US & World Daily Markets Financial Briefing 02-11-2009

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Stocks May Start Higher in Anticipation of Positive Economic Signals

The major U.S. index futures are pointing to a higher opening on Monday. Although the higher futures reflect the anxiety of traders to make an entry at levels that could earn them profits, especially after the recent retreat, uncertainty over the sustainability of the recovery should keep sentiment subdued. The fears are likely to be accentuated by the filing by lender CIT Group. Earnings news released thus far during the day were bordering on the positive.

The markets may focus on the trio of economic reports to be released after the markets open. Traders are likely to particularly focus on the results of the manufacturing survey of the Institute for Supply Management to gain insights into state of the manufacturing sector.

U.S. stocks extended their losses into the week ended October 30th, as economic data continued to be suggest that the economy's momentum is built on the back of stimulus measures may be derailed as it is weaned off these artificial boosts.

Last Monday, the markets retreated after some early strength, as a decline in oil prices amid the strengthening of the dollar led to a sell-off in the commodity space. In Tuesday's session, the major averages reacted to a weak consumer confidence reading and showed weakness for most of the session before the Dow Industrials recovered to close modestly higher, while the Nasdaq Composite Index and the S&P 500 Index ended lower.

The markets experienced another round of selling on Wednesday, as traders apprehension over a sustainable recovery intensified following the release of a housing market report that showed an unexpected decline in the existing home sales for September. Catalyzed by a couple of positive earnings reports and the release of the first read on third quarter GDP growth, which came in ahead of expectations, stocks advanced solidly on Thursday.

On Friday, the optimism waned, and the markets retreated steadily throughout the session, as bleak consumer data worked on the nerves of the traders. The major averages all ended down over 2%, with the Dow ending at a nearly a 3-week low.

For the week, the Dow Industrials ended down 2.60%, the S&P 500 Index fell 4.02% and the Nasdaq Composite Index receded 5.08%.

Among the sector indexes, the NYSE Arca Airline Index fell 8.10%, the NYSE Arca Gold Bugs Index declined 9.06%, the Philadelphia Oil Sector Index moved down 8.45%, the Philadelphia Housing Sector Index tumbled 9.47% and the KBW Bank Index lost 9.14%. While the NYSE Arca Biotechnology Index slipped 6.39%, the NYSE Arca Broker/Dealer Index, the Philadelphia Semiconductor Index and the Dow Jones Transportation Average all ended down over 5% for the week.

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Toronto Stocks Look To Bounce Back After Recent Slump

Bay Street stocks could recoup some of the sharp losses from last week Monday morning amid some positive earnings results from U.S.

U.S. futures are pointing mildly higher as Ford and Humana reported strong quarterly results before the bell. Markets on both sides of the border saw notable losses on Friday.

Commodities are also seeing some strength, which could push resource stocks higher. Crude oil has gained 49 cents to move at $77.49 a barrel and gold is up $15.80 to $1,056.20 per ounce, while copper is flat at $2.9465.

In Canadian corporate news, Cameco reported third-quarter net earnings of C$172 million or C$0.44 per share, up from net earnings of C$135 million or C$0.39 per share in the third quarter of 2008.

Iamgold announced the Societe D'Exploitation Des Mines D'Or De Sadiola, owner of the Sadiola Gold Mine in Mali, West Africa, board approval to proceed with the US$9 million Sadiola Deep Sulphide Feasibility Study.

ATCO Ltd. reported earnings of C$61.0 million or C$1.05 per share for the third quarter, compared to C$52.5 million or C$0.91 per share in the prior year quarter.

Canadian Utilities reported net income for the third quarter of C$120.9 million or C$0.96 per share, compared to C$67.0 million or C$0.53 per share for the year-ago quarter.

On Friday, the S&P/TSX Composite Index dropped 164.47 points or 1.48% to close at 10,910.75. The market lost a little more than 470 points amid volatile trading last week.

Currency, Commodity Futures

Crude oil futures are rising $0.59 to $77.59 a barrel after the December futures settled the week ended October 30th down $3.50 or 4.35% at $77 a barrel. Last Monday, oil fell by over $1.75-a-barrel, as demand concerns and the dollar's strength exerted downward pressure on oil.

The selling in the commodity continued into Tuesday's session, with oil dropping by almost as much as in Monday's session. However, oil reversed course and rose moderately on Wednesday amid the release of the weekly oil inventory report. Oil rose by about $2.50-a-barrel after the dollar weakened on Thursday following the release of the advance third quarter GDP report, only to retreat sharply on Friday in the wake of the weak consumer spending data to finish the week weaker.

Gold futures are advancing $13.60 to $1,054 an ounce after the precious metal fell $16 or 1.52% to $1,040.40 an ounce in the previous week.

