US & World Daily Markets Financial Briefing 13-11-2009

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Data Pointing to Global Economic Recovery May Help Sentiment

The major U.S. index futures are pointing to a higher opening on Friday, with the M&A announcements creating some optimism concerning the economic outlook. Additionally, the emergence of many of the European economies out of recession should also lend support to the recovery theme.

That said, underlying skepticism is likely to manifest itself and prevent and any meaningful move to the upside. With the major averages trading below key technical levels, there is likely to be significant resistance for an upward move.

Although U.S. stocks attempted to stay afloat on Thursday, as traders focused on the drop in weekly jobless claims, lurking fears over the market trading in overbought territory led to a sell off. By late morning trading, the major averages moved decisively into negative territory and began a steady decline to close notably lower.

The Dow Industrials fell 93.79 points or 0.91% to 10,195 and the Nasdaq Composite Index receded 17.88 points or 0.83%to 2,149, while the S&P 500 Index ended down 11.27 points or 1.03% at 1,087.

Twenty-five of the Dow components ended the session lower, with Caterpillar (CAT) (down 2.48%), Cisco Systems (CSCO) (down 2.17%), JP Morgan Chase (JPM) (down 2.30%), Travelers Co. (TRV) (down 2.15%), Exxon Mobil (XOM) (down 1.39%), Procter-Gamble (PG) (down 1.49%), McDonald’s (MCD) (down 1.05%), Chevron (CVX) (down 1.39%), Alcoa (AA) (down 1.71%) and American Express (AXP) (down 1.37%) posting notable losses.

Among the sector indexes, the NYSE Arca Airline Index fell 2.89%. The NYSE Arca Oil Index and the Philadelphia Oil Service Index moved down 1.90% and 2.97%, respectively, while the NYSE Arca Gold Bugs Index receded 3.16%. The Philadelphia Housing Sector Index dropped 2.49% compared to a 2.08% decline by the KBW Bank Index.

Canadian Stocks Could See Little Change In Early Trades

Bay Street stocks could be looking at a lackluster open on Friday morning as commodities remained close to the unchanged levels. The market fell about 0.7% yesterday amid weakness in the resource sectors.

Crude oil has lost 35 cents to $76.59, extending yesterday's losses. Gold gained $1.70 to $1,108.30 and copper has gained 1.25 cents to $2.9855.

Enerplus Resources Fund reported net income for the third quarter slid to C$38.18 million or C$0.23 per share from C$465.8 million or C$2.82 per share in the corresponding period last year.

Stella-Jones reported third-quarter net earnings grew to C$8.32 million or C$0.65 per share from C$6.85 million or C$0.54 per share in the previous year.
 
Uranium One reported a third-quarter net loss of US$11.9 million or US$0.03 per share compared to a loss of US$2.01 billion or US$4.30 per share last year.

TransAtlantic Petroleum said its third-quarter consolidated net loss was US$13.1 million or US$0.05 per share compared with a loss of US$1.5 million or US$0.02 per share in the third quarter of 2008.

Groupe Aeroplan Inc. said its third-quarter GAAP net earnings decreased to C$18.75 million or C$0.09 per share from C$34.95 million or C$0.18 per share in the prior year period.

Currency, Commodity Futures

Crude oil futures are trading down $0.37 at $76.57 a barrel after declining $2.34 to $76.94 a barrel on Thursday. The previous session’s decline came amid the strengthening of the U.S. dollar and the release of EIA’s weekly oil inventory report, which showed that crude oil inventories rose by 1.8 million barrels in the week ended November 6th to 337.7 million barrels. With the increase, crude oil stockpiles are now above the upper limit of the average range for this time of the year.

Gasoline inventories increased by 2.5 million barrels and were above the upper limit of the average range, while distillate fuel stockpiles edged up by 0.3 million barrels, remaining above the upper boundary of the average range for this time of year. Refinery capacity utilization averaged 80.8% over the four weeks ended November 6th compared to 81.1% in the previous week.

On Thursday, the monthly oil market report released by the IEA showed that the agency expects global oil demand to be higher than its earlier estimate. The firm now expects global oil demand for 2009 to rise by 210 kilo barrels per day to 84.8 million barrels per day and for 2010 to increase by 140 kilo barrels per day to 86.2 million barrels per day, with the increased forecasts attributed to strong demand data from OECD North America and non-OECD Asia/Middle East. The IEA expects global demand to show year-over-year growth for the first time since the second quarter of 2008 in the fourth quarter of 2009.

