Stock Market Update - Friday, October 15, 2010 - Cautious Uptrend Continues

Stock Market Update
Friday, October 15, 2010

Latest US Economic News Headlines:

USA EQUITY INDEXES: (OCT. 15, 4:00 PM EDT)
Dow Jones 11,062.78 -31.79 (-0.29%)
S&P 500    1,176.19 + 2.38 (+0.20%)
Nasdaq     2,468.77 +33.39 (+1.37%)

Dow Jones 3:30 PM Averages: DJIA 11,039.36 DN 55.21
  30 INDUS     11,039.36 DN   55.21 OR    0.50%
  20 TRANSP     4,687.40 DN   17.77 OR    0.38%
  15 UTILS        405.98 UP    0.81 OR    0.20%
  65 STOCKS     3,834.86 DN   12.96 OR    0.34%

US DOLLAR FUTURES INDEX DXY: 3:08PM EDT: 77.04   0.39 (0.51%)  

US COMMODITY PRICES: (OCT. 15, 4:00 PM EDT)
Crude Oil     81.26     + 0.01%
Natural Gas     3.52     - 0.28%
Gasoline     2.10     -
Heating Oil     2.23     -
Gold     1368.23     - 0.93%
Silver     24.27     - 1.46%
Copper     3.82     + 0.37%

US SECTOR SUMMARY: (OCT 15, 4:00 PM EDT)
Basic Materials       -0.11%
Capital Goods        -0.22%
Conglomerates       -1.56%
Cons. Cyclical        -0.18%
Cons. Non-Cyclical-0.15%
Energy                    -0.02%
Financial                 -0.95%
Healthcare             +0.14%
Services                 +0.64%
Technology            +0.81%
Transportation        -0.08%
Utilities                   +0.14%


US DOLLAR GRINDS UPWARD AS STOCKS DECLINE
US Stock Drop Steepens As Financials Weigh; DJIA Off 44

U.S. stocks waffled Friday as the financial sector slumped on persisting concerns over the foreclosure crisis, but technology companies climbed on strong earnings from Google.

The US Government has announced it posted a $1.294 trillion dollar deficit for 2010. It is the 24th straight monthly deficit in September, and is lower than it posted in 2009.

US stocks pared earlier gains and the Dow industrials and S&P 500 turned negative on Friday, weighed by declines in General Electric and top-tier banks.

U.S. stocks lost some of its early gains, led by weakness in the financial sector following disappointing results at General Electric's financial unit while sliding consumer sentiment also weighs on market sentiment. the tech-heavy Nasdaq Composite climbed 0.9% to 2457, boosted by an 11% jump in Google. The Internet-search giant reported a 32% rise in third-quarter profit, beating Wall Street estimates.

The Standard & Poor's 500 index fell less than a point to 1173 as the strength in the technology sector offset declines across financials

Could a rise in U.S. growth and inflation halt the bearish sentiment underlying the dollar? Currency traders have witnessed a wild mix price actions each day ahead of the slew of U.S. economic releases.The U.S. Dollar Index, which measures the U.S. currency against a basket of six others, edged up 0.2%.

Financial stocks were weak as concerns over the foreclosure crisis persisted. Bank of America fell 4.4% as S&P Equity Research cut its investment rating on the bank's shares to hold from strong buy, citing concerns that it may be less prepared than peers for future mortgage repurchase demands.  J.P. Morgan Chase dropped 3%.

American Express Co. (AXP) said Friday in a regulatory filing the number of U.S. borrowers at least a month behind in their card payments rose to 2.5% in September from 2.4% in August.

The uptick reverses several months of falling delinquencies at the credit-card issuer. AmEx also said Friday 30-day delinquency rates fell to 2.5% in the third quarter, according to preliminary data, from 2.7% in the second quarter. The New York-based lender is leading the pack in improving credit trends among the major U.S. issuers of plastic.

Delinquencies peaked for the company at 5.3% in February last year. The delinquency rate, a key gauge of future losses, is important because higher delinquencies force issuers to squirrel away capital to cover potential losses; ultimately, companies must write off loans if customers can't repay them.

AmEx also said it wrote off an annualized 5.2% of its U.S. card loans in the third quarter, citing preliminary data, down from 6.2% in the second quarter. This monthly report card on the performance of credit card loans, including those packaged into bonds, offers a window into the creditworthiness of the affluent, who make up the bulk of AmEx's consumer base.

The company's shares recently traded at $39.26, down 0.5%. The stock has traded in the range of $34.20 and $49.19 over the last 52 weeks.

General Electric's 3Q earnings fall 18% to $2.06 billion, or 18c a share, after recording $1.1 billion of reserves from selling its Japan consumer-finance business as the conglomerate reported its first growth in both equipment and service orders in eight quarters. Shares down 4%.

Gannett's 3Q profit jumps 38% to $101.4 million, or 42c a share, and earnings of continuing operations top analysts' expectations on improved margins, even as the top line is damped by continuing declines in print advertising.

Shares of Mattel fell 7.4% as investors were disappointed by slumping revenue at the toy maker's Fisher-Price division in the third quarter.

Seagate Technology surged 22% after the company said it has been approached by an unnamed party interested in taking the storage drive maker private, a move that comes as interest in the broad data management sector heats up.

