US & World Daily Markets Financial Briefing 18-01-2011

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Stocks Showing A Lack Of Direction In Early Trading

Stocks are turning in a lackluster performance in early trading on Tuesday, with traders reluctant to make any significant moves following the long weekend. The major averages are lingering near the unchanged line after ending last Friday's trading at multi-year closing highs.

While most of the major sectors are showing only modest moves, early strength is visible among gold stocks, which are rebounding along with the price of the precious metal. On the other hand, weakness has emerged among banking and airline stocks.

Citigroup (C) is helping to lead the banking sector lower after reporting fourth quarter earnings of $0.04 per share, short of the $0.08 per share expected on Wall Street. Revenues totaled $18.4 billion, which was below expectations for $20.45 billion.

Similarly, Delta Air Lines (DAL) is turning in one of the airline sector's worst performances after posting adjusted fourth quarter earnings of $0.19 per share, well below forecasts for $0.26 per share. Meanwhile, sales rose to $7.79 billion, topping expectations for revenues of $7.73 billion.

Shares of Apple (AAPL) are also moving lower after CEO Steve Jobs announced that he would be taking an indefinite medical leave of absence again, raising uncertainty regarding the direction of the company.

In an email to Apple employees Monday morning, Jobs said, "At my request, the board of directors has granted me a medical leave of absence so I can focus on my health. I will continue as CEO and be involved in major strategic decisions for the company."

On the economic front, conditions for New York manufacturers continued to improve in January, according to a report released by the Federal Reserve Bank of New York, with the index of regional manufacturing activity rising roughly in line with economist estimates.

The New York Fed said its general business conditions index rose to 11.9 in January from a revised 9.9 in December, with a positive reading indicating growth in regional manufacturing activity. Economists had expected the index to rise to 12.0 from the 10.6 originally reported for the previous month.

At 10:00 a.m. ET, the National Association of Home Builders will release the results of its January survey on homebuilder confidence. The index is forecast to remain at 16.

The major averages are currently turning in a mixed performance, with the Dow up by 15.78 points or 0.1 percent at 11,803,16, while the Nasdaq is down 4.33 points or 0.2 percent at 2,750.97 and the S&P 500 is down 2.15 points or 0.2 percent at 1,291.09.

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TSX Poised To Open Higher; BoC Holds Rate Steady

Bay Street stocks may open higher Tuesday amid positive cues from the commodities and global equity markets. Meanwhile, the Bank of Canada today left its key rates unchanged at 1%, as widely expected.

The BoC today held its key rates steady at 1% and noted that the global economic recovery is proceeding at a somewhat faster pace than it had anticipated, while cautioning that risks remain elevated. The Bank sees the economy to grow by 2.4% in 2011 and 2.8% in 2012.

U.S. stock futures were pointing to a higher open amid optimism about forthcoming corporate earnings. Citigroup, Inc. today reported fourth quarter net income of $1.3 billion or $0.04 per share, compared to a net loss of $7.6 billion or $0.33 per share in the prior year quarter.

On Monday, the S&P/TSX Composite Index eased 23.96 points or 0.18% to 13,440.11.

The price of crude oil was hovering around its 27-month peak, with crude for February edged down $0.30 to $91.24 a barrel. Earlier today, the IEA in its Monthly Oil Market Report released today, assesses 2010 global oil product demand at 87.7 million barrels per day or mbd, up by 2.7 mbd year-on year, and revised up that of 2011 by 1.4 mbd to 89.1 mbd.

The price of gold edged up amid a weak U.S. dollar. Gold for February was up $11.60 to $1,372.10 an ounce.

In corporate news from Canada, natural gas firm Encana Corp. said its subsidiary, Encana Oil & Gas (USA) Inc. will sell its Fort Lupton natural gas processing plant in Colorado to Western Gas Partners, LP for about $303 million.

Oil and gas firm Celtic Exploration said that it now estimates production for 2010 averaged about 17,300 boed, based on field estimates for December, compared to its previous forecast of 17,700 boed.

International energy company Gran Tierra Energy said it would acquire Petrolifera Petroleum Ltd in exchange of 0.1241 of its common shares for each share of the latter, valuing Petrolifera for about $195 million.

TD Ameritrade Holding Corp. reported higher first quarter net income of $145 million or $0.25 per share, compared to $136.2 million or $0.23 per share a year earlier. Canada's TD Bank, which holds 40% stake in TD Ameritrade, said it would benefit $48 million to first quarter net income.

