US & World Daily Markets Financial Briefing 25-03-2009

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Major Averages Move Off Their Highs But Remain Firmly Positive

Stocks have shown a strong upward move over the course of morning trading on Wednesday, with the major averages offsetting the losses posted in the previous session. The rebound comes as traders react to some much better than expected economic data.

Earlier in the day, the Commerce Department released a report revealing that durable goods orders unexpectedly showed a substantial increase in the month of February after falling in each of the six previous months.

The report showed that durable goods orders jumped 3.4 percent in February after falling by a revised 7.3 percent in January. Economists had been expecting durable goods orders to fall by 2.5 percent compared to the 4.5 percent decrease that had been reported for the previous month.
 
The Commerce Department also released a separate report showing an unexpected in increase in new home sales in the month of February, continuing a recent string of better than expected housing market reports.

The report showed that new home sales rose 4.7 percent to an annual rate of 337,000 in February from an upwardly revised January rate of 322,000. The results surprised economists, who had been expecting sales to fall to 300,000 from the 309,000 originally reported for the previous month.

In recent trading, the major markets have moved well off their best levels of the day, although they are holding onto strong gains. The Dow is currently up 148.46 at 7,808.43, the Nasdaq is up 26.03 at 1,542.55 and the S&P 500 is up 15.07 at 821.32.

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Toronto Stocks Move Moderately Higher In Morning Trading

Toronto stocks have turned higher in Wednesday morning trading, recovering some of the losses seen yesterday. Gold-related stocks were among the big gainers as the precious metal rebounded on the Comex.

The S&P/TSX Composite Index has added 79.27 points or 0.89% to move at 8,928.66. A higher close would be the 10th in 12 sessions.

Mining stocks have continued to see strength, rising 3.5%. Teck Cominco has led the rally with an 8.4% hike. Hudbay is up 3.2%.

The Gold and Materials indexes are both up 2.1% as the metal has jumped $14.90 to $938.70. Kinross has added 3% and Goldcorp is up 2.3%.

Financials are up 1.7% with Toronto-Dominion leading the big six banks with a 2% rise. Scotiabank has rallied 1.5% and Royal Bank of Canada is up 1.3%.
 
In corporate news, AutoCanada Income Fund is up 4.2%. The company reported a net loss for the fourth quarter of C$67.1 million, compared to net earnings of C$5.5 million in the prior year quarter. Revenue decreased 7.3% to C$182.4 million from C$196.7 million in the year-ago quarter.

Hydrogenics Corp. is up 1.7% after the company reported it narrowed its fourth quarter net loss to US$1.95 million or US$0.02 per share, compared to a net loss of US$9.50 million or US$0.10 per share in the same quarter of last year.

Goodfellow is basically flat after it reported net income for the second quarter of C$2.4 million or C$0.28 per share, compared to C$38,000 or C$0.00 per share for the year-ago quarter.

Compton Petroleum Corp. has lost 2.1% after the company reported a net loss for the fourth quarter of C$95.94 million or C$0.74 per share, compared to net income of C$50.46 million or C$0.38 per share in the year-ago quarter.

In economic news, data released by National Bank Financial revealed the Teranet-National Bank National Composite House Price Index dropped 2.4% in the month of January.

On Tuesday, the S&P/TSX Composite Index fell 109.12 or 1.21% end the session 8,849.39. Overall, the index has been trending sharply higher for the past two weeks, paring some of its massive yearly losses.

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Footsie struggles as miners fall
 
Market Movers
FTSE 100 3,866.48 -1.15%
techMARK 1,123.30 -0.37%
FTSE 250 6,319.36 -1.31%

For the second day in a row a bright start has been undermined by the mining sector.

Platinum is the problem today with Anglo American and Lonmin the worst performers, though Rio Tinto is also lower even though the Australian Competition & Consumer Commission opted not to block the increase of Chinalco’s stake to 18%.