Charles Schwab's 3Q earnings fall 38% to $124 million, or 10c a share, on $94 million of previously announced charges, as the company posted its first revenue increase in more than two years.

Federal Reserve Chairman Ben Bernanke keeps alive chances the Fed will provide additional support to a weak economy as he worries about too-low inflation and high unemployment. He says economic growth has been "less vigorous than we would like."

U.S. consumer prices barely budge during September in yet another sign the Fed might need to take action to combat continued weakness in the economy. Meanwhile, retail sales for September posted a stronger-than-expected increase.

US consumer sentiment index's preliminary reading for October falls to 67.9 from the 68.2 in September, as consumers think current economy is worsening. Economists expected a reading of 69.

Empire State's business conditions index jumps to 15.73 in October from 4.14 in September, suggesting the factory sector is doing much better in the fourth quarter after activity slowed sharply during the summer.

China's sovereign credit rating faces risks from high government debt and a potential fall in banks' asset quality from bad loans after the fiscal stimulus measures launched in late 2008, Fitch Ratings analysts say.

Expectations for a sizeable Treasurys purchase by the Federal Reserve are the key driver on government bond markets, as the advanced state of debt funding allows euro-zone sovereigns to scale down their supply.

FEDERAL REGULATORS CLOSED THREE US BANKS

The US Government FDIC regulators closed three US Banks late Friday and seized all assets. Premier Bank, Jefferson City, Missouri, WestBridge Bank and Trust Company, Chesterfield, Missouri and Security Savings Bank, F.S.B., located in Olathe, Kanses.

To see the complete list of failed banks and credit unions visit:

Online Consultancy Network™ Bank Failure List
http://ocnww.blogspot.com/2010/09/bank-failure-list-update-september-1.html

2010 US DEFICIT $1.294,000,000,000 TRILLION DOLLARS 

Government Budget Deficit In FY 2010 Shrinks By $122 Billion

The U.S. spent $1.294 trillion more than it collected in the fiscal year that ended Sept. 30, the Treasury Department said Friday. The government budget deficit shrank in fiscal 2010, but the big gap was only $122 billion lower than the record high set a year ago.

The deficit amounted to 8.9% of gross domestic product. That's down from fiscal 2009, when the deficit of $1.416 trillion was 10.0% of GDP.  Spending fell and revenues rose in fiscal 2010 as the economy recovered from the deep recession that contributed to the nation's troubled fiscal condition.

The reduction in the deficit was credited by U.S. officials to management of government emergency programs that were launched two years ago to save Wall Street from financial crisis.

"By carefully managing the emergency initiatives to stop the financial panic and by accelerating our exit from those investments, we have significantly lowered the cost to taxpayers," Treasury Secretary Timothy Geithner said in a statement. "However, we still have a long way to go to repair the damage to the economy and address the long-term deficits caused by the crisis," Geithner said.

The White House in July predicted a deficit of $1.47 trillion for fiscal 2010. The Congressional Budget Office had estimated the shortfall was slightly less than $1.3 trillion.

The Treasury's report Friday said the government collected $2.162 trillion in fiscal 2010, up from $2.104 trillion in fiscal 2009. Corporate tax receipts climbed as the economy crawled out of its long slump. Spending totaled $3.456 trillion in fiscal 2010, down from $3.520 trillion in fiscal 2009. Outlays rose, however, for providing compensation to the nation's jobless and interest payments on the nation's debt..

As for the month of September, the last month in fiscal 2010, the government ran a monthly budget deficit of $34.49 billion, the Treasury Department said. That was a record 24th straight monthly deficit. Historically, the government typically runs a surplus for that month of the fiscal year.


US CRUDE OIL FUTURES DECLINE AGAINST THE DOLLARS RISE
Crude retreats towards $81/Bbl as dollar rises. Nymex Crude settles down $1.44 at $81.25/Barrel.

Crude futures aimed lower Friday after wavering between gains and losses, as a speech from Federal Reserve Chairman Ben Bernanke earlier in the morning left traders wondering to what extent the central bank will support the economy.

Light, sweet crude for November delivery recently traded 18 cents lower at $82.51 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange traded 45 cents lower at $83.75 a barrel.

Oil prices had little direction Friday morning amid volatile moves in the dollar and in other markets. Crude rose sharply as Bernanke's comments drove down the dollar and also boosted the equities markets. But investors lost confidence towards the end of his remarks.

A weaker dollar makes oil cheaper for buyers in other currencies, and has pushed investors into hard assets, such as commodities.

Data and reports on the broader economy, along with the falling dollar, have trumped concerns about still-high supplies of oil and fuel products. The U.S. Department of Energy on Thursday reported a modest draw in crude stockpiles, but also said weekly U.S. demand for oil and fuels fell to the lowest level since November.

Market participants were also eyeing widespread strikes in France, which have hit the country's energy infrastructure. Front-month November reformulated gasoline blendstock, or RBOB, recently traded 0.38 cent higher at $2.1403 a gallon. November heating oil recently traded 1.49 cents higher at $2.2690 a gallon.


US NATURAL GAS FUTURES DROP TO YEAR LOW
Futures At 1-Year Low On High Supply; Off 3.2% On Week

Natural-gas futures plunged to a one-year low Friday, as ample supplies and a weak demand outlook continued to weigh on the market. High supplies continue to pressure prices, as U.S. inventories have expanded by more than average. 

