US & World Daily Markets Financial Briefing 21-12-2010

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Stocks See Early Strength But Trading Activity Remains Light

After showing a lack of direction over the course of the previous session, stocks have moved modestly higher in early trading on Tuesday. The major averages have all climbed into positive territory after ending the previous session mixed.

Electronic storage stocks are seeing notable strength in early trading, driving the NYSE Arca Disk Drive Index up by 1 percent. Early strength is also visible among software stocks, with Adobe (ADBE) helping to lead the sector higher.

Shares of Adobe are currently up by 6 percent after the software developer reported a fourth quarter profit versus a year-ago loss, with its revenue for the quarter topping $1 billion. The company also forecast better than expected first quarter results.

Most of the other major sectors have also moved to the upside, with banking, trucking, and semiconductor stocks posting notable gains. On the other hand, moderate weakness is visible among gold stocks.

After moving higher at the open, the major averages are currently hovering in positive territory. The Dow is up 34.02 points or 0.3 percent at 11,512.15, the Nasdaq is up 10.42 points or 0.4 percent at 2,659.98 and the S&P 500 is up 4.27 points or 0.3 percent at 1,251.35.

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TSX Poised For Lackluster Session Amid Mixed Cues

Toronto stocks may struggle for direction Tuesday morning amid lingering concerns over the euro zone sovereign debt situation.

Meanwhile, inflation in Canada slowed down in November leaving some room for the Bank of Canada to hold rates steady.

Earlier today, rating agency Moody's Investors Service warned it could downgrade Portugal's sovereign credit by a notch or two from A1, citing sluggish economic growth.

U.S. stock futures were pointing to a marginally higher open.

On Monday, the S&P/TSX Composite Index edged down 8.18 points or 0.06% to 13,193.28, a day after snapping its 3-day losing streak.

The price of crude oil was trading flat with unusually cold weather across Europe placing a floor. Crude for February edged up $0.40 to $89.77 a barrel.

The price of gold was little changed amid lingering worries over the euro zone debt situation. Gold for February was up $4.00 to $1,389.50 an ounce.

In corporate news from Canada, lender TD Bank said it would acquire auto lender Chrysler Financial Corp. from private equity firm Cerberus Capital Management LP for about $6.30 billion. Notably Friday Bank of Montreal announced plans to acquire Marshall & Ilsley Corp. for $4.1 billion.

The founder and largest individual shareholder of auto parts maker Magna International, Frank Stronach divested nearly 2.5 million shares for $124 million this month, according to a regulatory filing.

Independent electric power producer Atlantic Power Corp. said Monday it acquired 100% of the membership interests in Cadillac Renewable Energy, Llc., a 39.6 MW wood fired facility at Michigan for $77 million.

In economic news Statistics Canada said consumer prices rose 2.0% in the 12 months to November, following a 2.4% increase in October. Economists were expecting the annual inflation rate to slip to 2.3% following October's 2-year high. Meanwhile, the Bank of Canada's core inflation rate was unchanged in the month and rose 1.4% on the year, down from 8% in October, suggesting that the bank has a free hand to maintain accommodative interest rates well into 2011.

In another report, the agency said retail sales rose 0.8% in current dollars to C$36.6 billion in October, following the revised 0.5% increase reported for September. Economists expected retail sales to rise 0.5% in November. However, excluding sales at gasoline stations, retail sales edged down 0.1%.

Traders might put aside Korean concerns, at least for now, as the North refrained from retaliating to military drills on Yeonpyeong Island, which is near a disputed sea border.

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French Market Rises Moderately

The French market is rising moderately in afternoon trading Tuesday. Sentiment was influenced by strong cues from Asia as Korean concerns eased and investors shrugged off a warning on Portugal's credit rating. Construction stocks witnessed upside and banks were mostly higher.

In economic news, data from market research group GfK showed that confidence among German households is set to fall in January. The forward - looking consumer sentiment indicator, based on a survey of about 2,000 Germans, dropped to 5.4 from 5.5 in December. Economists had forecast the indicator to rise to 5.7.

Meanwhile, the Conference Board leading index climbed 0.8% from September, adding to the 0.7% gain in the previous month, pointing to continued robust growth in the coming months.

