US & World Daily Markets Financial Briefing 15-11-2010

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Stocks Mostly Higher After In-Line Increase In Inventories

Stocks are largely on the upside in mid-morning trading on Monday following a largely upbeat batch of economic reports, including report showing a bigger than expected increase in retail sales in October.

The major averages have all seen some upside in recent dealing and are currently up by varied margins. The Dow is up 55.21 points or 0.5 percent at 11,247.79, the Nasdaq is up 6.71 points or 0.3 percent at 2,524.92 and the S&P 500 is up 4.72 points or 0.4 percent at 1,203.93.

A short time ago, the Commerce Department reported that business inventories increased by 0.9 percent in September, matching the revised increase seen in August. The increase in inventories matched economists' expectations, while the growth in the previous month was upwardly revised from 0.6 percent.

Additionally, the report showed that business sales rose by 0.5 percent in September following a 0.3 percent increase in August.

Earlier, the Commerce Department said that retail sales surged up by 1.2 percent in October, marking the fourth consecutive month of growth for the key consumer health indicator. Economists had expected a more modest increase of 0.7 percent.

Excluding a 5.0 percent increase in sales by motor vehicle and parts dealers, retail sales increased by 0.4 percent in October, in line with economist estimates.

Meanwhile, the New York Federal Reserve reported that its general business conditions index fell to a negative 11.1 in November from a positive 15.7 in October, with a negative reading indicating a contraction in activity in the New York manufacturing sector. Economists had expected the index to remain positive at 11.7.

On the corporate front, construction equipment maker Caterpillar Inc. (CAT) entered into an agreement to buy ore extraction equipment specialist Bucyrus International Inc. (BUCY) for around $8.6 billion, including the assumption of debt.

Global mining leader BHP Billiton Group (BHP) withdrew its $40 billion offer to acquire Canadian fertilizer maker Potash Corp. of Saskatchewan Inc. (POT). The moves comes a week after the Canadian government blocked the deal, saying it does not provide a "net benefit" to the country.

Home improvement retailer Lowe's (LOW) reported third-quarter earnings and revenues that failed to meet estimates. Meanwhile, the firm's fourth quarter guidance called for earnings in-line with estimates and revenues on track to beat expectations.

Sector News

Railroad and banking stocks are heading the modest upward move seen thus far in today's session. The Dow Jones Railroads Index and the KBW Bank Index are up by 1.8 percent and 1.4 percent, respectively, while they both remain in a range near recent highs.

Electronic storage stocks are seeing a mixed outing, with the 4.1 percent jump by the NYSE Arca Disk Drive Index being driven by upbeat reaction to EMC's (EMC) agreement to acquire Isilon Systems Inc. (ISLN) for $2.25 billion in cash.

Isilon has surged up by 28.5 percent to an all-time intraday high and is responsible for much of the upside in the electronic storage index.

On the other hand, internet and health insurance stocks are under pressure but are seeing only moderate downside. The NYSE Arca Internet Index is down by 0.9 percent, sliding further away from last week's decade high.

Stocks Driven By Analyst Comments

UnitedHealth (UNH) is trading lower after being downgraded at Stifel Nicolaus from Buy to Hold. Shares are down by 2.5 percent, setting a two-week intraday low.

Meritage (MTH) is also under pressure after a downgrade at Ticonderoga from Buy to Neutral. The stock is down by 1.7 percent, moving further away from Thursday's five and a half month closing high.

Other Markets

In overseas trading, stock markets in the Asia-Pacific region saw a mixed close on Monday. Japan's benchmark Nikkei 225 Index rose by 1.1 percent while Hong Kong's Hang Seng Index declined by 0.8 percent.

The major European markets also remain on opposite sides of the unchanged line. While the German DAX Index is down by 0.1 percent, the U.K.'s FTSE 100 Index is up by 0.4 percent and the French CAC 40 Index is up by 0.9 percent.

In the bond markets, treasuries are notably lower. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is trading at 2.842 percent, posting a gain of 8.6 basis points.