Natural gas for November delivery fell 12.2 cents, or 3.3%, to $3.535 a million British thermal units on the New York Mercantile Exchange, the lowest price since September 2009. The benchmark contract ended the week down 3.2%, and has fallen 8.7% so far in October.

Natural-gas prices typically rise at this time of year in anticipation of winter's heating needs, but futures have been shackled by a persistent supply overhang and projections for continued high levels of production.

Normal or above-normal temperatures are likely through most of the U.S. during the next two weeks, meteorologists at private forecaster Commodity Weather Group wrote Friday.

The Energy Information Administration reported Thursday that inventories grew by more than average for a fifth consecutive week, rising by 91 billion cubic feet in the week ended Oct. 8. Weekly injections since early September have been about 23% above average, as strong production has outpaced demand.

Inventories on Oct. 8 stood at 3.590 trillion cubic feet, 7.4% above the five-year average.

   FUTURES          SETTLEMENT     NET CHANGE
   Nymex Nov           $3.535              -12.2c
   Nymex Dec           $3.925               -9.1c
   Nymex Jan             $4.169               -7.5c


PRECIOUS METALS PAUSE FOR RISING DOLLAR
US Gold:  $ 1,368.98
US Silver: $ 24.30
US Platinum: $1,691.00
US Palladium: $ 589.00 

Engelhard Corp's base price for industrial gold bullion was $1370.47 per troy ounce, down $5.76 from previous. It's selling price for gold in fabricated form was $1473.26, down $6.19.

Handy & Harman's base price for gold was $1367.50 per troy ounce, down $5.75. The fabricated form price was $1476.90, down $6.21.

Investors took a break from buying gold Friday as stronger than expected retail sales data counterbalanced Federal Reserve comments and consumer price figures that suggest monetary easing is imminent.

The most actively traded gold contract, for December delivery, was recently down $6.20, or 0.5%, at $1,371.40 a troy ounce on the Comex division of the New York Mercantile Exchange.


US STOCKS UP AT OPEN
US Stocks Rise As Bernanke's Comments Provide Boost

U.S. stocks rose Friday morning following comments from Federal Reserve Chairman Ben Bernanke and data showing flat inflation that boosted expectations for the central bank to provide more stimulus.

The Dow Jones Industrial Average rose 33 points, or 0.3%, to 11129, in early trading. Alcoa was the measure's best performer, up 1.1%, while DuPont and Hewlett-Packard both rose 0.8%.

General Electric sank to the bottom of the Dow, off 3.2%, following the conglomerate's third-quarter earnings report. GE's revenue came in short of Wall Street's view, which the company blamed on lower equipment sales and the impact of reduced assets at GE Capital.

The Nasdaq Composite added 1% to 2460, boosted by a 10% jump in Google. The Internet-search giant reported a 32% rise in third-quarter profit, beating Wall Street estimates. The company's report provided evidence that several key emerging businesses have grown faster than Wall Street expected.

The Standard & Poor's 500 index rose 0.5% to 1180, with its technology sector in the lead. 

The U.S. Dollar Index, reflecting the U.S. currency against a basket of six others, slipped 0.1%. Treasurys were mixed, with the two-year slightly higher, pushing its yield down to 0.35%, while the 10-year fell, lifting its yield to 2.54%.


BEFORE THE BELL:

US DOLLAR DECLINES AHEAD OF OPEN
US Futures Are Rising Before the US Market Opens

The Weekly US Dollar ETF UUP shows that the one year low on the two year chart for the dollar is almost in place. (See Chart )

The dollar remained on the defensive on expectations the Federal Reserve will implement additional quantitative easing. The euro rose 0.3% versus the U.S. unit to trade at $1.4077. The dollar fell 0.4% versus the Japanese currency to trade at 81.19 yen.

The DXY Index is 76.43, down 0.22. U.S. futures edge up after GE results. The Fed chief to deliver speech in Boston; CPI, retail-sales data on tap ahead of market open.The prospect of additional quantitative easing has helped lift investor appetite for risk, translating into gains for U.S. and global equities.

US stock futures rose Friday morning after Federal Reserve Chairman Ben Bernanke made a case for new steps by the Fed to boost economic growth while data showed US consumer prices barely budged during September, yet another sign supporting more stimulus.

Bernanke, who was scheduled to speak at 8:15 a.m. Eastern time at the Boston Fed’s annual conference, will be watched for further confirmation that the Fed is prepared to embark on another round of monetary stimulus via quantitative easing in an effort to shore up a faltering economy and fend off the threat of deflation.

He said Friday that the central bank was poised to take steps to help fight unemployment.

Federal Reserve Chairman Ben S. Bernanke today said gains in spending would probably be “uneven” because unemployment was too high, and indicated that additional monetary stimulus may be needed.
General Electric (GE  16.81,-0.35,-2.04%) reported third-quarter net profit attributable to the company of $2.06 billion, or 18 cents a share, down from $2.49 billion, or 23 cents a share, in the same period a year ago. Earnings from continuing operations rose to 29 cents a share from 22 cents a year ago.

GE said revenues fell 5% to $35.89 billion. Analysts had forecast sales of $37.43 billion. Shares of GE dropped 2.4% in pre-market trading.

