Stock Market Update - Tuesday, October 5, 2010 Outlook Cautious
Stock Market Update
Tuesday, October 5, 2010
Latest US Economic News Headlines:
USA EQUITY INDEXES: (OCT. 5, 4:00 PM EDT)
| 10,944.72 | +193.45 | (1.80%) | |
| 1,160.75 | +23.72 | (2.09%) | |
| 2,399.83 | +55.31 | (2.36%) |
US COMMODITY PRICES: (OCT. 5, 4:00 PM EDT)
Crude Oil 82.71 - 0.13%
Natural Gas 3.77 + 0.61%
Gasoline 2.12 -
Heating Oil 2.30 -
Gold 1340.12 + 1.89%
Silver 22.78 + 4.16%
Copper 3.72 + 1.67%
US SECTOR SUMMARY: (OCT. 5, 4:00 PM EDT)
Basic Materials +2.22%
Capital Goods +2.20%
Conglomerates +1.91%
Cons. Cyclical +1.73%
Cons. Non-Cyclical+1.19%
Energy +1.59%
Financial +1.73%
Healthcare +1.32%
Services +1.60%
Technology +1.68%
Transportation +1.86%
Utilities +1.04%
DOW CLOSES UP NEARLY 200 POINTS
Stocks Surged To Their Highest Level in Five Months Tuesday
Stocks are surging to their highest level in five months after activity in U.S. services companies powered ahead in September.
The Dow Jones industrial average rose 193 points Tuesday, or 1.8 percent, to close at 10,944, its highest level since mid-May. The S&P 500 index rose 24, or 2.1 percent, to 1,161, and the Nasdaq rose 55, or 2.4 percent, to 2,400. About five stocks rose for every one that fell on the New York Stock Exchange, where volume came to 1.2 billion shares.
A surprise move by the Bank of Japan to slash interest rates also lifted stocks worldwide. The dollar fell as investors shed defensive assets, and a gauge of U.S. stock market volatility fell.
The service sector grew for the ninth-straight month in a hopeful sign for the economy. Services had been growing more slowly than manufacturing, which makes up a much smaller part of the economy.
The Institute for Supply Management reported that the U.S. services industry grew slightly faster in September as demand from customers improved. It was the ninth straight month of expansion in services, which have been growing at a slower pace in the U.S. relative to the much smaller manufacturing sector.
Traders are also hoping to get more positive news from the beginning of corporate earnings reports this week and another key economic indicator, the Labor Department's monthly jobs survey on Friday. PepsiCo Inc. and Alcoa Inc. report results on Thursday.
YUM REPORTS PROFIT AFTER HOURS
Yum Brands post 7 percent gain in 3Q profit
The owner of the Pizza Hut, Taco Bell and KFC fast-food brands says its third-quarter profit grew 7 percent on the strength of surging overseas sales.Yum said its revenue rose 3 percent to $2.86 billion. Louisville-based Yum said Tuesday that its net income was $357 million, or 74 cents per share, for the three months that ended Sept. 4. That compares with $334 million, or 69 cents per share, a year earlier.
Analysts polled by polled by Thomson Reuters on average expected Yum to earn 72 cents per share in the most recent quarter on revenue of $2.87 billion. Analysts typically exclude one-time items from their earnings estimates. On that basis, Yum earned 73 cents per share.
US STOCKS SURGE - DOLLAR DROPS
US stocks rose more than 100 points at the open.
US Dollar Futures Index DXY, Day's Range: 77.70 - 78.69, 4:09PM EDT: 77.80
0.65 (0.83%)U.S. stocks rose Tuesday after some improving non-manufacturing data combined with the Bank of Japan's surprise move to pump more funds into its struggling economy to encourage investors.
The Dow Jones Industrial Average rose 144 points on Tuesday, recently trading near session highs and erasing Monday's 78-point drop. Caterpillar powered the Dow's gains, rising 2.4%, while DuPont rose 2.1% and Boeing shares gained 2.3%.
The Nasdaq Composite rose 1.6% to 2382. The Standard & Poor's 500-share index was up 1.4% to 1153. All ten of its sectors traded in positive territory, led by the materials, industrials and technology sectors.
The S&P 500 recently inched above 1150, which has become a highly significant resistance level of late. The index has peaked at or within two points of 1150 in intraday trading in six of the past seven sessions.
Stocks rose, the yen slid and gold and tin climbed to records as US service industries expanded more than forecast and investors speculated that central banks will join Japan's efforts to stoke economic growth..
The Standard & Poor’s 500 Index gained 1.2 percent to 1,150.89 at 10:13 a.m. in New York, above its highest close since May.
