US & World Daily Markets Financial Briefing 29-11-2010

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Stocks See Initial Weakness Amid Concerns About Europe - U.S. Commentary

Stocks showed a notable move to the downside at the start of trading on Monday, with lingering concerns about European financial stability generating some selling pressure. The major averages have all slid firmly into negative territory after turning in a mixed performance last week.

The initial weakness in the markets came as traders remain concerned regarding potential debt issues in Portugal and Spain even after the European Union and the International Monetary Fund reached an agreement about a financial bailout of Ireland.

Over the weekend, European finance ministers reached an agreement regarding an 85 billion euro financial assistance package for Ireland. Around 35 billion euros will go into propping up the Republic's banking system, while the remaining 50 billion euros will cover the day-to-day financing of the state.

In corporate news, BP Plc (BP) announced that it would sell its majority stake in Argentina-based oil and gas firm Pan American Energy to Bridas Corp. for $7.06 billion. The transaction is expected to be completed in 2011.

Software stocks have helped to lead the markets lower in early trading, while considerable weakness has also emerged among defense, pharmaceutical, and railroad stocks. Most of the other major sectors have also moved to the downside.

The major averages have not seen much follow-through on their initial drop but remain stuck in the red. The Dow is currently down 83.10 points or 0.8 percent at 11,008.90, the Nasdaq is down 12.23 points or 0.5 percent at 2,522.33 and the S&P 500 is down 8.38 points or 0.7 percent at 1,181.02.

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TSX Poised For Mixed Open

Toronto stocks may open mixed Monday amid varied cues from the commodities and global equity markets. While most Asian markets ended higher, European stocks were lingering in the red as investors shrugged off the news that the EU agreed to extend about $90 billion in bailout loans to Ireland.

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

On Friday, the S&P/TSX Composite Index lost 53.11 points or 0.41% to 12,892.71.

The price of crude oil moved up above $84 despite a strong dollar. Crude for January gained $0.82 to $84.58 a barrel.

The price of gold was trading flat amid a firm U.S. dollar, with gold for December edging up $1.60 to $1,364.00 an ounce.

In corporate news from Canada, uranium miner Uranium One said it has completed the initial closing of its transaction with JSC Atomredmetzoloto, comprising the issuance of 178.13 million new common shares of Uranium One to ARMZ for $610 million in cash.

Oil and natural gas producer Petrobank Energy and Resources said it received necessary final environment approval for its initial two well-pair THAI Dawson project.

Oil and gas firm TransGlobe Energy guided funds flow from operations to be $101 million or $1.43 per share for fiscal 2011.

Owner and operator of land lease communities Parkbridge Lifestyle Communities Inc. said 1561609 Alberta Ltd., a corporation owned of British Columbia Investment Management Corp. has obtained necessary approvals to acquire all of the outstanding common shares of Parkbridge.

News service provider Thomson Reuters announced that it has acquired GeneGo, a provider of biology and disease information, analytics, and decision support solutions for pharmaceutical research and development

Precious metals miner Silvermex Resources said it would privately place up to 19.35 million units at a price of C$0.62 per unit to raise up to C$12 million.

StreamOil & Gas  said it privately placed 6,500,000 units at a price of $1.50 per unit for $10 million.

Junior oil and gas firm Canadian Phoenix Resources reported a narrower third quarter net loss of C$2.0 million or C$0.04 per share compared to a loss of C$4.57 million or C$0.10 per share in the year-ago period.

Wireless radio frequency devices maker Active Control Technology Inc. said it's fiscal year 2010 net loss narrowed to C$4.29 million or C$0.02 per share from C$5.67 million or C$0.04 per share year ago. On Friday, the stock shed 20% to C$0.020.

In economic news, Statistics Canada said overall current account deficit, on a seasonally adjusted basis, with rest of the world widened by $4.6 billion to $17.5 billion in the third quarter. Stronger imports of goods accounted for the bulk of the increase in the deficit in the third quarter, as exports of goods also weakened. Economists expected a deficit of C$14.9 billion after the shortfall of C$11 billion initially reported for the second quarter. The second quarter deficit was revised to nearly C$13 billion.

Separately, the agency said the Industrial Product Price Index and the Raw Materials Price Index were up 0.5% and 1.7% respectively in October from a month ago, mainly due to petroleum and metal products.

