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

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Stocks Showing Solid Gains In Mid-Morning Trading

Stocks are on the upside by solid margins in mid-morning trading on Thursday, following the day's better than expected reading on weekly jobless claims levels. While the major averages have come off of their best levels, they remain firmly positive.

The Dow is currently up 57.40 points or 0.6 percent at 10,444.41, the Nasdaq is up 15.46 or 0.7 percent at 2,244.33 and the S&P 500 is up 8.77 points or 0.8 percent at 1,107.64.

Before the start of trading, the Labor Department said that initial jobless claims fell to 451,000 in the week ended September 4th from the previous week's revised figure of 478,000. Economists had been expecting jobless claims to edge down to 470,000 from the 472,000 originally reported for the previous week.

With the bigger than expected decrease, jobless claims fell to their lowest level since falling to a nearly two-year low of 427,000 in the week ended July 7th, although they remain at a relatively high level.

Commenting on the data, Peter Boockvar, equity strategist at Miller Tabak, said, "Labor Day weekend may have had an impact on the seasonal adjustment but we'll have to see next week to what extent."

"Either way though, the market will take a downward move to the lowest since early July in light of the worrisome rise over the past month," he added.

A separate report from the Commerce Department said that the U.S. trade deficit narrowed to $42.8 billion in July from a revised $49.8 billion in June. The trade deficit had been expected to narrow to $47.3 billion from the $49.9 billion originally reported for the previous month.

In global economic news, the Australian Bureau of Statistics revealed that the Australian jobless rate unexpectedly declined to 5.1 percent in August from 5.3 percent in July.

On the corporate front, McDonald's (MCD) announced global comparable sales growth of 4.9 percent in August, with U.S. comparable sales increasing 4.6 percent and sales in Europe rising by 2.2 percent. Sales in the Asia/Pacific, Middle East and Africa rose 7.8 percent, with Japan, China and Australia leading the way.

After the markets closed for trading in the previous session, Men's Wearhouse (MW) said that its second quarter profit rose 8 percent from last year, helped by higher sales and improved margins. The company's quarterly earnings and sales came in above analysts' expectations. The company also provided an upbeat outlook for the third quarter.

Sector News

Banking stocks are among the morning's best performers, driving the Kbw Bank Index up by 2.5 percent. With the advance, the index has risen to a one-month intraday high.

Software stocks are also moving markedly higher, with the NYSE Arca Software Index rising by 1.7 percent to a six-week intraday high.

Oil service, healthcare provider, housing and health insurance stocks are also being buoyed by early buying, while moderate weakness is visible among railroad and gold stocks.

Notably, the Dow Jones Railroads Index is down by 0.5 percent, pulling back off of the more than two-month closing high set on Wednesday.

Stocks Driven By Analyst Comments

Chemicals firm Celanese (CE) is trading higher after being upgraded at Citigroup from Hold to Buy based on its growth in China. The stock is up by 1.3 percent after setting a two and a half month intraday high in earlier trading.

On the other hand, Tellabs (TLAB) is trading lower following a downgrade at Soleil from Buy to Hold based on eroding market share. Shares are currently down by 1 percent, pulling back further off of last week's one-month closing high.

Valspar (VAL) is also down after analysts at Citigroup downgraded the stock from Buy to Hold. The stock is posting a loss of 1.8 percent, slipping from the three-week high set late last week.

Other Markets

Overseas, stock markets in the Asia-Pacific region ended mostly higher on Thursday. Japan's benchmark Nikkei 225 Index rose by 0.4 percent, while Hong Kong's Hang Seng Index advanced by 0.8 percent.

The major European markets are also moving higher by varied margins. The U.K.'s FTSE 100 Index is up by 1.2 percent, while the French CAC 40 Index and the German DAX Index are up by 1 percent and 0.9 percent, respectively.

In the bond markets, treasuries are showing moderate weakness. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is trading at 2.713 percent, posting a gain of 5.9 basis points.

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TSX May Edge Up At Open Amid Mixed Data

Bay Street stocks may witness some early gains Thursday after an unexpected drop in U.S. weekly jobless claims fueled hopes the employment situation is improving for the world's largest economy.

On Wednesday, the S&P/TSX Composite Index lost 59.71 points or 0.49% to 12,042.26, easing for a second session.

The price of crude oil was ticking higher after the OPEC, in its monthly report released today, left its world oil demand forecast unchanged. However, traders were cautious ahead of official weekly crude oil inventories data from the EIA. Wednesday after the markets close, the API said US crude inventories fell by 7.30 million barrels last week, as against consensus estimates for a 1 million build in inventories. However, gasoline inventories rose by 654,000 barrels, belying analyst estimates for a draw down of 1.25 million barrels. Crude for October was up $0.19 to $74.86 a barrel.

