US & World Daily Markets Financial Briefing 14-02-2011

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Stocks Showing A Lack Of Direction In Early Trading

With traders reluctant to make any significant moves, stocks are turning in a lackluster performance in early trading on Monday. The major averages are lingering near the unchanged line after ending last Friday's trading at multi-year closing highs.

The choppy trading comes amid a lack of economic news, with traders expressing some uncertainty about the outlook for the market's following the strength seen in recent weeks.

Most of the major sectors are showing only modest moves, although early strength is visible among oil service, gold, and electronic storage stocks. On the other hand, housing and utilities stocks are posting notable losses.

In corporate news, General Electric Co. (GE) said its Oil & Gas business has agreed to acquire the Well Support division of John Wood Group for approximately $2.8 billion. GE said the division is expected to generate $1.1 billion in revenue in 2011.

Aerospace giant Boeing (BA) also unveiled its 747-8 Intercontinental, the latest passenger version of the 747 jumbo jet. The company claims it is the only airplane to serve the 400-500 seat market and hopes it will compete with Airbus A-380.

Swiss banking firm Credit Suisse Group (CS) said it would issue about 6 billion Swiss francs (approximately $6.16 billion) worth of contingent convertible bonds to meet future capital requirements under the proposed new capital rules in Switzerland.

EchoStar Corp. (SATS) signed an agreement to buy out Hughes Communications (HUGH) for roughly $2 billion, including the assumption of debt.

The major averages are currently mixed, with the tech-heavy Nasdaq posting a modest gain. While the Nasdaq is up 2.48 points or 0.1 percent at 2,811.92, the Dow is down 26.33 points or 0.2 percent at 12,246.93 and the S&P 500 is down 0.53 points or less than a tenth of a percent at 1,328.62.

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TSX Poised For Mixed Open

Bay Street stocks are poised for a mixed open Monday amid steady commodities prices and mixed cues from the global equity markets. While most Asian markets ended higher overnight, European stocks were trading treading water.

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

On Friday, the S&P/TSX Composite Index erased 73.80 points or 0.53 percent to 13,766.76. Last week the main index advanced to a fresh 31-month peak of 13,893.

The price of crude oil was little changed as traders await Chinese inflation data, due out tomorrow, to determine whether more rate hikes are in the offing. Further monetary tightening from China could weigh on demand for oil. Crude for March edged down $0.11 to $85.47 a barrel.

The price of gold was steady around $1,360 amid a firm U.S. dollar. Gold for April edged up $0.10 to $1,360.50 an ounce.

In corporate news from Canada, Canada Bread said it would sell its fresh prepared sandwich business to Premium Brands Holding Corp.

Forest products company Canfor Corp. swung to profit in fourth quarter, reporting net income of C$30.7 million or C$0.21 per share compared to a net loss of C$17.0 million or C$0.12 per share a year ago. Excluding items, adjusted net income was C$12.9 million or C$0.09 per share compared to an adjusted net loss of C$24.2 million or C$0.17 per share in the prior year quarter.

Nuclear energy company Cameco Corp. reported a 65 percent decline in its fourth quarter net earnings at C$207 million or C$0.52 per share compared to C$598 million or $1.52 per share reported last year. However on an adjusted basis, earnings increased 12 percent to C$191 million or C$0.48 per share from C$170 million or C$0.43 per share in 2009. Analysts were expecting the company to report earnings of C$0.63 per share for the quarter.

International junior oil and gas firm Bengal Energy reported third quarter net loss of C$1.03 million or C$0.03 per share, compared to a net loss of C$885,000 or C$0.05 per share for the year-ago quarter.

Natural gas distributor Valener Inc. reported lower first quarter net income of $60.7 million or $0.48 per share, compared to net income of $78.10 million or $0.66 per share in the year ago quarter.

Mineral exploration and development company Ventana Gold said it would be acquired by a a takeover company formed by Brazilian resource firm Grupo EBX for $13.06 per share in cash, or about $1.4 billion.

