US & World Daily Markets Financial Briefing 25-10-2010

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Stocks Notably Higher In Mid-Morning Trading

Stocks are posting strong gains in mid-morning trading on Monday following policy news from the G20 this weekend that has weakened the U.S. dollar. The upside has been maintained by a better than expected reading on September existing home sales.

The major averages have given back some ground in the past few minutes but currently remain firmly positive. The Dow is up 85.87 points or 0.8 percent at 11,218.43, the Nasdaq is up 19.70 points or 0.8 percent at 2,499.09 and the S&P 500 is up 8.74 points or 0.7 percent at 1,191.82.

The National Association of Realtors said existing home sales jumped 10.0 percent to a seasonally adjusted annual rate of 4.53 million in September from a downwardly revised 4.12 million in August. Economists had expected sales to rise to an annual rate of 4.25 million from the 4.13 million originally reported for the previous month.

While existing home sales rose for the second consecutive month, the annual rate remains 19.1 percent below the 5.60 million-unit pace seen in September of 2009.

The early upside came following a pledge by the G20 that it will avoid competitive currency devaluation, which has led to a weakening of the dollar. The greenback hit a fresh 15-year low against the yen earlier, while it is also down against the euro and the British pound.

In other news this morning, Federal Reserve Chairman Ben Bernanke revealed that reviews of foreclosure practices by major banks will be unveiled in November. The report is expected to gauge the effect of errors on the real estate market and major financial institutions.

On the earnings front, RadioShack Corp. (RSH) reported third-quarter net income of $0.37 per share, up from $0.30 per share recorded in the same period last year. On average, analysts expected the company to report earnings of $0.35 per share.

Net sales and operating revenues grew to $1.05 billion from $990 million in the same quarter 2009. Comparable store sales for company-operated stores and kiosks increased 6.2 percent during the third quarter. Analysts estimated revenues of $1.04 billion.

After the closing bell, quarterly results from Texas Instruments (TXN) and Amgen (AMGN) are expected to attract attention along with many others.

Sector News

Networking stocks are among the morning's best performers, driving the NYSE Arca Networking Index up by 2.8 percent. The advance has lifted the index to a six-month intraday high.

CommScope (CTV) is leading the networking sector higher on news that it is in talks to be acquired by Carlyle Group for $31.50 per share in cash. Shares of CommScope have surged up by 30 percent on the news, reaching their best intraday level in over fix months.

Steel stocks are also markedly higher in the early going, with the NYSE Arca Steel Index up by 1.7 percent. Despite the upward move, the index remains rangebound.

Gold, housing, biotechnology and semiconductor stocks are also notably higher amid the widespread buying interest in stocks.

Stocks Driven By Analyst Comments

Endo Pharmaceuticals Holdings Inc. (ENDP) is trading notably higher after being upgraded at Collins Stewart from Hold to Buy. The broker also raised its price target on the stock from $38 to $43. The stock is up by 2.4 percent and set an historic intraday high in earlier trading.

On the other hand, Nu Skin (NUS) is under pressure after Stifel Nicolaus dropped its rating on shares from Buy to Hold. The stock is down by 4.1 percent, backing further off of last week's six-month closing high.

Other Markets

Overseas, stock markets in the Asia-Pacific region ended mostly higher on Monday. Hong Kong's Hang Seng Index gained 0.5 percent and India's BSE 30 Index moved up by 0.7 percent, while Japan's benchmark Nikkei 225 Index bucked the uptrend, sliding by 0.3 percent.

The major European markets are seeing varied gains. The French CAC 40 Index is up by 0.4 percent, while the German DAX Index and the U.K.'s FTSE 100 Index are both up by 0.7 percent.

In the bond markets, treasuries are seeing moderate upside. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is trading at 2.507 percent, posting a gain of 5.6 basis points.

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TSX Looks To Open Higher Monday

Bay Street stocks are poised for a higher open Monday after commodities prices moved up as the U.S. dollar resumed its southward journey after G20 financial leaders failed to come out with any concrete decision to avoid 'competitive devaluation' of currencies during their weekend meeting.

Moreover, cues from the global equity markets were encouraging, with most Asian markets ending in positive territory and European stocks moving higher in morning deals.

On Friday, the S&P/TSX Composite Index edged up 1.95 points or 0.02% to 12,601.18, to record its first weekly loss in six. The price of crude oil was moving higher, with crude for December delivery adding $0.98 to $82.67 a barrel.

The price of gold recovered Monday morning as the U.S. dollar turned weak versus a basket of currencies after an agreement by G20 financial leaders to avoid 'competitive devaluation' of currencies propped up the yen. Gold for December was up $21.20 to $1,346.30 an oucne.

