US & World Daily Markets Financial Briefing 24-03-2009

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Nasdaq Pulls Back To A New Low For The Session

Stocks are seeing notable weakness in mid-morning trading on Tuesday, with the major averages giving back some ground after posting standout gains in the previous session. The weakness in the markets is largely due to profit taking following Monday's rally.

While stocks are moving mostly lower, selling pressure has remained somewhat subdued, as traders keep an eye on comments by Federal Reserve Chairman Ben Bernanke and Treasury Secretary Tim Geithner's before the House Financial Services Committee.

In prepared remarks, Bernanke drove home the point that while the bonuses AIG has given to employees were inappropriate, the overall bailout of the world's largest insurer was necessary to prevent a 1930s style meltdown.
 
Additionally, Geithner made it known that the AIG Financial Products division was unregulated, operating in unregulated ways and that all institutions that pose systemic risk to the broader economy must be subject to oversight.

The major averages have moved to the downside in recent trading, with the tech-heavy Nasdaq pulling back to a new low for the session. The Dow is currently down 100.75 at 7,675.10, the Nasdaq is down 27.08 at 1,528.69 and the S&P 500 is down 11.99 at 810.93.

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Toronto Stocks Surrender Some Of Recent Rally

Toronto stocks have turned lower on Tuesday as traders cashed in on a recent rally. The drop took the market off its highest level in six weeks.

The S&P/TSX Composite Index has lost 135.40 points or 1.51% to 8,766.65. The index has closed higher in nine of the previous sessions.

Gold stocks are down a sharp 4.4% and materials have lost 3.2% as the precious metal has dropped more than $30 in Comex trading. Among the big names, Goldcorp has declined 4.8%, Agnico-Eagle Mines has dropped 4.5% and Kinross is down 3.6%.

Energy stocks are down 2.4% with crude oil surrendering some of its recent gains. Light sweet crude has lost 91 cents to $52.89 per barrel.

Suncor is down 4.5% adding to modest gains from yesterday that came after the company agreed to buy Petro-Canada in a $15.8 billion deal. Petro-Canada's stock has dropped 2% after soaring more than 20% on Monday.

The heavily-weighted Financial Index is down 1%. Sun Life Financial is down 1% as the insurer had its credit rating reduced to A- from A+ by Fitch Ratings.
 
In other corporate news, MTI Global has soared 20% after the company agreed to sell certain assets of its silicones business to Rogers Corp. for US$7.4 million.

HudBay Minerals is flat after the company announced that it has named Peter Jones chief executive officer. HudBay also appointed Wesley Voorheis as chairman.

Comaplex Minerals Corp. has lost 7% after the company reported fourth quarter net earnings of C$328,000 or C$0.01 per share, compared to C$2.85 million or C$0.06 per share in the same quarter of last year.

Shaw Communications has edged up 1.15% after the company said that its second-quarter basic cable subscribers increased 4,273 to 2.27 million. Digital and Internet customers totaled 1.08 million and 1.63 million, up by 106,489 and 26,130.

Tekmira Pharmaceuticals Corp. has plunged 9.5% after the company announced that its fiscal 2008 net loss was C$14.3 million or C$0.35 per common share, compared to a net loss of C$2.6 million or C$0.11 per common share in 2007.

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Early gains evaporate after inflation data
 
Market Movers
FTSE 100 3,910.16 -1.08%
techMARK 1,129.66 +0.82%
FTSE 250 6,407.82 +0.26%

Blue chips have reversed their early gains after inflation data showed a surprise rise in the government's measure in February.

Economists were scratching their heads as to why prices rose to 3.2%. RPI, arguably the real measure of inflation, fell to zero, but again this was higher than expected with minus 0.5% the consensus figure.

Among the stocks whose fortunes have reversed after the bright beginning are the banks Lloyds and Barclays though RBS is still in the blue Reports today suggested Goldman Sachs may be interested in Barclays’ iShares arm.

Miners are the main weak spot. Antofagasta, Rio Tinto and Xstrata lead the sector lower. Ukrainian iron ore producer Ferrexpo as expected said 2008 was a record year for the company, and it has continued to trade profitably in 2009 despite the downturn in markets.

Water firm Severn Trent is the best performer after it demonstrated its limited exposure to recessionary conditions by saying there has been no change to business performance or outlook since an update on 27 January.

Banknote printer De La Rue reports good trading in its currency division in the last three months with security division orders also holding up. "Overall, trading for the group during the final quarter of the year to 28 March 2009 has been in line with our expectations," De La Rue said.

