US & World Daily Markets Financial Briefing 23-12-2010

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Stocks Turning In Another Lackluster Performance

Stocks are showing a lack of direction in early trading on Thursday, as many traders are getting a head start on the holiday weekend. The major averages are lingering near the unchanged line after ending the previous session at their best closing levels in well over two years.

The choppy trading comes despite the release of a slew of economic data, including a report showing a modest drop in weekly jobless claims. A separate report showed a notable decrease in durable goods orders, although the decrease was largely due to a steep drop in orders for transportation equipment.

Before the start of trading, the Labor Department reported that fewer workers filed claims for unemployment benefits last week. Applications for jobless insurance payments fell by 3,000 to 420,000 in the week ending December 18th.

The Commerce Department also said that durable goods orders fell by 1.3 percent in November following a revised 3.1 percent decrease in October. Economists had expected orders to drop by about 1.0 percent compared to the 3.3 percent decrease that had been reported for the previous month.

Excluding an 11.9 percent drop in orders for transportation equipment, however, orders for durable goods actually rose by 2.4 percent compared to a 1.9 percent decrease in October.

While the Commerce Department released a separate report showing a slightly bigger than expected increase in personal income in the month of November, the report also showed a slightly smaller than expected increase in personal spending.

At 9:55 a.m. ET, Reuters and the University of Michigan will release the final report on their consumer sentiment index for December. The index is expected to be upwardly revised to 75.0 from the mid-month reading of 74.2.

Shortly afterward, the Commerce Department will release its report on new home sales for November at 10:00 a.m. ET. The consensus estimate calls new homes sales to rise to a yearly rate of 300,000 from October's 283,000.

In corporate news, Singapore-based semiconductor testing company Verigy Ltd. (VRGY) said that it has received a revised takeover proposal of $15.00 per share in cash from Japanese rival Advantest Corp. (ATE).

Verigy, which is already in merger agreement with LTX-Credence Corp. (LTXC), said its Board continues to recommend the deal with LTX-Credence to its shareholders and is not recommending the revised Advantest proposal at this time.

Reflecting the lackluster performance by the broader markets, most of the major sectors are showing only modest moves. Nonetheless, moderate weakness is visible among electronic storage stocks.

The major averages are currently turning in a mixed performance, with the Dow just above the unchanged line. While the Dow is up 11.85 points or 0.1 percent at 11,571.34, the Nasdaq is down 1.57 point or 0.1 percent at 2,669.91 and the S&P 500 is down 0.78 points or 0.1 percent at 1,258.06.

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TSX May Open Flat Ahead Of Christmas Holidays

Toronto stocks may witness a lackluster session Thursday amid thin volumes of trade as traders might prefer to remain on the sidelines ahead of Christmas holidays. Meanwhile, Canadian economy grew at at a weaker-than-expected 0.2% in October.

Commodities prices were mixed, with oil hovering near its 2-year peak and gold dipping below $1,380 an ounce. Meanwhile, copper leveled off from its record peak amid speculation that demand in China may slow down.

The benchmark index has advanced nearly 14% this year to hover near its 27-month high after oscillating between 11,092 and 13,380 so far in 2010.

U.S. stock futures were pointing to a flat open.

On Wednesday, the S&P/TSX Composite Index edged up to a fresh 2-year peak of 13,380.70, adding 15.55 points or 0.12%.

The price of crude oil was little changed despite recent reports revealed steep draw down in U.S. crude oil inventories for the past two weeks in a row. Crude for February edged down $0.01 to $90.47 a barrel.

Gold for February was down $9.8 to $1,377.60 an ounce.

In global M&A patch, Australian mining giant Rio Tinto sweetened its offer price to $3.9 billion to takeover Riversdale Mining Ltd.

In corporate news from Canada, gold miner Eldorado Gold Corp. recommended shareholders not to tender their shares in response to an offer by TRC Capital Corporation to purchase up to 5 million common shares or 0.91% of its outstanding shares.

Mineral explorer Ventana Gold said it would recommend its shareholders to reject the offer by AUX Canada Acquisition Inc., to acquire all of the outstanding common shares that it does not already own for $12.63 in cash per share. The stock closed Wednesday at C$13.05.

Financial services focused technology products company Davis + Henderson Income Fund said its subsidiary Davis + Henderson, Ltd. Partnership would buy substantially all the assets of ASSET Inc. for $76 million payable in cash.

