Stock Market Update - Thursday, October 14, 2010 - Cautious Rally Continues

Stock Market Update
Thursday, October 14, 2010

Latest US Economic News Headlines:

USA EQUITY INDEXES: (OCT. 14, 4:00 PM EDT)

Dow Jones	11,094.57	-1.51	(-0.01%)
S&P 500	1,173.83	-4.27	(-0.36%)
Nasdaq	2,435.38	-5.85	(-0.24%)

Dow Jones 2:30 PM Averages: DJIA 11,048.03 DN 48.05
  30 INDUS     11,048.03 DN   48.05 OR    0.43%
  20 TRANSP     4,689.92 DN   41.52 OR    0.88%
  15 UTILS        404.44 DN    1.25 OR    0.31%
  65 STOCKS     3,834.42 DN   20.98 OR    0.54%

US DOLLAR FUTURES INDEX DXY: OCT 14, 3:36 PM EDT: 76.60   0.47 (0.62%) 


US COMMODITY PRICES: (OCT. 14, 4:00 PM EDT) 

Crude Oil	82.51	- 0.22%
Natural Gas	3.65	- 0.14%
Gasoline	2.13	-
Heating Oil	2.28	-
Gold	1379.07	+ 0.49%
Silver	24.56	+ 2.21%
Copper	3.81	-

US STOCKS STRUGGLE AFTER DATA
Mixed Signals In US Economy Continue

U.S. stocks meandered between small gains and losses in early Thursday trading after weak weekly jobs data overshadowed other economic reports that eased deflation concerns. Wall Street opened mostly flat on Thursday after US jobless claims, the trade deficit and wholesale inflation rose more than expected, offering a mixed picture of the health of the economy.

The U.S. trade deficit balloons to $46.35 billion in August, inflated by a record-setting deficit with its largest trading partner, China, and cutting into 3Q U.S. economic growth. Jobless claims climb by 13,000 in week and producer prices gain 0.4% in September.

Stocks fluctuate in a tight range as corporate news buoys telecommunications companies, but financials are a drag due to intensifying concerns over banks' foreclosure practices. Bank of America falls 5% while J.P. Morgan is off 3%.

The technology-heavy Nasdaq Composite fell 0.1% to 2440. The Standard & Poor's 500 index fell 0.1% to 1177, as the financial sector was the biggest decliner, down 1.3%.

Thursday's modest declines came after the number of U.S. workers filing new claims for jobless benefits increased more than expected last week. The four-week moving average, which aims to smooth volatility in the data, also rose.

U.S. producer prices rose for the third month in a row in September on the back of higher food prices, a move that could help ease deflation concerns. The U.S. trade deficit also rose in August, inflated by a record-setting deficit with its largest trading partner, China.

U.S. TREASURY:
29-year 10-month bonds draw 3.852% at auction today with 2.49 bid/cover ratio. 32.4% of bonds to indirect bidders.

Before the bell, US stock-market futures clung to slim gains Thursday morning after weak jobs data was offset by other economic reports that eased deflation concerns. US Stock Futures Hold Slim Gains After Jobs, PPI Data.

Early Stock-index futures pared gains after the report. Futures on the Standard & Poor’s 500 Index expiring in December rose 0.1 percent to 1,175.3 at 8:56 a.m. in New York, after rising as much as 0.6 percent earlier. The yield on the 10-year Treasury note rose to 2.43 percent from 2.42 percent late yesterday.


FORCED HEALTH CARE FACES ANOTHER DAY IN COURT
US Florida Judge Won't Dismiss States' Challenge To Health-Care Law
A federal judge in Florida refused Thursday to dismiss a lawsuit by 20 states that challenges the constitutionality of the Obama administration's health-care overhaul.

U.S. District Court Judge Roger Vinson threw out some of the states' legal claims but said the case could proceed on others, including the states' argument that Congress exceeded its authority by imposing a requirement that individuals maintain health coverage or pay a penalty.

The Justice Department, which is defending the law, argued in a June filing with the court that the case had no merit and should be dismissed in its entirety. The case will now proceed for further pre-trial legal arguments.

Florida Republican Attorney General Bill McCollum filed the states' lawsuit just minutes after President Barack Obama signed the overhaul into law in March. The suit is the most prominent of several legal challenges to the law.

The Obama administration won a decision in a different case last week when a U.S. judge in Michigan ruled that key parts of the health-care law were constitutional.



US CRUDE OIL - DECREASED IMPORTS/USAGE
$ 83.72 per barrel - Crude Settles Down 32c At $82.69/Bbl

The EIA reported "U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 0.4 million barrels from the previous week." Imports Decreased by 5.6M Barrels.

Inventory level decreases by reducing refinery inputs by 1.6 million barrels and refining capacity to 81.9% this past week. However, removing 798 thousand barrels per day from imports is the ultimate story in US crude oil usage.

U.S. crude inventories showed a slight, unexpected draw last week, according to data released Thursday by the U.S. Department of Energy's Energy Information Administration.

