US & World Daily Markets Financial Briefing 14-10-2010

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 Stocks are showing a lack of direction in mid-morning trading on Thursday, following a mixed batch of economic reports including a larger than expected pickup in jobless claims in producer prices.

The major averages continue to see choppy trading as they linger near the flat line. The Dow is up by 0.19 points at 11,096.27, the Nasdaq is up by 0.84 points at 2,441.78, while the S&P 500 is down by 1.43 points at 1,176.67.

Stocks hit their highest in five months yesterday, amid talk of further easing measures by the Federal Reserve.

Before the start of trading, the Labor Department released a report showing that initial jobless claims rose to 462,000 in the week ended October 9th from the previous week's revised figure of 449,000. Economists had expected jobless claims to edge up to 450,000 from the 445,000 originally reported for the previous month.

In a separate report, the Labor Department said its producer price index rose by 0.4 percent in September exceeding forecasts, which projected prices to increase by 0.2 percent.

Excluding the jump in food prices as well as a moderate increase in energy prices, the core producer price index edged up by a more modest 0.1 percent in September. The increase in core prices came in line with economist estimates.

Further, the Commerce Department released a report showing that the trade deficit widened to $46.3 billion in August, while economists expected the deficit to widen to $44.5 billion.

Yahoo (YHOO) is in focus amid news that internet rival AOL Inc. (AOL) is preparing a takeover bid partnering with a number of private equity firms.

Meanwhile, Apollo Group (APOL) is under pressure after the for-profit educator announced that its fiscal fourth-quarter profit declined to $41 million, or 28 cents a share, from $91.5 million, or 59 cents a share, in the year-ago period. The company rescinded its 2011 outlook, citing industry uncertainty in the wake of increased government regulation.

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Bay Street stocks are poised for a positive open Thursday amid firm commodities prices as the U.S dollar continued to trade weak versus a basket of currencies. Speculation that the U.S. government will start injecting more money into the weak economy to give it another boost has been pressurizing the dollar for the past few weeks.

However, stocks may face selling pressure at higher levels after having gained over 200 points or nearly 2% in the past three sessions.

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

Meanwhile, the Canadian dollar hits parity with the U.S. dollar, its highest level since April 2010.

On Wednesday, the S&P/TSX Composite Index added 97.67 points or 0.78% to 12,673.31, it fresh 2-year high.

The price of crude oil edged up near its 5-month high as traders await the official weekly crude oil inventories data from the EIA. Wednesday after the markets close, the API said U.S. crude inventories fell by 4 million barrels last week, partly because of the closure of the Houston Ship Channel. Gasoline stocks also fell by 1.9 million barrels. Analysts were expecting 1.2 million barrels build in crude oil inventories and 1.3 million drop in distillates stocks last week.

Crude for November was up $0.49 to $83.50 a barrel.

The price of gold continued to surge to record highs amid a weak U.S. dollar. Gold for December gained $7.00 to $1,377.50 an ounce, after hitting an intraday high of $1,388.10.

In corporate news from Canada, independent power producer Atlantic Power Corp. (ATP.TO) said that it priced its public offering of 5.24 million of common shares at $13.35 per share for a net proceeds of approximately $75.6 million, including over-allotment option. The company also plans to raise $70 million by offering convertible debentures.

Natural gas explorer Fairborne Energy (FEL.TO) said it's lenders increased bank credit facility base to C$325 million from C$285 million.

Wireless network products maker DragonWave Inc. (DWI.TO) said it acquired Axerra Networks Inc. for $9.50 million, which could move up to $15.5 million if the latter meet certain revenue growth targets over the next 16 months.

Office properties developer Brookefield Properties Corp. (BPO.TO: News ) said it has increased the size of its proposed preferred shares offering to $300 million from the earlier $200 million.

Beer maker Brick Brewing Co (BRB.TO) announced the launch of their new Red Baron Platinum Light, a light beer with only 60 calories per bottle.

YM BioSciences (YM.TO) said it appointed Nick Glover as CEO effective November 18, 2010. Before joining the company in June 2010, Glover served as the President and Chief Executive Officer at Viventia Biotech Inc.

Mineral explorer Diadem Resources (DRL.V) said it would acquire a private company, which holds working interest in a substantial development stage mineral asset in central Africa, by issuing 7.0 million common shares and 1.0 million performance warrants.

In economic news, Statistics Canada said merchandise exports rose 3.1% to C$34.0 billion in August, snapping two months of declines. Industrial goods and materials and other consumer goods accounted for over three-quarters of the growth.