BP PLC said it would sell its recently-acquired interests in four mature producing deep-water oil and gas fields in the US Gulf of Mexico to Marubeni Oil and Gas for $650 million.

Canada law makers said that they will make their own analysis on BHP-Potash bid. In reply to the request by the government of Saskatchewan to block the BHP Billiton's plan to buy Potash Corp., Canada's industry minister said the nation will decide on the matter based on its own analysis.

In corporate news from Canada, lender RBC said it, through its Canadian Medium Term Note Program, has issued $1.5 billion of subordinated debentures that bear interest at a fixed rate of 3.18% per annam until November 2, 2015.

Internet and digital communications services provider Shaw Communications said it received approval from the Canadian Radio-television and Telecommunications Commission to acquire 100% of the over-the-air and specialty television businesses of Canwest, including all of Canwest's equity interests in CW Investments Co.

Supermarket and drug stores operator First Capital Realty announced the acquisition of two income-producing properties totaling 319,700 square feet, for about $77.9 million.

Copper miner Equinox Minerals said it would acquire acquire all of the issued and outstanding shares of Citadel in exchange of its one share for every 14.3 Citadel shares, plus A$0.105 per Citadel share in cash.

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European Markets Rally On G20 Optimism

The European markets are rallying in afternoon trading Monday, led by miners in the U.K. and car manufacturers in Germany, as the G20 meeting's decision to avoid a currency war diffused political tensions and a positive economic data from the region allayed fears of a slowdown.

Crude for December delivery is adding $0.60 at $82.29 per barrel and gold is advancing $19.1 at $1344.2 a troy ounce.

In a light day for European economic news, mortgage lending by British banks continued to slow in September with the number of loans approved by main high street banks falling to an 18-month low, figures released by the British Bankers' Association showed.

Meanwhile, Eurostat said new industrial orders received by euro area manufacturers rose in August and at almost twice the expected pace. The sharp rise lifts hopes that the eurozone's manufacturing-led recovery could continue through to the end of the year.

The FTSE 100 opened at 5,741 and remained in positive territory during the session. The German DAX began trading higher at 6,645 and moved in a range of 6,641-6,661. The French CAC 40, like its German counterpart, opened higher at 3,895 and has been trading above the flat line.

The FTSE 100 is currently adding 0.60%, compared to the DAX gaining 0.63% and the CAC 40 rising 0.42%.

Miners are on the rise in London, led by Antofagasta, which is rising 4.2%. Kazakhmys, Xstrata, Rio Tinto, BHP Billiton, Vedanta Resources, Lonmin, Anglo American, Eurasian Natural Resources and Fresnillo are gaining between 3.6% and 1.9%.

Retailer Burberry Group is adding 3.6%. Oil giant BP is gaining 0.7% after announcing the sale of some assets for $650 million. Lender Lloyds Banking Group is falling 3% and Royal bank of Scotland is slipping 1.4%. Standard Chartered is down 0.7%.

Publishing firm Pearson is losing 1.1%. The company reported a 7% rise in nine-month sales on a constant currency basis and raised its 2010 adjusted earnings forecast.

Car manufacturers are leading the rally in Germany with Volkswagen adding 5.4%. BMW is up 1.2% and Daimler is climbing 0.9%.

Detergent maker Henkel is rising 2.3%. Chipmaker Infineon Technologies and sports goods giant Adidas are adding 2.05% each. However, truck maker MAN is losing 1.3%, thus topping the losers.

Deutsche Bank is marginally up, while Commerzbank is moderately down. In France, luxury conglomerate LVMH is gaining about 4%. The company announced over the weekend that it was buying a stake in rival Hermes International. Car manufacturer Renault is adding 2.3% and Peugeot is gaining 0.9%.

Electric utility EDF, cosmetics giant Loreal, chipmaker STMicroelectronics, department stores operator PPR, oil and gas services firm Technip and dairy products maker Danone are among notable gainers.

Banks are trading mixed. BNP Paribas is losing 0.4% and Natixis is falling 1%. Societe Generale is up 0.8%. EADS, the maker of Airbus, is losing 1.1%, thus topping the decliners.

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Indian Market Pares Early Gains

The Indian market rose notably on Monday, buoyed by firm global cues, with consumer durable, auto, metal, healthcare and realty stocks leading the gains. However, volatility remained high as traders rolled over positions in the F&O segment ahead of the expiry of near-month contracts on Thursday.

The Sensex rose to a high of 20,452 before paring its gains and ending up 137 points or 0.68% at 20,303, with 23 of its components edging higher.

Likewise, with investors booking profits at higher levels, the broader Nifty ended off the day's high at 6,106, up 40 points or 0.66%, while the BSE mid-cap and small-cap indexes rose 0.77% and 0.95%, respectively.

