US & World Daily Markets Financial Briefing 04-09-2009

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Shrinking Job Losses May Support Markets

The major U.S. index futures are pointing to a higher opening on Friday, with the smaller-than-expected drop in jobs likely to encourage traders after the markets showed a lackluster trend for most of this week amid apprehensions over an economic recovery. That said, taking some sheen off the report was a climb in the jobless rate to a fresh 26-year high. Traders may also show some hesitation ahead of the 2-day G-20 finance ministers’ meeting starting today. The long weekend owing to the ‘Labor Day’ holiday on Monday should lead to light volume.

U.S. stocks opened Thursday’s session higher and stayed afloat amid the release of the results of the ISM’s service sector survey. Subsequently, the major averages pulled back sharply into negative territory in late morning trading before recovering immediately thereafter. The major averages traded with moderate gains for much of the remainder of the session, with buying interest picking up in late trading. The reversal in sentiment came about following the release of same store sales by retailers, which declined from year-ago levels but were still mostly ahead of expectations.

The Dow Industrials broke a 4-session losing streak to close up 63.94 points or 0.69% at 9,345 and the Nasdaq Composite ended at 1,983, representing a gain of 16.13 points or 0.82%. The S&P 500 Index advanced 8.49 points or 0.85% to 1,003.

Twenty-two of the thirty Dow components ended the session higher, with Alcoa, Bank of America, Caterpillar and JP Morgan Chase all gaining over 3%. American Express, DuPont, General Electric, Travelers Co. and Wal-Mart advanced more than 1.50% each. However, Merck and Pfizer posted notable losses, reflecting weakness in the drug sector.

Among the sector indexes, the Dow Jones Transportation Average rallied 2.27% and the NYSE Arca Airline Index gained 3.46%. In the resource space, the Dow Jones U.S. Basic Materials Average climbed 2.19%, the Philadelphia Oil Service Sector Index rose 1.80% and the NYSE Arca Gold Bugs Index jumped 5.82%.

Retail stocks rose in reaction to the chain store sales results for August, as reflected by the 2.03% rally by the S&P Retail Index. The Philadelphia Housing Sector Index gained 1.83%. The KBW Bank Index moved up 2.53% after its recent losses, while the NYSE Arca Securities Broker/Dealer Index rose 1.55%.

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Toronto Stocks Look To Continue Upward Move

Bay Street stocks will look for a third straight positive session on Friday as investors mull over employment data on both sides of the border. Markets are seeing strength in the U.S. and Europe.

Canadian employment increased by 27,000 in August, led by part-time work and among private sector employees, Statistics Canada said Friday. The unemployment rate edged up 0.1 percentage points to 8.7% as more people participated in the labor market.

Across the border, a Labor Department report showed that non-farm payroll employment fell by 216,000 jobs in August following a revised decrease of 276,000 jobs in July. Economists had expected a loss of about 230,000 jobs compared to the loss of 247,000 jobs originally reported for the previous month.

Despite the slower pace of job losses, the Labor Department also said that the unemployment rate jumped to 9.7 percent in August from 9.4 percent in July.
 
In corporate news, copper miner First Quantum Minerals Ltd. (FM.TO) announced the appointment of Mark Bolton as Chief Financial Officer, effective November 28. Bolton had been serving as acting finance chief at Paladin Energy Ltd.

Air Canada reported a 0.9% decline in August traffic to 5.13 billion revenue passenger miles or RPMs from 5.18 billion RPMs in the year earlier period. Capacity in August 2009 also decreased 3.6% to 5.92 billion available seat miles or ASMs from 6.14 billion ASMs in the prior year.

Enghouse Systems reported net income for the third quarter of C$2.4 million or C$0.10 per share, compared to C$1.6 million or C$0.06 per share in the year-ago quarter.

On Thursday, the S&P/TSX Composite Index rose 220.17 points or 2.05% to settle at 10,921.49. The market was boosted by a strong performance in the gold sector.

Crude oil futures are edging up $0.36 to $68.32 a barrel after ending Thursday’s session down $0.09 at $67.96 a barrel. Gold futures are currently receding $6.10 to $991.60 an ounce. In the previous session, the precious metal climbed $19.20 to $997.70 an ounce.

Among currencies, the U.S. dollar is trading at 92.573 yen compared to the 92.6355 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.4252.

Surprisingly, the yen has seen strength recent despite the stocks markets managing to hold onto their gains. Although risk appetite could influence short-term movement, the Japanese currency is most likely to maintain its current strength due to the increased probability of short-term rates remaining steady into 2010.

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Asian Markets End In Positive Territory

Most of the Asian markets ended in the positive territory on Friday, taking cues from Wall Street where major indices snapped the three-day losses and ended in positive territory with modest gains on increasing hopes of economic recovery. However, the markets in Japan and South Korea ended in the negative territory amid valuation concerns and caution ahead of key jobs report in the U.S.

In Japan, the benchmark Nikkei 225 Index ended at 10,187, representing a loss of 27.53 points, or 0.30%, while the broader Topix index of all first section stocks fell 7.03 points, or 0.8%, to 936.

Among automakers, Suzuki Motor edged up 0.24%, Honda Motor advanced 1.58%, Isuzu Motors slipped 0.48%, Toyota Motor remained unchanged from previous close and Nissan Motor rose 0.80%

Shipping stocks also ended in negative territory. Kawasaki Kisen declined 2.30%, Mitsui OSK Lines fell 2.12% and Nippon Yusen lost 2.31%.

In Australia, the benchmark S&P/ASX200 Index gained 0.13% or 5.90 points to close at 4,436, while the All-Ordinaries Index ended at 4,443, representing a gain of 9.80 points, or 0.22%.

