US & World Daily Markets Financial Briefing 13-03-2009

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Major Averages Once Again Turn Mixed After Failing To Sustain Upward Move

Stocks have shown a lack of direction over the course of morning trading on Friday, with the major averages have difficulty sustaining any significant moves after closing higher in the three previous sessions.

The choppy trading comes as traders express some uncertainty about the near-term outlook for the markets following the recent gains. While some investors expect stocks to extend the recent upward move, others expect the markets to retest their recent lows.

In corporate news, Fitch downgraded investment firm Berkshire Hathaway, Inc.'s Issuer Default Rating, or IDR, to 'AA+' from a top-notch credit rating of AAA and lowered its senior unsecured debt ratings to 'AA' from 'AAA'. However, Fitch has affirmed its 'AAA' Insurer Financial Strength or IFS ratings on the company's insurance and reinsurance subsidiaries.
 
Fitch also said that the rating outlook for all entities is "Negative". Fitch cited concerns about the potential for losses on the insurer's equity and derivatives holdings.

Meanwhile, Time Warner Inc. said Thursday that it has appointed Google Inc. executive Tim Armstrong as chairman and CEO of its AOL unit. Armstrong will replace Randy Falco, who, along with president and COO Ron Grant, plans to leave the company after a transition period.

While the major averages moved firmly into positive territory in recent trading, they have moved back to the downside in the past few minutes and are currently mixed. The Nasdaq is currently down 2.65 at 1,423.45, while the Dow is up 18.47 at 7,188.53 and the S&P 500 is up 1.92 at 752.66.

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Toronto Stocks Continue Upward Move - Canadian Commentary

Bay Street stocks are modestly higher in early trading and are looking for a fourth straight positive close. Traders mulled over some economic reports from both sides of the border.

The S&P/TSX Composite Index is up 32.76 points or 0.39% to 8,315.03. The index has reached its highest level in more than three weeks.

Financial stocks are up 1.3%, adding to recent gains. National Bank is up 1.5% and CIBC has added 1.2%. The Energy Index is down 0.5%. Paramount Resources has dropped 3.5% and Baytex Energy Trust is down 2.2%.

Light sweet crude oil is up 37 cents at $47.40 amid choppy trading on Friday morning. Prices hit as high as $48.14 earlier in the morning. Rock Energy has surged 25% after the company announced funds from operations for the fourth quarter rose to C$5.51 million or C$0.21 per share from C$4.73 million or C$0.18 per share last year.

In other corporate news, Capital Gold Corp. has jumped 7.4% after the company reported net income for the second quarter was C$3.20 million or C$0.02 per share, compared to C$2.13 million or C$0.01 per share in the same quarter of last year.

Biovail is up 1.3% after the drugmaker was initiated at Buy at UBS. Goldcorp is up 1.3%. The stock was rated at Underweight by Barclays Capital in new coverage.

Friday, gold exploration company Pacific Rim Mining Corp. is up 15.8% after the company said its third-quarter net loss was US$383,000 or breakeven per share, compared to a net loss of US$3.70 million or US$0.03 per share in the year ago quarter.

Statistics Canada announced a decline of 82,600 jobs in February, following a record $129,000 drop in January. The unemployment rate increased to 7.7%, up from 7.2 percent.

Meanwhile, the Canadian trade deficit widened to To C$993 million in the month of January, compared to a revised about 700,000 in the previous month. Economists were looking for a deficit of 800,000.

Across the border, the Commerce Department said that the trade deficit narrowed to $36.0 billion in January from $39.9 billion in December. Economists had been expecting a smaller decrease in the size of the trade deficit to about $38.0 billion.

Meanwhile, the Labor Department said Friday that import prices slipped 0.2 percent for February compared to the previous month. This followed a revised 1.2 percent decline in January. Economists had expected a sharper drop of 0.8 percent.

