US & World Daily Markets Financial Briefing 15-02-2011

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Stocks See Initial Weakness On Retail Sales Data

Stocks have shown a notable move to the downside in early trading on Tuesday, with traders cashing in on recent strength in the markets following the release of weaker than expected retail sales data. The major averages have all slipped well below the unchanged line.

The weakness in the markets comes after the Commerce Department released a report showing that retail sales rose by less than economists had been expecting in the month of January, although sales rose for the seventh consecutive month.

The report showed that retail sales edged up by 0.3 percent in January following a downwardly revised 0.5 percent increase in December. Economists had expected sales to increase by 0.5 percent compared to the 0.6 percent increase originally reported for the previous month.

Excluding auto sales, retail sales still rose by 0.3 percent, although the increase was also below forecast for 0.5 percent growth.

Meanwhile, the New York Federal Reserve said its general business conditions index rose to 15.4 in February from 11.9 in January, with a positive reading indicating growth in regional manufacturing activity. Economists had been expecting the index to rise to a reading of 15.0.

Coming up, the Commerce Department is scheduled to release its business inventories report for December at 10:00 a.m. ET. The report is expected to show a 0.6 percent increase in business inventories compared to the 0.2 percent increase recorded in the previous month.

At the same time, the National Association of Home Builders is scheduled to release the results of its February survey on homebuilder confidence. The index is expected to rise to 17 from 16.

Commercial real estate, telecom, and housing stocks are seeing moderate weakness in early trading, although selling pressure remains subdued. On the other hand, early strength has emerged among gold stocks, which are moving higher along with the price of the precious metal.

The major averages have bounced off their lows for the young session but currently remain in the red. The Dow is down 41.13 points or 0.3 percent at 12,227.06, the Nasdaq is down 7.99 points or 0.3 percent at 2,809.19 and the S&P 500 is down 3.99 points or 0.3 percent at 1,328.33.

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SX Looks To Extend Gains At Open Tuesday

Toronto stocks may open higher Tuesday amid firm commodities prices and positive cues from the global stock markets. Commodities were leveling off from their recent lows after China reported slower-than-expected inflation.

Global equity markets were mostly higher Tuesday as traders digested news that China's inflation had risen less than feared and Japan's economic prospects were improving amid stronger global demand.

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

On Monday, the S&P/TSX Composite Index advanced to a fresh 32-month high, adding 144.01 points or 1.05 percent to 13,910.77.

The price of crude oil edged up after slower-than-expected Chinese inflation tempered concern monetary policy will be tightened aggressively for the world's second-largest oil consumer of oil. Crude for March was up $1.00 to $85.81 a barrel.

The price of gold moved up amid inflation concerns after China's inflation exceeded the government's 2011 target for a fourth month. Gold for April added $10.70 to $1,375.80 an ounce.

In corporate news from Canada, integrated energy company Husky Energy reported lower fourth quarter net earnings of C$305 million or C$0.35 per share compared to C$320 million or C$0.38 per share last year. Adjusted net earnings were C$328 million or C$0.38 per share, down from C$334 million or C$0.39 per share in the same quarter last year.

Gold miner Orvana Minerals slipped in to the red in first quarter, reporting a net loss of $21.0 million or $0.18 per share, compared to net income of $1.2 million or $0.01 per share in the year-ago quarter.

Construction products company Canam Group reported lower fourth quarter net earnings of $0.76 million or $0.02 per share compared to $5.06 million or $0.11 per share a year ago. Analysts were expecting the company to report earnings of C$0.06 per share for the quarter. The company approved a quarterly dividend of $0.04 per share.

Pulp maker Mercer International Inc. reported improved fourth quarter net income of EUR 35.3 million or EUR 0.63 per share compared to EUR 2.7 million or EUR 0.07 per share a year ago.

Oil and gas explorer Centric Energy announced that its shareholders has approved the acquisition of the company by Somalia focused oil explorer Africa Oil Corp.

In economic news from south of the border, the U.S. Commerce Department said retail sales rose 0.3 percent to $381.6 billion in January compared to the previous month, following a downwardly revised 0.5 percent advance in December. Economists expected retail sales to rise 0.5 percent in January.

Separately, the Federal Reserve Bank of New York said its general business conditions index rose to 15.4 in February from 11.9 in January. Economists were expecting the index to rise to a reading of 15.0.

