US & World Daily Markets Financial Briefing 18-03-2009

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Major Averages Move To The Downside But Remain Off Lows

Stocks continue to see notable weakness in late morning trading on Wednesday, with the major averages stuck in negative territory. The continued weakness comes as traders cash in on the strong gains that were seen in recent sessions.

With traders reacting to decreases in most major commodities prices, resource stocks are turning in some of the market's worst performances. Oil stocks are seeing considerable weakness, dragging the Amex Oil Index down 3.7 percent.

Transportation stocks are also posting steep losses after trending higher in the recent sessions. After closing higher in the six previous sessions, the Dow Jones Transportation Average is currently posting a 2.7 percent loss.
 
While tobacco, chemical, and housing stocks also remain under pressure, banking stocks have turned higher over the course of the morning. The Kbw Bank Index is currently up 2.1 percent after moving lower earlier in the session.

The major averages have moved to the downside in recent trading, although they remain well off their worst levels of the day. The Dow is currently down 100.68 at 7,295.02, the Nasdaq is down 7.04 at 1,455.07 and the S&P 500 is down 7.84 at 770.28.

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Toronto Stocks Drop To Give Back Some Of Recent Rally

Bay Street stock experienced sharp weakness in early trading on Wednesday, giving back some of a recent rally. The market finished the previous session at its highest level in more than a month.

The S&P/TSX Composite Index has rallied 193.97 points or 2.27% to 8,365.63. If the losses hold, the drop would be the first in seven sessions for the index.

Mining stocks are down 3.9% to lead the way. Teck Cominco has lost 6.9%, Thompson Creek Metals has jumped 4.6%, FNX Mining is down 4.2% and First Quantum has dropped 3.1%.

Energy stocks have dropped 3.8% as crude oil has slipped on the NYMEX. Light sweet crude fell $1.02, down $48.14 for the session.

Verenex Energy is down 4.2% as Libya will exercise its right to buy the company, matching a bid nearly $400 million bid from China National Petroleum Corp.

Addax Petroleum Corp. is up 4.2%, despite being downgraded to Neutral from Buy at Bank of America.
 
Ivanhoe Energy has surged 8.8% after the company said a recently completed evaluation by independent engineers has estimated that Ivanhoe Energy's Tamarack Project, in the Athabasca region of Western Canada, contains best-estimate contingent resources of 441 million barrels of bitumen.

Materials stocks are down 2.6% as Potash Corp. has dropped 3.4% amid a report from the Canadian Press that the company will extended the layoff of 940 employees.

In other corporate news, Starcore International Mines has dropped 10.5%. The company reported a second quarter net loss of C$22,000 or C$0.00 per share, compared to a loss of C$1.5 million or C$0.02 per share in the year-ago quarter.

Timminco Ltd. has plunged 19.1% after the company said it will temporarily curtail production of silicon metal due to difficult market conditions and reduced demand for silicon metal in the chemical and aluminum industries.

On the economic front, Stats Canada reported wholesale sales declined 4.2% to $41.1 billion in current dollars in January. Lower activity in the automotive products sector was a major factor behind the decrease. Excluding the automotive products sector, wholesale sales fell 0.9%. In terms of the volume of sales, wholesale sales also fell 4.2%.

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Back to square one
 
Market Movers
techMARK 1,141.41 +0.14%
FTSE 100 3,852.80 -0.11%
FTSE 250 6,233.55 +0.35%

Leading shares are mixed after a poor set of UK unemployment figures put the kibosh on an early attempt to continue yesterday’s rally.

The number of people out of work rose to 2.03 mlns in the November - January quarter from 1.97m in the October to December period. A record 138,400 people signed on for job seeker’s allowance in February. This was well in excess of the 90,000 new claimants that had been expected and brings the total number of claimants to 1.39m.

Old Mutual is going well after the life group closed its US Life offshore unit, Old Mutual Bermuda, to new business. Elsewhere in the sector Prudential is weaker ahead of tomorrow’s results.

In the banking sector, reports of a good start to 2009 have prompted demand for Royal Bank of Scotland while Barclays is also wanted on hopes that it will dodge the need for a cash call by selling off its iShares business.

In an otherwise buoyant financial sector Standard Life, HSBC and Land Securities all trade lower in ex-dividend form.

Travel companies TUI Travel and Thomas Cook are hit by the double whammy of a rise in the crude oil price and the worse than expected unemployment figures.

Claims by Rio Tinto’s chief executive Tom Albanese that shareholders were coming round to the board’s view that the Chinalco cash injection was a better option for the company than a rights issue are beginning to sound hollow, as rising shareholder unrest sends the share price lower.

Venture Production is the best performing FTSE 250 stock after British Gas owner Centrica paid almost £240m for a 22% stake in the oil producer and said it was contemplating making a a cash offer for the whole company.

Centrica bought just over 33m shares at 725p each, a 25% premium to last night’s closing price.

