US & World Daily Markets Financial Briefing 17-02-2011

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Modest Weakness Visible On Wall Street Early On

Stocks are seeing modest weakness in early trading on Thursday, as traders digest reports on consumer prices and weekly jobless claims that were largely in line with estimates. The major averages have slipped into the red after ending the previous session at multi-year closing highs.

With NetApp (NTAP) leading the way lower after providing disappointing guidance, computer hardware stocks are giving back some ground after turning in a strong performance on Wednesday. Banking and brokerage stocks are also seeing early weakness, although selling pressure remains subdued.

Meanwhile, natural gas pipelines firm Williams Cos. (WMB) is posting a strong gain after the company's board approved a plan to offshoot its exploration and production division into a separate entity.

On the economic front, the Labor Department said its consumer price index rose by 0.4 percent in January, matching the revised increase seen in December. Economists had expected consumer prices to increase by 0.3 percent compared to the 0.5 percent growth originally reported for the previous month.

Excluding a jump in energy prices as well as an increase in food prices, core consumer prices edged up by 0.2 percent in January after rising by 0.1 percent in December. Core prices had been expected to inch up by 0.1 percent.

While the increase in core prices was relatively modest, it still marked the biggest increase since a matching increase in October of 2009.

A separate report from the Labor Department showed that initial jobless claims for the week ended February 12th rose by 25,000 to 410,000 from the previous week's revised figure of 385,000. Economists had expected jobless claims to rise to 410,000 from the 383,000 originally reported for the previous week.

The major averages have moved off their lows for the young session but currently remain in negative territory. The Dow is down 25.31 points or 0.2 percent at 12,262.86, the Nasdaq is down 4.34 points or 0.2 percent at 2,821.22 and the S&P 500 is down 3.14 points or 0.2 percent at 1,333.18.

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TSX Looks To Edge Up At Open

Bay Street stocks are likely to open higher Thursday helped by gold plays amid rising bullion prices and earnings reports from major gold producers, which came in mostly encouraging.

However, profit taking at higher levels as the main index moved past the 14,000-mark for the first time since mid-2008, may limit gains during the session.

U.S. stock futures were pointing to flat open amid inflation and weekly jobs data.

On Wednesday, the S&P/TSX Composite Index advanced to a fresh 2-year peak, adding 129.83 points or 0.93 percent to 14,059.18.

The price of crude oil was relatively flat, with crude for March edging up $0.03 to $85.02 a barrel.

The price of gold moved up above $1,380, levels not seen since mid-January, amid inflation concerns. Gold for April was up $5.70 to $1,380.80 an ounce

In corporate news from Canada, Barrick Gold said its fourth quarter net income grew to $896 million or $0.90 per share from $215 million or $0.21 per share last year. On an adjusted basis, net income rose 57 percent to $947 million or $0.95 per share from $604 million or $0.61 per share a year ago. Analysts were expecting the company to earn C$0.84 per share in the quarter. The company expects 2011 gold production to be in a comparable range to 2010 at 7.6 million - 8.0 million ounces.

Gold miner Kinross Gold reported lower fourth quarter net income of $210.3 million or $0.18 per share, compared to $235.6 million or $0.34 per share a year ago. Excluding special items, net earnings were down at $144.7 million from $148.6 million last year. Analysts were expecting the company to earn C$0.15 per share in the quarter.

Gold producer Agnico-Eagle Mines reported a 83 percent increase in fourth quarter profit at $87.96 million or $0.51 per share from $47.94 million or $0.30 per share in the year-ago period. Analysts were expecting the company to earn C$0.62 per share in the quarter.

OceanaGold Corp. swung to profit in fourth quarter, reporting net earnings of $20.98 million or $0.08 per share compared to loss of $8.46 million or $0.05 per share last year.

Oil and gas firm Nexen Inc. said its fourth- quarter net income declined to C$220 million or C$0.42 per share, from C$259 million or C$0.50 per share last year. The company declared regular quarterly dividend of C$0.05 per common share.

Petroleum and natural gas firm Penn West Exploration reported a wider fourth-quarter net loss of C$21 million or C$0.05 per unit, compared to net loss of C$12 million or C$0.03 per unit last year. The company said it plans a quarterly dividend of C$0.27 per share, subject to the approval of its Board of Directors.

Caterpillar equipment dealer Finning International reported a sharply higher fourth quarter profit at C$50.1 million or C$0.29 per share compared to C$16.3 million or C$0.10 per share in the year ago period. Analysts were expecting the company to earn C$0.34 per share in the quarter.

