US & World Daily Markets Financial Briefing 13-01-2011

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Stocks Move Modestly Lower In Early Trading

Stocks have moved modestly lower in early trading on Thursday, although selling pressure has remained subdued, limiting the downside for the markets. The major averages have slipped into negative territory, pulling back off yesterday's multi-year closing highs.

The early weakness in the markets comes as traders digest a mixed batch of economic data, including a report from the Labor Department showing an unexpected increase in initial jobless claims in the week ended January 8th.

The report showed that first-time claims for unemployment benefits rose to by 35,000 to 445,000 from the previous week's revised figure of 410,000. Economists had expected initial claims to slip to 405,000 from the 409,000 originally reported for the previous week.

At the same time, the Labor Department released a separate report showing that its producer price index rose by 1.1 percent in December following an unrevised 0.8 percent increase in November. Economists had been expecting prices to increase by a somewhat more modest 0.8 percent. Excluding a jump in energy prices as well as an increase in food prices, core producer prices edged up by just 0.2 percent in December compared to a 0.3 percent increase in the previous month. The modest increase in core prices matched economist estimates.

In another report, the Commerce Department said that the U.S. trade deficit narrowed to $38.3 billion in November from a revised $38.4 billion in October. The narrower deficit came as a surprise to economists, who had expected the deficit to widen to $41.0 billion.

Also on the economic front, RealtyTrac, an online marketplace for foreclosure properties, said foreclosure filings in December slipped 2 percent sequentially and declined 26 percent from last year. For the year 2010, filings rose about 2 percent from 2009.

In corporate news, American International Group (AIG) is trading higher after announcing that it will conclude its recapitalization process Friday, looking to wrap up its repayment of government aid issued during the 2008 financial meltdown.

Marathon Oil (MRO) is also in the spotlight after the firm's board approved a move that will divide the company into two entities.

Traders are also bracing for quarterly results from chipmaker Intel (INTC), which will release its quarterly report card after the markets close for trading.

While moderate weakness has emerged among trucking, pharmaceutical, and gold stocks, most of the major sectors are showing even more modest moves. Modest strength is visible among oil stocks.

The major averages have edged up off their lows for the young session in the past few minutes but remain in the red. The Dow is down 20.55 points or 0.2 percent at 11,734.89, the Nasdaq is down 6.65 points or 0.2 percent at 2,730.68 and the S&P 500 is down 1.93 points or 0.2 percent at 1,284.03.

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TSX May Struggle To Extend Gains

Bay Street stocks may struggle to sustain gains Thursday morning amid mixed economic data from both sides of the border and flat commodities prices. Profit taking at higher levels, as the main index gathered over 200 points in the past two sessions, may weigh on trader sentiment.

Media and telecommunications stocks may be in focus amid a host of earnings reports from this sector.

Today's data from Canada and the U.S. revealed that their respective trade deficits narrowed in November. Meanwhile, first-time claims for U.S. unemployment benefits unexpectedly jumped last week.

Earlier today, The European Central Bank today left its rates unchanged at 1% and the Bank of England held its rates steady at 0.5%.

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

On Wednesday, the S&P/TSX Composite Index extended gains for a second session, adding 59.16 points or 0.44% to 13,460.21, a fresh 2-year peak.

The price of crude oil was little changed, with crude for February edged down $0.21 to $91.65 a barrel.

The price of gold moved down Thursday morning amid a mixed U.S. dollar. Gold for February was up $6.40 to $1,392.20 an ounce.

In corporate news from Canada, base metals miners Inmet Mining and Lundin Mining signed a merger deal to create a company - Symterra Corp.- valued at $9 billion. Inmet stockholders will receive 3.4918 shares of Symterra for each share held, while Lundin shareholders will receive 0.3333 of Symterra share for each share held.

Communication services provider Cogeco Cable reported lower first-quarter net income of C$33.64 million or C$0.69 per share, compared to C$56.67 million or C$1.16 per share last year. The company declared a quarterly dividend of C$0.17 per share. The company upped its fiscal 2011 revenue guidance to C$1.36 billion, from the previous outlook of C$1.34 billion and raised its net income forecast to C$140 million from C$120 million.

Wireless network industry services provider EXFO Inc. reported improved first quarter net earnings of $14.1 million or $0.23 per share compared to $0.3 million or $0.01 per share in the same quarter last year. Analysts were expecting the company to report earnings of $0.05 per share this quarter. For the subsequent quarter, the company guides net earnings of $0.03 to $0.07 per share, while Street estimates were at $0.08 per share

Wireless communication services provider DragonWave Inc. slipped into the red, reporting third-quarter net loss of $0.05 million or breakeven per share, compared with a net income of $1.2 million or $0.34 per share in the year ago period. Analysts were expecting the company to record a loss of $0.01 per share this quarter.