Gold futures, which fell $8 to $1,106.60 an ounce in the previous session, are trading up $1.40 at $1,108 an ounce.

Among currencies, the U.S. dollar is trading at 90.204 yen compared to the 90.3695 yen it was worth at the close of New York trading on Thursday. Against the euro, the greenback is currently valued at $1.4868.

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Asian Markets End Mixed

Mixed trading was witnessed among the major markets across Asia, as traders preferred to take profits following recent gains. Weak closing in Wall Street in the previous session despite better-than-expected weekly jobless claims impacted market sentiment. While the markets in Australia, Japan, South Korea and Taiwan ended in negative territory with modest losses, the markets in China, Hong Kong, India, Indonesia and Singapore ended in positive territory.

In Japan, the benchmark Nikkei 225 Index fell 34.18 points, or 0.4%, to 9770.31, and the broader Topix index of all First Section issues fell 0.90 point, or 0.1%, to 867

On the economic front, results of a monthly survey conducted by Japan's Economic and Social Research Institute revealed that consumer confidence rose slightly to 40.8 in October from 40.7 recorded in September. Economists were expecting the reading of 40.6 for the month.

Commodity-related stocks led the decline after metal and oil prices slipped in the international market.

Impex Corp., engaged in oil exploration and production, slipped 0.13%, Nippon Mining Holdings fell 1.35%, Nippon Oil Corp. lost 1.47% and Showa Shell shed 1.75%.

Among mining and metal stocks, Mitsubishi Materials Corp. declined 2.19%, Mitsui Mining and Smelting lost 2.98%, Sumitomo Metal Mining shed 1.13%, Sumitomo Electric Industries slipped 1.02%, Nippon Light Metal declined 2.35% and DOWA Holdings decreased 1.60%..
 
Mixed trading was witnessed among the banking stocks. Sumitomo Mitsui Financial gained 0.62%, Mizuho Financial rose 1.70% and Resona Holdings gained 1.98%. However, Mitsubishi UFJ Financial bucked the trend and ended in negative territory with a loss of 0.78%.

Shipping stocks also ended in negative territory on concerns about earnings outlook and container shipping operations. Kawasaki Kisen Kaisha lost 3.87%, Nippon Yusen fell 3.50%, and Mitsui OSK Lines shed 1.13%.

Automotive stocks ended mixed following slight weakness in the local currency. Suzuki Motors gained 0.69%, Mitsubishi Motors advanced 0.77% and Mazda Motor rose 1.45%. However, Toyota Motor slipped 0.28%, Honda Motor edged down 0.17% and Nissan Motor shed 0.15%.

In Australia, the benchmark S&P/ASX200 Index shed 41.50 points, or 0.87% to close at 4,706, while the All-Ordinaries Index ended at 4,723, representing a loss of 35.60 points, or 0.75%.

Almost all the sectors ended weaker on profit taking.

Metals and mining stocks declined following weakness in commodity prices in the international market. BHP Billiton lost 1.37%, Rio Tinto shed 0.46%, Fortescue Metals slipped 0.74%, Iluka Resources fell 1.48%, and Oz Minerals declined 1.58%.

 Oil stocks also ended lower after crude oil declined in the international market. Woodside Petroleum lost slipped 0.20%, Santos shed 0.85%, Oil Search lost 1.53% and Origin Energy fell 1.10%.

Gold stocks ended sharply lower on profit taking. Lihir Gold Mining lost 2.33%, Newcrest Mining shed 2.84% and Sino Gold fell 2.08%.

Banking stocks also ended in negative territory. ANZ Bank lost 2.01%, Commonwealth Bank of Australia slipped 0.49%, National Australia Bank slumped 3.96% and Westpac Banking shed 0.84%.

Mixed trading was witnessed among the retail stocks. While David Jones slipped 0.52%, other companies in the sector ended in positive territory. Harvey Norman gained 1.64%, JB Hi-Fi added 0.73%, Wesfarmers advanced 0.76% and Woolworths edged up 0.14%.
 