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TSX Poised For Mixed Open; Potash In Focus

Bay Street stocks are poised for a mixed open Monday after a steep fall in the previous session, with traders digesting encouraging retail sales data from the U.S., Canada's largest trading partner.

Meanwhile, Statistics Canada said new vehicle sales rebounded in September.

Potash Corp. may be in focus after BHP Billiton withdrew its $130 per share hostile takeover bid for the fertilizer maker. BHP Billiton could not convince Canada's federal government to approve the deal. Earlier this month, the government said it would block the deal because it wasn't a 'net benefit' to Canada.

On Friday, the S&P/TSX Composite Index surrendered 185.50 points or 1.43% to 12,749.24.

The price of crude oil edged up Monday morning as traders await a slew of economic data due out from the U.S. during the week. Crude for December was up $0.45 to $85.33 a barrel.

The price of gold was trading flat amid a firm U.S. dollar. Gold for December edged down $1.90 to $1,363.60 an ounce.

In corporate news from Canada, diversifies management and holding company Power Corp. of Canada reported lower third quarter net earnings of C$178 million or C$0.37 per share compared to C$250 million or C$0.52 per share in the prior year quarter.

Investments management company BAM Investments reported a rise in third quarter profit at $3.6 million or $0.05 per common share from $2.3 million or $0.03 per common share last year.

Insurance solutions provider Kingsway Financial Services swung to profit in third quarter, reporting net income of $2.5 million or $0.05 per share compared to a loss of $118.1 million or $2.19 per share in the prior year quarter.

Gold mining company Gryphon Gold posted a wider third-quarter net loss of $1.84 million or $0.021 per share compared to $1.61 million or $0.026 per share in the prior year quarter.

South Africa focused uranium and gold miner First Uranium reported a wider second quarter loss, despite a surge in revenues. Net loss for the period widened to $27.1 million or $0.12 per share from $18.4 million or $0.11 per share in the year-ago period, while revenue more than doubled to $38.31 million from $19.02 million.

West Africa focused gold miner Crew Gold Corp. reported a narrower third quarter net loss of $2.14 million or $0.02 per share compared to $23.11 million or $4.32 per share reported in the previous year.

Copper miner Anvil Mining reported third-quarter net income of $6.06 million or $0.04 per share compared with a loss of $0.23 million or breakeven per share last year.

 Telecommunications company Vecima Networks reported higher first quarter net income of C$1.86 million or C$0.08 per share compared to C$1.2 million or C$0.05 per share in the year-ago period.

Environmental services company EnGlobe Corp. said it net earnings increased to C$4.6 million from C$1.9 million a year ago. The company also said that ONCAP II L.P. and certain affiliates would acquire all of the outstanding common shares of EnGlobe that they do not currently own at a price of C$0.265 per share.

Digital mapping company Intermap Technologies reported a wider third quarter net loss of $11.8 million or $0.20 per share compared to $4.3 million or $0.08 per share in the year-ago period.

Pharmaceuticals company WEX Pharmaceuticals reported third quarter net loss of $2.37 million or $0.01 per share compared with a loss of $2.04 million or $0.03 per share in the same period in the preceding year.

Bio-pharmaceutical company MethylGene Inc. reported a narrower third quarter net loss of C$4.8 million or C$0.12 per share, compared with a net loss of C$5.4 million or C$0.15 per share for the year-ago period.

Brokerage and clearing services technology provider Belzberg Technologies reported a narrower third quarter net loss of C$2.2 million or C$0.15 per share, compared to C$2.4 million or C$0.16 per share in the same period last year.

Steel structural products maker Genesis Worldwide reported a net loss of C$1.7 million or C$0.03 per share for the third quarter, compared to a net loss of C$2.2 million or C$0.05 per share in the prior year quarter.

Drilling services provider Forbes Energy Services reported a narrower third quarter net loss of $2.4 million or $0.03 per share, compared to a net loss of $9.6 million or $0.15 per share for the year-ago quarter.

Base-metals miner GlobeStar Mining reported improved third-quarter net income of $3.4 million or $0.032 per share, compared to $1.4 million or $0.013 per share in the third quarter of 2009.

