US & World Daily Markets Financial Briefing 18-11-2010

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Stocks In Rally Mode In Mid-Morning Trading

Stocks are posting strong gains in mid-morning trading on Thursday, as the markets are reacting to a slew of positive news, including prospective closure to the Irish debt crisis and a strong initial public offering from American auto giant General Motors (GM).

Far better than expected data on manufacturing activity in the Philadelphia area has also helped to generate buying interest.

The major averages have continued to move to the upside in recent trading, once again reaching new highs for the session. The Dow is currently up 179.21 points or 1.6 percent at 11,187.70, the Nasdaq is up 46.11 points or 1.9 percent at 2,522.12 and the S&P 500 is up 20.13 points or 1.7 percent at 1,198.72.

In corporate news, General Motors returned to trading on the New York Stock Exchange today, with an historic IPO of more than $20 billion, marking the beginning of the end of government control. After opening at $33.00, the stock has surged up by more than 7 percent.

Adding fuel to the rally have been easing concerns about Ireland's debt, with officials from the European Union, the European Central Bank and the International Monetary Fund constructing a bailout package for the cash-strapped nation. Worries about monetary tightening by China are also fading amid expectations that China might not raise interest rates and instead use other control measures to slow down its growth rate.

Sentiment was also boosted by the Philly Fed index of regional manufacturing activity, as it jumped to 22.5 in November from 1.0 in October, with a positive reading indicator growth in the sector. The index has been expected to show a much more modest increase to a reading of 5.0.

Also on the economic front this morning, the Conference Board reported that its leading indicators index rose by 0.5 percent in October, matching an upwardly revised 0.5 percent increase in September. Economists had expected the index to increase by 0.6 percent compared to the 0.3 percent increase originally reported for the previous month.

Earlier, the Labor Department report showed that jobless claims rose to 439,000 in the week ended November 13th from the previous week's revised figure of 437,000. Economists had been expecting jobless claims to increase to 442,000 from the 435,000 originally reported for the previous week.

Sector News

Steel stocks are posting strong gains early on, driving the NYSE Arca Steel Index up by 2.9 percent. The advance is helping the index to come off of a two and a half week closing low.

Airline, computer hardware and gold stocks round out some of the other leading performers in a market showing widespread strength in mid-morning dealing.

 NetApp Inc. (NTAP) is leading the hardware sector higher, rebounding from yesterday's steep drop that came after leaked quarterly results showed disappointing guidance. The stock is up by 7.9 percent, bouncing off of the nearly five-week closing low set on Wednesday.

Most other stocks and sectors are moving back towards recent highs after some profit taking earlier in the week.

Stocks Driven By Analyst Comments

Estee Lauder (EL) is trading notably higher after being upgraded at Oppenheimer from Underperform to Perform. The stock is currently up by 2.8 percent after setting an all-time intraday high of $75.14 per share earlier.

Tenaris (TS) is also elevated after Barclays came out with an initial rating of Overweight on the stock. Shares are currently up by 2.9 percent, moving back towards the eight-month closing high set earlier this month.

Other Markets

In overseas trading, stock markets in the Asia-Pacific region ended mostly higher on Wednesday. Japan's benchmark Nikkei 225 Index rose by 2.1 percent, while Hong Kong's Hang Seng Index gained 1.8 percent.

The major European markets are also trading higher. While the German DAX Index and the French CAC 40 Index are up by 1.4 percent and 1.9 percent, respectively, the U.K.'s FTSE 100 Index is up by 1.2 percent.

In the bond markets, treasuries are moderately lower. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is trading at 2.934 percent, posting a gain of 7 basis points.

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TSX Poised For Positive Open; Western Coal In Focus

Bay Street stocks are poised for a positive opening Thursday as commodities prices moved up amid a rec
eration and Development in its latest report said it expects the Canadian economy to progress at a moderate pace through 2011-12.

On Wednesday, the S&P/TSX Composite Index snapped its 4-day losing streak, adding 55.60 points or 0.44% to 12,657.83.

