US & World Daily Markets Financial Briefing 21-01-2011

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Stocks Regain Ground At The Start Of Trading

After moving lower in each of the two previous sessions, stocks regained some ground at the start of trading on Friday. The major averages all moved to the upside, with the Dow reaching its best intraday level in well over two years.

The initial strength in the markets was largely due a positive reaction to the latest earnings news, with better than expected results from big name companies such as General Electric (GE) and Google (GOOG) generating some buying interest.

General Electric reported fourth quarter earnings of $0.42 per share, better than the $0.28 per share seen last year and above expectations for $0.32 per share. Revenues increased to $41.38 billion from $41.05 billion in the year-ago quarter, also beating forecasts for $39.90 billion.

After the markets closed for trading on Thursday, Google said that its fourth quarter profit rose 29 percent from last year, driven by the holiday season that triggered the company's advertising revenues. Quarterly earnings came in well ahead of the expectations as did revenues.

Meanwhile, Bank of America Corp. (BAC) posted a fourth quarter net loss $0.16 per share compared to a loss $0.60 per share in last year period. Excluding a goodwill impairment charge, the company reported a profit of $0.04 per share.

On average, analysts expected Bank of America to earn $0.14 per share. Revenues totaled $22.6 billion, which was short of projections for $24.87 billion for the period.

Chip maker Advanced Micro Devices (AMD) said its fourth quarter profit fell 68 percent from last year, when results were boosted by a $1.24 billion legal settlement payment from rival Intel (INTC). However, the company's quarterly earnings per share, excluding items, came in above analyst expectations.

Networking stocks are turning in a strong performance in early trading after helping to lead the markets lower on Thursday. Banking, oil service, and electronic storage stocks are also seeing early strength, while most of the major sectors are showing more modest upward moves.

The major averages have pulled back off their highs for the young session but currently remain in positive territory. The Dow is up 58.92 points or 0.5 percent at 11,881.72, the Nasdaq is up 11.71 points or 0.4 percent at 2,716.00 and the S&P 500 is up 7.37 points or 0.6 percent at 1,287.63.

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TSX Up At Open Friday On Bargain Hunting

Toronto stocks opened higher Friday amid buying in energy and base-metals stocks, while gold stocks continued to linger in red for a second session. The S&P/TSX Composite Index gained 65.43 points or 0.49% to 13,396.76.

The Diversified Materials Index added nearly 1.0%, with First Quantum Minerals, Inmet Mining and Teck Resources gaining over 1% each.

In the oil patch, Niko Resources was up nearly 1%.

Oil explorer Midway Energy surged 7% after it said it expects to almost double production in 2011 and raised its capital budget for the year.

In the financial space, National Bank of Canada and Fairfax Financial Holdings rose around 0.50% each.

Global life-sciences company Nordion Inc. soared nearly 14% after the company swung to profit in fourth quarter.

Meanwhile, gold stocks were trading weak amid falling bullion prices. Agnico-Eagle Mines, Barrick Gold and Goldcorp. were down over 1% each.

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French Market Rallies

The French market is rallying in afternoon trading Friday, led by banks and construction stocks. The market shrugged off unimpressive economic data and weak cues from Asia amid encouraging earnings reports from the U.S.

In economic news from the country, the Conference Board leading index dropped 0.3 percent from October, following a 0.2 percent rise in the previous month and a 0.7 percent increase in September. Meanwhile, the German business climate index climbed to 110.3 from 109.8 in December. Economists had forecast the index to remain unchanged.

UK's gross mortgage lending declined 6 percent month-on-month to GBP 11 billion in December, the Council of Mortgage Lenders said. Gross lending fell 18 percent year-on-year. Meanwhile, mortgage lending remained subdued towards the end of 2010, according to the Bank of England's latest Trends in Lending publication.

The Office for National Statistics said UK retail sales volume, including automotive fuel, decreased 0.8 percent month-on-month in December, following a 0.4 percent rise in November.

The CAC 40 index opened at 3,982, up from the previous close of 3,965. The index is currently surging 1.67 percent.

Credit Agricole is leading the gainers by adding 4.5 percent. Other lenders Societe Generale, BNP Paribas and Natixis are gaining between 3.8 percent and 2.9 percent.

Among construction-related stocks, steel maker ArcelorMittal is gaining 3.2 percent, cement giant Lafarge is adding 2 percent. Builders Bouygues and Vinci are gaining 2.1 percent and 1.1 percent, respectively. Building materials maker Saint-Gobain is climbing 1.7 percent.

Insurer Axa is up 3 percent. Integrated oil and gas firm Total is adding 1.6 percent and oil services firm Technip is up 2.6 percent.

Dairy products maker Danone and chipmaker Infineon Technologies are seeing notable gains.

Elsewhere in Europe, the UK's FTSE 100 is adding 0.6 percent and the German DAX is gaining 0.95 percent.

Across Asia/Pacific, most major markets ended below the central line. Australia's All Ordinaries lost 0.6 percent and Hong Kong's Hang Seng retreated 0.5 percent. Japan's Nikkei 225 and India's BSE Sensex declined 1.6 percent and 0.2 percent, respectively. However, China's Shanghai Composite Index gained 1.43 percent.

In the U.S., futures point to a higher open on Wall Street. In the previous session, the Dow edged down less than a tenth of a percent, the Nasdaq fell 0.8 percent and the S&P 500 slipped 0.1 percent.