Broker Evolution Securities observed that the controversial deal still has more difficult obstacles to overcome and suggests that the recent rally in the Rio share price presents a ‘strong selling opportunity’.

Elsewhere in the sector, Eurasian Natural Resources reported a sharp rise in full-year pre-tax profits. Peru-focused Hochschild Mining is down 10% after slipping in to an attributable loss in 2008.

Insurer Legal & General is lower following disappointing results. It has halved the final dividend after plunging into a full year loss and boosting profit annuity credit default provisions to £1.2bn. There’s a final dividend of 2.05p a share versus 4.1p in 2007.

Rival Aviva is the worst performer in the life assurance sector as its controversially maintained dividend went ex today. Some still suggest it can't afford it, despite the firm's claims to the contrary.

HSBC has slipped back after announcing it may cut 1,200 of its 58,000 staff in the UK

Engineer Smiths Group is taking a bashing after it cautioned that its detection business's order flow could affect its short-term results. Headline pre-tax profit, which is before exceptional items, rose to £167m in the six months ended 31 January 2009 from £159m a year.

Supermarket chain Sainsbury’s delivered a strong performance in the final quarter of the year with like-for-like sales, excluding fuel, up a better-than-expected 6.2%. Like-for-like sales, including fuel, rose 2.7% in the 11 weeks to 21 March, while total sales were up 3.4% or 6.8% excluding fuel.

Fund managers Man and Schroders have slipped back after a bright start, though fallen star RAB Capital is up after it held the dividend despite an annual pre-tax loss as assets under management slumped.

Imperial Tobacco says trading continues to be steady as it announced the appointment of a new chief operating officer, Alison Cooper, who will take over the role with immediate effect.

Package tour operator TUI Travel has seen an uptick in business over the past three months for both its winter and summer holidays. "Trading for both winter and summer seasons has strengthened since our previous update on 5 February. Bookings are in line with capacity reductions and there is evidence of improved consumer demand in recent weeks," it said in a trading update.

Land Securities has announced 94.81% acceptances for its £755.7m rights issue. It had received valid acceptances for the 5 for 8 cash call at 270p a share in respect of 275.7m shares by yesterday’s closing date. Dealing in the new ordinary shares starts today.

Troubled sportswear retailer JJB Sports is frantically working on a deal to sell its fitness clubs after its latest extension to a standstill arrangement with its banks expired yesterday. Reports this morning added that if a deal cannot be agreed over the sale of the fitness club arm, for about £75m, Mike Ashley's Sports Direct will buy it from the administrator.

Oil firm Premier Oil is wanted after posting a record profit after tax of $98.3m, up from $39.0m in 2007, though the record figure is after deducting a non-cash write down of $31.9 million on the Chinguetti field. The company is proposing to acquire Oilexco North Sea from the administrators for $505m, and to raise £171m by means of a rights issue.

Car dealer HR Owen said its trading performance in 2008 mirrored the deterioration in the economy as profits more than halved. Pre-tax profits came in at £1.4m from £3m in the same period last year on revenue that rose 8% to £144m.

Predicting weakness in the retail and commercial sectors and shifting to other areas helped structural steel group Severfield-Rowen buck the recession to post a rise in profits. Revenue in 2008 climbed to £394.3m from £300.7m, helping to lift underlying pre-tax profits to £52.5m from £42.9m. 

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Asian markets end mixed as investors take profits

The markets across the Asia-Pacific region ended mixed on Wednesday, as investors preferred profit taking following an extended relief rally. The markets, having shrugged off the early weakness following a weak closing by Wall Street stocks, could not maintain the momentum and the euphoria over a revival in global economic conditions seems to be losing steam for want of evidence that could instill confidence. Global demand continues to be weak as is evident from a report released earlier in the day by the Japanese government, which showed that exports plummeted by a record 49.9% year-over- year while imports fell 43.0% year-over-year to 3.443 trillion yen.