Gold miner Iamgold announced 2010 total year gold production at the high end of the forecast range of 940,000 to 970,000 ounces and noted that capital expenditures for 2011 are budgeted at $460 million.

Precious metals miner Trevali Resources said it would acquire Kria Resources Ltd in exchange of 0.2 of its common shares for each share of the latter, valuing Kria at about C$44 million.

Space communications systems maker COM DEV International said it received $9 million contract for a military communications satellite.

Industrial equipment dealer Strongco Corp. said it has completed its rights offering for aggregate gross proceeds of C$7.86 million.

Product development company BSM Technologies said it has converted, on a one-for-one basis, of all about 65.78 million issued and outstanding preferred shares into common shares.

In economic news from south of the border, the Federal Reserve Bank of New York said its general business conditions index rose to 11.9 in January from a revised 9.9 in December. Economists had expected the index to rise to 12.0 from the 10.6 originally reported for the previous month.

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French Market Trading In Positive Territory

The French market is trading in positive territory, albeit with modest gains Tuesday afternoon lifted by banks and technology stocks, amid optimism about economic recovery in the region and US corporate earnings. Positive cues from Asian trading also impacted market sentiment.

Learning invaluable lessons from the recent debt crisis and rescue operations in Greece and Ireland, finance ministers of the euro-region have reiterated their resolve to strengthen region's rescue fund, spurring confidence in a recovery from the sovereign-debt crisis.

In economic news, data released by the Office for National Statistics in the UK revealed that British annual inflation accelerated further to an eight-month high in December, boosted by food and fuel prices. Staying above the central bank's 2% target for the 13th consecutive month, consumer price annual inflation in December came in at 3.7%, up from 3.3% in November, data revealed. Economists were expecting the rate to remain at 3.3%. On a monthly basis, consumer prices rose 1% in December, which was the highest on record. Economists had expected only 0.7% increase for December.

German economic sentiment index climbed to a six-month high in January, indicating strong economic performance in the first half of this year, results of a key survey revealed. The Mannheim-based Centre for European Economic Research, or ZEW, said its economic sentiment indicator that measures financial experts' six-month expectations for Germany, climbed to 15.4 points in January from 4.3 points in December. Economists had forecast an increase to 7 points.

The CAC 40 index opened higher at 3,991 compared to previous close at 3,975 and continued to stay in the green throughout. The index is presently gaining 0.62%.

Banks are trading in the green. Credit Agricole is advancing 1.73%, BNP Paribas is gaining 1.24% and Societe Generale is adding 0.36%.

Luxury goods firm LVMH is gaining 1.29% and tire maker Michelin is adding 0.45%. However dairy giant Danone is trading weaker with a loss of 1.49%.

Carmakers Renault and Peugeot are trading in positive territory.

Computer & consulting firm Cap Gemini, Vivendi, building materials maker Saint-Gobain and cement giant Lafarge are trading in positive territory with modest gains.

Elsewhere in Europe, the U.K's FTSE Index is advancing 1.13% and the Germany's DAX Index is gaining 0.83%

Across Asia/Pacific, markets ended in positive territory ahead of US earnings season. Japan's Nikkei 225 added 0.15%, Australia's All Ordinaries Index gained 0.80%, India's BSE Sensex advanced 1.110% and China's Shanghai Composite Index edged higher by 0.09%. However, Hong Kong's Hang Seng Index and South Korea's Kospi Index slipped into the red with minor losses of 0.01% and 0.16%, respectively.

In the U.S., futures point to a mixed open on Wall Street ahead of earnings from financial and technology majors including Citigroup, Apple and IBM.

In commodities, crude for February delivery is sliding $0.35 to $91.19 per barrel and gold is trading flat at $1,360.40 per troy ounce.

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Indian Market Ends Sharply Higher; Sensex Regains 19000 Level

After witnessing some consolidation in the previous session, the Indian market bounced back sharply on Tuesday, as forecast-beating third-quarter results from TCS and strong global cues buoyed sentiment.

Barring Infosys' results, third-quarter earnings announced by blue-chip companies such as HDFC, Larsen & Toubro and Axis Bank in recent sessions came in line with expectations, thus allaying near-term fears concerning corporate profits.

