Stock Market Update - Wednesday, October 20, 2010 Cautious Upward Trend

Latest US Economic News Headlines:

USA EQUITY INDEXES: (OCT. 20, 4:05 PM EDT)
Dow Jones 11,107.97 +129.35 (1.18%)
S&P 500    1,178.17  +12.27 (1.05%)
Nasdaq     2,457.39  +20.44 (0.84%)

Dow Jones 3:30 PM Averages: DJIA 11,142.55 UP 163.93
  30 INDUS     11,142.55 UP  163.93 OR    1.49%
  20 TRANSP     4,763.24 UP  115.96 OR    2.50%
  15 UTILS        412.13 UP    4.24 OR    1.04%
  65 STOCKS     3,882.60 UP   65.30 OR    1.71% 

US DOLLAR FUTURES INDEX DXY: OCT. 20, 4:10 PM EDT: 77.22  0.96 (1.23%)
 

US COMMODITY PRICES: (OCT. 20, 4:05 PM EDT)

Crude Oil     81.93     + 0.20%
Natural Gas     3.52     - 0.56%
Gasoline     2.08     -
Heating Oil     2.25     -
Gold     1344.12     + 0.68%
Silver     23.88     + 2.14%
Copper     3.79     + 0.98%

US Stocks Up Dollar Down

The US dollar lost steam overnight causing all commodities and equities to roar back to recent highs throughout the world markets.

U.S. stocks jumped Wednesday as investors bounced back from the previous day's gloominess, bidding up stocks in a broad-based rally that lifted all sectors. The Dow is headed for a test of the April high at 11,200.

At mid-day the Dow Jones Industrial Average gained 128 points, or 1.2%, at 11107 in morning trading, while the Standard & Poor's 500-stock index was higher by 13 points to 1179 and the Nasdaq Composite gained 27 points to 2464.

Materials and energy stocks were the two best performing sectors, a day after both were clobbered by fears over Beijing's attempts to slow the world's second-largest economy. Cliffs Natural Resources added 3.9% and Freeport McMoran gained 2.9%, while Massey Energy jumped 5.8% amid reports the Richmond, Va., miner is exploring a potential sale of the company.

The dollar was trading lower against a basket of currencies, with the dollar index down by 0.6%,
The euro rose to $1.393 from Tuesday's $1.373. Against the yen, the dollar fell to 81.16 yen from Tuesday's 81.55 yen, and the benchmark 10-year Treasury note fell 2/32, increasing the yield to 2.488%.

Commodity traders need to pay extra close attention to the U.S. dollar index in the near term. If the index does bottom out and start to trend higher, that would be a significantly bearish clue for many commodity markets.

Technical pullbacks in the markets are inevitable. Some consider them healthy during an uptrend bias in the major markets.

U.S. stocks posted broad-based gains Wednesday, emboldened by strong earnings from Boeing and a small handful of other closely-watched bellwethers.

In early trading, the Dow Jones Industrial Average gained 017 points, at 11087, while the Standard & Poor's 500-stock index was higher by ten points to 1175 and the Nasdaq Composite gained 18 points to 2455.


CRUDE OIL - ENERGY REPORTS:

US Crude Oil: $81.93
US Crude Oil Stocks +0.667M Bbl In Wk; Seen +2M Bbl

US Gasoline Stocks +1.155 Mln Bbl At 219.329 Mln Bbl

US Distillate Stocks -2.155 Mln Bbl At 170.055 Mln Bbl

US Refineries Ran At 82.5%; Seen 82.00%

The Department of Energy (DOE) reported Wednesday only modest declines in heating oil, and stockpile builds in both crude oil and gasoline. Refineries ran at 82.5% percent of capacity.

The Department of Energy's Energy Information Administration said total U.S. commercial crude-oil and fuel stockpiles fell by 2 million barrels in the week ended Oct. 15, continuing a decline from 27-year highs hit last month.

The EIA report combined with a sharply weakening dollar to retake much of the ground crude lost Tuesday, when a stronger dollar and fears of slowing demand in China pushed oil futures below $80 a barrel for the first time this month.

Crude-oil futures settled higher Wednesday, rebounding from a fall of more than 4% in the previous session, as a government report showed a drop in total U.S. crude oil and fuel supplies and the dollar weakened.

Light, sweet crude oil for November delivery settled $2.28, or 2.9%, higher at $81.77 a barrel on the New York Mercantile Exchange. The contract expired at settlement Wednesday, and the more-actively traded December contract settled $2.38 higher at $82.54 a barrel.

Brent crude oil on the ICE futures exchange settled $2.50 higher at $83.60 a barrel.

Gasoline inventories rose by 1.2 million barrels, while stockpiles of distillates, which include heating oil and diesel, fell by 2.2 million barrels. Analysts surveyed by Dow Jones Newswires expected a 1.3-million-barrel decline in gasoline stocks and a 600,000-barrel fall in supplies of distillates.

The bigger-than-expected draw in distillates helped boost heating-oil futures, with the November contract settled up 6.55 cents, or 3%, higher at $2.2548 a gallon.

Front-month November reformulated gasoline blendstock, or RBOB, settled up 3.43 cents at $2.0826 a gallon.

US NATURAL GAS: 

Nat Gas Futures Rise Futures Settle Up 0.7% At $3.539/MMBtu

Natural-gas futures rose Wednesday for a second consecutive day on bargain buying as market participants who had bet that gas prices would fall bought back those positions to profit from the market's recent declines.

Natural gas for November delivery climbed 5.6 cents, or 1.6%, to $3.569 a million British thermal units on the New York Mercantile Exchange. The benchmark contract ended higher Tuesday, as traders were reluctant to bet that the market would continue lower after setting 13-month lows this week.

Strong production has left the U.S. market well supplied, and the overhang since has stifled attempts at a seasonal rally and pressured prices lower.

Wednesday's rebound suggests that the market is re-balancing itself ahead of winter, said Gene McGillian, an analyst with Tradition Energy. But there's still the potential for prices to slide further because of "robust storage with no market to speak of," he said.

The last five injections into U.S. storage have been above average, and analysts say this week's storage report could continue the trend. The Energy Information Administration's weekly storage report is scheduled for release Thursday at 10:30 a.m. ET. 