Among the currencies, the U.S. dollar weakened against the yen, dropping 2.14% to 90.09 yen. Meanwhile, the greenback recorded a weekly gain of about 2% against euro to $1.4719, as doubts resurfaced over the sustainability of the global economic recovery.

Currently, the U.S. dollar is trading at 90.081 yen and is valued at $1.4764 versus the euro.

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Most Asian markets retreated on Monday, with the exception of China, after a weak U.S. lead from over the weekend re-ignited recovery worries. The Japanese and the Australian markets declined sharply, with the key averages in the region falling by over 2% each.

Japan's Nikkei 225 average opened lower and fell further in the morning before moving sideways throughout the rest of the session, as a stronger yen weighed on exporters. The index closed down 231.79 points or 2.31% at 9,803, its lowest level since October 8th. A majority of stocks declined in the session, with only some utility, financial and brewery stocks bucking the downtrend.

On the economic front, Japan's Ministry of Health, Labor and Welfare reported that total cash earnings of employees in industries fell for the 16th straight month. Total cash earnings in firms with 5 or more employees rose 1.6% year-over-year in September to 266,364 yen, slower than the 2.7% growth in the previous month.

Australia's All Ordinaries opened lower and declined sharply in early trading before some buying emerged, helping the average cut some of its losses. The index closed down 100.60 points or 2.16% at 4,546. The selling pressure was broad based, with material, consumer staple, energy, financial, healthcare, industrial and energy stocks seeing significant weakness.

A report released by the Melbourne Institute and TD Securities showed that consumer prices in Australia rose at their slowest year-over-year rate in record. The index climbed 1.2% in October compared to the previous year, which is notably below the central bank target of 2%-3%. The data gives leeway for the Reserve Bank of Australia for tightening the monetary policy further.

Meanwhile, in its mid-year review, the Australian government said the domestic economy would grow by 1.5% in the fiscal year ending June 30th, 2010 compared to its earlier forecast for a 0.5% contraction. The Treasury expects the net debt to peak at 10% of its GDP.

Although Hong Kong's Hang Seng Index opened notably lower, it gradually cut its losses to close down merely 132.68 points or 0.61% at 21,620. Most stocks, barring a couple of property stocks and some China-related stocks, declined.

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The major European averages are showing an uncertain trend in the morning on Monday and are trading higher. While the French CAC 40 Index and the German DAX Index are rising up 0.57% and 0.08%, respectively, the U.K.'s FTSE 100 Index is advancing 0.54%.

In corporate news, Royal Bank of Scotland said it would adhere to its recovery plan despite anti-trust regulators seeking large-scale disposals. The bank noted that talks with the European Union and Treasury have led to discussions over some asset sales, which were not initially contemplated. The bank is also in talks with the Treasury to insure some of its risky assets.
A report from property data manager Hometrack showed that the average asking price of a home in the United Kingdom rose by 0.2 percent to 156,400 pounds in October. On an annual basis, home prices were down 4.2 percent following a 5.6 percent contraction in the previous month.

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Gilead Sciences is likely to be in focus after it announced that data from two pivotal Phase III trials, evaluating safety and efficacy of Viread, its treatment for chronic hepatitis B showed that the majority of patients receiving Viread for up to 144 weeks experienced sustained suppression of HBV DNA levels in the blood. Additionally, it was observed that over 144 weeks, 8% of the patients experienced 's' antigen loss, which can contribute to resolution of infection.

Human Genome and GlaxoSmithKline may see some activity after the companies said their BENLYSTS met the primary endpoint in the second of the two pivotal Phase III trials in seropositive patients with systemic lupus. The treatment showed significant patient response compared with placebo and standard care, while it was also well tolerated.

Amylin and Eli Lilly are expected to move in reaction to their announcement that the FDA has approved an expanded indication for their BYETTA injection, which is now approved for use as a stand-alone medication along with diet and exercise to improve glycemic control in adults with type 2 diabetes.

Vertex Pharma could gain ground after it said more than 80% of hepatitis C patients in each of its Phase II study achieved a sustained viral response with a telaprevir-based regimen.

Pitney Bowes could see weakness after law firms Federman & Sherwood and Kendall Group filed class action lawsuit against the company on behalf of plaintiffs over alleged securities violations related to public statements made by the company between July 30th, 2007 and October 29th, 2007.

FMC Corp. may be in focus after it announced that it plans to challenge the Environment Protection Agency's decision to deny an administrative hearing on its action to cancel all U.S. food tolerances for carbofuran insecticide.

Denbury Resources may see some weakness after it announced that it has agreed to acquire Encore in a deal valued at $4.5 billion, including the assumption of debt and the value of the minority interest in Encore Energy Partners.

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