US & World Daily Markets Financial Briefing 21-09-2009

You can now manage your positions directly from your web browser, whether you use PC or Mac.  Test-drive VT Trader™ Web with your free practice account! Click Here

Uncertainty May Pose Threat to Recent Rally

The major U.S. index futures are pointing to a lower opening on Monday, with the negativity reflecting skepticism that the recent gains may have been overdone. While the Asian markets showed lackluster sentiment, the European averages are trading deep in the red. Additionally, traders may show caution ahead of the week’s economic reports, which may offer further clues on where the economy stands as far as recovery is concerned.

Commodity prices, including crude oil prices, have begun to retreat in reaction to the strengthening of the dollar after uncertainty is driving traders to safe bets like the dollar and the yen.

U.S. stocks gained for the second consecutive week in the week ended September 18th, even as traders remained wary of the recent upside, exposing the markets to the risk of a minor correction.

Notwithstanding the negative lead from the rest of the global markets, U.S. stocks advanced last Monday, aided by a late session buying surge. A pronouncement from Federal Reserve Chairman Ben Bernanke that the recession may be over catalyzed a strong upward move on Tuesday afternoon after the market reaction to a few solid economic data points released in the morning was mostly muted.

On Wednesday, propelled by a report showing strong industrial production growth and a positive housing market report, the major averages advanced solidly and ended with gains in excess of 1% each. However, the markets receded modestly on Thursday, as the notable gains in the previous session led some traders to take profits on their recent gains and move to the sidelines. Despite the absence of any major catalysts, stocks stayed mostly above the unchanged line on Friday, although they did show a lack of direction amid volatility associated with quadruple witching.

Consequently, for the week, the Dow Industrials was up 2.24% and the S&P 500 Index was up 2.45%, while the Nasdaq Composite Index ended the week up 2.50%.

Among the sector indexes, the NYSE Arca Airline Index gained the most in the week, rising 9.31%. The Philadelphia Oil Sector Index, the Philadelphia Housing Sector Index and the KBW Bank Index all ended the week up about 5%. The Dow Jones Utility Average, the S&P Retail Index, the NYSE Arca Biotechnology Index and the NYSE Arca Securities Broker/Dealer Index all gained about 3%.

Get our Daily Trade Signals and Grain Newsletter along with a copy of the CBOT Introduction to Agricultural Futures and Options Book for Free! The grain trading professionals at MF Global can guide you in the right direction with your trading. Click here to Get your Free Grain Trading Kit Today

Commodities Could Drag TSX Lower

Bay Street stocks could see early weakness on Monday, with commodities posting notable losses on the NYMEX. Stocks overseas are also moving in the red.

Crude oil has dropped $1.81 to $70.23 in electronic trading. Gold is down $11.50 to $998.80 and copper is off 2.15 cents to $2.7635.

Calfrac Well Services said it has agreed to acquire Century Oilfield Services, a privately held fracturing services company based in Calgary. The stock and cash deal is worth about $90 million.

Thomson Reuters announced a deal to acquire Hugin Group. Terms of the deal were not disclosed.

Fairfax Financial Holdings announced it will acquire the remaining shares of Odyssey Re Holdings Corp. for US$65 per share in cash or about US$1 billion.
 
Dell Inc. will acquire Perot Systems Corp. agreement under which Dell would acquire Perot Systems for about $3.9 billion.

Air Canada said that it has reached a settlement with the U.S. Department of Transportation that will allow the resumption of NHL sports charter flights for the 2009-10 season to cities in both Canada and the U.S.

Potash Corp. of Saskatchewan revised full-year earnings guidance to a range of $3.25-$3.75 per share, compared to its earlier estimates in the range of $4.00-$5.00 per share.

Bay Street stocks finished notably lower after a selling spree in the final half hour. The S&P/TSX Composite Index declined 82.28 points or 0.71% to close at 11,445.95.

Currency, Commodity Futures

Crude oil futures are trading down $1.76 at $70.28 a barrel after the commodity rose yet again in the week ended September 18th, when it rose $2.75 or 3.97% before ending at $72.04 a barrel.

Although the commodity began the week on a negative note, dropping moderately on Monday, it picked up momentum on Tuesday. Oil rose over $2-a-barrel on Tuesday and advanced more than $1.50-a-barrel on Wednesday, helped by a weaker dollar.

After receding modestly on Thursday, the commodity came under selling pressure yet again on Friday. Nevertheless, the black gold finished the week stronger, mainly on the strength provided by the mid-week rally.

Gold futures are currently moving down $11.30 to $999 an ounce. In the previous week, the precious metal gained $3.90 or 0.39% to close at $1,010.30 an ounce.