Earlier today, China reported that its consumer prices rose 4.9 percent in January from a year earlier after a 4.6 percent gain in December. Economists had anticipated a 5.4 percent gain in the consumer price index. Meanwhile, producer-price inflation quickened to 6.6 percent from 5.9 percent.

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French Market Moderately Up

The French market is moderately higher in afternoon trading Tuesday, as gains by banks more than offset losses in building stocks. Investors shrugged off weaker-than-expected domestic growth data as optimism returned with robust full-year numbers from yoghurt maker Danone.

In economic news, data from statistical office Insee showed that France's gross domestic product rose 0.3 percent sequentially in the fourth quarter compared to expectations for a 0.6 percent growth. In 2010, French GDP climbed by 1.5 percent after falling 2.5 percent in 2009.

The Federal Statistical Office said German economy expanded 0.4 percent sequentially in the fourth quarter. Economists were expecting the quarter-on-quarter growth to ease to 0.5 percent from 0.7 percent in the third quarter.

Meanwhile, UK annual inflation rose to 4 percent in January from 3.7 percent in December, in line with economists' expectations, the Office for National Statistics said. The annual rate reached the highest level since November 2008.

The CAC 40 opened at 4,129, compared to the previous close of 4,097. The index has been in positive territory for most of the session and is currently adding 0.40 percent.

Dairy giant Danone is leading the gainers by adding 3.6 percent after reporting strong growth in fiscal year earnings. Banks Societe Generale, BNP Paribas, Credit Agricole and Natixis are gaining between 3.3 percent and 1.6 percent.

Car manufacturer Peugeot is rising 1.9 percent, while Renault is losing 0.3 percent.

Those making notable gains include chipmaker STMicroelectronics, tire firm Michelin, contact lens maker Essilor International and insurer Axa.

Telecom equipment maker Alcatel Lucent is losing about 2 percent. Construction stocks Bouygues, Vinci, Saint-Gobain and Lafarge are falling.

Machinery & equipment company Alstom, steel giant ArcelorMittal, luxury goods group LVMH, commodity chemicals company Air Liquide and department stores operator PPR are losing notably.

Elsewhere in Europe, the UK's FTSE 100 is falling 0.11 percent and the German DAX is advancing 0.11 percent.

Across Asia/Pacific, major markets closed mixed. Australia's All Ordinaries slipped 0.1 percent and Hong Kong's Hang Seng lost about 1 percent. However, Japan's Nikkei 225 and India's BSE Sensex advanced 0.2 percent and 0.4 percent, respectively.

In the U.S., futures point to a mixed open on Wall Street. In the previous session, the Dow inched down less than a tenth of a percent, while the Nasdaq moved up 0.3 percent and the S&P 500 rose 0.2 percent.

In commodities, crude for March delivery is adding $0.43 to $85.24 per barrel and gold is gaining $8.6 to $1373.7 a troy ounce.

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Indian Market Ends Higher After Early Fall

The Indian market reversed an early slide to end higher for a third consecutive session on Tuesday, with oil/gas, banking, public sector and auto stocks leading the gainers. Capital goods, realty and IT stocks were the laggards.

After a sharp spike in the past two sessions, the benchmark 30-share Sensex witnessed choppy movement early in the session before rising to a high of 18,362 in mid-afternoon trading. However, with investors taking some profits at higher levels, the Sensex closed off the day's high at 18,274, posting a modest 0.39 percent gain. Likewise, the 50-share Nifty pared its early gain to end 0.46 percent higher at 5,481.

The broader indexes such as the BSE mid-cap and small-cap ended mixed, with the former declining marginally and the latter ending up 0.59 percent. The market breadth was slightly positive, with gainers outpacing decliners in the ratio of 1.2:1 on the BSE.

State Bank of India, which is expected to launch its first tranche of $2.2 billion retail bond issue on Monday, closed up 1.38 percent. ICICI Bank rose over 2 percent and HDFC Bank edged up 0.17 percent.

Anil Ambani-controlled Reliance Communications fell to a low of Rs.95.15 early in the session before ending 4.16 percent higher at Rs.101.45. Other group stocks such as Reliance Capital (up 9.05 percent) and Reliance MediaWorks (up 10.68 percent) also received good buying support.

Jindal Steel and Power rose 0.26 percent after it reportedly received a fresh nod from the environment ministry to set up an integrated steel plant in Orissa. Heavyweight Reliance Industries advanced nearly 3 percent and state-run oil explorer ONGC gained 1.13 percent.