A heavy round of economic data is on tap. The September consumer-price index, or CPI, and September retail-sales data are set for release at 8:30 a.m. Eastern, while the New York Fed’s Empire State index, a gauge of regional manufacturing activity, is set for release at the same time.

Data on business inventories and University of Michigan consumer sentiment are set for release later in the day.

Economists surveyed by MarketWatch produced an average estimate of a 0.2% rise in CPI after a 0.3% rise in August. Retail sales are forecast to rise 0.5% after a 0.4% August increase.


Senior's Won't See Cost of Real Inflation Increase
For the second year in a row, the nearly 54 million retirees and other Americans who receive Social Security benefits will not get any cost-of-living increase in 2011. Excluding the US "Core Index" the cost of inflation seen at the supermarket for rising food, or the cost to drive to the market, won't be paid for by any increase in retirement benefits.

Because it is a political campaign season in America, as elections near this October and November, We expect President Obama to announce another way to buy votes for the democrats, by issuing an order to give US retired pensioners a $250 payment boost before the elections.


RETAIL UP MORE THAN EXPECTED
US Retail Sales Climbed More Than Forecast in September

Retail sales in the U.S. climbed more than forecast in September, easing concern consumer spending will weaken and endanger the recovery.

Purchases rose 0.6 percent following a 0.7 percent gain in August that was larger than previously estimated, Commerce Department figures showed today in Washington. Other reports showed inflation cooled even further last month and manufacturing in the New York region accelerated.

Retail sales were projected to rise 0.4 percent after a 0.4 percent gain previously reported for August, according to the median estimate of 80 economists in a Bloomberg News survey. Economists’ estimates ranged from a decline of 0.1 percent to a gain of 0.8 percent.


US INFLATION SEEN TAME - CORE CPI FLAT

U.S. consumer prices barely budge in September in yet another sign the Fed may need to act to combat continued weakness in the economy amid concerns about low inflation. Economists were expecting a 0.2% rise in CPI and a 0.1% gain in the core number.

If you exclude energy and food inflation then the cost of living in the US only rose 0.1 percent in September, less than forecast, showing companies are finding it difficult to raise prices, figures from the Labor Department showed today. Core prices, which exclude food and fuel costs, rose 0.8 percent in the past 12 months, the smallest year-over-year gain since 1961.

The Fed Bank of New York’s general economic index rose to 15.7 in October, the highest level in four months and more than twice the median forecast of economists surveyed by Bloomberg. Readings greater than zero signal gains in the so-called Empire State Index covering New York, northern New Jersey and southern Connecticut.


US CONSUMER SENTIMENT DECLINED AGAIN

The Michigan Consumer Sentiment index in the U.S. showed a decline for October to 67.9 points from 68.2 in September. Analysts had expected the index to rise to 69.0 points. The data places another question mark over the already sluggish U.S. economic recovery, to which Mexico's economic performance is highly linked. 

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Canadian Market: 

Canada Dollar Down Against the US Dollar

The Canadian dollar ended substantially lower Friday, after rallying in early trading. The U.S. dollar was at C$1.0132 at 3:25 p.m. EDT (1925 GMT), from C$1.0059 at 8:00 a.m. EDT (1200 GMT) and C$1.0063 late Thursday. The U.S. dollar dipped to a low of C$1.0011 as it sold off broadly after the text of Bernanke's 8:15 a.m. EDT speech in Boston was released.

The U.S. dollar began a sustained rebound against its Canadian counterpart as the speech prompted markets to reconsider the degree to which quantitative easing has already been priced into prices for currencies and other assets.

"The whole world seems to be positioned against the U.S dollar, right now. They're very much positioned for a massive amount of stimulus to be announced come November," said Brendan McGrath, senior foreign exchange trader at Custom House, a global payments firm in Victoria, British Columbia.

Market participants are retreating somewhat from the extensive quantitative easing they have priced into the U.S. dollar in recent sessions, McGrath said. "People are taking profits now because they've clearly bought the rumor and they're starting to sell the news a bit, already," he said.

The U.S. dollar's rebound reflects its tendency to bounce back after dropping to the parity level against its Canadian counterpart, which many regard as a good level to take profits on the Canadian unit and boost holdings of the greenback.

"[The Canadian dollar] pretty much always acts the same way around par," McGrath said.

News that Canadian manufacturing shipments were up 2.0% in August from July, considerably exceeding the expected 0.5% increase, was supportive for the Canadian unit in early trading, but was eclipsed by the broader currency market moves Friday.

Friday's action was significant enough to signal at least a short-term reversal for the U.S./Canadian dollar pair, McGrath said. The C$1.0250 to C$1.0300 area is likely to provide some resistance to a move higher, he said.

International securities transactions data for August will be released on Monday, but the key event for the currency comes on Tuesday, when the Bank of Canada has its second last policy announcement date of the year.

The Bank is expected to pause from monetary tightening after raising its overnight target rate by a total of 75 basis points to 1.00% earlier this year.

The downside risks to the Canadian dollar from next week's Bank of Canada meeting are limited given that the market is primed for a rate pause until at least year-end, said a report from RBC Capital Markets.

