US & World Daily Markets Financial Briefing 08-11-2010

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Stocks Giving Back Ground In Early Trading

After seeing considerable strength last week, stocks moved back to the downside at the start of trading on Monday. The major averages all slipped into negative territory after ending Friday's trading at their best closing levels in over two years.

Profit taking contributed to the initial weakness among stocks, with traders cashing in on the recent strength in the markets amid a light news day. Following the slew of news last week, some traders may stay on the sidelines to digest the markets' recent performance.

Amid today's corporate news, McDonald's Corp. reported global sales growth at locations open for at least a year of 6.5 percent in October, which was slightly less than expected by Wall Street analysts.

U.S. comparable sales grew 5.6 percent for the month, as the popularity of the featured core products drove monthly growth. In Europe, revenues rose by 5.8 percent, while sales rose by 5.3 percent in the Asia/Pacific, Middle East and Africa.

In earnings news, food wholesaler Sysco posted first-quarter net income of $0.51 per share, in-line with Wall Street expectations. Sales for the quarter came in at $9.75 billion, an increase of 7.4 percent from the same period last year and higher than forecasts for $9.56 billion.

While selling pressure has remained relatively subdued in early trading, moderate weakness is visible among airline, defense, and housing stocks. Nonetheless, most of the major sectors are showing only modest moves.

The major averages have moved off their lows for the young session but currently remain stuck in the red. The Dow is currently down 45.34 points or 0.4 percent at 11,398.74, the Nasdaq is down 3.92 points or 0.2 percent at 2,575.06 and the S&P 500 is down 3.28 points or 0.3 percent at 1,222.57.

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TSX May Open Flat Amid Mixed Cues

Canadian stocks are poised for a lackluster open Monday ahead of a less eventful week, with a very light economic calendar. Meanwhile, easing commodities prices might weigh on trader sentiment.

Commodities witnessed a decent run up last week, with gold settling at a record high and crude oil gaining nearly 7%.

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

On Friday, the S&P/TSX Composite Index advanced 46.31 points or 0.36% to 12,925.11, its fresh 2-year peak.

The price of crude oil edged down as traders await for fresh triggers. Crude for December moved down $0.27 to $86.58 a barrel.

The price of gold edged down Monday morning amid a rebounding U.S. dollar. Last week, gold settled at a record high of $1,397.70, gaining $40 as the U.S. dollar weakened after the Federal Reserve announced plans to infuse $600 billion in a phased manner into the economy to spur growth. Gold for December was down $6.20 to $1,391.50 an ounce.

In an attempt to spread wings in the Asia-Pacific region, RBC acquired Fortis Wealth Management Hong Kong Ltd., a wholly owned subsidiary of Fortis Bank.

Information technology services provider MacDonald Dettwiler said it would sell its property information business to private equity firm TPG Capital for C$850 million. The company also announced a dividend policy of $1 per share from operating cash to be paid in two equal installments on or about March 31 and September 30, commencing in 2011.

Copper miner Equinox Minerals swung to profit in third quarter, reporting net income of $71.15 thousand or $0.10 per share compared to a loss of $56.27 thousand or $0.08 per share in the same quarter last year. Copper production grew 37% to 38,445 tonnes or 84.76 million pounds from the prior-year quarter, the company said.

Food products company Dominion Citrus Income Fund slipped into the red, reporting third-quarter net loss of C$487 thousand or C$0.02 per share, compared to income of C$1.88 million or C$0.09 per share in the same quarter last year.

Residential real-estate services provider Brookfield Real Estate Services Fund posted decline in third-quarter profit at C$2.02 million or C$0.21 per unit from C$2.23 million or C$0.23 per unit prior year. The Fund declared a cash distribution of $0.117 per unit for the month of November 2010

Asset management company Dundee Corp. acquired 440,860 flow-through common shares of Sabina Gold & Silver Corp. at a price of $5.35 per share, in a brokered and non-brokered private placement.

Stainless steel company Tree Island Wire Income Fund reported a wider third quarter loss of C$4.9 million or C$0.21 per share for the quarter, compared to a net loss of C$1.6 million or C$0.07 per share in the year-ago period. The year-ago period results included a non- recurring gain on the sale of surplus land of $5.4 million.

Aerospace industry products maker General Donlee Income Fund reported higher third quarter profit of C$1.4 million or C$0.262 per unit compared to C$0.2 million or C$0.040 per unit in the year-ago period.

Oil and gas industry services provider Wenzel Downhole Tools turned to profit, reporting third quarter net earnings of C$1.58 million or C$0.05 per share, compared to a loss of C$843 thousand or C$0.03 per share last year.

