US & World Daily Markets Financial Briefing 23-03-2009

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Major Averages Holding Onto Standout Gains

Stocks are holding onto substantial gains in late morning trading on Monday, with the major averages hovering firmly in positive territory. The markets continue to benefit from a positive reaction to the government's plan to buy up banks' toxic assets.

Financial stocks continue to turn in some of the market's best performances after the Treasury Department released details of a plan to buy up banks' toxic assets through a combination of $100 billion in TARP funds and private investment.

Significant strength is also visible among certain resource stocks amid increases in most commodities prices. Steel, oil, and natural gas stocks are posting particularly strong gains.
 
Most of the other major sectors have also shown strong upward moves over the course of the morning, reflecting broad based strength in the markets. Railroad, real estate, housing, and semiconductor stocks are posting notable gains.

In recent trading, the major averages have pulled back off their best levels of the day, although they continue to post standout gains. The Dow is currently up 267.85 at 7,546.23, the Nasdaq is up 49.27 at 1,506.54 and the S&P 500 is up 28.78 at 797.32.

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Bay Street Stocks Soar More Than 4% - Canadian Commentary

Canadian stocks have soared in early trading on Monday and extended its highest level in more than a month. Stocks were boosted as investors mulled details of a new U.S. government plan to subsidize private investors' purchase as much as $1 trillion in toxic assets on the books of troubled banks.

The S&P/TSX Composite Index has rallied 361.52 points or 4.25% to move at 8,867.87. The index finished lower Friday for the first time in nine sessions.

Energy stocks have rallied 7%. Light sweet crude is up 59 cents at $52.66 per barrel as May takes over as the front-month contract.

Suncor Energy and Petro-Canada are both higher after the companies announced they will merge in an all-stock deal. Suncor has added 3.5% while Petro-Canada has soared 23.1%. Both companies expect the proposed merger to be completed in the third quarter of 2009. The combined entity will operate corporately and trade under the Suncor name.

Baytex Energy Trust has dropped 3.5% after the company announced will sell 6.90 mlns trust units to underwriters at C$14.50 per unit for total gross proceeds of C$100.05 mln.

NAL Oil & Gas Trust is up 2.2% after the company announced it has agreed to acquire Alberta Clipper Energy in a deal worth $115 mlns. Alberta Clipper has dropped 10.2% following the news.
 
Angle Energy has added 3.3% after the company announced funds from operations for the fourth quarter rose to C$15.69 mln or C$0.40 per share from C$7.67 mlns or C$0.23 per share in the year-ago quarter.

Mining stocks have surged 7.4% to lead the way. Among the big names, First Quantum has surged 9.6%, Teck Cominco has rallied 9%, Inmet has jumped 5.3% and Thompson Creek is up 2%.

Denison Mines Corp. has lost 8.8% after the company announced that Peter Farmer will step down as chief executive officer and director on April 30.

Financials are up 5% with all of the big six banks showing significant gains. Toronto-Dominion is up 6.5%, CIBC has added 5.5%, Bank of Montreal has gained 5.2%, National Bank is up 4.9%, Royal Bank has gained 4.7% and Scotiabank is up 4.5%.

In other corporate news, Pet Valu is up 1% after the company reported net income for the fourth-quarter of US$4.3 mln or US$0.42 per share, compared to US$4.7 mlns or US$0.46 per share for the fourth quarter of fiscal 2007.

West Fraser has lost 0.9% after the company said it will temporarily curtail plywood production in response to continuing weak demand, which will affect about 600 full and part-time employees.

Agrium has gained 4% after CF Industries Holdings announced that its board has recommended it reject Agrium's offer to acquire all outstanding shares of CF Industries.

In economic news, Canada's composite leading index for February fell 1.1% after a 0.9% decrease in January, with 9 of the 10 components declining, according to data released Monday by Statistics Canada.
 
The Obama administration released details Monday of its latest plan to solve the massive, debilitating banking crisis which continues to hold the financial system in its crushing grip.