Airlines company Westjet Airlines said it launched the return of non-stop service from Calgary to Maui and Honolulu.

In economic news, Statistics Canada said the number of new motor vehicles sold in December declined 4.8 percent to 128,210 units. Sales of both passenger cars and trucks dipped, with weaker truck sales accounting for most of the overall decline. Meanwhile, based on preliminary industry data, the number of new motor vehicles sold in January increased 3 percent.

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French Market Turns Negative

The French market reversed early gains and is in negative territory in afternoon trading Monday, as market shook off early boost to sentiment from the ouster of Hosni Mubarak as well as firm cues from Asia/Pacific. Banks and car manufacturers are falling, while construction stocks are gaining.

In economic news from the region, Eurozone industrial production dropped 0.1 percent month-on-month in December, following the revised increase of 1.4 percent in November, Eurostat said. Economists had forecast a decline of 0.2 percent.

In Portugal, economy contracted 0.3 percent sequentially in the fourth quarter, flash estimates from the statistical office showed. This follows last quarter's revised 0.2 percent growth.

The CAC 40 index opened at 4,081, lower than the previous close of 4,101 and made some early gains, but is currently falling 0.17 percent.

Carmaker Peugeot is falling 1.9 percent, thus leading the decliners. Peer Renault is dipping 1.3 percent. Insurer Axa and media firm Vivendi are notably lower.

Banks Credit Agricole, BNP Paribas, Societe Generale and Natixis are on the losing side.

Among construction stocks, Bouygues and Vinci are higher. Building materials maker Saint-Gobain and cement giant Lafarge are rising.

Telecom equipment maker Alcatel Lucent is gathering 3.9 percent. Commodity chemicals firm Air Liquide and grocery retailer Carrefour are notably higher.

Drugmaker Sanofi-Aventis, dairy firm Danone and utility EDF are making moderate gains.

Elsewhere in Europe, the UK's FTSE 100 is losing 0.30 percent, while the German DAX is adding 0.30 percent.

Across Asia/Pacific, major markets ended higher. Australia's All Ordinaries added 1.1 percent, China's Shanghai Composite Index gained 2.5 percent and Hong Kong's Hang Seng climbed 1.3 percent. India's BSE Sensex expanded 2.7 percent and Japan's Nikkei 225 increased 1.1 percent.

In the U.S., futures point to a mixed open on Wall Street. In the previous session, the Dow climbed 0.4 percent, the Nasdaq moved up 0.7 percent and the S&P 500 rose 0.6 percent.

In commodities, crude for March delivery is losing $0.21 to $85.37 per barrel and gold is slipping $2.4 to $1358 a troy ounce.

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Indian Market Extends Pullback Rally

A rally in global markets after the resignation of Egyptian President Hosni Mubarak and data showing a marginal decline in the rate of price rise in January helped the Indian market end sharply higher for a second consecutive session on Monday. Capital goods, auto, metal, consumer durable and banking stocks led the pull-back rally.

Regaining the 18,000 mark after one month, the 30-share Sensex ended 474 points or 2.67 percent higher near the day's high at 18,202, while the 50-share Nifty climbed by 146 points or 2.75 percent to 5,456.

The BSE mid-cap and small-cap indexes that consist of several prominent stocks ended up around 4 percent each on bargain hunting following a sharp fall in the preceding three weeks. The market breadth was strong with gainers outpacing decliners in the ratio of 5:1 on the BSE.

Meanwhile, with prices of sugar and wheat declining a little bit, India's annual inflation based on wholesale prices eased marginally to 8.23 percent in January versus 8.43 percent in the previous month, government data released today showed.

According to the Commerce Ministry, the average inflation so far in the financial year was 7.44 percent compared with 9.42 percent in the corresponding period last year. The ministry also revised upwards wholesale price inflation rate for November to 8.08 percent from 7.48 percent reported earlier. Finance Minister Pranab Mukherjee expressed the hope that overall inflation will come down to around 7 percent by March end.