Software exporter TCS climbed 5.48% to a fresh 52-week high on posting robust earnings with a 30% rise in third-quarter net profit. Infosys and Wipro rose by 2-3%. Banking stocks bounced back, with leading banks such as ICICI Bank, SBI, HDFC Bank and Axis Bank rising between 1% and 4%. Among metal stocks, Tata Steel, Hindalco, Jindal Steel and Sterlite added between 1.5% and 4.5%.

Cipla (up 2.67%), Jaiprakash Associates (up 2.66%), ITC (up 2.53%), Bajaj Auto (up 2.16%), Tata Motors (up 1.58%) and Mahindra & Mahindra (up 1.23%) were the other prominent gainers, while Hero Honda Motors, Reliance Industries, DLF, HDFC, Bharti Airtel, Tata Power and Reliance Infrastructure underperformed, ending down between 0.17% and 4.53%.

The benchmark 30-share Sensex closed near the day's high at 19,092, up 210 points or 1.11% and the 50-share Nifty climbed 70 points or 1.23% to 5,724. With second-line stocks posting moderate gains, the market breadth was slightly positive, with 1490 gainers versus 1342 decliners on the BSE.

Tulip Telecom rose 2.57% after it bought a data center facility in Bengaluru for Rs.230 crore. Jindal Saw rose 3.38% on bagging orders worth Rs.700 crore for export markets in Far East. Suzlon Energy added 2.81% after its unit REpower bagged a contract to supply 150 wind turbines to Canada-based Saint-Laurent Energies.

Opto Circuits jumped nearly 11% on buoyant results. Indiabulls Real Estate rallied 3.33% after reporting a more than 27-fold jump in its third-quarter net profit. Group firm Indiabulls Power ended up 2%.

Camlin advanced 3.45% after the company denied media reports that its promoters would sell about 15% stake to a private equity player. 3i Infotech gained 1.37% on winning a major contract in the health care sector from Manipal Health Enterprises.

Hindustan Construction Company tumbled 4% after it reportedly received a final order from the environment ministry, confirming environmental violation by its unit Lavasa Corp. GAIL (India), which is reportedly scouting for shale gas assets in the United States, ended down 0.90%.

Ashok Leyland fell 1.78% despite bagging orders worth Rs.172 crore from VRL Logistics. Mastek fell 3.28% after the mid-cap software services firm reported a net loss of Rs 27.66 crore in the third quarter. Industrial and automotive batteries maker Exide Industries slumped 11% on disappointing third-quarter results.

Elsewhere, the other Asian markets closed mostly higher on Tuesday, led by energy and technology companies, ahead of the reopening of the U.S. markets. European stocks were broadly higher in early trading, helped by strength in the auto and basic-resources sectors, while the Dow futures reversed early losses on optimism about corporate earnings with technology and banking bellwethers Apple and Citigroup due to report their earnings later in the day.

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Dollar Hits Fresh 2-month Low Versus Sterling

The dollar remained under pressure versus other major currencies on Tuesday, ahead of a slew of economic data as Wall Street gets back to work following the Martin Luther King, Jr. holiday.

A much better than expected survey on German economic sentiment boosted the euro this morning. German economic sentiment index climbed to a six-month high in January, according to the Mannheim-based Centre for European Economic Research, or ZEW.

The buck dropped toward last week's lows against the euro, touching $1.34 in very early dealing. The buck has dropped more than 5 cents from the start of last week, when it reached a 4-month peak of $1.2873.

Also this morning the dollar was hit hard against the sterling. The dollar slid to $1.60 for the first time in more than two months, extending a dramatic recent decline.

The dollar hit a fresh 2-year low of C$0.9840 against the Canadian dollar, ahead of the latest interest rate decision from the Bank of Canada. With the strong loonie threatening exports from Canada, the BoC is expected to keep rates low at 1 percent.

There was little movement for the dollar against the yen, as the greenback drifted slightly lower to Y82.45.

Looking at today's economic calendar from the US, results of the New York Federal Reserve's empire state manufacturing survey for January will be released at 8:30 AM ET.

Economists expect the headline general business conditions index to come in at 14, following a reading of 10.6 for December.

At 9.00 a.m. ET, the Treasury Department will release a report on the flows of financial instruments into and out of the U.S. for November.

At 10.00 a.m. ET, the National Association of Homebuilders will release the results of its January survey on homebuilders' confidence. The index is widely expected to rise to 17.

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