PRECIOUS METALS:

Gold Flat Despite Sharply Lower Dollar
Gold: $1,344
Silver: $ 23.88

A sharply weaker dollar has done little to boost gold prices Wednesday, with Comex gold futures flat as market participants focus on locking in gains.

The most actively traded contract, for December deliver, was recently up 0.4%, or $5.70, at $1,341.70 per troy ounce on the Comex division of the New York Mercantile Exchange.

Gold prices were only slightly higher Wednesday as some investors sought to book recent profits. The precious metal saw slight selling pressure throughout the morning as some market participants locked in gains after six consecutive weeks of record highs.


INVESTOR'S PERSPECTIVE

Investors were looking to bounce back from the worst one-day drubbing in over two months, as investors reeled from China's surprise rate hike, negative outlooks from Apple and International Business Machines, as well as fears that Bank of America may have to repurchase bad mortgages.

Boeing shares led the charge, gaining 1.5% after the aerospace giant said it swung to a quarterly profit from a year-ago loss and lifted its outlook.

Morgan Stanley pared deep morning losses to shed 1.1% after the investment bank's net profit fell in the third quarter, and Wells Fargo gained 3.1% after the San Francisco bank posted its best-ever quarterly earnings and made encouraging remarks on the foreclosure issue.

Materials and energy stocks were two of the three best performing sectors, a day after both were clobbered by fears over Beijing's attempts to slow the world's second-largest economy.

Dow Chemical gained 1.8% and Cliffs Natural Resources added 1.5%, while Massey Energy jumped 2.3% amid speculation the Richmond, Va. Miner is exploring a potential sale of the company.

Financial stocks, however, weighed on the downside, after a disappointing trio of earnings from big banks added to nagging concerns over the ongoing mortgage foreclosure debacle.

As of Monday's 5 1/2-month closing high, the Dow's 11% run-up took just seven weeks. That's enough to make any bull itchy to lock in some profits.Stock futures pointed to a higher open Wednesday, climbing back after the previous session's steep sell-off as investors looked ahead to the afternoon release of the Federal Reserve's Beige Book report.

The Federal Reserve Bank of New York has joined a group of investors demanding that Bank of America buy back mortgages in default.

The 10:30 a.m. EDT weekly energy readings by the DOE will set the tone for this mornings action in the energy commodities. Overnight crude sites at $80.33 per barrel.

The afternoon session brings the release of the Federal Reserve's Beige Book for October at 2 p.m. ET. The report, a compilation of anecdotal evidence on economic conditions across the Fed's 12 districts, is what the Federal Open Market Committee will reference during its next Nov. 2-3 policy-setting meeting.

EBay 3Q Profit Up 24%

After the Bell eBay(EBAY) Reported Positive Earnings

EBay Inc. (EBAY) third-quarter earnings climbed 24% amid fewer charges as the e-commerce operator raised its seesawing outlook for the year and predicted strong fourth-quarter results. Shares jumped 6.5% after-hours to $27.33 as the latest results beat the company's cautious forecast.

After cutting 2010 estimates in July because of the strengthening dollar, eBay now expects earnings of $1.67 to $1.70 a share on revenue of $9.05 billion to $9.15 billion. Prior estimates were $1.60 to $1.65 and $8.8 billion to $9 billion, respectively.

For the current quarter, eBay projected income of 45 cents to 48 cents and revenue of $2.39 billion to $2.49 billion. Analysts' average expectations were 44 cents and $2.4 billion, respectively, according to Thomson Reuters.

The company, which has a market capitalization of about $34 billion, said its board approved another $2 billion in stock buybacks in order to offset dilution from its stock-compensation programs. EBay bought back $300 million of its common shares in the third quarter.

The marketplaces segment, eBay's largest, had 3.4% revenue growth in the third quarter from a year earlier. Gross merchandise volume, the total value of goods sold on the website, rose 3.3%, excluding vehicles. EBay has spent the last two years overhauling the online marketplace, and while it previously said the turnaround is on track, U.S. sales volume growth continues to lag that of the international unit.

Revenue at the segment including PayPal jumped 22%. The thriving PayPal unit has grown steadily even through the downturn, but it remains much smaller than the marketplaces business.

EBay reported a profit of $431.9 million, or 33 cents a share, from $349.7 million, or 27 cents a share, a year earlier. Excluding items such as stock-based compensation, profit rose to 40 cents from 38 cents as revenue increased 0.5% to $2.25 billion.

In July, the company's downbeat guidance was income of 35 cents to 37 cents and revenue of $2.13 billion to $2.18 billion. Excluding items, operating margin rose to 28.7% from 28.4% as the enhanced productivity was partly offset by the stronger and growth in the low-margin payments business.



GENERAL MILLS ANNOUNCED PRICE INCREASE IN US MARKETS

Major US cereal and baked goods maker, General Mills announced late Wednesday, that they will raise prices on some cereal products in the US. General Mills will also be raising prices on select baking products. They expect that their price increases will affect a quarter of their cereal volume in the  US market.



US MORTGAGE BANKING SAW LARGE DECLINE
Mortgage Activity Fell Sharply in Latest Weekly Survey

The Mortgage Bankers Association said U.S. mortgage activity fell sharply in the latest weekly survey, following a week in which activity rose. Long-term interest rates rose for the first time in six weeks, the MBA said.

Interest rates for 30-year, fixed-rate mortgages rose from a record low of 4.21 percent to 4.34 percent while the average for 15-year fixed-rate contracts rose from a record low 3.62 percent to 3.74 percent, the MBA said. Average points for 30-year contracts fell 1.02 to 0.82. Points for 15-year mortgages fell from 1.06 to 1.

The MBA's Market Composite Index, indicating the volume of new mortgage activity fell 10.5 percent in the week ending Oct. 15. The Refinancing Index dropped 11.2 percent, the trade group said.


US Commercial Insurance Rates Fell
U.S. commercial insurance rates fell 5.2% in the third quarter, narrowing from a 6.4% drop in the second quarter, according to a leading survey of insurance brokers.

The price decline will come as no surprise to those in the insurance industry, which has experienced falling prices in every quarter since 2004. Since the start of the U.S. recession, the declines have been fueled in part by an imbalance of supply and demand--business that buy the coverage have scaled back because they have less to insure, and insurers are competing against each other for the business that remains.

