US & World Daily Markets Financial Briefing 31-01-2011

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Stocks Experiencing Choppy Trading Early On

After failing to sustain an initial upward move, stocks have shown a lack of direction over the course of the first few minutes of trading on Monday. The major averages have pulled back off their highs for the young session, with the Nasdaq dipping below the unchanged line.

The initial strength in the markets came as traders picked up stocks at reduced levels following the sell-off that was seen on Friday. However, continued concerns about civil unrest in Egypt limited the upside for the markets.

While most of the major sectors are showing only modest moves, early strength is visible among natural gas stocks, which are moving higher along with the price of natural gas. Railroad, real estate, and oil stocks are also seeing moderate strength in early trading.

In economic news, the Commerce Department released a report showing that personal income increased by 0.4 percent in December, matching the upwardly revised increase seen in the previous month. The increase in income came in line with economist estimates.

The report also showed that personal spending rose by 0.7 percent in December following a downwardly revised 0.3 percent increase in November. Spending had been expected to rise by 0.5 percent compared to the 0.4 percent growth that had been reported for the previous month.

Additionally, the Institute for Supply Management - Chicago said its Chicago business barometer rose to 68.8 in January from 66.8 in December, with a reading above 50 indicating growth in Chicago-area business activity. Economists had expected the index to fall to a reading of 65.0.

Among the day's major corporate earnings reports, Exxon Mobil posted fourth-quarter net income of $1.85 per share compared to $1.27 per share notched a year earlier. On average, analysts expected earnings of $1.63 per share for the quarter.

Total revenues and other income for the latest quarter increased to $105.19 billion from $89.84 billion in the comparable period, topping forecasts for $99.11 billion.

Illinois Tool Works (ITW) reported fourth-quarter net income of $0.79 per share, just under expectations for $0.80 per share. Total revenues rose to $4.17 billion, higher than the $4.09 billion forecast on Wall Street. The company's first quarter earnings guidance was above Street view.

The major averages are currently turning in a mixed performance, with the Nasdaq posting a modest loss. While the Nasdaq is down 6.22 points or 0.2 percent at 2,680.67, the Dow is up 5.00 points or less than a tenth of a percent at 11,828.70 and the S&P 500 is up 1.82 points or 0.1 percent at 1,278.16.

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TSX May Open Flat As Economy Chugs Along In November

Bay Street stocks are poised for a mixed open Monday, following data showing the nation's economy grew faster than expected in November.

Meanwhile, the price of gold pared previous session's gains, even as crude oil continued to move higher.

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

Elsewhere, markets in the Middle East were sharply down amid turmoil in Egypt.

On Friday, the S&P/TSX Composite Index added 27.38 points or 0.20 percent to 13,437.58. Last week, the main index gained nearly 180 points or 1.35 percent.

Energy stocks may be in play after ExxonMobil reported quarterly earnings of $1.85 per share, beating consensus estimates for $1.63 per share this quarter.

The price of crude oil extended gains amid turmoil in Egypt. Crude for March was up $0.46 to $89.80 a barrel.

Meanwhile, the price of gold moved down, surrendering previous session's gains. Gold for April slipped $12.40 to $1,329.30 an ounce.

In corporate news from Canada, franchised and corporate restaurants operator Imvescor Restaurant Group slipped in to the red in fourth-quarter, reporting net loss of C$20.02 million or C$2.120 per share compared with a net income of C$11.34 million or C$1.550 per share a year ago.

Mexico focused gold miner Torex Gold Resources posted a wider fiscal 2010 net loss of C$16.4 million compared to a loss of C$1.0 million reported in year ago period.

Pharmaceutical and medical device company Angiotech Pharmaceuticals said Friday that the company and certain of its subsidiaries have voluntarily commenced insolvency proceedings.

Molybdenum miner Roca Mines reported a narrower first-quarter loss of C$1.33 million or C$0.01 per share compared with net loss of C$1.36 million or C$0.02 per share last year.

Sterilization technologies developer Seair Inc. reported a wider fiscal 2011 first quarter of C$584,850 from C$265,300 in the year ago quarter.

In economic news Statistics Canada said real gross domestic product rose 0.4 percent in November, double the rate of October's increase, despite a decline in manufacturing. Economists expected growth of 0.2-0.3 percent from the previous month.

