US & World Daily Markets Financial Briefing 27-11-2009

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Worries About Impact Of Dubai Crisis Generate Substantial Selling Pressure

The major U.S. index futures are pointing to a sharply lower opening on Friday, as traders react to news of a financial crisis in Dubai. The downward momentum comes after Dubai World, the main investment arm of Dubai, asked to postpone payment on some of its $60 billion in debt. Worries about a default by the city-state have raised significant concerns about the impact on banks.

The news has contributed to substantial weakness in overseas markets that appears poised to carry over into the U.S. markets. Light volume on Wall Street amid a holiday-shortened session could contribute to increased volatility.

The major U.S. averages, which showed some indecision in early trading on Wednesday, advanced strongly shortly after the open, reaching their intra-day highs in early afternoon trading. Thereafter, they pared some of their gains and traded with modest gains in the afternoon.

The Dow Industrials ended the session up 30.69 points or 0.29% at 10,464 and the S&P 500 Index rose 4.98 points or 0.45% to end at 1,111, while the Nasdaq Composite Index advanced 6.87 points or 0.32% to 2,176.

Twenty of the thirty Dow components ended the session higher, with Boeing (BA), Caterpillar (CAT), DuPont (DD), Disney (DIS), Home Depot (HD) and Pfizer (PFE) posting strong gains. On the other hand, Kraft Foods (KFT) and Bank of America (BAC) declined by over 1% each.

Among the sector indexes, Dow Jones Utility Average advanced 1%, the Dow Jones U.S. Basic Materials Average climbed 1.72% and the NYSE Arca Airline Index gained 1.16%. The NYSE Arca Oil Index and the Philadelphia Oil Service Index moved up about 1% each, while the NYSE Arca Gold Bugs Index rose 2.80%.

Canadian stocks plunged on Thursday, following the lead of European market, amid worries from Dubai, which asked to postpone $60 billion in loan payments until May. Trading was lighter than usual with U.S. markets closed for Thanksgiving.

The S&P/TSX Composite Index dropped 200.10 points or 1.72 points to 11,436.80. The market had gained in three of the last four sessions.

Mining stocks dropped 2.7% as copper prices fell. Teck Resources dropped 2.8%, First Quantum declined 2.4% and Ivanhoe lost 2%.

Materials stocks finished 2.4% lower as Potash lost 2.9% and Agrium declined 2.3%. Gold stocks fell 1.2% as Eldorado declined 3.7%.
 
Industrial stocks dropped 2%. Bombardier Aerospace dropped 3.8% after the company announced it will reduce its CRJ aircraft production rate as previously indicated and also layoff 715 employees in Bombardier Aerospace's facilities in Montreal area.

In other corporate news, Rogers Communications said on Thursday that it has entered into agreements to buy 3.2 million subordinate voting shares of Cogeco Cable fors $36.43 per share, a deal worth about $116.6 million.

After the bell, Mosaid Technologies reported second quarter net income of C$5.0 million or C$0.49 per share, compared with a loss of C$3.4 million or C$0.33 per share last year.

On the economic front, the Conference Board of Canada revealed its consumer confidence index fell to 79.0 in November.

Currency, Commodity Futures

Crude oil futures are trading down $3.14 at $74.82 a barrel after rising $1.94 to $77.96 a barrel on Wednesday. Gold futures, which ended the previous session up $21.20 at $1,188.60, are currently moving down $21 to $1,167.60.

Among currencies, the U.S. dollar is trading at 86.61 yen, while the greenback is currently valued at $1.4922 versus the euro compared to yesterday’s $1.5019.

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Stocks markets across the Asia-Pacific region ended sharply lower on Friday on concerns about a financial crisis in Dubai. Investors across the world dumped high-risk stock investments and sought asylum in safe-haven government bonds.

In Japan, the benchmark Nikkei 225 Index slumped 301.72 points, or 3.22%, to 9,082 while the broader Topix index of all First Section issues declined 18.55 points, or 2.24%, to 811.

On the economic front, a statement released by the Ministry of Internal Affairs & Communications revealed that the unemployment rate in Japan stood at a seasonally adjusted 5.1% in October, down from 5.3% in the previous month. Economists had expected the unemployment rate to rise to 5.4%.

