US & World Daily Markets Financial Briefing 15-10-2010

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Stocks were unable to hold on to their early gains and are mostly on the downside in mid-morning trading on Friday following a worse than expected reading on consumer sentiment.

Early upside came as Federal Reserve Chairman Ben Bernanke made the case for further quantitative easing measures and September retail sales topped expectations.

The major averages have all seen downside in recent dealing, although the tech-heavy Nasdaq continues to post a modest gain. The Nasdaq is up by 3.95 points or 0.2 percent at 2,439.33, while the Dow is down by 72.28 points or 0.7 percent at 11,022.29 and the S&P 500 is down by 5.82 points or 0.5 percent at 1,167.99.

A short time ago, Reuters and the University of Michigan released their preliminary reading on consumer sentiment for October, showing a decline to 67.9 from September's 68.2. Economists polled expected the index to rise to a reading of 68.5.

Shortly afterward, the Commerce Department reported that business inventories moved up 0.6 percent in August following a 1.1 percent increase in July. The gain came in slightly above expectations which called for a 0.5 percent increase.

Earlier, all eyes were trained on Fed chief Ben Bernanke as he continued to make the case for additional quantitative easing action, citing a dismal labor market and continued struggles in the housing sector.

Beyond additional purchases of government backed bonds, Bernanke offered little detail for additional stimulus action, although he stated that the Fed may commit to keeping interest rates "low for longer than markets expect".

Also before the start of trading, the Commerce Department reported that retail sales rose by 0.6 percent in September following upwardly revised 0.7 percent growth in August. Excluding vehicle sales, sales gained 0.4 percent. The data came in better than expected, with economists projecting increase of 0.4 percent for both the headline and adjusted numbers.

The Labor Department said that its consumer price index for September inched up by 0.1 percent, while core prices, which exclude volatile food and energy, were flat for the month. Economists had expected the headline index to increase by 0.2 percent and the core index to rise by 0.1 percent.

Further, the New York Fed said that manufacturing activity picked up in October, with its survey coming in with a reading of 15.7 compared to 4.1 in September. The surge surprised economists who forecast a reading of 6.5.

In earnings news this morning, General Electric Co. (GE) reported third-quarter net income of $0.29 per share, topping expectations for $0.27 per share for the quarter. Total revenues for the quarter were $35.89 billion, down from $37.80 billion in the same period last year and short of estimates for $37.67 billion.

After the closing bell Thursday, tech giant Google Inc. (GOOG) reported third quarter EPS of $7.64 and revenues of $7.29 billion. The results firmly beat analyst expectations which estimated EPS at $6.67 and sales at $5.25 billion.

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Bay Street stocks are poised for a positive open Thursday amid firm commodities prices as the U.S dollar continued to trade weak versus a basket of currencies. Speculation that the U.S. government will start injecting more money into the weak economy to give it another boost has been pressurizing the dollar for the past few weeks.

However, stocks may face selling pressure at higher levels after having gained over 200 points or nearly 2% in the past three sessions.

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

Meanwhile, the Canadian dollar hits parity with the U.S. dollar, its highest level since April 2010.

On Wednesday, the S&P/TSX Composite Index added 97.67 points or 0.78% to 12,673.31, it fresh 2-year high.

The price of crude oil edged up near its 5-month high as traders await the official weekly crude oil inventories data from the EIA. Wednesday after the markets close, the API said U.S. crude inventories fell by 4 million barrels last week, partly because of the closure of the Houston Ship Channel. Gasoline stocks als

Bay Street stocks reversed early gains to dip in to the red in mid morning deals Friday. In early trading, stocks edged up following the latest comments by Federal Reserve Chairman Ben Bernanke that signaled another round of stimulus package to support the economy in the U.S., Canada's largest trading partner.

The S&P/TSX Composite Index was down 45.24 points or 0.36% to 12,574.45, shedding for a second session.

The price of crude oil edged down with crude for November easing $0.52 to $82.17 a barrel.

In the oil patch, Crew Energy (CR.TO), NuVista Energy (NVA.TO) and Petrobakken Energy (PBN.TO) were down over 1% each.

The price of gold was leveling off from its record high, with gold for December shedding $10.70 to $1,366.90 an ounce.

The global Gold Index lost 1.03%. A host of stocks including Alamos Gold (AGI.TO), Aurizon Mines (ARZ.TO) and Eldorado Gold (ELD.TO) lost around 2% each.

Gold explorer Capital Gold (CGC.TO) lost nearly 2% even after reporting improved fiscal 2010 net income of $11.99 million or $0.25 per share, compared to $10.41 million or $0.21 per share in the prior year. Further, the company expects fiscal 2011 gold sales of 65,000 to 70,000 ounces, up from the present 54,304 ounces.

