US & World Daily Markets Financial Briefing 28-02-2011

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Stocks Moving Mostly Higher In Early Trading

Stocks have moved mostly higher in early trading on Monday, with the markets continuing to recover from the steep losses seen early last week. The major averages have all moved to the upside but remain well off their recent highs.

The early strength in the markets is partly due to reported that Libya has resumed oil shipments, contributing to a decrease by the price of oil. The news has helped to ease some of the recent concerns about the economic impact of higher oil prices.

Healthcare provider stocks are seeing notable strength early on, adding to the standout gains posted in the previous session. Health insurance, railroad, and networking stocks are also posting significant gains, moving to the upside along with most of the major sectors.

In economic news out of the U.S., the Commerce Department said personal income surged up by 1.0 percent in January following a 0.4 percent increase in December. Personal income had been expected to show a much more modest increase of about 0.4 percent.

At the same time, the report showed that personal spending edged up by 0.2 percent in January after rising by a downwardly revised 0.5 percent in December. Economists had expected spending to increase by 0.4 percent compared to the 0.7 percent growth originally reported for the previous month.

The National Association of Realtors is also due to release its pending home sales data for January at 10:00 a.m. ET. Pending home sales are expected to decline by 3.2 percent for the month after rising by 2 percent in December.

In corporate news, Ventas Inc. (VTR) entered an agreement to purchase Nationwide Health Properties Inc. (NHP) in a stock-for-stock deal worth approximately $7.4 billion. The deal will create one of the highest valued REITs on the market.

The major averages have seen some further upside in the past few minutes, rising to new highs for the young session. The Dow is up 59.94 points or 0.5 percent at 12,191.00, the Nasdaq is up 15.86 points or 0.6 percent at 2,796.91 and the S&P 500 is up 6.89 points or 0.5 percent at 1,326.77.

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TSX Looks To Open Higher Amid Strong GDP Growth

Toronto stocks are poised for a higher open Monday amid data showing the nation's economy grew faster-than-expected in the fourth quarter 2010. Also, a firm trend in commodities prices might help lift trader sentiment.

While most Asian markets were up in overnight trading, with the Hang Seng gaining 1.42 percent, European markets are mixed in early trading. Meanwhile, stocks across the Middle East moved lower amid tensions in the region.

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

On Friday, the S&P/TSX Composite Index gained 184.82 points or 1.33 percent to 14,052.13, paring weekly losses.

The price of crude oil was little changed as uprising in Libya continued over the weekend and violent protests in Oman cemented speculation that political upheaval could impact other crude exporters. Crude for April edged down $0.27 to $97.61 a barrel.

The price of gold was steady above $1,410 as tensions in the Middle East lifted safe-haven buying. Gold for April was up $4.10 to $1,413.40 an ounce.

Base-metals stocks may be in play amid M&A news and firm copper prices.

In corporate news from Canada, Australian mining company Equinox Minerals said it will make an offer to acquire Canada's Lundin Mining  for about C$4.8 billion in cash and shares.

Quadra FNX Mining reported fourth quarter net income of $57.9 million or $0.30 per share compared to $46.5 million or $0.46 per share recorded a year ago. Adjusted earnings for the quarter surged to $105.1 million or $0.55 per share from $51 million or $0.51 per share in the same quarter a year earlier.

Supermarket and junior department store focused trust RioCan Real Estate Investment Trust reported a five-fold jump in its fourth-quarter profits to $179.4 million from $27.5 million a year ago, due to a one-time non-cash reversal on future income taxes of about $150 million.

Cliffs Natural Resources said that Consolidated Thompson Iron Mines shareholders approved the plan of arrangement for Cliffs to acquire all of the Thompson's outstanding shares.

Merchant banker Clairvest Group said it along with Clairvest Equity Partners Limited sold combined interests in Van-Rob Inc. to Kirchhoff Automotive GmbH for C$35 million.

Wood products company Ainsworth Lumber swung to profit in fourth quarter, reporting net income of C$1.8 million or C$0.02 per share, compared with a loss of C$12.4 million or C$0.12 per share a year ago.

Engine and fuel injection systems company Westport Innovations said it has secured a funding commitment of C$2.3 million from Sustainable Development Technology Canada to develop Westport HD technology using natural gas fueling for high-horsepower applications.

In economic news, Statistics Canada said real gross domestic product (GDP) rose 0.8 percent in the fourth quarter, led by exports, following a 0.4 percent gain in the previous quarter. On an annualized rate, real GDP in the fourth quarter grew 3.3 percent, after expanding 1.8 percent in the third quarter. Economists expected 3 percent annualized growth.

