US & World Daily Markets Financial Briefing 26-01-2011

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Stocks Showing A Lack Of Direction In Early Trading

Stocks are turning in a lackluster performance in early trading on Wednesday, as traders digest another batch of earnings news along with President Barack Obama's State of the Union address. The major averages are lingering near the unchanged line after ending the previous session nearly flat.

Traders may be staying on the sidelines ahead of the release of a key report on new home sales in the month of December as well as the Federal Reserve's announcement of its latest monetary policy decision.

On the earnings front, Boeing (BA) reported fourth quarter net income of $1.56 per share, well above expectations. However, total revenues declined to $16.55 billion from $17.94 billion in the prior-year quarter, coming in under projections for $16.97 billion.

Boeing's 2011 earnings guidance was also well short of estimates, while its revenue forecast was in-line. The stock is down by 3.8 percent in early trading.

Yahoo! Inc. (YHOO) said its fourth quarter profit doubled from last year due to better cost controls. However, quarterly revenues declined 12 percent, as the Internet search engine company continues to face tough competition in the online-advertising market.

Looking ahead, the company forecast revenue for the first quarter below Wall Street expectations. Shares are down by 3 percent in early trading.

Despite the lack of direction being shown by the broader markets, electronic storage stocks are seeing early strength. Hutchinson Technology (HTCH) is leading the sector higher despite reporting a first quarter loss compared to a year-ago profit.

Health insurance, airline, and oil service stocks are also posting notable gains, while modest weakness is visible among defense and real estate stocks.

The major averages are currently turning in a mixed performance, with the Dow posting a modest loss. While the Dow is down 2.35 points or less than a tenth of a percent at 11,974.84, the Nasdaq is up 2.44 points or 0.1 percent at 2,721.69 and the S&P 500 is up 1.97 points or 0.2 percent at 1,293.15.

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TSX Looks To Open Higher

Bay Street stocks may edge up at open Wednesday as commodities steadied after recent fall. Also, a recent batch of encouraging corporate earnings reports might lift trader sentiment.

Traders also took positive cues from Obama's annual State of the Union speech, in which he proposed to cut corporate taxes and boost spending for education, innovation and infrastructure.

U.S. stock futures were pointing to a higher open, but caution may be exercised ahead of today's announcement on interest rates from the Federal Reserve.

On Tuesday, the S&P/TSX Composite Index shed 87.95 points or 0.66 percent to 13,259.63.

The price of crude oil was recovering from its 2-month low, hit in the previous session, with crude for March adding $0.32 to $86.51 a barrel.

The price of gold was steady near its 3-month low, hit in the previous session. Gold for February edged down $1.20 to $1,331.10 an ounce.

In corporate news from Canada, railways operator Canadian Pacific Railway said its fourth-quarter net income grew to C$185.8 million or C$1.09 per share from C$146.2 million or C$0.87 per share last year. Adjusted earnings were C$190.1 million or C$1.12 per share for the latest quarter. Analysts had expected earnings per share of $1.08 for the latest quarter. The company plans to spend in the range of C$950 million to C$1.05 billion on capital programs in 2011.

Information technology solutions provider CGI Group reported first quarter net earnings of C$126.6 million or C$0.45 per share, up from C$111.2 million or C$0.37 per share last year.

Oil and gas firm NAL Energy said that in 2011 it is planning a $200 - $230 million capital program in 2011 and anticipates to drill about 139 wells. The company's 2011 plans target a dividend payout ratio of 40 percent - 50 percent of current year cash flow.

Simulation tools & equipment maker CAE Inc. said its U.S. subsidiary has been awarded US$44 million contract by the U.S. Navy.

Mineral mining company Chieftain Metals announced that it has appointed Keith Boyle as Chief Operating Officer, effective February 7, 2011 and named Clive Creaney Project Manager, effective January 1, 2011.

Digital radio and syndicated television services provider International Datacasting said it received $2.8 million contract for Canadian Forces Radio And Television Network.

Exploration and development company Los Andes Copper announced the appointment of Eduardo Covarrubias as President and CEO, effective immediately.