E-commerce solutions provider Mediagrif Interactive Technologies announced the acquisition of Laval based InterTrade Systems Inc. for a cash consideration of $8.1 million.

Wireless and fiber network solutions maker Active Control Technology reported a narrower first quarter loss of C$0.47 million or breakeven per share compared to loss of C$1.32 million or C$0.01 per share in the year ago period.

Indonesia focused mineral explorer Kalimantan Gold Corp. revealed that it received commitments from investors for 16.12 million common shares at a price of C$0.08 or GBP 0.05 per share to raise C$1.29 million under its previously announced private placement financing.

In economic news, Statistics Canada said real gross domestic product increased 0.2% in October, reversing from a 0.1% decline in September, with mining and oil and gas  extraction recording growth. Meanwhile, manufacturing decreased 0.6% in October. Economists were expecting GDP to grow 0.3%.

From south of the border, the U.S. Labor Department said applications for jobless insurance payments fell by 3,000 to 420,000 in the week ended December 18. Economists were expecting the claims to come in unchanged at 420,000.

Separately, the U.S. Commerce Department said durable goods orders fell by 1.3% in November following a revised 3.1% decrease in October. Economists were expecting orders to drop by about 1.0% compared to the 3.3% decrease that had been reported for the previous month.

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French Market Moderately Down

The French market erased early gains and is losing moderately in afternoon trading Thursday, amid thin volume as investors are bracing for Christmas. Construction stocks and lenders are trading lower.

In economic news, French consumer spending rose more than expected in November as households bought more cars, Statistical office INSEE said. Consumer spending climbed 2.8% from October compared to a revised 0.6% fall in the previous month. Economists had forecast a 0.9% rise.

Meanwhile, the number of mortgages approved for house purchase in the U.K. fell to a seasonally adjusted 29,991 in November, the lowest since March 2009, from 30,689 in the previous month, the British Bankers' Association said. The expected figure was 30,250. Furthermore, net mortgage lending by banks was at its weakest in 11 years.

After opening slightly higher at 3,923, the CAC 40 index erased those gains and is currently down 0.58%.

Commodity chemicals firm Air Liquide is losing 1.65%. Cement giant Lafarge, building metrials maker Saint-Gobain, steel giant ArvelorMittal and buiolder Vinci are notably lower.

Banks Credit Agricole, Societe Generale, BNP paribas and Natixis are moderately lower. Carmakers Renault and Peugeot are trading down.

Telecom equipment maker Alcatel Lucent is adding 1.8% and beverages firm Pernod-Ricard is advancing about 1%.

Elsewhere in Europe, the UK's FTSE 100 is gaining 0.01% and the German DAX is falling 0.36%.

Across Asia/Pacific, major markets closed mostly lower. China's Shanghai Composite Index lost 0.79%, Hong Kong's Hang Seng slipped 0.62% and India's BSE Sensex dropped 0.16%. However, Australia's All Ordinaries added 0.38%.

In the U.S., futures point to a lower open on Wall Street. In the previous session, the Dow gained 0.2%, the Nasdaq edged up 0.1% and the S&P 500 rose 0.3%.

In commodities, crude for February delivery is losing $0.04 to $90.44 per barrel and gold is slipping $9 to $1378.4 a troy ounce.

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Indian Market Ends Lackluster Session Modestly Lower

The Indian market consolidated on Thursday moving choppily in a restricted range before ending modestly lower. After moving in a range of 20,076- 19,939, the benchmark 30-share Sensex ended down 33 points or 0.16% at 19,983, with 20 of its components declining.

Likewise, with global cues offering little direction and rising global oil prices raising the upside risks to inflation, the 50-share Nifty posted a modest 0.10% loss. The BSE mid-cap and small-cap indexes also followed, ending down by 0.23% and 0.13%, respectively.

India's annual food inflation rose by 12.13% for the second week of this month, up from 9.46% in the previous week, government data released today showed, raising pressure on the Reserve Bank of India to take sterner measures and tighten policy rates. This was the third consecutive weekly rise in food inflation after seven consecutive weeks of easing.

High-beta metal stocks, which posted strong gains in recent sessions on the back of strength in base metal prices, were among the prominent decliners today. Aluminum maker Hindalco lost 1.81% and steelmaker Tata Steel ended down 1.61%. However, Sterlite rose nearly a percent as copper prices stayed within reach of record highs.