Oilfield services contractor Ensign Energy Services reported an 82% growth in profit for the third quarter. Third quarter net income was $30.7 million $0.20 per share, up from $16.9 million $0.11 per share last year.

GPS products company Hemisphere GPS reported a narrower third quarter net loss of $1.97 million or $0.04 per share compared to net loss of $3.76 million or $0.07 per share in the year-ago period, with the agriculture segment helping total revenue grow by 46%.

Philippines based mineral exploration company Crazy Horse Resources said it has received the conditional approval of the TSX Venture Exchange to the complete the acquisition of a 100% interest in the Taysan Copper-Gold Porphyry Project in Philippines consisting of two exploration permits and three exploration permit applications.

In economic news, the Canada Mortgage and Housing Corporation said the seasonally adjusted annual rate of housing starts fell to 168,000 units in October, down from the revised185,000 units. Economists were expecting housing starts to decline to 180,000 units in October.

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French Market Modestly Down

The French market is modestly down in afternoon trading Monday, following a strong rally last week. Utilities were under pressure, while banks were mostly higher.

Crude for December delivery is dropping $0.19 at $86.66 per barrel and December gold is sliding $5.5 at $1392.2 an ounce.

In economic news, Germany's trade surplus widened in September as exports increased, a report by the Federal Statistical Office showed. The trade surplus increased to EUR 16.8 billion in September from EUR 9 billion in the previous month. Economists had expected a surplus of EUR 12 billion. The figure was also bigger than EUR 11.5 billion recorded a year ago.

German industrial production fell 0.8% month over month in September, the Federal Ministry of Economics and Technology said. Following a 1.5% rise in August, economists were looking for 0.4% growth for September.

Switzerland's seasonally adjusted jobless rate dropped to 3.6% in October from 3.7% in September, in line with economists' expectations, the State Secretariat for Economic Affairs said. The number of unemployed was 143,050, down from 145,777 in the preceding month.

Meanwhile, market research group Sentix said Euro area investor confidence, which measures the level of investors' confidence in the eurozone economic activity, improved sharply in November, exceeding forecast. The investor sentiment index rose to 14 from 8.8 in October. The indicator stayed above the expected score of 10.

The CAC 40 opened at 3,916 and has been trading in the range of 3,897- 3,918. The index is currently losing 0.12%.

Telecom equipment maker Alcatel Lucent is sliding 2.7% reportedly on an analyst downgrade. Machinery firm Alstom is declining 2.3%.

Water utility Veolia Environnement is losing 1.2% and peer Suez Environnement is dipping 0.8%. Electric utility EDF is down 1.1%.

Lenders BNP Paribas, Societe Generale and Natixis are adding between 0.8% and 0.1%. Credit Agricole is down 0.1%.

Steel giant ArcelorMittal is advancing 1.4% and cement manufacturer Lafarge is gaining 1.3%. Carmakers Renault is rising 1.2% and Peugeot is marginally up.

Elsewhere in Europe, the UK's FTSE 100 is losing 0.33% and the German DAX is declining 0.12%.

Most Asian markets closed higher. China's Shanghai Composite Index gained 1%, Hong Kong's Hang Seng added 0.35% and Japan's Nikkei 225 climbed 1.1%. However, India's BSE Sensex and Australia's All Ordinaries dropped 0.4% and 0.7%, respectively.

In the U.S., futures point to a lower open on Wall Street. In the previous session, the Dow and the Nasdaq edged up around 0.1% each, while the S&P 500 rose 0.4%.

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Indian Market Eases From Record High

The Indian market ended Monday's session notably lower, with profit taking following a sharp rally in the past few sessions, weighing on sentiment.

Financials like HDFC Bank, SBI, HDFC and ICICI Bank, technology stocks like Infosys and Wipro, and auto makers like Mahindra & Mahindra, Maruti Suzuki and Hero Honda Motors came under selling pressure, while select metal stocks like Sterlite, Tata Steel, cement maker ACC, infra firm Jaiprakash, Tata Motors and Hindustan Unilever showed significant strength. Reliance Infrastructure, DLF and Reliance Industries also ended up about half a percent each.

The 30-share BSE Sensex, which ended at a record high of 21,005 during the Muhurat session on Friday evening, lost about 150 points or 0.73% today to close at 20,852. The broader Nifty ended down 39 points or 0.62% at 6,273.

However, the BSE mid-cap and small-cap indexes closed mostly unchanged. In the broader market, declining shares outpaced gaining ones by 1520 to 1451 on the BSE.