Among the currencies, the U.S. dollar rebounded against the yen in the week ended September 18th, reversing some of the declines of the previous week. On the other hand, the greenback receded against the euro, with the U.S. currency remaining under pressure for most of the week before trimming some of its loss on Friday. The dollar rose 0.64% against the yen to 91.2912 yen, while it moved down 0.9% against the euro to $1.4702.

Currently, the U.S. dollar is trading at 92.429 yen and is valued at $1.4625 versus the euro.

Click Here

Asian Stocks End Modestly Lower

The markets in the Asia-Pacific region have either faltered after a modestly positive start or showed little change amid somewhat listless movements on Monday, as traders sought direction from the U.S. equities markets ahead of the crucial two-day U.S. Federal Reserve meet, which kicks off on Tuesday.
A number of markets across the region, including Japan, remained closed and this coupled with lower commodity prices also weighed on sentiment.

The Fed's policy makers are expected to keep interest rates steady at historically low levels of close to zero. However, the statement accompanying the rate decision will be scrutinized to determine how strong the board's key committee thinks the economy is recovering and when interest rates will rise.

Although cues from Wall Street on Friday are positive, they were not strong enough to warrant any significant buying today. The major U.S averages rose modestly on Friday, as Procter & Gamble and other major homebuilders advanced on positive analysts' comments and investors bet a recent pick up in the economic outlook would help sustain corporate profits. The Dow finished up by 0.37%, the Nasdaq advanced 0.29% and the S&P 500 rose 0.26%.

Crude oil prices fell nearly 1% towards $71 a barrel in late Asian trading on Monday, as traders took profits amid pressure from a slightly stronger U.S. dollar. Japan, India and Singapore, Asia's major oil trading hub, were closed Monday for holidays. On Friday, light sweet crude oil rose to as high as $72.66 in early trading before finishing at $72.04 per barrel, down 43 cents on the session.
 
China's Shanghai Composite index gave off most of its early gains before closing at 2,967, up 4 points or 0.15%. Retailers gained sharply ahead of holidays starting Oct 1. However, analysts said that a correction is in the waiting, as the stock regulator approved more than a dozen companies for second board listings.

Construction and engineering company Metallurgical Corp of China, that completed the world's second-biggest initial public offering this year, jumped 28% on its first trading day.

Hong Kong's Hang Seng fell 151 points or 0.7% to 21,473, weighed down by profit taking in banking, property and mainland Chinese shares.

Shares in HSBC and Manulife erased their early gains and finished lower. Bank of China fell 2.26% and ICBC declined 1.6%. However, Li & Fung surged up around 7% on signs of recovery in the U.S., the world's largest economy.

The Australian market closed modestly lower amid light trading volumes. The benchmark S&P/ASX200 index closed at 4,677. down 16 points or 0.34% and the broader All Ordinaries index fell nearly 10 points or 0.2% to 4,684.

Big Miner Rio Tinto eased 0.51% after it announced the completion of $750 million sale of the Corumba iron ore mine in Brazil to Vale SA. Its rival BHP Billiton ended down 1.60%.

Pallet supplier Brambles rose 2.70% and QBE Insurance advanced 1.77% due to these firms' exposure to the U.S economy. Telstra rose 1.54% after the federal government last week strengthened its demand for the country's biggest telephone company to break up.

Banking stocks closed lower, retail stocks fell and gold mining stocks tracked weaker gold prices, while oil and media stocks closed mixed.

The South Korean market snapped a 4-day rally despite firm buying by foreign investors. The benchmark KOSPI closed at 1,695, down 4 points or 0.25%, with losers outnumbering gainers by 405 to 393. Volume was moderate at 510.82 million shares worth 5.44 trillion won
 
Hynix Semiconductor rallied more than 5% after Morgan Stanley raised its rating on the stock to "Equal-weight" from "Underweight." STX Pan Ocean surged up over 8% after the company confirmed reports that it was in talks with Brazilian mining company Vale for a long-term iron ore shipping contract.

The New Zealand market snapped a three-day rally, as investors took profits in the absence of clear leads from several Asian markets, including Japan, India and Singapore. The benchmark NZX-50 finished almost unchanged, easing 0.81 point or 0.03% to 3,156. NZ Oil & Gas (down nearly 5%) and Tower (down 3.4%) bore the bunt of the selling pressure after recent gains.

Market heavyweight Telecom Corp., gave off 1.5% on concerns the decision by the Australian government to split up Telstra Corp may have an impact on its asset valuations. Defensive stock Vector fell 2% and Contact Energy declined 1.2%, as investors reshuffled their portfolios in favor of cyclicals.

Fast-food chain Restaurant Brands continued its uptrend, gaining over 4% after it upgraded its fiscal year earnings forecast. Auckland Airport rallied nearly 4% on institutional buying.