Precious metals miner NovaGold Resources (NG.TO) shed 1.25% after reporting significantly wider third quarter net loss of C$147.6 million or C$0.66 per share compared to a net loss of C$18.1 million or C$0.10 per share last year.

Gold and copper miner Northgate Minerals (NGX.TO) was down over 1%. The company said it sold $20 million of 3.50% convertible senior notes due 2016 for about $163.5 million. The company intends to utilize the proceedings to part finance the $339 million pre-production development cost of its Young-Davidson gold mine near Matachewan, Ontario, which is currently scheduled to begin producing in early 2012.

Among base-metals stocks, Equinox Minerals (EQN.TO) shed 3.61%. Teck Resources (TCK_B.TO), Ivanhoe Mines (IVN.TO) and Lundin Mining (LUN.TO) were down over 1% each.

Meanwhile, zinc and copper miner HudBay Minerals (HBM.TO) added over 1%. The company today updated resource estimates for its Back Forty project in Michigan and noted that the increased mineral resource, which includes approximately one million ounces of contained gold, could significantly improve the economics of the project.

In the financial space, Scotiabank (BNS.TO) and Sun Life Financial (SLF.TO) eased around 0.50% each.

Potash Corp. (POT.TO) lost over 1% to C$146.70. According to media reports, Sinochem has abandoned its plan to make a rival bid to acquire Potash Corp., thrashing investors' hopes for a counter offer to Australian miner BHP Billiton, which made a hostile bid valuing the company at $130 per share.

o fell by 1.9 million barrels. Analysts were expecting 1.2 million barrels build in crude oil inventories and 1.3 million drop in distillates stocks last week.

Crude for November was up $0.49 to $83.50 a barrel.

The price of gold continued to surge to record highs amid a weak U.S. dollar. Gold for December gained $7.00 to $1,377.50 an ounce, after hitting an intraday high of $1,388.10.

In corporate news from Canada, independent power producer Atlantic Power Corp. (ATP.TO) said that it priced its public offering of 5.24 million of common shares at $13.35 per share for a net proceeds of approximately $75.6 million, including over-allotment option. The company also plans to raise $70 million by offering convertible debentures.

Natural gas explorer Fairborne Energy (FEL.TO) said it's lenders increased bank credit facility base to C$325 million from C$285 million.

Wireless network products maker DragonWave Inc. (DWI.TO) said it acquired Axerra Networks Inc. for $9.50 million, which could move up to $15.5 million if the latter meet certain revenue growth targets over the next 16 months.

Office properties developer Brookefield Properties Corp. (BPO.TO: News ) said it has increased the size of its proposed preferred shares offering to $300 million from the earlier $200 million.

Beer maker Brick Brewing Co (BRB.TO) announced the launch of their new Red Baron Platinum Light, a light beer with only 60 calories per bottle.

YM BioSciences (YM.TO) said it appointed Nick Glover as CEO effective November 18, 2010. Before joining the company in June 2010, Glover served as the President and Chief Executive Officer at Viventia Biotech Inc.

Mineral explorer Diadem Resources (DRL.V) said it would acquire a private company, which holds working interest in a substantial development stage mineral asset in central Africa, by issuing 7.0 million common shares and 1.0 million performance warrants.

In economic news, Statistics Canada said merchandise exports rose 3.1% to C$34.0 billion in August, snapping two months of declines. Industrial goods and materials and other consumer goods accounted for over three-quarters of the growth.

From the U.S, the Labor Department said jobless claims rose by 13,000 to a seasonally adjusted 462,000 last week, surpassing economists' expectations for claims of 450,000.

In another report, the U.S. Commerce Department said trade deficit widened to $46.3 billion in August from a revised $42.6 billion in July. Economists were expecting the deficit to widen to $44.5 billion from the $42.8 billion originally reported for the previous month.

Geospatial systems company OSI Geospatial (OSI.TO) lost 12.50% after reporting a wider third quarter net loss of C$1.1 million or C$0.02 per share, compared to a net loss of C$410,000 or C$0.01 per share a year ago.

Merchandise leasing company easyhome Ltd.  plummeted over 17% after it said it has discovered a $3.4 million employee fraud case.

Meanwhile, traffic management technology company International Road Dynamics (IRD.TO) edged up 1.50% after reporting improved third quarter net income of C$0.7 million or C$0.05 per share, compared to C$0.5 million or C$0.03 per share in the the year-ago period.

Neptune Technologies & Bioressources (NTB.V) gained over 5% after it swung to profit in second quarter, reporting net earnings of $274,000 or $0.01 per share compared to a net loss of $2.11 million or $0.06 per share a year ago

In economic news, Statistics Canada said manufacturing sales increased 2.0% in August to C$45.1 billion. Economists were expecting manufacturing sales to rise 0.4% following a decline of 0.9% in the previous month.