In commodities, crude for March delivery is sliding $0.13 to $89.46 per barrel and February gold is slipping $4.1 to $1342.4 a troy ounce.

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Indian Market Ends Volatile Session Modestly Lower

The Indian market ended a volatile session modestly lower on Friday on the back of subdued Asian cues and weekend profit taking. While IT, FMCG, metal and realty stocks bore the brunt of the selling, the strength in the banking sector for a second consecutive session and a nearly 2% gain in heavyweight Reliance shares ahead of its results later in the day limited the downside. Select power and consumer durable stocks also found modest buying support.

After fluctuating in a range of 19,065-18,932, the 30-share Sensex ended the session 40 points or 0.20% lower at 19,008, with 18 of its components declining. The 50-share Nifty fell by 15 points or 0.26% to 5,696, while the BSE mid-cap and small-cap indexes rose 0.22% and 0.465, respectively.

Wipro plunged nearly 5% to finish near the day's low after the software exporter gave a muted revenue guidance for Q4 and announced management changes. Rival Infosys dropped 1.34%, while TCS, which has managed to consistently increase its margins over the past four-five quarters, ended up marginally.

ONGC fell 2.57% after the state-owned explorer said it detected an oil spill at its fields off the Mumbai coast. Hindustan Construction eased 1.35% and Sasken Communication Technologies shed almost 3% on disappointing results.

Diversified business conglomerate ITC fell 1.63% despite posting better-than-expected earnings with a 21% rise in quarterly net profit. Tata Steel shed 0.84%. According to stock exchange data, its $763 million follow-on offering was subscribed 2.21 times by midday on the last day of the offer Friday.

Public sector lender SBI, which will unveil its Q3 results tomorrow, ended up 2.5%. Other banking stocks such as ICICI Bank (up 1.43%), Axis Bank (down 0.10%) and HDFC Bank (down 0.91%) turned in a mixed performance ahead of next week's monetary policy review meet.

Corporation Bank rose 2.17% and Bank of India climbed 6.50% on strong earnings. State-run engineering firm BHEL rose 1.75% on posting a better-than-expected 31% rise in quarterly net profit.

High-beta realty stocks closed mostly lower, with DB Realty and DLF ending down around 2% each. Drug maker Dr Reddy's ended down 1.23% after it launched a generic version of Protonix drug in the U.S. market. Coal India closed down half a percent after it reportedly lowered its production targets for the current and the next fiscal year.

Mahindra & Mahindra added 1.40% after it reportedly received approval from the large creditors of Ssangyong Motors to take over the ailing Korean sports utility vehicle maker. Suzlon Energy gained 2% on securing a 218-MW project from Brazil. Valecha Engineering hit the 20% upper circuit limit on winning a Rs.53-crore construction contract.

Elsewhere, most Asian stock markets edged lower on Friday on Chinese rate tightening concerns. However, China's Shanghai Composite average rose nearly 1.43% on bargain hunting, recovering a significant portion of the yesterday's 2.9% decline.

Likewise, European stocks were modestly higher in early trading, as a bounce back in oil and metal prices lifted resource stocks and an unexpected rise in German business confidence to a record high in January boosted sentiment. The 17-nation euro hit a two-month high against the dollar, as a gain in Chinese shares improved investor risk appetite and expectations grew that euro zone policymakers will evolve a consensus on shoring up the current rescue fund.

The U.S. index futures were marginally in the red ahead of earnings from Bank of America and General Electric.

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Dollar Extends 2-Month Low Versus Euro

The dollar was generally weaker on Friday, as traders turned attention to Europe amid a lack of first-tier economic news from the United States.

Reports surfaced this morning indicating that Spain is planning to bail out its beleaguered regional savings banks, which have struggled since the nation's housing bubble burst in 2009.

The dollar dropped to a fresh 2-month low of $1.3567 versus the euro, extending its steep losses from earlier in the week. Earlier in January, the buck touched a 4-month high of $1.2873.

Talk of inflation in the Euro zone and successful bond auctions for Spain and Portugal have raised speculation that the European Central Bank will boost interest rates sooner than expected.

German business confidence hit a new high in January, boosted by an increasingly optimistic manufacturing and construction sectors.

The business climate index, which measures firms' sentiment, rose to 110.3 in January from a revised 109.8 in December, a monthly survey conducted by the Ifo institute among 7,000 executives showed Friday.

The buck weakened a bit versus the yen, slipping to Y82.70. Back in November, the dollar hit a 15-year low of Y80.22 and has since failed to sustain any movement away from that mark.

The dollar was stable versus the sterling, holding at $1.5950 compare to a 2-month low of $1.6059 set earlier in the week.

Commodity prices steadied after pulling back sharply on Thursday. The dollar eased a hair below parity versus Canada's resource-backed loonie.

While there is little economic news expected from the US today, corporate earnings results may give a sense of conditions in the private sector.

It is hoped that the pace of hirings will pick up if corporations continue to post string quarterly profits.

First-time claims for unemployment benefits fell by much more than anticipated in the week ended January 15th, according to a report released by the Labor Department on Thursday, with jobless claims pulling back near the two-year low set in late December.

The report showed that initial jobless claims fell to 404,000 from the previous week's revised figure of 441,000. Economists had been expecting jobless claims to slip to 420,000. 

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