US & World Daily Markets Financial Briefing 19-06-2009

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The major U.S. index futures are pointing to a higher opening on Friday. After apprehension over an economic recovery kept sentiment subdued for much of the week, unwavering hopes of a seeing at least a slow and steady turnaround has driven some traders back into the market. Asian stocks showed some strength today, while the European averages are higher for the second straight day.

The financial space may be in the spotlight after it saw resurgence yesterday, while technology stocks may also see some activity in reaction to Research In Motion’s tepid guidance. Commodity stocks are expected to benefit from the rally witnessed in commodity prices. The triple witching in the U.S. could lead to some volatility and due to the absence of any other major catalysts, market direction today could be highly uncertain.

After showing modest weakness early in Thursday’s session, U.S. stocks moved sharply higher in morning trading, as encouraging economic data helped ease much of the early apprehension. The Dow Industrials and the S&P 500 Index traded sideways thereafter before closing moderately higher, while tech stocks showed some degree of volatility before closing on a marginally weak note.

The Dow Industrials ended the session up 58.42 points or 0.69% at 8,556 and the S&P 500 Index gained 7.66 points or 0.84% at 918, while the Nasdaq Composite ended down 0.34 points or 0.02% at 1,808.

Twenty-one of the thirty Dow components ended the session higher, with Bank of America, JP Morgan Chase, Coca-Cola, Merck, Pfizer, Procter-Gamble and Alcoa recording strong gains. On the other hand, Caterpillar lost 2.07%, while Cisco, General Electric, Home Depot and Intel declined by over 1% each.

Among the sector indexes, the KBW Bank Index rose 2.96% and the NYSE Arca Biotechnology Index moved up 2.05%. The Dow Jones Utility Average ended up 2.23%. However, the S&P Retail Index fell 1.33% and the Philadelphia Housing Sector Index receded 1.6%. The NYSE Arca Gold Bugs Index lost 2.56% compared to a 1.84% dip by the Philadelphia Semiconductor Index. The NYSE Arca Computer Hardware Index lost close to a percentage point.

On the economic front, the Labor Department said initial claims for unemployment benefits rose to 608,000 in the week ended June 13th, up from the previous week’s upwardly revised reading of 605,000. Continuing claims came in at 6.687 million, marking the first weekly drop since January.

The pace of contraction in manufacturing activity in the mid-Atlantic region slowed significantly, with the index of business activity coming in at –2.2 in June compared to –22.6 in May and the economists estimate of –17. The prices paid and prices received indexes improved, rising to –13 and –16.6, respectively. The new orders index also saw a significant improvement, with the index moving up about 21 points to –4.8, while the shipments index climbed 21 points to 2.1. On the employment front, there was improvement as well, albeit on a moderate degree. On a more upbeat note, the 6-month outlook index rose to 60.1 from 47.5 in the previous month, reaching the highest level since September 2003.

Also, the Conference Board said its leading indicators index rose 1.2% in May, more than the 1% increase estimated by economists. However, the coincident as well as the lagging indicators indexes fell by 0.2% each. The index of supplier deliveries, interest rate spread, stock prices, real money supply, the index of consumer expectations, building permits and manufacturers’ new orders for non-defense capital goods were the components that contributed positively to growth, whereas weekly manufacturing hours, average weekly initial claims for unemployment insurance and manufacturers’ new orders for consumer goods and materials acted as drags.

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Toronto stocks could struggle to find direction in early trading on Friday morning. Higher commodity prices may be offset by somewhat lackluster guidance from Research in Motion and a larger-than-expected drop in retail sales.

RIM reported first quarter earnings of $1.12 per share, up from the $0.84 last year and better than analysts' expectations. The company expects to report second quarter EPS between $0.94 and $1.03, compared to the $0.97 expected by analysts.

Oil is up 75 cents to $72.12 in electronic trading, adding to yesterday's modest gains. Gold added $3.40 to $938 per ounce and copper jumped 2 cents to $2.302 a pound.

In economic news, retail sales in Canada declined 0.8% in April. Sales were expected to fall 0.2%, compared to a 0.3% rise last month.

Yamana Gold declared a second quarter dividend of $0.01 per share for shareholders on record June 30, payable July 14.
 