"Market conditions haven't changed much since last quarter," said Ken Crerar, the president of the Council of Insurance Agents and Brokers, which conducted the survey. "Barring any unforeseen events, there is nothing on the immediate horizon that suggests a dramatic change in the market's direction." 

The quarterly drop was steepest for the largest businesses, with a 6.6% price decline when compared to the same quarter a year earlier for accounts generating more than $100,000 in commissions and fees.

FED BEIGE BOOK REPORT
US Economic Condition Sluggish Retail - Housing Declines - Credit Sluggish

The Beige book is a compilation of Federal Reserve District summary's. The report said that the U.S. economic activity continued to rise modestly in some districts and decline in others in September and early October, with growth picking up in several districts, according to a report released Wednesday by the Federal Reserve.

Several sectors in some districts, however, showed continued signs of sluggishness, the Fed's latest beige book indicated.

Housing markets remained weak, with most of the Fed's 12 regional districts reporting sales below those of a year ago, the Fed said. "Home inventories were elevated or rising according to most District reports," the Fed said.

The report comes as the Fed is widely expected by investors to announce new government bond purchases at its next meeting on Nov. 2-3 in a bid to boost the slowing recovery.

Minutes from Fed policymakers last meeting Sept. 21 showed most officials believing that the central bank needed to undertake new measures to boost growth, given that inflation remains too low and unemployment too high.

The U.S. central bank compiles the beige book eight times a year from anecdotal information collected by the dozen regional Fed banks scattered around the country. The report, which is based on interviews with businesses, economists and market experts, helps inform Fed officials as they decide the future course of monetary policy.

This latest beige book was prepared by the Federal Reserve Bank of Dallas, based on information collected on or before Oct. 8, and is prepared for the central bank's next policy-setting meeting.

With the central bank concerned that inflation is too low, the beige book found that input costs increased slightly but were generally not being passed on to consumers in the form of higher prices for goods and services.

"Pass-through of rising input costs to final prices remained limited although there were scattered reports of increases," the Fed said.

Most districts reported minimal wage pressure, though there were numerous reports from all the districts that firms expected health-care reform to increase the cost of employee benefits.

According to the beige book, retail spending was flat to up slightly in most districts, and retailers said that "consumers are slowly regaining confidence." But the Fed also said that consumers are confining their purchases largely to must-buy items. Atlanta and Richmond districts were the exceptions to the generally positive trend; each suffered declining shopping traffic and sales, the Fed said.

"Looking ahead, retailers in several districts expected modest sales growth through year-end. In particular, some contacts in New York planned to add more holiday staff than last year," the report said.

In most districts, new auto sales either held steady or grew. Sales of used vehicles were reported to be strong, with prices rising thanks to demand and lean inventories, the report said. "Respondents' outlooks were for slight growth in sales through year-end," the Fed said.

Manufacturing continued to expand across most districts, with exports boosting activity in several regions. Hiring by manufacturing firms "remained sluggish," the Fed said.

A few districts saw improvement on the housing front, including Philadelphia, which reported an uptick in sales of existing homes. Richmond, Kansas City and Dallas districts also reported increased home sales in the higher price range.

Lending activity reported during the early fall remained at low levels, but "there were some reports that demand picked up slightly," the Fed said. Richmond and Dallas both reported an uptick in lending activity.

"Some contacts noted there was pressure to price loans slightly more aggressively," the Fed said.



CREDIT MARKETS - COMMERCIAL BOND INSURANCE COST JUMPS
Home Foreclosure Crisis Grabs Attention - Moves For More Costs

The home foreclosure crisis again grabbed attention in credit markets Wednesday, as the cost to insure bonds issued by H&R Block Inc. (HRB) and some U.S. homebuilders increased substantially.

Treasurys rebounded from earlier losses amid speculation that the Federal Reserve will soon engage in a second round of government-debt buying to spur growth in the fragile U.S. economy.

  Investment-Grade Corporates

The cost to insure bonds issued by tax preparer H&R Block and U.S. homebuilders skyrocketed Wednesday as investors worried that the liability U.S. banks could face in the alleged mortgage foreclosures scandal may spill over to real estate and related sectors.

The price of derivatives known as credit default swaps, which investors use to hedge or speculate against the risk of a company not paying interest on its debt, rose sharply for H&R Block and major U.S. builders, according to data from Markit.

The anxiety stems from whether Bank of America Corp. (BAC) and other banks caught up in the foreclosures debacle may be forced to repurchase soured mortgage-backed securities because of faulty documentation, and the ancillary effect this may have on companies with mortgage lending or servicing subsidiaries.

The cost of CDS to cover $10 million of homebuilder Centex Corp. (CTX) debt for five years rose 30% to $340,000 a year from $262,000 Tuesday; PulteGroup (PHM) CDS rose to $425,000 from $372,000; Toll Brothers (TOL) CDS rose to $255,000 from $231,000; Lennar Corp. (LEN) CDS rose to $505,000 from $469,000; KB Home (KBH) to $505,000 from $483,000; DR Horton Inc. (DHI) to $365,000 from $328,000; and Ryland Group Inc. (RYL) to $305,000 from $284,000.

H&R Block CDS costs rose to $768,000 from $722,000 on Tuesday. A credit strategist focusing on U.S. banks said the company could face the same issues as Bank of America because of a legacy portfolio of mortgages from Option One Mortgage Corp., which it agreed to sell in 2008. A call to H&R Block was not immediately returned.

Junk bond issuance remained on its comparatively modest October pace, with only a handful of deals in the market Wednesday after Monday and Tuesday also saw two deals apiece.

BEFORE THE BELL:

US STOCK FUTURES UP - DOLLAR DOWN OVERNIGHT

Futures for the Dow Jones Industrial Average were up by 28 points, or 50 points above fair value, at 10,971. Futures for the S&P 500 were up by 5 points, or 7 points above fair value, at 1169, and Nasdaq futures were higher by 11 points, or 11 points above fair value.

Stocks plunged Tuesday after China unexpectedly hiked rates and as investors worried that banks may be forced to repurchase soured mortgage-backed securities.

Investors are awaiting earnings from Morgan Stanley(MS) and Wells Fargo(WFC) before the opening bell, with expectations for profits of 15 cents and 55 cents a share, respectively.

