US & World Daily Markets Financial Briefing 24-02-2011

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Stocks Showing A Lack Of Direction In Early Trading

With traders weighing continued violent protests in the Arab world against an upbeat report on jobs in the U.S., stocks are turning in a lackluster performance in early trading on Thursday. The major averages are lingering near the unchanged line after posting notable losses in each of the two previous sessions.

The choppy trading comes as while ongoing protests in Libya have helped to drive the price of oil above $100 a barrel, the Labor Department released a report showing that weekly jobless claims have slipped back below the key 400,000 level.

The report showed that initial jobless claims slipped by 22,000 to 391,000 from the previous week's revised figure of 413,000. Economists had expected jobless claims to edge down to 405,000 from the 410,000 originally reported for the previous week.

Weekly jobless claims have seen considerable volatility in recent weeks due to distortions caused by the severe winter weather that recently hit large parts of the country.

In other economic news, the Commerce Department said durable goods orders increased by 2.7 percent in January following a revised 0.4 percent decrease in December. Economists had expected orders to increase by about 3.0 percent.

Excluding a 27.6 percent jump in orders for transportation equipment, durable goods orders fell by 3.6 percent in January compared to a 3.0 percent increase in December.

Most of the major sectors are showing only modest moves, although early strength has emerged among trucking, networking, and semiconductor stocks. On the other hand, oil service stocks are moving lower despite the continued increase by the price of crude oil.

The major averages are currently turning in a mixed performance, with the Dow down 1.29 points or less than a tenth of a percent at 12,104.49, while the Nasdaq is up 9.04 points or 0.3 percent at 2,732.03 and the S&P 500 is up 0.56 points or less than a tenth of a percent at 1,307.96.

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TSX May Open Mixed Amid Firm Energy, Weak Global Cues

Toronto stocks may struggle for direction at open Thursday amid mixed cues from the commodities and global equity markets.

Global stocks continued to move lower as the spiraling oil prices expected to increases costs for companies and threatens to dislocate a fragile global economic recovery.

Energy stocks may continue to move higher tracking firm trend in the oil prices and financial stocks may be in play after National Bank and CIBC reported estimate-beating earnings.

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

On Wednesday, the S&P/TSX Composite Index edged down 7.49 points or 0.05 percent to 13,956.19.

The price of crude oil advanced above $100 Thursday morning as investors weighed the risk of Libya unrest spreading to neighboring oil rich nations. Crude for April gained $2.73 to $100.83 a barrel.

The price of gold was steady above $1,415 amid a weak U.S. dollar and inflation worries. Gold for April edged up $2.20 to $1,416.20 an ounce.

In corporate news, Canada's sixth-largest lender National Bank of Canada reported record first quarter net profits of $312 million or $1.80 per share compared to $215 million or $1.22 per share a year ago. Analysts were expecting the company to report earnings of $1.64 per share for the quarter.

CIBC reported improved first quarter net income of C$799 million or C$1.92 per share compared to C$652 million or C$1.58 per share last year. The bank declared a dividend of $0.87 per share. Analysts were expecting the company to report earnings of $1.77 per share for the quarter.

Automotive component maker Magna International said it swung to profit in fourth quarter, reporting net income of $216.0 million or $0.88 per share, as against a net loss of $139.0 million or $0.62 per share a year earlier. The company hiked its quarterly dividend by 39 percent to $0.25 per share.

Gold miner Yamana Gold reported a much improved fourth quarter net earnings of $160.4 million or $0.22 per basic share compared to $36.2 million or $0.05 per basic share in the prior year quarter. Adjusted earnings grew to $173.3 million or $0.23 per share from $100.9 million or $0.14 per share in the year-ago quarter. Analysts were expecting the company to report earnings of $0.20 per share for the quarter.

Multinational pharmaceuticals company Valeant Pharmaceuticals slipped into the red, reporting fourth quarter net loss of $31.13 million or $0.10 per share, compared to profit of $73 million or $0.46 per share last year.

Merchandise company Loblaw Companies (posted lower fourth-quarter net earnings of C$151 million or C$0.54 per share compared to C$165 million or C$0.59 per share in the same quarter last year.

Industrial auctioneer Ritchie Bros. Auctioneers reported a lower fourth-quarter net earnings of $13.52 million or $0.13 per share compared to $21.83 million or $0.21 per share last year. On an adjusted basis, net earnings were $13.52 million or $0.13 per share compared with $21.09 million or $0.20 per share a year earlier. Analysts were expecting the company to report earnings of $0.105 per share for the quarter.

Packaging and tissue products company Cascades Inc. reported a narrower fourth-quarter net loss of C$34 million or $0.35 per share compared with C$41 million or $0.42 per share last year. The company declared a quarterly dividend of C$0.04 per share.