Separately, the agency said the number of new motor vehicles sold in August declined 4.8% to 128,764 units, with sales of both trucks and passenger cars moving down. Economists were expecting sales of new automobiles to rise 1.3%, following the downwardly revised 2.2% increase witnessed in July.

From south of the border, the U.S. Labor Department revealed that consumer prices were up 0.1% in September. Economists had expected the measure to rise by 0.2%.

Meanwhile, the U.S. Commerce Department announced that retail sales rose 0.6% in September, following a revised 0.7% advance in the previous month. Economists had expected the measure to rise by 0.4%. Excluding the auto sector, retail sales climbed 0.4% in the month.

The New York Federal Reserve's Empire State Manufacturing Survey showed a reading of 15.7 for October. Economists had expected a reading of 5.75, compared to the reading of 4.1 that was recorded last month. Any reading above zero indicates expansion for New York manufacturers.

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The European markets are mixed in afternoon trading Friday. While the U.K. market is declining, stocks in Germany and France are mostly rising.

Crude for November delivery is sliding $0.28 at $82.41 and gold is advancing $0.9 at $1378.5 per troy ounce.

In a light day for economic news, Eurozone annual inflation rose to 1.8% in September from 1.6% in August, data from Eurostat showed. The statistical office confirmed the initial estimate released on September 30.

In the U.K., the FTSE 100 opened at 5,727 and made some early gains, which it gave up later. The German DAX began trading at 6,478, up from the prior close, and remained in the green throughout the session. The French CAC 40 opened slightly higher at 3,830 and has been witnessing volatile trading.

The FTSE 100 is currently declining 0.35%, compared to the DAX gaining 0.32% and the CAC 40 adding 0.16%.

Insurer Old Mutual is leading the decliners on the FTSE 100 by falling 6.2%. Lender HSBC Holdings informed the insurer that it would not proceed with a partial offer for South-African lender Nedbank, where Old Mutual has a majority stake.

Standard Life and RSA Insurance Group are each down 3%. Legal&General is down 1.4% and Prudential is declining 1.1%.

Miners Xstrata, Kazakhmys, Vedanta Resources, Antofagasta, BHP Billiton and Rio Tinto are losing between 2.7% and 1%.

Aerospace/defense firm Rolls-Royce is adding 1.6% after the company reportedly received an analyst upgrade. Among lenders, Barclays is rising 1.5%, Royal Bank of Scotland is adding 1.2% and Lloyds Banking Group is rising 1%. HSBC is moderately up.

In Germany, Deutsche Boerse is advancing 2% and steel producer ThyssenKrupp is rising1.7%. Chipmaker Infineon Technologies, utility RWE, personal care products maker Beiersdorf and airline Lufthansa are notably higher. HeidelbergCement is retreating 1.7%.

Among carmakers, Daimler is rising 1%, while Volkswagen is slipping 0.2% and BMW is losing 0.8%.

Commerzbank is marginally up, while Deutsche Bank is losing 0.6%.

In France, grocery retailer Carrefour is declining 4% after the company reportedly said it would take additional charges on its Brazilian operations. Brewer Pernod-Ricard is sliding 2.2% and Insurer Axa is down 1.6%.

Car manufacturer Peugeot is rising 4.1% and Renault is advancing 1%. Lenders Natixis is rising 0.2%, while Societe Generale and Credit Agricole are slightly up.

Across Asia/Pacific, markets mostly ended lower. Australia's All Ordinaries slipped 0.16% and Hong Kong's Hang Seng dipped 0.40%. Japan's Nikkei 225 ended the day down 0.87% and India's BSE Sensex lost 1.82%. However, China's Shanghai Composite Index gained 3.18%.

In the U.S., futures point to a mixed opening on Wall Street. While the Dow and S&P 500 futures are in the red, the Nasdaq 100 futures is in the green. In the previous session, the Dow inched down 0.01%, the Nasdaq declined 0.2% and the S&P 500 fell 0.4%.

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The Indian market tumbled on Friday, with IT stocks leading the losses, on concerns that recent gains are overdone. While Infosys numbers came in line with expectations, weak global cues and continued profit taking ahead of the nation's largest ever IPO of Coal India, slated to open on Monday, put pressure on the indexes.

IT bellwether Infosys fell 3.39% despite announcing forecast-beating results, as the software exporter has not upped its full-year rupee guidance because of the strength in the rupee.

"The continued global economic uncertainty, coupled with extreme currency volatility is a concern for the IT industry," Infosys Chief Financial Officer V. Balakrishnan said. TCS and Wipro, which are set to announce their results next week, ended down 3.52% and 3.58%, respectively.

The 30-share BSE Sensex ended near the day's low at 20,125, down 373 points or 1.82%, with 29 of its component declining. Only NTPC bucked the downward trend to end 0.35% higher.

