US & World Daily Markets Financial Briefing 29-12-2010

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Stocks Posting Slim Gains In Early Trading

Stocks are seeing modest strength in early trading on Wednesday, although buying interest remains subdued amid another light trading day. The major averages are currently all just above the unchanged line after ending the previous session mixed.

While a majority of the major sectors indices are on the upside, most are showing only small upward moves. Modest strength is visible among natural gas, pharmaceutical, and gold stocks.

Among individual stocks, shares of BJ's Wholesale Club (BJ) are seeing early strength after the New York Post reported that the warehouse retailer may face a hostile takeover bid from Los Angeles buyout firm Leonard Green & Partners if an auction isn't initiated in the coming weeks.

Meanwhile, Savient Pharmaceuticals (SVNT) is trading lower after announcing that its board has initiated a search for a Chief Executive Officer. Paul Hamelin, the company's president since November 2008, will continue to lead the day-to-day operations until Savient hires a CEO.

The major averages are currently holding on to slim gains, with the Dow at its best intraday level in well over two years. The Dow is currently up 27.32 points or 0.2 percent at 11,602.86, the Nasdaq is up 2.84 points or 0.1 percent at 2,665.72 and the S&P 500 is up 2.00 points or 0.2 percent at 1,260.51.

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TSX Poised For Higher Open After Long Break

Bay Street stocks may edge up at open Wednesday after a four-day holiday break amid firm commodities prices.

Commodities remained steady even after China raised interest rates 0.25% to 5.81%, the second time in just over two months.

However, big gains may be capped as traders might stay on the sidelines ahead of New Year festivities.

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

On Friday, the S&P/TSX Composite Index edged up to a fresh 2-year peak, adding 11.95 points or 0.09% to 13,383.16 amid lack of cues from the commodities and the U.S. equity markets that had remained closed.

The price of crude oil edged down as traders await inventories data from the API, due out after the markets hours today and the EIA, due out tomorrow. Crude for February edged down $0.36 to $91.13 a barrel.

The price of gold was little changed as the U.S. dollar was trading flat versus a basket of currencies. Gold for February inched down $0.50 to $1,405.10 an ounce.

Base-metals stocks may be under the buyers' radar as the price of copper climbed to a record amid demand recovery hopes.

Molybdenum miner Thompson Creek Metals may be in play after China said it is reducing the export quota of rare earths. Rare earths are essential to devices as varied as cellphones, computer drives and hybrid cars. Less rare earth metals available on the open market should mean better earnings for companies without export restrictions going forward.

In corporate news from Canada, Nunavut Iron Ore Acquisition Inc. has raised its offer for Baffinland Iron Mines to $1.40 per share, and increased the number of shares it's willing to purchase. Earlier this month, ArcelorMittal raised its offer to $1.25 per share from $1.10 per share.

Battery making company Electrovaya Inc. slipped into the red in the fourth quarter, posting a loss of $50,000 or $0.01 per share, compared to a profit of $549,000 or $0.01 per share in the same period a year-ago.

Agricultural chemicals company AgriTec Systems said it raised $1.01 million by privately placing 1.01 million units

Gold miner Visible Gold Mines said it raised $4.92 million by privately placing 6.15 million "flow-through" units.

Precious metals miner Williams Creek Explorations said it raised $1.03 million through a non-brokered private placement.

Junior oil firm Canacol Energy announced a $106 million capital budget in 2011 for exploration and development activities in Colombia, Guyana, and Brazil.

Strategic metals dealer Dacha Strategic Metals said it has acquired 12 tons of Heavy Rare Earth Elements for $3.5 million.

CCTV infra-red imaging and night vision cameras maker Cantronic Systems reported third-quarter net earnings of C$128,000 or C$0.002 per share, down from C$731,000 or C$0.009 per share last year.

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Banks, Construction Stocks Take French Market Up

The French market is rising moderately in afternoon trading Wednesday, led by banks and construction stocks. On a day of light economic data, sentiment was influenced by firm cues from Asia, although volumes were thin as many traders kept away from their desks ahead of the New Year.

In economic news, eurozone M3 money supply rose 1.9% year-on-year in November, the European Central Bank said. It was expected to rise 1.6%. In October, M3 money supply increased by a revised 0.9%.

After opening slightly higher at 3,870, the CAC 40 index has been witnessing gains. The index is currently adding 0.93%.

Media firm Vivendi is rising 1.7%. Oil giant Total is adding 1.2%, buoyed by crude prices that are around their two-year highs.

In construction-related stocks, Saint-Gobain is adding 1.7%. Builders Vinci and Bouygues are gaining 1.55% and 0.63%, respectively. Cement giant Lafarge is advancing 1.3%.

Lenders BNP Paribas, Natixis, Societe Generale and Credit Agricole are adding between 1% and 0.4%.

Carmakers Renault and Peugeot are up 0.9% each.

Those on the falling side include advertising firm Publicis Groupe, tire company Michelin and oil & gas services firm Technip.

Elsewhere in Europe, the UK's FTSE 100 is losing 0.41% and the German DAX is advancing 0.35%.

Across Asia/Pacific, major markets ended above the unchanged line. Japan's Nikkei 225 added 0.50%, Hong Kong's Hang Seng gained 1.54% and China's Shanghai Composite Index rose 0.68%. India's BSE Sensex and Australia's All Ordinaries advanced 1.15% and 0.07%, respectively.

