US & World Daily Markets Financial Briefing 30-09-2010

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Decline in Jobless Claims May Bring Relief to Markets

The major U.S. index futures are pointing to a lower opening on Thursday, with traders expected to heave a sigh of relief over jobless claims declining in the recent reporting week. The modest upward revision to second quarter GDP growth may also serve as a morale booster. A private sector manufacturing reading to be released later in the day may also have an impact on the markets. That said, big gains are unlikely, as traders look ahead to the national manufacturing index to be released tomorrow.

U.S. stocks showed a lackadaisical performance throughout Wednesday’s session, as traders had few catalysts to digest. The major averages opened lower and languished below the unchanged line for the better part of the session before closing on a modestly negative note. The lack of clarity on the economic environment and recent sharp gains that took the averages to 4-1/2 month highs helped to keep sentiment subdued.

The Dow Industrials ended down 22.86 points or 0.21% at 10,835 and the S&P 500 Index fell 2.97 points or 0.26% to close at 1,145, while the Nasdaq Composite ended 3.03 points or 0.13% lower at 2,377.

Twenty-two of the thirty Dow components closed lower, with Travelers Co. (TRV), JP Morgan Chase (JPM), Intel (INTC), DuPont (DD), American Express (AXP), Bank of America (BAC) and Alcoa (AA) receding over 1% each. Meanwhile, Boeing (BA) and Hewlett-Packard (HPQ) rose solidly.

Among the sector indexes, the Philadelphia Housing Sector Index fell close to 1%, while the Philadelphia Oil Service Index gained 2.20% and the NYSE Arca Computer Hardware Index climbed 1.37%.

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Crude oil futures are rising $0.81 to $78.67 a barrel after advancing $1.68 to $77.86 a barrel on Wednesday. The previous session's rally came amid the release of the oil inventory report, which showed that crude oil inventories fell by 0.5 millions barrels to 357.9 million barrels in the week ended September 24th. Inventories were above the upper limit of the average range.

Gasoline stockpiles fell by 3.5 million barrels but remained above the upper limit of the average range. Distillate fuel inventories also fell, dropping by 1.3 million barrels, although they remained above the upper boundary of the average range. Refinery capacity utilization averaged 85.8% over the four-weeks ended September 24th compared to 87.8% in the previous week.

Gold futures are currently climbing $4.40 to $1,314.70 an ounce. In the previous session, the precious metal climbed $2 to $1,310.30 an ounce.

On the currency front, the U.S. dollar is trading at 83.326 yen compared to the 83.7005 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is currently valued at $1.3646 compared to yesterday's $1.3626.

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The major Asian markets ended Thursday's session mixed, with the Japanese, Hong Kong, Australian, Singaporean, Taiwanese and New Zealand markets closing to the downside, while the Malaysian, South Korean, Indonesian, Indian and Chinese markets ended higher.

Japan's Nikkei 225 Index showed some tentativeness in early trading before declining steadily over the course of the session to close notably lower. The index closed down 190.03 points or 1.99% at 9,369.

A majority of stocks declined in the session, with Furukawa Electric, J Front Retailing, Meidensha, Mitsumi Electric, Mitsui & Co., Mitsui Mining & Smelting, Nisshin Steel, Shin-Estu Chemicals, Shinsei Bank and Taiheiyo Cement among the notable decliners.

Japan's industrial output fell 0.3% month-over-month in August, according to a report released by Japan's Ministry of Economy, Trade and Industry. Economists had estimated a 1.1% increase for the month. A separate government report showed that housing starts rose 20.5% year-over-year following a 4.3% increase in the previous month. Economists expected a more modest 10.2% increase.

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After seeing steep declines in the morning on Thursday, the major European markets have moved back into positive territory. The U.K. FTSE 100 and the German DAX Index are currently rising by 0.57% and 0.44%, respectively, while the French CAC 40 Index is moving up 0.02%.

In economic news, the Nationwide Building Society released its house price survey, showing that U.K. house prices rose 0.1% month-over-month in September following a 0.8% drop in August. Economists had expected a 0.3% decline. Annually, house prices rose 3.1% in September, slower than the 3.9% increase in the previous month.

Meanwhile, consumer sentiment in the United Kingdom deteriorated more than expected in September, clouding the prospects for household spending in the coming months. The GfK NOP said its consumer confidence index shed two points to -20. Economists were looking for a score of -19. The reading is four points lower than the same month last year. The slump followed a strong rebound in the previous month. In August, the index jumped to -18 from -22 in July, marking the first increase since February.

French statistical agency INSEE stated that its producer price index for France rose 0.1% month-over-month, slower than the 0.2% increase in the previous month. Economists had expected a 0.3% increase.

Separately, German Federal Labor Agency reported that the number of unemployed individuals persons in Germany fell by 40,000 in September following a 20,000-person drop in August. The decline was bigger than the 20,000-person drop expected by economists. Meanwhile, the unemployment rate eased one-tenth of a percentage point to 7.5%.

A flash estimate released by Eurostat showed that the euro area’s annual inflation rate rose to 1.8% in September from 1.6% in August. The increase was in line with expectations.

In a worrisome development, ratings agency Moody's downgraded Spain's sovereign bond rating by one notch to Aa1 from its top rating of 'AAA.' The agency cited a worsening financial situation and weak economic prospects for the action. Moody's also blamed the country's worsening debt affordability and significant borrowing requirements. The outlook on the Ratings was maintained as stable.

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Western Union (WU) could react to its announcement that it expects third quarter revenue growth of 1%, while analysts estimate revenues to decline 0.40%. The company also reaffirmed its guidance for fiscal year 2010.

Oplink Communications (OPLK) may see buying interest after Standard & Poor's announced that the company will replace Landry's Restaurants (LNY) in the S&P SmallCap 600 Index after the close of trading on October 6th.

YRC Worldwide (YRCW) is expected to react to its announcement that its board has approved a tentative agreement with the International Board of Teamsters. In turn, the Teamsters have approved submitting the tentative agreement to the company's Teamster represented employees for ratification. Additionally, the company announced that it plans to amend its certificate of incorporation on September 30th, 2010 to implement a reverse stock split with a ratio of 1:25.

Baxter International (BAX) is likely to see some activity after it reported that it has announced the first approval of PREFLUCEL by the Austrian Agency for Health and Food Safety.

Arthur J. Gallagher (AJG) may also be in focus after it announced that its subsidiary Gallagher Bassett Services has signed an agreement to buy substantially all the third party administrator assets and managed service operations of GAB Robins North America and its subsidiary MedInsights. The company noted that the deal would generate $45 million to $50 million in annualized revenue.

Worthington (WOR) is likely to move in reaction to its announcement that its first quarter earnings rose to 30 cents per share from 8 cents per share last year. Net sales rose to $616.8 million from the year-ago's $417.5 million. Analysts estimated earnings of 24 cents per share on revenues of $563.09 million.

Wal-Mart (WMT) may also see some activity over the announcement of the appointment of Charles Holley as its CFO. Holley will succeed Tom Schoewe and will assume office on November 30th.

Stericycle (SRCL) is also likely to be in focus after it announced a deal to buy Healthcare Waste Solutions for $245 million in cash, subject to various adjustments, including a reduction of Healthcare's indebtedness as of the closing date.