Crude oil futures held steady following the EIA's report, with November contracts recently up 1% at $83.84 a barrel. November contracts for reformulated gasoline blendstock, were recently up 0.3% at $2.1721 a gallon and heating oil was up 0.6% at $2.3140 a gallon.

Crude oil stockpiles fell by 416,000 barrels to 360.5 million barrels for the week ended Oct. 8, compared with an average survey estimate of a 1.2-million-barrel increase. The American Petroleum Institute, an industry group, reported a 4-million-barrel drop on Wednesday.

Gasoline stockpiles dropped by 1.8 million barrels to 218.2 million barrels, the EIA said in its weekly report. Analysts had forecasted a 1.4-million-barrel draw based on a Dow Jones Newswires survey of 15 analysts.

Distillate stocks, which include heating oil and diesel fuel, fell by 255,000 barrels to 172.21 million barrels versus estimates calling for a decline of 1.5 million barrels.

Refining capacity utilization fell by 1.2 percentage points to 81.9%. Analysts had expected it to fall by 0.1 percentage point.

API  Gasoline inventories reported that utilization fell by 1.5 percentage points last week to 80.1%. The industry group's data also showed that gasoline stocks fell by 1.9 million barrels and distillates declined by 250,000 barrels.

The EIA released its weekly data a day late because of the Columbus Day holiday in the U.S. on Monday.



US NATURAL GAS
Futures Rise As Weekly Storage Build Meets Views- Futures Fall After Above-Average Storage Build 

Futures Settle Down 1.1% At $3.657/MMBtu

Natural-gas futures reversed their earlier losses Thursday, breaking into positive territory after a weekly storage report came in near analysts' expectations.

Natural gas for November delivery rose 0.6 cent, to $3.702 per million British thermal units on the New York Mercantile Exchange. The benchmark contract had fallen as low as $3.595/MMBtu in early trading, but pared those losses after the storage report.

The U.S. Energy Information Administration said natural-gas inventories grew by 91 billion cubic feet last week, slightly above the consensus estimate of an 89-bcf build.

The strength in prices after Thursday's report was likely a signal that the market had already taken large storage builds into account, said Gene McGillian, an analyst with Tradition Energy.

Last week's increase marked the fifth consecutive above-average build in inventories. The supply overhang pressured prices to one-year lows this week, but market participants have been reluctant to bet on further declines with winter's gas heating demand on the horizon.

Natural gas in U.S. storage for the week ended Oct. 8 stood at 3.590 trillion cubic feet, 7.4% above the five-year average, and 3.2% below last year's figure. The week's injection was well above both the five-year average increase of 64 bcf and last year's 60-bcf increase. Market participants pay close attention to these reports because they provide an indicator of balance between gas supplies and demand.

Storage builds this summer were below average, as record heat spurred demand for gas-fired electricity to cool homes and businesses. But as temperate weather has settled in, recent weekly injections have been higher than average, stifling attempts at a seasonal rally. Gas prices typically rise heading into the winter on expectations for increased heating demand for the fuel.

U.S. gas production has increased in recent years even as demand growth slowed, as more production from unconventional shale gas formations comes online. The supply growth has helped to moderate price swings in what was one of the most volatile commodity markets of the past decade.


PRECIOUS METALS CLIMB

U.S. Gold Prices $1,374.45
US Silver Prices: $ 24.44

New York (Dow Jones)--Engelhard Corp's base price for industrial gold bullion was $1376.23 per troy ounce, up $7.71 from previous. It's selling price for gold in fabricated form was $1479.45, up $8.29.

Handy & Harman's base price for gold was $1373.25 per troy ounce, up $7.75. The fabricated form price was $1483.11, up $8.37.


US WHOLESALE PRICES UP ON FOOD AND ENERGY
Wholesale prices tame beyond volatile food, energy

US wholesale inflation stayed tame last month if you exclude a sharp rise in food and energy prices. Moderate price inflation allows the Federal Reserve to keep the short-term interest rate it controls at a record low of nearly zero, where it has been since December 2008. Low inflation also makes it more likely the Fed will launch another effort to lower longer-term rates by purchasing Treasury bonds when it meets next on Nov. 2-3.

The producer price index, which measures price changes before they reach the consumer, increased 0.4 percent in September, the Labor Department said Thursday. It rose by an equal amount in August.
Excluding volatile food and energy costs, core producer prices rose only 0.1 percent in September from the previous month. That rise was driven by higher car and truck prices. In the past year, core prices have risen only 1.6 percent.

A 1.2 percent rise in food prices and a 0.5 percent rise in energy prices drove the index up. Wholesale prices have increased 4 percent in the past year. The cost of meats and fresh vegetables drove the increase in food prices.

The weak US economy is keeping a lid on prices. Frugal consumers are seeking out discounts and balking at higher costs. That has made it harder for producers to raise the prices they charge to retailers.


BEFORE THE BELL:

MORE JOBLESS AMERICANS
New US Jobless Claims Rise 13,000, to 462,000

Initial Jobless Claims in U.S. Rose 13,000 Last Week to 462,000
The number of Americans filing first-time applications for unemployment benefits unexpectedly increased last week, indicating the U.S. job market is struggling to mend.