In the banking sector, SBI edged up 0.15% and HDFC Bank added around half a percent, but ICICI Bank eased marginally. Property developer DLF, automaker Tata Motors, engineering & construction firm Larsen & Toubro and two-wheeler manufacturer Hero Honda Motors ended the session about a percent lower.

IT stocks closed mostly higher, shrugging off a rise in the value of rupee to a fresh one-week high versus the dollar. Bellwether Infosys rose 0.77% and Wipro added 0.23%.

In the healthcare sector, Glenmark Pharmaceuticals gained half a percent after receiving the U.S. FDA approval to market three generic drugs. Suven Life Sciences advanced 2% on securing four product patents for its new chemical entities.

A2Z Maintenance closed at Rs.328.90 on its first day of trading, down about 22% compared to its initial public offering price of Rs.400 per share. Reliance MediaWorks ended half a percent lower after it tied up with Russian World Studios to outsource film restoration, image processing and enhancement work.

Nitin Fire Protection Industries climbed 7% after the company said it would form a joint venture with U.S.-based Worthington Industries Inc. for cylinder manufacturing business, in a deal worth about $21 million.

Uniphos Enterprises hit the 5% upper circuit limit after its board approved a rights issue. Radico Khaitan, which is reportedly looking for marketing tie-ups with three overseas companies, closed up 2.21%.

Pipavav Shipyard rose 1.35% after it signed a pact with Sweden-based SAAB Dynamics AB to foray into army and air force segments. India Infoline gained 1.15% on the back of a bulk deal on the BSE.

ABG Infralogistics soared 17% to Rs.190.20 after its board approved a share buyback at Rs. 244.50 per share through the tender offer route. PTC added a percent after its unit PTC India Financial Services filed the draft red herring prospectus with market regulator SEBI for its upcoming initial public offering.

Elsewhere, other Asian markets closed mostly lower on Thursday, led by China, after the government said it will strengthen the review process for foreign investment in real estate to curb rising property prices. The Japanese market was closed for the emperor's birthday.

European stocks were little changed in early trading amid thin volumes ahead of the Christmas break and the Dow futures pointed to a flat opening on Wall Street Thursday. After hitting two-year highs on bullish inventory data, crude futures were last trading slightly weaker above $90 a barrel.

The euro steadied against the dollar and the Swiss Franc on Thursday after reports suggested that China was ready to buy 4-5 billion euros of Portuguese sovereign debt to help ease the pressure in debt markets.

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Jobless Claims Barely Budge At 420,000

Applications for jobless insurance payments fell by only 3,000 to 420,000 in the week ending December 18, according to data released by the Department of Labor Thursday morning.

The modest drop in the number of workers filing claims for unemployment benefits last week suggested the economy is struggling to generate jobs in the final weeks of a rough year in the labor markets.

The result was in line with market estimates, as economists surveyed by Barron's projected 420,000 claims.

The previous week's figure was revised slightly higher to 423,000 from the 420,000 initially reported.

The 4-week moving average of initial claims, smoothing out fluctuations, edged up to 426,000. This represents an increase of 2,500 from the previous week's revised average of 423,500.

While jobless claims remained above the psychologically important 400,000 mark, the slowdown in the pace of firings may be an encouraging sign for the economy.

The "420k level was the second lowest reading for first-time filers since July 2008, surpassed only by a 410k level in mid-November," noted Jennifer Lee, Senior Economist and Vice President at BMO Capital Markets.

"We've already seen the private sector create jobs for the past 11 months. And hiring should pick up in 2011, boosted by improving economic activity (productivity has already slowed)," Lee added.

Continuing claims, or those currently receiving benefits, was 4.06 million for the week ending December 11, a decrease of 103,000 from the preceding week's revised level of 4.167 million.

That number excludes Americans receiving emergency extended unemployment benefits.

The four-week average of continuing claims fell to 4.16 million from 4.19 million.

Including those receiving extended benefits, a total of 8.9 million Americans received unemployment checks in the week ending December 4, down from 9.2 million a week earlier.

Chris Low of FTN Financial noted "big declines in extended benefits, emergency claims and continuing claims."

"The takeaway: Layoffs no longer falling as fast as in November, but the pace of hiring may have picked up," said Low.

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