Renewable energy company Etrion Corp. reported a narrower third-quarter net loss of $6.4 million or $0.04 per share compared to a net loss of $50.9 million or $0.32 per share last year.

Photovoltaic energy products company Day4 Energy reported a narrower third quarter net loss of C$2.32 million or C$0.06 per share compared with a net loss of C$4.23 million or C$0.12 per share last year. Revenues climbed to C$41.30 million from C$13.34 million in the comparable period.

In economic news, data from Statistics Canada revealed new vehicle sales rebounded in September after a notable drop in the previous month. The number of new motor vehicles sold rose 4.2% to 134,845 units in September, helped by stronger truck sales that increased 5.8% to 77,885 units in September after declining the previous month.

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French Stocks Erase Early Losses

The CAC 40 turned positive in afternoon trading Monday, even as worries about the Irish debt continued to influence sentiment. Banks were mixed, while insurer Axa gained notably.

In economic news, France saw a current account deficit of EUR 4.4 billion in September, up from a EUR 4.3 billion shortfall in August, the central bank said.

U.K. house prices recorded the steepest fall in nearly three years this month due to a widening imbalance between supply and demand. House prices fell 3.2% compared to the previous month, reversing the 3.1% increase in October, Hometrack said.

In the eurozone, trade balance with the rest of the world rose to an unadjusted surplus of EUR 2.9 billion, compared with a deficit of EUR 5 billion in August, Eurostat said. Economists had forecast a deficit of EUR 0.8 billion.

After opening at 3,840, the CAC 40 has been moving in a range of 3,798-3,852. The index is currently gaining 0.54%.

Insurer Axa is gaining 2.2%. The company made a joint proposal with Australian wealth manager AMP Ltd for Axa Asia Pacific Holdings Ltd. Carmaker Renault is gaining 1.4% and Peugeot is adding 0.23%.

Chemical firm Air Liquide, tire company Michelin and real estate investment trust Unibail-Rodamco are seeing notable upside.

Among banks, Natixis is up 0.9% and BNP Paribas is advancing marginally. Societe Generale is down 0.12% and Credit Agricole is losing 0.6%.

Those making notable losses include advertising firm Publicis Groupe and machinery & equipment company Alstom. Alcatel Lucent, Suez Environnement and EADS are losing moderately.

Elsewhere in Europe, the UK's FTSE 100 is advancing 0.32% and the German DAX is rising 0.60%.

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Asian Markets End Mixed Amid Cautious Trading

Asian markets open for trading on Monday, the first day of the trading week, witnessed mixed trading with markets in Australia, Hong Kong, Indonesia, Singapore and Taiwan ending in negative territory, while the markets in China, India, Japan, and South Korea ended in positive territory led by weaker Japanese currency. Caution over the global economy amid concerns about monetary tightening measures in China and resurfacing of debt crisis in Europe impacted market sentiment.

In Australia, the benchmark S&P/ASX200 Index slipped by 4.70 points, or 0.10%, and closed at 4,688 points, while the All-Ordinaries Index ended at 4,773, representing a loss of 5.50 points, or 0.12%.

On the economic front, data released by the Australian Bureau of Statistics revealed that the total value of owner-occupied housing commitments, excluding alterations and additions, rose 0.6% to A$13.8 billion in September compared to the previous month. The data further revealed that total personal finance commitments rose 3.5% to A$7.7 billion. Fixed lending commitments rose 6.3% and revolving credit commitments rose 0.9%. The total value of commercial finance commitments rose 2.7% in September. Lease finance commitments increased 0.2%.

In a separate statement, the Statistics Bureau revealed that the total number of new vehicles sold in Australia decreased by a seasonally adjusted 0.6% in October compared to the previous month. Year-over-year, sales were up 3.3%. Sales of passenger vehicles decreased by 1.6% on a monthly basis in October. This was partly offset by a 1.5% increase in SUV sales. Light sweet crude oil futures for December delivery ended at $84.73 a barrel in electronic trading, down $0.15 per barrel from previous close at $84.88 a barrel in New York on Friday.