The Ministry also revealed that Japan's general consumer prices dropped 2.5% year-on-year in October following a 2.2% drop in prices in each of the previous three months. Core consumer prices, which exclude fresh food, dropped 2.2% in October from a year earlier, slower than a 2.3% drop in the previous month. Economists expected a 2.4% decline. This is the eighth consecutive month that consumer prices have fallen.

Separately, the Ministry of Economy, Trade & Industry revealed that retail sales in Japan dropped 0.9% year-on-year to 10.83 trillion yen in October, slower than the 1.3% decline in the preceding month. Economists had expected sales to drop 1.6%. This marks the fourteenth straight month in which retail sales have fallen on an annual basis.

Almost all the stocks ended in negative territory, mirroring the weak sentiment prevailing across the markets in the region.

Exporters declined on additional concerns about the strengthening of the local currency against the dollar. Automakers also ended sharply lower, while banking stocks were the major losers. Sumitomo Mitsui Financial declined 3.68%, Mitsubishi UFJ Financial shed 2.20%, Mizuho Financial lost 3.27% and Resona Holdings fell 2.67%.

In Australia, the benchmark S&P/ASX200 Index slumped 136.50 points, or 2.90% to close at 4,572, while the All-Ordinaries Index ended at 4,597, representing a loss of 130.40 points, or 2.76%.

Most Australian stocks ended in negative territory, impacted by the weak global sentiment on the Dubai financial crisis. Among the major banks, ANZ Bank declined 3.59%, Commonwealth Bank of Australia fell 3.40%, National Australia Bank lost 3.98% and Westpac Banking shed 3.83%. Investment banker Macquarie Group slumped 5.05%.

Metals and mining stocks also ended sharply lower. BHP Billiton fell 3.37%, Rio Tinto lost 2.97%, Fortescue Metals shed 3.14%, Gindalbie Metals declined 2.69% and Oz Minerals plunged 5.98%. Retail stocks, oil stocks and property stocks also ended in negative territory, mirroring the weakness in the global markets.

In Hong Kong, the Hang Seng Index plunged 1,075.91 points, or 4.84%, to 21,134, mirroring the gloomy picture across the other Asian markets on concerns about the financial crisis in Dubai and its cascading impact on banks and other institutions. All 42 components in the index ended in negative territory, with banks leading the decline.

South Korea’s KOSPI Index slumped 75.02 points or 4.69% to 1,524, tracking the other markets in the region on the Dubai fears. All the components of the index ended in negative territory as traders preferred to switch to treasuries and sold off stocks.

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Shares mixed
 
Europe’s main markets are mixed in midday dealings as investors mull what implications Dubai’s decision to delay payment on some of its $59bn debt pile is likely to have.

The Dax is 8 points lower in Frankfurt at 5,606, while the Cac is 8 points higher at 3,688. The Swiss market has gained 3 points to 6,286.

European markets dropped early on after posting triple-digit falls yesterday. London slumped more than 3% on Wednesday.

Asian markets also felt the impact. Japan hit a new four-month closing low, with banks bashed on worries about the financial sector’s exposure to a debt default by Dubai World.

The state-owned property business has asked creditors if it can delay debt repayments due next month until May of next year.

Hong Kong fell over 1,000 points as big banks like HSBC tumbled on fears about the situation in the Gulf state. There are serious concerns that the country will be forced to sell stakes to raise capital.

Fears about Dubai World are also weighing on crude oil prices and energy shares. In Europe, Royal Dutch Shell, Eni and Total are all lower.

Elsewhere, financial services group ING has priced its €7.5bn rights issue at a steep discount on Friday. The Dutch firm said it would issue 1.7bn new shares at €4.24.

Economic confidence in the eurozone rose for the eighth month running and slightly more than expected in November, official figures showed this morning.

The European Commission's economic sentiment indicator added 2.7 points to 88.8 in the eurozone, though that is still below the long-term average of 100.