Light sweet crude oil price for October delivery ended at $68.39 a barrel in electronic trading, up $0.43 from its previous close $67.96 a barrel in New York on Thursday.
 
Oil related stocks ended in positive territory. Woodside Petroleum added 1.29%, Santos gained 1.11% and Oil Search rose 2.46%. However, Origin Energy bucked the trend and ended with a loss of 2.00%.

Among gold stocks, Lihir Gold remained unchanged from previous close and Sino Gold Mining added 0.72%. However, Newcrest Mining ended in the red with a loss of 0.09%.

Metals and mining stocks ended weaker, giving away the early gains. BHP Billiton slipped 0.22%, Fortescue Metals lost 1.20%, Iluka Resources fell 4.50%, and Rio Tinto edged down 0.25%.

Mixed trading was witnessed in banks. ANZ Bank added 0.09%, Commonwealth Bank of Australia rose 1.56% and Westpac Banking advanced 0.41%. However, National Australia Bank ended in negative territory with a loss of 1.59%.

Among retailers, David Jones advanced 2.86% and Woolworths added 0.81%. However, Harvey Norman bucked the trend and slipped 0.75%.

In Hong Kong, the Hang Seng Index surged higher with a gain of 2.82% or 556.94 to close at 20,319. Positive closing in Wall Street in the previous session and late buying interest on increasing expectations of sustaining the growth momentum lifting the stocks. Of the 42 components in the index, as many as 40 stocks ended in the positive territory. Property stocks and banks led the gains while china-related shares and resource stocks also edged higher.

 In South Korea, the benchmark KOSPI Index ended in the negative territory with a minor loss of 4.29 points, or 0.29% at 1,609, as institutional investors sold off auto and technology stocks on valuation concerns. Banks however managed to gain, thus limiting the losses. Traders moved to the sidelines ahead of the weekend and key economic release from the US related to jobs report.

The Indian stock market snapped the 4-day losing streak and ended in the positive territory taking cues from the other markets in the region, positive trading in European markets and higher US futures prices. The BSE Sensex ended at 15,689, up 291 points or 1.89% and the S&P CNX Nifty rose 87 points or 1.89% to close at 4,680.

Among the other major markets in the region, China's Shanghai Composite Index added 0.58% or 16.58 points, to 2,862, Indonesia's Jakarta Composite Index edged up 0.49 points, or 0.02% to close at 2,323, Singapore's Strait Times Index gained 24.33 points, or 0.94% to close at 2,623, and Taiwan's Weighted Index rose 0.68% or 48.48 points to close at 7,153.

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The major European markets are trading on a positive note, with the French CAC 40 Index and the German DAX Index rising 1.37% and 1.79%, respectively. The U.K.’s FTSE 100 Index is moving up 1.56%.

In corporate news, Standard & Poor’s lowered its long term credit rating for Royal Dutch Shell to ‘AA’ from ‘AA+’, with the rating agency attributing the change to its concerns over the company’s rising debt levels.

Reports suggested that Vodafone along with France Telecom and Telefonica may be interested in buying the T-Mobile unit of Deutsche Telekom.

U.S. Economic Reports

Non-farm payroll employment fell by 216,000 in August following a revised decline of 276,000 in July. Economists had expected a decrease of about 230,000 jobs compared to the decrease of 247,000 originally reported for the previous month.

The continued decrease in jobs reflected declines in employment in both the good-producing and service-providing sectors. While goods-producing sectors lost 136,000 jobs, service-providing sectors lost 80,000 jobs, a slower pace of decline than the 154,000 rate in the previous month.

At the same time, the Labor Department said that the unemployment rate edged up to 9.7% from 9.4% in July. The rate came in higher than the 9.6% rate expected by economists.

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Shanda Entertainment is likely to be in focus after the company filed a registration statement with the SEC for an $800 million million in IPO for its games unit. Separately, the company reported that its second quarter net revenues rose 47.7% year-over-year to 1.24 billion Chinese yuan. The company’s non-GAAP net income attributable to ordinary shareholders rose to 6.40 Chinese yuan per ADS or $0.94 per ADS compared with 4 Chinese yuan per ADS in the year-ago period. Analysts estimated earnings of 84 per ADS on revenues of $178.61 million.

TriQuint is likely to see some activity after it announced that it has acquired TriAccess Technologies, a maker of Cable TV and Fiber-to-the-Premise IC. TriQuint previously served as TriAccess’ its foundry supplier.

Cooper Companies is likely to see weakness after it announced that its third quarter adjusted earnings were 54 cents per share, below the 62 cents per share consensus estimate. Sales climbed to $285.2 million from the year-ago’s $278.5 million, also below the mean analysts’ estimate of $288.8 million. The company tightened its full year earnings guidance to $2.27-$2.29 per share from its earlier estimate of $2.16-$2.36 per share. The company estimates revenues of $1.07 billion to $1.08 billion. The consensus estimates call for earnings of $2.30 per share on revenues of $1.08 billion.

Quicksilver may also be in focus after it said its third quarter earnings fell to 1 cents per share from 3 cents per share in the year-ago period, while sales declined to $501.4 million from $564.9 million last year. Analysts estimated earnings of 3 cents per share on revenues of $480.2 million.

AMR Corp. is likely to be in focus after it announced that its subsidiary American Eagle reported load factor of 72.7% for August, up 3 percentage points. However, traffic and capacity declined 3.1% and 7.2%, respectively, compared with the previous year. At the same time, United Airlines reported a 2.5 percentage point-increase in its load factor to 86.1 despite traffic and capacity falling 3.3% and 6.2%.

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