Northern Foods rose after UBS upgraded the Goodfellas pizza firm to ‘buy’ from ‘neutral’ following recent declines in the group’s share price.

Specialist insurer and reinsurer Beazley has published details of its plan to rebase to the Republic of Ireland for tax purposes. A new company, referred to as “New Beazley" in the proposal document, will be created by way of a court sanctioned scheme of arrangement, and this will become the parent company of the existing group.

UK-based oil explorer BG Group has lifted its stake in bid target Pure Energy Resources to 90.93%. As the recommended cash offer for Pure has now received acceptances in respect of more than 90% of the Australian energy company’s share capital the offer price will be increased from A$8 to A$8.25 per Pure share.

Credit card transaction handler DataCash reports its strong growth has continued into the first three months of the current year. The group has seen over 25% growth in the volume and value of transaction processed year to date versus 2008, with business boosted by the Cheltenham horse racing festival, outgoing chief executive Andrew Dark said.

Oil explorer Emerald Energy has abandoned a well in Colombia after drilling showed that it was not oil-bearing. The Jacinto No. 1 exploration well in the Jacaranda block was drilled to a total depth of 6,460 feet but the evaluation showed the sand channel to be water bearing.

Insurance software group Innovation has received an approach from SICAR (a company owned by Carlyle Europe Technology Partners II, and CETP II Co-Investment) at 15p per share. 

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Asian markets end higher on optimism about banking sector stability

The major markets across the Asia-Pacific region ended in the green on Tuesday, buoyed by the cues from Wall Street, where the markets witnessed the biggest one-day rally since October 2008 after the Obama Administration unveiled plans to help banks sell toxic assets and pave way for a revival in credit flow, which is critical for reviving the economy. Positive economic data on existing home sales also lifted market sentiment.

Market analysts are speculating that the extension of the relief rally might signal that the bottom has already been reached and the markets may find stability in the short-term, on optimism that the plans will really work and the global economic recovery might take place sooner than expected, with the banking sector likely to lead the recovery.

Crude oil was modestly down at $53.54 a barrel in Asian trading having ended Monday's session higher by $1.73 at $53.80 a barrel on New York Mercantile Exchange after hitting an intra-day low of $51.62 and a high of $54.05.
 
In Tokyo, the benchmark Nikkei 225 Index ended 273 points or 3.32% higher at 8,488. The broader Topix Index of all First Section issues gained 2.7% or 21.16 points to 813.

On the economic front on Tuesday, minutes from the Bank of Japan's monetary policy meeting held on February 18 and 19 revealed that board members suggested that the Japanese economy may begin to recover from the current recession in the second half of this year at the earliest. At the meeting, the board voted unanimously to keep the overnight call rate unchanged at 0.10%. The board also decided to expand special funds-supplying operations in order to facilitate a fall in longer-term interest rates that are actually applicable to fund-raising by firms and relieve them from funding concerns.

Among banking stocks, Mitsubishi UFJ, Japan's biggest bank, gained 4.49%, Sumitomo Mitsui rose 3.16% and Mizuho Financial advanced 5.00%. Exporters also gained on the back of a weaker yen. Canon advanced 4.35%, Sharp gained 3.08% and Sony rose 5.72%. Automaker Toyota added 3.61% and Honda moved up 2.42%.

Oil-related stocks also advanced. Inpex edged up 0.14%, Nippon Oil gained 3.35% and Showa Shell added 1.10%. Among trading houses, Mitsubishi Corp. gained 4.23%, Itochu moved up 3.99% and Sumitomo Corp. rose 1.89%.

In Australia, the benchmark S&P/ASX 200 index, having opened strongly and gained as much as 2.6% in early trading, pared back much of its gains over the course of the session before ending higher by 29.7 points, or 0.84%, to 3,580, and the broader All Ordinaries Index, following a similar trend, closed the session up 34.20 points, or 0.98%, at 3,517.

Mining stocks advanced on higher commodity prices. BHP Billiton, the largest mining company in the world, gained 1.77% and Rio Tinto, the third largest miner in the world, advanced 4.73%. However, Oz Minerals shed 11.02% after the government extended its review into a A$1.8 billion rescue bid by Chinese state-owned Minmetals.

Among energy stocks, Woodside gained 4.50%, Oil Search advanced 5.43% and Santos rose 1.67%.

Financial stocks ended mixed as investors resorted to profit taking at higher levels. ANZ Banking Group added 1.31%, National Australia Bank moved up 0.35% and Westpac Banking gained 0.84%. Investment bank Macquarie Group surged 5.38%. On the other hand, Commonwealth Bank of Australia ended lower by 1.65%.

