US & World Daily Markets Financial Briefing 14-04-2009

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Major Averages Posting Notable Losses In Mid-Morning Trading

While stocks have regained some ground since moving sharply lower at the open, the major averages remain firmly in negative territory in mid-morning trading on Tuesday. The weakness in the markets is largely due to reaction to disappointing retail sales data.

Before the start of trading, the Commerce Department said that retail sales fell 1.1 percent in March following an upwardly revised 0.3 percent increase in February. The decrease came as a surprise to economists, who had expected sales to increase by 0.3 percent.

The unexpected drop in retail sales was partly due to a 5.9 percent drop in sales by electronics and appliance stores. Auto sales also showed a notable decrease for the month.
 
Meanwhile, investors are awaiting a speech from President Barack Obama. The economy will be the subject of the speech, with the president expected to give a recap of the economic progress the country has made so far.

The major averages have moved well off their worst levels of the day, although they continue to post notable losses. The Dow is currently down 72.72 at 7,985.09, the Nasdaq is down 11.66 at 1,641.65 and the S&P 500 is down 7.54 at 851.19.

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Canadian Stocks Look To Extend Recent Gains Tuesday

Canadian stocks will look to extend their recent winning streak on Tuesday, but early signals are mixed amid some concerns about corporate earnings results. Commodities have rallied of late, pushing the resource-heavy Canadian market to yesterday's three-month closing high after four straight days of gains.

On Monday, the S&P/TSX Composite Index rose 98.50 points or 1.07% to 9,285.62. This marks the highest close for the index since January 6.

Energy stocks may get a boost this morning as the price of crude snapped back above the $50 mark after falling sharply on Monday.

Financials will also be in focus after Goldman Sachs said that first quarter profit rose from last year, helped by strong revenue growth in its fixed income, currency and commodities businesses. The company also said it has commenced a $5 billion public offering of its common stock, which along with additional resources, may be used to repay TARP funds.
 
Looking at the tech sector, the world's biggest chipmaker Intel Corp. (INTC) is scheduled to release first-quarter results after market close today, analysts are expecting earnings of $0.02 per share on revenues of $6.98 billion for the quarter.

Miners could continue their recent rally after the price of copper jumped almost 8 percent on Monday amid signs of increased demand from China.

In Canada, Vasogen Inc. (VAS.TO: News ) reported a first quarter net loss of C$1.9 million or C$0.09 per share, compared to a net loss of C$5.3 million or C$0.24 per common share in the last year quarter.

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The major European markets, which opened following Easter holidays, are trading mixed on Tuesday. While the French CAC 40 Index and the U.K. ‘s FTSE Index are moving down 0.20% and 0.65%, respectively, the German DAX Index is moving up 0.57%. Financial stocks are holding up well following Goldman Sachs’ better-than-expected first quarter results. At the same time, resource stocks are acting as drags on the major averages.

In corporate news, Royal Philips Electronics reported a loss attributable to equity holders of parent company of 59 million euros compared to a net income of 294 million euros in the year-ago period. Sales were off 15% at 5.08 billion euros. Both the results were below the estimates of most analysts.

U.S. Economic Reports

A Labor Department report showed that producer prices fell 1.2% in March following 0.1% growth in February, while the core producer price index remained unchanged. Economists had expected the headline index to show an unchanged reading and the core reading to show 0.1% growth.

Food prices fell 0.7% compared to a 1.6% decline in the previous month. Energy prices declined 5.5% following a 1.3% increase in the previous month. On a year-over-year basis, the producer price index fell an unadjusted 3.5%. Inflation pressures in the pipeline continued to wane, as intermediate food and energy prices slid 0.5% and 6.3%, respectively.

Meanwhile, the Commerce Department said retail sales fell 1.1% month-over-month in March following an upwardly revised 0.3% increase in February. Economists had estimated a 0.3% increase for March.

Sales, excluding autos, fell 0.9% in March, reversing the downwardly revised 0.2% growth in the previous month. Economists had estimated retail sales, excluding autos, to have remained unchanged in the month. Sales at motor vehicle & part dealers fell 2.3% compared to the previous month and they declined 23.5% from the year-ago period.

Sales at electronics & appliance stores fell 5.9% compared to a 0.7% increase in the previous month. Sales at gasoline station sales slipped 1.6% compared to a 3.1% increase witnessed in the previous month.

The Commerce Department is scheduled to release its business inventories report for February at 10 AM ET. The report summarizes the results from the monthly retail trade, wholesale trade and factory goods orders surveys. The report is expected to show a 1.2% decline in business inventories for the month.