Tata Motors rose 2.41 percent on reporting a 16 percent rise in its global vehicle sales for January. Two-wheeler manufacturer Bajaj Auto rose 2.16 percent and car maker Maruti Suzuki ended up 1.34 percent.

Pantaloon Retail climbed nearly 7 percent on reports of business restructuring. Henkel India hit the 5 percent upper circuit limit on the buzz that its parent Henkel AG may sell its portfolio of Indian detergent and personal care brands such as Chek detergent and Neem Active toothpaste.

Tata Power (up 2.14 percent), NTPC (up 1.54 percent) and Reliance Infrastructure (up 1.12 percent) were the other prominent gainers.

On the negative side, engineering & construction giant Larsen & Toubro shed 2.16 percent on profit taking after climbing nearly 7 percent in the previous session. Realty firm Unitech fell 3.45 percent on disappointing results. D B Realty, Ackruti City, Indiabulls Real Estate, Orbit Corp. and DLF fell by 1-3 percent.

Infrastructure firm Jaiprakash Associates and aluminum maker Hindalco fell around 3 percent each, power generation equipment manufacturer BHEL declined 2.45 percent, utility vehicle manufacturer Mahindra & Mahindra lost 1.81 percent, software exporter TCS eased 1.50 percent and drug maker Cipla ended down a percent. Tata Steel closed half a percent lower ahead of its results later in the day.

Shiv-Vani Oil & Gas Exploration Services (down 2.43 percent) and Welspun India (down 3.12 percent) closed subdued on disappointing results. Religare Enterprises edged down 0.85 percent after it posted a net loss of Rs 98.46 crore for the third quarter ended December.

Tulip Telecom slumped 4.61 percent on reports of stake sale in Qualcomm's India broadband venture. Unity Infraprojects closed 2.78 percent down despite bagging a Rs.59.26-crore contract. Likewise, Supreme Infrastructure India lost nearly 3 percent despite winning three prestigious work orders worth Rs. 238.95 crore.

Elsewhere, the other Asian markets closed on a mixed note Tuesday after China reported slower-than-estimated inflation. Hong Kong's Hang Seng ended down nearly a percent, Singapore's Straits Times eased 0.77 percent and South Korea's KOSPI posted a modest 0.2 percent loss, while the markets in China and Japan ended firm with modest gains.

European shares recovered after an early slide following encouraging results from heavyweights Barclays and Danone, while the U.S. index futures were largely unchanged. Crude futures traded marginally higher in late Singapore trading and the euro fluctuated against the dollar.

Japan's central bank on Tuesday raised its assessment of the economy for the first time in nine months, saying exports were showing signs of picking up. As expected, the Bank of Japan left its benchmark interest rate unchanged at 0.0-0.1 percent and kept the size of its asset purchase program unchanged at 5 trillion yen ($60 billion).

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Dollar Pounded By Sterling As U.K. Inflation Heats Up

The dollar was under pressure against most majors Tuesday morning, as official data showed inflation heating up in China and the U.K.

While the Federal Reserve has shrugged off rising prices here in the U.S., other central banks are expected to tighten monetary policy to combat inflation in 2011.

Consumer prices in China rose 4.9 percent in January from a year earlier after a 4.6 percent gain in December. Economists had expected a 5.4 percent gain in the consumer price index. Meanwhile, producer-price inflation quickened to 6.6 percent from 5.9 percent.

Elsewhere, inflation in UK soared to 4 percent in January from 3.7 percent in December. With inflation now double the Bank of England's target, traders are pricing in an interest rate hike in the next few months.

The dollar was hammered against the sterling, dropping more than a penny to a weekly low of $1.6146.

The dollar also gave back some recent gains versus the euro, easing to $1.3550 from yesterday's 3-week high near $1.3425.

The Eurozone economy expanded 0.3% sequentially in the fourth quarter of 2010, unchanged from the third quarter, preliminary data from the Eurostat showed on Tuesday.

Economists had forecast the economy to grow by 0.4%.

The dollar managed to edge higher against the yen, extending its recent gains to Y83.75 -- its highest since before Christmas.

Looking at today's economic calendar from the U.S., retail sales are slated to be released at 8:30 a.m. ET. For January, economists estimate a 0.5% increase each in retail sales.

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