The retest of parity on Thursday was largely brought about by the increased focus on additional quantitative easing in the U.S., with Canada-specific factors playing only a minor role, RBC said. "But it would be a mistake to dismiss this lop-sided USD-induced move as temporary, as domestic fundamentals continue to support a move toward and maybe even beyond parity over the medium-term," it added.

Exchange rates at 3:25 p.m. EDT (1925 GMT), 8:00 a.m. EDT (1200 GMT), and late Thursday.

            USD/CAD   1.0132  1.0059  1.0063
            EUR/CAD   1.4150  1.4181  1.4156
            CAD/JPY    80.39   81.15   80.93

Toronto Stocks are Little-Changed At Midday; Commodities Declined

The stock market was hovering around break-even at midday Friday as a drop in commodity prices was offset by gains in the financial sector.

At 11:45 a.m. EDT, the S&P/TSX Composite Index was down 6.18 points, or 0.05%, at 12613.51 but had been gaining for much of the morning session. Decliners outpaced advancers 725 to 626. Trading volume was 213.4 million shares. The S&P/TSX 60 Index was off 0.14 points 728.52 points.

Toronto Indexes, Volume; 3 PM EDT Composite Down 10.89

 S&P/TSX Composite   12608.80  off  10.89  or 0.1%
 S&P/TSX 60 Index      728.18  off   0.47  or 0.1%
 Financials            178.53  up    0.43  or 0.2%
 Materials             402.68  off   3.46  or 0.9%
 Energy                292.78  off   0.26  or 0.1%
 Industrials           107.41  up    0.21  or 0.2%
 IT                     28.35  up    0.06  or 0.2%

   Volume          Friday           Thursday
    2-3               51.4M             52.9M
    9:30-3           394.6M            422.0M

Toronto Most Actives At 10:15 AM EDT

Discovery Air            4,123,000  0.28  up   0.03
Eastern Platinum         3,625,818  1.57  up   0.04
Horizons NYMEX Gas Bull  2,699,337  3.15  off  0.11
Osisko                   1,589,690 14.95  up   0.22
Catalyst Paper           1,528,619  0.23  up   0.05
Questerre                1,301,955  1.86  off  0.08
Farallon                 1,151,010  0.55  off  0.01
Connacher                1,108,109  1.34  up   0.02
Suncor                   1,089,553 34.53  off  0.19
Kinross                  1,036,820 19.33  off  0.12

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South American Markets:

BRAZIL:

Brazil Stocks And Real Erase Gains As US Dollar Gains
Brazilian stocks and the Brazilian real gave up early gains as of late-morning trading Friday following release of a bearish U.S. consumer sentiment index.

As of 1425 GMT, the benchmark Ibovespa stocks index was down 0.3% at 71486. In early trading, the Ibovespa index had topped the 72000-point mark for the first time since June of 2008.

Also as of 1425 GMT, the Brazilian real was trading at BRL1.6639 for a slight loss over the Thursday close of BRL1.6620.

Brazilian assets lost ground after release of the Michigan Consumer Sentiment index in the U.S. The index declined to 67.9 points in October from 68.2 in September. Analysts had expected the index to rise to 69.0 points.

At the market open Friday, the Brazil Ibovespa Index Up 0.60% In Early Trading was at 72,124.Brazil stocks index hit 72,000 for the first time since 2008 in early trading.

Brazil's benchmark Ibovespa stocks index opened 0.3%  higher, but quickly posted more gains. In the first minutes of trading, the index was up 0.6% at 72,124 points, surpassing the 72,000-point mark for the first time since June of 2008.

Brazilian investors were encouraged by rising international metals and oil prices Friday. Higher commodities price help Brazilian exporters. The only cloud on the horizon was the possibility of profit-taking later in the session.

Blue chips were higher in early trading. Mining major Vale (VALE, VALE5.BR) rose 0.48% to 47.77 Brazilian reals ($28.95) on higher global metals prices. State-controlled energy giant Petrobras (PBR, PETR4.BR) advanced 0.30% to BRL26.52. Telecommunications leader Tele Norte Leste SA (TNE, TNLP4.BR), or Oi, rose 0.67% to BRL25.50. Flat-steel maker Usinas Siderurgicas de Minas Gerais (USIM5.BR), or Usiminas, rose 1.47% to BRL21.38. Minas Gerais utility Cemig (CMIG4.BR) rose 1.09% to BRL28.82. Aircraft manufacturer Empresa Brasileira de Aeronautica (ERJ, EMBR3.BR), or Embraer, was up 1.07% to BRL11.32.


MEXICO:

MEXICO SHARES FLAT
Mexico Stocks Pull Back From Recent Record Gains, Peso Flat

Mexican shares were slipping lower early Friday to retreat from recent record gains, in line with dips in U.S. stocks.

The IPC index of Mexico's 35 most-traded shares was down 0.2% at 34,755 on volume of 941 million pesos ($75.7 million). In the previous session, the IPC had advanced 0.1% to 34,837 points, its second consecutive record high, although trade was highly mixed ahead of this month's slew of quarterly reports.

Among Mexican blue chips, wireless carrier and market bellwether America Movil's (AMX) L shares were down 0.2% to MXN34.88, cement group Cemex's (CX) CPOs were losing 2.1% to MXN9.87, and beverage group Femsa's (FMX) UBD's were off 0.5% to MXN67.83.