Meanwhile, another oil firm, Bowleven is also the subject of bid speculation. The West Africa focused oil firm has received a possible 150p per share cash offer from an unnamed suitor and said it would probably accept an offer at that price if a firm proposal were made.

French Connection has scrapped its final dividend after a “disappointing” set of full year figures that saw the fashion retailer plunge deep into the red. It posted a loss before tax of £17.4m for the year ended 31 January 2009 due to an £11.9m impairment charge versus a profit of £3.1m in 2008.

Bus and train group Stagecoach has agreed a new joint venture to operate the sightseeing services of its Gray Line New York unit and the business of CitySights NY.

Building and insulation products firm SIG has launched a £341m cash call to shore up its balance sheet after profits plunged last year. Some 454m new shares will be issued though a combination of an open offer and firm placing, both at 75p each.

Bid target and leisurewear retailer Blacks Leisure is to take one-off provisions of £5m this year as exits its struggling boardwear business. Trading so far this calendar year has been in line with expectations, it added, with the Outdoor business performing well in a tough prevailing retail market but the Boardwear business continues to trade poorly. Talks are still ongoing with a potential bidder, Blacks added, but remain at an early stage.

Countermeasures and ordnance specialist Chemring is confident that the outlook for 2009 remains in line with expectations. Trading at both its Energetics and Countermeasures divisions for the four month period to the end of February continued to be strong, with revenues and operating profits in excess of 50% higher than 2008.

Property developer Quintain Estates tends firmer on rumours that it is close to announcing plans to raise £100m by means of an open offer.

FTSE 100 - Risers
Royal Bank of Scotland Group (RBS) 23.60p +6.31%
Old Mutual (OML) 42.70p +5.96%
Legal & General Group (LGEN) 31.40p +5.72%
Barclays (BARC) 96.50p +5.70%
Cairn Energy (CNE) 1,959.00p +3.65%

FTSE 100 - Fallers
Thomas Cook Group (TCG) 223.00p -3.57%
Rio Tinto (RIO) 1,914.00p -3.43%
Standard Life (SL.) 174.30p -3.38%
HSBC Holdings (HSBA) 447.00p -2.83%
Land Securities Group (LAND) 384.00p -2.66%

FTSE 250 - Risers
Venture Production (VPC) 726.00p +25.17%
GKN (GKN) 67.25p +7.17%

FTSE 250 - Fallers
SIG (SHI) 95.25p -9.29%
Thames River Red Ptg Pref NPV Hedge (TRMA) 87.25p -6.18% 

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Asian markets advance on Wall Street's gains

The major markets across the Asia-Pacific region advanced for the fourth day in succession, led by financials. However, the rally seems to be losing steam, with profit taking in select stocks and a slump in metals generating some selling pressure. Except Australia, all the other markets in the region ended in the green.

Crude oil ended $0.71 down in Asian trading at $48.45 a barrel in electronic trading, after having closed at $49.16 a barrel on the New York Mercantile Exchange on Tuesday. In the New York session, the commodity gained, $1.81 after hitting an intraday low of $46.53 and a high of $49.82.

Japan
 
The benchmark Nikkei 225 Index, having opened strongly above the 8,000 mark in early trading on Wall Street cues, could not sustain at higher levels and declined sharply by the mid-session on the negative outlook for the gaming console makers. A report from the World Bank revising the GDP forecast for China to 6.5% from 7.5% also also led to some weakness.

However, the index recovered in late afternoon trading to close at 7,972, while the broader Topix Index of all First Section issues advanced 4.03 points or 0.5% to 765.

The Bank of Japan, at the conclusion of the 2-day meeting revealed that interest rates have been left unchanged at 0.10%. The Bank also stated that it would buy 1.8 trillion yen of government bonds each month, up from 1.4 trillion yen now. The new measure is expected to help commercial banks increase lending. On Tuesday, the Bank outlined plans to provide as much as 1 trillion yen of subordinated loans to banks to revive lending and replenish capital sapped by falling stocks. These measures are expected to lend the much-needed support to the banks to combat recession and spur economic growth.

Among the banking stocks, Resona Holdings surged up 5.37%, Sumitomo Mitsui Financial Group surged up 3.35%, Mizuho Financial advanced 3.00%, and Mitsubishi UFJ Financial added 0.21%.

Gaming console manufacturers declined after Deutsche Bank downgraded Ninetendo's stock on lower profit outlook for next year. Leading gaming company Nintendo declined more than 4.9% following the downgrade.

Exporters ended mixed, with Canon losing 0.93%, while Sharp advanced 2.45% and Sony added 0.40%. Automakers also ended mixed; Toyota Motor gained 0.66%, while Honda motor shed 0.86%.

Oil-related stocks gained following the overnight rise in crude oil price. Inpex gained 0.76%, and Showa Shell rose 0.59%. Nippon Oil, however, ended unchanged. Trading houses also ended higher; Mitsubishi Corp rose 1.33%, Itochu gained 0.45%, and Sumitomo Corp. advanced 0.49%.