Television broadcast industry technology services provider Miranda Technologies said its fourth-quarter net income improved to C$3.8 million or C$0.17 from C$2.09 million or C$0.09 per share in the prior year.

In economic news from south of the border, the U.S. Labor Department said initial jobless claims slipped by 22,000 to 391,000 in the week ended February 19 from the previous week's revised figure of 413,000. Economists were expecting jobless claims to edge down to 405,000 from the 410,000 originally reported for the previous week.

Separately, the U.S. Commerce Department said durable goods orders increased by 2.7 percent in January following a revised 0.4 percent decrease in December. Economists had expected orders to increase by about 3.0 percent compared to the 2.3 percent drop that had been reported for the previous month.

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French Market Trading Lower

The French market is declining in afternoon trading Thursday, impacted by tensions in Libya, as crude prices are moving further northward.

Crude for April delivery is advancing $2.69 to $100.79 per barrel and gold is adding $4.3 to $1418.3 a troy ounce.

In economic news, French consumer sentiment remained unchanged in February in line with economists' expectations. Households' confidence index was at 85, steady compared to January's score, the statistical office INSEE said.

Detailed data from the Federal Statistical Office confirmed that the German economy expanded 0.4 percent sequentially in the fourth quarter, following a 0.7 percent expansion in the previous three months. Although the growth rate moderated, the recovery in the Eurozone powerhouse was faster than its peers.

UK retail sales growth hit an eight-month-low in February, the Confederation of British Industry said citing its latest quarterly distributive trades survey. According to the survey, 36 percent of retailers saw an increase in sales volume in the two weeks to February 16, while 30 percent said they fell. The resulting balance was 6 percent, below the expected 25 percent.

The CAC 40 index opened lower at 3,985, compared to the prior close of 4,013 and has been seeing volatile trading. The index is currently losing 0.26 percent.

Steel tube maker Vallourec, which warned of margin pressure from higher raw material costs, is declining 4.8 percent. Alcatel Lucent is dropping 4.3 percent.

France Telecom is losing 2.3 percent after reporting higher profit in fiscal 2010. Renault is losing 1.9 percent and Peugeot is down 0.3 percent.

Cement giant Lafarge and building materials maker Saint-Gobain are notably lower. Those making notable losses include grocery retailer Carrefour, luxury conglomerate LVMH, hotel group Accor and insurer Axa.

Among banks, Societe Generale, Natixis and BNP Paribas are losing between 1.2 percent and 0.7 percent. However, Credit Agricole is surging 3.9 percent after the lender said it would not resort to a capital increase to prepare for Basel III.

Oil giant Total is adding 1.65 percent and oil services firm Technip is rising 0.9 percent.

Elsewhere in Europe, the UK's FTSE 100 is losing 0.37 percent and the German DAX is receding 1.18 percent.

Across Asia/Pacific, most major markets ended lower. Japan's Nikkei 225 lost 1.19 percent and India's BSE Sensex retreated 3 percent. Australia's All Ordinaries and Hong Kong's Hang Seng receded 0.7 percent and 1.34 percent, respectively. However, China's Shanghai Composite Index gained 0.58 percent.

In the U.S., futures point to a lower open on Wall Street. In the previous session, the Dow fell 0.9 percent, the Nasdaq slid 1.2 percent and the S&P 500 declined 0.6 percent

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Indian Market Tumbles On Oil Price Spike; Sensex Down 3 Percent

The Indian market tumbled on Thursday, as a spike in crude prices to fresh 2-1/2-year highs amid violent protests in Libya and data showing a rise in weekly food inflation after two weeks of declines stoked worries over inflation and interest rates.

The expiry of near-month derivative contracts and little expectations from the upcoming Union Budget due on Monday also added to the cautious undertone. Rate-sensitive banking, realty and auto stocks along with shares of consumer durable, capital goods and metal companies bore the brunt of the selling.

The benchmark Sensex witnessed a free fall to end down about 545 points or 3 percent lower at 17,632, with 29 of its components ending in the red. Hero Honda Motors bucked the downward trend and ended 1.61 percent higher after the two-wheeler manufacturer reportedly received the FIPB nod for bringing in foreign equity as part of a deal to buy Honda's 26 percent stake in the company.

The 50-share Nifty fell a whopping 3.21 percent or by 175 points to 5,263, while the BSE mid-cap and small-cap indexes closed down around 3 percent each. In the broader market, declining shares outpaced gainers in the ratio of 3:1 on the BSE.

Auto stocks such as Maruti Suzuki, Bajaj Auto, Mahindra & Mahindra and Tata Motors fell by 2-8 percent on concerns that hardening interest rates could squeeze demand. In the banking sector, SBI, which received overwhelming response to its retail bond issue, ended down 3.48 percent. Private sector lender ICICI Bank plunged 5.43 percent and HDFC Bank lost 2.16 percent after raising their base rates. Mortgage lender HDFC fell 3.73 percent.