Jobless claims rose by 13,000 to 462,000 in the week ended Oct. 9, Labor Department figures showed today in Washington. The total number of people on unemployment insurance rolls decreased to the lowest level since November 2008, while those getting extended benefits declined.

Persistent dismissals show it will take longer for employers to add enough workers to reduce unemployment that’s close to a 26-year high. The prospect of joblessness holding above 9 percent through next year is among the reasons Federal Reserve policy makers may ease monetary policy.


OIL RISES - WEAK DOLLAR
Crude Oil is at $83.62 a barrel after the dollar declined in over-night trade.

US Gasoil Futures Contracts Traded On ICE Futures Europe Oct 12 contract.

The dollar was weaker against the euro and the yen, whacked by moves by the Monetary Authority of Singapore to tighten policy. The dollar has been on a decline recently as expectations have increased that the Fed will take additional steps to boost the economy.

The U.S. Dollar Index, which tracks the currency against a basket of six others, fell 0.7%. The euro was recently at $1.4060, up from $1.3957 late Wednesday.

Treasurys fell, pushing the yield on the 10-year note up to 2.43%. Crude-oil and gold futures both rose. European stocks were mostly higher and Asian markets finished with strong gains.


US TRADE GAP
US Trade Gap Widens in August

The US trade deficit ballooned to $46.3 billion in August. The U.S. trade deficit widened more than forecast in August as growing demand for autos and capital equipment made overseas swamped a gain in exports, Commerce Department figures showed today. The gap widened 8.8 percent to $46.3 billion.

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that total August exports of $153.9 billion and imports of $200.2 billion resulted in a goods and services deficit of $46.3 billion, up from $42.6 billion in July, revised.

August exports were $0.3 billion more than July exports of $153.5 billion. August imports were $4.1 billion more than July imports of $196.1 billion.

In August, the goods deficit increased $3.9 billion from July to $59.0 billion, and the services surplus increased $0.1 billion to $12.6 billion. Exports of goods were virtually unchanged at $107.7 billion, and imports of goods increased $3.9 billion to $166.7 billion. Exports of services increased $0.3 billion to $46.2 billion, and imports of services increased $0.2 billion to $33.5 billion.

The goods and services deficit increased $15.3 billion from August 2009 to August 2010. Exports were up $23.5 billion, or 18.0 percent, and imports were up $38.8 billion, or 24.0 percent.


US MARKET FUTURES UP AHEAD OF MARKET OPEN
US Dollar Declines Overnight - 15-Year Low Against the Yen

Overnight the US Dollar slid to a 15-year low against the yen and multi-month troughs against the euro and the pound.

The yen is now within touching distance of its post-World War II low against the dollar of 79.75 yen, which will do nothing to lift the mood among Japan's export-heavy business executives, who have voiced their worries about the export-sapping appreciation of the currency.

As a result, the markets are on the lookout for another intervention from the Bank of Japan — last month it bought dollars and sold yen directly for the first time in six years to stem the tide.


MORE THAN 940,000 US FORECLOSURES NOTICES
Banks Repossessed Record Number of U.S. Homes in Sept.
311 Loans Totaling $3.8B Became Newly Delinquent in Sept

RealtyTrac reported a record 102,134 U.S. homes were repossessed by banks in September.

The spike in foreclosures comes at a time when the mortgage industry is facing a probe by all 50 U.S. states into alleged irregularities in the documentation process related to foreclosures.

Foreclosure filings, which include default notices, scheduled auctions and bank repossessions, were reported on 930,437 properties in the third quarter, RealtyTrac said, a nearly 4 percent increase from the previous quarter but a 1 percent decrease from the third quarter of 2009.

One in every 139 U.S. housing units received a foreclosure filing during the quarter. Bank repossessions also hit a record high in the third quarter, According to RealtyTrac, foreclosure activity in the 24 states where home foreclosures are subject to judicial review accounted for 40 percent of all foreclosure activity in the third quarter. These states, where homeowners were the hardest hit by the foreclosure documentation issue, accounted for as much as 36 percent of bank repossessions.

One in every 357 Louisiana homes was hit by a foreclosure action during the third quarter, ranking the state 35th in the nation, RealtyTrac said.

More than 1,500 Louisiana homeowners saw their residences swept away by seizure during the third quarter of 2010, a national company that tracks foreclosures reported Thursday. In addition to 1,560 foreclosure sales, another 2,819 homeowners received a sale notice during the July-through-September period. A total of 5,269 foreclosure notices - ranging from an initial notice of default on a loan to actual repossession - were recorded in Louisiana.

On Wednesday, officials in 50 states and the District of Columbia launched a joint investigation into allegations that mortgage companies mishandled documents and broke laws in foreclosing on hundreds of thousands of homeowners.

The states' attorneys general and bank regulators will examine whether mortgage company employees made false statements or prepared documents improperly. Employees of four large lenders have acknowledged in depositions that they signed off on foreclosure documents without reading them.

In September, according to RealtyTrac, foreclosure activity in Louisiana picked up sharply with 458 repossessions and 1,007 sale notices. There were a total of 2,020 foreclosure-related actions affecting 1 in every 932 homes. That was a 29.6 percent jump in August and a 22.5 percent increase from September 2009.

