US & World Daily Markets Financial Briefing 06-04-2010

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US stocks have pulled back from yesterday’s 18-month high in early dealings on Tuesday.

The Dow hit fresh highs on Monday thanks to a rise in US non-farm payrolls. Though the March increase, at 162,000, was slightly below the figure of 170,000 economists were predicting, the news nevertheless gave a spark to the market. It was only the third time the monthly payroll total has risen since the start of the recession in late 2007, while there was further good news in the form of revisions to the January and February figures.

The Labor Department now reckons non-farm payrolls increased by 14,000 in January, having initially reported a 26,000 decline, while the reduction in February, originally reported as 36,000, is now reckoned to have been only 14,000.

Elsewhere on the economic front, minutes from the Federal Reserve's latest policy meeting are due out later today.

Across the markets, the Dow Jones is 27 points lower, while the Nasdaq has dropped 8 points. The S&P 500 is down 3 points.

Coal group Peabody Energy has sweetened its offer for Macarthur Coal from A$3.3bn to A$3.6bn as it turned up the heat in the takeover battle with Hong Kong-based rival Noble Group for control over the Australian miner.

Takeover target Macarthur Coal rejected the $3.3bn bid last week and said it would go ahead with a vote on April 12 on a rival plan which would see Noble swap its stake in Gloucester Coal, a smaller Australian miner, for shares in Macarthur.

Toyota Motor is recalling 12,984 cars in South Korea for potential defects that could trap the gas pedal under the floor mat. The Japanese carmaker has recalled more than 8 million vehicles globally following a string of safety problems.

The news came just after the US government announced plans to fine the car group $16.4m for holding back information about faulty accelerator pedals.

Canadian stocks may pause for a breather Tuesday morning as commodities prices were leveling off from their recent highs. Also, renewed worries over the Greece debt situation may weigh on the sentiment.

U.S. stock futures point to a lower opening.

On Monday, the S&P/TSX Composite Index rose 35.29 points or 0.29% to settle at a new 18-month high of 12,186.35.

The price of crude oil edged down $0.11 to $86.51 a barrel, yet hovers near its 18-month high. Meanwhile, the price of gold eased from a 3-week high, trimming $5.5 to $1,128.3 an ounce.

Meanwhile, the Canadian dollar traded at parity with the U.S. dollar for the first time since July 2008, mainly on higher oil prices and on expectations of an interest rate hike.

In corporate news, minerals explorer Copper Mountain Mining (CUM.TO) announced plans to sell 8.2 million shares at C$3.05 per share.

Oil and gas royalty trust NAL Oil and Gas Trust (NAE_UN.TO) said it will sell 7.55 million units at C$13.25 per unit.

Uranium explorer CanAlaska Uranium (CVV.V) inducted Ram Ramachandran as its Chief Financial Officer.

Adamus Resources (ADU.V) announced the completion of the second tranche of the private placement of 11 million ordinary shares at A$0.36 per share.

Nickel explorer Mirabela Nickel (MNB.TO) said its director Nick Poll resigned in order to focus on new business ventures.

Airlines operator WestJet (WJA.TO) reported a 10% increase in March traffic to 1.37 billion revenue passenger miles or RPMs from 1.24 billion RPMs in the prior year period.

Communications services provider Sandvine Corp. (SVC.TO) turned to profit in first-quarter, reporting net income of C$0.004 per share, compared to net loss of C$0.035 per share last year.

Media production services company Immersive Media (IMC.V) announced that it has granted 2.27 million options to purchase its common shares at a price of $1.00 per share for a period of five years, to directors and officers of the company.

Natural resources explorer VMS Ventures (VMS.V) said it would launch a new nickel exploration company and will own approximately 45% of the new company at the completion of the two private placements.

With no major economic data on tap from Canada, traders will look to the minutes from the March Federal Reserve meeting apart from the movements in the commodities prices.

Greece worries hit the market again after a newspaper report said Greece was seeking to raise around $10 bln  from the U.S. investors. In other news, the country reportedly wanting to renegotiate a deal struck last month in the EU.

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The Indian market ended a volatile session almost flat on Tuesday, as investors took profits following Monday's strong rally. Auto stocks underperformed after recent strong gains. Tata Motors, Ashok Leyland, Maruti Suzuki, Mahindra & Mahindra and Bajaj Auto fell by 1-2.5%.