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European Markets Trading Higher

European markets are presently trading in positive territory Wednesday afternoon amid optimism about global economic recovery. Positive cues from Asian markets and easing debt concerns in Eurozone region also lifted market sentiment.

On the economic front, Policy makers of the Bank of England left the key interest rate unchanged in January by a split vote, with a second member seeking a rate hike, the minutes of the rate-setting session released earlier in the day revealed. Six members of the Monetary Policy Committee including Governor Mervyn King preferred to retain the key rate at 0.5% and to maintain the size of asset purchase programme at GBP 200 billion. Martin Weale, Andrew Sentance and Adam Posen dissented. The meeting was held on January 12 and 13.

A report released by the British Bankers' Association revealed that the number of loans approved for house purchase in the UK decreased in December. Banks approved 28,726 new home-loans in December, down from 29,696 in November. It fell for the seventh consecutive month. The number for 2010 came in at just under 400,000, representing a decrease of 10% from 2009.

A report released by the Federal Statistical Office in Germany revealed that the country's import price inflation jumped to 12% in December from 10% in November. This was notably higher than the 10.8% rise forecast by economists. According to the statistical office, the latest rate of inflation was the highest since October 1981. On a monthly basis, import prices rose 2.3%, faster than the 1.2% rise in the previous month. Economists had expected prices to rise at the same pace as in November.

A statement released by European Automobile Manufacturers' Association revealed that European new commercial vehicle registrations increased by 8% in 2010. Demand for vans and trucks increased, while registrations of buses and coaches declined in 2010. In December, demand for new commercial vehicles grew by 12.5% with demand rising across segments, except for buses and coaches. New van registrations were up 8.4% and the segment of heavy trucks posted the strongest increase of 70.2%. New truck sales advanced 47.8%, while buses and coaches sales dropped by 1.4% in December.

In the UK the FTSE 100 opened at 5917.71, the same as previous close and continued to move northward, lifted by resource stocks. Optimism about economic recovery lifted market sentiment. The market is presently gaining around 1.40%.

Resource related stocks were trading higher. Anglo American is surging up more than 3%, Antofagasta is gaining more than 2.80% and Kazakhmy's is advancing more than 2.40%.

Banks and financial stocks are also trading in the green.

In Germany, the DAX index opened trading at 7,093, sharply higher than previous close at 7060 and continued to trade in the positive territory. The index is presently gaining 1.29%.

Automakers are trading in the green, leading the gains. BMW is up 1.44% and Daimler is adding 1.45%.

Financials are also trading in the positive territory. In France, the CAC 40 index opened sharply higher at 4043 compared to previous close at 4.019, and is presently trading in the green. The index is gaining 1.02%.

Among the leading gainers, Alcatel Lucent is surging up more than 3%, while tire maker Michelin is gaining more than 1%.

Across Asia/Pacific, major markets open for trading on Wednesday, except the Japanese market, ended in positive territory with moderate gains on optimism about global economic recovery. The markets in Australia and India were closed for a public holiday. Except for the Japanese market, the markets in the China, Hong Kong, Taiwan, South Korea, Indonesia and Singapore ended in the green.

In the U.S., futures point to a higher open on Wall Street. In the previous session, mixed trading was witnessed. While the Dow Jones ended in the red with minor losses, the Nasdaq and the S&P 500 index ended in the green with moderate gains amid optimism about corporate earnings and economic recovery.

In commodities, crude for March delivery is gaining $0.68 to $86.87 per barrel and February gold is trading at $1332 a troy ounce.

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Asian Markets End In Positive Territory

Asian markets open for trading on Wednesday ended in positive territory with modest gains on optimism about sustaining global economic recovery. Except the Japanese market where profit taking dragged the indices into negative territory, all other markets open for trading witnessed gains, The markets in India, Australia and New Zealand were closed for a public holiday. The markets in China, Hong Kong, Indonesia, Singapore, South Korea and Taiwan ended in the green.

In Australia, the markets were closed for a holiday on Australia Day.