Separately, the agency said the nation's overall current account deficit, on a seasonally adjusted basis, narrowed C$5.9 billion to reach C$11.0 billion in the fourth quarter.

From south of the border, the U.S. Commerce Department said personal income moved up by 1.0 percent in January following a 0.4 percent increase in December. Personal income had been expected to show a much more modest increase of about 0.4 percent. At the same time, personal spending edged up by 0.2 percent in January after rising by a downwardly revised 0.5 percent in December. Economists were expecting spending to increase by 0.4 percent.

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French Market Gains In Afternoon Trading

The French market is rising in afternoon trading Monday, helped by firm cues from Asia where markets ended higher. Concerns about geopolitical tensions and rise in crude prices continued to impact sentiment in early trade. Banks and utilities are witnessing upside.

The CAC 40 index opened at 4,029, lower than the previous session's close of 4,070. The index erased those losses later and is currently adding 0.99%.

Electric utility EDF is adding about 2%. Chipmaker STMicroelectronics is rising 1.5% and Schneider Electric is adding 1.3%.

Alcatel Lucent, ArcelorMittal, GDF Suez and Veolia Environnement are notably higher.

Among banks, Societe Generale is rising about 1%. BNP Paribas, Credit Agricole and Natixis are moderately higher.

Car manufacturer Renault is adding 1.8% and Peugeot is rising 0.4%.

Insurer Axa, building products maker Saint-Gobain and builder Vinci are seeing gains.

Cement giant Lafarge is declining 1.2%. Department stores operator PPR, tire firm Michelin and drugmaker Sanofi-Aventis are losing moderately. Elsewhere in Europe, the UK's FTSE 100 is rising 0.07 percent and the German DAX is gaining 1.32 percent. Swiss Market is up 1.31 percent and the Euro Stoxx 50 index is adding 1.14 percent.

Across Asia/Pacific, most major markets ended higher. China's Shanghai Composite Index gained 0.93 percent and Hong Kong's Hang Seng climbed 1.42 percent. Japan's Nikkei 225 and India's BSE Sensex added 0.92 percent and 0.69 percent, respectively. However, Australia's All Ordinaries closed marginally down by 0.05 percent.

In the U.S., futures point to a higher open on Wall Street. In the previous session, the Dow gained 0.5 percent, the Nasdaq moved up 1.6 percent and the S&P 500 rose 1.1 percent.

In economic news, Eurozone inflation rose less than expected in January, final data from Eurostat showed. Consumer price index rose 2.3 percent annually in January following the 2.2 percent increase in December. That was revised down from 2.4 percent reported in a flash estimate released on January 31.

Meanwhile, French factory gate inflation eased unexpectedly to 5.2 percent in January from 5.4 percent in December, data from the statistical office Insee revealed. Economists had forecast the rate to accelerate to 5.6 percent. On a monthly basis, producer prices grew 0.8 percent, while a 0.9 percent increase was expected.

In commodities, crude for April delivery is dropping $0.43 to $97.45 per barrel and April gold is adding $5.3 to $1414.6 a troy ounce.

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Indian Market Ends Off Day's High

A positive tone of the Union Budget, with thrust on infrastructure and agriculture sectors, no change in the excise duty and service tax rates versus expectations of a 2 percent hike and a cut in corporate surcharge to 5 percent from the current 7.5 percent helped the Indian market end higher for a second session in a row on Monday.

Given hard economic realities and the adverse political environment in North Africa and the Middle East, Finance Minister Pranab Mukherjee on Monday did a balancing act as he sought to tame inflation, while maintaining stable economic growth. "In the current fiscal year, agriculture would rise 5.4 percent, industry by 8.1 percent and services 9.6 percent. " he said.

Among the major budget proposals, the finance minister announced infra status for the fertilizer sector investments and cold storage chains, assured steps to simplify the tax and tariff procedures and the service tax refunds process. He proposed to issue infra bonds worth Rs 30,000 crore to boost the infrastructure sector and said the government would raise Rs 40,000 crore from disinvestment program in 2011-12.

Besides, he proposed a capital infusion of Rs 20,157 crore in public sector banks and a 1 percent interest subvention on home-loans up to Rs 15 lakh. Targeted subsidy on kerosene and food to reduce the wastage of subsidy, the digitization of I-T system to expand the tax base, income tax relief to general tax payers, promise to introduce the Goods and Services Tax bill in the current session of Parliament and other measures on the taxation and spending to boost growth momentum were also announced. Meanwhile, investors shrugged off a marginal hike in Minimum Alternate Tax to 18.5 percent of book profit from 18 percent.

