US & World Daily Markets Financial Briefing 09-12-2010

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Drop In Jobless Claims Leads To Initial Strength For Stocks

With traders reacting positively to a bigger than expected drop in weekly jobless claims, stocks moved higher at the start of trading on Thursday. The major averages have given back some ground since then but currently remain in positive territory.

The initial strength in the markets came after the Labor Department released a report showing that initial jobless claims fell to 421,000 in the week ended December 4th from the previous week's revised figure of 438,000.

Economists had been expecting jobless claims to slip to 429,000 from the 436,000 originally reported for the previous week.

At 10:00 a.m. ET, the Commerce Department will release its wholesale inventories report for October. Economists expect wholesale inventories at the end of October to show a 0.7 percent increase following an unexpected 1.5 percent increase recorded in the previous month.

In economic news overseas, the Cabinet Office in Japan revealed that its economy expanded by 1.1 percent in the third quarter of 2010, just above economist forecasts for a 1.0 percent increase. The number was also higher than the 0.9 percent preliminary number.

Members of the Bank of Korea monetary policy board voted to hold interest rates at the current level of 2.50 percent, in line with forecasts.

The bank was widely expected to keep rates unchanged to help soothe investors, particularly in light of the geopolitical tensions on the Korean peninsula and the lingering debt concerns in Europe.

Meanwhile, technology integration specialist SAIC Inc. (SAI) said that its third quarter profit rose 27 percent from last year, driven by strong program execution and improved returns on fixed-price contracts. The company's quarterly earnings also came in above analyst expectations.

After helping to lead the markets higher in the previous session, banking stocks are seeing further upside in early trading. The Kbw Bank Index is currently up 1.5 percent, rising to a four-month intraday high. Networking, gold, and brokerage stocks are also seeing early strength, but buying interest is subdued.

The major averages have moved further off their highs in the past few minutes but are currently holding on to modest gains. The Dow is up 5.18 points or 0.1 percent at 11,377.66, the Nasdaq is up 8.33 points or 0.3 percent at 2,617.49 and the S&P 500 is up 3.34 points or 0.3 percent at 1,231.62.

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TSX Poised For Higher Open - Canadian Commentary

Toronto stocks may edge up at open Thursday after leveling off from their 2-year peak in the past two sessions.

Cues from the global equity markets were encouraging as Asian stocks moved higher after Japan revised up its economic growth estimates and Australia reported lower unemployment. Meanwhile, European stocks were trading firm.

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

On Wednesday, the S&P/TSX Composite Index lost 98.67 points or 0.74% to 13,152.00.

The price of crude oil moved up after falling in the previous session on worries over further monetary tightening measures by the China. Crude for January was up $0.54 to $88.82 a barrel.

The price of gold was flat after falling for the past two sessions, with gold for February edging up $3.10 to $1,386.30 an ounce.

In corporate news from Canada, athletic apparel company lululemon athletica inc. reported third-quarter net income of $25.7 million or $0.36 per share, up from $14.07 million or $0.20 per share last year. Analysts were expecting the company to report net earnings of $0.25 per share. The company guided net revenue to be in the range of $210 million to $215 million and earnings per share are expected range between $0.46 to $0.48 for the quarter. Analysts expect the company to earn $0.41 per share, on revenues of $201.25 million.

Kirkland Lake Gold swung to profit in second quarter, reporting net income of C$8.56 million or C$0.13 per share compared with a restated loss of C$7.27 million or C$0.12 per share last year. Analysts were expecting the company to report earnings of C$0.10 per share this quarter. Looking ahead, the company expects to meet its fiscal 2011 gold production target of 90,000 to 100,000 ounces, with 24,000 to 30,000 ounces expected to be mined in the coming quarter.

Cenovus Energy said it will invest about $2 billion into its oil sands projects in 2011. Mineral explorer Centamin Egypt said it would place 51.5 million shares to institutional investors through BofA Merrill Lynch and Stifel, Nicolaus & Company, Inc.

Coal mining company Sidon International Resources Thursday said it has acquired an additional property in the region of its ongoing drilling project on its MEG Property southeast of Morogoro in east central Tanzania for $5 million and issuing 10 million shares.

Steel fabrication services provider ADF Group reported lower third quarter net earnings of C$630,000 or C$0.02 per share, down from C$1.38 million or C$0.04 per share last year.