Metal stocks such as Tata Steel, Sterlite, and Hindalco rose between 0.7% and 4.32%, as the dollar weakened, boosting demand for commodities.

Oil explorer Reliance Industries ended up 0.82%. Cement maker ACC (up 4.04%), automaker Tata Motors (up 2.80%), drugmaker Cipla (up 2.34%), utility vehicles manufacturer Mahindra & Mahindra (up 2.08%) and Mortgage lender HDFC (up 1.99%) were the other prominent gainers. TCS, which reported forecast-beating profit for the second quarter over the weekend, closed up 2.26%.

On the losing side, Wipro tumbled 4% on a brokerage downgrade following disappointing results. Infosys (down 1.11%), HDFC Bank (down 0.45%), Tata Power (down 0.32%), BHEL (down 0.30%) and Jaiprakash Associates (down 0.28%) also ended in the red.

Hndustan Unilever rose 1.36% on reporting forecast-beating net profit for the second-quarter ended September. Diversified business conglomerate ITC lost 1.1%.

Torrent Pharma fell 1.62% on reporting a modest 3% rise in quarterly net profit. Amara Raja Batteries plunged 5.46% on disappointing results. Man Infraconstruction rallied 4.34% on winning new orders worth Rs 383 crore. Simbhaoli Sugars soared 6% on fund-raising news.

On the macro front, Prime Minister Manmohan Singh on Monday expressed hope that India will return to a 9 percent growth path from the next financial year. " I am confident that the strong fundamentals of the Indian economy will enable us to achieve our objective of double-digit growth in the coming years," Dr. Singh said at business luncheon hosted by Nippon Keidanren. However, we shouldn't underestimate the challenges in achieving such high levels of growth, he cautioned.

Separately, India's exports rose by 23.2% year-over-year to $18.02 billion in September this fiscal, while imports grew at a faster pace, leaving a trade deficit of $9.2 billion for the month, Commerce Secretary Rahul Khullar said.

Elsewhere, Asian stocks rose the most in a week on Monday, as Japanese exports climbed more than expected and the weekend meeting of G-20 finance chiefs produced a historic reform of giving emerging economies more of a say in the International Monetary Fund's operation.

Sentiment also received a mild boost after the dollar edged lower against major counterparts, boosting demand for commodities such as oil and gold, ahead of a speech by U.S. Federal Reserve chairman Ben Bernanke, where he may outline details of a second round of quantitative easing.

However, Japanese stocks ended modestly lower, as the yen's rise against the dollar in the afternoon, dragged down exporters such as Toyota Motor and Canon.

Investors also await Tuesday's Consumer Confidence report, Wednesday's new home sales and durable goods data and the first reading of third-quarter GDP on Friday from the U.S. for clues to upcoming policy decisions.

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Dollar Closer To Record Low Versus Yen After Vague G20 Pledge On Currencies

The dollar extended its 15-year low versus the yen Monday, edging closer to its lowest ever, after the weekend meeting of G-20 finance ministers produced a vague pledge to refrain from competitive devaluation of currencies.

With fundamentals seen taking over, the dollar came under pressure across the board, as traders bet the Federal Reserve would embark on a second round of quantitative easing next week.

Fed officials will be making numerous speaking appearances over the course of this week, and may give hints about the size and scope of additional asset purchases.

Chairman Ben Bernanke speaks in Washington DC at 8:30 am ET, while St. Louis boss James Bullard and New York chief Willam Dudley speak this afternoon.

The National Association of Realtors is scheduled to release its report on existing home sales for September at 10 AM ET. Economists estimate existing home sales of 4.25 million for the month following a 7.6% monthly increase in August to a seasonally adjusted annual rate of 4.13 million units.

The dollar dropped to Y80.40 against the yen, nearing a record low of Y79.80. The Japanese have tried unsuccessfully to limit the rise of the yen, and with the G20 pledging to leave currency fluctuations to the markets and correct trade imbalances, the yen is likely to rise further in the coming days.

The greenback slipped to $1.4075 versus the euro, moving back towards an 8-month low of 1.4150 from earlier in October.

New industrial orders received by euro area manufacturers rose in August and at almost twice the expected pace, official figures showed on Monday.

Eurostat said new orders rose 5.3% compared with the previous month, reversing the 1.8% fall in July.

The dollar weakened very slightly to $1.5735 versus the sterling, and has been relatively steady over the past few weeks amid speculation that sever austerity measures in the UK will limit economic growth.

The dollar eased to CHF 0.97 versus the Swiss franc, having rallied away from a record low near 0.9450 over the previous week.

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