In other corporate news, a group led by Bombardier has been awarded a contract to modernize 156 passenger rail cars by Companhia do Metropolitano de Sao Paulo, the state-owned transit operator that runs the Sao Paulo metro system in Brazil's largest city.

Stellar Pharmaceuticals announced that its second quarter revenues will exceed C$1 million, an increase of about 55% over revenues reported for the same quarter in 2008. The company also expects that it will be profitable for the period.

Greystar Resources announced the resignation of Chief Financial Officer Pauline Pasetka. Executive Vice President Frederick Felder has been appointed acting CFO until a replacement is identified.

On Thursday, the S&P/TSX Composite Index added 55.39 points or 0.55% to move at 10,121.50. With the gain, the market moved off of a three-week low.

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The Asian markets ended Friday’s session in positive territory following the release of the better0than-expected U.S. economic data, which raised hopes that the worst for the economy might be nearing end.

Japan’s Nikkei 225 Average opened sharply higher at 9,758 compared to its previous close of 9,704, and continued to rise above the 9,800-mark on optimism about a global recovery. However, profit taking in the afternoon session ahead of the weekend trimmed the gains. The index finally closed at 9,786, representing a gain of 82.54 points or 0.85%. The broader Topix Index of all first section issues ended at 919, up 7.76 points or 0.85%.

Banks led the advances after Goldman Sachs stated in a report that stocks in the sector are under-valued and recommended the sector. Mitsubishi UFJ Corp. gained 4.05%, Mizuho Financial advanced 3.73%, Resona Holdings added 3.13% and Sumitomo Mitsui Financial rose 4.08%.

Memory chipmaker Elpida Memory advanced 3.27% following reports that the company might approach the Government for financial assistance. Kawasaki Kisen gained 3.39% after Morgan Stanley raised its rating on the stock to "equal weight" from "under weight".

Australia’s All Ordinaries Index opened higher at 3,894 compared to its previous close at 3,892, and moved up further on hopes of a global recovery. The index held above the unchanged line throughout the session before ending at 3,894, representing a gain of 7.00 points, or 0.18%. The benchmark S&P/ASX 200 Index followed a similar trend and ended higher at 3,900 with a gain of 7.50 points or 0.20%.

Financials ended in positive territory on recovery hopes. ANZ Bank gained 1.22%, Commonwealth Bank added 1.13%, National Australia Bank edged up 0.23% and Westpac Banking Corp. rose 1.00%. Among oil stocks, Santos gained 1.22% after brokerage UBS upgraded its recommendation to "buy" from "neutral" and also raised its price target. Woodside Petroleum gained 2.74%. However, Oil Search Ltd bucked the trend and ended down by 2.99%.

Energy services provider Worley Parsons gained 4.96% following the news that the company had bagged two contracts to build nuclear plants in Egypt and Armenia.

In resource space, BHP Billiton ended unchanged from previous close. Rio Tinto shed 3.43%. Mixed trading was witnessed among gold stocks. While Lihir Gold edged down 0.35%, New Crest Mining advanced 1.24%. Sino Gold, however, remained unchanged from previous close.

In Hong Kong, the Hang Seng Index opened sharply higher at 17,936 compared to its previous close of 17,777. Concerns about valuations and earnings limited the upside and the market finally ended with a gain of 144 points, or 0.81%, at 17,921.

Banks advanced following buying interest at lower levels. BOC Hong Kong gained 1.53%, Bank of Communications edged up 0.40%, ICBC advanced 1.12% and China Commercial Bank surged 3.79%. PetroChina edged up 0.36% and CNOOC, the largest offshore oil firm in China, added 0.52%. Oil refiner Sinopec Corp gained 2.54% on higher crude oil prices.

In India, the stock market recovered its early losses and ended in the green on positive global cues and pre-budget announcements. The BSE Sensex gained 256.36 points or 1.80%, to close at 14,522, and the broader Nifty index rose 62.20 points, or 1.46% to close at 4,314.

Among the other major markets in the region, China's Shanghai Composite Index gained 26.59 points or 0.93% to close at 2,880, the Strait Times Index of Singapore rose 35.98 points or 1.61% to close at 2,273, Taiwan’s Weighted Index added 86.62 points or 1.41% to close at 6,231, and Indonesia's Jakarta Composite Index advanced 39.49 points, or 2.02% to close at 1,990.

