US & World Daily Markets Financial Briefing 16-12-2010

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Stocks Seeing Early Strength But Buying Interest Subdued

Stocks are seeing modest strength in early trading on Thursday, although buying interest remains relatively subdued. The major averages have climbed above the unchanged line after ending the previous session in the red.

The early strength in the markets comes as traders digest another batch of upbeat economic data, including reports showing an unexpected drop in weekly jobless claims and an increase in housing starts.

After releasing a report last week showing a bigger than expected drop in first-time claims for U.S. unemployment benefits, the Labor Department released a report a short time ago showing another modest drop in initial jobless claims in the week ended December 11th.

Jobless claims fell to 420,000 from the previous week's revised figure of 423,000. The modest drop came as a surprise to economists, who had expected jobless claims to edge up to 425,000 from the 421,000 originally reported for the previous week.

At the same time, the Commerce Department said that housing starts rose 3.9 percent to an annual rate of 555,000 in November from the revised October estimate of 534,000. Economists had been expecting housing starts to rise to 545,000 from the 519,000 originally reported for the previous month.

Chris Low, chief economist at FTN Financial, said, "It's tempting to characterize the result as stronger-than-expected, but in a series with typical month-to-month volatility of 7 percent or so, this is what sideways looks like."

Meanwhile, building permits, an indicator of future housing demand, fell 4.0 percent to an annual rate of 530,000 in November from the revised 552,000 in the previous month. Building permits had been expected to edge up to 560,000 from the 550,000 originally reported for October.

At 10:00 a.m. ET, the Philadelphia Federal Reserve will release the results of its manufacturing activity survey for December. Economists expect the diffusion index of current activity to show a reading of 13.0 for December, down from the 22.5 recorded last month.

The markets are also focusing on second-quarter results from shipping giant FedEx (FDX), which posted second-quarter earnings of $1.16 per share, well under the $1.31 projected for the quarter. The company reported revenues that rose 12 percent to $9.63 billion but still fell short of estimates of $9.70 billion.

Housing stocks are seeing notable strength on the heels of the housing starts data, while moderate strength is also visible among airline and banking stocks. On the other hand, gold stocks are moving to the downside along with the price of the precious metal.

The major averages are currently posting modest gains, although they are off their highs for the young session. The Dow is up 13.78 points or 0.1 percent at 11,471.25, the Nasdaq is up 6.34 points or 0.2 percent at 2,623.56 and the S&P 500 is up 2.69 points or 0.2 percent at 1,237.92.

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TSX May Open Lower On Economic Growth Jitters

Toronto stocks may struggle to move higher at open Thursday on falling commodities and resurfaced worries over the euro zone debt situation.

European leaders will begin a 2-day meeting in Brussels Thursday to try and agree the next steps in tackling the euro zone debt crisis.

Food products company George Weston may be in focus after announcing a $1 billion payout in special dividend.

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

On Wednesday, the S&P/TSX Composite Index shed 51.01 points or 0.38% to 13, 229.07.

The price of crude oil edged down even after an official report revealed that U.S. crude oil inventories were down by a huge 9.9 million barrels last week. Crude for January edged down $0.43 to $88.19 a barrel.

The price of gold moved down for a second day amid a firm U.S. dollar, with gold for February losing $10.20 to $1,376.00 an ounce.

In corporate news from Canada, food products company George Weston said it will pay a $1 billion special dividend, which works out to C$7.74751 per share, on January 25 to shareholders of record as of January 18.

Telecommunications services provider COGECO Inc. reported fiscal year 2010 net income of C$56.3 million or C$3.36 per share. Excluding certain unusual adjustments recorded in fiscal 2010 and 2009, adjusted net income totaled C$46.6 million or C$2.79 per share, compared to C$36.4 million or C$2.18 per share last year.

Tour operator Transat A.T. Inc. reported much improved fourth quarter net earnings of C$52.36 million or C$1.37 per share, compared to C$18.11 million or C$0.52 per share last year.

Software services company Enghouse Systems reported improved fourth-quarter net income of C$3.4 million or C$0.13 per share, compared to net income of C$2.6 million or C$0.10 per share in the same quarter last year. The company declared a quarterly dividend of C$0.04 per share.

Gold miner Agnico-Eagle Mines guided that its payable gold production is expected to be in the range of 1.13 million and 1.23 million ounces in 2011. for the subsequent four years, the company expects to produce an average of 1.36 million ounces of gold per year. The company declared a quarterly cash dividend for 2011 of $0.16 per common share.

Gold miner Newmont Mining said Wednesday that it acquired 2 million units of Loncor Resources Inc. at C$1.95 per unit, aggregating $3.90 million.