At 10:30 a.m. ET, the Energy Information Administration will release its weekly read on energy inventories. Analysts polled by Platts are anticipating an increase of 2.1 million barrels to crude oil supplies in the week ended Oct. 15. Gasoline and distillate stocks are slated to decrease, by 1.2 million barrels and 1.3 million barrels, respectively.

In commodity markets, November crude oil gained 87 cents to trade at $81.03 a barrel, while the December gold contract rose $5.60 to $1,341.60 an ounce.

Wells Fargo & Co (WFC.N) reported on Wednesday that third-quarter profit rose, as lower loan losses helped counter a drop on lower loan losses.

Boeing Co., the world's largest aerospace company, boosted its full-year earnings forecast and posted a healthy profit.

Boeing Co. (BA) on Wednesday raised its full-year profit guidance as the aerospace and defense group worked through a record backlog of commercial plane orders and focused its military unit on overseas sales.

The company increased the 2010 guidance to $3.80 and $4 a share from $3.50 to $3.80, though it said it expects cash flow next year to dip from prior forecast because of lower-than-expected deliveries of its long-delayed 787 and 747-8 aircraft.

Piper Jaffray(PJC) reported a 24% dip in third-quarter net income but managed to top analysts' estimates on strong revenue from advisory services and municipal financing.

United Technologies (UTX) upped its year-end guidance to the high end of its previous range at $4.70 a share and announced third-quarter net earnings of $1.30 a share on sales of $13.53 billion. Analysts had been looking for a profit of $1.28 a share on sales of $13.92 billion.

Altria Group Inc.'s third-quarter earnings rose 28% as the tobacco giant reported improved sales and margins along with fewer charges.

Delta Air Lines Inc. (DAL) swung to a third-quarter profit, posting adjusted results that beat analysts' estimates, as revenue continued to recover.

Morgan Stanley (MS.N) reported a third-quarter loss as slumping trading volumes weighed on its trading business.

Yahoo Posted 3Q Profit Doubles, Revenue Lackluster

Yahoo Inc. reported earnings after the bell Tuesday.  They shuffled through the quarter of sluggish growth, a performance that may further test the patience of the Internet company's already restless shareholders. Yahoo Inc. (YHOO 15.49,-0.44,-2.73%) ended the day off by 44 cents a share, or almost 3%, at $15.49 in advance of the Internet company’s quarterly report, due after the market close. 

Tuesday, the US stock market suffered its worst single-session drop in two months as market participants shrugged off a big batch of better-than-expected earnings and a rising dollar that cut across all sectors with declines in its wake.

Gallup Finds U.S. Unemployment at 10.0% in Mid-October

US Unemployment is essentially the same as the 10.1% at the end of September

by Dennis Jacobe, Chief Economist

PRINCETON, NJ -- Unemployment, as measured by Gallup without seasonal adjustment, is at 10.0% in mid-October -- essentially the same as the 10.1% at the end of September but up sharply from 9.4% in mid-September and 9.3% at the end of August. This mid-month measurement confirms the late September surge in joblessness that should be reflected in the government's Nov. 5 unemployment report.
















http://www.gallup.com/poll/143714/Gallup-Finds-Unemployment-Mid-October.aspx

-
-
-

Canadian Market:

Toronto Stocks Higher

The stock market was on the rebound at midday Wednesday, with golds leading a broad rally for miners and commodities.

Resources were hit hardest in Tuesday's sell-off after a surprise interest rate hike in China sparked worries about slowing demand for raw materials.

At 11:45 a.m. EDT (1545 GMT), the S&P/TSX Composite Index was up 63.52 points, or 0.51%, at 12634.07. Advances led declines 944 to 435. Trading volume was 249.8 million shares. The S&P/TSX 60 Index was up 2.26 points, or 0.31%, to 729.61.


TORONTO:

Canada Dollar Up Sharply

The Canadian dollar ended sharply higher Wednesday after the U.S. dollar tumbled against a broad range of currencies as investors reconsidered China's surprise rate increase Tuesday.

The U.S. dollar was at C$1.0224 at 3:34 p.m. EDT (1934 GMT), from C$1.0276 at 8:00 a.m. EDT (1200 GMT) and C$1.0337 late Tuesday.

The U.S. dollar dropped below parity with its Canadian counterpart last Thursday, dipping as low as C$0.9976 before beginning an extended rebound.

Exchange rates at 3:34 p.m. EDT (1934 GMT), 8:00 a.m. EDT (1200 GMT), and late Tuesday.

            USD/CAD   1.0224  1.0276  1.0337
            EUR/CAD   1.4267  1.4235  1.4208
            CAD/JPY    79.37   79.05   78.83

Canada Bonds See Modest Decline After Monetary Policy Report

Canadian bonds notched a slim decline on Wednesday, as the market breathed a sigh of relief on the Bank of Canada's Monetary Policy Report and better-than-forecast wholesale trade data.

Canada's two-year bond yield was at 1.309% late Wednesday, from 1.297% late Tuesday. The 10-year bond yielded 2.726%, from 2.703% late Tuesday. Bond yields fall as prices rise.

The Monetary Policy Report was less dovish than had been feared, assuring the market that the bank would resume raising rates when domestic and global conditions improve.
On Tuesday, the Bank of Canada announced it would hold its key overnight interest rate steady at 1%, after three consecutive quarter-point rate increases, citing its bleak assessment of the recovery at home and abroad.

It slashed Canada's growth forecasts for 2010 and 2011, and revised down its inflation outlook. It said that the output gap is "slightly larger," and that the Canadian economy will return to full capacity by the end of 2012, not the beginning of that year as was forecast in July.

In data Wednesday, Canadian wholesale sales rose at a sharper-than-expected pace in August after holding steady the previous month, led by higher sales of machinery, equipment and supplies, while inventories declined for the first time in five months.

Wholesale sales rose 1.2% to C$44.50 billion, far outpacing the rise of 0.5% that had been forecast.

In new supply, the province of Quebec reopened its 10-year bond maturing in December 2020, raising an additional C$500 million. The issue, which carries a coupon of 4.50%, was priced at 82 basis points over the government of Canada 3.5% June 2020 benchmark bond, for a yield of 3.554%.