The price of crude oil was recovering from its monthly low hit last session, with crude for December adding $1.51 to $81.95 a barrel.

The price of gold gained Thursday morning as the U.S. dollar was trimming its gains versus a basket of currencies. Gold for December gained $18.30 to $1,355.20 an ounce.

General Motors, which made a $23 billion public offering, is to trade on the Toronto stock market under the symbol GMM.U.

In corporate news from Canada, engineering contract services provider SNC-Lavalin  and its partner, Genoa-based Ansaldo Energia, said that they have been awarded a C$340 million contract for 420 MW gas-powered thermal plant.

Metallurgical coal producer Western Coal Corp. said would enter into a $3.3 billion business combination agreement with U.S.-based Walter Energy, Inc., which could entitle it to receive C$11.50 per share, in cash and Walter shares. The proposed value represents a premium of 55.8% to Western's latest closing price of C$7.38.

Solar power products supplier Canadian Solar Inc. reported lower net income of $20.3 million or $0.47 per share compared to $25.3 million or $0.69 per share last year, mainly on the fair value of derivatives loss of $23.6 million. However, net earnings beat consensus estimates for C$0.43 per share.

Pulp products company Mercer International said it has completed its private offering of $300 million of 9.5% senior notes due 2017.

Mexico focused base-metals explorer Candente Gold Corp. said it acquired Casua claim from Minera Silex Peru S.R.L.

Base-metals miner Iberian Minerals  reported a wider loss third quarter net loss of $97.7 million or $0.29 per share compared to $70.4 million or $0.21 per share in the same quarter last year.

Oil and natural gas producer NuLoch Resources  reported 130% growth in its third quarter Funds From Operations  at $1.50 million, up from $0.65 million in 2009. However, FFO per share dropped 50% to $0.01 from $0.02 owing to an increase in number of shares, following the company's $28.1 million stock offering.

 In economic news, Statistics Canada said non-residents added a further C$12.3 billion to their portfolios, up from C$11.1 billion in August and better than the C$9.2 billion estimated by analysts. Meanwhile, Canadian investors added $2.7 billion of foreign stocks to their holdings in September, the largest investment since March.

In another report, the agency said wholesale sales rose 0.4% to C$44.8 billion in September, following a 1.3% advance in August. Economists expected wholesale sales to rise 0.3% from the 1.2% increase initially reported for August.

The OECD predicts the Canadian economy to grow 3% this year, slip to 2.3% next year, then return to 3% growth in 2012. It added that Canada's unemployment rate would fall from 8.% this year, to 7.8% next year and to 7.4% by 2012.

From south of the border, the U.S. Labor Department said jobless claims rose to 439,000 in the week ended November 13 from the previous week's revised figure of 437,000. Economists had been expecting jobless claims to increase to 442,000 from the 435,000 originally reported for the previous week.

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French Stocks Rise On Ireland Debt Solution Hopes

The French market is notably higher in afternoon trading Thursday on hopes that a bailout plan for Ireland is taking shape with talks between Irish authorities and a delegation of officials from the European Union and the European Central Bank. Lenders and construction stocks witnessed upside.

In economic news, the eurozone's current account deficit rose sharply in September due to larger shortfalls in the income and current transfers accounts. The European Central Bank said the seasonally adjusted current account deficit soared to 13.1 billion euros from 6.9 billion euros in August.

U.K. retail sales including automotive fuel rose 0.8% month-on-month in October in terms of value, the Office for National Statistics said. Economists had forecast a monthly increase of 0.5%. On an annual basis, retail sales value climbed 2%.

Meanwhile, the U.K.'s public sector net borrowing, excluding the effects of financial interventions, rose to 10.3 billion pounds in October from 10.1 billion pounds in the same month a year ago, the Office for National Statistics said.

The CAC 40 opened at 3,824 and remained in positive territory throughout the session. The index is currently adding 1.62%.

Schneider Electric is gaining 4.3%, leading the gainers. Carmakers Peugeot and Renault are advancing 3.5% and 2.8%, respectively.

