US & World Daily Markets Financial Briefing 25-02-2011

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Stocks Seeing Early Strength Amid Easing Oil Worries

Stocks have shown a notable move to the upside in early trading on Friday, with traders picking up stocks at reduced levels amid easing concerns about oil supplies. The major averages have all climbed into positive territory after ending the previous session mixed.

The early strength in the markets is partly due to news that Saudi Arabia has pledged to ramp up oil production in the event of further supply disruptions. The news has eased concerns that a spike in oil prices could derail the global economic recovery.

Meanwhile, traders have largely shrugged off a report from the Commerce Department showing that the U.S. economy expanded by less than previously estimated in the fourth quarter.

The report showed that U.S. gross domestic product increased at an annual rate of 2.8 percent in the fourth quarter, downwardly revised from the previous estimate of 3.2 percent growth. Economists had expected GDP growth to be upwardly revised to 3.4 percent.

Despite the downward revision, the positive number indicated the sixth consecutive quarter of growth for the U.S. economy.

In corporate news, Boeing (BA) is trading higher after U.S. Air Force awarded the aerospace and defense giant a $35 billion tanker deal. Boeing was picked over European contender EADS.

American International Group (AIG) reported a profit for the fourth quarter, helped primarily by gains on the sale of its businesses as the bailed out insurer stepped up efforts to repay the government.

Gold stocks are helping to lead the way higher after seeing considerable weakness in the previous session, while early strength is also visible among healthcare provider, networking, and semiconductor stocks.

The major averages have pulled back off their highs for the young session but are currently holding on to gains. The Dow is up 35.35 points or 0.3 percent at 12,103.85, the Nasdaq is up 21.78 points or 0.8 percent at 2,759.68 and the S&P 500 is up 7.08 points or 0.5 percent at 1,313.18.

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TSX Looks To Open Mixed Amid Weak Commodities

Bay Street stocks are poised for a mixed open Friday amid falling commodities prices and positive cues from the global equity markets.

Asian markets ended mixed in overnight trading with the Nikkei up 0.75 percent and most European stocks were trading higher as concerns over inflation eased after crude oil prices dipped below $100 on Saudi Arabia's assurance to increase supplies.

U.S. stock futures were pointing to a higher open. Meanwhile, economic activity in the U.S., Canada's largest trading partner, increased by much less than originally estimated in the fourth quarter.

On Thursday, the S&P/TSX Composite Index extended losses for a fourth session, shedding 88.88 points or 0.64 percent to 13,867.31.

The price of crude oil slipped below $97 Friday morning as Libya supply fears eased. Yesterday, oil advanced to $103, but ended lower after Saudi Arabia assured that it can counter Libyan supply disruptions. Crude for April was down $1.01 to $96.27 a barrel.

The price of gold slipped back near $1,400 amid a firm U.S. dollar. Also, lower oil prices eased inflation concerns that drove gold prices higher this week. Gold for April was down $10.20 to $1,405.60 an ounce.

In corporate news from Canada, Goldcorp. reported improved fourth quarter net earnings of $327.7 million or $0.44 per share, compared to $65.8 million or $0.09 per share in last year period. Adjusted net earnings for the quarter were $417.1 million or $0.57 per share, compared to $182.7 million or $0.25 per share in last year period. Analysts were expecting the gold producer to report earnings of $0.47 per share this quarter.

Mid-tier gold mining company Iamgold swung to profit in the fourth quarter, reporting net income of $144.5 million or $0.39 per share, compared to a loss of $47.4 million or $0.13 per share in the year ago quarter. Adjusted earnings increased to $144.9 million or $0.39 per share from $56.8 million or $0.15 per share. Analysts were expecting the gold producer to report earnings of $0.29 per share this quarter.

Transportation and logistics company TransForce Inc. turned to profit in the fourth quarter, reporting net income of of C$35.6 million or C$0.37 per share, compared to net loss of C$ 27.2 million or C$0.29 per share a year ago. Adjusted net income rose to C$20.9 million or C$0.22 per share from C$17.8 million or C$0.19 per share in the comparable quarter a year ago. Consensus estimates were for a profit of C$0.20 per share this quarter.

Insurance services provider EGI Financial Holdings swung to profit in fourth-quarter, reporting profits of $3.3 million, or $0.26 per share, compared to a loss of $2.3 million or $0.19 per share.

In economic news from south of the border, the Commerce Department said that U.S. gross domestic product increased at an annual rate of 2.8 percent in the fourth quarter, downwardly revised from the previous estimate of 3.2 percent growth. Economists had expected GDP growth to be upwardly revised to 3.4 percent.

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Indian Market Ends Volatile Session Higher

After yesterday's panic selling, the Indian market rose modestly on Friday, as positive global cues, a drop in crude prices and the release of the economic survey in Parliament, which made a strong case for pushing economic reforms, offset worries over Libyan unrest, albeit temporarily.