Satellite Radio Holdings parent company of XM Canada, reported 12.6% jump in first quarter revenues at $15.4 million compared to $13.7 million a year earlier. Average Monthly Subscription Revenue Per Subscriber increased to $11.40 from $11.26 last year, marking the second consecutive quarter of ARPU growth.

Broadband internet services provider Sandvine Corp. swung to profit in fourth-quarter, reporting net income of C$874,000 or C$0.006 per share, compared to loss of C$4.73 million or C$0.035 per share last year.

Television broadcasting company Astral Media reported lower first-quarter net income of C$53.31 million or C$0.93 per share, compared to C$64.64 million or C$1.14 per share last year.

Media company Score Media reported lower first-quarter net income of C$0.84 million compared to C$1.07 million prior year. However, earnings per share remained same at C$0.01 this year and a year earlier.

Xceed Mortgage said its loss for the fiscal year ended October 31, 2010, widened to C$17.63 million or C$0.64 per share from C$3.34 million or C$0.12 per share year ago.

Minerals explorer Augyva Mining Resources said it plans to acquire ferroniobium producer Niocan Inc. in exchange for cash or securities

Gold producer Orosur Mining said its second-quarter net income rose to $2.68 million or $0.04 per share from $0.676 million or $0.01 per share a year ago.

In economic news from Canada, Statistics Canada said said the nation's trade deficit with the rest of the world narrowed to C$81 million in November from C$1.5 billion in October. Economists expected the trade deficit to widen to C$2 million.

From south of the border, the U.S. Labor Department said initial jobless claims rose to 445,000 in the week ended January 08. Economists were expecting the claims to slip to 405,000 from the 409,000 originally reported for the previous week.

Separately, the Labor Department said its producer price index rose by 1.1% in December following an unrevised 0.8% increase in November. Economists were expecting prices to increase by a more modest 0.8%. Excluding the jump in energy prices and an increase in food prices, core producer prices edged up by just 0.2% in December compared to a 0.3% increase in the previous month.

Meanwhile, a report from U.S. Commerce Department revealed that the trade deficit narrowed to $38.3 billion in November from a revised $38.4 billion in October. Economists were expecting the deficit to widen to $41.0 billion from the $38.7 billion originally reported for the previous month.

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French Market Moderately Higher

The French market is moderately higher in afternoon trading Thursday, led by banks and construction stocks. Sentiment was influenced by mostly positive cues from Asia/Pacific.

In economic news, the country's consumer price index rose 1.8% year-on-year, faster than 1.6% in November, statistical office INSEE said. Economists had forecast an inflation rate of 1.7%. Month-on-month, the index increased 0.5%, after a 0.1% gain in the previous month, a tad above economists' expectations for a 0.4% rise.

Germany's wholesale price inflation increased to 9.5% in December from 7.8% in November, data from the Federal Statistical Office showed. This was the highest annual rate since July 2008, when the annual rise in wholesale prices was 9.8%.

The European Central Bank maintained its key interest rate at a historic low of 1% for the 20th straight month. The decision came in line with economists' expectations.

The Bank of England left its key interest rate unchanged at a record low again as expected and retained the size of the quantitative easing at GBP 200 billion.

After opening higher at 3,951, the CAC 40 index has mostly remained in positive territory. The index is currently adding 0.42%.

Banks Societe Generale, BNP Paribas, Credit Agricole and Natixis are gaining between 4.6% and 2.2%.

Building products maker Saint-Gobain is adding 2.7%. Builders Vinci and Bouygues are moderately higher. Cement giant Lafarge is up 0.3%. Steel giant ArcelorMittal is declining 1.9%.

Insurer Axa is up 4.5% and engineering group Alstom is higher by 2.2%. Carmaker Renault is up 0.1%, while Peugeot is declining 0.6%.

Those making notable gains include Alcatel Lucent, utility EDF and Veolia Environnement.

Personal care products maker Loreal and luxury goods conglomerate LVMH are notably lower. Hotel group Accor is down 0.9% and department stores operator PPR is falling 0.7%. Airbus maker EADS is losing 0.6%.

Elsewhere in Europe, the UK's FTSE 100 is losing 0.29% while the German DAX is adding 0.01%.

Across Asia/Pacific, most major markets ended higher. Australia's All Ordinaries added 1.44%, and China's Shanghai Composite Index gained 0.22%. Hong Kong's Hang Seng and Japan's Nikkei 225 rose 0.47% and 0.73%, respectively. However, India,'s BSE Sensex lost 1.80%.

In the U.S., futures point to a mixed open on Wall Street. In the previous session, the Dow rose 0.7%, the Nasdaq advanced 0.8% and the S&P 500 jumped 0.9%.

In commodities, crude for February delivery is adding $0.06 to $91.92 per barrel and gold is declining $1.7 to $1384.1 a troy ounce.