Prime Minister Manmohan Singh congratulated the finance minister for presenting a growth-oriented and inclusive budget despite the adverse international economic climate. Asked on the lack of any amnesty scheme in the Budget, he said such schemes unveiled in the past have not succeeded. The issue has to be dealt with in a "permanent and holistic manner," he added.

With investors giving thumbs up to the Budget, the 30-share BSE Sensex rose as much as 600 points or over 3 percent to a high of 18,297 in the afternoon. However, the rally proved short-lived and the Sensex pared most of its gain to end about 0.69 percent or 122 points higher at 17,823, after data showed India's economy grew at a slower pace in the December quarter.

The Indian economy grew 8.2 percent compared to the same period a year earlier between October and December, government data showed on Monday. This was below analyst forecasts for an 8.5 percent increase following an 8.9 percent expansion in the July to September period.

The 50-share Nifty ended up about 30 points or 0.56 percent at 5,333, while the BSE mid-cap and small-cap indexes rose about 0.3 percent each. The market breadth was slightly positive, with 1598 gainers versus 1204 decliners on the BSE.

Among heavy weights, ITC (up 8.23 percent) led the gainers after the finance minister left excise duty on cigarettes unchanged. Utility vehicle manufacturer Mahindra & Mahindra rallied 3.19 percent after the finance minister proposed to launch a national mission for hybrid and electric vehicles in India. Car maker Maruti Suzuki gained 3.07 percent, as there has been no change in the excise duty rates for automobiles.

Among other prominent gainers, Hindustan Unilever, Larsen & Toubro, Wipro, BHEL, SBI, Jindal Steel, Sterlite Industries and ONGC gained between 1 percent and 3 percent.

Healthcare stocks such as Fortis, Sun Pharma, Dr Reddy's Lab, Lupin, Biocon, Opto Circuits, Aurobindo Pharma and Piramal Health rose by 1-4 percent after the government enhanced spending on the health sector by 20 percent to Rs.26,760 crore in the next fiscal year.

Reliance Capital climbed 4.76 percent after the finance minister allowed SEBI-approved mutual funds to accept funds from foreign investors. Infrastructure-related stocks such as Nagarjuna Construction, IRB Infra and GMR Infrastructure rose by 1-3 percent after Mukherjee raised spending on the sector by 23 percent in the next financial year.

Cement stocks closed mostly lower after the finance minister proposed to replace the existing excise duty rate with composite rates. ACC fell 2.21 percent, Ambuja Cements plunged nearly 5 percent, India Cements declined 2.22 percent and UltraTech Cement ended down almost 3 percent.

Elsewhere, while the other Asian markets closed mostly higher on Monday, European stocks fluctuated and the Dow futures were little changed owing to worries about some sort of contagion effect of the unrest in Libya to other oil producing countries. Crude futures were higher for a second day in New York and the U.S. dollar weakened against most major currencies.

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Dollar Still On Defense Ahead Of Bernanke Testimony

The dollar was poised to end a rough month by extending its recent losses on Monday, falling to its lowest in 2011 ahead of Senate testimony from the top official at the Federal Reserve.

On Tuesday, Fed Chairman Ben Bernanke is widely expected to defend the central bank's controversial $600 billion bond buying program and re-state has pledge to keep interest rates near zero for an extended period.

He will likely face question on the Fed's possible reaction to soaring food and energy prices, a phenomenon that some at the Fed call temporary and have blamed on overly accommodative monetary policy in emerging nations.

The dollar dropped to a 4-week low of $1.3840 against the euro. A move to $1.3865 would take the dollar to its lowest since November.

News that Eurozone inflation rose less than expected in January failed to give the dollar a lift.

Consumer price index, or CPI, rose 2.3% annually in January following the 2.2% increase in December. That was revised down from 2.4% reported in a flash estimate released on January 31.

There was little movement for the dollar against yen, with the pair holding near Y81.80. Last week's losses took the dollar near its lowest in 2011.

The dollar fell sharply versus the sterling this morning, dropping more than a penny to $1.6240.

Looking at the economic calendar from the U.S., the Bureau of Economic Analysis is due to release its personal income & outlays report for January.

Economists expect the report, which is due out at 8:30 a.m ET, to show that personal income and personal spending increased 0.4 percent each in the month.

The results of the Institute of Supply Management-Chicago's business survey for February are scheduled to be released at 9:45 AM ET. Economists expect the business barometer index based on the survey to edge down to 68.

Data on Pending Home Sales, which is a leading indicator of housing market activity released by the National Association of Realtors, is due out at 10 AM ET. The index is expected to decline 3.2 percent in December.

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