The province of Manitoba reopened its 10-year bond maturing in June 2020 to raise an additional C$250 million. The issue, which carries a coupon of 4.150%, was priced at 66 basis points over the relevant government of Canada benchmark to yield 3.397%.  A total of C$800 million is outstanding under this bond.

Alberta Capital Finance Authority raised C$500 million from an issue of 2.5-year floating rate notes. The notes, due April 2013, pay the three-month Canadian dealer offered rate plus seven basis points.The ACFA is a funding source for local authorities in the province to fund capital projects.

First Capital Realty Inc. (FCR.T) priced its C$50 million offering of debt maturing November 2018 at 240 basis points over the relevant government of Canada benchmark, for a yield of 4.897%.The offering carries a coupon of 4.95%.

Canadian Imperial Bank of Commerce (CM) raised C$1.5 billion from an issue of subordinated notes maturing November 2010, but callable in 2015. The minimum issue size targeted was C$1 billion.

The offering was priced at 135 basis points over the relevant benchmark curve for a yield of 3.196%, or in line with guidance. The bonds carry a coupon of 3.15%.

The Canadian dollar corporate issue market has been relatively quiet this month ahead of the upcoming release of quarterly earning results. The bank's planned offering, however, could be a sign that activity is poised to pick up as it follows Brookfield Asset Management Inc.'s (BAM) C$350 million offering earlier Wednesday and a C$50 million deal by First Capital Realty Inc. (FCR.T).

Toronto Indexes, Volume; 3 PM EDT Composite Up 79.40

 S&P/TSX Composite   12649.95  up   79.40  or 0.6%
 S&P/TSX 60 Index      730.07  up    2.72  or 0.4%
 Financials            182.06  up    1.03  or 0.6%
 Materials             396.09  up    5.22  or 1.3%
 Energy                290.52  up    0.41  or 0.1%
 Industrials           107.91  up    0.54  or 0.5%
 IT                     28.65  up    0.62  or 2.2%

   Volume         Wednesday    Tuesday
   2-3                 51.0M       66.2M
   9:30-3             405.4M      404.3M


OTTAWA:

Economic Outlook For Canada

The economic outlook for Canada has changed and Canadians need to remain vigilant about running up debt, Bank of Canada Governor Mark Carney said Wednesday.

His comments come a day after the central bank held its benchmark overnight rate steady at 1.00% following three consecutive increases, citing rising tensions in currency markets and a weaker recovery in the United States, among other factors.

"What we need to focus on is the medium term, making sure household balance sheets are sustainable," Carney said, adding that despite weaker growth in the third quarter there remained "underlying momentum in the economy."

Earlier Wednesday, the Bank's quarterly monetary policy report lowered growth forecasts for 2010 and 2011 and revised down the inflation outlook. It now expects the economy to return to full capacity by the end of 2012, a year later than projected in July. The report cited downside risks that relate to Canada's international competitiveness, global growth prospects and a more pronounced correction in the Canadian housing market.

"Household expenditures are going to moderate to a pace more consistent with income growth," Carney said. "But we all need to remain vigilant," he said.

-
-
-

South American Markets:

BRAZIL:

Brazil Stocks Steady, Swing Higher

Brazilian share prices opened stable Wednesday after sharp losses Tuesday, moving into positive territory shortly after opening on profit-taking and bargain-hunting.
Brazil's Central Bank continues intervention in the Real and buys US Dollars at auction at BRL1.6772

Brazil's benchmark Ibovespa stock index opened at 69,863.49 points, just marginally lower than the Tuesday close of 69,863.58 points.  Within minutes of opening it rose to 70,410 points, offsetting what traders viewed as Tuesday's "exaggerated" fall.

Stocks plunged Tuesday amid uncertainties on government tax policy on investments after the government hiked the IOF financial operations tax on foreign investments in fixed-income applications to 6% from 4%, the second rise this month. The government also hiked the tax on margin deposits for futures positions held by foreigners to 6% from 0.38%.

Traders on Tuesday expressed concern that the tax hikes would be extended to foreign investments in shares. However, Eduardo Guardia, financial director of BM&FBovespa, the company which operates Brazil's Bovespa stock exchange, said late Tuesday he doesn't expect the government to increase taxes on foreign investments in shares in Brazil, which today stands at 2%, local newswire Estado reported.

Brazil's government is willing to take more measures to diminish the strength of the local currency, the real, Brazilian President Luiz Inacio Lula da Silva said Wednesday, according to the Estado news agency.

Brazil's own currency has strengthened about 30% over the past 18 months amid a flood of incoming foreign investment and a trend of a weakening dollar globally.


MEXICO:

Mexico's August Retail Sales Up Stocks Rise

Mexican stocks bounced back Wednesday from the previous session's global sell-off to close just short of the local index's record high finish.



IPC Poised to Break through Monday's Record Finish of 34919
The IPC index of Mexico's 35 most-traded shares jumped 1.2% to 34880 in active trade of 6.11 billion pesos ($492 million), nearly erasing the losses provoked Tuesday by China's surprise rate hike. 

Retail sales in Mexico accelerated in August at their fastest rate since May as consumers increased their purchases of both perishable and durable goods, the National Statistics Institute, or Inegi, said Wednesday.

Mexican shares were moving higher early Wednesday, rebounding after the previous session's heavy losses.

Among Mexican blue chip stocks, wireless carrier and market benchmark America Movil's (AMX) L shares advanced 1.6% to MXN35.34, cement maker Cemex's (CX) CPOs charged 3.5% higher to MXN10.02 and copper miner Grupo Mexico's (GMEXICO.MX) B shares added 2% to MXN40.69.

Retailers had a good run, benefiting from the August retail sales data. Comercial Mexicana's (COMERCI.MX) UBC shares spiked 6.8% to MXN12.40, Soriana's (SORIANA.MX) B shares gained 2.3% to MXN36.46 and Walmex's (WALMEX) V shares advanced 1.5% MXN32.08.

In other sectors, investors celebrated microfinance company Compartamos' (COMPART.MX) third quarter earnings, pushing the company's O shares up 1.2% to MXN91.02. On Tuesday, after the market close, Compartamos revealed a 37% jump on the year in its third quarter net profit of MXN491 million as its client base expanded 23% to 1.75 million and its loan portfolio expanded by 24.2% to MXN8.78 billion.