The price of gold was holding onto its recent gains amid speculation that the European banks might struggle to raise the required additional capital and signs of economic slowdown in the U.S. Gold for December was down $2.80 to $1,254.70 an ounce.

In corporate news from Canada, drilling contract services provider Major Drilling swung to profit in first quarter, reporting net earnings of C$5.1 million or C$0.21 per share versus a loss of C$3.3 million or C$0.14 per share last year. The company increased its semi-annual dividend by 10% to C$0.22 per share.

Logistics technology solutions provider Descartes Systems Group reported improved second quarter net income of $2.02 million or $0.03 per share, compared to $812 thousand or $0.02 per share in the same quarter last year. Analysts were expecting the company to report $0.10 per share on revenues of $26.11 million.

Telecasting technology services provider Miranda Technologies acquired all of the outstanding shares of OmniBus Systems Ltd., an IT-based media management and delivery solutions for television and Internet broadcasters, from Palamon Capital Partners, a pan European private equity firm for C$48.7 million.

Communication equipments maker Evertz Technologies reported improved first quarter net income of C$20.6 million or C$0.28 per share, compared to C$17.1 million or C$0.23 per share in the year ago quarter.

Mineral properties explorer Cardero Resource said it has acquired an additional 2.38 million common shares of Wealth Minerals Ltd., a public company headquartered in Vancouver B.C, at C$0.60 per share.

Precious metals explorer Torex Gold Resources reported a wider third quarter loss of C$4.1 million or $0.01 per share compared with a net loss of C$0.14 million or $0.01 per share last year.

Mineral properties company Teck Resources said it plans to raise as much as $700 million of debt in two phases, mainly to fund 10.75% senior secured notes due 2019.

Xceed Mortgage swung to profit in third quarter, reporting net income of C$1.39 million or C$0.05 per share, compared to a loss of C$7.52 million or C$0.27 per share in the year ago quarter.

Integrated tour operator Transat A.T. Inc. reported lower third quarter net income of C$20.9 million or C$0.55 per share from C$31.0 million or C$0.94 per share a year ago.

Contract drug manufacturer Patheon Inc. reported a narrower third quarter loss of $3.0 million or $0.023 per share compared to $9.8 million or $0.106 per share last year.

In economic news, Statistics Canada said the New Housing Price Index decreased 0.1% in July following a 0.1% increase in June, recording its first decrease in 13 months. Year-on-year, the NHPI was up 2.9% in July following a 3.3% increase in June.

In another report, the agency said the nation's trade deficit with the world widened to C$2.7 billion in July from C$1.8 billion in June. Merchandise exports fell 0.7% to C$32.8 billion in July from $33.0 billion in June, while imports grew to $35.5 billion in July from $34.9 billion in June, recording it highest level since November 2008.

Meanwhile, the Canada Mortgage and Housing Corp. said Canadian housing starts fell 3% in August to a seasonally adjusted rate of 183,300 units from a downwardly revised 188,900 units in July. Analysts were expecting for 185,000 starts.

From the U.S., the Labor Department said that initial jobless claims fell to 451,000 in the week ended September 4, from the previous week's revised figure of 478,000. Economists were expecting jobless claims to edge down to 470,000 from the 472,000 originally reported for the previous week.

In another report, the U.S. Commerce Department said that the trade deficit narrowed to $42.8 billion in July from a revised $49.8 billion in June. Economists were expecting the deficit to narrow to $47.3 billion from the $49.9 billion originally reported for the previous month.

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Asian Markets End In Positive Territory

Asian markets open for trading on Thursday, ended in positive territory, except the Chinese market, taking cues from Wall Street where the major averages ended in positive territory with solid gains as European debt concerns eased considerably following auction of Portugal's sovereign bonds. Better than expected unemployment rate in Australia and bargain hunting at select stocks at lower levels helped the major markets end in positive territory, as concerns about double-dip recession fades and optimism about sustaining economic recovery, albeit at a slower pace, gains momentum.

In Japan, the benchmark Nikkei 225 Index rose 0.82%, or 73.79 points, to 9,098, while the broader Topix index of all First Section issues gained 5.85 points, or 0.71%, to 827.

On the economic front, results of a survey conducted by the Cabinet Office in Japan revealed that consumer confidence fell in August to 42.5 from 43.4 in July. The data further noted that households' consumer sentiment also deteriorated in August, to 42.4. Economists had expected the indicator to rise to 43.6 from 43.3 in the prior month. Among the sub indicators of households' consumer confidence, the index for overall livelihood slipped slightly to 43 from 43.2, while the income growth index stagnated at 41.5. The reading for employment came in at 40.1, down from 41.8 in July. At the same time, willingness to buy durable goods decreased to 45 from 46.7.