CAC 40 - Risers
Alcatel-Lucent (ALU) € 2.30 +4.03%
Michelin (ML) € 51.68 +2.80%
Lafarge (LG) € 55.34 +2.08%
EADS (EAD) € 11.96 +1.87%
Saint Gobain (SGO) € 36.31 +1.42%
Renault (RNO) € 32.00 +1.39%
ArcelorMittal SA (MT) € 25.23 +1.33%
Credit Agricole (ACA) € 13.98 +1.30%
BNP Paribas (BNP) € 54.53 +1.26%
Unibail-Rodamco (UL) € 150.90 +1.21%

CAC 40 - Fallers
Sanofi-Aventis (SAN) € 50.53 -1.50%
Lagardere SCA (MMB) € 28.65 -1.41%
Total (FP) € 41.25 -0.76%
Technip (TEC) € 45.94 -0.72%
Vivendi (VIV) € 19.24 -0.70%
Accor (AC) € 35.38 -0.63%
GDF Suez (GSZ) € 28.32 -0.63%
L'Oreal (OR) € 71.74 -0.62%
Veolia Environnement (VIE) € 22.56 -0.62%
Schneider Electric (SU) € 72.69 -0.59% 

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Bellamont Exploration Q3 Loss Widens

Oil and gas exploration company Bellamont Exploration Ltd.  reported Friday wider year-over-year loss for the third quarter, hurt by a 35% drop in quarterly sales as well as sharply lower production and average realized prices. The company updated its production forecast for 2009 and provided production outlook for the first quarter of 2010.

The Calgary, Canada-based company reported a net and comprehensive loss of C$0.97 million or C$0.02 per share, wider than C$0.51 million or C$0.01 per share in the prior-year quarter.

Petroleum and natural gas sales for the quarter dropped 35.4% to C$2.24 million from C$3.46 million in the year-ago quarter.

Funds generated from operations for the quarter dropped significantly to C$0.75 million or C$0.01 per share from C$1.01 million or C$0.02 per share in the same quarter last year.

Bellamont's total production for the quarter was 822 barrels of oil equivalent or Boe, per day at an average realized price of C$29.62 per Boe, sharply down from 548 boe at an average realized price of C$68.66 per Boe in the year-ago quarter.

Crude oil production totaled 168 barrels per day at average an average realized price of C$68.04 per barrel, compared to 159 barrels per day at an average realized price of C$115.08 per barrel in the comparable quarter a year ago.

Total natural gas production was 3,768 million cubic feet per day or Mcf, at average an average realized price of C$3.02 per Mcf, compared to 2,267 Mcf at an average realized price of C$7.92 per Mcf in the prior-year quarter.
 
Natural gas liquids produce were 26 barrels per day at average an average realized price of C$60.16 per barrel, compared to 11 barrels per day at an average realized price of C$120.93 per barrel in the corresponding quarter last year.

Capital expenditures for the quarter declined 7.2% to C$3.01 million from C$3.25 million in the same quarter last year.

After the end of the third quarter, the company closed a bought deal financing and a private placement financing raising total gross proceeds of $13.33 million, of which $9.27 million was in the form of subscription receipts that will be exchanged for Bellamont Class A common shares upon closing of the Peace River Arch area acquisition.

Bellamont renewed its line of credit with its lender and is pleased to announce that lender has agreed to increase its line from $7.25 million to $12 million, subject to satisfying certain customary closing conditions relative to the Peace River Arch area acquisition.

Based on the boosted credit line, the company is well positioned to pursue an active capital program in 2010. However, It intends to announce 2010 budget after compiling all the results of its current drilling and completions program.

For the nine-month period, the company reported a net loss of C$3.00 million or C$0.07 per share, sharply wider than C$0.67 million or C$0.01 per share in the same period last year. Petroleum and natural gas sales for the year-to-date period declined 16.5% to C$4.86 million from C$8.21 million in the year-ago period.

Looking ahead, Bellamont Exploration said it expects to exit 2009 at about 1,125 boe/d of production, including the production from the Peace River Arch area acquisition. Earlier, the company expected to exit the year with 1100 Boe/d and add another 100 Boe/d in the first quarter of 2010.

The company also expects to average 1,350 boe/d, about 40% light oil, in the first quarter of 2010.

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