Separately, the agency said the industrial product price index rose 0.7 percent in December, moving higher for a fifth month and topping market forecasts of a 0.6 percent gain. Raw materials prices were up 4.2 percent, beating estimates for a 4.0 percent gain.

From south of the border, the U.S. Commerce Department said personal income increased by 0.4 percent in December, in line with economists' expectations. Meanwhile, personal spending rose by 0.7 percent in December following a downwardly revised 0.3 percent increase in November. Spending had been expected to rise by 0.5 percent.

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French Market Slightly Up

The French market is marginally up in afternoon trading Monday, reversing earlier losses, amid concerns about the unrest in Egypt. Sentiment was influenced by weak cues from Asia and the previous session's discouraging trading on Wall Street.

In economic news, German retail sales dropped 0.3 percent month-on-month in December following the revised 1.9 percent decline in November, the Federal Statistical Office said. That was in contrast to economists' forecast for a 2.2 percent rise.

Eurozone inflation rose to 2.4 percent in January from 2.2 percent recorded in December, flash estimate from the Eurostat showed. Consumer prices rose more than the expected increase of 2.3 percent.

The CAC 40 index opened at 3,997, down from the previous close of 4,002, and has been seeing volatile trading. The index is currently adding 0.04 percent.

Grocery retailer Carrefour is gaining 1.9 percent and contact lens maker Essilor International is adding 1.4 percent. Department stores operator PPR is rising 1.1 percent.

Societe Generale is leading the losers by falling 2.25 percent. BNP Paribas, Credit Agricole and Natixis are losing between 0.7 percent and 0.35 percent.

Cement giant Lafarge is losing 2.2 percent. Builder Vinci is slipping 0.9 percent and Bouygues is dipping 0.2 percent. Steel maker Aperam is declining 1.9 percent.

Peugeot is losing 1.5 percent and Renault is marginally down. Airbus maker EADS is dropping 1.5 percent.

Elsewhere in Europe, the UK's FTSE 100 is losing 0.22 percent and the German DAX is retreating 0.16 percent.

Across Asia/Pacific, most major markets ended lower. Australia's All Ordinaries lost 0.46 percent, Japan's Nikkei 225 retreated 1.2 percent and Hong Kong's Hang Seng dipped 0.72 percent. However, China's Shanghai Composite Index gained 1.35 percent.

In the U.S., futures point to a slightly higher open on Wall Street. In the previous session, the Dow dropped 1.4 percent, the Nasdaq fell 2.5 percent and the S&P 500 slid 1.8 percent.

In commodities, crude for March delivery is up $0.32 at $89.66 per barrel and gold is losing $11.8 at $1329.9 a troy ounce.

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Indian Market Ends Off Day's Low

The Indian market fell for a fifth consecutive session on Monday, extending last week's sell-off, as risk averse investors moved to the sidelines fearing that the unrest in Egypt could hinder the global economic recovery. That said, the day's upbeat report on December infrastructure sector output and an upward revision to India's FY10 GDP estimate by the government to 8 percent from 7.4 percent helped limit the loss.

After falling to a five-month low of 18,038 early in the session, the benchmark 30-share Sensex cut its intra-day loss significantly before ending down 68 points or 0.37 percent at 18,328, with 17 of its components declining. Likewise, the 50-share Nifty closed off the day's low at 5,506, down about 6 points or 0.11 percent from its previous close.

Realty, FMCG, telecom, IT, metal, auto and banking stocks bore the brunt of the selling, while capital goods, power, consumer durable and oil/gas stocks saw selective buying. In the broader market, gainers outpaced decliners in the ratio of 1.4:1 on the BSE.

Among heavyweights, Jaiprakash Associates led the decliners with a 4.69 percent loss despite posting healthy quarterly earnings. FMCG player ITC lost 3.18 percent, mortgage lender HDFC fell 2.73 percent, telecom giant Bharti Airtel declined 2.61 percent and software exporter TCS ended down 2.15 percent.

Reliance Infrastructure (down 2.31 percent), Reliance Communication (down 2 percent), Tata Power (down 1.97 percent), Infosys (down 1.80 percent), Sterlite Industries (down 1.80 percent) and Hero Honda Motors (down 1.63 percent) were the other prominent losers.

On the positive side, ONGC, which delivered stellar quarterly results,climbed 3.69 percent. BHEL (up 2.98 percent), Hindalco (up 2.73 percent), Larsen & Toubro (up 2.19 percent), Mahindra & Mahindra (up 2.18 percent), Maruti Suzuki (up 1.56 percent) and SBI (up 0.86 percent) were the other prominent gainers.

