US & World Daily Markets Financial Briefing 18-06-2010

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Stocks Modestly Higher In Mid-Morning Trading

Stocks are modestly higher in mid-morning trading on Friday, with the lack of major economic and corporate news helping equities hang on to recent gains on quadruple witching day. Nonetheless, movement in today's session may be held in check by overhangs remaining from the European debt crisis and its potential cloud over the budding global economic recovery.

Some of the day's moves may be coming as traders are considering the latest developments in the corporate arena. BP Plc (BP) is once again in focus as the oil spill in the Gulf of Mexico continues at a sizable rate which experts have failed to adequately quantify.

Thursday, firm CEO Tony Hayward was hammered by lawmakers on Capitol Hill over his decision making and his company's safety procedures leading up to the disaster.

Also on the corporate front, pharmacy health care provider CVS Caremark Corp. (CVS) said that it reached an agreement, under which drugstore chain Walgreen Co. (WAG) will continue participating in the CVS Caremark pharmacy benefit management plan. The companies did not disclose the financial terms of the new contract.

The Dow is up by 33.48 points or 0.3 percent to end at 10,467.65, the Nasdaq is up by 11.92 points or 0.5 percent to 2,319.27 and the S&P 500 is up by 3.57 points or 0.3 percent to 1,119.61.

Sector News

Gold stocks are some of the morning's best performers, prompting at 2 percent advance in the NYSE Arca Gold Bugs Index. With the move, the index is up for a fourth straight day, setting a five-week intraday high.


The advance by gold stocks comes as the price of the precious metal continues its record run, up by $9.60 to $1,258.30 an ounce after ending at a record high yesterday of $1,248.70 an ounce.

Biotechnology, networking, banking and oil service stocks are also seeing strong gains, further boosting the broader markets.

Meanwhile, weakness among pharmaceutical and healthcare related stocks is limiting the gains in equities thus far.

Stocks Driven By Analyst Comments

The Williams Company (WMB) is higher after being upgraded by analysts at Goldman Sachs to a Conviction Buy from Buy. The stock has gained 1.6 percent, setting a one-month intraday high.

On the other hand, Forest Oil (FST) is down after Goldman Sachs lowered its rating on the stock to Neutral from Buy based on recent valuation. Shares have dipped by 2.1 percent, pulling further off of a nearly twenty-month closing high set earlier this month.

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Toronto Stocks Poised For A Soft Open Friday

Bay Street may witness a lackluster session Friday amid a light economic calendar and mixed cues from the equity and commodity markets. Traders might prefer to stay on the sidelines ahead of next week's major economic events, including the FOMC meeting.

Meanwhile, the markets in Asia ended mixed as China, India, Japan and Singapore closed lower and Australia, Hong Kong, Indonesia and South Korea ended higher. The European markets were also trading mixed.

On Thursday, the S&P/TSX Composite Index edged up 24.91 points or 0.21% to 11,945.97, taking its cumulative gains in the past six session to just over 4%.

The price of crude oil continued to retreat from its six-week high hit earlier this week, amid concerns over the economic growth. Crude for July delivery was down $0.75 to $76.04 a barrel.

Meanwhile, the price of gold advanced to a fresh all-time high, adding on to its previous session's 1.5% gain. Gold for August moved up $8.6 to $1,257.30 an ounce.

In corporate news, financial services company Power Financial Corp. announced plans to issue preferred share at C$25.00 per share, for an aggregate amount of C$200 million.


Entertainment technology company IMAX Corp. said it will be installing five IMAX digital theatre systems in Thailand.

Oil and gas firm Equal Energy said it has increased it bought out deal financing to $35 million, which will be used for its ongoing capital expenditure program and for general corporate purposes.

Oil field services company Pure Energy Services said its wholly- owned USA subsidiary, Pure Energy Services USA, Inc. has obtained aggregate credit facilities of $15 million from San Francisco-based Bank of the West.