Among metal stocks, Tata Steel, India's largest steel maker by sales, shed 2.85 percent after the company said it has not made a decision regarding its stake in Africa-focused coal miner Riversdale Mining. State-run SAIL which is mulling the possibility of acquiring coking coal mines abroad, slipped 0.81 percent. Copper producer Sterlite fell 3.60 percent and aluminum major Hindalco lost 3.30 percent.

Jaiprakash Associates (down 6.20 percent), Jindal Steel (down 5.37 percent), Larsen & Toubro (down 4.94 percent), Reliance Infrastructure (down 4.21 percent) and Reliance Communication (down 4.09 percent) were the other prominent decliners in the Sensex pack.

Wockhardt, which is fighting a legal battle with holders of its foreign currency convertible bonds, ended down 2.13 percent. Jet Airways slumped 6 percent after it hiked fuel surcharge on its domestic network to compensate for increasing aviation turbine fuel prices. Kingfisher plunged 5 percent and SpiceJet plummeted over 10 percent.

Aurobindo Pharma plunged 17 percent after the U.S. Food and Drug Administration imposed a ban on shipments from the company's manufacturing facility in Hyderabad. Natco Pharma eased 0.69 percent on turning ex-dividend.

State-run oil companies such as ONGC, BPCL, HPCL and IOC fell between 2 percent and 4 percent after crude prices climbed over 4 percent above $102 a barrel in Asian trading in reaction to the ongoing protests against the Gaddafi regime in Libya.

Cairn India, which is likely to benefit from rising crude prices, closed 1.13 percent higher, while rival Reliance Industries ended down a little over 3 percent.

The Indian government, which is making all possible arrangements to evacuate its citizens stranded in Libya, said today that it has commissioned ships to bring back all those Indians who are willing to be evacuated from that country free of cost.

On the macroeconomic front, India's food inflation for the week ended February 12 rose slightly to 11.49 percent from 11.05 percent in the previous week, owing to higher prices of milk, egg, meat and vegetables, government data released today showed. The government's policy is to bring down inflation to 7 percent by the end of the fiscal year without hurting employment growth, Prime Minister Manmohan Singh said in the Parliament on Thursday.

Elsewhere, the other major Asian markets, barring Chinese stocks, edged lower on Thursday, with losses ranging between 0.60 percent and 1.41 percent. European stocks fell for a fifth straight consecutive session and the Dow futures were down 60 points, as a spike in oil prices to the highest level in almost 30 months sparked concerns about global growth.

China's Shanghai Composite average ended up 0.58 percent, led by brokerages and coal miners, defying the weak trend in global equities.

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Eurozone Feb. Economic Sentiment Rises More Than Expected

Eurozone economic sentiment resumed its upward trend in February due to a widespread improvement across sectors, while business confidence remained at its highest level since May 2000, a closely watched survey showed Thursday. But there is no significant change to the performance divergence between euro area nations.

At 41-month high, the economic sentiment index (ESI) rose to 107.8 from an upwardly revised 106.8 in January, according to a monthly survey published by the European Commission. The expected score was also 106.8.

The strong February sentiment reading confirms that the Eurozone economy as a whole started this year with solid forward momentum, said ING Bank's Martin van Vliet. However, the recent surge in oil prices, if sustained, might start to dent confidence soon, the economist added.

Reflecting sizeable improvements in both domestic and export order books, industrial sentiment improved in February to 6.5 from 6.1 points. Consumer sentiment strengthened to minus 10 from minus 11.2. That was weaker than the flash estimate of minus 9.9.

If the Eurozone is to see decent growth in 2011, it really needs consumers to increasingly step up to the plate, said IHS Global Insight economist Howard Archer. The problem is that higher consumer confidence in the Eurozone does not always feed through to higher spending as is evident from the softness in the second half of 2010.

In the service sector, managers were especially upbeat about the evolution of demand observed in the past months, while they were more cautious about expected demand. The corresponding sentiment indicator rose to 11.1 from 9.9. Consensus forecast called for a score of 9.5.

Confidence in financial services, which is excluded from the ESI, improved 3.8 points, mainly backed by higher demand expectations.

The economic sentiment in EU27 climbed to 107.2 from 105.8 in January. Among the seven largest member states of EU, Poland and the UK reported the most significant increase, followed by Spain and Germany. Only France and Italy reported a fall.

In a separate communique, the European Commission said business confidence in the euro area remained unchanged at 1.45 points in February. Economists had expected it to rise to 1.61. The current level of the indicator is very close to historical peaks, suggesting that the recovery in industry will continue in the coming months.

The Eurozone economy expanded 0.3% sequentially in the fourth quarter of 2010, taking the full year growth to 1.7%. The European Commission expects 1.5% growth this year.

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