Construction stocks Saint-Gobain, Lafarge and Vinci are rising between 2.3% and 1.9%.

Among lenders, Societe Generale is rising 3.1% and BNP Paribas is adding 2.4%. Credit Agricole and Natixis are gaining 1.2% and 1%, respectively.

Those making notable gains include chipmaker STMicroelectronics, hotel group Accor and brewer Pernod-Ricard.

Telecom equipment maker Alcatel Lucent and EADS, the maker of Airbus, are on the losing side.

Elsewhere in Europe, the UK's FTSE 100 is adding 1.35% and the German DAX is advancing 1.42%.

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Asian Markets End In Positive Territory

Asian markets open for trading on Thursday ended in positive territory as fears about China's tightening measures eased considerably amid speculation that China might not raise interest rates and instead look for other options to cool down its economy. Debt concerns in Ireland also eased considerably amid speculation that the EU, ECB and the IMF might collectively rescue the country from debt related issues. Bargain hunting at lower levels after recent losses amid higher commodity prices lifted most of the markets in the region.

In Australia, the benchmark S&P/ASX200 Index advanced 15.90 points, or 0.34%, and closed at 4,640 points, while the All-Ordinaries Index ended at 4,723, representing a gain of 17.70 points, or 0.38%.

On the economic front, a report released by the Australian Bureau of Statistics revealed that the value of Australia's merchandise imports decreased in October from September. As per the report, the original value of merchandise imported into the country during October was A$17.7 billion, down 4% or A$665 million, from September's total of A$18.3 billion. The report further noted that, on a balance of payments basis, goods imports fell A$565 million or 3% in seasonally adjusted terms to A$17.1 billion in October. Intermediate and other merchandise goods imports dropped 5%.

In a separate report, the Statistics Bureau revealed that the average full-time total weekly earnings of Australian adults rose 4.8% year-on-year in August, Weekly earnings were up 4.3% in the private sector and rose 6.3% in the public sector. Earnings increased 4.5% for males and 4.8% for females. In the three months to August period, total weekly earnings rose 0.6% compared to three months earlier.

Light sweet crude oil futures for December delivery ended at $81.38 a barrel in electronic trading, up $0.94 per barrel from previous close at $80.44 a barrel in New York on Wednesday.

The major gainer in the market is Sonic Health Care, having surged 5.04%, after the healthcare giant stated that it expects full year profit to rise between 5% to 15% on higher pathology volumes in line with long-term growth rate.

Resource stocks advanced on higher commodity prices. BHP Billiton advanced 0.76%, Rio Tinto added 0.85%, Fortescue Metals climbed 2.29%,Gindalbie Metals surged up 4.57%, Iluka Resources was higher by 4.99%, Macarthur Coal soared 4.91%, Mincor Resources gained 2.06%, Murchison Metals rose 0.86% and Oz Minerals was up 4.24%.

Mixed trading was witnessed among oil related stocks. Woodside Petroleum edged up 0.07%, Santos Ltd added 0.31%, and Oil Search Ltd climbed 2.30%. However, ROC Oil Ltd declined 1.30% and Origin Energy shed 0.85%.

Banks ended in negative territory, limiting the overall gains in the market. ANZ Bank shed 1.05%, Commonwealth Bank of Australia shed 0.76%, National Australia Bank slipped 0.37% and Westpac Banking Corp. was down 0.64%. Investment banking company Macquarie Group, however, bucked the negative trend and ended in positive territory with a gain of 1.22%.

In Japan, the benchmark Nikkei 225 Index advanced 201.97 points, or 2.06% to 10,014, while the broader Topix index of all First Section issues gained 18.51 points, or 2.18%, to 869..

Light sweet crude oil futures for December delivery ended at $81.38 a barrel in electronic trading, up $0.94 per barrel from previous close at $80.44 a barrel in New York on Wednesday.

All the 33 sectors in the market ended in positive territory amid optimism about economy and weaker local currency against the dollar.

Financial stocks, including large banks, securities and insurance stocks led the gains in the market.