Energy services company Hyduke Energy Services placed 2.19 million common shares at C$0.40 per share to a senior officer for gross proceeds of C$0.878 million. The fund will be mainly used for working capital.

Integrated wood products maker Tembec guided third-quarter EBITDA in the range of C$47 million to C$53 million, compared with EBITDA of C$32 million in the second quarter ended March 27, 2010.

Uranium explorer Denison Mines said a U.S. court has denied a motion for a preliminary injunction seeking to halt operations at its mine in northern Arizona.

Airlines operator WestJet Airlines said it will cut its top end fares by around 25%

In economic news, Statistics Canada said foreign investments in Canadian Securities were up C$12.40 billion in April, while Canadians acquisition of foreign securities slowed to C$1.40 billion.

In another report, the agency said the composite leading index rose by 0.9% in May, mainly due to manufacturing components. The housing index recorded its first decline since April 2009, easing 1.2% in May.

Meanwhile, the number of Canadians receiving Employment Insurance benefits stood at 667,400, practically still in April, Statistics Canada said.

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Asian Markets End Mixed

Mixed trading was witnessed among the major markets open for trading in Asia on Friday. While the markets in China, India, Japan, Singapore and Taiwan ended in negative territory on profit taking, the markets in Australia, HongKong, Indonesia and South Korea ended in positive territory with modest gains. Most of the traders preferred to stay away from the markets in a light trading day adopting a cautious approach ahead of major economic events, including the FOMC meeting, next week.

In Japan, the benchmark Nikkei 225 Index fell 4.38 points, or 0.04%, to 9,995.02, while the broader Topix index of all First Section issues fell 2.84 points, or 0.3%, to 885.

On the economic front, minutes of the recent monetary policy board meeting revealed that the members of the board reiterated that the bank will continue extremely easy monetary policy for the time being. At the meeting, the board unanimously held the uncollateralized overnight call rate at the record low of 0.10% - where they have remained since December 2008. The bank also announced that it will offer one-year loans to commercial banks to encourage lending and pull the country out of deflation. The board members emphasized that the new lending policy is temporary, the minutes showed, and it must not affect the bank's interest rate policy. The true indicator or economic recovery, the minutes continued, will be a self-sustaining rebound in domestic demand.

Automakers led the declines on stronger local currency. Toyota Motor Corp. declined 1.67%, Honda Motor fell 1.68%, Nissan Motor Corp. lost 2.47%, Suzuki Motor Corp. edged down 0.42%, Hino Motors shed 0.82% and Mitsubishi Motors declined 0.85%.

Exporters also ended in negative territory. Canon Inc. fell 1.05%, TDK Corp. lost 1.11%, Kyocera Corp. slipped 0.75%, Sharp Corp. edged down 0.20% and Sony Corp. declined 0.59%.

Mixed trading was witnessed among trading companies. Toyota Tsusho Corp. gained 0.53% and Itochu Corp. managed to end unchanged from previous close. However, Mitsui & Co., plunged 5.22%, Mitsubishi Corp. declined 0.68%, Sumitomo Corp. lost 0.72% and Marubeni Corp. slipped 1.20%.

Large banks also ended in negative territory following reports that banking regulators are considering are mulling over an idea to instruct banks to increase their capital adequacy ratios. Sumitomo Mitsui Financial declined 1.67%, Resona Holdings lost 2.38%, Mitsubishi UFJ Financial slipped 1.41% and Mizuho Financial shed 0.65%.

In Australia, the benchmark S&P/ASX200 Index advanced 24.60 points, or 0.54% and closed at 4,552, while the All-Ordinaries Index ended at 4,574, representing a gain of 27.10 points, or 0.60%.

Mining and metal stocks ended in positive territory on optimism about global economic recovery. BHP Billiton advanced 0.80%, Fortescue Metals gained 1.39%, Gindalbie Metals rose 2.20%, Iluka Resources added 0.80%, Macarthur Coal climbed 2.46%, Mincor Resources was up 2.71%, Murchison Metals increased 1.90%, Oz Minerals grew 1.45% and Rio Tinto ascended 1.11%.

