US & World Daily Markets Financial Briefing 15-12-2010

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Stocks Showing A Lack Of Direction In Early Trading

Stocks are turning in a lackluster performance in early trading on Wednesday, as traders digest the latest batch of economic data. The major averages are lingering near the unchanged line after ending the previous session modestly higher.

The choppy trading comes as traders digest a slew of economic data, including a tame reading on consumer price inflation as well as better than expected readings on New York manufacturing activity and national industrial production.

The Labor Department said its consumer price index edged up by 0.1 percent in November following an unrevised 0.2 percent increase in October. Economists had been expecting consumer prices to increase by about 0.2 percent.

Core consumer prices, which exclude food and energy prices, also rose by 0.1 percent in November after coming in unchanged in each of the three previous month. The modest increase in core prices came in line with economist estimates.

Separately, the New York Federal Reserve said its general business conditions index climbed to a positive 10.6 in December from a negative 11.1 in November, with a positive reading indicating an expansion in regional manufacturing activity. The index had been expected to increase to a positive 3.0.

Also his morning, the Federal Reserve reported that industrial production rose by 0.4 percent in November following a revised 0.2 percent decrease in October. Economists had expected production to increase in by 0.3 percent after production was originally reported as unchanged in the previous month.

Additionally, the Fed said capacity utilization rose to 75.2 percent in November from a revised 74.9 percent in the previous month. The capacity utilization rate had been expected to rise to 75.0 percent from the 74.8 percent originally reported for October.

Coming up, the National Association of Homebuilders will issue the results of its homebuilder confidence survey for December at 10:00 a.m. ET. The index is widely expected to rise to 17 from a reading of 16 recorded last month.

Most of the major sectors are showing only modest moves, although some strength is visible among pharmaceutical stocks. Novartis (NVS) is leading the sector higher after announcing an agreement to complete its takeover of Alcon (ACL).

The major averages are currently turning in a mixed performance, with the Dow up 14.08 points or 0.1 percent at 11,490.62, while the Nasdaq is down 1.27 points or 0.1 percent at 2,626.45 and the S&P 500 is down 0.44 points or less than a tenth of a percent at 1,241.15.

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TSX Poised For Lower Open Amid Economic Worries

Toronto stocks may extend losses Wednesday morning as commodities continued to level off from recent highs amid economic growth worries. Cues from the global equity markets were also discouraging with most Asian markets ending flat, while European stocks were lingering in the negative territory.

Earlier today, Moody's Investor Service said it has put Spain's Aa1 rating on review for a possible downgrade.

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

On Tuesday, the S&P/TSX Composite Index snapped its 3-day winning streak to ease 15.77 points or 0.12% to 13,280.08.

The price of crude oil moved down Wednesday morning as traders await cues from today's economic data, including the report on U.S. weekly crude oil inventories from the EIA. Today during trading hours, the EIA will release its weekly U.S. crude oil inventories report. Analysts expect crude oil inventories to drop by 2.5 million barrels, while gasoline stocks move up by 2 million barrels. Crude for January was down $1.05 to $87.23 a barrel.

The price of gold slipped back below $1,390 after the U.S. Federal Reserve refrained from expanding the size of its bond-purchase program in its one day interest setting meet Tuesday. Gold for February lost $15.60 to $1,388.00 an ounce.

In corporate news from Canada, fertilizer maker Agrium Inc. said would sell the commodity management business of Australian grain producer AWB Ltd to Cargill, Inc. Earlier this month, Agrium acquired the division for $1.2 billion.

Pharmaceutical company Cangene Corp. slipped into the red in first quarter, reporting net loss of $5.4 million or $0.08 per share, compared with net income of $5.3 million or $0.08 per share last year.

Forest products company Canfor Corp. said it plans C$145 million in capital pending plan for its lumber business in 2011.

Real-estate investment trust Dundee REIT announced that it would buy Realex Properties Corp. shares for C$154.4 million cash. Holders of Realex common shares will receive C$8.25 per share reflecting an enterprise value of C$385 million.

Uranium miner Mantra Resources said it would be acquired by ARMZ Uranium Holding Co. for A$8.00 per share via a Board recommended Scheme of Arrangement under the Australian Corporations Act. This values Mantra Resources at around A$1.16 billion. Shares of Mantra close at C$7.590 Tuesday.

In economic news, Statistics Canada said manufacturing sales increased 1.7% to C$45.5 billion in October, due to gains in petroleum products, metals and motor vehicle parts. Economists expected manufacturing sales to rise by a modest 0.8%.

Canadian economic growth will pick up the pace in 2011, latest economic outlook from RBC Economics revealed. Economic growth slowed down in the third quarter 2010 largely due to a lull in the housing market and the U.S. economy, according to the report. The bank forecasts that the unemployment rate will continue to moderate slowly, reaching 7% by the end of 2012, while GDP is expected to rise by 3.1% in 2012, after rising 3.2% in 2011.

