US & World Daily Markets Financial Briefing 23-06-2009

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The major U.S. index futures are pointing to a slightly higher opening on Tuesday. Trading is likely to characterize caution, as the FOMC begins to deliberate on the course of monetary policy. Uncertain economic course is likely to cast a shadow on the market even as traders nurture hopes of seeing some stabilization. Traders may also stay tuned to the housing market report to be released later in the day.

The pullback witnessed early last week resumed Monday after mitigating over the course of the previous week, as U.S. stocks tumbled amid renewed economic concerns. The major U.S. averages opened sharply lower and saw some further downside in early trading, although selling pressure had waned by the early afternoon. Thereafter, it was more of a sideways movement for the averages before they closed sharply lower.

The Dow Industrials ended down 200.72 points or 2.35% at 8,339 and the Nasdaq Composite Index receded 61.28 points or 3.35% to 1,766. The S&P 500 Index lost 28.19 points or 3.06% to close at 893.

Twenty-seven of the thirty Dow components ended the session lower, with Alcoa (down 8.91%), Bank of America (down 9.68%), JP Morgan Chase (down 6.09%) and General Electric (down 4.79%) declining sharply in the session. Boeing, Caterpillar, Chevron, Walt-Disney, DuPont,  3M Co.  Microsoft and Exxon Mobil all fell by mote than 3% each.

After basing since early June, the Dow Industrials broke below the base pattern following yesterday’s pullback. The index is now below its 200-day moving average as well as its 50-day moving average, which are currently at 8,553 and 8,378, respectively. On the downside, the other support levels are around 8,161, 7,989 and 7,514.

Among the sector indexes, KBW Bank Index and the NYSE Arca Securities Broker/Dealer Index fell 5.33%. The resource space also came under significant selling pressure, with the NYSE Arca Oil Index losing 4.47%, the Philadelphia Oil Service Index dropping 6.87% and the NYSE Arca Gold Bugs Index receding 6.36%. The Dow Jones Transportation Average and the NYSE Arca Airline Index ended down 4.67% and 5.59%, respectively.

The Philadelphia Semiconductor Index, the NYSE Arca Software Index and the NYSE Arca Disk Drive Index declined over 3% each. The NYSE Arca Networking Index and the NYSE Arca Internet Index both moved down over 4%.

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Toronto stocks will look to rebound in early trading on Monday after losing more than 4% yesterday. Resource stocks may lead the charge as commodity prices have recovered some of the sharp losses in the prior session.

Crude oil prices climbed $1.08 to reach $68.01 in electronic trading. Gold added $2.30 to $923.30 an ounce and copper rose 4.95 cents to $2.1935.

In corporate news, MAG Silver Corp. said Monday that in its view, Fresnillo's decision decision to not proceed with its "take-under" bid was motivated by much different considerations that Fresnillo has not been prepared to publicly acknowledge.

Royal Laser Corp. reported net income for the fourth quarter of C$44 thousand, compared to C$323 thousand in the year-ago quarter. On per share basis, the company posted a breakeven for the current quarter and the last year quarter.
 
Agrium said 62% of CF Industries common shares were tendered in support of Agrium's $3.82 billion hostile takeover offer.

Printing company Quebecor World named Mark Angelson as chairman of the board.

On Monday, the S&P/TSX Composite plummeted 453.77 points or 4.41% to end at 9,834.18 after a bleak forecast from the World Bank for the world economy. This marked the lowest finish since May 15.

Across the border, the existing home sales report is set to be released at 10 a.m. ET. Economists expect existing home sales to climb to an annual rate of 4.82 million units in May from a 4.68 million unit rate in April.

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The markets across the Asia-pacific region ended in negative territory on Tuesday, tracking the negative sentiment on Wall Street overnight amid increasing concerns over a delay in economic recovery.

Japan’s Nikkei 225 Average opened sharply lower at 9,696 compared to its previous close of 9,826, and continued to drift further down before closing at 9,550, representing a loss of 276.66 points or 2.82%. The broader Topix Index of all first section issues ended at 902, down 20.79 points or 2.30%.

Sumitomo Metal Mining, country's largest nickel producer, fell 6.16%. Among trading houses, Mitsubishi Corp. lost 5.31%, Mitsui & Co fell 4.55% and Sumitomo Corp., declined 5.01%. Automakers and other exporters declined on the strengthening of the local currency against the U.S. greenback.

In Australia, the All Ordinaries Index opened unchanged from its previous close at 3,911, but it slipped into negative territory sharply by nearly 100 points in early trading before moving sideways for the rest of the session. The index ended with a loss of 117.80 points, or 3.01%, at 3,793. The benchmark S&P/ASX 200 Index followed a similar trend and ended lower at 3,797, representing a loss of 121.9 points, or 3.10%.