Fund management company Fiera Sceptre said its fourth-quarter net earnings declined to C$91,400 or C$0.006 per share from C$527,000 or C$0.038 per share last year.

In economic news, Statistics Canada said its New Housing Price Index rose 0.1% in October following a 0.2% advance in September. The result was in line with economist estimates.

From the U.S., the Labor Department said initial jobless claims fell to 421,000 in the week ended December 04 from the previous week's revised figure of 438,000. Economists had expected jobless claims to slip to 429,000 from the 436,000 originally reported for the previous week.

Earlier today, the Bank of England held its interest rates steady at 0.5% and decided to maintain the stock of asset purchases financed by the issuance of central bank reserves at GBP 200 billion.

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French Stocks Rise, Led By Banks

The French market is moderately higher in afternoon trading Thursday, led by banks. Sentiment was influenced by firm cues from most major economies in Asia/Pacific that rose on impressive economic data from Australia and Japan.

In economic news, U.K. logged a visible trade deficit of GBP 8.5 billion in October, data from the Office for National Statistics showed. That was in contrast to an expected contraction to GBP 8.1 billion from GBP 8.4 billion recorded in September.

Meanwhile, house prices in the U.K. declined 0.1% month-on-month in November, taking the annual fall to 0.7%, a report from Lloyds Banking Group Plc's Halifax division revealed. The year-on-year fall was the first since November 2009.

German consumer price inflation rose to the highest level in more than two years, final data from the Federal Statistical Office confirmed. The consumer price index rose 1.5% year-on-year in November following the 1.3% increase in October.

Outside Europe, unemployment rate in Australia declined in November by 0.2% to 5.2%. Meanwhile, Japan's economy expanded 1.1% in the third quarter from the previous quarter, the Cabinet Office said in its final report. This is better than forecasts for a 1% increase following the 0.9% gain in the preliminary reading.

The CAC 40 opened higher at 3,858 and has remained in positive territory, despite some volatile trading. The index is currently adding 0.54%.

Insurer Axa is rising 4.6%, reflecting the positive reaction shown by insurance stocks in the region.

Banks Societe Generale and Credit Agricole are adding 3.6% and 2.6%, respectively. BNP Paribas is gaining 2.3% and Natixis is up 0.9%.

Cement giant Lafarge is up 1.2%. Builders Bouygues and Vinci are rising 0.9% and 0.8%, respectively.

Carmakers Peugeot and Renault are declining 3% and 2.7%, respectively. Airbus maker EADS, department stores operator PPR, hotel group Accor and luxury goods conglomerate LVMH are notably lower.

Elsewhere in Europe, the UK's FTSE 100 is adding 0.31%, while the German DAX is declining 0.05%.

Across Asia/Pacific, major markets had a mixed outing. Australia's All Ordinaries added 0.75%, Japan's Nikkei 225 rose 0.52% and Hong Kong's Hang Seng gained 0.34%. However, China's Shanghai Composite Index lost 1.32% on concerns about interest rate hikes and India's BSE Sensex retreated 2.3% due to year-end profit taking by foreign funds.

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

In commodities, crude for January delivery is rising $0.22 at $88.50 and February gold is advancing $0.8 at $1384 an ounce.

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Indian Market Tumbles; Second-line Stocks Hit Hard

The Indian market tumbled on Thursday, extending its recent losses, as investors dumped stocks across all sectors in the wake of the recent spate of scams, charges of share price manipulation in several non-index stocks and year-end profit taking by foreign funds.

Data showing a rise in food inflation rate and fears of a hike in fuel prices owing to soaring global crude oil prices also weighed on sentiment to some extent.

India's food inflation for the week ended November 27 rose marginally to 8.69% from 8.60% in the previous week on the back of higher prices of rice, onions, fruits and milk, official data released today showed. Notwithstanding the recent fall in food inflation for seven consecutive weeks, the annual inflation in food articles is still above the apex bank's tolerance level of 5%-6%.

The benchmark 30-share Sensex ended down 454 points or 2.31% at 19,242, with consumer durable, realty, metal, healthcare, auto and banking stocks bearing the brunt of the selling.

Heavyweight banking stocks extended their recent losses on liquidity concerns. SBI tumbled 4.33%, ICICI Bank fell 4.41% and HDFC Bank ended down 1.82%. Axis Bank reversed its early gains to end half a percent lower.