In economic news, Statistics Canada said wholesale sales increased for a fifth consecutive month in December, rising by 0.8 percent to C$45.9 billion. Economists were expecting the sales to 1.3 percent

From south of the border, the U.S. Labor Department said consumer price index rose by 0.4 percent in January, matching the revised increase seen in December. Economists had expected consumer prices to increase by 0.3 percent compared to the 0.5 percent growth originally reported for the previous month. Excluding the jump in energy prices as well as an increase in food prices, core consumer prices edged up by 0.2 percent in January after rising by 0.1 percent in December. Core prices had been expected to inch up by 0.1 percent.

Separately, the U.S. Labor Department said initial jobless claims rose by 25,000 to 410,000 from the previous week's revised figure of 385,000. Economists had expected jobless claims to rise to 410,000 from the 383,000 originally reported for the previous week.

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French Market Indecisive

The French market has been moving across the unchanged line and is marginally lower in afternoon trading Thursday, amid mixed economic reports from the region. Firm cues from Asia and strong corporate earnings reports failed to sustain optimism as some investors resorted to profit taking.

In economic news, excluding self-managed businesses, the number of new business start-ups in France slumped a seasonally adjusted 24.9 percent in January compared to the previous month. Including self-managed businesses, total start-ups were down an unadjusted 10.2 percent in January, statistical office INSEE said.

The number of people in employment in Germany rose 1 percent from the same period a year earlier to 41.04 million between October and December, statistical office Destatis said. This is the highest level of employment in a quarter since German reunification and the first time it has exceeded 41 million.

UK manufacturers expect output to grow strongly over months ahead, the latest Industrial Trends Survey from Confederation of British Industry showed. In February's survey, 37 percent of respondents predict an increase in output, while 14 percent expect a fall, giving a balance of plus 23 percent. Growth is now expected to be the strongest since the first half of 2007.

The drop in Eurozone construction output quickened in December as bad weather conditions hit activities. Construction output fell 1.8 percent month-on-month after declining 0.9 percent in November, European Union statistical agency Eurostat said .

The CAC 40 index opened at 4,124, compared to the prior close of 4,151. The index has been witnessing volatile trading and is currently slipping 0.01 percent.

IT services provider Cap Gemini is climbing 8.3 percent after reporting a surge in fiscal year profit. Chipmaker STMicroelectronics is adding 2.3 percent.

Schneider Electric, which reported an increase in full-year profit, is rising 2.9 percent. Oil and gas servicing firm Technip is gaining 2.5 percent after reporting a profit in the fourth quarter.

Electric utility EDF and department stores operator PPR are among notable gainers.

Beverages firm Pernod-Ricard is falling 4.1 percent in response to higher half-yearly results announced today.

Insurer Axa, which reported a full-year profit decline, is losing 1.3 percent. Those making notable losses include tire firm Michelin and Airbus maker EADS.

Lenders BNP Paribas, Credit Agricole and Natixis are declining, while Societe Generale is advancing 1.5 percent. BNP Paribas reported higher fourth-quarter profit today.

Carmakers Renault and Peugeot are moderately lower.

Elsewhere in Europe, the UK's FTSE 100 is losing 0.05 percent and the German DAX is slipping 0.05 percent.

Across Asia/Pacific, Australia's All Ordinaries added 0.15 percent, China's Shanghai Composite Index gained 0.10 percent and Hong Kong's Hang Seng rose 0.63 percent. Japan's Nikkei 225 and India's BSE Sensex advanced 0.26 percent and 1.13 percent, respectively.

In the U.S., futures point to a cautious open on Wall Street. The Dow gained 0.5 percent, the Nasdaq moved up 0.8 percent and the S&P 500 rose 0.6 percent.

In commodities, crude for March delivery is sliding $0.14 to $84.85 per barrel and gold is rising $4.4 to $1379.5 a troy ounce.

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Indian Market Northbound; Sensex Adds Over 200 Points

Positive global cues amid signs of sustainable global economic recovery and domestic data showing a decline in food inflation to a nine-week low helped the Indian market end sharply higher near the day's high on Thursday.

News that the government has scrapped the controversial S-Band spectrum deal between ISRO's commercial arm Antrix and private firm Devas Multimedia and expectations from the upcoming Union Budget also helped bolster investor sentiment to some extent.

Extending its gains for a fifth consecutive session, the benchmark 30-share Sensex rose by 206 points or 1.13 percent to 18,507, with 19 of its components edging higher. Wipro (down 1.34 percent), ONGC (down 0.61 percent), Hindustan Unilever (down 0.56 percent) and Hindalco Industries (down 0.17 percent ) were the prominent laggards.