IT stocks continued to retreat on concerns a stronger rupee could drag their earnings. IT bellwether Infosys, TCS and Wipro fell around a percent each

Healthcare and oil/gas stocks also slipped, while select metal, banking, FMCG, power and realty stocks received good buying support as funds shuffled their portfolios.

Tata Steel gained about a percent after posting an 18% rise in its FY10 sales. Hindustan Zinc gained 0.64% and Sterlite Industries added 0.40%.

After moving choppily in a narrow range of 17,991-17,898, the 30-share Sensex ended up by about 6 points at 17,941, while the 50-share Nifty ended down 3 points at 5,366.

On the BSE, the small-cap index rose 0.52% and the mid-cap index added 0.68%, outperforming the frontline indexes. Gainers outpaced decliners by 1745 to 1166.

TTK Prestige rose 1.12% on launching a new range of pressure cookers. Shriram EPC (up 6.03%), Subhash Projects & Marketing (up 1.17%) and Punj Lloyd (up 0.78%) advanced on winning new orders. Suzlon Energy gained 2.25% on bagging a repeat order from GSFC.

Emami rose 1.02% on news the company is looking at several acquisition opportunities in the FMCG and pharma space. Castrol India rallied over 4% ahead of the record date next week for a liberal 1:1 bonus issue.

Religare Enterprises gained 1.66% after announcing a top-level management rejig. Bodal Chemicals hit the 5% upper circuit limit after its board approved a 5-for-1 stock split. Persistent Systems gained 32% on its debut.

Elsewhere, most Asians stocks finished higher Tuesday after Friday's upbeat U.S. jobs report and Monday's reassuring data on the housing and service sectors reinforced signs of recovery in the world's largest economy.

The European markets, which opened after an extended weekend on account of Easter holidays, were also trading strong, while the U.S stock futures edged lower in the absence of any major economic catalysts.

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The major European averages are hovering in positive territory in early afternoon trading Tuesday, boosted partly by encouraging monthly payrolls data from the U.S. Sentiment was also influenced by reports on better-than-expected Eurozone investor sentiment and U.K. construction activity. Crude for May delivery is trading down $0.15 at $86.47 per barrel and gold is lower by $4.1 at $1129.7 an ounce.

The Sentix research group said Eurozone investor sentiment rose to 2.52 in April from minus 7.48 in March, marking the first positive reading since June 2008. In the U.K., a report released by Markit Economics showed that construction activity increased for the first time since February 2008, rising to 53.1 in March from 48.5 in the previous month. Meanwhile, the Reserve Bank of Australia hiked the cash rate by 25 basis points to 4.25%.

The FTSE 100 opened at 5,745 and witnessed some upward momentum and has been trading largely sideways since then. The German DAX opened higher at 6,250 and touched a high of 6,265 before the end of the morning session. Later on, the index erased some of that gain. The French CAC 40 began trading above the flat mark at 4,049 and is making moderate gains.

The FTSE 100 is currently up 0.57% and the DAX is rising 0.25%. The CAC 40 is adding 0.50%.

In London, Imperial Tobacco is losing 1.69%, followed by Vodafone, which is slipping 1.51%. Pharmaceutical firms AstraZeneca and GlaxoSmithKline are declining 0.98% and 0.63%, respectively.

Insurer Admiral is gaining the most by adding 5.03%. Miner Kazakhmys is up 3.03% and Eurasian natural Resources is gaining 2.69%. Antofagasta, Vedanta Resources, Rio Tinto, BHP Billiton and Xstrata are trading notably higher.

Among banks, Royal Bank of Scotland is up 1.96% and Standard Chartered is rising 1.11% and Barclays is trading up 0.70%. Lloyds Banking Group is adding 0.65%, while HSBC Holdings is down 0.01%.

Among the DAX components, Bayer is topping the list of losers by slipping 1.02%. The winners are led by chipmaker Infineon Technologies, which is rising 2.58%. Steel producers Salzgitter and ThyssenKrupp are up 2.19% and 2.13%, respectively. Commerzbank is up 1.81% and Deutsche Bank is rising 1.02%.

In Paris, tire manufacturer Michelin is losing 1.86% and drugmaker Sanofi-Aventis is declining 0.90%. Metal fabrication firm Vallourec is rising 3.01%, followed by steel giant ArcelorMittal, which is up 2.75%. Among banks, Dexia is up 1.07% and Credit Agricole is rising 0.83%. BNP Paribas is adding 0.41%.

However, Societe Generale, which is probing "anomalies" found in a client account overseen by one of its private bankers in Singapore, is down 0.22%.

