US & World Daily Markets Financial Briefing 23-02-2011

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Stocks Turning In A Lackluster Performance In Early Trading

After seeing substantial weakness in the previous session, stocks are showing a lack of direction in early trading on Wednesday. The major averages are lingering near the unchanged line after ending Tuesday's trading sharply lower.

While traders had seemed poised to do some bargain hunting following yesterday's sell-off, continued concerns about unrest in the Middle East and the subsequent surge by the price of crude oil have helped to keep buying interest subdued.

Most of the major sectors are showing only modest moves, although early strength is visible among housing, gold, and oil stocks. On the other hand, Hewlett Packard (HPQ) is helping to lead the computer hardware sector lower after providing disappointing guidance.

On the economic front in the U.S., the National Association of Realtors is scheduled to release its report on existing home sales for January at 10:00 a.m. ET. Economists estimate existing home sales of 5.25 million for the month after posting a rate of 5.28 million for December.

With the lack of any additional economic data, the markets may look to comments from some central bankers for further hints on the economy.

Philadelphia Federal Reserve President Charles Plosser is scheduled to speak about the economic outlook to the Rotary Club of Birmingham, Alabama, at 11:00 a.m. ET. At 12:30 p.m. ET, Kansas City Fed President Thomas Hoenig is due to speak at a housing and finance conference in Washington.

The major averages are currently turning in a mixed performance, with the Dow posting a modest loss. The Dow is currently down 10.86 points or 0.1 percent at 12,201.93, while the Nasdaq is up 4.83 points or 0.2 percent at 2,761.25 and the S&P 500 is up 2.15 points or 0.2 percent at 1,317.59.

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Euro Extends Rally Versus Dollar

The euro jumped to its highest in more than three weeks against the dollar Wednesday morning, as rising oil prices fueled speculation that European central bankers will raise interest rates sooner than forecast.

Rising commodity prices have been detected in recent inflation data, and with the European Central Bank seen as more hawkish than the Federal Reserve, the interest rate gap between the U.S. and E.U. may widen in the next few months.

This morning, the minutes of the most recent meeting of the Bank of England showed a growing divergence of opinion among policy makers in the U.K.

While the BoE kept its easy monetary policy in place, the minutes showed increasing sentiment for rate hikes amid above-target inflationary pressures.

The euro rose to $1.3765 against the dollar, up more than a penny from its overnight level. The euro has picked up more than 3 cents in the past week.

The single currency held its ground against the sterling, firming to GBP 0.8472 from 0.8420.

With the yen's safe haven appeal somewhat diminished today, the euro snapped back to Y113.70 from Y112.23 earlier this week.

In economic news, Eurozone industrial new orders unexpectedly rose in December as France and Italy outperformed, offsetting a decline in Germany.

Total new orders grew 2.1% month-on-month, European Union statistical agency Eurostat said Wednesday.

Existing home sales in the U.S. rose for the third consecutive month in January, according to a report released by the National Association of Realtors on Wednesday. NAR said existing home sales rose 2.7 percent to an annual rate of 5.36 million in January from a downwardly revised 5.22 million in December.

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French Market Falls

The French market is losing in afternoon trading Wednesday, as unrest continued in Libya, triggering concerns about crude supply. Banks are gaining, while construction stocks are falling.

Crude for April delivery is adding $0.41 to $95.83 per barrel and gold is advancing $3.8 to $1404.9 a troy ounce.

In economic news, Eurozone industrial new orders rose 2.1 percent month-on-month in December, Eurostat said. Economists had forecast a decline of 1 percent following a revised 2.2 percent increase in November.

French consumer price inflation unexpectedly steadied in January, as discount sales offset higher energy prices. The consumer price index rose 1.8 percent annually in January, unchanged from December, data from statistical office Insee showed. Economists had forecast an increase to 2 percent.

The minutes of the Monetary Policy Committee meeting released today showed that policy makers of the Bank of England left the key interest rate unchanged and maintained the size of quantitative easing at GBP 200 billion by a split vote in February. Six members including Governor Mervyn King preferred to hold the key interest rate at a historic low of 0.5 percent, while Andrew Sentance, Spencer Dale and Martin Weale dissented.

Mortgage approvals for house purchase in UK rose to 28,932 in January from 28,907 in December, short of the expected 29,250 approvals, the British Bankers' Association said. The value of mortgages approved remained unchanged at GBP 4.1 billion.

The CAC 40 index opened lower at 4,045, compared to the previous close of 4,050, and witnessed volatile trading that kept the index below the flat line in early trading. However, the benchmark index later broke into positive territory, but erased those gains later. The index is currently losing 0.07 percent.

Hotel group Accor is declining 2.85 percent after reporting a profit in the full year. Oil & gas services firm Technip is falling 1.65 percent.

Carmakers Renault and Peugeot are declining 1.55 percent and 0.8 percent, respectively. Construction stocks Bouygues, Vinci, cement giant Lafarge and building materials maker Saint-Gobain are falling.

Those making notable losses include IT services firm Cap Gemini, department stores operator PPR, Veolia Environnement and LVMH.

Lender Natixis is surging 5.4 percent after reporting a fourth-quarter profit that topped expectations. The company also said it would resume dividend. Credit Agricole, Societe Generale and BNP Paribas are advancing between 1.6 percent and 1 percent.

Insurer Axa is adding 2.3 percent and media firm Vivendi is rising 1.8 percent.

Tire firm Michelin, rail equipment maker Alstom, grocery retailer Carrefour and oil firm Total are seeing moderate gains.

Elsewhere in Europe, the UK's FTSE 100 is losing 0.68 percent and the German DAX is falling 0.53 percent.