In the telecom sector, Bharti Airtel fell 2.58%, Reliance Communication slumped 5.66% and Idea Cellular tumbled 3.40% after the Supreme Court said that the ongoing probe into the 2G spectrum scam should be widened to include the period since 2001.

High-beta metal stocks like Tata Steel, Sterlite and Hindalco fell between 3% and 5%. In the oil/gas sector, heavyweight Reliance Industries ended down 3.41%.

Automaker Tata Motors plummeted 4.71% after it announced a four-year/ 60,000 km manufacturer's warranty on Nano cars at no extra cost to its customers. Mahindra & Mahindra lost 3.43%. Hero Honda Motors ended about half a percent lower after it raised motorcycle prices.

Reliance Infrastructure (down 6.62%), Cipla (down 4.92%), Jaiprakash Associates (down 3.80%), Larsen & Toubro (down 2.55%), DLF (down 2.34%), Bajaj Auto (down 2.29%) and Hindustan Unilever (down 2.09%) were the other prominent decliners.

However, a few stocks from information technology sector like Wipro (up 0.67%) and Infosys (up 0.54%) closed firm after the U.S. government agreed to extend the Bush-era tax cuts and unemployment benefits. Shares of diversified business conglomerate ITC (up 0.39%) also closed in positive territory.

The Nifty index lost 137 points or 2.32% to close at 5,766, while the broader indexes such as the BSE mid-cap and small-cap indexes plunged by 4.5% and 6%, respectively as investors dumped shares of little known companies with suspect management.

Shares of Ruchi Soya (down 6.89%), KS Oils (down 10.80%) and Karuturi Global (down 9.82%) continued to remain under pressure on reports of alleged price rigging. Scam-hit Money Matters  Financial Services lost 5% and LIC Housing Finance plunged 7.26%.

Bhushan Steel slumped 5.58% after the company said it was facing increased pressure from high raw material prices. Rallis India ended down 2.69% on buying a 53.5% stake in Bangalore-based seeds research company Metahelix Life Sciences.

On the global front, the other Asian and European markets rose on Thursday, copper futures hit a record high, crude prices bounced back after a two-day drop and the U.S. index futures strengthened, as better-than-expected economic reports from Australia and Japan bolstered investor confidence in the global economic recovery.

The euro regained some lost ground against the greenback, as U.S. Treasury yields dropped from their highest level in six months.

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Japan GDP Revised Higher In Q3, +1.1% Q/Q

Japan's economy expanded 1.1 percent in the third quarter of 2010 compared to the previous three months, the Cabinet Office said on Thursday in its final report - better than forecasts for a 1.0 percent increase following the 0.9 percent gain in the preliminary reading.

On an annualized basis, gross domestic product gained 4.5 percent - again beating forecasts for a 4.1 percent gain after showing 3.9 percent in the estimate.

Nominal GDP was revised slightly lower, coming in at 0.6 percent. That missed forecasts for a 0.8 percent increase following the 0.7 percent gain in the preliminary reading and the revised 0.3 percent decline in Q2.

The GDP deflator also was revised lower, to -2.4 percent on year from -2.0 percent in the estimate. Forecasts had called for no change.

Exports were revised higher to 2.5 percent on quarter, up from the 2.4 percent preliminary reading and the 5.6 percent gain in the second quarter. Imports jumped 3 percent on quarter, up from the 2.7 percent gain originally reported and the 4.2 percent increase in the previous three months.

Private consumption was bumped up to 1.2 percent on quarter from 1.1 percent in the preliminary reading and from the revised 0.3 percent increase in the second quarter, although its positive contribution to Q3 GDP was an unrevised 0.7 percentage point.

Private capital expenditures were revised up to 1.3 percent on quarter from the preliminary showing of 0.8 percent and the revised 2.7 percent in the previous three months. Its contribution to Q3 GDP was revised up to 0.2 percentage point from 0.1 point.

In fiscal 2009, real GDP contracted 2.4 percent, revised down from the preliminary estimate of -1.8 percent and compared with a revised 4.1 percent decline in fiscal 2008.

Upon the release of the data, the yen drifted lower against its major rivals, trading at 84.11 against the U.S. dollar, 111.44 versus the euro, 132.88 against the pound and 85.28 against the Swiss franc.

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