The Treasury's response involves using up to $100 billion in funds from the $700 billion financial rescue plan passed in 2008 in addition to capital from private investors to generate an estimated $500 billion to purchase the toxic assets.

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Barclays boosted by iShares talk
 
Financials and miners are leading London’s advance as the market awaits an announcement later today by US Treasury Secretary Timothy Geithner in which he is expected to give more details of the US government's stimulus plans.

With further help for the banking system expected to be announced by Geithner, banks are understandably in demand. Barclays is higher on talk that it could conclude a sale of iShares business for £5bn as early as this week. Barclays bear Sandy Chen at Panmure Gordon is unimpressed, and said his 40p price target for Barclays could be cut if the bank offloads iShares.

Not even the prospect of dropping £500m through its exposure to troubled lender Cattles prevents Royal Bank of Scotland from advancing strongly, while fellow part-nationalised bank Lloyds Banking is also in demand.

The rising equity markets have helped ease some of the concerns over the life insurance sector with Aviva, Friends Provident and Old Mutual all doing well this morning. Legal & General shrugs off concerns that it might announce a dividend cut when it declares its results on Wednesday; the shares rise sharply, helped by a broker note from KBW, which has a 75p price target for the stock.

Miners have also rallied with hopes that the latest US stimulus plan could produce some tangible results for the US economy. Lonmin and Rio Tinto are leading the sector higher, while silver miner Fresnillo celebrates its return to the FTSE 100 with a solid gain.

Daily Mail and General Trust said first half results will show a "substantial fall" from last year's equivalent figures due to a combination of the worsening trading conditions and a change in the timing of profits. It is cutting 1,00 jobs at regional paper arm Northcliffe, double its previous forecast.

The take-up of the recent rights issue from property firm Hammerson, the owner of London’s Brent Cross shopping centre, has topped that of rival British Land. Acceptances for Hammerson’s £584m rights issue were received for 98.6% of the shares on offer, compared to a 96.57% take-up announced last week for British Land’s issue.

There has been industrial action at Hochschild Mining’s four operations in Peru over a dispute about profit sharing, which the miner says is not currently affecting its 2009 production target.

Logistics firm Wincanton has won two contracts worth £100m for warehousing and transport services in the UK. The group secured a long-term contract renewal with HJ Heinz as well as a new 3-year contract by Panasonic to manage the group's nationwide outbound transport from its National Distribution Centre in Northampton.

Specialist magazine publisher Future expects results this year to hit targets despite its US business sliding into the red after a dispute between wholesalers and distributors there.

Bid target Bowleven is upbeat about its future irrespective of what happens with the takeover talks. The Africa-focused oil explorer’s results for the six months to December showed a profit of $82.7m, versus an interim loss of $6.6m the year before.

Building contractor Renew Holdings said the outlook has deteriorated and it does not expect results to meet full year market expectations now.

Penny share Alizyme fell out of bed this morning despite the drug developer narrowing full-year losses and expressing confidence in the future. Net losses after tax came to £10.1m in the year ended 31 December compared with a loss of £31.2m last time as revenue rose to £1.9m from £13,000 previously. 

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Asian markets advance on stimulus expectations; resource, financials gain

The major markets across the Asia-Pacific region advanced on Monday, led by resources and financial stocks, on higher commodity prices. Hopes of a stimulus package from Japan to revive the economy, announcement from China that it would meet its growth target and expectations of initiatives from U.S to unclog the credit markets and remove the toxic assets from the banks' balance sheets, more than offset the weaker closing in Wall Street on Friday.

In Asian trading, crude oil futures for May delivery, in their first day as a front-month contract, are currently at $52.67 a barrel, up $0.60. On Friday, the April futures expired at $51.06 a barrel, up $0.55 from their previous close.

In Tokyo, the benchmark Nikkei 225 index ended higher by 269 points, or 3.4% at 8,215. The broader Topix Index of all First Section issues advanced 3.5%, or 26.79 points to close at 792.
 