From the U.S., the Labor Department said its consumer price index edged up by 0.1% in November following an unrevised 0.2% increase in October. Economists were expecting consumer prices to increase by about 0.2%. Core consumer prices, which exclude food and energy prices, also rose by 0.1% in November after coming in unchanged in each of the three previous month.

In another report, the New York Federal Reserve said its general business conditions index climbed to a positive 10.6 in December from a negative 11.1 in November. The index had been expected to show a much more modest increase to a positive 3.0. A positive reading indicates an expansion in activity.

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French Market Falls

The French market is falling in afternoon trading Wednesday, led by banks  and carmakers. Sentiment was impacted by concerns about Spain's financial position and weak cues from Asia.

In economic news, Eurozone's employment remained unchanged sequentially in the third quarter, a report by Eurostat showed. The number of people employed in the euro area remained stable on a sequential basis in the third quarter, compared to a 0.1% rise in the previous quarter. On a year-over-year basis, the number of employed decreased 0.2% in the third quarter, following a 0.6% fall in the previous quarter.

The UK claimant count rate remained at 4.5% in November, in line with economists' expectations, the Office for National Statistics said. The number of people claiming Jobseeker's Allowance fell by 1,200 between October and November to reach 1.46 million, while economists expected a decrease of 3,000.

Meanwhile, ratings agency Moody's placed Spain'a Aa1 credit rating on review for a possible cut, citing the country's deteriorating fiscal position. Moody's said the key factor for its decision was Spain's vulnerability to funding problems given its high refinancing needs in 2011, and the potential for a further increase in public debt.

The CAC 40 index opened below the unchanged line at 3,894. The index has been moving in a range of 3,865- 3,893 and is currently declining 0.83%.

Car manufacturer Peugeot is declining 2.7% and Renault is losing 2%. Lenders Credit Agricole, Societe Generale, Natixis and BNP Paribas are losing between 2.6% and 1.65%.

Those making notable losses include building materials maker Saint-Gobain, insurer Axa, personal care products maker L'oreal and oil & gas services firm Technip.

Media firm Vivendi, Suez Environnement and steel giant ArcelorMittal are moderately up.

Elsewhere in Europe, UK's FTSE 100 is losing 0.36% and the German DAX is sliding 0.65%.

Across Asia/Pacific, most major markets ended in negative territory. China's Shanghai Composite Index lost 0.54% and Hong Kong's Hang Seng retreated 1.95%. Japan's Nikkei 225 and India's BSE Sensex gave up 0.07% and 0.76%, respectively. However, Australia's All Ordinaries managed to close in positive territory, up 0.05%.

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

In commodities, crude for January delivery is trading lower by $0.70 at $87.58 per barrel, ahead of the weekly inventory data from the Energy Information Administration, and February gold is slipping $11.1 to $1393.2 a troy ounce.

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Asian Markets Decline On Concerns About Global Economic Recovery

Asian markets ended Wednesday's trading session mostly lower as concerns about sustaining global economic recovery resurfaced. Pessimistic outlook for the near term from the quarterly Tankan Survey in Japan and comments from the US Federal Reserve, given the high unemployment rate, impacted market sentiment as traders moved to the sidelines amid cautious trading awaiting more cues on global economic recovery.

In Australia, the benchmark S&P/ASX200 Index edged up 0.90 points, or 0.02%, and closed at 4,768 points, while the All-Ordinaries Index ended at 4,853, representing a gain of 2.50 points, or 0.05%.

On the economic front, data released by the Australian Bureau of Statistics revealed that new vehicle sales in the country increased in November by a seasonally adjusted 0.2% over October. The data further revealed that compared to a year earlier, vehicle sales were, however, down 0.9%. A total of 85,583 vehicles were sold during the month of November. Sale of passenger vehicles increased 1.1% on month, while sales of sports utility vehicles decreased 0.8%, the report further noted.

A report released by the Department of Education, Employment and Workplace Relations revealed that job vacancies for skilled workers in the country decreased a seasonally adjusted 2.8% month-on-month in December, after having risen 2.2% in the previous month. The report further noted that, on a yearly basis, the skilled vacancy index was up 0.1%, slower than the 3.6% increase in the preceding month.

A report released by Westpac Bank  in association with the Melbourne Institute revealed that an indicator of Australian consumer sentiment rose slightly this month despite the Central Bank's surprise decision to raise interest rates  in November. The Westpac-Melbourne Institute Index of Consumer Sentiment rose by 0.2% month-on-month in December to 111.0. Data further revealed that big increases were seen in assessments on consumers' own financial position. The index measuring assessments of family finances versus a year ago rose 4.1%, while expectations for finances over the next 12 months climbed 2.7%.