Louisiana ranked 31st in foreclosures last month after ranking 39th in August.
The highest foreclosure rates in the third quarter were recorded in Nevada, Arizona, Florida, California, Idaho, Utah, Georgia, Michigan, Illinois and Hawaii.


Banks Repossessed Record Number of U.S. Homes in Sept.
Experts Fear that U.S. Has Yet to See the Bottom

Experts agree that we have not hit rock bottom yet. People are still losing their jobs. Homes are going into foreclosure at a rate of 120,000 a month. Many who feared foreclosure in their future say they tried to work with the banks for "loan modification" -- but they "were denied or given the runaround,

Last week, Bank of America announced it halted foreclosures in order to get some paperwork problems worked out. A few other banks followed suit, but only for 23 states.


US MORTGAGE RATE DECLINE AGAIN
Mortgage Rate on 30-Year Loan Falls to Record 4.19%

A six-month decline in mortgage rates has spurred a surge in refinancing. 
Longer-term mortgage rates slid the past week, with the average rate on 30-year fixed-rate mortgages furthering its all-time low for the third straight week to 4.19%, according to Freddie Mac's (FMCC) weekly survey of mortgage rates.

The 30- and 15-year fixed-rate mortgages and the 5-year adjustable-rate all sit at their record lows, with Freddie tracking the 30-year since 1971, the 15-year since 1991 and the 5-year since 2005. Freddie said that using data from the Federal Housing Administration, the last time the 30-year was this low was April 1951.

Rates have slumped for months, setting record lows in the process, as yields on Treasurys have slid amid economic uncertainty. Mortgage rates generally track the yields, which move inversely to Treasury prices.

The 30-year fixed-rate mortgage averaged 4.19% for the week ended Thursday, down from the prior week's 4.27% average and 4.92% a year ago. Rates on 15-year fixed-rate mortgages were 3.62%, falling from 3.72% and 4.37%, respectively.

Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 3.47%, flat on the week and down from 4.38% last year. One-year Treasury-indexed ARMs were 3.43%, up from 3.4% the prior week but down from 4.6% a year earlier.

To obtain the rates, the 30-year fixed-rate and 1-year adjustable-rate mortgages required payment of an average 0.8 point, the 15-year on average required 0.7 point and the 5-year had 0.6 point. A point is 1% of the mortgage amount, charged as prepaid interest.


OVERNIGHT RALLY - US MARKET TARGETS
US Stock index futures pointed to a higher open on Wall Street on Thursday, with futures for the S&P 500 up 0.4 percent, Dow Jones futures up 0.4.

World markets mostly rose Thursday as investors remained buoyed by the prospect of more monetary stimulus from the Federal Reserve.



US Index Targets On Tap For Friday or Monday

The Dow is headed for a test of the April high at 11,200. The S&P 500 broke through short-term resistance at 1150 and the upper trend channel, signaling an advance to the April high of 1220. The Nasdaq 100 is headed for a test of its April high at 2,060.

US Dollar Forecast to Further Decline Friday or Monday

The U.S. dollar weakened further against its major currency counterparts, with the EUR/USD rallying to a high of 1.4121 on Thursday, strongly suggesting further decline to the dollar's two-year low Friday, or very early next week.



Gallup Poll Shows Discretionary Spending at All Time LowTrends Support Double-Dip Theory

In a trend that may be telling for the upcoming holiday shopping season Gallup reports Lower- and Middle-Income Spending Lowest Since January '08

Lower- and middle-income Americans' self-reported average daily spending in stores, restaurants, gas stations, and online averaged $48 per day during September -- down $6 from August and $16 from July. Consumer discretionary spending by these Americans making less than $90,000 a year is now at its lowest level since Gallup began daily tracking in January 2008, as the recession was just getting underway.

Upper-Income Spending Remains Essentially Flat

Upper-income Americans reported spending an average of $118 per day in September -- up $9 from August but virtually the same as they spent in June and July. Spending among this group making $90,000 or more annually is not much different from the $114 they spent in September 2009. Only once -- in May -- has 2010 upper-income spending exceeded the 2009 "new normal" upper-income spending range of $107 to $121 per day.

Spending Trends Could Mean Double-Dip

Gallup modeling suggests that lower- and middle-income spending is significantly more sensitive to job market conditions than is upper-income spending. In this regard, the September decline in lower- and middle-income spending may reflect the sharp increase in unemployment over the same period and continued high underemployment levels. Further, the lagged effects of continuing high and increasing unemployment are probably yet to be fully felt.

Read the entire indepth article at Misses Global Economic Trend Analysis:
http://globaleconomicanalysis.blogspot.com/2010/10/gallup-poll-shows-discretionary.html
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Canadian Market:
Toronto Stocks Slightly Lower At Midday
 
The stock market was slightly lower at midday Thursday as investors pocketed gains from this week's rally. Many were also awaiting Google's earnings report to provide direction.