The Office for National Statistics said UK Public sector net borrowing excluding the temporary effects of financial interventions grew GBP 5.9 billion year-on-year to GBP 23.3 billion in November. Economists had expected an increase to GBP 17 billion from GBP 10.3 billion recorded in October.

Ratings agency Moody's has warned Portugal of a possible downgrade to its A1 credit rating, citing rising fiscal uncertainties. The agency said Portugal's ratings could be lowered by a "notch or two" if the country's debt affordability deteriorates or the economic outlook worsens due to austerity measures.

The CAC 40 index opened higher at 3,903 and moved in a range of 3,869-3,912. The index is currently advancing 0.76%.

Building materials company Saint-Gobain is advancing 2.54%. Builders Bouygues and Vinci are notably higher. Cement giant Lafarge is rising 0.9%.

Carmakers Peugeot and Renault are advancing 1.6% and 1.3%, respectively.

Those making notable gains include retailer Carrefour, Airbus maker EADS and commodity chemicals firm Air Liquide.

Banks Societe Generale is up 1.6% and Natixis is rising 0.9%. Credit Agricole and BNP Paribas are nearly flat.

Personal care products maker Loreal and beverages firm Pernod-Ricard are moderately lower.

Elsewhere in Europe, the UK's FTSE 100 is gaining 0.78% and the German DAX is rising 0.63%.

Across Asia/Pacific, major markets ended higher. Australia's All Ordinaries added 0.69%, China's Shanghai Composite Index gained 1.8%, and Hong Kong's Hang Seng rose 1.6%. India's BSE Sensex and Japan's Nikkei 225 climbed 0.86% and 1.51%, respectively.

In the U.S., futures point to a slightly higher open on Wall Street. In the previous session, the Dow slid 0.1%, while the Nasdaq climbed 0.2% and the S&P 500 rose 0.3%.

 In commodities, crude for February delivery is advancing $0.07 to $89.44 per barrel and gold is rising $0.8 to $1386.9 a troy ounce.

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Asian Markets End In Positive Territory

Asian markets open for trading on Tuesday ended in positive trading amid thin volumes as most of the traders preferred to stay in the side lines looking forward with optimism for the new year and Christmas holidays.

In Australia, the benchmark S&P/ASX200 Index advanced 35.30 points, or 0.75%, and closed at 4,772 points, while the All-Ordinaries Index ended at 4,862, representing a gain of 33.30 points, or 0.69%.

On the economic front, a report released by the Conference Board revealed that its leading index increased 0.6% for October, following a decrease of 0.1% in the previous month. The report further revealed that the Coincident Index, which measures current economic activity, increased 0.1%. The Board noted that despite the October gain, the Leading Index has seen its six month growth rate moderate in recent months, while the Coincident Index has picked up lightly. "Taken together, the current behavior of the composite indexes suggests that economic growth will likely be moderate in the near term," the Conference Board said.

Releasing the minutes of the recent policy board meeting, the Reserve Bank of Australia revealed that its current level of benchmark interest rates were "mildly restrictive". The central bank had held is overnight cash rate unchanged at 4.75% at the December meeting after delivering a surprise quarter percentage point hike in November. The RBA said it saw little change to the medium-term outlook for the Australian economy, noting households were still cautious with regards to consumption and borrowing despite high levels of confidence.

Light sweet crude oil futures for January delivery was trading at $89.46 a barrel in electronic trading, up $0.09 per barrel from previous close at $89.37 a barrel in New York on Monday.

Resource related stocks led the gains on higher commodity prices in the international market. BHP Billiton gained 1.34%, Rio Tinto rose 1.46%, Fortescue Metals advanced 1.20%, Gindalbie Metals climbed 2.70%, Iluka Resources was up 1.63%, Macarthur Coal surged up 3.63%, Minara Resources soared 5.88%, and Oz Minerals was higher by 1.78%.

Banking stocks also ended in positive territory on optimism about economic recovery. ANZ Bank advanced 1.80%, Commonwealth Bank of Australia added 0.53%, National Australia Bank gained 1.17% and Westpac Banking Corp. edged up 0.22%. Investment banking company Macquarie Group, however, bucked the trend and ended in negative territory with a modest loss of 0.51%.