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Europe Roundup - Eurozone Retail Sales Continue To Fall

Friday, official data revealed that Eurozone retail sales decreased for the eighth consecutive month in January as consumers reduced their spending amid the economic slowdown.

In other news, new car registrations in Europe dropped 18.3% in February from the same period of the previous year, the European Automobile Manufacturers' Association reported. This follows a 27% annual fall in January. The number of passenger cars registered in February totaled 968,159. The downturn was more marked in the new EU Member States than in Western Europe, where the German market pushed total registrations upward.

Eurozone

Compared with January 2008, Eurozone retail sales dropped 2.2%, a slower pace than December's 2.4% decline, the Eurostat said. Economists were looking for an annual decrease of 2.3%.

Retail trade volume in the Euro area rose 0.1% in January from the previous month, reversing three consecutive months of decline. Sales were down 0.3% in December and 0.1% in November. However, retail sales growth in January was smaller than the consensus forecast of 0.2%.

The Eurostat also said Eurozone labor costs increased 3.8% year-over-year in the fourth quarter, smaller than a revised 4.2% growth in the previous quarter. Economists' were looking for an increase of 3.6%.

Germany's Federal Statistical Office said in a report that the real manufacturing turnover decreased a working day adjusted 20% year-over-year in January, compared with a 12.6% fall in the previous month. This was the highest annual decline since 1991.

The German statistical office also reported that the wholesale price index declined 5.7% year-over-year in February, after falling 5.9% in January.

Italy's National Institute of Statistics announced that the average labor cost per employee rose 3.5% year-over-year in the fourth quarter, smaller than the 6.2% rise in the third quarter.

Statistics Austria announced that the jobless rate stood at 4% in the fourth quarter, up from 3.7% in the previous three months. A year ago, the jobless rate was 4%.

The Netherlands' Central Bureau of Statistics announced that the trade surplus stood at EUR 2.8 billion in January, up from EUR 2.5 billion in December.

The Statistical Service Of the Republic of Cyprus said retail trade turnover increased 32.2% month-on-month in December, accelerating from 8.3% increase seen in the previous month.

Finland recorded a current account deficit of EUR 27 million in January, reversing from a surplus of EUR 287 million in December, a report by the Bank of Finland said.

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Indian market surges on strong global cues

Friday, the Indian market jumped on heavy buying across the board to post its best weekly rise in three weeks. Battered index heavyweights saw heavy buying as investors drew comfort from a sustained rally in the global markets.

Stocks rallied strongly in Asia and Europe, as hopes of a revival in the global economy strengthened following positive U.S. retail sales data and encouraging comments from major U.S. banks over the past few days.

Comments from the Chinese Premier Wen Jiabao that his Government is ready to unveil another stimulus package for reviving the economy and reports that Government officials in Tokyo are contemplating new stimulus package to support the world's second largest economy also added to the buoyancy.

Back home, the strengthening of the rupee against the US dollar and signs of revival in the domestic economy also bolstered investor sentiment. Rate sensitive stocks like realty and banks, metal and IT were the best performers.

The BSE Sensex opened higher at 8,481 and saw continuous buying all through the day. The index closed near the day's high at 8,757, up 413 points or 4.95% over the previous close. Meanwhile, the S&P CNX Nifty rallied 102 points or 3.89% to 2,719.

On the BSE, the market breadth was positive, with advances outnumbering decliners by 1583 to 854. The broad-based BSE 500 index rose 4.15% and the mid-cap index gained 2.96%, while the small-cap index moved up a modest 1.97% compared to the broader market.
 
Realty stocks soared on hopes that lower rates will spur housing demand after the inflation rate fell to a multi-year low of 2.43%, paving the way for the RBI to cut further its key policy rates to boost economy. Twenty-eight out of 30 Sensex stocks participated in the rally, while NTPC and Sun Pharma ended in the red.