At 11:45 a.m. EDT (1545 GMT), the S&P/TSX Composite Index was down 40.63 points, or 0.32%, at 12632.68. Decliners outweighed advancers 700 to 661. Trading volume was 239.9 million shares. The S&P/TSX 60 Index was down 3.24 points, or 0.5%, to 728.69 points.

The biggest decline was in the energy group, off 0.64% as oil prices softened slightly. EnCana was off 11 Canadian cents to C$30.77 and Suncor was down 0.46 to 34.85. The materials sector was down 0.24% even as gold prices continued to march higher. Barrick Gold was down 0.53 to 48.88. The financial services group was also off although it is unlikely to be tarnished by the foreclosure mess in the U.S.

In mixed trading, the group was down 0.20%. Royal Bank of Canada had slipped 0.01 to 55.28 but Bank of Montreal was up 0.07 to 60.28. BMO announced Thursday that it was the first Canadian bank to open a subsidiary in China. 
 


Toronto Indexes, Volume; Noon EDT Composite Down 39.63

 S&P/TSX Composite   12633.68  off  39.63  or 0.3%
 S&P/TSX 60 Index      728.92  off   3.11  or 0.4%
 Financials            178.13  off   0.33  or 0.2%
 Materials             406.34  off   1.00  or 0.2%
 Energy                293.52  off   2.04  or 0.7%
 Industrials           107.30  off   0.22  or 0.2%
 IT                     28.37  off   0.16  or 0.6%

   Volume             Thursday       Wednesday
   11-12                79.6M           80.6M
   9:30-12             260.9M          285.5M

Toronto Most Actives At 10:15 AM EDT
Eastern Platinum       12,070,910   1.66  up  0.09
RS Technologies        11,517,590   0.01  unchanged
Crowflight Minerals     4,046,195   0.07  up  0.01
Uranium One             3,098,585   3.94  up  0.13
Farallon Mining         2,903,688   0.56  off 0.01
Emerge Oil & Gas        1,973,450   3.43  up  0.08
iShares S&P/TSX 60      1,813,685  18.35  off 0.04
Carpathian Gold         1,757,502   0.57  off 0.10
Kinross Gold            1,735,252  19.74  off 0.01
Horizons NYMEX Gas Bull 1,498,410   3.17  0ff 0.11
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South American Markets: 

BRAZIL:

BRAZIL ECONOMY IS BUILDING
Brazil Retail Sales Continued To Surge In August

Brazilian retail sales rose in August for the eighth consecutive month, as the strong economy continues to create jobs and drive up incomes, But with inflation under control, the central bank isn't expected to raise interest rates until the beginning of next year, at the earliest.

August retail sales rose a seasonally adjusted 2% compared with July and 10.4% from August 2009, the Brazilian Census Bureau, or IBGE, said Thursday. The figures came in a the top end of analysts' forecasts.

"Without doubt, retail sales have been fueled by the vigorous labor market, which lifted consumer confidence," said Newton Rosa, an economist at local investment fund, Sulamerica Investimento. "The expansion of retail sales should continue and we expect an expansion of 11% for this year."

In August, Brazil's unemployment rate fell to its lowest level ever recorded, at 6.7%, down from 6.9% in July, according to the IBGE. That was the lowest unemployment rate recorded under the IBGE's methodology, falling below the previous record of 6.8% set in December.

Despite the vigor of the country's economic activity, the central bank probably won't have to raise interest rates soon as inflation is under control, said Sulamerica's Rosa.

The consumer price inflation index, IPCA, advanced to 4.70% in the 12 months through September, slightly higher than the government's target of 4.5% but still considered to be well under control. Despite pressure from food prices, the market consensus is for the IPCA to rise 5.15% this year, and 4.98% in 2011.

Earlier this year, the central bank raised the Selic key rate by a total of two percentage points to 10.75%, but in September it halted that cycle, and has since kept the rate unchanged.



MEXICO:

Mexico Stocks Open Higher

Mexico's stocks opened marginally higher Thursday, cautiously building on the previous session's record close as investors questioned how much further the market's recent rally can go.

The market's benchmark IPC index of most-traded issues was up 0.2% at 34,853.01 points. Volume was 50.3 million shares traded at a total value of 1.55 billion pesos ($125.3 million).

The peso was quoted in Mexico City trading at MXN12.3940 to the dollar, compared with MXN12.3715 at the close Wednesday.  The IPC on Wednesday surged 1% to a record-high close of 34,799 points.

Wireless operator and IPC heavyweight America Movil (AMX) L shares were up 0.1% at MXN34.97, copper miner Grupo Mexico (GMEXICO.MX) B shares were 0.1% higher at MXN41.70, and retail and beverage conglomerate Femsa (FMX) UBD shares were up 0.6% at MXN68.07.

Retail leader Wal-Mart de Mexico (WMMVY) V shares were flat at MXN31.09, and cement maker Cemex (CX) CPO shares were flat at MXN10.13.



CHILE:

CHILE STOCKS CLOSE DOWN
Chile Stocks Close 0.5% Lower

Chile's blue-chip Ipsa index fell to profit-taking Thursday, following the previous session's 2.7% increase, while the market awaited the central bank's monetary policy decision.