Among those gained, private sector lender HDFC Bank led the gainers, rising over 4 percent, while mortgage lender HDFC rallied over 3 percent, telecom giant Bharti Airtel climbed 3.14 percent, engineering & construction giant Larsen & Toubro advanced 2.69 percent, steel maker Tata Steel added 2.16 percent and utility vehicle manufacturer Mahindra & Mahindra closed up 1.84 percent.

BHEL, ITC, Reliance Industries, TCS and SBI, Bajaj Auto and Reliance Infrastructure ended up between 1 percent and 2 percent.

The 50-share Nifty index climbed 65 points or 1.18 percent to 5,546 and the BSE mid-cap and small-cap indexes closed up around a percent each. In the broader market, the breadth was fairly positive, with 1681 gainers versus 1126 decliners.

Mahindra Satyam rose 1.52 percent after it agreed to pay $125 million to settle U.S. shareholder litigation arising from a 2009 accounting fraud. Pipavav Shipyard rallied 3.67 percent after it announced an overseas tie-up to tap opportunities in Indian defence sector. Aventis Pharma gained 2.85 percent on reporting stellar quarterly results.

Everonn Education soared over 17 percent after it tied up with Microsoft to provide IT training to college students under the latter's IT Academy programme.

Vijaya Bank closed up 1.43 percent after it convened a board meet on February 22 to consider a preferential share issue to the government of India. Glenmark Pharmaceuticals edged up 0.64 percent after it filed an application in Netherlands for human trials on its GRC 17536 molecule to help treat pain and respiratory disorders.

Piramal Glass jumped 5.56 percent after it revealed plans to invest Rs.260 crore over the next two years in capacity expansion. Koutons Retail India hit the 5 percent upper circuit limit on debt-restructuring news. Atlanta rose 1.55 percent on winning a new highway contract worth Rs.104 crore. Bharati Shipyard added 2.71 percent on fund-raising reports.

Techno Electric & Engineering Company soared over 8 percent on reports that it may raise Rs.750-crore debt to part-finance its 200-megawatt wind power project in Tamil Nadu. Manappuram General Finance and Leasing, which is reportedly aiming to more than double its net profit in 2010-11, closed up a whopping 12 percent.

State-run steel maker SAIL closed 1.75 percent higher on the buzz that it would delay a follow-on public offering due to uncertain market conditions. Other divestment candidates such as IOC (down 0.90 percent) and Hindustan Copper (down 3.60 percent) closed subdued.

On the macro-economic front, India's annual food inflation eased for the second straight week to a nine-week low of 11.05 percent for the week ended February 5, as pulses, wheat and potato prices declined, government data released today showed. The WPI inflation has fallen by 600 basis points during the preceding two weeks. It is a good sign and food inflation will be under single digit in quite some time, Finance Minister Pranab Mukherjee said.

Elsewhere, most Asian stocks rose on Thursday after strong corporate earnings and an upbeat forecast for U.S. economic growth from the Federal Reserve bolstered investors confidence over the global economic outlook.

European stocks were narrowly mixed amid spreading unrest across the oil-rich Middle East, while the U.S. index futures were largely unchanged.

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Dollar Stable Ahead Of Inflation, Jobless Claims Data

The dollar was steady Thursday morning in New York, as traders paused for the deluge of economic data coming before the opening bell on Wall Street.

While jobless claims figures will be paid much attention, plenty of focus will be on consumer price inflation data from the Commerce Department.

Fed Chairman Ben Bernanke has insisted that inflation is well under control, but some economists say prices are creeping up and will accelerate higher if the Fed maintains its extremely accommodative monetary policy.

The dollar was little changed at $1.3557 versus the euro, and drifted lower to $1.6125 against the sterling.

Early losses against the sterling were caused by hawkish comments from a voting member of the Bank of England.

Inflationary pressure in the UK is greater than the central bank yesterday projected in its Inflation Report, according to policy maker Andrew Sentance.

He said a rise in the interest rate will raise sterling moderately, mitigating global inflationary pressure in the short run, and will also help bring inflation back to the target over the medium term.

The buck kept most of its recent gains against the yen, staying near Y85.65.

Looking at today's economic calendar from the U.S., the consumer price index for January is scheduled to be released at 8:30 AM ET. The consensus estimates call for a 0.3 percent increase in the consumer price index, while the core consumer price index that excludes food and energy is likely to have risen 0.1 percent.

The Labor Department is due to release its customary jobless claims report for the week ended February 12th at 8:30 a.m. ET. Economists expect claims to increase to 410,000.

The Conference Board is scheduled to release a report on the U.S. leading index for January at 10.00 a.m. ET. The consensus estimate calls for a 0.2 percent increase in the leading indicators index for the month.

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