Mexico's third biggest bank, Banorte (GFNORTE.MX), said after the market close Tuesday that it's in nonbinding merger discussions with Ixe (IXEGF.MX), a niche bank and brokerage that caters mostly to high net worth clients.

Banorte O shares added 0.8% to MXN49.22 in active trade while Ixe O shares sprinted 2.2% higher to MXN19.


At 10:30 a.m. ET, the IPC index of Mexico's 35 most-traded shares was up 0.4% at 34580 on volume of 1.08 billion pesos ($87 million).

Among Mexican blue chips early Wednesday, wireless carrier and market benchmark America Movil's (AMX) L shares were advancing 0.1% to MXN34.82, cement maker Cemex's (CX) CPOs were up 1.2% to MXN9.80 and copper miner Grupo Mexico's (GMEXICO.MX) B shares were adding 1.2% to MXN40.38.

Among those who released earnings Tuesday, conglomerate Alfa's (ALFA.MX) A shares were gaining 0.2% to MXN97.68 and microfinance company Compartamos' (COMPART.MX) O shares were up 1% to MXN90.80.

BBVA Securities reiterated its outperform recommendation on Alfa shares Wednesday, saying that the recovery in the car industry and Alfa's incorporation of its Bar S acquisition drove the company's third-quarter results, adding that its energy project is the company's main catalyst going forward.

Alfa reported a 6% rise in net profit of $61 million for the most recent quarter on a 19% year-over-year increase in sales of $2.68 billion.

Compartamos, meanwhile, showed a 36.8% jump on the year in third-quarter net profit of MXN491 million as its client base expanded 23.1% to 1.75 million and its loan portfolio expanded by 24.2% to MXN8.78 billion.

Compartamos shares have outperformed the broader Mexican market this year, gaining 33% compared with a 7% advance for the IPC.

Retail Sales Climb Higher
Inegi said retail sales rose 4.4% from August 2009, with increases in clothing, food and beverages, cars and auto parts, computers, domestic appliances and others, Inegi said. The increase was above market expectations of around 2%, and the highest since May when sales rose 5%.

Retail sales also rose 0.73% from July in non-annualized seasonally adjusted terms, Inegi said.

Sales at wholesale level, which often point to retail sales in the pipeline, rose 4.2% in August from a year ago and were up 0.22% from July, Inegi said.


MEXICAN GOVERNMENT INVESTS IN BONDS

The Mexican government placed 150 billion yen ($1.8 billion) in 10-year bonds with a yield to maturity of 1.51%, completing its foreign capital markets financing needs for the next two years. Plus, Mexico's lower house of Congress passed early Wednesday the income portion of the 2011 budget, making some changes to the proposal submitted in September by President Felipe Calderon. The MXN3.438 trillion revenue plan targets a fiscal deficit of 0.5% of gross domestic product, slightly wider than the executive branch's initial 0.3% proposal.

The lower house also made changes to some of the macroeconomic assumptions in the budget, raising projected economic growth for next year to 3.9% from 3.8% and for this year to 4.8% from 4.5%, while leaving the exchange rate estimate for 2011 at MXN12.90 to the dollar.




CHILE:

Chile Stocks End Flat

Chile's blue-chip Ipsa index ended virtually unchanged on the day Wednesday, as investors booked profits on select stocks while other stocks grew, especially banks, tracking surging U.S. markets.

The Ipsa ended 0.04% higher at 4767.13, while market volume rose to 135.4 billion Chilean pesos ($279.4 million), compared with CLP116.6 billion the previous session.

Investors took profits on retail holding giant Cencosud (CENCOSUD.SN), which had closed at two, consecutive 52-week highs after it said it looks to at least double its supermarket sales in Brazil through the purchase of the Bretas supermarket chain for $810 million. Cencosud, which has a 4.4% weighting on the Ipsa, fell 0.6% to CLP3,470.00.

Power generators, which rose sharply the prior session, fell on profit-taking. The nation's largest power producer, Endesa (EOC, ENDESA.SN), slipped 1.1% to CLP861.57, while its parent company, power holding company Enersis (ENI, ENERSIS.SN), lost 0.6% to CLP225.26. Rival generator Colbun (COLBUN.SN) fell 1.4% to CLP135.20.

Those losses, however, were evened out by rising banks and consumer-related companies.

As several of the Ipsa's heavier-weighted shares also trade in New York, the Ipsa often tracks the Dow Jones Industrial Average. The DJIA was recently up 151 points, or 1.4%, at 11129, with financial stocks joining in the rally.

  Among banks in Chile, the nation's largest lender, Banco Santander Chile (SAN, BSANTANDE.SN), increased 1.6% to CLP43.17, BCI (BCI.SN) rose 0.7% to CLP28,766.00, and Corpbanca (BCA, CORPBANCA.SN) expanded 1.2% to CLP7.52.

"The strong gains posted by U.S. banks rubbed off on Chilean banking shares. Either way, with stocks like Banco Santander dropping considerably lately, investors are again taking positions in banks," said analyst Raul Barros with local brokerage BBVA Research.

Investors continued to snap up shares of beverage company Compania Cervecerias Unidas (CCU, CCU.SN), which had fallen sharply in recent weeks. CCU ended 3.4% higher at CLP5,552.00.

  In other local markets, the peso ended stronger against the dollar as most major currencies, including the euro, rallied against the greenback and as participants awaited concrete action from the government to moderate the local currency's strength.

The peso firmed to CLP484.50 to the dollar, versus Tuesday's close of CLP487.00. It traded in a wide range of CLP483.50 to CLP489.00.

In the bond market, yields on inflation-indexed Chilean central bank bonds, or BCUs, declined following a scheduled auction of central bank sovereign debt, as institutional investors snapped up bonds.

The yield on five-year BCU bonds ended at 2.65%, down from 2.66% Tuesday, while the yield on 10-year BCUs closed at 3.06%, down from 3.07% the previous session.

-
-
-
European Markets:

LONDON:

London Stocks Close Higher

FTSE 100 lifted by an upbeat U.S. session and strength in the mining sector, having been largely rangebound for the first half of the session. Xstrata 3.4+% and Rio Tinto +2.5%.