The Ipsa finished 0.5% lower at 4777.09. Market volume more than doubled to 280.3 billion Chilean pesos ($585.4 million), compared with volume of CLP126.0 billion the previous session.

Trading in bank Corpbanca (BCA, CORPBANCA.SN) accounted for 28% of session volume, as bank controllers, the Saieh family, put a 5% stake in the financial institution on the auction block. The Saiehs sold 11 billion shares at CLP7 a share to an undisclosed buyer. Corpbanca ended 0.9% higher at CLP7.50.

Session decliners that fell to profit-taking included retailer SACI Falabella (FALABELLA.SN, which slid 3.1% to CLP4,624.00 and integrated steel and iron ore maker Cap (CAP.SN), which tumbled 2.2% to CLP23,246.00. Both of these rallied sharply the previous session.


Chile's Peso Closes Weaker

Chile's peso ended weaker against the dollar Thursday

The peso finished at CLP478.80 to the dollar versus Wednesday's close of CLP477.70, after trading in a range of CLP475.30 to CLP479.40.

The central bank at its monthly monetary policy meeting for October is expected to increase the benchmark interest rate 25 basis points to 2.75%.

But, given the strength of the peso in relation to the U.S. currency, analysts also expect it to make some mention of the currency or even announce market intervention measures.

Earlier in the week, the peso hit a 29-month high against the dollar, but has since retreated slightly in anticipation of a central bank move.

Chile's economy is highly dependent on its exports. The export of copper, fishmeal, wood pulp, molybdenum, nitrates and fertilizers, fresh fruit and wine represent over 50% of the country's gross domestic product. As a result, a stronger peso cut into the exporting sector's competitiveness abroad.

The central bank will release its post-meeting communique after 5 p.m. ET.

In the bond market, yields on inflation-indexed Chilean central bank bonds, or BCUs, ended lower as some market participants aren't ruling out that the central bank will hold the benchmark rate steady to help ease the peso's strength.

The yield on five-year BCU bonds ended at 2.74% compared with 2.78% on Wednesday, while the yield on 10-year BCUs closed higher, at 3.13% from 3.16% the previous session.


ARGENTINA:

Argentina's Inflation Expectations Rise To 30% -Survey

Argentines' expectations for future inflation surged in October from the previous month, according to a closely watched survey of consumers.

Universidad Torcuato Di Tella said Thursday that the median projection for inflation over the next 12 months was 30% in October. Inflation expectations in the previous five months had remained steady at 25%.

The gap between what people expect inflation to be and what economists think the government will say it is now stands at 18.8 percentage points, the university reported.

"This gap continues to be very elevated and continues to reflect the lack of credibility of the official data," Torcuato Di Tella said. "The jump in inflation expectations indicates that the inflation dynamic that for some time has been affecting the Argentine economy is getting worse."

According to the national statistics institute, Indec, August consumer prices were up 11.1% on the year. Virtually all private sector economists contend that Indec manipulates its data to make inflation appear lower than it is in reality--a charge Indec officials routinely deny. Most private sector economists expect inflation to total at least two or three times the official Indec rate.

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European Markets: 
EUROPEAN EQUITIES CLOSE: The FTSE dropped 20 pts today to 5727, the CAC fell 9 pts to 3819, while the DAX gained 20 pts to 6455.

EUROPEAN MARKET RALLY

European Shares at 5-Month Highs- Gold Rocks Up

Miners featured among the top gainers as the STOXX Europe Basic Resources index rose 0.9 percent, tracking a sharp gain in metals prices. Stock indexes are breaking out of their six-month range.
 
Gold XAU= hit a record high, silver XAG= climbed to a 30-year peak and copper MCU3 rose to its highest level in 27 months on a steep fall in the dollar, making commodities cheaper for holders of other currencies.


The technical picture improved as the blue-chip Euro STOXX 50 .STOXX50E breached key resistance of 2,740.32, its 61.8 percent retracement of an April high to a May low, on Wednesday and rose about its August peak of 2,849.45 on Thursday.

The index's 50-day moving average, now at 2,740.71, moved closer to the 200-day moving average at 2,764.26, raising prospects that the 50-day average might cross the 200-day average, which would mean a bullish signal.



LONDON:

FTSE 100 Hit its Highest in More Than Five Months 

European shares climbed to their highest in more than five months on Thursday, with growing expectations of more U.S. monetary easing and hopes of a robust earnings season boosting demand for riskier assets.
The technical outlook improved, with a key index breaching strong resistance and the 50-day moving average getting closer to its 200-day moving average -- generally a positive sign.

At 0848 GMT, the FTSEurofirst 300 index of top European shares .FTEU3 was up 0.4 percent at 1,090.76 points after touching a high of 1,094.13, the highest since late April. It climbed 1.4 percent on Wednesday and is up 4.3 percent this year.

BHP Billiton (BLT.L), Antofagasta (ANTO.L), Rio Tinto (RIO.L), Xstrata (XTA.L) and ENRC (ENRC.L) rose 0.3-1.8 percent.

UK Government: To Axe 192 Independent Government Agencies

The U.K. government announced plans Thursday to axe 192 independent government agencies and merge another 118 as part of plans to cut public spending and bring services back into government departments.