In Asian trading, crude oil declined about 1.3% in electronic trading, ahead of the release of the U.S. weekly petroleum inventories report. Light sweet crude oil for May delivery ended $0.18 higher on New York Mercantile Exchange at $53.98, after hitting an intra-day high of $54.20 and a low of $52.45.

In Japan, the benchmark Nikkei 225 Index declined 8.31 points, or 0.10% to close at 8,480, while the broader Topix Index of all First Section issues gained 5.77 points, or 0.7% to close at 818.
 
Investors evinced interest in companies whose business year will end on 31 March, as this is the last day the shares traded with rights for dividend. KDDI Corp, the second largest mobile operator in the country, gained 5.99%, and JFE Holdings, the second largest steel maker in the country, advanced 4.41%. Japan Tobacco gained 4.86%.

Banking stocks ended on a mixed note. While Mitsubishi UFJ, Japan's biggest bank, declined 0.56%, Resona Holdings lost 1.61%, and Sumitomo Mitsui fell 1.01%, Mizuho Financial moved up 0.87%. Shinsei Bank ended lower by 2.63% as the bank stated that it is planning to raise 48.2 billion yen by issuing preferred securities in the current month as it seeks to bolster its capital base.

Exporters declined on the back of a stronger yen. Canon lost 0.52%, Sharp declined 1.56% and Sony fell 2.35%. However, automakers advanced. Toyota moved up 1.27% and Honda Motor gained 0.43%.

Oil related stocks ended mixed. Inpex lost 3.01%, but Showa Shell moved up 0.87% and Nippon Oil advanced 1.92%. Among trading houses, Mitsubishi Corp. gained 1.02% and Sumitomo Corp. advanced 1.42%, but Itochu declined 0.19%.

 Electronics maker Sanyo Electric Co. warned of a 90 billion yen net loss for the year ending March 2009, hurt by the worsening global recession. This compares to its earlier forecast that it would breakeven. The company's stock dropped 1.44%.

In Sydney, the benchmark S&P/ASX 200 Index gained 29.30 points, or 0.82% to close at 3,609, and the broader All Ordinaries Index moved up 0.82%, or 28.90 points, to end at 3,546.

Financials advanced on hopes that the plan unveiled by the U.S to remove toxic assets from banks' balance sheet will help the global financial sector to stabilize sooner than expected. Australia and NZ Bank advanced 4.52%, National Australia Bank rose 3.63%, Westpac Bank added 2.97% and Commonwealth Bank of Australia increased 3.26%. However, investment bank Macquarie Group declined 4.68%.

In the resources sector, mining conglomerates ended on a mixed note after commodity prices declined in London Metals Exchange on Tuesday.

While BHP Billiton declined 1.51%, rival Rio Tinto gained 1.24% after the Australian Consumer and Competition Commission stated that the proposed investment by Aluminum Corp. of China in Rio Tinto will not affect the iron ore, copper, bauxite and alumina markets. Resource company Alumina Ltd surged up 8.07%. Oz Minerals gained more than 7% following the news that the bankers might extend loans to the company even as the Regulators sought more time to review the takeover proposal from China Minimetals Group.

Gold miners ended mostly weak after gold closed lower for a third straight session overnight. Newcrest lost 2.54% and Lihir Gold declined 3.04%. However, Sino Gold advanced 2.16%.
 
Following the modest gain in crude oil price overnight, oil stock Woodside Petroleum gained 2.29%, Santos advanced 4.90% and Oil Search rose 2.76%.

Retail stocks ended mostly higher. While Wesfarmers gained 3.53%, Harvey Norman rose 1.56% and David Jones added 1.06%, Woolworths dropped 0.28%.

In Hong Kong, the benchmark Hang Seng Index decreased 288.23 points, or 2.07%, to close at 13,622. Almost all the stocks, which witnessed a rally in the past few trading sessions, ended lower on profit taking.

Among financials, HSBC Holdings fell 4.69%, Hang Seng Bank lost 2.65%, BOC Hong Kong decreased 2.30%, Bank of East Asia shed 2.68% and Bank of Communications dropped 1.66%. However, Bank of China gained 1.68%.

