lafarge, builders Vinci and Bouygues and building materials maker Saint-Gobain are seeing notable gains.

Car manufacturers Peugeot and Renault are each advancing about 1.5 percent.

Those making notable gains include chipmaker STMicroelectronics, Airbus maker EADS, luxury goods group LVMH, insurer Axa and telecom equipment maker Alcatel Lucent.

Grocery retailer Carrefour and beverages company Pernod-Ricard are trading modestly down.

Elsewhere in Europe, the UK's FTSE 100 is gaining 0.65 percent and the German DAX is advancing 0.67 percent.

Across Asia/Pacific, most major markets settled higher. Australia's All Ordinaries added 0.11 percent, Japan's Nikkei 225 gained 0.5 percent, and India's BSE Sensex rose 0.16 percent. However, Hong Kong's Hang Seng slipped 1.5 percent. The Chinese market is closed.

In the U.S., futures point to a slightly higher open on Wall Street. In the previous session, the Dow advanced 0.3 percent, the Nasdaq moved up 0.6 percent and the S&P 500 rose 0.3 percent.

In commodities, crude for March delivery is advancing $0.33 to $89.36 per barrel and gold is dipping $0.9 to $1348.1 a troy ounce.

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Indian Market Ends Volatile Session Flat

The Indian market failed to hold onto its early gains on Monday, as cautious investors stayed on sidelines fearing more FII selling.

Taking cues from positive global cues and a decline in oil prices amid receding violence in Egypt, the benchmark 30-share Sensex traded firm till late afternoon before paring its gain and ending 29 points or 0.16 percent higher at 18,037.

Likewise, the 50-share Nifty shed all its intra-day gains before closing unchanged, while the BSE mid-cap and small-cap indexes ended in the red, losing 0.52 percent and 0.83 percent, respectively. In the broader market, declining shares outpaced gainers in the ratio of 1.6:1 on the BSE.

Among high-beta realty stocks, Unitech climbed 3 percent after it reportedly repaid debt of Rs 178 crore loan ahead of the February 22 deadline. HDIL rallied nearly 4 percent, DLF rose 2.32 percent and Indiabulls Real Estate added 1.72 percent.

In the oil-gas sector, Reliance Industries (RIL) rose 1.07 percent after London-based BP Plc reportedly held talks with RIL to buy a 30-45 percent stake in the latter's hydrocarbon block in the KG basin. In the telecom sector, Bharti Airtel and Reliance Communication closed up about 0.7 percent each, while Idea Cellular eased 1.43 percent and Tata Teleservices ended down 0.89 percent. FMCG player Hindustan Unilever gained half a percent on the price hike buzz. Dabur India, Tata Global Beverages, ITC and Nestle India added between 0.6 percent and 3 percent on defensive buying.

Sugar stocks rallied after Tropical Cyclone Yasi smashed sugarcane crops in Australia last week. Balrampur Chini (up 2.11 percent), Dhampur (up 2.39 percent) and Shree Renuka (up 4.18 percent) were the prominent gainers.

Allied Digital plunged 20 percent despite the management clarification on IT raids at some locations and premises of the company. Cipla fell 3 percent and Piramal Life Sciences lost 1.38 percent on disappointing results. Radico Khaitan, which is expected to finalize some international marketing tie-ups soon, ended down 2 percent.

Eicher Motors pared most of its early gain before ending 0.3 percent higher on robust quarterly earnings. Suzlon Energy jumped 3.54 percent after it posted a standalone net profit of Rs 1.2 crore for the quarter ended December versus a loss in the year-ago period. Nagarjuna Fertilizers (up 1.37 percent) and Pratibha Industries (up 1.18 percent) closed firm on healthy quarterly earnings.

Tata Motors eased 0.32 percent after it launched its new version of sedan Manza. Maruti Suzuki rose 0.87 percent and Hero Honda Motors gained 2.75 percent. Higher base metal prices helped stocks such as Sterlite and Tata Steel end about 0.5 percent higher, while Hindalco lost nearly 2 percent.

Banking stocks such as SBI (up 0.60 percent), HDFC Bank (up 0.98 percent) and ICICI Bank (down 1.63 percent) closed on a mixed note. Mortgage lender HDFC fell over 2 percent. Among software exporters, Infosys rose 1.40 percent, but Wipro and TCS fell around 2 percent each.

In economic news, the government today pegged the economic growth for fiscal year 2010-11 at 8.6 percent versus the 8 percent recorded last year, in line with economists' expectations.

Elsewhere, the other Asian markets closed mostly higher on Monday, as steadily improving employment in the U.S. and healthy corporate profit growth boosted sentiment.

European stocks were higher in early trading and the Dow futures pointed to a firmer start later in the global day, as signs of life in the U.S. labor market help offset worries about the political unrest in Egypt. The euro was a tad higher against the dollar.

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Dollar Comeback Gaining Traction

The dollar continued to rebound against the euro Monday morning in New York, after the government reported a steep drop in the U.S. unemployment rate on Friday.

Additional support for the dollar has been provided by last week's comments from European Central Bank President Jean-Claude Trichet, who suggested that inflationary pressures in the euro zone are likely to be temporary.

Trichet's less hawkish remarks signal the ECB may refrain from hiking rates until year's end.

The dollar was steady near $1.3550 versus the euro this morning, having risen 3 cents from near $1.3850 over the past few sessions.

An indicator of investor sentiment in the Eurozone rose to the highest level in three-and-a-half year high, despite the currency bloc facing debt woes, a new survey showed on Monday.

The dollar has also clawed back above Y82.35 versus the yen, after dropping towards November's 15-year low near Y80.23 last week.

Early losses saw the dollar level off against the sterling, with the pair stuck around $1.6170.

There will be no first tier economic news from the U.S. on Monday, leaving traders to assess Friday's jobs report from the government.

The employment report showed that non-farm payroll employment rose by 36,000 jobs in January following an upwardly revised increase of 121,000 jobs in December. Economists had expected an increase of about 150,000 jobs.

At the same time, the unemployment rate fell to 9.0 percent in January from 9.4 percent in December, with the drop largely reflecting a decrease in the size of the labor force.

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