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The European markets, which snapped a 4-session losing streak on Thursday, are extending their gains on Friday, as financial and commodity stocks are back in favor. The major averages began the session on a tentative note before advancing solidly. The French CAC 40 Index and the German DAX Index are rising 1.22% and 0.42%, respectively, while the U.K.’s FTSE 100 Index is rallying 1.97%.

On the economic front, the German Federal Statistical Office said its producer price index fell 3.6% year-over-year in May after falling 2.7% in April. This was the lowest annual rate of PPI since April 1987. The producer prices inflation rate for May came in line with economists' expectations. A year ago, the producer price index had increased 5.3%. On a monthly basis, wholesale prices remained unchanged in May, compared with a 1.4% fall in the preceding month.

Meanwhile, a report released by France's Ministries in charge of Labor and Employment said the basic monthly wage of all employees grew 0.8% in the first quarter compared to the previous quarter. The index of hourly wage also rose 0.8% in the first three months of the year over the previous three months.

The price of gold inched higher on Friday morning as the dollar saw slight weakness against its major rivals, adding to the value of the precious metal as a hedge investment.

Gold for August delivery moved to $936.40 per ounce, up $1.40 on the session. Prices moved between $939 and $931 through the morning.

The metal has remained range-bound throughout the week as traders await the results of next week's Federal Open Market Committee meeting. Gold is down more than $40 per ounce for the month of June. Early this month, the metal had reached above $992 before turning lower.
 
The dollar lingered near 1.3910 against the euro after recovering most of its early losses on Thursday. The greenback slipped to a two-day low against the sterling, and saw slight gains versus the yen.

Gold also got a boost as crude oil prices moved higher. Light sweet crude added 37 cents to $71.74 per barrel in NYMEX trading.

There is no major economic news expected on Friday and Monday's calendar is light as well. Investors are left to mull over a couple of key earnings reports.

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Research In Motion may be in focus after it reported first quarter adjusted earnings of 98 cents per share compared to 84 cents per share last year. Analysts estimated earnings of 94 cents per share last year. Revenues rose 53% to $3.42 billion. The company’s net subscriber additions during the quarter totaled 3.8 million compared to 3.9 million in the previous quarter. For the second quarter, the company expects second quarter earnings of 94 cents to $1.03 per share on revenues of $3.45 billion-$3.7 billion. The consensus estimates call for earnings of 97 cents per share on revenues of $3.61 billion.

Quicksilver could react to its announcement that it has priced its offering of $600 million aggregate principal amount of senior notes due 2016. The company noted that notes will have an interest rate of 11.75% per annum and will be issued at a price equal to 96.717% of the principal amount thereof to yield 12.50%. Meanwhile, another stock that could react to the news of the pricing of an offering is Hospital Properties Trust , which said it has priced its public offering of 17.5 million shares at $11.50 per share. Wendy’s/Arby’s Group also said it has priced its previously announced offering of senior unsecured notes due 2016 at 97.533% of its face value to generate gross proceeds of $551 million.

Hospira is likely to gain ground after it said a U.S. district court has ruled in favor of the company in a patent infringement lawsuit filed by Sanofi Aventis regarding its chemotherapy medication Eloxatin. The company said it has tentative approval from the FDA for its generic version of the productS and hopes to get full FDA approval shortly.

ProLogis may also be in focus after it said it has closed three secured loans totaling $347 million. The company said it intends to use the proceeds to pay off corporate debt.

CB Richard Ellis is likely to move in reaction to its announcement that it has completed the offering of $450 million aggregate principal amount of senior subordinated notes due 2017. The notes have an interest rate of 11.625% per annum and were issued at a price equal to 96.873% of their face value. The company estimates net proceeds of $425 million.

Regions Financial may also be in the spotlight after it said it will have raised $2.5 billion when itS previously announced exchange offer of common stock for trust preferred securities settles on June 22, 2009. With this, the company noted that its Tier 1 common equity capital requirements prescribed by the Federal Reserve’s Supervisory Capital Assessment Program has been met.

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