DLF (up 11.47%), Tata Motors (up 10.72%), Tata Power (up 9.18%), ICICI Bank (up 8.60%), Hindalco (up 7.99%), Sterlite Industries (up 7.93%), HDFC (up 7.53%), Tata Steel (up 6.89%)and Larsen & Tourbo (up 6.76%) were the major gainers.

Banking stocks extended the rally following sharp gains among their peers in the other global markets after beleaguered US banks Citigroup and Bank of America said that they were profitable in January and February.

Among the major gainers in this space, Axis Bank and ICICI Bank surged up around 8% each and Bank of Baroda jumped 7.17%, while Indian Overseas Bank, IDBI Bank, Oriental Bank of Commerce, Punjab National Bank and Union Bank of India rallied over 6% each.

Metal stocks jumped in line with a rally in commodity prices after Chinese Premier Wen Jiabao said that he had allocated 595 billion yuan in this year's budget for stimulus moves. JSW Steel, National Aluminum, Welspun Gujarat, Hindalco, Sterlite, Tata Steel, Hindustan Zinc and Steel Authority of India were some of the prominent gainers.

Among airline stocks, Kingfisher soared 8.02%, JetAirways jumped 9.69% and SpiceJet rallied 4.93% as their load factors saw a jump in February. Gateway Distriparks climbed 7.81% after Allcargo Global Logistics acquired around 6% stake in the company from the open market.

State Bank of India moved up 4.63% after the Life Insurance Corporation of India hiked its stake in the company to 9.16% from 2.12% through open market purchases between mid November '08 and early March.

Simple Infrastructure gained 3.89% on reports that the company's sales would grow between 30-40 percent for FY10. SRF showed marginal gains after the company resumed the operations of the polymerization and spinning lines at its plant at Manali, Tamil Nadu.

Liquor manufacturer United Spirits moved up 5.29% following reports that huge cash spending ahead of general elections could boost demand for liquor. Firstsource Solutions surged up 5.76% after the company repurchased $17.9 million worth Zero Coupon convertible bonds.

Tea stocks such as Harrisons Malayalam, Warren Tea and Mcleod Russel moved up sharply amid reports that tea prices may rise 15-20% in the next fiscal year due to weather problems in India and a crop shortage in Kenya.

DCM rose 0.69% after Aggresar Leasing and Finance, a promoter group company hiked its stake in the company. Matrix Laboratories tumbled 3.01% despite receiving a U.S. drug regulator's tentative approval for antiretroviral tablets.

In the energy sector, Reliance Industries jumped 6.69%, Cairn India rallied nearly 4% and ONGC advanced 3.50% after crude oil held firm at around $47 a barrel. However, oil-marketing companies such as HPCL, BPCL and IOC ended in the red.

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Gold Notably Higher For Third Straight Session

Gold rallied for a third straight session on Friday and continued to move off its monthly low. The metal is now up almost $40 in the last three days.

April gold added $10.60 to reach $934.60 per ounce. Prices hit as high as $936.60 in early trading. On the economic front Friday, the Commerce Department said that the trade deficit narrowed to $36.0 billion in January from $39.9 billion in December. Economists had been expecting a smaller decrease in the size of the trade deficit to about $38.0 billion.

Meanwhile, the Labor Department said Friday that import prices slipped 0.2 percent for February compared to the previous month. This followed a revised 1.2 percent decline in January. Economists had expected a sharper drop of 0.8 percent.

Export prices were down 0.1 percent from last month, the Labor Department said.

The Reuters/University of Michigan's preliminary report on the consumer sentiment index for March is scheduled to be released at 10 a.m. ET. Consumer confidence is expected to tick down in the month, with economists are forecasting a flat reading for the index at 56.3.

At 10.30 a.m. ET, White House National Economic Council director Lawrence Summers is set to give briefing on the government's economic program and the U.S. economic outlook.

Gold surged $13.30 on Thursday and gained nearly $30 in the last two sessions, coming off a monthly low. Before the rally, gold had dropped in 10 of 12 session since crossing above $1,000 on Feb. 20.

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