Gold stocks also ended higher following rise in bullion prices in the international market. Lihir Gold surged up 2.11% and Newcrest Mining gained 1.73%.

Banks also ended in positive territory on hopes of economic recovery. ANZ Bank advanced 0.83%, Commonwealth Bank of Australia edged up 0.17%, Macquarie Group added 0.43%, National Australia Bank rose 1.29% and Westpac Banking gained 1.25%.

Mixed trading was witnessed among retailers after David Jones announced the retirement of its CEO Mark McInnes. Shares of David Jones declined 0.44% and Reject Shop shed 1.34%. The other major retailers ended in positive territory. Harvey Norman added 0.29%, JB Hi-Fi Ltd edged up 0.10%, Myer Holdings climbed 1.58%, Pacific Brands surged up 3.24%, Wesfarmers advanced 1.04% and Woolworths was up 0.40%.

Indian equities paused for breath on Friday after seven sessions of consecutive gains. However, with the euro holding steady near its three-week high on the back of a successful Spanish bond auction, expectations of more capital inflows in the wake of strong domestic growth prospects helped the benchmark 30-share Sensex end a volatile session with a modest 0.26% loss at 17,571. The 50-share Nifty fell by 12 points or 0.23% to 5,263.

Among the other major markets open for trading, Indonesia's Jakarta Composite Index gained 38.49 points, or 1.33% to close at 2,930. However, China's Shanghai Composite Index ended in negative territory with a loss of 47.02 points, or 1.84%, at 2,513, Taiwan's Weighted Index slipped 22.67 points, or 0.30% to close at 7,493.and Singapore's Strait Times Index declined 10.55 points, or 0.37% to close at 2,833.

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Footsie gives back early gains

Market Movers
FTSE 100 5,246.78 -0.14%
techMARK 1,649.74 -0.13%
FTSE 250 9,906.71 +0.44%

Footsie has now dipped into the red as the early rally by the miners faded away, though BP continues to recover.

News that the net cash requirement for the public sector came in at £11.96bn, against expectations of £20.25bn has had little benefit. The accruals-based measure of public sector net borrowing was also better than expected at £16bn, versus expectations of £18bn.

BP is higher despite the eight-hour verbal assault for chief executive Tony Hayward from US politicians yesterday. Hayward was up in front of a US Congressional Committee to explain how the Gulf of Mexico catastrophe arose. He didn't, driving his already angry interrogators even more irate in the process.

They accused the oil man of ignoring the risks his company was taking drilling a mile down in the Gulf of Mexico.

Russian president Dmitry Medvedev has now joined in, expressing his concern that the penalties likely to hit BP could bankrupt the company. Russia is another major area of development for BP through its joint venture TNK-BP. BP shares have rallied even so.

Spain’s Santander has confirmed that it has entered a bid for about 300 high street branches being sold by the Royal Bank of Scotland. The banking giant didn’t comment on any financial details, but market speculation earlier this week suggest a deal could be worth about £1.8bn.

Elsewhere, Capita and Serco are weaker on news yesterday that the new government has put the brakes on £11.5bn of projects casting doubts on growth prospects for two of public sector's favourite outsource companies.

BT is also lower on reports it faces a long-drawn out strike with its blue-collar workers.

On the bright side mining stocks are buoyant despite metal prices being little changed while insurer Aviva gets a lift from JPMorgan Chase, which has upgraded the stock to “overweight” and bumped up its price target from 285p to 509p.

Engineering services group Lamprell has secured a $129m new contract from Seajacks for the design and construction of a Gusto MSC NG-5500 design self-elevating and self-propelled offshore wind turbine installation vessel. The vessel, named "Seajacks Zaratan", will be constructed at Lamprell's Hamriyah facility and is due to be delivered in 2012.

