US & World Daily Markets Financial Briefing 14-12-2010

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Stocks Move Slightly Higher In Early Trading

Stocks are seeing modest strength in early trading on Tuesday, as traders react positively to a report showing stronger than expected retail sales growth. The major averages are currently all in positive territory after ending the previous session mixed.

The early strength in the markets comes after the Commerce Department released a report showing that retail sales increased by more than expected in the month of November.

The report showed that retail sales rose by 0.8 percent in November following an upwardly revised 1.7 percent increase in October. Economists had expected sales to increase by 0.5 percent compared to the 1.2 percent growth originally reported for the previous month.

A jump in sales by clothing and accessories stores contributed to the stronger than expected retail sales growth, with sales at clothing and accessories stores surging up by 2.7 percent.

Nonetheless, buying interest remains relatively subdued ahead of the Federal Reserve's interest rate announcement. While the Fed is likely to leave rates unchanged, traders will be paying close attention to its accompanying statement.

The limited buying interest also comes after consumer electronics retailer Best Buy (BBY) posted third-quarter earnings of $0.54 per share, short of estimates for $0.61 per share. Revenues for the quarter slipped to $11.89 billion from $12.02 billion, well short of forecasts for $12.47 billion for the quarter.

For fiscal 2011, Best Buy expects earnings in the range of $3.20 to $3.40 per share compared with its prior guidance of $3.55 to $3.70 per share. Analysts project full-year earnings of $3.59 per share.

Also today, the Labor Department said its producer price index increased by 0.8 percent in November after rising by 0.4 percent in each of the two previous months. The price growth exceeded economist estimates for a 0.5 percent increase in prices.

Excluding a significant increase in energy prices as well as an increase in food prices, the core producer price index increased by a more modest 0.3 percent in November compared to a 0.6 percent drop in October. Economists had expected core prices to increase by 0.2 percent.

Healthcare provider, biotechnology and utilities stocks are seeing modest strength, although the gains are being offset by weakness among electronic storage and real estate stocks.

The major averages have pulled back off their highs for the young session but currently remain positive. The Dow is up 25.20 points or 0.2 percent at 11,453.76, the Nasdaq is up 2.97 points or 0.1 percent at 2,627.88 and the S&P 500 is up 1.72 points or 0.1 percent at 1,242.18.

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TSX May Edge Down At Open

Canadian stocks may edge down at open Tuesday as commodities were struggling to extend gains. Traders are also digesting a mixed batch of economic data from both sides of the border, while profit taking may not be ruled out at higher levels as the main index settled at a fresh 2-year peak in the previous session.

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

On Monday, the S&P/TSX Composite Index closed at a fresh 2-year peak, adding 56.39 points or 0.43% to 13,295.86.

The price of crude oil was little changed, with crude for January edging down $0.04 to $88.57 a barrel.

Gold for February edged up $3.0 to $1,401.00 an ounce.

In the M&A patch, oil giant BP plc said it would sell almost all of its exploration and production assets in Pakistan to United Energy Group Ltd. for $775 million in cash.

In corporate news from Canada, telecommunication services provider TELUS Corp. said its revenues for 2011 are expected between C$9.925 billion and C$10.225 billion and earnings per share are targeted in the range of C$3.50 to C$3.90.

Fertilizer maker Agrium Inc. said it is planning to sell the commodity management business of Australian grain producer AWB Ltd., which it recently acquired for $1.2 billion.

Development stage natural resources company PhosCan Chemical swung to profit in third quarter, reporting net income of C$174,742, compared with a net loss of C$287,238 a year earlier.

Gold producer Orvana Minerals slipped in to the red in 2010, reporting net loss of C$2.4 million or C$0.02 per share compared with net income of C$13.4 million or C$0.12 per share. The company expects annualized gold production to increase from about 28,000 ounces to nearly 120,000 ounces, early in 2012 and annualized copper and silver production are expected to increase substantially to over 12,000 tonnes and to 750,000 ounces respectively.

Oil and gas explorer TransGlobe Energy said its output rose to a record 10,957 Barrels of oil per day in November and noted its capital program for 2011 would be a 28% increase over fiscal 2010 at $90.0 million.

Aviation company Discovery Air Inc reported that its third-quarter net earnings grew to C$4.02 million or C$0.03 per share, from C$1.67 million or C$0.01 per share in the prior year.

Copper and gold miner Rambler Metals and Mining Plc reported a narrower first quarter pre-tax loss of $268,000 or $0.003 per share compared to $515,000 or $0.008 per share in the year ago period.