Femsa's soft drink unit, Coca-Cola Femsa (KOF), said after the market close Thursday that it's in discussions to acquire Panamanian dairy interest Grupo Industrias Lacteas. If the acquisition is completed, the dairy business "will become part of the non-carbonated beverage platform that Coca-Cola Femsa shares with its partner, Coca-Cola Co. (KO)," Coca-Cola Femsa said.

Industrias Lacteas manufactures, sells and distributes milk, yogurt, ice cream and juice in Panama, where it leads the dairy sector. The company has nearly 1,800 employees. A successful transaction could deflect some of the criticism that Femsa, the parent company, has received in recent months from analysts anxious to see the company make use of its large pile of cash. Femsa had $1.78 billion of cash on its books at the end of June, with just $38.4 million in net debt.

Highly leveraged Cemex, meanwhile, said Wednesday it's in preliminary talks for a possible sale of its Irish subsidiary Readymix PLC.

America Movil is set to report its first quarterly results since the company assimilated the assets of fixed-line operator Telmex and international operator Telmex International. Local brokerage Ixe said in a research note Thursday that while it's difficult to predict the company's consolidated results, it expects a pro forma net sales increase of 5% and for the company to post 11.1% growth in wireless subscribers with net additions of 4.7 million users.

Early Friday, the Bank of Mexico held interest rates unchanged for a 15th straight month, as widely expected, citing low inflation and sluggish domestic consumption, while noting that strong investment flows to Mexico have contributed to the peso's recent strength.

"Annual inflation continues below the Bank of Mexico's forecast range, in fact, this has been the case for the last two quarters," the central bank said in its monthly policy statement.

The peso got off to a volatile start Friday. The peso was trading at MXN12.4440 to the dollar, unchanged from Thursday's close.


ECUADOR:

Ecuador's 3Q Jobless Rate 7.4%

Ecuador's unemployment rate fell slightly to 7.4% in the third quarter from 7.7% in the second quarter and 9.1% in the third quarter one year ago, the National Statistics and Census Institute, or Inec, said Friday.

Ecuador's economically active population is estimated at around 5 million. President Rafael Correa has said his government plans measures to address unemployment and underemployment.

The Underemployment percentage, is the percentage of Ecuadoreans employed in the informal sector or who work on an occasional basis--stood at 49.6% in the third quarter, down from 50.4% in the previous quarter and 51.7% in the third quarter of last year, Inec said.


PERU:

Peru's August GDP Expanded 9.2% Vs Year Ago -INEI

Peru's gross domestic product expanded 9.2% in August over the same month a year earlier, the government said Friday. The accumulated figure for January to August was 8.4%, said Peru's National Statistics Institute, or INEI, at a press conference.

The August growth figure was higher than expectations of about 8% and the INEI attributed the growth to continued increases in domestic demand, growth in the construction sector, as well as higher exports of traditional products such as cotton, sugar and coffee. The indicator also received a boost from the fact that last year's August GDP contracted by 0.2%.

Goldman Sachs said in a report Friday, following the release of the GDP indicator, that it expects Peru's economy "to continue to perform well in the quarters ahead and to grow 8.5% in 2010 on the back of firming credit flows, strengthening labor market, improving business and consumer confidence, and solid terms of trade." Goldman said the forecast already factors in a less favorable statistical base in the second half of 2010, as well as the gradual withdrawal of fiscal and monetary stimulus. It added that "the current growth cycle has been anchored in significant private and public investment which bodes well for non-inflationary growth in the quarters ahead."

Other statistics given by the INEI Friday showed the construction sector had expanded 14% in August, compared to the same month last year, and that cement consumption was up by almost 14%, mainly due to public works projects such as the building of roads and hospitals.

The latest figures from Peru's National Association of Cement Producers say cement production rose 17% to 6.03 million metric tons in the January-to-September period, compared to the same period last year.

In the manufacturing sector the INEI said activity grew by 19% in August, while the financial sector grew by 12%, with mortgage demand up almost 19%.

The retail sector grew by 9%, while electricity and water production was up 7.9% and transportation and communications activity was up 6.5%.

Production in Peru's mining and hydrocarbon sector fell however by 5.6% in August, mainly due to lower production of gold, silver, zinc, copper, lead and tin, the INEI said. Hydrocarbons production however grew by over 43%.

Farming sector activity shrank by 1.7% and fishing sector production was down a sharp 35%.

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European Markets: 
Banks in the troubled periphery of the euro zone continued to account for most of the European Central Bank's lending in September, frustrating the hawks on the ECB's board who want to start rationing credit again, says Geoffrey Smith.

European Shares Moved Up Friday
European stocks were mostly higher Friday, with retail stocks in focus after trading updates from some of the region’s big names.

The French CAC 40 index (FR:PX1 3,833, +13.90, +0.36%)  rose 0.1% and the German DAX 30 index  (DX:DAX 6,502, +46.30, +0.72%)  gained 0.2% although London’s FTSE 100 index (UK:UKX 5,726, -1.44, -0.03%)  slipped 0.3%.


LONDON:

London Stocks End Lower
FTSE 100                     5703.37   -23.84    -0.42%
FTSE 250                    10833.51   -49.15    -0.45%
DJ UK Smaller Companies       915.74    -4.54    -0.49%

The U.K. government will spend some GBP7 billion over the next five years on a so-called "Fairness Premium" to support the most disadvantaged children in the country, Deputy Prime Minister Nick Clegg said Friday. As Britain grapples with a massive budget deficit, Prime Minister Cameron is intent on weaning Britain off public money in hopes of reviving private enterprise. 