U.K. Chancellor of the Exchequer George Osborne laid out sweeping spending cuts Wednesday, sticking to the timetable for paring back the budget deficit that he unveiled in June.

U.K. banks Wednesday were warned by the government they face further tax rises, although U.K. Chancellor of the Exchequer George Osborne stopped short of introducing additional bank levies as part of his plan to cut the U.K.'s budget deficit.

With the focus on the variety of cuts and savings U.K. Chancellor George Osborne has made in his June Budget and today's spending review, it's easy to miss a major engine of restructuring the U.K.'s economy and public sector: inflation.

U.K. insurers may be able to step in and provide insurance cover as the U.K. government reduces its role in providing welfare services as a result of massive budget cuts, the head of the Association of British Insurers said Wednesday.

The housing industry slammed planned spending cuts to social housing outlined by U.K. Chancellor George Osborne in his Comprehensive Spending Review Wednesday because it will limit the number of new low-cost homes built and cost tenants more to live in them.

U.K. gross mortgage lending saw the slowest growth for the month of September in 10 years and 2010's second-half figures are likely to be subdued compared with the unexpected recovery in the latter half of 2009, the Council of Mortgage Lenders said Wednesday.

The Bank of England edged closer to expanding its bond-buying monetary stimulus program in October after Monetary Policy Member Adam Posen voted to increase it by GBP50 billion, the minutes of the policy meeting showed Wednesday.

Oil and gas company Dragon Oil PLC (DRS.DB) Wednesday said the rise in production from its fields in the Caspian Sea will be less than it expected in 2010, sending its shares lower.

Santander U.K. has mandated Bank of America Merrill Lynch, Barclays Capital, JPMorgan Chase & Co., and Santander Global Banking & Markets as joint-lead managers for an issue of prime U.K. residential mortgage-backed securities via its Holmes master trust program, a spokesman said Wednesday.

A U.K. tribunal slapped a GBP66,062 fine on Andre Scerri for using inside information to make trades in oil and gas company Amerisur Resources PLC (AMER.LN), the highest fine yet in an investigation by the Financial Services Authority into suspicious activity in the company's shares before a May 2007 share placing.

FTS-Eurofirst 300 up 0.4 pct
The FTSE 100 rebounds 3.11 points, at 07% as investors eye spending review as banks, miners rebound European shares, US earnings eyed.

The British Pound halted its three day decline against the U.S. dollar as price action reversed course at the 50-day moving average.

Across Europe, the FTSE 100 .FTSE, Germany's DAX .GDAXI and France's CAC 40 .FCHI were up 0.3 to 0.4 percent.

By 1122 GMT the pan-European FTSEurofirst 300 .FTEU3 index of top shares was up 0.4 percent at 1,086.77 points, after slipping 0.5 percent on Tuesday.

U.K. gilts outperformed other sovereign bonds Wednesday as investors gave their approval to the U.K. government's commitment to cut spending and pare its bulging budget deficit, driving down the yield spread between gilts and safe-haven German bunds to its narrowest this year.

By 1325 GMT, the December gilts contract was up 0.05 at 124.12 while safe- haven peers German bunds and U.S. Treasurys were trading in the red.

European shares rose by midday on Wednesday as miners rebounded on a weak dollar and banks rose ahead of results from U.S. peer Morgan Stanley (MS.N), while Novo Nordisk (NOVOb.CO) gained after a setback for its rivals.

Shares were also supported by minutes from the Bank of England which reinforced expectations the central bank is edging towards further quantitative easing.

Novo Nordisk rose 8 percent to the top of the FTSEurofirst 300 index, rebounding from losses in previous session after U.S. health regulators declined to approve a diabetes drug being developed by peers Amylin Pharmaceuticals (AMLN.O) and Eli Lilly (LLY.N).

That boosted prospects for Novo's key new product hope Victoza.

Miners were also firmer, drawing strength from strong metals prices as the dollar retreated following gains on Tuesday after a surprise interest rate hike by China.

Eurasian Natural Resources (ENRC.L), BHP Billiton (BLT.L) and Xstrata (XTA.L) added 1.8 to 2.2 percent.

Rio Tinto (RIO.L) added 2 percent after it approved a $3.1 billion iron ore expansion, staking a claim to become the world's top producer and defying industry concerns over a new Australian mining tax.

Banks were also on the rise, with investors likely to focus on results from U.S. peers Morgan Stanley (MS.N) and Wells Fargo & Company (WFC.N) to gauge the health of the banking sector.


FRANCE:

FRENCH STRIKE BROADENS

Almost 4,000 Gas Stations Waiting For Fuel - Rail Partially Working

Rolling strikes have spread across the country, causing transport disruption and fuel shortages, as the French upper house prepares to vote in the coming days a pension bill that would raise the retirement age to 62 from 60.

About a quarter of French filling stations had run dry Wednesday because of a blockade of fuel depots by workers opposing pension reform, Ecology and Energy Minister Jean-Louis Borloo said Wednesday.

"Of precisely 12,311 filling stations, 3,190 have said they are empty at the moment and are awaiting resupply," Borloo told the French National Assembly.

A further 1,700 stations had run short of either gasoline or diesel, he added. "It's more or less similar to the situation as yesterday [Tuesday], not in the same locations because those change," said the minister.

French state-owned railway operator SNCF Wednesday said it has been able to operate only about 10% of freight trains for its customers over the past two weeks as a result of strikes to protest against the government's pension reform.

The company said in a statement that the disruption is damaging all the efforts made to stimulate combined transport and develop rail motorways, just when it was beginning to experience an economic upturn.


GREECE:

Greek Jan-Sept. Budget Deficit Falls 30.9%

The Greek budget deficit for the period between January to September fell 30.9%, better than the 29% targeted, due to aggressive cost controls while despite a lag in revenue, the Finance Ministry said Wednesday.

The budget deficit for the nine-month period came in at EUR16.2 billion compared to EUR23.5 billion in 2009. The annual deficit reduction target promised to the International Monetary Fund and European Union in exchange for the EUR110 billion bailout to stave off bankruptcy is 36.9%.

The nine month budget target varies from the annual target given the larger interest payments for the period, the Finance Ministry said. Net revenue of the ordinary budget increased only 3.6% against an annual target of an 8.7% rise, but VAT revenue was up 16.9% in September.