India needs a policy to bring another round of multifaceted reforms to sustain double-digit industrial output growth, the nation's annual economic survey, released today on the eve of the upcoming Union Budget, noted.

With economic growth reverting to pre-crisis levels in the current fiscal year, revenues remaining buoyant and non-tax revenues arising from telecom 3G/BWA auctions providing comfort, there was headroom for higher levels of expenditure at the given fiscal deficit targets, the survey said.

The survey pegged India's GDP growth at 9 percent for the next fiscal year, while fiscal deficit for the current financial year 2011 is seen at 4.8 percent on higher GDP base.

The benchmark 30-share Sensex moved in a range of 17,812-17,470 before ending up 69 points or 0.39 percent at 17,701, while the 50-share NSE Nifty index climbed 41 points or 0.78 percent to 5,304.

However, second-line stocks saw little buying, as nervous investors remained wary of further political developments in the Middle East. The BSE mid-cap and small-cap indexes ended down 0.22 percent and 0.31 percent respectively.

Sector-wise, FMCG, banking, auto and consumer durable stocks saw selective buying, while IT, capital goods, power, oil/gas and metal stocks closed subdued.

Hero Honda Motors gained 0.66 percent amid reports that it will raise $749 million via a bond issue to acquire Honda's 26 percent stake in the company. Tata Motors climbed 4.43 percent on bargain hunting after plunging around 8 percent in the previous session.

Banking stocks such as Punjab National Bank, SBI, Union Bank of India, IDBI Bank, Axis Bank, Bank of Baroda, ICICI Bank, Canara Bank and Bank of India rose by 2-4 percent after the Economic Survey proposed to consider separate licences for basic and full banking services.

Syndicate Bank rallied 3.64 percent after state-run insurer Life Insurance Corporation of India raised its stake in the public sector bank. GVK Power and Infrastructure added half a percent after it signed a concession pact for a road project in Gujarat.

Tata Steel, India's largest steel maker by sales, added a percent after it agreed to sell some assets of Teesside Cast Products to Thailand's Sahaviriya Steel Industries. Other metal stocks such as Sterlite Industries and Hindalco ended down over 2 percent each. MphasiS plummeted over 28 percent after the IT and BPO company reported disappointing quarterly results.

Rail-related stocks bore the brunt of the selling after railway minister Mamata Banerjee unveiled a more or less populist budget that froze both passenger and freight fares. Titagarh Wagons and Kalindee Rail Nirman lost around 13 percent each, Kernmex Micro plunged 5 percent, Stone India slumped 8 percent and BEML ended down 3 percent.

Dredging Corp fell 1.26 percent after it signed a pact with a Dutch firm for design, construction and supply of a trailer suction hopper dredger. Shipping Corporation of India, which is mulling investing $1 billion every year to acquire new ships, closed flat with a negative bias.

On the global front, most Asian stocks rose on Friday, taking a breather after a four-day losing streak, as crude prices backed from a 2-1/2 year peak and assurances from the U.S, Saudi Arabia and the International Energy Agency that they could compensate for any disruption of Libyan shipments eased concerns that the global recovery will be derailed.

Likewise, European stocks edged higher on bargain hunting following five days of consecutive losses and trading in the U.S. index futures suggested that the Dow could rise 57 points at the opening bell later in the global day.

The euro climbed against the dollar in Asian trading on Friday on speculation that the European Central Bank would move to raise interest rates to combat inflationary pressure.

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Dollar Further Below Par Versus Canada's Loonie

The dollar was mixed Friday morning in New York, dropping to its lowest since 2008 against its Canadian counterpart while charging higher against the sterling.

There was little movement against the euro, with the dollar unable to pare much of its steep recent losses.

On the economic front, the Bureau of Economic Analysis is due to release its preliminary estimate of fourth quarter GDP at 8:30 AM ET. Economists expect GDP growth of 3.4 percent for the quarter.

The Reuters/University of Michigan's final report on the consumer sentiment index for February is scheduled to be released at 9:55 AM ET. The consumer sentiment index is expected to be left unrevised at 75.1.

The dollar was down to C$0.98 against Canada's loonie, as crude oil firmed above $97 after yesterday's steep afternoon drop.

The buck drifted slightly higher against the the euro, improving to $1.3770 from a 3-week low of $1.3837.

Concerns about the U.K. economy helped to the dollar touch a 2-week high of $1.6070 versus the sterling.

The British economy contracted more than initially estimated in the fourth quarter with the only support coming from government spending.

Falling for the first time in more than a year, GDP fell 0.6% from the third quarter, when it expanded 0.7%, data from the Office for National Statistics showed Friday.

The buck remained stuck in the mud versus the yen, holding near Y81.50. The dollar hit a 15-year low of Y80.22 back in November.

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