On the economic front, Japan's Finance Ministry and Cabinet Office said that the large company business sentiment index registered a reading of -51.3 in the first quarter of 2009, compared to -35.7 in the fourth quarter. Negative readings indicate more companies are pessimistic about the economy than are optimistic. The survey's large manufacturers' index deteriorated to -66.0 versus the Q4 reading of -35.7.

Also, Japan's Finance Minister said in an interview that a massive government stimulus package would be necessary to prevent the current fiscal quarter from repeating the 12.1% economic contraction seen in the fourth quarter of 2008.

Trading houses advanced the most on expectations of an earlier-than-expected recovery in China, after the latter reaffirmed that it would meet the growth target. Mitsui Co., a leading trading company that derives more than half of its profits from commodity trading, surged up 10.56%. Among other major trading houses, Mitsubishi Corp. gained 7.74%, Itochu Corp. advanced 9.63% and Sumitomo Corp. rose 8.30%.

Banking stocks ended higher on hopes of the new U.S. plan to prop up its financial system. Mitsubishi UFJ, Japan's biggest bank, advanced 4.70% after unveiling plans to close 50 more outlets and cut 1,000 jobs as part of its efforts to trim down domestic operations. Sumitomo Mitsui gained 7.74% and Mizuho Financial rose 5.26%. Resona Holdings added 0.79%.

Oil-related stocks also gained. Inpex rose 6.83%%, Nippon Oil advanced 7.48% and Showa Shell gained 6.80%.

Among exporters, Canon rose 2.79%, Sharp advanced 3.71% and Sony gained 1.88%. However, automakers also posted gains. Toyota added 2.87% and Honda Motor gained 1.79%. In Sydney, the benchmark S&P/ASX200 index gained 84.5 points, or 2.4% to close at 3,550, and the broader All Ordinaries Index advanced 78.1 points, or 2.3% to close at 3,483.

Resource related stocks led the gains after the price of commodities in the London Mercantile Exchange advanced. Copper futures gained 1%. Telstra Corp, the largest telephone company in the country, rose 3.96% following reports that the company is planning to pay higher interest rates for borrowing A$300 million to meet working capital requirements.

BHP Billiton, the largest mining company in the world, gained 3.42% and Rio Tinto, the third largest mining company in the world, surged 7.86%. The market regulator has halted trading at Oz Minerals ahead of the announcement by the company related to the acquisition of the company by China Minimetals Group.

Woodside Petroleum gained 2.19%, Santos, the third-largest producer of oil and gas in the country, advanced 2.84%. and Santos rose 1.97%, on higher oil prices. Retail stocks ended higher. David Jones advanced 2.88%. Harvey Norman gained 2.98%, Wesfarmers added 2.69%, and Woolworths rose 1.13%.

Financial stocks advanced on hopes of measures to unclog the credit markets and revival of the global financial sector. Investment bank Macquarie Group moved up 1.06%. ANZ Bank gained 3.44%, Commonwealth Bank of Australia firmed 2.65% and National Australia Bank advanced 3.66%. Westpac Banking rose 3.69%.

Gold-related stocks ended mixed. While Newcrest Mining declined 1.58%, Sino Gold and Lihir Gold gained 2.43% and 0.59% respectively.

The benchmark Hang Seng Index surged up 614 points, or 4.78%, to close at 13,447. Among the major gainers, Aluminum Company of China, or Chalco, surged 16.33%, Petrochina gained 7.53% and CNOOC advanced 6.77%.

China-related shares advanced after the Chinese Government stated that it would meet the specified growth target for the year. China Merchant Holdings rose 11.40%, Espirit Holdings gained 6.09% and China Overseas advanced 3.09%

Telecom stocks ended higher; Hutchison Whimpoa gained 3.91%, China Mobile advanced 4.91%, and Tencent Holdings rose 5.93%.

Insurance stocks also moved up; Ping An Insurance rose more than 7.6%, and China Life advanced 5.12%. Financial shares also gained. While HSBC Holdings gained 0.60%, Hang Seng Bank advanced 3.81%, Bank of East Asia advanced 5.78%, ICBC increased 6.18%, BOC Hong Kong and Bank of China closed higher 3.88% and 2.64% respectively.