In Japan, the benchmark Nikkei 225 Index slipped 62.52 points, or 0.60 percent, to 10,402.while the broader Topix index of all First Section issues lost 6.64 points, or 0.71 percent, to 923

On the economic front, a report released by the Bank of Japan revealed that an index measuring corporate service prices in the country was down 1.3 percent on year in December, standing at 96.4. That matched forecasts following the 1.1 percent annual decline in November. On a monthly basis, the index eased 0.2 percent. For the fourth quarter of 2010, the index fell 1.2 percent on year and 0.4 percent on quarter, standing at 96.5. For all of 2010, the index was down 1.1 percent on year to 97.1.

A statement released by the Shoko Chukin Bank in Japan revealed that Japanese small business sentiment eased slightly in January. The business confidence index fell to 45.8 from 45.9 in December. The indicator continued to stay below the neutral level of 50. While manufacturers' sentiment dipped to 45.6 from 46, non-manufacturers' confidence rose to 46 from 45.8. For February, overall confidence is forecast to rise to 46.7. Manufactures' confidence is seen at 47.1 and that for non-manufacturers at 46.3.

The Bank of Japan continues to believe that the country's economy still shows signs of a moderate recovery, but the recovery "seems to be pausing." In its latest monthly report, the central bank broadly maintained its assessment that the economy is expected "to gradually overcome the deceleration in the pace of improvement and return to a moderate recovery path." It said exports are likely to pick up "moderately," reflecting improvements in global economic conditions. Light sweet crude oil futures for March delivery was trading at $86.40 a barrel in electronic trading, up $0.21 per barrel from previous close at $86.19 a barrel in New York on Tuesday.

Stocks of sea transport ended in the red on profit taking. Kawasaki Kisen Kaisha Ltd shed 2.21 percent, Nippon Yusen slipped 1.87% and Mitsui OSK Lines was down 2.34%,

Shares of brokerage houses and securities also ended weaker. Mizuho Securities Co., declined 1.73%, Matsui Securities slipped 1.51%, Nomura Holdings shed 1.15% and Daiwa Securities Co was down 2.11%.

In China, the benchmark Shanghai Composite Index ended in the green with a modest gain of 31.31 points, or 1.17%, at 2,708.74.

In Hong Kong, the benchmark Hang Seng Index ended in positive territory with a modest gain of 54.41 points, or 0.23%, at 23,843.24.

In Taiwan, the Taiwanese Weighted Average Index ended at 9,055.59, up 64.20 points, or 0.71% from previous close.

In South Korea, the benchmark KOSPI index ended at 2,110.46, up 23.79 points, or 1.14% from previous close.

In Singapore, the benchmark Strait Times Index ended at 3,220.78, up 39.63 points, or 1.25 percent, from previous close.

In India, the stockmarkets were closed as the country celebrated its Republic Day today.

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Dollar Extends Losses Versus Euro Ahead Of Fed Rate Call

The dollar was generally weaker Wednesday morning ahead of the latest interest rate announcement from the Federal Reserve, extending its recent losses against the resurgent euro.

The Fed is universally expected to keep its benchmark interest rate near zero and maintain its controversial quantitative easing program, citing poor conditions in the labor and housing market as reasons not to pull support in the near term.

While the rate decision is foregone conclusion, the markets will be paying close attention to the Fed's comments regarding the threat of inflation and the pace of the economic recovery.

On the housing front, the new home sales report for December is slated for release by the Commerce Department at 10.00 a.m. ET. The consensus estimate calls for new homes sales of 300,000 for the month.

The Fed's interest rate decision comes at 2 pm ET.

The dollar slipped to $1.37 against the euro for the first time since November 21. The buck has lost roughly 9 cents over the past two weeks.

The buck gave back some of yesterday's strong gains against the sterling, dropping a penny to $1.5875.

The minutes of this month's rate setting meeting of the Bank England showed a deepening division within the central bank, with two members voting for a rate hike.

However, the vote took place before yesterday's release of dreadful figures on the UK economy, which unexpectedly contracted in the fourth quarter.

The buck was steady near Y82.20 versus the yen.

Japan's economy still shows signs of a moderate recovery, but the recovery "seems to be pausing," the Bank of Japan has said.

In its latest monthly report, the central bank broadly maintained its assessment that the economy is expected "to gradually overcome the deceleration in the pace of improvement and return to a moderate recovery path."

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