European Goldfields said it arrange a $300 million secured Term and Revolving Facility for its Greek subsidiary Hellas Gold SA.

In economic news, Statistics Canada said non-residents acquired a further $9.5 billion of Canadian securities in October, while Canadian investment  in foreign securities were down to $821 million.

From the U.S., the Labor Department said jobless claims fell to 420,000 in the week ended December 11 from the previous week's revised figure of 423,000. Economists were expecting jobless claims to edge up to 425,000 from the 421,000 originally reported for the previous week.

In another report, the U.S. Commerce Department said said housing starts rose 3.9% to an annual rate of 555,000 in November from the revised October estimate of 534,000. Economists were expecting housing starts to rise to 545,000 from the 519,000 originally reported for the previous month. Meanwhile, building permits, an indicator of future housing demand, fell 4.0% to an annual rate of 530,000 in November from the revised 552,000 in the previous month.

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French Market Modestly Down

The French market is modestly declining in afternoon trading Thursday, ahead of some key economic reports from the U.S. Fall in commodity prices and mixed cues from Asia/Pacific impacted sentiment, in addition to lingering worries about the eurozone debt crisis even as political leaders are holding a summit in Brussels, prompting investors to stay on the sidelines.

Among key economic data released today, a preliminary report from Markit Economics showed that Eurozone private sector growth eased in December with the flash composite output index falling to a two-month low of 55 from 55.5 in November. Economists had forecast a decline to 55.3.

Meanwhile, Eurozone annual inflation remained at 1.9% in November, matching the flash estimate issued on November 30, final data from the European Union statistical office Eurostat revealed. Monthly inflation was 0.1%, also in line with expectations.

The Office for National Statistics said UK retail sales excluding automobile fuel rose 0.3% month-on-month in November. This was in line with economists' expectations. On an annual basis, sales grew 1.8%. Including automobile fuel, retail sales climbed 0.3% month-on-month, matching economic expectations.

The Swiss central bank left its key interest rate unchanged at 0.25%, citing the strong franc and muted inflationary pressures. Renewed sovereign debt concerns in the eurozone had led to a further appreciation in the Swiss franc as investors flocked to the currency as a safe haven, the bank said.

Data on jobless claims, housing starts and Philadelphia-area manufacturing activity are expected from the U.S., which may affect sentiment later.

The CAC 40 opened slightly lower at 3,878. After remaining in positive territory for a major part of the session, the index reversed those gains and is currently losing 0.22%.

Lender BNP Paribas is falling 1.2% and Credit Agricole is dropping 1%. Natixis is down 0.4%, while Societe Generale is advancing 0.3%.

Drugmaker Sanofi-Aventis is declining 1% and department stores operator PPR is slipping 0.8%.

Among carmakers, Peugeot is moderately down, while Renault is moderately up.

Grocery retailer Carrefour is rising 2.15%. The company said it would decide on the future of its real estate unit in the first half of the year. Commodity chemicals firm Air Liquide and tire company Michelin are gaining 0.8% each.

Elsewhere in Europe, the UK's FTSE 100 is adding 0.12% and the German DAX is adding 0.02%.

Across Asia/Pacific, major markets had a mixed outing. Australia's All Ordinaries closed up 0.32%, India's BSE Sensex added 1.1% and Japan's benchmark Nikkei 225 edged up 0.01%. However, China's Shaghai Composite Index and Hong Kong's Hang Seng ended down 0.46% and 1.33%, respectively.

In the U.S., futures point to a cautious opening on Wall Street with the Dow, S&P 500 and Nasdaq 100 futures just above the flat line. In the previous session, the Dow slid 0.2%, the Nasdaq fell 0.4% and the S&P 500 declined 0.5%.

In commodities, crude is down $0.30 at $88.32 per barrel and gold is dropping $1.5 to $1384.7 per troy ounce.

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Asian Markets End Mixed

Mixed trading was witnessed among the major markets open for trading in Asia on Thursday. While the markets in Australia, Japan, India, Singapore and Taiwan ended in positive territory, the markets in China, Hong Kong, Indonesia and South Korea ended in negative territory with modest losses.

In Australia, the benchmark S&P/ASX200 Index advanced 16.20 points, or 0.34%, and closed at 4,784 points, while the All-Ordinaries Index ended at 4,869, representing a gain of 15.40 points, or 0.32%.

On the economic front, a statement released by the Melbourne Institute revealed that Australia's consumer inflationary expectations fell to 2.8% in November from 3.1% in the previous month. Commenting on the results, Michael Chua, a research fellow at the Melbourne Institute, said that the central bank's rate hike in November had helped in inflation expectations. "Nevertheless, the median consumer inflationary expectations in December remains on a high side," he said.