Australia

In Sydney, the benchmark S&P/ASX200 shed 5.6 points, or 0.16% to close at 3,446, while the broader All Ordinaries Index dropped 7.2% or 0.21% to end at 3.386.

Resource stocks led the declines after Goldman Sachs cut the rating for Rio Tinto to "sell" from "hold". The brokerage opined that Rio Tinto's proposed deal with Aluminum Company of China, or Chinalco, might not materialize due to concerns about the debt levels of the third biggest mining company in the world.

Rio Tinto declined 8.86% following the downgrade, dragging the indices down. BHP Billiton lost 3.45%, Minara Sources declined 5.17% and Riversdale Mining dropped 6.41%.
 
Oil stocks closed mixed, with Santos advancing 1.39%, while Woodside Petroleum and Oil Search lost 1.39% and 0.39% respectively.

Gold stocks also ended on a mixed note, with Lihir Gold advancing 1.32% while Sinoa-Gold and Newcrest Mining shed 4.98% and 2.71% respectively compared to previous day.

Among retail stocks, David Jones soared 9.24% after reporting a 2.4% rise in profit for the first half and affirming that its second-half profit will rise by 5% despite weak economic conditions and bleak forecast. Coles' owner Wesfarmers gained 1.58%. Woolworths, however, bucked the trend, and closed 0.71% lower.

Financial stocks continued to advance on expectations of stability in the banking sector. Commonwealth Bank added 0.77%, ANZ Bank advanced 2.49%, National Australia Bank ended 0.95% higher and Westpac Banking gained 0.51%.

South Korea

In Seoul, the benchmark KOSPI Index, gained 6.07 points or 0.52% and ended at 1,170,.

The financial watchdog of the economy, Financial Supervisory Services, in a statement revealed that loan default rate of banks rose sharply to a three-year high as slumping economic conditions affected the small businesses the most. The delinquency ratio of banks rose to 1.67% in February, up 0.17% from January, the statement noted.

Blue chip stocks were the major gainers during the day. Market Heavyweight Samsung Electronics advanced 1.12%. Technology stock Hynix Semiconductor soared more than 4.5%, and LG Electronics gained 1.49%.

Shipbuilders advanced on a stronger local currency. Hyundai Heavy Industries and Samsung Heavy Industries gained more than 1% each.

Financial stocks are trading mixed; Shinhan Financial Group advanced 2.78% while Woori Finance and KB Financial Group declined 0.55% and 2.31% respectively.

Hong Kong

The benchmark Hang Seng Index advanced 1.86% or 239.08 points to 13,117, on positive cues from the US market.

Among the financials, HSBC Holdings advanced 5.77%, BOC Hong Kong gained 2.41%, Bank of East Asia surged 3.10% and Bank of China added 2.15%. However, Hang Seng Bank declined 0.70% on profit taking.
 
In the resource space, Petrochina gained 2.23% and CNOOC advanced 2.65%. Aluminum Company of China or Chalco, however, shed 2.83% following reports that the deal between the company and Rio Tinto might not materialize.

Insurance stocks were trading mixed, with China Life advancing 1.88% while Ping An closed lower by 0.23%. Among telecom stocks, Hutchison Whimpoa advanced 3.36% and China Mobile added 1.49%. Utility stocks ended lower, with HK & China Gas shedding 0.87% and HK Electric dropping 0.97% from earlier close.

Other markets

Among the other major markets in the region, China's Shanghai Composite Index gained 0.24% or 5.40 points to 2,224; Singapore's Strait Times Index advanced 1.08% or 16.91 points to 1,576; Indonesia's Jakarta Composite Index is up 10.75 points or 0.82% at 1,383; and Taiwan's Weighted Index ended at 5,048, up 6.15 points or 0.12%.

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Crude Oil Slips Ahead Of EIA Report

Crude oil prices edged to the downside in early trading on Wednesday as May took over as the front-month contract. Investors are awaiting the Energy Information Administration's weekly inventory report.

Light sweet crude for May settlement dropped 51 cents to $48.65 per barrel. Prices closed the previous session at a multi-month high.

Traders looked ahead to the release of inventory data at 10:30 a.m. ET. Experts are looking for a build of about 1.2 million barrels. Last week, the EIA said crude oil inventories increased 749,000 barrels.

Light sweet crude oil for April delivery finished at $49.16, up $1.81, at the highest close since Dec. 1 for a front-month contract. Prices reached as high as $49.82 earlier in the day.
 
May oil added $1.99 to finish the session at $50.04 per barrel. This was the contract's highest finish since Jan. 15.

Prices have been rising this week amid hopes the Organization of Petroleum Exporting Countries members will reduce output, according to the agreement from last year.

OPEC decided Sunday to not reduce oil production below current levels, instead deciding to focus their efforts on getting member countries to abide by their current output quotas. The cartel's 152nd meeting was held in Vienna.

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