Business inventories fell by 1.1% in January. The December reading was revised down to a 1.6% drop from the 1.9% drop estimated earlier. Business sales declined by 1%, keeping the business inventories to sales ratio unchanged at 1.43, matching the highest levels seen since September 2001.

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The major markets in the Asia-Pacific region ended higher on Tuesday on growing optimism regarding a global recovery after Goldman Sachs, the sixth largest bank in the U.S, reported better than expected financial results for the first quarter. The company also announced plans to raise $5 billion to repay all of the TARP funding it received from the U.S. government. Buoyed by the announcement from Goldman Sachs, the markets ignored the mixed closing on Wall Street and posted gains, primarily on the support lent by financial stocks. However, the Nikkei bucked the trend and ended in negative territory, dragged down by property stocks.

The benchmark Nikkei 225 Index ended at 8,843, down 81.75 points, or 0.9%, and the broader Topix index of all First Section Issues slipped 5.55 points, or 0.7%, to 843.

Property related stocks ended weaker after Sumitomo Realty & Development reported lower-than-expected earnings, primarily due to increased writedowns. The stock declined 5.60%. Among other property related stocks, Mitsubishi Estate lost 2.16%, Mitsui Fudosan lost 2.50% and Tokyu Land Corp fell 3.99%.

Automakers ended weaker following the news that the U.S. Treasury Department is directing General Motors to prepare for a liquidation filing by a June 1st deadline. However, financial stocks and resource stocks ended mixed.

Australia’s benchmark S&P/ASX 200 index gained 81.3 points, or 2.21% to close at 3,753 and the broader All Ordinaries index advanced 80.5 points, or 2.23% to 3,698. The market witnessed a broad based rally, with banks, miners, energy and retail stocks seeing firm buying interest.

On the economic front, the results of the latest survey of the National Australia Bank revealed that business confidence in the country improved in March, with the index rising to minus 13 from minus 22 in February. The index of business confidence increased 3 points to minus 17, but it remained at a low level not seen since 1992.

Qantas Airways staged a smart recovery in late trading and ended with a gain of 2.04%. Earlier in the day the stock declined as much as 8% after it slashed its full-year profit forecasts and flagged a further 1,750 jobs cuts and capacity reductions amid rapidly deteriorating trading conditions.

In South Korea, the benchmark KOSPI Index ended higher by 4.37 points, or 0.33% at 1,343. Among the financials, KB Financial Group gained 0.38% and Woori Finance advanced 2.50%. However, Shinhan Financial ended unchanged from the previous close.

Technology stocks ended mostly higher, while among shipbuilders, Hyundai Heavy Industries gained 0.95%, Daewoo Shipping advanced 3.27% and Samsung Heavy Industries rose 2.46%. In the auto space, Hyundai Motor edged up 0.30%, and Kia Motor remained unchanged from the previous close. However, Ssangyong Motor lost 6.03% on profit taking.

In Hong Kong, the benchmark Hang Seng Index gained 4.55% or 678.75 points to close at 15,580. Financial stocks were the major gainers, while resource stocks also ended in positive territory. Aluminum Corporation of China, or CHALCO, rose 11.05%, CNOOC gained 7.73% and PetroChina advanced 4.43%.

Among the other major markets, China's Shanghai Composite Index gained 13.48 points, or 0.54% to close at 2,527, Indonesia's Jakarta Composite Index advanced 1.94% or 29.86 points to 1,570, Singapore's Strait Times Index edged up 1.08% or 20.25 points to 1,897 and Taiwan's Weighted Index rose 35.04 points, or 0.60% to 5,893.

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Gold Prices Slip In Early Trading

Gold prices slipped in early trading on Tuesday, surrendering some of yesterday's gains. A stronger dollar lowered the precious metal's hedge value.

May-stamped gold prices slipped to $892.20, down $3.60 for the session. Prices touched as low as $889.10 in the early going.

The dollar saw some strength against its higher-yielding counterparts on Tuesday, rising against the euro and sterling. Gold usually moves opposite the dollar because of the precious metal's hedge value.

The U.S. Labor Department said producer prices dropped 1.2 percent in March, following a revised increase of 0.1 percent in the previous month. Economists had expected no change in producer prices for the month.
 
Meanwhile, retail sales unexpectedly showed a notable decrease in the month of March, according to a report released by the Commerce Department on Tuesday, although the report also showed an upward revision to February sales.

The report showed that retail sales fell 1.1 percent in March following a revised 0.3 percent increase in February. Economists had expected sales to increase by 0.3 percent compared to the 0.1 percent decrease originally reported for the previous month.

June-dated gold ended Monday at $895.80, up $12.50 for the session.

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