Among the large banks, Sumitomo Mitsui Financial surged up 3.39%, Resona Holdings soraed 9.17%, Mitsubishi UFJ Financial Group climbed 4.30% and Mizuho Financial rose 3.88%.

Securities stocks also ended in positive territory. Nomura Holdings climbed 4.73%, Matsui Securities Co. surged up 4.37%, Daiwa Securities soared 5.28% and Mizuho Securities was higher by 6.99%.

Among the insurance companies, Tokio Marine Holdings surged up 5.31%, T&D Holdings climbed 4.98%, MS&AD Insurance Group Holdings climbed 4.04%, and NKSJ Holdings was higher by 4.34%.

Exporters, trading companies, resource stocks and others also ended in positive territory, lifted by weaker yen against the US Dollar.

Encouraging Asian as well as European cues helped lift the Indian market modestly higher on Thursday after a steel fall in the previous session. As volatility ruled the roost, the benchmark 30-share Sensex moved choppily in a range of 19,616-20,056 before finally ending up 66 points or 0.33% at 19,931, with 19 of its components edging higher. The broader Nifty rose by 10 points or 0.17% to 5,999, while the BSE mid-cap indexes shed 0.30% and 1.06%, respectively, as the market undertone still remained jittery over Irish debt concerns

Among the other markets in the region, China's Shanghai Composite Index added 26.59 points, or 0.94% to close at 2,865.45, Hong Kong's Hang Seng Index surged up 422.93 points, or 1.82%, to close at 23,639.39, Jakarta Composite Index in Indonesia edged higher by 3.88 points, or 0.11%, to close 3,678, the Strait Times Index in Singapore advanced 3.12 points, or 0.10%, to close at 3,215, Taiwan Weighted Index gained 27.91 points or 0.34% to close at 8,283.and Seoul Composite Index in South Korea ended in positive territory with a gain of 30.75 points, or 1.62%, at 1,928.

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Dollar Rally Fizzles Out As Risk Appetite Returns

The dollar pulled back against most majors Thursday morning, as conditions improved in the global markets, diminishing appetite for safe havens.

After a solid week saw the dollar trim its steep recent losses, the buck is back on the defensive amid reports that Ireland is nearing a deal to bail out its struggling banks and sovereign debt.

Irish central bank Governor Patrick Honohan said Thursday that the Republic is likely to get loans worth "tens of billions" of euros from the European Union and the International Monetary Fund as talks begin in Dublin.

Speaking to the state broadcaster RTE, Honohan said the Republic will likely have to accept the bailout to rescue the country's ailing banking sector and to restore confidence.

Meanwhile, US stocks were set to soar at the opening bell this morning, with investors snapping up shares of reborn General Motors on its first day back on the New York Stock Exchange.

The dollar dipped to $1.3655 against the euro, down more than 2 cents from this week's 2-month high of $1.3448. With the loss, the dollar edged closer a recent 10-month low near $1.43.

The buck also lost ground against the sterling, easing back to $1.60.

U.K. retail sales increased for the first time in three months suggesting that consumers are opening their wallets, albeit slowly. Retail sales volume including automotive fuels increased 0.5% month-on-month in October reversing a similar size decline in September.

The buck was stuck on pause versus the yen, even as the Japanese currency was generally weak against other majors. The dollar fetched Y83.30, staying near a monthly high of Y83.58 from earlier in the week.

On the economic calendar in the US, the Labor Department will release its customary jobless claims report for the week ended November 13th at 8:30 a.m. ET. . Economists expect jobless claims to come in at 442,000 for the week, slightly higher than 436,000 reported for the previous week.

The Conference Board will table its report on the U.S. leading economic indicators index for October at 10.00 a.m. ET. Economists expect that the leading indicators index increased 0.6% for the month, following 0.3% increase in the previous month.

Traders will also focus on the results of the Philadelphia Federal Reserve's manufacturing survey, to be released at 10.00 a.m. ET. Economists expect the diffusion index of current activity to show a reading of 4.5 for November.

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