The FTSE 100, an index of the 100 most highly capitalized companies listed on the London Stock Exchange, has traded as high as 5770 this week, and this bullish tone is likely to continue next week. FTSE 100 closed down 0.42% at 5703.37, on downbeat US confidence data, and as US Fed Chairman Bernanke hints at further stimulus measures.

UK miners declined following Thursday's bumper gains in the sector. Xstrata -2.3%. Next week, no major UK data due Monday, so eyes are on US industrial production at 1315 GMT.

Bank of England Executive Director for Markets Paul Fisher has said it is possible that the central bank could yet expand its asset purchases, but that it isn't yet clear whether that will be appropriate.

Lloyds TSB Bank PLC has set the size and final price guidance on its planned multi-currency issue of triple-A rated residential mortgage-backed securities, a person familiar with the situation said Friday. U.K. lender Standard Chartered PLC (STAN.LN) said Friday its Hong Kong unit received regulatory approval to enter China's interbank bond market, becoming the first foreign bank to gain access to the nation's onshore bond market.

Barclays PLC (BCS) is considering ways to meet new capital requirements without issuing equity, which could include a new bond that would pay out less if the bank's Core Tier 1 ratio dropped, according to a person close to the situation. Old Mutual PLC (OML.LN) said Friday that HSBC Holdings PLC (HBC) had ended discussions to buy a stake in South Africa's Nedbank Group Ltd. (NED.JO).

The coalition government's comprehensive spending review will take center stage next week as detailed plans over spending cuts and where the jobs axe will fall in the public sector will fall.  The BT Group PLC (BT.A.LN) said Friday that it has struck a deal with the U.K. government and reiterated its outlook, which should allay investors fears about the telecommunication group's exposure to government spending cuts.

Desire Petroleum Shares Fall On Second Falklands Blow
Shares in Desire Petroleum PLC (DES.LN) plunged more than 20% Friday after the oil explorer said it didn't find any oil at the Rachel prospect in the South Atlantic.

Jaguar-Land Rover Decides Against UK Plant Closure 
Jaguar-Land Rover Friday said it won't close one of its manufacturing plants in England's West Midlands after all, and instead will create thousands of jobs over the next decade as it expands its range of brands


FRANCE:

SHIPPING PORTS REMAIN CLOSED
French Ports & Docks Union: Continues Industrial Action All Weekend

France's ports and docks trade union, Confederation Generale du Travail, or CGT, said Friday industrial strike action will continue during the weekend, after failing to reach an agreement with employers. The union said new talks with employers are scheduled next week.

The industrial action to protest against national pension reform has prompted all of France's refineries to either reduce or stop production, the Confederation Generale du Travail union said.   Another strike at France's southern Fos-Lavera port entered its 19th day Friday, causing a backlog of 62 ships. Fos-Lavera is the world's third-largest oil port.


GREECE:

GREEK PROTEST CONTINUES
Geek protesters have been met with police action to quell the uprising in the streets. Protesters continue to fight the austerity plans for cut backs going forward by the government.
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Asian Pacific Markets:

JAPAN:

ASIAN PROFIT TAKING FRIDAY
Nikkei decline 0.9% percent, U.S. bank concerns weigh on markets

Japan's Nikkei average fell 0.9 percent on Friday, hurt by broad profit-taking after gaining sharply a day earlier and as financial stocks tracked their Wall St peers lower on worries about a widening U.S. foreclosure crisis and currency challenges ahead of the US Fed's Friday morning speach.

Japanese Finance Minister Yoshihiko Noda stressed that countries must work together to strengthen the global currency order. Governments would find it tough to cope with the current environment on their own, he told reporters.

Among banks, Mizuho Financial Group fell more than 4 percent and Sumitomo Trust and Banking dropped more than 3 percent.

"Market players are concentrating on adjusting positions after posting strong gains yesterday," said Kenichi Hirano, operating officer at Tachibana Securities.

"Yesterday's big rise was somewhat artificial as buying in the futures market drove up the Nikkei. Today we are watching whether the market can regain its strength again."

Traders said Thursday's gains were partly due to active buying by one European institution, which bought Nikkei futures possibly on behalf of overseas commodity trading advisers (CTAs) and hedge funds who were doing short-term trades.

By mid-morning trade, the benchmark Nikkei .N225 was trading down 70.10 points at 9,513.41, while the broader Topix .TOPX fell 1 percent to 828.80.

On Thursday, the Nikkei rose 1.9 percent, its best daily performance in a month, buoyed by a jump in resource stocks as dollar weakness fuelled a climb in commodity prices.

The dollar stood at 81.40 yen JPY= in Asian trade after it dropped to a 15-year low of 80.88 yen on EBS on Thursday despite wariness about Japanese intervention, and looked set to challenge its record low of 79.75 hit in April 1995.

Technical indicators showed the Nikkei is likely to find support at several areas, including the 25-day moving average, now at 9,458, while its next upward targets are its recent peaks around 9,700, marked this month, and 9,800, hit in July.