Rubber products were the major gainers in the market following sharp sell-off in the previous session. Bridgestone Corp. gained 2.23% and the Yokohama Rubber Co. rose 1.75%.

Iron & steel related stocks also ended higher on optimism about sustaining global economic recovery, albeit at a slower pace. JFE Holdings gained 1.78%, Nippon Steel rose 2.07%, Pacific Metals Co. urged up 3.47%, Kobe Steel climbed 3.33%, and Nisshin Steel Co. soared 4.14%.

Stocks pertaining to glass and ceramic sector also ended in positive territory. TOTO Ltd climbed 4.74%, NGK Insulators rose 1.91%, Asahi Glass Co., gained 2.34% and Tokai Carbon Co. advanced 0.80%.

Automotive stocks also ended in positive territory. Toyota Motor Corp. surged up 3.53%, Honda Motor advanced 1.24%, Hino Motors Ltd rose 1.58%, Nissan Motor Co. added 0.76% and Mazda Motor increased by 1.08%.

Real estate related stocks, however, bucked the trend and ended in negative territory with marginal losses. Mitsui Fudosan plunged 3.56%, Sumitomo Realty & Development fell 2.10%, Mitsubishi Estate shed 1.89% and Tokyu Land Corp. was down 1.19%.

In Australia, the benchmark S&P/ASX200 Index gained 45.00 points, or 0.99%, and closed at 4,582 points, while the All-Ordinaries Index ended at 4,621, representing a gain of 43.00 points, or 0.94%.

On the economic front, a report released by the Australian Bureau of Statistics revealed that unemployment rate in the country declined to a seasonally adjusted 5.1% in August, a decline of 0.2% from 5.3% reported for July. Most economists had forecast a decrease of 0.1% to 5.2% for the month. The report further revealed that the number of employed Australians increased by 30,900 in August. The rise in employment was driven by an increase in full-time employment, which was up 53,100, while part-time employment decreased by 22.100 people. The number of unemployed Australians decreased by 22,500 to 607,700.

Banking shares led the gains as concerns about European banks as well as debt eased considerably following strong demand for Portugal's bonds issue. ANZ Bank advanced 1.15%, Commonwealth Bank of Australia gained 1.37%, National Australia Bank climbed 3.73% and Westpac Banking increased 1.23%. Investment banker Macquarie Group was up by 1.70%.

Mining and metal stocks also ended in positive territory. BHP Billiton added 0.71%, Rio Tinto advanced 0.63%, Fortescue Metals gained 0.83%, Gindalbie Metals rose 0.55%, Iluka Resources climbed 3.13%, Mincor Resources increased by 1.12%, Murchison Metals surged by 5.57% and Oz Minerals edged up by 0.37%.

Insurance company AXA Pacific declined the most following ACCC's denial of permission for the proposed merger with National Australia Bank. The stock plunged 6.62%.

Mixed trading was witnessed among oil related stocks. Santos Ltd declined 6.98% after the company announced that it would sell 15% stake in Gladstone LNG project to Total SA for $650 million. Among the other energy related stocks, Woodside Petroleum added 0.52%, ROC Oil Ltd climbed 2.67%, Origin Energy edged up 0.07% and Oil Search Ltd gained 1.02%.

Momentum-based fund buying in heavyweight stocks and positive cues from global markets following a successful bond auction in Europe lifted the Indian market notably higher on Thursday ahead of the holiday weekend. Meanwhile, the market shrugged off data that showed food inflation rose for a second consecutive week. India's food inflation accelerated to 11.47% in late August versus 10.86% during the previous week, on the back of increase in prices of cereals, fruits, vegetables and milk, data released on Thursday showed, adding pressure on the Reserve Bank of India to raise interest rates at its review next week. The fuel price index rose an annual 12.71% during the week under review. Despite a bout of volatility, the 30-share BSE Sensex managed to rise about 133 points or 0.71% to 18,800, with 18 of its components ending in the green. The broader Nifty climbed 32 points or 0.57% to 5,640.

Among the other major markets open for trading, China's Shanghai Composite Index declined 38.94 points, or 1.44%, to 2,656, and Taiwan's Weighted Index slipped 15.77 points, or 0.20%, to close at 7,836. Singapore's Strait Times Index managed to end in positive territory with a gain of 10.86 points, or 0.36%, at 3,022. The market in Indonesia was closed for a public holiday.