Across Asia/Pacific, major markets ended mostly lower. Australia's All Ordinaries lost 0.24 percent, Hong Kong's Hang Seng retreated 0.36 percent and India's BSE Sensex dipped 0.64 percent. Japan's Nikkei 225 lost 0.80 percent, while China's Shanghai Composite Index added 0.25 percent.

In the U.S., futures point to a higher open on Wall Street. In the previous session, the Dow sank 1.4 percent, the Nasdaq plummeted 2.7 percent and the S&P 500 dropped 2.1 percent.

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Asian Markets Mostly End In Negative Territory

Asian markets open for trading on Wednesday ended mostly in the red with minor losses as geopolitical concerns in Libya continued to haunt the investors. The increasing unrest in Tripoli amid military intervention to restore peace and normalcy as well as rising crude oil prices for the second day impacted market sentiment. Weak closing on Wall Street in the previous session and fresh concerns that economic growth might be negatively impacted by rising oil prices impacted market sentiment. While the markets in China and Indonesia managed to end in the green, the other markets ended in the red with marginal losses.

In Australia, the benchmark S&P/ASX200 Index was down 10.80 points, or 0.22 percent, a 4,845.90 points, while the broader All Ordinaries Index ended at 4,935.60 points, representing a loss of 11.70 points, or 0.24 percent.

On the economic front, a report released by the Australian Bureau of Statistics revealed that the country's Wage Price Index decreased to 1.0 percent in the December 2010 quarter. The decrease was 0.1 percent, following the Q3 reading of 1.1 percent. The Bureau also said the index rose 0.4 percent compared to one year ago. The full year index reading was 3.9 percent, vs. 3.5 percent in Q4 2009. The Bureau reported that its trend estimate for private sector wages, which further smooths the seasonally adjusted data, rose 1.0 percent in the December 2010 quarter compared to 0.9 percent for the public sector.

A separate report released by the Australian Bureau of Statistics revealed that the total amount of construction work done in the country increased 0.8 percent in the December 2010 quarter compared to the quarter before. The Statistics Bureau further noted that the seasonally adjusted value of overall construction work was A$14.922 billion. This figure was below the 1.5 percent growth forecast by most economists.

Reserve Bank of Australia Governor Glenn Stevens urged a continued increase in the country's savings as a means of dealing with the mining investment boom. Speaking in Melbourne, Stevens said it was unclear how long the boom will last and that China and India are likely to continue growing rapidly in the coming years. The surge in income arising from the boom should be allowed to flow into savings, he said.

Light sweet crude oil futures for April delivery was trading at $95.49 a barrel in electronic trading, up sharp by $0.17 per barrel from previous close at $95.42 a barrel in New York on Tuesday.

Banking stocks ended weaker with all the four major banks - ANZ Bank, Commonwealth Bank of Australia, National Australia Bank and Westpac Banking Corp - ending in the red with moderate losses.

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Mixed trading was witnessed among oil related stocks despite surge in crude oil prices in the international market. Santos Ltd managed to end in the green with modest gains, while both Oil Search Ltd and Woodside Petroleum ended in the red with minor losses.

Mining resource companies BHP Billiton and Rio Tinto ended in the red with moderate losses, while retailers also remained mixed.

In Japan, the benchmark Nikkei 225 Index dropped 85.60 points, or 0.80 percent, to 10,579.10, while the broader Topix index of first section issues was down 9.82 points, or 1.03 percent, to 946.88.

On the economic front, a report released by Ministry of Finance revealed that Japan saw a merchandise trade deficit of 471.4 billion yen in January, falling into the red for the first time in 22 months. The reading came as a shock to analysts, who had been expecting a surplus of 49.3 billion yen following the downwardly revised surplus of 725.9 billion yen in December. Exports were much weaker than expected, rising just 1.4 percent on year to 4.971 trillion yen - well shy of expectations for a 7.4 percent increase following the downwardly revised 12.9 percent gain a month earlier. Imports came in much higher than expected, rising for the 13th straight month to 12.4 percent on year to 5.442 trillion yen versus forecasts for an 8.1 percent rise following the 10.6 percent gain in the previous month.

The Bank of Japan said that an index measuring corporate service prices in Japan was down 1.1 percent on year in January, standing at 96.1. That was slightly better than forecasts for a 1.3 percent annual contraction, which would have matched December's decline. Prices were down 0.3 percent on month following a 0.2 percent decline in December.

Light sweet crude oil futures for April delivery was trading at $95.49 a barrel in electronic trading, up sharp by $0.17 per barrel from previous close at $95.42 a barrel in New York on Tuesday.

Inpex Corp, the leading mining and exploration company in the country, led the decliners with a loss of 4.07 percent.

Sea transport related companies also ended weaker. Nippon Yusen slipped 2.65 percent, Mitsui OSK Lines fell 1.81 percent and Kawasaki Kisen Kaisha Ltd was down 3.25 percent.

In China, the benchmark Shanghai Composite Index ended in the green with a modest gain of 7.12 poins, or 0.25 percent, at 2,862.63.

In Hong Kong, the benchmark HangSeng Index ended at 22.906.90, down 83.91 points, or 0.36 percent, from previous close.

In Indonesia, the benchmark Jakarta Composite Index ended at 3,474.12, up 23.02 points, or 0.67 percent from previous close.

In Singapore, the Strait Times Index ended in the red with a loss of 17.27 points, or 0.57 percent, at 3,001.95.

In South Korea, the benchmark KOSPI Index ended at 1,961.63, down 8.29 points, or 0.42 percent, from previous close.

In Taiwan, the Taiwan Weighted Index ended at 8,528.94, representing a sharp loss of 144.73 points, or 1.67 percent, from previous close.

In India, the benchmark BSE Sensex ended at 18,178.83, down 117.83 points from previous close while the broader Nifty Index ended at 5,437.35, down 31.85 points.

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