Property trusts also ended mixed. While CFS Retail Property Trust added 0.51% and GPT Group advanced 0.78%, Commonwealth Property Office Fund lost 1.29%, Mirvac Group shed 0.64%, Stockland slipped 0.25% and Westfield Group fell 1.20%.

In Hong Kong, the Hang Seng Index ended in positive territory with a gain of 156.06 points, or 0.70%, at 22,553.63, lifted by buying interest in banking stocks after Industrial and Commerical Bank of China released a bullish outlook for mainland China. Speculation about takeovers in the financial sector, with China Construction Bank in talks with Taifook Securities to have control over the latter also lifted market sentiment in general and banking sector in particular.

In South Korea, the KOSPI Index ended nearly flat at 1,572, representing a loss of 0.74 points, or 0.05% from its previous close. Weak closing in Wall Street in the previous session weighed on stocks with foreign institutional investors selling technology and automotive stocks in late trading, offsetting the early gains in steelmakers and bank stocks. Traders preferred to adopt a wait and watch approach ahead of key economic data slated for release during the upcoming week.

A strong industrial output data released on Thursday, the dollar's weakness after overnight gains, and advances in Europe on the back of merger news between British Airways and Iberia, helped the Indian market end a highly volatile session notably higher on Friday. Aiding to the positive sentiment, the Centre for Monitoring Indian Economy (CMIE) said that it has revised India's FY10 GDP growth forecast upwards to 6.2% from 6% and industrial growth forecast to 7.2% from 5.8%. The BSE Sensex finished at 16,849, up 153 points or 0.92% and the S&P CNX Nifty rose 46 points or 0.93% to 4,999.

Among the other major markets in the region, China's Shanghai Composite Index gained 14.70 points or 0.46% to close at 3,188, Indonesia's Jakarta Composite Index gained 6.52 points, or 0.27% to close at 2,427 and Singapore's Strait Times Index edged up 0.99 points, or 0.04% to close at 2,727. However, Taiwan's Weighted Index slipped 5.30 points, or 0.07%, to close at 7,666.

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The major European markets are trading on a mixed note on Friday, with the French CAC 40 Index receding 0.31%, while the German DAX Index and the U.K.’s FTSE 100 Index are rising 0.08% and 0.16%, respectively.

In corporate news, French bank Dexia reported third quarter net income of 274 million euros compared to a loss of 1.54 billion euros in the year-ago period. Additionally, British Airlines and Spanish carrier Iberia announced an agreement to merge in an all stock deal. Under the terms of the proposed merger, British Airways' shareholders will receive one new ordinary share in the combined company for every existing ordinary share they hold in British Airways, while Iberia shareholders will receive 1.0205 new ordinary shares for every existing ordinary share they hold in Iberia.

On the economic front, Eurostat reported that eurozone GDP rose 0.4% sequentially in the third quarter after contracting for five straight quarters. Economists had expected 0.5% GDP growth for the quarter. On a year-over-year basis, the economy contracted 4.1%, much steeper than the 3.9% GDP decline expected by economists.

French statistical agency INSEE reported that the French consumer price index fell 0.2% year-over-year in October, marking the sixth consecutive month of declines. However, the decline was in line with expectations. On a monthly basis, the consumer price index rose 0.1% following a 0.2% decline in September, with the monthly growth helped by an increase in prices of fresh products and services.

Preliminary estimates released by INSEE showed that French GDP rose 0.3% quarter-over-quarter in the third quarter, with the pace of growth the same as in the previous quarter. Economists had estimated GDP growth of 0.6%.

Meanwhile, the German economy grew 0.7% sequentially in the third quarter compared to the 0.4% growth seen in the second quarter, according to the German Federal Statistical Office. The growth was supported by exports and gross fixed capital formation in machinery and equipment and construction, while consumer spending acted as a drag.

U.S. Economic News

With the value of imports increasing at a faster pace than the value of exports in September, the Commerce Department released a report on Friday showing that the U.S. trade deficit widened by much more than expected.

The report showed that the trade deficit widened to $36.5 billion in September from a revised $30.8 billion in August. Economists had been expecting the deficit to widen to $31.8 billion from the $30.7 billion originally reported for the previous month.

The U.S. Labor Department revealed that import prices climbed 0.7% in October. This followed a revised 0.2% increase in September.