Material stocks led the declines on weak commodity prices. BHP Billiton declined 4.11%, Centennial Coal slumped 11.24%, Fortescue Metals lost 9.83%, Oz Minerals fell 5.35% and Rio Tinto shed 2.78%. Gold, oil and bank stocks also saw weakness.

In Hong Kong, the Hang Seng Index opened sharply lower at 17,577 compared to its previous close at 18,060 and traded in a narrow range throughout the session, on concerns about a global recovery. The market ended with a loss of 521.18 points, or 2.89%, to close at 17,538. Thirty-nine of the forty two ended in negative territory, as investors sold off shares amid growth and valuation concerns.

In India, the stock market ended nearly flat, recovering most of the losses during the course of trading amid short covering and optimism about the first budget from the incumbent government. The BSE Sensex ended flat with a loss of 2.21 points or 0.02% at 14,324, and the broader Nifty index ended in the green with a gain of 12 points, or 0.28% at 4,247.

Among the other major markets in the region, China's Shanghai Composite Index slipped 3.60 points or 0.12% to close at 2,893, Taiwan's Weighted Index lost 143.74 points, or 2.27% to close at 6,197, the Strait Times Index iof Singapore shed 40.82 points or 1.80% to close at 2,226 and Indonesia's Jakarta Composite Index shed 60.64 points or 3.07% to close at 1,914.

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The major European markets are showing some strength on Tuesday after yesterday’s slump. The French CAC 40 Index is trading up 0.53%, while the German DAX Index and the U.K.’s FTSE 100 Index are rising 1.01% and 0.54%, respectively.

On the economic front, the INSEE reported that French consumer spending decreased 0.2% month-over-month in May following a downwardly revised 0.5% increase in April. Meanwhile, economists had forecast that spending will rise 0.2%. On an annual basis, consumers spent 1.6% less in May. A separate report released by the statistical agency showed that French business sentiment rose for the third straight month in June. The confidence indicator was 75 compared to a revised reading of 73 for May, and exceeded the consensus estimate of 74.

German consumer confidence strengthened following a period of stability, signaling positive development in July, results of the latest consumer climate survey from market research firm GfK Group showed.The survey's forward - looking consumer sentiment index rose to 2.9 points for July from a revised value of 2.6 in June. Economists had estimated a reading of 2.5 for July.

Currency, Commodity Markets

In their first day as the front-month contract, crude oil futures for August delivery are rising $0.51 to $68.01 a barrel. The July contract expired at $66.93 a barrel on Monday, representing a decline of $2.62.

Gold futures are gaining $3.50 at $924.50 an ounce. In the previous session, the precious metal lost $15.20 to close at $921 an ounce.

On the currency front, the U.S. dollar is sliding to 95.87 yen after ending New York trading on Monday at 95.865 yen. Against the euro, the dollar is trading at $1.4014 compared to yesterday’s $1.3867.

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U.S. Economic Reports

The Federal Reserve Open Market Committee is scheduled to begin its 2-day monetary policy meeting today and the central bank will release its post-meeting monetary policy statement at 2:15 PM ET on Wednesday.

The National Association of Realtors is scheduled to release its report on existing home sales for May at 10 AM ET. Economists expect existing home sales to rise to an annual rate of 4.82 million for the month.

Existing home sales rose 2.9% to a seasonally adjusted annual rate of 4.68 million units in April compared to a revised reading of 4.55 million in March. The median price of existing homes rose to $170,200, up from $169,900 in March, but down 15.4% from a year-ago. Inventories measured in months' supply rose to 10.2 months from 9.6 months in the previous month. According to data from the association, about 45% of the sales were of distressed properties.

Stocks in Focus

Intersil, a manufacturer of analog and mixed signal semiconductors, could gain ground after it raised its second quarter revenue guidance to $145 million to $148 million from its previous guidance of $123 million to $132 million. The company attributed the upside to strength in its computing and consumer end markets.

Meanwhile, Rambus is likely to move to the downside after it lowered its second quarter revenue guidance to $26.7 million to $27.2 million from its initial estimate of $27 million to $30 million, with the company attributing the lowered guidance to the current macroeconomic situation and its effect on the sales of semiconductors and consumer electronics systems. The company also upwardly revised its expenses guidance for the quarter. Separately, the company said it proposes to offer $150 million principal amount of convertible senior notes due 2014.

Ashland could react to its announcement that it has signed a definitive agreement to sell its global marine services business to J.F. Lehman & Co. in a deal valued at $120 million before tax. The company intends to use the after-tax proceeds to reduce debt.

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