From the U.S, the Labor Department said jobless claims rose by 13,000 to a seasonally adjusted 462,000 last week, surpassing economists' expectations for claims of 450,000.

In another report, the U.S. Commerce Department said trade deficit widened to $46.3 billion in August from a revised $42.6 billion in July. Economists were expecting the deficit to widen to $44.5 billion from the $42.8 billion originally reported for the previous month.

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Mixed trading is being witnessed Thursday afternoon among the major markets in Europe. While the DAX index in Germany and CAC-40 in France are trading in positive territory with modest gains, the FTSE 100 index in the UK is trading in negative territory. Profit taking after a rally that lifted the major indices to a fresh five-month high in the previous session is attributed as the reason for the pause in the markets.

The German DAX 30 index is presently gaining 29.63 points, or 0.46%, at 6,464, and the CAC-40 index in France is marginally up 0.15%, or 5.70 points, at 3,834; However, the FTSE 100 Index in the UK is down 15.62 points, or 0.27%, at 5,732.

Crude oil for November delivery is higher by $0.40 a barrel at $83.41, while December gold is trading at 1,377 a troy ounce, up 0.57% from previous close.

With no major economic data on tap for the day, traders took some profits and await more economic data from the US, especially the jobless claims, for more cues on global economic recovery and the much-awaited quantitative easing measures from the Federal Reserve.

In the UK, profit taking is being witnessed among the lenders, defensives and airline stocks while miners extend gains on higher commodity prices.

Among the lenders, Barclays is down 3.00%, HSBC Holdings is down 0.52%, and Lloyds is losing 1.31%. Standard Chartered, however, is presently gaining 0.91%.

Among miners, Vedanta Resources is losing 2.00%; however, Rio Tinto, Kazakhmys, Antofagasta and BHP Billiton are trading in positive territory with modest gains.

The major losers include MAN Group, Diageo, Astrazeneca, GlaxoSmithkline and Carnival.

Energy stocks also witness mixed trading. BP and Essar Energy are trading in the red, while Tullow Oil is up 0.16%.

In Frankfurt, the major loser is Infineon Technology, down 0.97%, followed by Deutsche Post, down 0.71% and Thyssenkurup which is sliding 0.17%.

Among lendes, Commerzbank is declining 1.18% while Deutsche Bank is edging up 0.18%.

Mixed trading is being witnessed among the automakers. Volkswagen is gaining 0.45%, while BMW and Daimler are trading in negative territory.

Fresnius VZ is leading the pack of gainers, followed by Siemens, Linde and E on N.

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Asian Markets Mostly End Higher

Asian markets open for trading on Thursday, except the markets in India and Singapore, ended the trading session in positive territory, extending gains from the previous session taking cues from the Wall Street where the major averages rose to a new five-month high on positive earnings from bellwether Intel and financial giant JP Morgan Chase. Increasing optimism about quantitative measures from the Federal Reserve lifted the indices even as the greenback declined to a 15-year low against the Japanese yen and slipped against other major currencies. The markets in India and Singapore ended in negative territory on profit taking.

In Australia, the benchmark S&P/ASX200 Index surged up 79.20 points, or 1.71%, and closed at 4,699 points, while the All-Ordinaries Index ended at 4,766, representing a gain of 74.80 points, or 1.59%.

On the economic front, a statement released by the Melbourne Institute revealed that Australia's median consumer inflationary expectations surged to 3.8% in September from 3.1% in August. The proportion of consumers expecting inflation to be within the RBA's 2-3% target range fell slightly in September, reaching 15.1% from 19%. In contrast, inflation expectations of managers and professionals decreased from 3.4% to 3.3%, suggesting that not all respondents share the view that inflation will rise strongly.

Resource related stocks ended in positive territory. BHP Billiton gained 2.06%, Rio Tinto surged up 4.40%, Fortescue Metals added 1.27%, Gindalbie Metals climbed 3.60%, Iluka Resources was higher by 3.76%, Macarthur Coal edged up 0.31%, Mincor Resoruces advanced 0.50% and Oz Minerals increased by 3.50%.

Oil related stocks also ended in positive territory. Woodside Petroleum gained 1.53%, Santos Ltd advanced 0.86%, ROC Oil Ltd surged up 3.61%, Origin Energy gained 1.73% and Oil Search Ltd rose 2.73%.