In economic news, Statistics Canada said the number of new motor vehicles sold in October edged down 0.3% to 134,427 units. Economists expected new vehicle sales to rise 3.3%. Lower sales of trucks were partially offset by higher sales of passenger cars.

Separately, the agency said labor productivity of Canadian businesses edged up 0.1% in the third quarter, after falling a revised 0.6% in the second quarter. Economists expected labor productivity to decline 0.1%, following the 0.8% decline initially reported for the second quarter.

From the U.S., the Commerce Department said retail sales rose by 0.8% in November following an upwardly revised 1.7% increase in October. Economists were expecting sales to increase by 0.5% compared to the 1.2% growth originally reported for the previous month. Excluding a 0.8% drop in sales by motor vehicle and parts dealers, retail sales increased by 1.2% in November compared to a revised 0.8% increase in October. Ex-auto sales had been expected to increase only by 0.6%.

In another report, the U.S. Labor Department said its producer price index increased by 0.8% in November after rising by 0.4% in each of the two previous months. Economist were expecting only for a 0.5% increase in prices.

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French Market Modestly Down

The French market has been fluctuating between gains and losses in afternoon trading Tuesday, as global economic worries re-emerged overshadowing positive cues from Asia/Pacific. The market is currently modestly down. Lenders were mixed, while carmakers were lower.

In economic news, French annual inflation remained at 1.6% in November, the statistical office Insee said. The expected rate was 1.7%. The consumer price index rose 0.1% month-on-month in the month.

German economic sentiment rose more than expected in December, results of a key survey conducted by the Centre for European Economic Research or ZEW showed. ZEW said its economic sentiment indicator for Germany climbed to 4.3 points from November's 1.8 points. Economists had forecast an increase to 3.9 points.

Eurozone industrial production grew 6.9% year-on-year in October, faster than a 5.4% rise in the previous month, the Eurostat said. Economists were looking for an increase of 7.6%.

The consumer price index in the U.K. rose 3.3% year-on-year following a 3.2% increase in October, the Office for National Statistics said. Economists had expected inflation to stay unchanged at 3.2%. On a monthly basis, the CPI climbed 0.4% in November after rising 0.3% in October, faster than the expected increase of 0.3%.

The CAC 40 opened slightly higher at 3,894, but has been witnessing volatile trading. The index is currently losing 0.21%.

Schneider Electric is leading the decliners by falling 1.3%. Insurer Axa is down 1.2%. Airbus maker EADS and oil & gas services firm Technip are lower by 0.9% each.

Carmaker Renault is dropping 1.1% and Peugeot is losing 0.2%.

Banks BNP Paribas and Natixis are moderately lower, while Credit Agricole and Societe Generale are modestly up.

Builder Vinci is down 0.3%, while Bouygues is adding 0.2%. Saint-Gobain is losing 0.1%.

Suez Environnement is adding 2.85% and peer Veolia Environnement is rising 1.5%. Advertising firm Publicis Groupe is rising 1.35%.

Elsewhere in Europe, the UK's FTSE 100 is adding 0.09% and the German DAX is sliding 0.15%.

Across Asia/Pacific, major markets ended in positive territory. Australia's All Ordinaries gained 0.20%, Hong Kong's Hang Seng rose 0.49% and China's Shanghai Composite Index added 0.14%. Japan's Nikkei 225 gained 0.22% and India's BSE Sensex added 0.55%.

In the U.S., futures point to a slightly higher open on Wall Street. In the previous session, the Nasdaq declined 0.5%, while the Dow gained 0.2% and the S&P 500 drifted up by less than a point.

In commodities, crude for January delivery is trading lower by $0.25 at $88.36 and February gold is advancing $8.9 to $1406.9.

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Asian Markets End In Positive Territory Amid Cautious Trading

Asian markets open for trading on Tuesday ended in the session in positive territory with modest gains on increasing optimism about global economic recovery. Speculation that China will not take drastic steps to cool off its economy and weakening US dollar against the euro and the yen lifted commodity stocks and the markets in general. However, cautious trading ahead of the year-end and slew of economic data impacted market sentiment.

In Australia, the benchmark S&P/ASX200 Index gained 9.80 points, or 0.21%, and closed at 4,767 points, while the All-Ordinaries Index ended at 4,851, representing a gain of 9.70 points, or 0.20%.

On the economic front, data released by the Australian Bureau of Statistics revealed that the total number of new dwelling construction starts in the country declined by a seasonally adjusted 13.2% in the September quarter, following a 2.1% increase in the June quarter. The bureau reported that a seasonally adjusted 39,399 new dwelling units begin in the September quarter, of which 25,771 were private sector houses. The data further revealed that for the full year, total dwelling construction starts were up 12.4% in seasonally adjusted terms. Private sector new housing starts declined 4.3% in the September quarter, following a 4.5% decline in the June quarter.