The broader Nifty fell by 115 points or 1.86% to 6,063, the BSE mid-cap index eased 1.22% and the small-cap index ended down 0.74%. In the broader market, declining shares outpaced gaining ones by 2023 to 976 shares.

On the economic front, India's wholesale price inflation moved up to 8.62% in September, from 8.51% in the previous month, because of a rise in prices of milk, vegetables, fruits and wheat, and certain non-food items, government data showed today, exerting pressure on the RBI to hike rates further by at least 25 basis points at its upcoming rate-setting meeting on November 2.

Among rate-sensitive auto stocks, Mahidnra & Mahindra, Bajaj Auto, Ashok Leyland, Maruti Suzuki and Hero Honda Motors shed between 1% and 3%. Tata Motors declined 2.24% after reporting a 19% rise in its global vehicle sales for September.

In the banking sector, Axis Bank fell 3.69% despite posting strong quarterly results. SBI fell 3%, HDFC Bank declined 1.51% and ICICI Bank eased 1.10%. Mortgage lender HDFC ended down 0.72%.

Telecom stocks fell across the board after the sector regulator TRAI issued a consultation paper on telecom tariffs. Bharti Airtel declined 3.10%, Idea Cellular gave off 1.43% and Reliance Communication ended down 2.52%. Among metal stocks, Hindalco, SAIL, Sterlite, JSW Steel and Tata Steel ended down between 1.6% and 2.3%.

Reliance Infrastructure slipped 0.85% after it tied up debt of Rs7,000 crore for developing a Mumbai metro project. ABG Shipyard edged down 0.67% despite bagging two export orders. Sadbhav Engineering fell 3% even as it secured a Rs.1,411.36-crore order from NHAI.

Manappuram General Finance declined 1.15% despite reporting healthy second-quarter earnings. SKS Microfinance plunged 6.79% after the Andhra Pradesh Cabinet approved an ordinance to regulate microfinanciers.

Heidelberg Cement India tumbled 4% after its September-quarter net profit plunged 90% year-over-year. Eros International Media gave off a percent after it signed a pact with Zee Entertainment Enterprises for exclusive broadcast of some of Eros' films on Zee's television network.

Fertilizer stocks such as Chambal (up 3.34%) and RCF (up 4.29%) ended sharply higher. EID Parry (India) rose 2.13% after the company proposed to consider a stock split.

Elsewhere, most Asian stocks closed in the red on Friday, as a rather flat close on Wall Street overnight amid an unexpected increase in initial jobless claims and concerns of increased scrutiny of home foreclosure practices weighed on sentiment.

Likewise, European stocks were little changed and the Dow futures reversed initial gains, as investors turned cautious ahead of a speech from Federal Reserve chairman Ben Bernanke today in Boston, which is expected to provide clues on the Fed's next policy steps at its Nov 2-3 meeting.

However, China's Shanghai average rallied 3.18%, extending its rally for a sixth consecutive session, on hopes for more foreign inflows, as the yuan strengthened ahead of the publication of a report by the U.S. Treasury Department on trade partners' currency practices.

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The euro wobbled versus the dollar on a hectic Friday morning in New York, adding to its 8-month highs before pulling back as traders weighed a flurry of economic data and remarks from Federal Reserve Chairman Ben Bernanke.

In one of his most highly anticipated speeches of the year, Bernanke acknowledged that a case could be made for the central bank to support the sluggish US economy with further accommodation. The euro raced higher to $1.4150 -- its highest level since January -- on that initial headline.

However, when Bernanke failed to provide details about the size and scope of additional quantitative easing, the market reacted with caution, fearing any easing measures might be underwhelming compared to current expectations.

The euro briefly slipped back below $1.4000 as the speech was dissected, and has settled above that mark approaching mid-day.

The single currency continued its run of choppy trading versus the yen, holding just above Y114. By moving sideways for the past week, the euro has stayed away from a 9-year low of Y105.41 set this summer.

A mixed bag of economic data gave few clues about the direction the Fed may take at its November 3 meeting, although with US inflation seemingly in check, the central bank has a free hand to ease without much concern of runaway inflation in the near-term.

US consumer prices rose very slightly last month, driven up by higher prices at the pump and grocery store, the Labor Department said Friday.

Stripping out volatile energy and food costs, prices were flat compared to the expectation of a 0.1 percent rise.

Meanwhile, Eurozone trade deficit widened more than expected in August as import growth outpaced that of exports, data released by Eurostat showed Friday.

The trade shortfall widened to EUR 1.4 billion in August from EUR 0.2 billion in July. Trade balance has been in deficit since May. Economists had forecast a deficit of EUR 0.8 billion. Exports rose 1% month-on-month, recovering from a 0.2% drop in July.