Financial stocks also ended in positive territory on optimism about global economic recovery, albeit at a slower pace. ANZ Bank advanced 1.57%, Commonwealth Bank of Australia gained 2.36%, National Australia Bank rose 1.86% and Westpac Banking Corp. climbed 2.48%. However, investment banker Macquarie Group bucked the positive trend and ended in negative territory with a loss of 1.11%.

In Japan, the benchmark Nikkei 225 Index advanced 180.00 points, or 1.91%, to 9,583, while the broader Topix index of all First Section issues gained 14.30 points, or 1.74%, to 837.

On the economic front, a statement released by the Bank of Japan revealed that an index measuring the prices for domestic corporate goods declined 0.1% on year in September, standing at 102.8. That was slightly below analyst expectations for a flat reading following an unchanged reading in August. Export prices were down 0.5% on month and 5.0% on year, while import prices eased 0.1% on month but added 2.8% on year. On month, the CGPI was unchanged, matching both expectations and the previous month's reading. On a quarterly basis, prices were down 0.2% on quarter and 0.1% annualized, also with an index score of 102.8.

All the 33 sectors in the market ended in positive territory on optimism about sustaining economic recovery.

Securities stocks were the major gainers. Nomura Holdings surged up 5.57%, Daiwa Securities Group climbed 4.08%, Matsui Securities rose 2.99% and Mizuho Securities gained 4.40%.

Real estate stocks also ended in positive territory. Sumitomo Realty & Development surged up 4.36%, Mitsui Fudosan climbed 4.51%, Tokyu Land Corp rose 3.80% and Heiwa Real Estate was up 3.72%.

After rallying in the previous session, the Indian market fell sharply on Thursday, as investors took profits at higher levels despite positive global cues. After moving in a narrow range till noon, the BSE Sensex saw a late-session plunge to 20, 443 before finally ending down 190 points or 0.92% at 20,498, with 25 of its components declining. The broader Nifty fell sharply in the late afternoon to end down 57 points or 0.91% at 6,177.

Among the other markets in the region, China's Shanghai Composite Index added 18.27 points, or 0.64% to close at 2,880, Hong Kong's Hang Seng Index surged up 394.58 points, or 1.68%, to 23,852, Jakarta Composite Index in Indonesia added 6.50 points, or 0.18%, to 3,618, Seoul Composite Index in South Korea advanced 23.61 points, or 1.26%, to close at 1,900, and Taiwan Weighted Index increased 108.79 points or 1.34% to 8,215. However, the Strait Times Index in Singapore bucked the trend and ended in negative territory with a loss of 7.14 points, or 0.22%, at 3,195.

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Euro Briefly Back Above $1.41 For First Time Since January

The euro rallied above $1.41 versus the dollar for the first time since January, after unexpected tightening from Singapore highlighted difference on monetary policy between Europe and the United States.

The European Central Bank has taken a wait-and-see approach and appears hesitant to offer further support for the sluggish economy, while the policy makers in the US are expected to embark on a second round of asset purchases in November.

Some central banks are more fearful of inflation, while others have warned against the dangers of pulling back to quickly on stimulus.

In fact, the European Central Bank said today that raising interest rates could be an effective way to pop asset-price bubbles. Despite lingering economic weakness, energy, metal and agricultural prices are rising sharply.

With the effective interest rate gap between the euro zone and US seen widening by years end, the euro has skyrocketed in the past few weeks.

The euro hit $1.4121 in early dealing versus the dollar, then leveled off to 1.4070 after some mixed economic data from the US.

The US trade deficit widened more than expected, and initial jobless claims jumped to 462,000 for the week ended October 2. Meanwhile, producer prices increased by much more than expected in the month of September, as corn costs soared.

The euro held above Y114.50 versus the yen, staying well away from a 9-year low of 105.41 set back in August.

And the euro was only slightly weaker versus the sterling, easing to 0.8770 after touching a 5-month high above 0.8835 earlier in the week.

The Bank of England should now start gradual adjustment of monetary policy in line with economic developments, hawkish policy maker Andrew Sentance said late Wednesday.

"The improvement we have seen in the economy over the last year and the above-target inflation we have experienced point to the need to begin the process of withdrawing the very substantial level of monetary stimulus," he said in a speech to the British American Business Council.

The German economy would grow more than expected this year and next, leading the Eurozone economic recovery, major think tanks of the country said in a joint forecast released Thursday. The economic research institutes, which include Ifo, Kiel, Halle and RWI Essen, now see 2010 German growth at 3.5%, up from just 1.5% predicted in April.