The 4% forecast contraction in gross domestic product for 2010 in the debt laden Mediterranean country is having severe impact on revenue, economists say.

Ordinary budget expenditure for the nine-month period declined by 7% while primary expenditure fell by 11.6% against an annual target of 9.2%. This was due mainly to restrictions in spending for health and social security.

Interest expenditure was up 8% against a projected target of an 7.2% annual increase.
_
-

-
Asian Pacific Markets:

Asia stocks cut losses, China shock wears off as yields jump with more rate rises seen, and the yuan declined in value.

CHINA:

China Bond Yields Jump on Expectations of Future Rate Increase

China's bond yields surged to an eight-month high on Wednesday after the central bank's surprise rate rise sparked fears of a sustained tightening campaign, but authorities kept a lid on the yuan to ward off hot money inflows.

The People's Bank of China's (PBOC) unexpected 25 basis-point increase in benchmark interest rates late on Tuesday caused a widespread scramble out of risky assets globally, and came amid heightened tension over global currency policies ahead of a meeting of Group of 20 finance ministers this weekend.

Chinese investors raised their expectations for future interest rate rises. The yield on the benchmark five-year bond CN5YT=RR jumped 21 basis points to 2.97 percent, which would be its biggest single-day rise since August 2009, reflecting the aggressive reshifting in expectations.


JAPAN:

The benchmark Nikkei .N225 lost 157.85 points, or 1.7 percent, to 9,381.60, its lowest close since Oct. 4. It fell as much as 2.3 percent at one stage.

The broader Topix .TOPX declined 1.2 percent to 823.69.
Toshiba Corp (6502.T) climbed 2 percent to 417 yen after the Nikkei business daily said the company will beat its first-half operating profit forecast by more than 43 percent on strong sales of flash memory chips, but stick to its full-year outlook.

Trade picked up slightly on the Tokyo exchange's first section, with about 1.88 billion shares changing hands, after posting on Monday its lowest volume since late September, just below 1.50 billion shares.

Japan's Nikkei average fell almost 2 percent to book its lowest close in two weeks on Wednesday as investors rushed to take profits after China unexpectedly tightened credit.
China raised interest rates by 25 basis points, its first hike in nearly three years, and resource-related shares in particular took a hit as investors reined in their appetite for commodities.

But the Nikkei pared earlier losses as Shanghai shares reversed an early fall, with some analysts also saying China's move was beneficial for the Chinese economy in the long run.
Fears that the yen could rise if Chinese shares fell were not realized and an apparent halt to the yen's recent appreciation also lent some support to Tokyo shares.

WORLD FOREX CURRENCIES SNAPSHOT:
(WEDNESDAY, OCT 20, 2010 4:05 PM EDT)
EUR/USD     1.3958     +0.0213 (1.55%)
USD/JPY     81.1800 -0.4000 (-0.49%)
GBP/USD     1.5855     +0.0148 (0.94%)
CAD/USD     0.9780     +0.0094 (0.97%)
USD/HKD     7.7631     +0.0028 (0.04%)
USD/CNY     6.6518     +0.0074 (0.11%)
AUD/USD     0.9861     +0.0146 (1.50%)

WORLD MARKETS SNAPSHOT:
(WEDNESDAY, OCT 20, 2010 4:05 PM EDT)
Shanghai     3,003.95     +2.10 (0.07%)
Nikkei 225     9,381.60     -157.85 (-1.65%)
Hang Seng Index     23,556.50     -207.23 (-0.87%)
TSEC     8,124.62     +78.39 (0.97%)
FTSE 100     5,728.93     +25.04 (0.44%)
DJ EURO STOXX 50     2,851.52     +14.19 (0.50%)
CAC 40     3,828.15     +20.98 (0.55%)
S&P TSX     12,656.52     +85.97 (0.68%)
S&P/ASX 200     4,624.90     -30.80 (-0.66%)
BSE Sensex     19,872.15     -110.98 (-0.56%)

WEDNESDAY'S U.S. ECONOMIC CALENDAR:

7:00 a.m.
Oct 15 MBA Mortgage Applications Survey Market Composite Index (previous 897.2), Market Composite Index Cur Chg (previous +14.6%), Purchase Index (S.A.) (previous 181.8), Purchase Index (S.A.) Cur Chg (previous -8.5%), Refinance Index (previous 5060.3), Refinance Index Cur Chg (previous +21%)

10:30 a.m.
Oct 15 EIA Petroleum Status Report Crude Oil Stockpile (previous 360.53M), Crude Oil Stockpile Report (Net Change) (expected +2.4M), Gasoline Stockpiles Report (previous 218.17M), (Net Change) (expected -1.3M0, Distillate Stocks (previous 172.21M), (Net Change) (expected -900K), Refinery Usage (expected 81.9%)

12:45 p.m.
Federal Reserve Bank of Philadelphia President Charles Plosser speech

2:00 p.m.
U.S. Federal Reserve Beige Book

US STOCK MARKET SUMMARY, TUESDAY, OCT. 19, 2010:

Stocks:
U.S. stocks broadly fell Tuesday, with the Dow Jones Industrial Average dipping under the 11,000 mark, after a report that Pacific Investment Management Co., BlackRock and Federal Reserve Bank of New York are attempting to force Bank of America to repurchase soured mortgages packaged by Countrywide Financial Group. "Pimco and the New York Fed...obviously are two gorillas that could make this thing have more legs," said Tom Donino, partner and co-head of trading at First New York Securities. 

Treasurys:
The Treasury market rallied as interest rate decisions from China and Canada fanned worries about the global economic outlook. The 30-year bond led the buying, with its yield falling back below 4%. A surprising interest-rate hike from the People's Bank of China and a significant reduction of economic forecasts by the Bank of Canada raised investors' anxiety. 

Forex:
The dollar racked up gains across the currency board after China tried to put a brake on its rapid economic growth, while the Bank of Canada issued a tepid assessment of the global recovery. Worried about the specter of a global slowdown, investors rushed into the perceived safety of the dollar, sending the ICE Dollar index, which tracks the greenback's performance against a trade-weighted basket of currencies, shooting higher.

© Copyright 1999-2010, Online Consultancy Network™. All Rights Reserved.