Retail stocks also ended mixed. David Jones advanced 1.38%, and Coles' owner Wesfarmers gained 0.97%, while Woolworths fell 1.12%.

Gold miners ended weak after gold closed marginally lower for a second straight session on Monday. Lihir Gold lost 3.53% and Newcrest Mining shed 1.96%. However, Sino Gold bucked the trend and edged up 0.18%.
 
In Hong Kong, the benchmark Hang Seng Index gained 462.92 points, or 3.44% to close at 13,910, led by financial stocks, telecom and china-related shares.

Among financials, HSBC Holdings surged up 9.83%, Hang Seng Bank gained 4.94%, BOC Hong Kong advanced 6.57%, Bank of East Asia rose 6.97%, and Bank of Communications added 4.04%. Insurance stocks also gained. Ping An Insurance rose 4.44% and China Life moved up 0.58% from previous close.

Telecom stocks ended higher; Hutchison Whimpoa advanced 5.62%, China Mobile gained 1.59%, and Tencent Holdings gained 5.12%.

China-related stocks ended mixed. China Mercantile Holdings surged 11.18% and China Resources gained 0.49%. However, China Overseas lost 2.65%.

Among other major stocks, Foxconn International Holdings gained 7.91%, while retailer Espirit Holdings lost 4.71%

Resource stocks showed mixed sentiment. While Aluminum Company of China, or Chalco, decrealsed 1.17%. CNOOC and Petrochina gained 4.35% and 0.93% respectively.

The benchmark KOSPI Index in South Korea gained 22.20 points, or 1.85% and closed at 1,222.

In an effort to revive the economy by boosting demand, the South Korean government approved an extra budget of 28.9 trillion Won, equivalent to $20.7 billion, earlier in the day.

Further, in a meeting with the local business leaders and economic analysts, the Minister for Knowledge Economy stated that, based on the preliminary report from the Korea Customs Service, trade surplus for March is likely to reach $4.5 billion, due to a much sharper decline in imports than in exports during the first 20 days of the month. The data accentuates the weakness in the domestic economy.

Among the financials, Woori Finance gained 2.41%, Shinhan Financial Group advanced 3.61% and KB Financial Group, the holding firm of Kookmin bank, moved up 4.63%.
 
Market heavyweight Samsung Electronics rose 1.82%. Among technology stocks, Hynix Semiconductor added 0.97%. LG Electronics gained 3.60%, and LG Display moved up 2.04%.

Shipbuilders also ended higher. Hyundai Heavy Industries advanced 1.23%, Samsung Heavy Industries gained 1.90%, and Daewoo Ship building rose 2.97%.

Oil-related stocks advanced on higher crude oil prices. SK Holdings gained 4.33%, and S-Oil rose 1.37%.

Among the other major markets, China's Shanghai Composite Index rose 12.94 points or 0.50% to 2,338, Indonesia's Jakarta Composite Index closed at 1,436, up 29.47 points, or 2.02%, Singapore's Strait Times Index gained 2.54%, or 42.26 points, to 1,706, and Taiwan's Weighted Index added 118.30 points, or 2.30%, to 5,242.

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Crude Backs Away From Multi-Month High

Crude oil prices edged lower on Tuesday and gave back some of yesterday's rally. The decline took prices away from the recently-seen multi-month high.

Light sweet crude for May delivery fell 48 cents to $53.32 per barrel. Prices slipped as low as $52.87 in the opening moments of the session after touching above $54 on Monday.

Traders looked ahead to the Energy Information Administration data on weekly inventories, due Wednesday. Last week's report showed crude oil inventories increased 2 million barrels from the previous week. Motor gasoline inventories unexpectedly increased by 3.2 million barrels last week.

Fed Chairman Ben Bernanke and Treasury Secretary Tim Geithner will appear before a House Financial Services Committee hearing on the government's role in saving AIG, which has been propped up to the tune of nearly $200 billion dollars in taxpayer money.
 
The AIG hearing is set to kick off at 10 am ET, the same time that FDIC head Sheila Bair will testify at a Senate Banking Committee hearing on bank regulation.

The dollar remained on the defensive versus the resurgent sterling but was steady against most other majors Tuesday morning in New York. With the Dow Jones Industrial Average at its highest level in more than a month, higher-yielding currencies have seen renewed buying interest.

Crude for May rallied to $53.80, up $1.73 on Monday. Prices hit as high as $54.05 earlier in the day, the best level since January.

Speaking at a conference hosted by the Czech National Bank in Prague, Chicago Federal Reserve Bank President Charles Evans predicted that the Fed's actions would help to stabilize financial markets, which is an essential part of an economic recovery.

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