Data released by the Reserve Bank of Australia revealed that the central had sold a net A$342 million in the foreign exchange market in November, following a net sale of A$305 million in the previous month. The central bank further noted that it had bought a net A$355 million in the forex market from the Australian government in November following a net purchase of A$368 million in the previous month.

Light sweet crude oil futures for January delivery was trading at $88.47 a barrel in electronic trading, down $0.15 per barrel from previous close at $88.62 a barrel in New York on Wednesday.

Oil related stocks ended in positive territory. Woodside Petroleum added 0.28%, Santos Ltd climbed 2.94%, ROC Oil Ltd surged up 3.85% and Origin Energy edged up 0.29%. However, Oil Search Ltd bucked the positive trend and ended in negative territory with a loss of 0.28%.

Mixed performance was witnessed among the major banks in light trading session. ANZ Bank slipped 0.25% and National Australia Bank edged down 0.04%. However, Commonwealth Bank of Australia added 0.87% and Westpac Banking Corp., ended in positive territory with a gain of 0.35%. Investment banking company Macquarie Group gained 1.02%.

Resource related stocks also witnessed mixed trading. BHP Billiton edged up 0.07% and Iluka Resources advanced 0.94%. However, Rio Tinto slipped 0.02%, Fortescue Metals shed 0.88%, Gindalbie Metals lost 2.26%, Macarthur Coal fell 1.11%, Murchison Metals was down 0.78% and Oz Minerals declined 2.65%.

Airliner Virgin Blue was the major gainer, having surged up 5.88% after the the Australian Competition and Consumer Commission granted approval for a tie-up with Air New Zealand on their trans-Tasman routes. Qantas Airways, however, ended in negative territory with a loss of 2.57%.

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In Japan, the benchmark Nikkei 225 Index rose 1.51 points, or 0.01%, to 10,311, while the broader Topix index of all First Section issues also rose 1.42 points, or 0.2%, to 904.

On the economic front, a statement released by the Ministry of Finance revealed that Japanese investors sold a net 1.8 billion yen in foreign stocks last week. Japan residents also sold a net 309.1 billion yen in foreign bonds and notes last week. The statement further noted that foreign investors purchased a net 95.1 billion yen in Japan stocks last week, and also sold a net 417.3 billion yen in Japan bonds and notes.

Stocks of large banks ended in positive territory. Sumitomo Mitsui Financial gained 2.22%, Mitsubishi UFJ Financial advanced 1.40%, Mizuho Financial climbed 2.74% and Resona Holdings added 0.19%.

Real estate related stocks also ended in positive territory lifted by the news that Bank of Japan will continue its asset-purchasing program. Sumitomo Realty & Development advanced 0.68%, Tokyo Tatemono Co., climbed 3.03%, Mitsui Fudosan added 0.58%, Mitsubishi Estate Co., gained 0.62% and Heiwa Real Estate was up 0.39%.

Stocks of select exporters also ended in positive territory on weaker yen. Canon Inc., gained 1.22%, Sharp Corp. added 0.49%, and Honda Motor advanced 1.26%.

The Reserve Bank of India's policy decision to pause in its rate tightening cycle and sustained buying in information technology stocks on the back of a weaker rupee and encouraging U.S. economic data helped the Indian market end a choppy session sharply higher near the day's high on Thursday. The RBI today left its key policy rates unchanged after six increases this year to address the tight liquidity situation in the system, arising from corporate advance tax payments and the busy credit season. However, governor Subbarao warned that inflation continues to remain a major concern because of rising demand and higher global commodity prices. The benchmark 30-share Sensex moved choppily in a narrow range for most of the day before finally ending up 217 points or 1.10% at 19,865, while the 50-share Nifty index rose by 56 points or 0.96% to 5,949. The BSE mid-cap and small-cap indexes added about half a percent each and in the broader market, gaining shares outpaced declining ones by 1534 to 1314 shares.

Among the other markets in the region, China's Shanghai Composite Index declined 13.28 points, or 0.46% to close at 2,898, HongKong's Hang Seng Index lost 306.57 points, or 1.33% to close at 22,669, Jakarta Composite Index in Indonesia was down 86.58 points, or 2.37%, to close at 3,572 and Seoul Composite Index in South Korea was down 8.24 points, or 0.41%, to close at 2,009. However , Singapore's Strait Times Index managed to end in positive territory with a gain of 0.47 points, or 0.01%, at 3,148 and Taiwan Weighted Index advanced 25.49 points or 0.29% to close at 8,782.

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