On the economic front, New Zealand's Roy Morgan Consumer Confidence Rating rose 5.5 points to 120 in September, the highest since January 2008, driven by increasing confidence among people about both the short-term and long term future, the latest survey from Roy Morgan showed Monday. The confidence rating was 10.1 points higher than a year earlier.

Separately, the New Zealand service sector expanded to its highest level since February 2008 in August, the latest survey from Business NZ and BNZ Capital showed Monday.

Come Into the LIVE Online Trading Session and Watch Us Make at Least 1 Point ($500 - $2000 a Day). The LIVE Trading Session is Completely FREE! - Sign Up Now here!

After showing a lack of direction on Monday morning, the major European markets have moved decisively into negative territory. Currently, the French CAC 40 Index and the German DAX Index are declining 0.89% and 1.42%, respectively, while the German DAX Index is moving down 0.78%.

Average asking prices of houses in the U.K. were up 0.6% in September compared to August as, autumn sellers raised price expectations, the property website Rightmove reported. House prices had declined 2.2% in August after rising 0.6% in July. On a year-on-year basis, house prices dropped at a slower pace of 1.5% in September compared to a 3.1% drop in August.

U.S. Economic News

Although the unfolding week's calendar seems to be relatively light, there are a few key events and reports that could keep traders on tenterhooks. The focus of the week is likely to be the 2-day FOMC meeting to be concluded on Wednesday and the G-20 heads of governments' summit to be held in Pittsburgh on Friday. Additionally, traders may closely watch the National Association of Realtors' existing home sales report for August, the Commerce Department's new home sales report for August and the final reading of the Reuters/University of Michigan's consumer sentiment index for September.

The durable goods orders report for August, the Conference Board's leading indicators index for August and the regularly scheduled weekly jobless claims and crude oil inventory reports may also attract some attention. The results of the Treasury auctions of 52-week bills, 2-year notes, 5-year notes and 10-year notes due to be announced this week could also impact market movement.

The FOMC members now seem to have divergent opinions over the course of interest rates. Some of the committee members are reportedly concerned about the need to discuss the timeframe for raising interest rates and exit strategies. The post-meeting policy statement of the September meeting is likely to relay more optimism on growth than the previous meeting's statement and the description of inflation and the inflation outlook is likely to be maintained unchanged. At the same time, it is believed that the Fed may soon announce the phasing out of its purchase program for agency debt and mortgage backed securities.

Existing as well as new home sales are likely to show another month of growth in August. The recent strength is partly attributable to government subsidies to first time buyers and it remains to be seen if the strength continues beyond November, when the program is set to expire.

Durable goods orders are likely to rise again in August, thereby reducing the annual percentage decline further. That said, aircraft orders are likely to show weakness following July's outsized gains. The sustainability of the gains in new orders is likely to hinge on whether sales strengthen in the near term.

The Conference Board is scheduled to release a report on the U.S. leading index for August at 10 AM ET. The consensus estimate calls for a 0.7% increase in the leading indicators index for the month.

In July, the leading indicators index of the Conference Board rose 0.6%, rising for the fourth straight month. Six of the ten indicators that make up the index showed month-over-month increases. The coincident index was flat in July, as gains in industrial production, real personal income and real business sales offset a decline in payroll employment.

Here are 10 simple Dos and Don’ts any investor can follow which may contribute to potential for success in trading futures. This FREE guide can provide some of the basic principles that traders inherently live by.

Click Here to Request Your Free Guide!

Dell could move to the downside after it announced that it has agreed to buy Perot Systems for $3.9 billion or $30 per share in cash.

Praxair may gain ground after it announced that its Praxair China unit has secured a liquid nitrogen supply contract with Shanghai The First Biochemical & Pharmaceutical Co. that employs its NCOOL cryogenic heat exchanger system.

Jones Soda may come under selling pressure after it announced that it has received a letter from the Nasdaq for non-compliance with the minimum bid price rule for continued listing on the exchange.

Bob Evans Farms is likely to be in focus after it said its CFO Don Radkoski would retire from the company. Radkoski’s position will be filled by Tod Spornhauer, who has been serving as VP- finance, controller, assistant treasurer and assistant secretary since 2003.

Lennar could also move in reaction to its announcement that it posted a third quarter loss of 97 cents per share, including a 76 cents per share impact due to write-downs and tax adjustments, compared to a loss of 56 cents per share last year. Revenues fell 35% to $729.7 million.

Analysts’ estimates, which typically exclude one-time items, called for a loss of 46 cents per share on revenues of $774.4 million.

Our informative 24”x36” wall chart explores 40 years of historical market data on Crude Oil, Gold and S&P500 markets, and includes historical event call-outs. It’s a great trading and analytic tool for professional and beginner traders.

Sign up here to receive your chart today!

Investors Hub Services