Mixed trading was witnessed among the major bank stocks. Commonwealth Bank of Australia gained 0.64% and National Australia Bank advanced 0.57%. However, ANZ Bank ended in negative territory with a loss of 0.60% and Westpac Banking Corp. edged down 0.09%. Investment banking company Macquarie Group ended in negative territory with a loss of 0.11%.

Resource-related stocks also witnessed mixed trading. BHP Billion, which had withdrawn its bid to acquire Canadian company Potash Corp, ended in negative territory with a loss of 0.36%. Among the other major losers among resource stocks, Fortescue Metals declined 1.60%, Gindalbie Metals lost 2.98%, Iluka Resources fell 1.86%, Macarthur Coal edged down 0.09%, Mincor Resources was down 1.97%, Murchison Metals plunged 3.04% and Oz Minerals shed 2.25%. However, Minara Resources managed to end in positive territory with a gain of 0.63% and Rio Tinto advanced 0.21%.

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Mixed trading was witnessed among oil-related stocks as well. Woodside Petroleum declined 1.37%, Santos Ltd shed 1.42%, ROC Oil Ltd plunged 3.49% and Origin Energy slipped 0.31%. However, Oil Energy bucked the negative trend and ended in positive territory with a gain of 1.38%.

Brambles Inc., the logistics company, was the major gainer in the market, having surged up 5.36% after the company announced that it would aquire Dutch based IFCO Systems NV and its re-usable plastic container business for €923 million.

In Japan, the benchmark Nikkei 225 Index ended 102.70 points, or 1.06%, higher to 9,827, while the broader Topix index of all First Section issues gained 4.58 points, or 0.54%, to 852.

On the economic front, a report released by the Cabinet Office revealed that Japan's economy grew at a stronger than expected pace between July and September, underpinned by a solid increase in domestic demand. As per the report, gross domestic product rose 0.9% compared to the previous quarter. That was higher than the 0.6% rise forecast by analysts after the 0.4% growth in the June quarter.

A report released by the Ministry of Economy, Trade and Industry revealed that industrial production slid a revised 1.6% month-on-month in September. This was slower than the 1.9% fall estimated earlier. As per the report, shipments decreased 0.5% in September. Inventory rose 0.1%, while the inventory ratio climbed 1.3%. On a yearly basis, production was up 11.5%, higher than the previously estimated 11.1% rise. Shipments increased 12.6% and inventory was up 3.4%.

Light sweet crude oil futures for December delivery ended at $84.73 a barrel in electronic trading, down $0.15 per barrel from previous close at $84.88 a barrel in New York on Friday.

Exporters led the gains on weak local currency. Sony Corp. climbed 2.65%, Panasonic Corp. advanced 2.06%, Sharp Corp. added 1.85% and Olympus Corp. surged up 3.74%.

Automotive stocks also ended in positive territory, lifted by weak local currency. Honda Motor Co. added 1.71%, Toyota Motor Co. advanced 1.45%, Suzuki Motor was up by 0.90% and Nissan Motor climbed 1.55%.

The Indian market reversed its early loss to end notably higher on Monday, as data showing easing inflation suggested that there may not be any more rate hikes this year. A little bit of short covering following last week's sell-off also helped the benchmark indexes to close near the day's highs. The benchmark 30-share Sensex moved in a range 20,047-20,336 before ending up 153 points or 0.76% at 20,310, with 20 of its components edging higher. The broader Nifty rose by about 50 points or 0.82% to 6,122

Among the other markets in the region, China's Shanghai Composite Index advanced 28.98 points, or 0.97% to close at 3,014, and Seoul Composite Index in South Korea ended in positive territory with a gain of 0.69 points, or 0.04%, at 1,914. However, Hong Kong's Hang Seng Index declined 195.40 points, or 0.81%, to close at 24,057, Jakarta Composite Index in Indonesia fell 9.38 points, or 0.26%, to close 3,656, the Strait Times Index in Singapore slipped 15.20 points, or 0.47%, to close at 3,237, and Taiwan Weighted Index shed 75.40 points or 0.91% to close at 8,241.