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The major European averages are rising on Thursday, with the French CAC 40 Index and the German DAX Index advancing 1.16% and 0.82%, respectively, while the U.K.’s FTSE 100 Index is gaining 1.14%.

In a key central bank decision, the Bank of England left its key interest rate unchanged at a record low again and maintained the size of the quantitative easing at 200 billion pounds.

At the end of two-day rate setting meeting, the bank’s Monetary Policy Committee decided to retain the interest rate at 0.5%. The current rate is the lowest since the central bank was established in 1694. The decision came in line with economists' expectations.

U.S. Economic Reports

With the value of exports rising and the value of imports falling in the month of July, the U.S. trade deficit for the month narrowed by much more than economists had been expecting, according to a report released by the Commerce Department.

The Commerce Department said that the trade deficit narrowed to $42.8 billion in July from a revised $49.8 billion in June. The trade deficit had been expected to narrow to $47.3 billion from the $49.9 billion originally reported for the previous month.

In another potential sign of improvement in the beleaguered labor market, the Labor Department released a report showing that first-time claims for unemployment benefits fell by much more than expected in the week ended September 4th.

The report showed that initial jobless claims fell to 451,000 from the previous week's revised figure of 478,000. Economists had been expecting jobless claims to edge down to 470,000 from the 472,000 originally reported for the previous week.

The Energy Information Administration is scheduled to release its weekly petroleum inventory report for the week ended September 3rd at 10:30 AM ET. The report being released a day later than its customary release schedule of Wednesday due to Monday's public holiday.

Crude oil inventories rose by 3.4 million barrels to 361.7 million barrels in the week ended August 30th. Inventories of crude oil remained above the upper limit of the average range.

Meanwhile, gasoline inventories edged down by 0.2 million barrels but remained above the upper limit of the average range. Distillate stockpiles fell by 0.7 million barrels, remaining above the upper boundary of the average range. Refinery capacity utilization averaged 87% over the four weeks ended August 27th compared to 87.7% in the previous week.

Stocks in Focus

Shanda Interactive could be in focus after it reported that its second quarter non-GAAP earnings fell to 3.84 yuan or 56 cents per share from 6.40 yuan per share in the year-ago period. Revenues rose 10% year-over-year to $200.6 million. Analysts had estimated earnings of 51 cents per share on revenues of $196.48 million.

UAL is also likely to see some activity after its United Airlines unit reported that its consolidated load factor rose 0.6 points year-over-year to 86.7%. The company’s traffic rose 4.6% and its capacity increased 4.2%.

Shuffle Master could move in reaction to its announcement that its third quarter GAAP net income rose by a cent to 11 cents per share. The company reported adjusted earnings of 13 cents per share. Revenues rose 14% to $51.5 million. The consensus estimates had called for earnings of 12 cents per share on revenues of $49.69 million.

Men’s Warehouse could also be in focus after it reported second quarter adjusted earnings of 83 cents per share compared to 75 cents per share last year. Sales rose 2% to $537 million. Analysts estimated earnings of 77 cents per share on revenues of $535.01 million. For the third quarter, the company expects adjusted earnings of 40-47 cents per share. The consensus estimates call for earnings of 40 cents per share on revenues of $460.94 million.

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Dollar Firms Versus Sterling As BoE Maintains Interest Rate

The dollar was steady versus other majors Thursday in New York, pausing near a 15-year low against the yen. Another look at the struggling jobs market is due this morning, as the Labor Department releases its weekly jobless claims data at 8:30 am ET.

Economists expect jobless claims to decline to 470,000 for the week from 472,000 reported for the previous week. Claims remain extraordinarily high despite massive government spending and a tepid economic recovery from the worst recession in decades.

Meanwhile, the Bank of England left its key interest rate unchanged at 0.5 percent and maintained the size of the quantitative easing at GBP 200 billion.

The dollar rose to 1.5380 against the sterling ahead of the rate call, and moved sideways from there. With the advance, the dollar moved back toward a month and half high near 1.5300, set earlier this week.

The U.K.'s deficit on trade in goods widened to GBP 8.7 billion in July from a revised shortfall of GBP 7.5 billion in June, data from the Office for National Statistics showed Thursday.

The buck was stuck in neutral versus the euro, holding near 1.2725. The pair has shown little direction over the past month, ranging between 1.2600 and 1.2900.

The buck was little changed from the previous session versus the yen, staying very close to yesterday's 15-year low of 83.33. Its been a steady decline over the summer months for the dollar, as the yen became the world's preferred safe haven play.

The Organisation for Economic Co-operation and Development (OECD) slashed its global economic growth forecast on Thursday, and urged further government stimulus to bolster an increasingly fragile recovery.

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