The yen weakened against most major currencies and Australia’s dollar fell 0.3 percent against the dollar after the nation’s central bank unexpectedly kept its main interest rate unchanged. Gold climbed to $1,333.80 an ounce, silver touched a 30-year high and tin rose as high as $26,000 a metric ton.
The yen weakened against most major currencies and Australia’s dollar fell 0.3 percent against the dollar after the nation’s central bank unexpectedly kept its main interest rate unchanged. Gold climbed to $1,333.80 an ounce, silver touched a 30-year high and tin rose as high as $26,000 a metric ton.
The faster-than-estimated growth in the Institute for Supply Management’s gauge of service industries bolstered optimism that the economic recovery is picking up. The Bank of Japan’s decision to create a fund to buy bonds and other assets comes as policy makers in the U.S. and the U.K. consider similar steps, known as quantitative easing, to protect their economic recoveries.
US Stocks Extend Gains After Positive ISM Data
The U.S. non-manufacturing sector expanded at a better-than-expected pace in September. The ISM's non-manufacturing purchasing managers' index rose to 53.2 in September from 51.5 in August. Forecasters surveyed by Dow Jones Newswires had expected the September PMI to edge up to 52.0 Readings above 50 indicate expanding activity.
The ISM report is comprised mainly of comments from service-sector companies that make up the bulk of the U.S. economy, but it also includes construction and public administration.
US DOLLAR
The dollar sank against the yen after getting only a brief BOJ-related boost. Gold pushed higher to an intraday record of $1,333.80 an ounce.
The dollar dropped against the euro. The euro was trading recently at $1.3795, up from $1.3690 late Monday in New York. The U.S. Dollar Index, which tracks the currency against a basket of six others, fell 0.6%.
U.S. stocks rose Tuesday as the dollar fell after the Bank of Japan unexpectedly announced it was pumping more funds into its struggling economy to spur growth.
The Dow Jones Industrial Average rose 94 points, or 0.9%, to 10844 on Tuesday, erasing Monday's 78-point drop. Caterpillar powered the Dow's gains, rising 2.1%, while United Technologies increased 1.8% and J.P. Morgan Chase rose 1.5%.
The Nasdaq Composite rose 1.2% to 2372. The Standard & Poor's 500-share index rose 1.1% to 1149. All ten of its sectors traded in positive territory, led by the materials and financial sectors.
DOLLAR UNDER ATTACK
US To Press Currency Issues At IMF
U.S. officials plan to press their foreign counterparts to avoid interfering in global currency markets at this weekend's International Monetary Fund meetings, warning of the potential effect on the global rebalancing efforts.
A senior Treasury Department official, speaking to reporters at a briefing, said U.S. officials will stress the need for countries to allow for "market-oriented exchange rates" as part of a broader rebalancing of the world economy. Asked about Japan's recent intervention on behalf of the yen, as well as broader volatility in currency markets, the official said the U.S. position has not changed.
"The U.S. believes the IMF should play a more aggressive role in ensuring countries live up to their commitments on exchange-rate policy, the official said, stressing the fund's "very important surveillance mandate."
IMF REPORT:
Forex Turmoil Not Yet Major Concern For Stability
Escalated turbulence in foreign exchange markets isn't a major concern presently for global financial stability, a senior International Monetary Fund official said Tuesday.
Jose Vinals, director of the IMF's monetary and capital market division, also repeated calls on governments to continue mending their banking sectors, branding the global financial system as the "Achilles' heel" of the global recovery.
Speaking at a press briefing on global financial market stability, Vinals said currency moves should be in the directions that reflect market fundamentals. He encouraged banks to insulate against future volatility by building up capital and liquidity buffers.
"Exchange rate changes in the medium term have to be in line with market fundamentals...It is essential for the re-balancing of the global economy," he told reporters.
Besides China's undervalued yuan, intervention by South Korea, Brazil and Japan to suppress the value of their currencies have raised foreign exchange tensions, propelling the sensitive issue to the forefront of international talks due to take place in Washington by the end of the week, on the sidelines of the IMF's annual meetings.
Finance ministers and central bankers of the group of the world's 20 largest economies will hold informal talks Friday morning, while finance ministers of the seven most industrialized countries are due to meet for an informal dinner Friday night.
"Volatility in currency markets has always been here. What is important is that we don't go to excess volatility," Vinals said.
Despite intervention by some emerging nations to hold down the value of their currencies, Vinals said he didn't see the risk of a generalized asset bubble developing in those countries. As part of G-20 discussions, countries are trying to agree on mechanisms to better regulate capital inflows into emerging countries, to prevent them from accumulating excessive foreign exchange reserves that could result in currency misalignments.