CHINA:

CURRENCY CONFLICT CONTINUES
Beijing kept up the heat on the United States, saying Washington should not make China a scapegoat for its own problems by constantly pressing for a swifter rise in the yuan.

Speaking hours before the U.S. Treasury Department is due to deliver its semi-annual assessment of whether China manipulates its currency, Commerce Ministry spokesman Yao Jian said it was not fair to criticize Beijing's exchange rate policy simply by pointing to China's trade surplus.

"Other countries have no right to comment on what is a reasonable level for a country's trade surplus," Yao told a monthly news conference.

Sniping over what exchange rates are appropriate to put the world economy back on course is intensifying ahead of a pair meetings of the Group of 20 leading economies in South Korea.

European Central Bank policymaker Juergen Stark was reported as saying countries must avoid a 'fatal' race to devalue and instead coordinate better to smooth out currency swings.

Both he and his colleague, Jose Manuel Gonzalez-Paramo, said China, which is resisting pressure from the United States and other developed nations to allow its yuan to revalue faster, needed to be more flexible.
G20 Finance ministers meet next week in Gyeongju to prepare for a summit of their leaders in Seoul on November 11-12.

U.S. data on Thursday showed America's trade deficit with China swelled to a record high of $28 billion in August. U.S. politicians say that China keeps the yuan artificially low to help its exporters.


AUSTRALIA:

Australian Dollar Hits Parity Against US Dollar

The Australian dollar hit parity against the US Dollar as a downbeat speech by US Federal Reserve Chairman Ben Bernanke sunk the USD against major forex counterparts.


WORLD FOREX CURRENCIES SNAPSHOT:
(TUESDAY, OCT 15, 2010 3:00 PM EDT)

EUR/USD     1.3997     -0.0077 (-0.55%)
USD/JPY     81.3300 -0.1400 (-0.17%)
GBP/USD     1.6025     +0.0017 (0.11%)
CAD/USD     0.9893     -0.0063 (-0.63%)
USD/HKD     7.7576     +0.0001 (0.00%)
USD/CNY     6.6397     -0.0108 (-0.16%)
AUD/USD     0.9881     -0.0051 (-0.51%)


WORLD MARKETS SNAPSHOT:
(TUESDAY, OCT 15, 2010 3:00 PM EDT)

Shanghai     2,971.16     +91.52 (3.18%)
Nikkei 225     9,500.25     -83.26 (-0.87%)
Hang Seng Index     23,757.63     -94.54 (-0.40%)
TSEC     8,205.30     -10.15 (-0.12%)
FTSE 100     5,703.37     -23.84 (-0.42%)
DJ EURO STOXX 50     2,841.65     +5.54 (0.20%)
CAC 40     3,827.37     +8.20 (0.21%)
S&P TSX     12,611.21     -8.48 (-0.07%)
S&P/ASX 200     4,689.00     -10.10 (-0.21%)
BSE Sensex     20,125.05     -372.59 (-1.82%)

FRIDAY'S US ECONOMIC CALENDAR:

8:00 a.m.
Federal Reserve Bank of Atlanta President Dennis Lockhart at EWG conference

8:15 a.m.
Federal Reserve Chairman Ben Bernanke speech in Boston

8:30 a.m.
Oct Empire State Manufacturing Survey Manufacturing Index (expected 6), Employment Index (previous 14.93), New Orders Index (previous 4.33), Prices Received Index (previous 1.49)

8:30 a.m.
Sep CPI (expected +0.2%), CPI Core (previous +0.1%), CPI Core, Unrounded (previous +0.05%), CPI Energy Index (previous +2.3%), CPI Food Index (previous +0.2%), CPI Real Average Weekly Earnings (previous 0%), CPI, Unrounded (previous +0.25%)

8:30 a.m.
Sept. Real Earnings

8:30 a.m.
Sept. Advance Monthly Sales for Retail & Food Overall Sales (expected +0.4%), Sales, Ex-Auto (expected +0.3%)

9:55 a.m.
Oct Thomson Reuters / University of Michigan Survey of Consumers - preliminary Sentiment Index Mid Month (expected 69), Expectations Index Mid Month (previous 59.1), Value (Current Period) Mid Month (previous 78.4)

10:00 a.m.
Aug Manufacturing & Trade: Inventories & Sales Total Inventories (expected +0.5%)

US MARKET SUMMARY, THURSDAY, OCT. 14, 2010:

Stocks:
U.S. stocks dropped, dragged lower by financial shares as investors' concerns ramped higher regarding banks' foreclosure practices. Financials led the Dow's declines, as Bank of America. The drop followed probes by 50 state attorneys general into allegations that thousands of home foreclosures were improperly handled.

Treasurys:
A tepid 30-year bond sale fueled broad selling in the Treasury market, sending the 10-year benchmark note's yield to the highest level since the start of the month. The auction erased an earlier rally in the 30-year bond and turned it into the biggest loser in the market. The yield hit the highest level since Sept. 20.

Forex:
The dollar fell sharply against a broad range of currencies as prospects for Asian economic growth contrasted with the likely need for more stimulus in the U.S. A monetary-tightening move overnight by the Monetary Authority of Singapore accelerated the dollar's slide, knocking the greenback to long-term lows against rivals in Asia, Europe and North America before the dollar regained some poise in New York trading.



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