Across Asia-Pacific, major averages had a mixed outing. China's Shanghai Composite ended up 0.02%, India's BSE Sensex added 0.03%, and Australia's All ordinaries settled higher by 0.98%. However, Japan's Nikkei 225 ended lower by 0.50%.

In the U.S., the markets are poised to open lower with the Dow, S&P 500 and Nasdaq 100 futures trading in the red. In the previous session, the Dow advanced 0.43%, the Nasdaq closed up 1.12% and the S&P 500 added 0.79%.

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Rate themes dominate currencies this week

The currency markets seem to have picked up where they left off prior to the Easter break. Friday’s US payroll numbers, though below expectations, came in with a positive figure of 160k which was enough to buoy risk appetite and continue to buoy global recovery hopes.

This week the market has to contend with a whole host of central bank announcements, and the Reserve Bank of Australia kicked that off with a rate hike last night, as they raised interest rates to 4.25% in an attempt to rein in inflation as Australia wrestles with a commodities boom driven by growth from China.

On the same rate theme we have the publication of the latest minutes from the Federal Open Market Committee today, where we should find out if they were any other dissenters to the retention of the phrase “rates to be kept low for an extended period” other than Kansas City Fed President Thomas Hoenig.
Any further dissenters will raise concerns that the Fed will remove the phrase and increase the possibility of US rate hikes sooner rather than later. Yesterday’s Fed meeting about the discount rate continues to keep the market guessing as to when they will raise this rate, but any change will be largely cosmetic given that yield differentials are already beginning to work in the dollars favour, especially against the Euro.

Other rate decisions due this week include the Bank of Japan, Bank of England and European Central Bank.

On the sterling front, UK Prime Minister Gordon Brown is expected to announce the date for the general election for May 6th today, as the pound continues to be buffeted by the shifting fortunes of the opinion polls.

The Euro continues to be capped by concerns about sovereign debt, especially Greece as they seek to fund the next stage of their debt roll over to the tune of about €10bn. It’s also not being helped by continued disagreement amongst European leaders about the rates that Greece should be charged for any help, as Greece seeks to change the terms for any financial aid that was agreed at last months EU summit, over fears of further social unrest.

EURUSD - The Euro continues to find the air a little thin above the highs between the 1.3540/60 area, after the fall below 1.3400 earlier last week. The key resistance level is currently situated at 1.3570 trend line resistance from the highs at 1.5145. While below here the risk is for further weakness. A break above could well target the March highs around 1.3800.

GBPUSD - sterling continues to remain fairly well supported, despite the fluctuating opinion polls, however it is finding progress beyond the 1.5370/80 highs in March difficult to sustain. This is also where the 50 day moving average comes in and should act as resistance. However a break above these highs could act as a catalyst for further gains towards the 8th February lows at 1.5530.

EURGBP – last weeks close below the 200 day moving average is quite a bearish signal and has pushed the cross lower, and the euro now looks as if it could well test towards trend line support at 0.8795 from the January lows at 0.8602. Any rebounds should now find resistance around the 200 day moving average at 0.8875.

USDJPY - the dollar has continued its advance against the yen hitting a 7 month high yesterday at 94.78 after breaking through the January highs at 93.65/75 area last week. While continuing optimism about a recovery across Asia and the US remains, expect the yen to continue to remain under pressure.
Support should now come in around the 93.75 previous highs, while below that the dollar should also find support around 93.30 and 92.80. The next target lies at 95.10 which is 61.8% retracement of the down move from 101.45 to 84.80.

Commodities

Oil jumps past $86, gold firms

Crude oil futures touched a 17-month high on Monday, extending its recent rally, driven by hopes of strong demand as the US economy picks up.

Light crude for May delivery rose $1.75 to settle at $86.62 a barrel on the New York Mercantile Exchange, the highest settlement since October 2008.

Friday’s upbeat job numbers gave oil a boost while Monday’s upbeat housing data also increased appetite for oil.

The report from the National Association of Realtors showed pending home sales index rose 8.2% to 97.6 from a revised 90.2 in January while a separate report showed improvement in the US services sector. Friday’s government data said employers added 162,000 jobs to their payrolls in March.

A weaker dollar also kept demand simmering away. Commodity markets were closed on Friday and many European markets remained closed on Monday for the Easter weekend.

Among precious metals gold for June delivery rose $7.70 to $1,133.80 per ounce as investors cheered encouraging economic data.

Silver for May delivery rose 23 cents at $18.12 an ounce.

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