Siemens climbed over 17 percent to Rs.853.50 after its German parent said it would buy an additional 19.82 percent stake in its Indian arm at Rs.930 a share. HCL Infosystems advanced 3.58 percent on bagging a Rs.250 crore contract from state-run BSNL. Dr Reddy's Laboratories added 3.72 percent after a U.S. district court allowed the company to sell a generic version of Sanofi-Aventis's anti-allergy drug, Allegra D-24.

MindTree plunged 5 percent after Ashok Soota, co-founder and executive chairman of the mid-tier IT company, resigned from the company. Indian Hotels (down 2.29 percent), Hotel Leela Venture (down 2.88 percent) and Colgate Palmolive (down 2.29 percent) closed subdued on disappointing results.

Telecom stocks closed subdued after telecom minister Kapil Sibal said the government would make a directional shift from past practice and bring a fresh policy regarding spectrum. Public sector lenders such as Central Bank of India, Andhra Bank and Canara Bank rose between 1 percent and 7 percent after announcing better-than-expected quarterly results. Aviation stocks such as Kingfisher and JetAirways plunged around 5 percent each in view of soaring crude oil prices which may result in a hike in jet fuel prices.

In economic news, India's output of the six core infrastructure industries -crude oil, petroleum refinery products, coal, electricity, cement and finished steel — rose a healthy 6.6 percent in December 2010 versus a 6.2 percent expansion in December 2009 and 2.7 percent growth charted in the previous month, government data released today showed, raising expectations for higher industrial output numbers for December. The core industries account for 26.68 percent of the nation's total factory output.

Elsewhere, the other Asian markets, barring Chinese stocks, closed mostly lower on Monday, as concerns that deadly protests in Egypt could spark instability in the Middle East and North Africa prompted investors to flee to safe-haven assets such as the U.S. dollar, yen and government bonds.

However, with investors steeping up buying ahead of the long Lunar New Year holidays that start later this week, China's Shanghai Composite index ended up 1.35 percent.

The European averages such as France's CAC, Germany's DAX and Britain's FTSE were down about 0.7 percent each in early trading and trading in the U.S. index futures suggested the Dow could fall 30 points at the opening bell on Monday. Europe's benchmark Brent crude prices were just short of $100 a barrel on expectations that global supply of crude oil may be hit.

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Dollar Falls As Euro Zone Inflation Heats Up

The dollar went back on the defensive against the euro Monday morning, giving back its gains from the previous session amid the release data confirming that euro zone inflation is heating up.

Policy makers at the European Central Bank have insisted that price stability is their primary concern, meaning that an interest rate hike may on its way sooner than forecast.

On the flip side, the Federal Reserve in the U.S. is widely expected to keep interest rates at a record low near zero for the rest of 2011.

The euro is likely to strengthen if the interest rate gap widens, even as the euro area struggles with sovereign debt problems on its periphery.

Eurozone inflation rose further in January, staying above the European Central Bank's target for the second straight month.

The harmonized index of consumer prices, or HICP, climbed 2.4% year-on-year, faster than the 2.2% rise in December, flash estimate from the European Union statistical agency Eurostat showed Monday. Economists had expected a rate of 2.3%.

The dollar dropped to $1.3685 versus the euro, down from $1.3570 last night. With the loss, the dollar edged back toward last week's 2-month low of $1.3757.

There was little movement versus other major currencies. The buck edged a hair below parity versus its Canadian counterpart, and was stuck near Y82 against the yen.

The dollar barely budged at CHF 0.94 versus the Swiss franc, staying near a recent record low of CHF 0.9299.

Looking at today's economic calendar from the U.S., the Bureau of Economic Analysis will release its personal income & outlays report for December at 8:30 AM ET. Economists predict that the report might show that personal income rose 0.4% and personal spending increased 0.5% in the month.

The results of the Institute of Supply Management-Chicago's business survey for January will be released at 9:45 a.m. ET. Economists expect the business barometer index based on the survey to remain unchanged at 65.

In news out of Asia, industrial production in Japan rose a seasonally adjusted 3.1 percent in December compared to the previous month, the Ministry of Economy, Trade and Industry said in a preliminary report on Monday, rising for the second straight month.

That beat forecasts for an increase of 2.8 percent following the 1.0 percent rise in November.

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