UK Minister: Quango Cutting Will Save Money, Improve Accountability

The U.K. government will increase the accountability of so-called quangos and save money by reducing their number, a cabinet minister said Thursday, as up to 200 such non-government bodies are expected to be axed in an announcement later in the day.

UK Treasury: New Pension Move To Raise GBP4 Billion Per Year

The U.K. Treasury said Thursday that it will raise GBP4 billion per year to help reduce its huge budget deficit by sharply reducing the annual allowance for tax-privileged pension savings from April next year.

Solid Demand At Latest UK Gilt Auction

The latest auction of five-year U.K. government bonds garnered robust demand Thursday, as the recent cheapening of the gilt attracted buyers.




GERMANY:

German Economy On Right Track
Germany's DAX .GDAXI rose to a two-year high.

A report from leading German economic research institutes Thursday shows that forecast growth of 2.5% this year shows that the country's economic recovery is on a good, sustainable path, German Chancellor Angela Merkel said Thursday.

Risks remain for the German economy as the recovery continues, Merkel told reporters at her offices here, but she said government leaders have charted the right course in first deploying stimulus and now planning tough budget consolidation.

Earlier Thursday, a group of leading economic research institutes forecast that Germany's economy will grow 3.5% in Germany this year, compared with the 1.5% rise the group predicted in April. The institutes say Europe's largest economy will expand 2.0% next year, compared with the 1.4% increase for 2011 they had forecast previously. 


FRANCE:

FRENCH UNION STRIKE CONTINUES
French Unions Call New Strike For Tuesday October 19

Strike Effects Oil
French Oil Firms Ask For Emergency Supplies From Strategic Reserve 

France's petrol distributors on Thursday urged the government to release emergency stocks from the strategic reserve to avert shortages due to a strike blocking most of the country's oil refineries.

France's CAC 40 .FCHI rose to its highest since May.


BELGIUM:

EUROPEAN UNION - NOVEMBER IRAN TALKS
EU's Ashton Suggests New Iran Nuclear Talks In November

The European Union's foreign affairs chief Catherine Ashton, who represents world powers in nuclear talks with Iran, on Thursday proposed a new round of meetings in Vienna next month.

Ashton, the EU's High Representative, suggested the talks take place over three days in mid-November in the Austrian capital, a spokesperson for her office said. The offer was made "following recent positive indications from Iran" that its top nuclear negotiator was willing to meet Ashton on behalf of the E3+3/P5+1 group of countries, including the United States, Britain, China, France, Russia and Germany. Ashton "hopes Mr Jalili will respond positively and looks forward to constructively engaging with Iran next month," the spokesperson said.
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Asian Pacific Markets: 

JAPAN:

ASIAN MARKET RALLY - US DOLLAR DROPS 
Nikkei rises 1.9 pct as resource stocks jump

Japan's Nikkei average rose 1.9 percent on Thursday, its best daily performance in a month, buoyed by a jump in resource stocks as dollar weakness fuelled a climb in commodity prices.

The market took in stride the yen's rise to a fresh 15-year high against the dollar, as some analysts said markets seemed to have already priced in quantitative easing by the U.S. Federal Reserve early next month and the dollar's broad decline may soon run its course.

The benchmark Nikkei .N225 ended up 180.00 points at 9,583.51. The 1.9 percent rise was its biggest daily percentage gain since Sept. 15. The broader Topix .TOPX rose 1.7 percent to 836.95.

In Asian currency trade, the dollar hit a fresh 15-year low of 81.14 yen JPY= although caution remained that Japanese authorities could intervene the closer the greenback gets to its record low of 79.75 yen.

the Nikkei's next upward targets stand near recent peaks: the first around 9,700 marked this month, and then near 9,800 hit in July.

Strong support lies at the 38.2 percent retracement of its September-October rally and its 55-day moving average, both around 9,365.

Resource-related stocks were powered higher by a bull run for commodities, with copper hitting a 27-month high and gold returning to record peaks.

Mitsui Mining and Smelting advanced 4.5 percent to 257 yen and Sumitomo Metal Mining rose 4.1 percent to 1,454 yen. JX Holdings, which owns Japan's top copper smelter Pan Pacific Copper, climbed 5.2 percent to 486 yen.

Japan's top oil explorer Inpex Corp rose 4.1 percent to 454,500 yen as oil approached a five-month high.

Yahoo Japan Corp shot up 6.4 percent to 30,600 yen after a source with knowledge of the matter told Reuters that several private equity firms had approached Internet and media companies including News Corp and AOL Inc to gauge their interest in buying out Yahoo Inc.

Alps Electric Co rose 4.9 percent to 745 yen after the Nikkei business daily said the electronic parts maker was set to report more than 20 billion yen in operating profit for the half year to September, recovering from a 17 billion yen loss in the same period last year.

2.18 billion shares changed hands on the Tokyo exchange's first section, down from a five-month high of 2.88 billion booked last Wednesday. Advancing stocks outnumbered decliners by 3 to 1.