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Indian Market Tumbles On Infosys Results, FII Selling

Muted third-quarter results and flattish revenue guidance from Infosys and continued selling by foreign funds amid mounting inflation worries and signs of strength in the dollar index dragged the Indian market sharply lower on Thursday.

After Wednesday's short covering-led rally, the major indexes looked a bit weaker in early trading owing to Infosys' disappointing results. As the day progressed, selling intensified in banking, IT, consumer durable and metal stocks, thus wiping out all of yesterday's gains.

Infosys plunged nearly 5% after its third-quarter earnings lagged estimates. "The weaker economic recovery in developed markets coupled with high unemployment and risk of sovereign default could impact industry growth," Infosys CEO and MD S Gopalakrishnan said. Other IT stocks such as Wipro (down 2.67%), TCS (down 1%) and HCL Technologies (down 3.10%) also lost ground.

Banking stocks fell on profit taking after yesterday's surprise rebound. SBI and ICICI Bank tumbled nearly 4% each, HDFC Bank fell 3% and Axis Bank declined 3.5%. Punjab National Bank, which announced restructuring of its existing joint ventures with Principal Financial Group of Mauritius and Vijaya Bank, ended down 4.65%.

Among other prominent decliners, NTPC, Reliance Infrastructure, Hindalco Industries, Reliance Industries, Mahindra & Mahindra, Tata Steel, HDFC, Jindal Steel and Hero Honda Motors ended down between 1% and 2%.

However, Tata Motors (up 1.58%), ONGC (up 1.04%), DLF (up 0.61%) and Reliance Communication (up 0.14%) bucked the weak trend.

The benchmark 30-share Sensex ended down 351 points or 1.80% at 19,183, while the 50-share Nifty lost 111 points or 1.90% to close at 5,752. After witnessing some buying early in the session, the broader market also closed in the red. The BSE mid-cap and small-cap indexes ended down 0.80% and 0.65%, respectively. On the BSE, declining shares outpaced gainers in the ratio of 1.53:1.

Birla Corporation eased 0.73% after it signed a pact to set up a greenfield cement plant in Assam at a cost of Rs.450 crore. Sintex Industries shed 0.80% after reporting a 56% rise in its third-quarter consolidated net profit.

SKS Microfinance rose a percent despite a brokerage downgrade. Elecon Engineering edged up 0.63% on winning a Rs.24.83-crore contract. Hindustan Construction Company posted a modest 0.11% gain after it decided to invest Rs.1,200 crore to set up a renewable energy project in Gujarat.

Meanwhile, after rising for five consecutive weeks, India's annual food inflation for the week ended Jan 1 fell to 16.91% from 18.32%, while the fuel price index for the week eased to 11.53% versus 11.63% last week, government data released today showed, offering some respite to the government which has been conducting hectic meetings with senior ministers to check price rise.

According to reports, the government is likely to announce some measures later in the day to combat rising food prices. These include suspension of sugar and wheat exports and removing essential commodities from the futures market.

Elsewhere, the other Asian markets closed mostly higher on Thursday as Portugal's successful debt auction eased concerns that the country will need a financial bailout.

The key benchmark indexes in China, Hong Kong and Japan rose between 0.22% and 0.73%. However, South Korea's KOSPI average slipped 0.26% in the wake of surprise rate hike from the central bank.

The members of the Bank of Korea monetary policy board voted to raise interest rates by 25 basis points to 2.75 percent, surprising analysts who had widely expected no change for the second straight meeting.

European stocks were mixed in early trading Thursday ahead of Italian bond auction and interest rate decisions from the Bank of England and the European Central Bank later in the day. Following Wednesday's Portuguese auction, Spain today sold €3 billion, or $3.9 billion, of five-year bonds at a yield of 4.54 percent successfully, early reports suggest. The U.S. index futures fluctuated before Intel's results and data on weekly jobless claims.

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Dollar Drops As ECB, BoE Hold Steady On Interest Rates

The dollar extended this week's losses versus the euro and sterling Thursday morning in New York amid a pair of key interest rate decisions from across the Atlantic.

Policy makers in the UK and the euro area held steady on interest rates, as expected. However, traders will be looking closely at accompanying commentary from European Central Bank President Jean-Claude Trichet, who speaks at 8:30 am ET.

The Bank of England kept its key interest rate at a record low 0.5 percent, shrugging off recent figures showing inflation is heating up in the UK.

The ECB stayed at 1 percent, and with a sovereign debt crisis and severe austerity measures making growth difficult on the periphery of the euro area, the central bank is unlikely to move very quickly to tighten monetary policy.

The dollar dropped to $1.3175 versus the euro, moving back into December's narrow trading range. A short-lived rally took the dollar to a 4-month high of 1.2783 earlier this week.

A successful bond auction for Spain helped support the euro.

The dollar dropped to a monthly low of $1.5780 versus the sterling, and was stuck near Y83 against the yen.

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