In stock-specific action, India's largest automobile company Tata Motors climbed 5.60 percent on reporting robust earnings. Tata Steel rallied over 4 percent ahead of its results tomorrow. Engineering & construction giant Larsen & Toubro soared 6.70 percent on bagging a Rs.1100-crore EPC order from Gujarat State Electricity Corporation. Reliance Infrastructure added nearly 2 percent after its board approved a share buyback at a price not exceeding Rs.725 a share.

Among other prominent gainers, Bajaj Auto, HDFC, Tata Power, Hero Honda Motors, Hindalco, SBI, Jindal Steel, BHEL and Jaiprakash Associates rose between 3.12 percent and 6.79 percent. Heavyweight Reliance Industries closed half a percent higher, shrugging off alleged insider-trading charges.

Mahindra Satyam climbed nearly 12 percent after reporting an over over two-fold rise in its quarterly profit sequentially. Balrampur Chini Mills rallied 7.73 percent after the company proposed to consider a share buyback. Other sugar stocks such as Shree Renuka, Bajaj Hindusthan and Dhampur closed up by 2-8 percent.

Gayatri Projects (up 3.26 percent), Gitanjali Gems (up 9 percent), Rajesh Exports (up 6.45 percent) and Supreme Infrastructure (up 6.26 percent) advanced on healthy quarterly earnings. Bank of Maharashtra climbed over 4 percent and State Bank of Mysore soared nearly 9 percent after the public sector lenders hiked their lending rates by 25 basis points each. Emami rose 2.28 percent on reports that it may buy Marico's refined sunflower oil brand 'Sweekar.'

Elsewhere, the other Asian markets rose across the board on Monday, as news of Egyptian President Hosni Mubarak's resignation boosted investor appetite for riskier assets. China's Shanghai Composite average rose 2.53 percent on talk of slower-than-expected January inflation, a day ahead of the official release. The key benchmark indexes in Japan, Hong Kong and South Korea rose between 1.13 percent and 1.89 percent.

Japan's economy shrank slightly in the final quarter of 2010 but Economic and Fiscal Policy Minister Kaoru Yosano expects a recovery this year, thanks to an expected increase in exports and positive effects of some policy measures.

European stocks rose for a second consecutive session, with miners leading the gainers, owing to strong Chinese trade data. However, the U.S. index futures were largely unchanged. Crude futures pared early gains and were marginally lower, while the U.S. dollar was mixed against its major counterparts.

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Dollar Rises Further Versus Euro Monday Morning

The dollar rose to its highest in three weeks against the euro on Monday, amid word that a major German bank is in danger of being closed down by regulators.

Slightly disappointing euro zone industrial production figures also soured traders on the euro to the benefit of the dollar.

With no first-tier economic data on tap from the U.S., trading was expected to be fairly quiet today, but all eyes will now turn to the euro zone for clues about the health of the region's banking system.

Troubled German bank West LB failed over the weekend to reach an agreement on a restructuring model, according to Reuters. The bank needs to restructure as part of the deal with the European Commission that rescued West LB during the financial crisis.

The dollar extended last week's gains against the euro, rising another penny to $1.3445.

Eurozone industrial output dropped for the first time in three months in December as the exceptionally cold weather hit production in most of the member states.

Industrial production fell 0.1 percent month-on-month following the revised increase of 1.4 percent in November, Eurostat said Monday.

Versus the sterling, the buck improved to $1.5985 from $1.6070.

Meanwhile, the dollar held most of last week's gains against the yen by firming to Y83.45. Last week, the buck rose to a nearly 3-month peak of Y83.66.

Gross domestic product in Japan was down 0.3 percent sequentially in the fourth quarter of 2010, the Cabinet Office said in a preliminary reading on Monday, contracting for the first time in five quarters.

Economic and Fiscal Policy Minister Kaoru Yosano called the contraction a momentary blip on the road to recovery.

Looking ahead to this week's data from the U.S., the Labor Department reports on import and export prices as well as producer and consumer price inflation for January.

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