EARTHQUAKE REPORTED

5.4 Magnitude Quake Hits Japan's SE Hokkaido

An earthquake with a preliminary magnitude of 5.4 jolted southeastern Hokkaido, Japan's northernmost main island, on Thursday night, the Japan Meteorological Agency said, Kyodo News reported.

No tsunami warning has been issued. The 10:59 p.m. quake measured 4 on the Japanese seismic intensity scale of 7 in the eastern Hidaka region, and the central and southern Tokachi region.  The focus of the quake was in the south of the Tokachi region at a depth of about 60 kilometers.
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WORLD FOREX CURRENCIES SNAPSHOT:
(THURSDAY, OCT 14, 2010 4:00 PM EDT)

EUR/USD     1.4056     +0.0091 (0.65%)
USD/JPY     81.4500   -0.3700 (-0.45%)
GBP/USD     1.5986     +0.0087 (0.55%)
CAD/USD     0.9930     -0.0036 (-0.36%)
USD/HKD     7.7576     -0.0019 (-0.02%)
USD/CNY     6.6505     -0.0129 (-0.19%)
AUD/USD     0.9910     -0.0002 (-0.02%)

WORLD MARKETS SNAPSHOT:
(THURSDAY, OCT 14, 2010 2:00 PM EDT)

Shanghai     2,879.64     +18.27 (0.64%)
Nikkei 225     9,583.51     +180.00 (1.91%)
Hang Seng Index     23,852.17     +394.48 (1.68%)
TSEC     8,215.45     +108.79 (1.34%)
FTSE 100     5,727.21     -20.14 (-0.35%)
CAC 40     3,819.17     -9.17 (-0.24%)
S&P TSX     12,629.37     -43.94 (-0.35%)
S&P/ASX 200     4,699.10     +79.20 (1.71%)
BSE Sensex     20,497.64     -190.24 (-0.92%)

THURSDAY'S US ECONOMIC CALENDAR:

8:30 a.m.
Aug U.S. International Trade in Goods & Services Deficit (expected -43.4B), Exports (previous 153.33B), Exports Percent Change (previous +1.8%), Imports (previous 196.11B), Imports Percent Change (previous -2.1%)

8:30 a.m.
Sept. PPI (expected +0.1%), PPI Core (expected +0.1%), PPI Core Crude Goods (previous +4.1%), PPI Core Intermediate Goods (previous +0.1%), PPI Crude Goods (previous +2.3%), PPI Energy Goods (previous +2.2%), PPI Intermediate Goods (previous +0.3%), PPI Passenger Cars (previous -0.4%)

8:30 a.m.
Oct 9 Unemployment Insurance Claims Report - Initial Claims Weekly Jobless Claims (expected 446K), Net Change (expected +1K), Cont Jobless Claims (prior week) (previous 4462000), (prior week) (previous -48K)

10:00 a.m.
Oct 2 DJ-BTMU Business Barometer (previous +0.3%), (52 Wk) (previous +4.8%)

10:30 a.m.
Oct 8 EIA Natural Gas Storage Report Total Working Gas in Storage (previous 3499B), (Net Change) (previous +85B)

11:00 a.m.
Oct 8 EIA Petroleum Status Report Crude Oil Stocks (previous 360.95M), (Net Change) (expected +1.5M), Gasoline Stocks (previous 219.94M), (Net Change) (expected -1.3M), Distillate Stocks (previous 172.47M), (Net Change) (expected -1.5M), Refinery Usage (expected 83.1%)

4:30 p.m.
Oct 13 Foreign Central Bank Holdings Foreign US Debt Holdings (previous 3.25T), US Foreign Agency Holdings (previous 751.75B), Foreign Treasury Holdings (previous 2.5T)

4:30 p.m.
Oct 13 Federal Discount Window Borrowings Primary Credit Borrowings (previous 110M), Primary Credit Borrowings W/E Daily Avg (previous 89M), Discount Window Borrowings (previous 49.48B), W/E Daily Avg (previous 49.15B)

4:30 p.m.
Oct 4 Money Stock Measures

5:00 p.m.
Minneapolis Fed Pres Kocherlakota speaks in Bloomington, Minn.

US MARKET SUMMARY, WEDNESDAY, OCT. 13, 2010:

Stocks:
A strong burst of earnings helped U.S. stocks log a fourth straight day of gains, helped by a jump in Chinese demand for commodities amid the steadily weakening dollar. Investors were buoyed by better-than-expected earnings from blue chips Intel and J.P. Morgan Chase, though the rally waned late in the session as shares of those companies dropped.

Treasurys:
Treasury notes due seven years or less ended the session flat. The Fed's announcement of $32B in buying over the next few weeks lured buyers back. This is the amount the central bank is reinvesting from proceeds from its MBS pay-downs. The size came as a surprise as many analysts expected $26 billion to $29 billion.


Forex:
The dollar fell broadly as the likelihood of more monetary easing and low interest rates in the U.S. pushed investors toward higher-yielding assets. Commodity-based currencies as the Australian, New Zealand and Canadian dollars jumped higher, bouncing off a 2% spike in the price of a barrel of oil, which followed overnight data indicating global growth.


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