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French Market Reverses Early Gains

The French market gave up early gains and is in negative territory in afternoon trading trading Monday, as the Irish debt bailout failed to sustain investors' risk appetite. Banks, car manufacturers and construction stocks are lower.

In economic news, Eurozone economic confidence rose to 105.3 in November from 103.8 in October, above the expected reading of 104.9, a survey from European Commission showed.

The UK's mortgage approvals in October declined to 47,185 from 47,369 in September, the Bank of England said. Mortgage approvals in the month were lower than the previous six-month average of 48,503, but stayed above the consensus forecast of 46,500.

Additionally, property data provider Hometrack said UK house prices fell for the fifth consecutive month in November due to the ongoing decline in demand. House prices fell 0.8% month-on-month in November. The decline was 0.9% in October and 0.4% in September.

The CAC 40 opened above the flat line at 3,748, but shortly followed its counterparts in the region and moved into the red. The index is currently retreating 1.15%.

BNP Paribas is leading the decliners by falling 2.8%. Societe Generale, Natixis and Credit Agricole are losing between 2.6% and 1.8%.

Tires and rubber firm Michelin, computer and consulting services company Cap Gemini, machinery and equipment maker Alstom and hotel group Accor are among notable losers.

Carmakers Renault and Peugeot are losing 2.3% each.

Among construction stocks, Saint-Gobain is losing 1.7%, Lafarge is sliding 1.4%, Bouygues is down 1.5% and Vinci is losing 1.1%.

Elsewhere in Europe, the UK's FTSE 100 is losing 0.74% and the German DAX is sliding 1.10%.

Across Asia/Pacific, most major markets closed in the green. Australia's All Ordinaries added 0.35% and Hong Kong's Hang Seng gained 1.26%. Japan's Nikkei 225 and India's BSE Sensex climbed 0.9% and 1.4%, respectively. However, China's Shanghai Composite Index retreated 0.19%.

In the U.S., futures point to a slightly negative open on Wall Street. In the previous session, the major averages ended the day firmly in negative territory. The Dow fell 0.9 percent, the Nasdaq slipped 0.3 percent and the S&P 500 dropped 0.8 percent.

Crude for January delivery is adding $0.82 at $84.58 per barrel and December gold is trading lower by $2.6 at $1359.8 an ounce.

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Asian Markets End In Positive Territory

Asian markets open for trading on Monday, the first day of the trading week, ended in positive territory with modest gains on improving market sentiment in the markets, despite weak closing on Friday in the Wall Street. Better than expected sales on Black Friday, bailout of Ireland from the debt crisis and rise in oil prices impacted market sentiment as investors resorted to bargain hunting at lower levels.

In Australia, the benchmark S&P/ASX200 Index advanced 20.20 points, or 0.44%, and closed at 4,618 points, while the All-Ordinaries Index ended at 4,707, representing a gain of 16.50 points, or 0.35%.

On the economic front, results of a survey conducted by the Housing Industry Association along with Jeld-Wen revealed that the number of new homes sold in the country increased in October, although it is unlikely to prevent a renewed decline in residential construction. The New Home Sales Report showed that the number of new homes increased by 2.4% during the month following a downwardly revised 1.7% decline in the previous month.

A report released by the Australian Bureau of Statistics revealed that company operating profits were down a seasonally adjusted 1.5% in the third quarter of 2010 compared to the second quarter. That was below forecasts for a 4% quarterly gain following a revised 17% increase in the second quarter. The report further noted that inventories were down 0.8% on quarter versus expectations for a 0.4% increase after the revised 0.1% decline in the second quarter.

Nufarm, engaged in supply of agricultural chemicals, was the major gainer in the market, having surged 4.95%, lifted by a broker upgrade on higher crop prices.

Healthcare stocks led the gains in late trading session on fresh buying interest evinced by traders in late trading session. Sonic Healthcare gained 1.28%, Cochlear surged up 2.79% and CSL ended in positive territory with a gain of 0.69%.

Oil-related stocks also ended in positive territory following rise in crude oil prices in the international market. Woodside Petroleum gained 1.86%, Santos Ltd added 0.49%, Origin Energy rose 0.76% and Oil Search Ltd was up 0.45%. ROC Oil Ltd remained unchanged from previous close.

Banking related stocks also ended in positive territory with minor gains, lifting the overall market indices into positive territory. ANZ Bank advanced 1.15%, Commonwealth Bank of Australia gained 2.08%, National Australia Bank rose 1.29% and Westpac Banking Corp. was higher by 1.89%. Investment banking company Macquarie Group ended in positive territory with a gain of 0.28%.