Coal India, which gained 42% on its debut last week, plunged 5.49% on profit taking. Power Grid Corporation of India fell 3.58% to Rs.98.35 after the state-run transmission company fixed the price band of its upcoming follow-on public offering at Rs 85-90 a share. SBI declined almost 2% amid reports that it may acquire a second bank in Indonesia.

Cement maker Ambuja Cement, which recently said its cement production rose 16% in October, jumped 7.73%. Drugmaker Glenmark Pharmaceuticals rallied 3.56% after it completed phase-III trials for its crofelemer drug. Delta Corporation (up 2.30%), IFCI (up 4.17%) and Orchid Chemicals (up 3.53%) closed firm on hectic volumes.

Reliance Power, which has placed a $750 million order with U.S.-based General Electric to procure gas turbines for its power plant in Andhra Pradesh, climbed 4.27%. Mahindra Satyam advanced 3.41% ahead of its half-yearly results due next week.

HCL Technologies declined 1.76% after it signed a deal with Novotech, the largest independent clinical research organization in Australia. Shares of state-run oil marketing companies came under significant selling pressure, as crude futures hovered near a two-year high. BPCL fell 2.73%, HPCL tumbled 3.81% and IOC ended down 2.56%.

Jain Irrigation Systems rose 2.94% on posting a 46% rise in quarterly net profit. Aban Offshore added 0.91% after it posted a modest 5% rise in its second-quarter consolidated net profit. Megasoft hit the 5% upper circuit limit after it concluded a deal with HTC Global Services (India) for selling its land and building at Begumpet, Hyderabad.

Sugar stocks were in demand as raw sugar futures settled at a 30-year high on Friday. Bajaj Hindusthan (up 6.67%), Balrampur ( up 6.69%), Dhampur ( up 9.11%) and Shree Renuka (up 4.83%) were some of the prominent gainers.

Elsewhere, most Asian stocks rose on Monday, reversing early losses, with solid jobs data from the U.S. and higher commodity prices lifting sentiment. However, a little bit of profit taking following last week's strong gains and concerns over budget woes in Greece, Ireland and Portugal limited the upside.

However, European stocks were subdued in early trading, dragged down by miners, and the U.S. index futures pointed to a slightly lower open on Wall Street Monday. The dollar rose against major rivals today, as investors covered short positions on the back of improving jobs data from the world's largest economy.

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Dollar Gains On Euro As Focus Turns To G20

The dollar continued to fight back against the euro Monday morning, as the markets looked ahead to this week's gathering of world leaders at the G20 Summit in South Korea.

Volatility in the currency markets have become a focal point of foreign policy, with many nations seen as deliberately weakening their currencies to give their exporters a competitive advantage.

President Barack Obama will join leaders from the developed and developing world on Thursday and Friday in Seoul.

Last week, the Federal Reserve announced an additional $600 billion in asset purchases to support the economy, but because the size and scope of the move was already priced in, the dollar has managed to stabilize over the past few days, particularly against the euro.

With little economic data to chew on today, traders will focus on a pair of speeches from officials of the Federal Reserve.

Federal Reserve Bank of St. Louis President James Bullard speaks on monetary policy and inflation, while Richard Fisher of the Dallas Fed will discuss the health of the nation's economy.

The dollar rose to $1.39 versus the euro -- its highest level in a week. With the advance, the dollar moved away from a recent 10-month low of $1.4281.

Gains were more muted against the sterling, with the dollar improving to $1.6120 from last week's 10-month low near $1.63.

The dollar was just above parity against the Canadian loonie, and was hovering around Y81 versus the yen.

The dollar has found a measure of support since hitting a 15-year low of Y80.23 on Halloween.

The Japanese government intervened only once in the currency markets to weaken the yen in September, official data showed on Monday.

The Ministry of Finance said it sold 2.1 trillion yen for the U.S. dollar on September 15. That was the first intervention by Japanese authorities in the currency markets in over six years.

Japan's central bank on Monday downgraded its view of the economy amid stagnating exports and weakening global demand.

The Japanese recovery is likely to proceed at a "slower pace for some time," the Bank of Japan said, cutting last month's assessment that the recovery should continue at a moderate pace.

In other economic news from around the globe, Euro area investor confidence improved sharply in November, exceeding forecast, results of a survey showed Monday.

The investor sentiment index rose to 14 from 8.8 in October, market research group Sentix said this morning.

German industrial output dropped 0.8% month-on-month in September, according to a report from the Federal Ministry of Economics and Technology. Following a revised 1.5% rise in August, economists were looking for 0.4% growth for September.

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