In the U.S., futures point to a slightly higher open on Wall Street. In the previous session, the Dow gained 0.2% and the S&P 500 edged up 0.1%, while the Nasdaq declined 0.2%.

In commodities, crude for February delivery is slipping $0.50 at $90.99 per barrel and gold is declining $1.1 to $1404.5 a troy ounce.

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Indian Market Ends Near Day's High

After staying range-bound in recent sessions, the Indian market rose sharply on Wednesday, a day before the expiry of near-month derivative contracts. With firm global cues offering support, strong buying in heavyweight metal and banking shares along with consumer durable, FMCG and auto stocks lifted the benchmark 30-share Sensex up by about 230 points or 1.15% to a near one-and-half month high.

The broader Nifty climbed 64 points or 1.07% to 6,060. Second-line stocks also posted notable gains and in the broader market, the breadth was fairly positive, with 1782 gainers versus 1082 decliners on the BSE.

In the Sensex pack, ICICI Bank, Hindalco, ITC, HDFC, HDFC Bank, Sterlite and Hindustan Unilever led the market higher, rising between 1% and 3%. Carmaker Maruti Suzuki gained 1.30%, state-run lender SBI added 0.94%, oil explorer ONGC advanced 0.85% and property developer DLF closed up 0.74%. Bharti Airtel (up 3.45%) led the gains in the telecom sector. Utility vehicles manufacturer Mahindra & Mahindra gained 1.24% on the price hike buzz.

In the consumer durables sector, VIP Industries climbed nearly 9% amid huge volumes. Gitanjali Gems rallied 7.64% on reports of stake sale to private equity investors. Shares of state-run oil marketing companies such as BPCL, HPCL and IOC added around half a percent each ahead of an impending decision on diesel price hike this week.

IT stocks such as Infosys and TCS (up about half a percent each) underperformed, as the Indian rupee strengthened tracking gains in regional stocks markets and the dollar's sharp losses versus major currencies recently. Wipro eased 0.66% after it was reportedly asked to deposit Rs.24 crore in a tax dispute case.

MindTree jumped over 7% after it completed a restructuring of its wireless products business. Nitin Fire Protection Industries rallied 3.48% after U.S.-based Worthington Industries reportedly bought a 60% stake in its fully-owned subsidiary, Nitin Cylinders. State-run steelmaker SAIL added 2%, paring losses in the past four sessions.

Sugar stocks such as Balrampur Chini, Shree Renuka and Dhampur closed about 1%-2% higher on the back of rising sugar prices in international markets. Shares of liquor manufacturing companies such as Khoday India and United Spirits added a percent each on expectations of demand surge on the eve of the New Year. Gayatri Projects gained 1.42% and Maytas Infra added nearly 3% after their joint venture firm bagged a road contract from the government of Nagaland. Mukta Arts closed up 1.34% on expanding its film exhibition business. ABG Infralogistics rose 2.57% after announcing the schedule for its share buyback.

Elsewhere, the other Asian markets closed mostly higher on Wednesday, with Japan's Nikkei rising half a percent and Hong Kong's Hang Seng up 1.54%, as steady oil, copper and gold prices lifted commodity companies and signs of an uneven recovery in the world's largest economy suggested the Fed will hold its easy-money policy static until the last quarter of 2011. Chinese shares rose 0.68%, snapping a two-day fall.

China's central bank today raised its re-discount rate (interest rate on loans that it makes to commercial banks) to 2.25% from 1.8%, the first such change in two years, and increased the one-year re-lending rate by 52 basis points to 3.85% in an attempt to curb inflation and prevent asset bubbles.

European shares also edged higher in holiday-thinned trading and the Dow futures pointed to a higher start on Wall Street on Wednesday, as higher commodity prices and the dollar's broad weakness in recent days helped revive investor risk appetite ahead of the year-end.

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Euro Still In The Dumps As 2010 Winds Down

The euro remained under pressure on Wednesday, unable to rally versus the dollar while hitting a new record low versus its surging Australian counterpart.

The euro zone will focus on austerity in 2011, preferring to work toward fiscal stability rather than a robust economic recovery. A lack of economic growth will likely prevent the euro reclaiming its status as one of the world's more dependable assets.

Sovereign debt problems plagued the euro area in 2010, stripping the euro of its stature as a reliable reserve currency.

Austerity measures and controversial bailouts for Greece and Ireland helped to alleviate the threat of default, but borrowing costs remain high for many euro area members.

With no major economic data scheduled for the rest of the year, it is unlikely the euro will stage an eleventh hour rally.

The euro was stuck near $1.31 against the dollar, down more than 10 cents from where it began 2010. The low point was seen in June, when the euro tumbled to a 4-year low of $1.1805.

Soaring commodity prices have pushed the euro lower against resource-linked currencies. The euro hit a fresh record low of A$1.2926 against the Australian dollar this morning.The euro further weakened against the yen, slipping to Y107.70. In August, the euro hit a 9-year low of Y105.41.

Eurozone M3 money supply rose 1.9% year-on-year in November, the European Central Bank said Wednesday. It was expected to rise 1.6%. In October, M3 money supply increased by a revised 0.9%.

In the three months to November, M3 money supply was up 1.3% compared to the same period a year ago. Economists had forecast 1.2% increase.

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