Vinals said capital controls could be used as part of the toolkit to tackle erratic capital flows, but warned they shouldn't serve as a substitute for reforms aimed at rebalancing the global economy. To that end, he also called on emerging countries to work towards the development of domestic capital markets.
The IMF stressed a lot remains to be done to fix the global banking system, by closing down or recapitalizing ailing financial institutions. The need to mend banks is given an added sense of urgency by persistent sovereign debt tensions, particularly in Europe, which in turn could be exacerbated by substantial refinancing needs for governments in the medium-term, the IMF said.
Some $4 trillion worth of sovereign bonds are coming up for refinancing over in the next two years. European banks, which rely on wholesale funding--funding that banks get from markets or central banks--for 40% of their financing needs, are especially exposed to potential debt roll over hurdles, according to the IMF.
"Weak sovereign balance sheets exacerbate weaknesses in the financial sector...If not addressed these weaknesses can reignite the need for deleveraging," of nations and banks, Vinals said.
He added some European banks will have to step up their restructuring efforts and will need more capital. He welcomed steps undertaken by Spain and Germany to deal with their troubled regional banks, some of which have failed recent Europe-wide stress tests.
US BLUE CHIPS BUILDING DIVIDENDS FOR INVESTORS
US Companies Added $5.1B To Dividend Payouts In 3Q
Significantly more U.S. public companies increased their dividends in the third quarter, according to Standard & Poor's, continuing a robust payout trend since earlier this year as companies look to put their combined record level of cash to use.
Companies have been increasing shareholders' returns via dividends or stock repurchases as corporations sit on near-record levels of cash and the perceived need to hoard it in the wake of the financial crisis fades.
S&P said that in the latest quarter, 299 U.S. companies increased dividend payouts, compared with 191 a year earlier, as reductions tumbled to 35 from 135. Overall, $5.1 billion was added to dividend payments in the third quarter.
So far this year, the number of companies that have raised dividends has increased to 1,033 from 707 a year ago while only 117 companies have cut dividend, compared with 730 a year earlier.
AMERICAN POWER BUILDING LARGEST SOLAR PLANT OHIO
American Electric Power Largest Solar Energy Plant East Of Rockies Planned For Ohio
American Electric Power Co. (AEP) announced it would purchase solar energy from Turning Point Solar LLC in what would be the largest commercial solar development east of the Rockies.
Turning Point, a joint venture of Agile Energy Inc. and New Harvest Power, will develop a 49.9-megawatt solar generating facility on about 500 acres in southeastern Ohio. If executed as expected, AEP Ohio would purchase through a 20-year agreement all of the output, including renewable energy credits, from the facility.
A megawatt can provide enough electricity to power between 500 and 1,000 typical homes.
Construction and commercial operation of the facility will be phased in over three years. About 20 megawatts are expected to be in commercial operation by late 2012, with an additional 15 added the following year and the rest coming online by the end of 2014. The project is expected to bring about 600 permanent facility and construction jobs to the region.
Terms of the power purchase agreement weren't disclosed "for competitive reasons," according to AEP.
American Electric Power, one of the largest utilities in the U.S., was hurt by a sharp drop in power demand driven by a severe national recession. In July, the company reported its second-quarter profit slid 57% as charges masked increased revenue and power sales, though the company continues to take a cautious stance on a recovery for the sector. Shares were up 0.7% at $36.45 in recent trading.
ISM Non-Manufacturing Data Mixed
ISM service sector index
The U.S. non-manufacturing sector expanded at a better-than-expected pace in September. Economists expected ISM index to show that service companies would grew modestly in September
ISM's non-manufacturing purchasing managers' index rises to 53.2 in September from 51.5 in August. Forecasters had expected the September PMI to edge up to 52.0. Activity at service-oriented companies, the nation's predominant job generator, likely kept growing at a sluggish pace in September.
The Institute for Supply Management's service-sector index for last month is expected to read 52, compared to 51.5 in August, according to economists polled by Thomson Reuters.
Readings above 50 signal growth, while levels below 50 indicate that activity is shrinking. The higher the number is above 50, the faster companies are reporting that business has picked up.
The report is expected at 10 a.m. EDT Tuesday. ISM's survey polls about 350 different companies in 18 industries.
The service sector is important because it accounts for about 80 percent of U.S. employment, including jobs at hospitals, shops, restaurants, airlines, banks and consulting firms. But service companies have trailed the much smaller manufacturing sector in recovering from the downturn, putting a damper on overall hiring.
ISM's service-sector report typically comes before the government's release on jobs, and it helps provide a hint as to how many jobs employers added in the previous month.
Economists expect the Labor Department to report on Friday that the jobless rate edged up to 9.7 percent in September from 9.6 percent in August.