Mixed trading was witnessed among oil related stocks. Woodside Petroleum slipped 0.14%, and Origin Energy declined 0.76%. ROC Oil Ltd managed to remain unchanged from previous close. However, Oil Search Ltd ended in positive territory with a gain of 1.16% and Santos Ltd gained 0.89%.

Mixed trading was witnessed among gold-related stocks. While Newcrest Mining ended in negative territory with a loss of 0.12%, Avoca Resources ended in the positive territory with a gain of 3.06%.

In Japan, the benchmark Nikkei 225 Index ended 154.12 points, or 1.51% higher at 10,371, while the broader Topix index of all First Section issues rose 7.66 points, or 0.85%, to 906.

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In Japan, the benchmark Nikkei 225 Index ended 154.12 points, or 1.51% higher at 10,371, while the broader Topix index of all First Section issues rose 7.66 points, or 0.85%, to 906.

On the economic front, Bank of Japan kept its monetary policy stance unchanged as it gauged the impact of its various stimulus support measures. Members of the Bank of Japan's policy board voted unanimously to maintain the overnight call rate unchanged at 0-0.1% as expected and broadly maintained their economic assessment. The central bank also kept the size of its asset purchase program unchanged at 35 trillion yen and restated its commitment to continue buying assets and providing liquidity. "The bank will continue to consistently make contributions as the central bank through the three-pronged approach of pursuing powerful monetary easing consisting of comprehensive monetary easing, ensuring financial market stability, and providing support to strengthen the foundations for economic growth," the BOJ said.

A report released by the Ministry of Economy, Trade and Industry revealed that Japanese all industry activity fell for the third straight month as expected in October. The index was down 0.2% month-on-month, exactly in line with analyst expectations, following 0.8% drop in September. The report further noted that Industrial production fell 2% in October after a 1.6% decline in the prior month, while government services were down 0.2%. These were partly offset by a 0.5% increase each in services and construction.

Stocks pertaining to the glass and ceramics sector led the gains. Nippon Electric Glass Co. gained 2.27%, Asahi Glass Co., climbed 2.68%. NGK Insulators rose 1.60%, Tokai Carbon Co. surged up 3.45% and TOTO Ltd was higher by 2.22%.

Precision machinery related stocks also ended in positive territory. Terumo Corp. rose 2.63%, Nikon Corp., surged up 2.77%, Olympus Corp. advanced 1.75%, Konica Minolta Holdings surged up 2.99% and Citizen Holdings added 1.43%.

Mixed trading was witnessed among sea-transport stocks. Nippon Yusen KK gained 0.55% and Mitui OSK Lines added 0.35%. However, Kawasaki Kisen Kaisha bucked the trend and ended in negative territory with a loss of 0.28%.

Firm global cues and reports of higher advance tax payments by bluechip companies like ICICI Bank, Reliance Industries and ITC among others helped the Indian market end on a buoyant note Tuesday. While metal, banking and realty stocks led the gains, healthcare, telecom and IT stocks closed subdued. The benchmark 30-share Sensex rose by 171 points or 0.86% to 20,060 and the 50-share Nifty added 54 points or 0.90% to end just above the 6,000 mark, while the BSE mid-cap and small-cap indexes gained 0.79% and 0.95%, respectively. The market breadth on the BSE was extremely positive, with 1754 gainers versus 1092 decliners. Metal stocks such as Tata Steel, Hindalco and Sterlite Industries rose by 2%-5% as base metal prices strengthened in overseas markets. Realty stocks like DLF and Unitech gained about 2% each on bargain hunting after recent losses. In the banking sector, Axis Bank (up 3.67%) was the top gainer followed by ICICI Bank (up 3.56%), HDFC Bank (up 1.89%) and SBI (up 1.48%).

Among the other markets in the region, China's Shanghai Composite Index gained 51.20 points, or 1.79% to close at 2,904, Hong Kong's Hang Seng Index surged up 354.78 points, or 1.57% to close at 22,994, Jakarta Composite Index in Indonesia rose 68.64 points, or 1.92%, to close at 3,637, Seoul Composite Index in South Korea added 16.81 points, or 0.83%, to close at 2,037. Singapore's Strait Times Index was up 6.89 points or 0.22%, to close at 3,140 and Taiwan Weighted Index increased 59.07 points or 0.67% to close at 8,828.