Gold related stocks ended in negative territory on lower gold prices in the bullion market. Newcrest Mining lost 1.49% and Avoca Resources declined 2.14%.

In Japan, the benchmark Nikkei 225 Index gained 86.43 points, or 0.86% to 10,126 while the broader Topix index of all First Section issues advanced 7.78 points, or 0.90%, to 875..

On the economic front, a report released by the Ministry of Economy, Trade and Industry revealed that retail sales fell for the first time this year in October as government subsidies wound to a close and tobacco tax was raised. As per the report, retail sales dropped 0.2% during October from a year earlier to 10.8 trillion yen, compared to the 1.4% increase in the previous month. Analysts expected a 0.7% month-over-month increase in retail sales for the month. The report further noted that the unexpected decline in retail sales was due to a 24.1% fall in motor vehicle sales following the expiry of subsidy for purchasing green cars.

Results of a survey conducted by the Shoko Chukin Bank revealed that confidence among small businesses in Japan fell for the third consecutive month in November. As per the survey results, the small business confidence index fell to 45.8 in November from 46.4 reported for the previous month. Confidence among manufacturers fell 1.4 points to 46.6, while that among non-manufacturers edged up to 45.2. The report further noted that small businesses were even more downbeat over their expectations for December, with the index projected to fall to 45.0.

Light sweet crude oil futures for January delivery ended at $84.33 a barrel in electronic trading, up $0.57 per barrel from previous close at $83.76 a barrel in New York on Friday.

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Exporters led the gains in the market following weakness in the local currency against the US dollar. The yen traded above the 84-mark per US dollar, a two-month high following the strengthening of the greenback. Canon Inc. added 1.00%, Advantest Corp. advanced 1.63%, Sony Corp. climbed 2.80%, Sharp Corp. rose 0.86%, and Panasonic Corp. was up 0.99%.

Sea-transport stocks also ended in positive territory on weaker local currency. Mitsui OSK Lines climbed 2.43%, Nippon Yusen surged up 3.64% and Kawasaki Kishen Kaisha gained 3.17%.

Automotive stocks ended in positive territory. Honda Motor Co. added 0.65%, Toyota Motor edged up 0.30%, Nissan Motor climbed 1.53%, Mazda Motor Corp. gained 0.42% and Mitsubishi Motor Corp. rose 0.85%. However, Suzuki Motor Corp. bucked the trend and ended in negative territory with a loss of 1.10%.

Trading companies also advanced on optimism about recovery and weaker local currency. Toyota Tsusho Corp. gained 1.83%, Marubeni Corp. surged up 3.55%, Mitsubishi Corp. advanced 0.85%, Itochu Corp. rose 1.54% and Sojitz Corp. climbed 3.70%.

Real-estate stocks also ended in positive territory. Sumitomo Realty & Development gained 1.72%, Mitsui Fudosan rose 1.20%, Mitsubishi Estate advanced 1.12%, Tokyu Land Corp climbed 2.38% and Heiwa Real Estate was higher by 0.88%.

The Indian market bounced back sharply on Monday after a correction last week, as investors bought battered heavyweight stocks such as Reliance Industries, ICICI Bank, TCS, Tata Motors and Hindustan Unilever amid firm global cues. Among the prominent gainers, market heavyweight Reliance Industries climbed 3.7% after crude futures rose to a two-week high above $85 a barrel in Asian trading on optimism over Ireland's €85 billion bailout package. The 30-share BSE Sensex ended up 268 points or 1.40% at 19,405, while the broader Nifty rose by 78 points or 1.36% to 5,830.

Among the other markets in the region, HongKong's Hang Seng Index gained 288.97 points, or 1.26% to close at 23,166, Singapore's Strait Times Index edged higher by 0.13 points, or 0.00%, to close at 3,128, and Taiwan Weighted Index ended in positive territory with a gain of 55.02 points or 0.66% to close at 8,367. However, China's Shanghai Composite Index ended in negative territory with a minor loss of 5.34 points, or 0.19% at 2,866, Jakarta Composite Index in Indonesia slipped 11.86 points, or 0.33%, to close at 3,631, and Seoul Composite Index in South Korea shed 6.26 points, or 0.33%, to close at 1,896.