Results of a monthly business survey conducted by the National Australia Bank revealed that an indicator of Australian business confidence fell in November, reflecting increasing uncertainty in the economic environment. As per the results, the business confidence index fell to 6 during November from 8 reported for the previous month. The business conditions index, however, increased to 4 for the month from 2 reported for the previous month.

Light sweet crude oil futures for January delivery was trading at $88.50 a barrel in electronic trading, down $0.11 per barrel from previous close at $88.61 a barrel in New York on Monday.

Resource related stocks ended in positive territory on optimism about sustained demand for commodities from China. BHP Billiton added 0.46%, Rio Tinto edged up 0.15%, Fortescue Metals gained 1.50%, Gindalbie Metals climbed 2.27%, Iluka Resources surged up 3.08%, Mincor Resources rose 1.68%, Minara Resources was up 3.08% and Oz Minerals soared 5.81%.

Energy-related stocks also ended in positive territory on optimism about global demand. Woodside Petroleum gained 1.43%, Santos Ltd advanced 0.87%, ROC Oil Ltd climbed 2.63% and Origin Energy remained unchanged from previous close. However, Oil Search bucked the positive trend and ended in negative territory with a loss of 0.86%.

Stocks of major retailers also ended in positive territory. David Jones advanced 0.71%, Harvey Norman added 0.34%, Wesfarmers edged up 0.03% and Woolworths increased by 0.23%.

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Banks ended in negative territory limiting the overall gains on concerns about competition in the banking sector. ANZ Bank slipped 0.62%, Commonwealth Bank of Australia shed 1.07%, National Australia Bank shed 0.24%, and Bank of Queensland fell 1.37%. However, Westpac Banking Corp. bucked the trend and ended in positive territory with a gain of 0.44%.

In Japan, the benchmark Nikkei 225 Index was up 22.88 points, or 0.22%, to 10,317, while the broader Topix index of all First Section issues gained 4.49 points, or 0.50%, to 902.

On the economic front, a report released by the Ministry of Economy, Trade and Industry revealed that Japanese industrial production declined 2% month-on-month in October. The decline for October was revised from 1.8% fall estimated initially. On a yearly comparison, it grew 4.3%. The report further revealed that capacity utilization dropped by a seasonally adjusted 2.3% in October from the previous month after recording a 1.1% fall in September. On an unadjusted basis, it dipped 6.5% from September and grew 6.1% annually.

Impex Corp., engaged in oil exploration and mining, gained 2.56%.

Stocks of securities and brokerage houses continued to rise on optimism about economic recovery. Matsui Securities surged up 2.53%, Daiwa Securities Group soared 2.89%, Mizuho Securities climbed 4.11% and Nomura Holdings rose 1.54%.

Real estate related stocks ended in positive territory. Mitsubishi Estate Co., gained 1.97%, Sumitomo Realty & Development advanced 1.07%, Mitsui Fudosan Co., rose 1.17%, Tokyo Takemono climbed 2.83%, Heiwa Real Estate added 0.79% and Tokyu Land Corp. was higher by 2.07%.

Profit taking limited the gains as traders resorted to book some profits after the index reached a 7-month high in recent rally amid cautious trading ahead of key economic reports during the course of the week.

Among the losers, Bridgestone Corp., slipped 0.72% and the Yokohama Rubber Co., declined 1.14%.

The Indian market extended gains for the third successive day lifted by positive trading across other markets in the region that more than offset mixed closing on Wall Street in the previous session. The weakening of the US dollar against the euro and the yen, optimism that China will not take drastic measures to cool off its economy and surprise drop in wholesale price index for the latest month helped lift market sentiment. The benchmark 30-share index, BSE Sensex gained 107.41 points or 0.55% at 19,799.19. Meanwhile, the broad based NSE Nifty climbed by 36.45 points or 0.62% at 5,944.10.

Among the other markets in the region, China's Shanghai Composite Index added 4.12 points, or 0.14% to close at 2,927, HongKong's Hang Seng Index gained 113.58 points, or 0.49% to close at 23,431, Seoul Composite Index in South Korea rose 12.46 points, or 0.62%, to close at 2,009, and Taiwan Weighted Index edged higher by 3.84 points or 0.04% to close at 8,740. However, Jakarta Composite Index in Indonesia slipped 2.57 points, or 0.07%, to close at 3,690 and Singapore's Strait Times Index declined 5.41 points, or 0.17%, to close at 3,177.

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