Petroleum import prices were up 0.9 percent. Leaving out the volatile petroleum sector, import prices were up 0.7 percent. Export prices advanced 0.3 percent, following a revised 0.2 percent slide in September.

The Reuters/University of Michigan's preliminary report on the consumer sentiment index for November is scheduled to be released at 9.55 AM ET. The consumer sentiment index is expected to rise slightly to 71 from October's 70.6.

Chicago Federal Reserve Bank President Charles Evans is scheduled to participate in a panel discussion with Bank of France Governor Christian Noyer on "Should Monetary Policy Prevent Bubbles?" in Paris at 10:30 AM ET.

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Disney (DIS) moved to the upside in Thursday’s after hours session after its fourth quarter adjusted earnings of 46 cents per share exceeded the 41 cents per share consensus estimate. Revenues rose 4% year-over-year to $9.87 billion, ahead of the $9.27 billion mean analysts’ estimate.

Nordstrom (JWN) is likely to react to its announcement that its third quarter net sales rose to $1.87 billion from $1.81 billion last year. Total revenues were up 8.8% at $1.96 billion. The company’s earnings rose to 38 cents per share from 33 cents per share last year. Analysts estimated earnings of 39 cents per share on revenues of $1.87 billion. The company raised its 2009 earnings per share estimate to $1.83-$1.88 from its earlier estimate of $1.50-$1.65. The consensus estimates call for earnings of $1.81 per share on revenues of $8.13 billion.

Microsemi (MSCC) could be in focus after it reported a loss of 39 cents per share for its fourth quarter compared to net income of 21 cents per share last year. On an adjusted basis, the company reported earnings of 24 cents per share. Sales declined 18.6% year-over-year to $109.7 million. Analysts estimated earnings of 23 cents per share on revenues of $109.4 million. For the first quarter, the company expects sales growth of 1%-4% and adjusted earnings of 24-26 cents per share. Analysts estimated earnings of 23 cents per share on revenues of $109.44 million.

RehabCare (RHB) is likely to be in focus after it announced that it would offer 5.4 million shares of its common stock at $24 per share. The company expects the offer to close on November 18th, 2009. Rehab closed Thursday’s session at $25.12.

Dollar General (DG), which is set to begin trading on the Big Board today, is likely to be in focus, with the discount retailer pricing its IPO of 34.1 million shares at $21 per share. The company will sell 22.70 million shares, while existing shareholders will sell about 11.40 million shares.

Waste Management (WM) is likely to see activity after it said it has priced an underwritten public offering of $600 million aggregate principal amount of 6.125% senior notes due November 30, 2039. The offering is expected to close on November 17th, 2009. Another stock that could react on a note offering is Zimmer Holding (ZMH), which said it has agreed to sell $1 billion of its senior unsecured notes in an underwritten public offering consisting of $500 million of 4.625% notes due 2019 and $500 million of 5.75% notes due 2039.

PDL BioPharma (PDLI) could gain ground after it announced a special dividend of $200 million, with part of the proceeds from the $300 million securitization transaction completed on November 2, 2009. The company said all stockholders owning PDL shares on December 1st, 2009 will be paid a special dividend on December 15th, 2009.

URS Corp. (URS) could recede in Thursday’s after hours session after the company reported that its third quarter revenues fell to $2.32 billion from the year-ago’s $2.59 billion. Analysts estimated revenues of $2.34 billion. The company reported earnings of 79 cents per share, higher than 77 cents per share last year and exceeding the 67 cents per share consensus estimate. For 2009, the company expects revenues of $9.4 billion to $9.6 billion and earnings of $3.32-$3.42 per share, including a gain of 37 cents per share from the sales of MIBRAG in 2009. The consensus estimates call for earnings of $2.99 per share on revenues of $9.56 billion.

Dun & Bradstreet (DNB) could see some activity after it announced that its Chairman and CEO Steven Alesio will retire from the company, effective June 30th, 2010. The company named president and COO, Sara Mathew as Alesio’s successor. Mathew will take over from Alesio as the company’s CEO, effective January 1st, 2009 before expanding her role as the Chairman following Alesio’s resignation.

AmerisourceBergen (ABC) may see buying interest after it announced an increase in its quarterly dividend rate by 33% to 8 cents per share. The company’s board also authorized a new $500 million share repurchase program, effective immediately.

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