Resource related stocks ended in negative territory on lower commodity prices, especially the price of copper. BHP Billiton slipped 0.66%, Rio Tinto shed 1.00%, Gindalbie Metals declined 1.48%, Iluka Resourcs fell 2.30%, Macarthur Coal lost 1.95%, and Oz Minerals was down 1.73%.

Mixed trading was witnessed among oil related stocks. Woodside Petroleum slipped 0.18% and Santos Ltd shed 0.71%. ROC Oil Ltd remained unchanged from previous close. However, Oil Search Ltd bucked the trend and ended in positive territory with a gain of 1.30% and Origin Energy climbed 1.79%.

Mixed trading was witnessed among banking stocks as well. Westpac Banking Corp. managed to end in the green with a gain of 0.30%, and investment banking company Macquarie Group advanced 0.57%.. However, ANZ Bank slipped 0.54%, Commonwealth Bank of Australia shed 0.30%, and National Australia Bank was down 0.24%.

Among gold related stocks, Newcrest Mining ended in positive territory with a gain of 1.30%, while Avoca Resources remained unchanged from previous close.

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In Japan, the benchmark Nikkei 225 Index fell 6.99 points, or 0.1%, to 10,310; however, the broader Topix index of all First Section issues managed to end in positive territory with a modest gain of 0.53 points, or 0.1%, to 902.

On the economic front, the quarterly Tankan Survey released by the Bank of Japan revealed that the large manufacturers' index declined from a two-year high in the fourth quarter of 2010, falling for the first time in seven quarters while posting a score of 5. That beat expectations for a score of 3 following the Q3 reading of 8. The report further noted that the outlook for the first quarter of 2011 remained pessimistic with a score of -2, worsening for the second straight quarter. Analysts had expected the outlook to show a score of 0 following the -1 registered in the previous three months. The non-manufacturing index for Q4 posted a score of 1, beating expectations for a reading of 0 but down from 2 in the third quarter. The non-manufacturing outlook came in at -1 versus forecasts for a score of -3 after showing -2 three months earlier.

A report released by the Ministry of Economy, Trade and Industry revealed that an index measuring tertiary industry activity in the country was up a seasonally adjusted 0.5% in October compared to the previous month, coming in at 98.3. Industries that contributed to the increase included information and communications, wholesale and retail trade, finance and insurance, and health care. Industries that were down included electricity, gas, heat supply, water, real estate, goods rental and leasing, and compound services.

Stocks of securities and brokerage houses ended mixed following recent downgrades by Goldman Sachs. Daiwa Securities Group declined 1.41%, and Nomura Holdings edged down 0.19%. Shares of Matsui Securities remained unchanged from previous close, while shares of Mizuho Securities Co., managed to end in positive territory with a gain of 0.44%.

Mixed trading was witnessed among real estate stocks following reports that the Bank of Japan will start purchasing real estate investment trusts as part of its asset-buying program. Sumitomo Realty & Development gained 0.90% and Mitsubishi Estate Co., advanced 0.41%. However, Mitsui Fudosan slipped 0.19%, Heiwa Real Estate shed 0.39%, Tokyu Land Corp. fell 0.51% and Tokyo Tatemono Co., was down 0.27%.

Shares of trading companies ended in positive territory on weaker local currency. Mitsubishi Corp. gained 2.05%, Itochu Corp. rose 2.10%, Sumitomo Corp. advanced 1.10%, Mitsui & Co., Ltd added 0.59% and Marubeni Corp. increased 1.22%.

Profit taking following three sessions of consecutive gains and caution ahead of RBI's mid-quarter policy review meet tomorrow dragged the Indian market notably lower on Wednesday. Heavy selling was seen in realty, banking, consumer durable, healthcare and metal stocks, while IT stocks such as TCS (up 2%), Infosys (up 1.7%) and Wipro (up 1%) rose on the back of stronger-than-expected U.S. retail sales data. The benchmark 30-share Sensex ended down 151 points or 0.76% at 19,648 and the 50-share Nifty index fell by 52 points or 0.87% to 5,892, while the BSE small-cap and mid-cap indexes ended down about 1.5% each.

Among the other markets in the region, China's Shanghai Composite Index declined 15.66 points, or 0.54% to close at 2,911, HongKong's Hang Seng Index shed 455.84 points, or 1.95% to close at 22,975, Jakarta Composite Index in Indonesia lost 31.35 points, or 0.85%, to close at 3,658 and Singapore's Strait Times Index fell 29.71 points, or 0.94%, to close at 3,147. However, Seoul Composite Index in South Korea managed to end in positive territory with a modest gain of 8.43 points, or 0.42%, at 2,017, and Taiwan Weighted Index advanced 16.28 points or 0.19% to close at 8,757.

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