Canary Wharf owner Songbird has shot ahead on a report that the The Qatar Investment Authority will spend £700m to mop up the 76% it does not already own.

Fund manager Henderson has scrapped its planned acquisition of fund boutiques run by US asset manager RidgeWorth Capital Management after failing to agree terms with owner SunTrust Banks. The £1bn UK firm said discussions “have been discontinued as the parties have not reached agreement on terms”.

Blue-collar recruitment and training specialist Staffline now expects earnings for both the first half and full financial year to be significantly ahead of current expectations. The company upped its forecasts thanks to a number of new business wins and the impact of recent acquisitions together with increased demand from existing clients.

Giant TV screen renter Avesco halved interim loses and expects to make a trading profit for the full year buoyed by orders for the World Cup and World Expo in Shanghai.

Kazakhstan-focused oil explorer Roxi has firmed up its estimate of reserves at its main Galaz prospect. Estimates for total gross proved recoverable oil reserves on the NW Konys field are 2.4m barrels, total proved plus probable are 7.5m barrels while there are 10.9m barrels including possible reserves.

British wireless communications technology firm Innovision Research & Technology has been snapped up by American giant Broadcom Corporation for £32m, almost twice its value yesterday evening. The AIM-listed company’s shareholders will get 35p in cash for each Innovision share compared with a closing price of just 19p when the stock market closed on Thursday, an 84% premium.

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SunTrust (STI) could react to its announcement that it continues to review strategic options for portions of the institutional management businesses of its subsidiary RidgeWorth Capital Management. The company noted that RidgeWorth and its boutiques collectively manage $65.1 billion in assets as of March 31, 2010.

Watts Water Technologies (WTS) is likely to see some activity after it confirmed that it is planning to acquire Austroflex Rohr-Isoliersysteme GmbH, a maker of pre-insulated PEX pipes for hot and cold water applications, by the end of June.

Ryland (RL) may also be in focus after rating agency Fitch upgraded its outlook for Ryland to “Negative” from “Stable”, while it reaffirmed its issuer default rating and senior unsecured debt ratings at “BB.” The company attributed its action to the company’s strong balance sheet, improved operating results and moderately stronger prospects for the housing sector.

Dollar Drifts Lower Versus Yen, Steadies Against Euro

The dollar was mixed in quiet dealing Friday morning, having suffered notable losses earlier in the week versus most major counterparts.

Renewed risk appetite weighed on the dollar for most of the week, but a sense that the global economic recovery may be fizzling out has given the safe haven dollar of modicum of support against the euro and sterling today.

On the flip side, the dollar remained under pressure versus the yen, which has become an even more fashionable safety play.

The latest round of data from the US has fueled concerns that the world's biggest economy may be in for a double-dip in housing, which would keep anxious consumers from sparking a sustainable recovery.

Massive government spending and record low interest rates have helped end a severe recession brought on by the near-collapse of the global financial system, but in lieu of evidence of organic growth, its is feared the economies may again contract.

The dollar held near 1.2380 versus the euro, having touched a 3-week low of 1.2406. Last Monday, the dollar hit a 4-year high of 1.1805 before pulling back.

Germany's producer prices increased for the second consecutive month in May, a report by the Federal Statistical Office showed on Friday.

The producer price index, or PPI, rose 0.9% year-on-year in May, faster than the 0.6% growth in the previous month. Economists had expected an increase of 0.8%.

Greece's economic programme to cut its budget deficit is on track and the country's government is implementing policies as agreed, the European Commission, the European Central Bank and the International Monetary Fund said Thursday.

The dollar managed to pare a fraction of this week's losses versus the sterling, improving slightly to 1.4800 from a monthly low near 1.4886.

Against the yen, the dollar dipped to a 3-week low of Y90.45 before finding its footing.

Barring any major economic news today, currency markets may look for direction in equities on quadruple witching day. This is the day on which contracts for stock index futures, stock index options, stock options and single stock futures all expire, generating some volatility in equities.

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