Insurance stocks ended lower. Ping An lost 4.74%, and China Life decreased 1.74%. In telecom space, Hutchison Whimpoa fell 2.60%, Tencent declined 5.72% and China Mobile lost 0.30%.

Resource stocks also ended weaker. Aluminum Company of China, or Chalco, decreased 2.76%. CNOOC shed 4.94% and Petrochina slipped 0.30%.

Among china-related stocks, China Overseas fell 3.53% and China Resources edged down 0.16%. Utility stocks ended mixed. While HK Electric advanced 1.06%, HK & China Gas fell 0.17%.

The benchmark KOSPI Index in South Korea ended higher by 7.32 points or 0.60% at 1,229 driven by expectations that liquidity in the market will increase following measures taken by the government.

The Ministry of Health, Welfare and Family Affairs has revealed that rules governing investment in domestic stock markets by the country's largest institutional investor, the National Pension Service, has been relaxed. The pension service is now allowed to invest in a range between 10% and 24% of its total assets in domestic markets, as against its previous range between 12% and 22%.
 
Meanwhile, data released by the Korea Automobile Manufacturers Association revealed that auto exports to Eastern Europe plunged sharply by 70.7% during February 2009 to 11,216 vehicles. The head of the Korea Development Institute, Hyun Oh-seok, stated that the country's economy is presently accumulating energy and might rebound from the second half of the year.

Financial stocks ended mixed. While Shinhan Financial Group fell 0.92%, KB Financial, the holding firm of Kookmin Bank, advanced 0.43%, and Woori Finance gained 0.92%.

Among shipbuilders, Hyundai Heavy Industries gained 1.95%, Daewoo Ship building advanced 2.22% and Samsung Heavy Industries rise 2.99%.

Market heavyweight Samsung Electronics lost 0.54%. In the technology space, while Hynix Semiconductor fell 1.92%, LG Electronics and LG Display advanced 2.06% and 2.36% respectively. Oil-related stocks advanced. SK Holdings gained 3.69%, and S-oil moved up 0.68%.

Among the other major markets, China's Shanghai Composite Index declined 2%, or 46.86 points, to 2,292, Indonesia's Jakarta Composite Index fell 13.51 points, or 0.94% to 1,423, and Singapore's Strait Times Index lost 0.93%, or 15.87 points, to 1,690. However, the Taiwan Weighted Index gained 1.99%, or 104.20 points, to 5,346.

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Crude Oil Drops Ahead Of EIA Report

Oil prices dropped for a second straight day on Wednesday as traders looked ahead to the Energy Information Administration's weekly inventory report. The drop took crude further off its recently seen multi-month high.

Crude oil prices fell to $52.60, down $1.38 for the session. Prices touched as low as $52.08 in the early going.

Traders await the Energy Department's weekly inventory report due at 10:30 a.m. ET. Experts are looking for a build of about 1.2 million barrels in the recent week. This would be the the 22nd rise in 26 weeks.

The American Petroleum Institute reported Tuesday that crude oil inventories increased by 4.57 million barrels in the recent week. Gasoline inventories fell 805,000 barrels.
 
Oil slipped 18 cents amid choppy trading on Tuesday. Prices added $1.73 on Monday and hit an intraday high of $54.05, the best level since January.

On the economic front, a Commerce Department report showed that durable goods orders jumped 3.4 percent in February after falling by a revised 7.3 percent in January. Economists had been expecting durable goods orders to fall by 2.5 percent compared to the 4.5 percent decrease that had been reported for the previous month.

Meanwhile, industry data showed that mortgage application volume rose over 32 percent last week, as low mortgage rates on the heels of the Fed's decision to buy Treasury securities encouraged both the purchase and refinancing of mortgages. Rates fell to 6-year lows, spurring a 41.5 percent jump in refinancing activity.

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