The benchmark KOSPI Index in South Korea opened higher at 1,180, compared to previous closing on Friday at 1,171, and is trading at 1,193, up 1.91% or 22.38 points,

Officials in the Government revealed that the South Korean Government, in an effort to prevent the economy from slipping in to recession, is planning to spend an addition 29 trillion Won, or US$ 20.64 billion, and details of the spending plans for this extra budget will be submitted to the Cabinet on Tuesday.

Oil stocks gained on higher crude oil prices. SK Holding gained 5.91% and S-Oil rose 2.11%. Among steel makers, POSCO, the fourth largest steel company in the world, gained 3.36%, and Hyundai Steel advanced 5.99%.

Market heavyweight Samsung Electronics rose 1.29%. Among the shipbuilders, Hyundai Heavy Industries gained 5.45%, Samsung Heavy Industries advanced 1.94% and Daewoo Shipbuilding rose 1.63%.

Financial stocks also ended higher. KB Financial Group, the holding firm of Kookmin Bank, advanced 5.02%, Shinhan Financial Group gained 4.78%, and Woori Finance rose 4.18%. Technology stock Hynix Semiconductor surged 7.42%, LG Electronics gained 4.71% and LG Display gained 2.08%.

Among the other major markets, China's Shanghai Composite Index gained 1.93%, or 44.39 points at 2,325, Singapore's Strait Times Index moved up 67.16 points, or 4.21% at 1,665, Indonesia's Jakarta Composite Index advanced 45.76 points, or 3.36% at 1,407, and Taiwan's Weighted Index rose 162.56 points, or 3.28% to 5,124.

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Gold Prices Edge Lower Again

Gold prices inched lower again in early trading on Monday, giving back a little more of last Thursday's massive rally. Trading took place amid the release of details of a new government plan to subsidize private investors' purchase of toxic assets on the books of troubled banks.

April-dated gold fell to $947.50, down $8.70 for the session. Prices dipped as low as $947.20 after earlier trading at $958.10.

The Obama administration released details Monday of its latest plan to solve the massive, debilitating banking crisis which continues to hold the financial system in its crushing grip.

The Treasury's response involves using up to $100 billion in funds from the $700 billion financial rescue plan passed in 2008 in addition to capital from private investors to generate an estimated $500 billion to purchase the toxic assets, a number that could double to $1 trillion over time, the Treasury said.
 
The dollar remained on the defensive versus the euro and sterling, but advanced against the yen after Japan's Finance Minister said that a massive government stimulus package would be necessary to prevent the current fiscal quarter from repeating the 12.1% economic contraction seen in the fourth quarter of 2008.

Despite dropping in four of the five sessions this week, gold finished up $26.20 or 2.8%. Gold soared $68.70 on Thursday amid worries of inflation after the Federal Reserve's plan to buy as much as $1.15 trillion in bonds was revealed the day before.

Meanwhile, on the economic front, the National Association of Realtors is scheduled to release its report on existing home sales for February at 10 AM ET. Economists estimate existing home sales of 4.45 million for the month.

Crude Oil Slightly Lower In Early Trading

Crude oil prices turned lower amid choppy trading on Monday morning as May took over as the front-month contract.

Light sweet crude for May delivery dropped to $51.95, down 12 cents for the session. Prices hit as low as $51.62 and as high as $52.60.

However, total motor gasoline inventories unexpectedly increased by 3.2 million barrels last week. A decline of about 2 million barrels was expected.

Last week, April crude increased $4.80 a barrel despite a 55-cent drop on Friday. Prices soared $3.47 Thursday on the Federal Reserve's plan to buy as much as $1.15 trillion in bonds was revealed the day before.

In big news on the corporate front Monday morning, Canadian oil firms Suncor Energy and Petro-Canada announced Monday that the companies have agreed to merge in an all-stock deal. Both companies expect the proposed merger to be completed in the third quarter of 2009. The combined entity will operate corporately and trade under the Suncor name.

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