US RETAIL SALES DROP AGAIN
US Retail Sales Down 0.4% In Sept Vs Aug
National chain store sales fell 0.4% in the five weeks of the September reporting period compared with August, according to Redbook Research's latest indicator of national retail sales released Tuesday.
The fall in the index was compared to a targeted 0.2% drop.
The Johnson Redbook Index also showed seasonally adjusted sales for the period were up 2.6% from last year, while the targeted increase was 2.9%.
Redbook said sales were "modestly" better the past week from a week earlier amid "cooler and more fall like temperatures in many parts of the country which accelerated sales at both specialty and department stores and bolstered foot traffic in malls." But heavy rain and flooding in other areas disrupted business, Redbook noted some others saying.
Sales for the week were up 2.7% from a year earlier. As for October, Redbook gave an initial target of 2.8% sales increase from a year earlier and 0.6% growth from September.
Walgreen Co.'s (WAG) same-store sales edged up 0.4% in September, as the drugstore chain extended its four-month growth streak, thanks in part to stronger prescription sales as the company benefited from its store remodeling efforts.
Shares were up 2.42% at $33.91 in recent pre-market trading as Jefferies raised its investment rating on the stock ahead of the news to buy from hold. The stock through Monday was down 9.8% this year.
Women's apparel retailer Talbots cut revenue guidance for the quarter and year as President and Chief Executive Trudy Sullivan said traffic in the fiscal third quarter "has been inconsistent." Shares slid 10%.
Among stocks in focus, Mosaic's fiscal first-quarter earnings nearly tripled, coming off a very steep drop in profit in the year-earlier period, as the fertilizer maker's revenue and margins both jumped. Shares rose 3.3%.
US TREASURY OFFICIAL SEES BORROWING FALLING
A U.S. Treasury Department official says the government's borrowing needs will likely decrease significantly as the economy recovers from recession, expecting net new borrowing to step down significantly in 2012.
AMERICAN-EXPRESS ANTITRUST SUIT
U.S. hits AmEx with antitrust suit
Justice Department settlement gives merchants the ability to reduce prices for certain credit cards.
The Justice Department announced Tuesday that it had filed an antitrust suit against American Express for preventing retailers from offering customers discounts for using rival credit cards with lower processing fees.
Federal officials added that they had reached a proposed agreement with Visa and MasterCard over the matter.
The issue of "swipe fees" has long been a thorn in the side of the retailing industry, which complained that it has little power to inform customers of the differences in card costs. In its complaint, the Justice Department estimated that the fees cost merchants $35 billion each year - resulting in higher prices for shoppers.
The card networks "put customers and consumers in a no-win situation," Attorney General Eric H. Holder Jr. said in a news conference. "We are sending a very clear message: We will not tolerate anti-competitive policies and practices."
American Express has some of the highest fees and most restrictive practices in the industry, federal officials said. AmEx, based in New York, said it plans to fight the case, calling it "seriously misguided."
"Our merchant contracts are pro-competitive and pro-consumer," said Louise M. Parent, American Express executive vice president and general counsel.
Retailers must pay a fee of about 2 percent of the purchase price each time a customer swipes a card. That money is an important source of revenue for the banks that issue cards as well as the networks, such as Visa and MasterCard, that process the transactions. Though card companies argue that consumers spend more when they use plastic - a boon to retailers - merchants say they have little control over the fees they must pay.
Visa and MasterCard reach a settlement with the US Justice Department after a two-year lawsuit over anti-competitive practices. But American Express vows to fight on.
GOLD SOARS AS DOLLAR DROPS
$1,340 an ounce and rising. Silver is trading at $22.61 an ounce.
Gold futures topped $1,340 an ounce Tuesday, posting their highest-ever price as investors fled paper currencies in favor of the metal as a perceived store of value.
The most-actively traded gold contract, for December delivery, was recently up $23, or 1.7%, at $1,339.80 an ounce on the Comex division of the New York Mercantile Exchange. It hit an intraday peak of $1,341.20, the highest ever price for a most-actively traded contract.
London Late Gold And Silver At 1515 GMT
Current Bid-Ask Previous
---------------- ---------
Gold 1338.90-1339.30 1314.50-1315.25
Silver 22.65-22.67 22.00-22.02
India Spot Pure Gold Hits All-Time High Of INR19,410/10 Grams The price of pure spot gold in India Tuesday rose to a fresh all-time high of INR19,410 per 10 grams, tracking firm overseas markets, the Bombay Bullion Association said.
DOLLAR DROPS - OIL UP
Crude Nudges Higher as Dollar Drops
OIL FUTURES: Crude Settles At $82.82, 5-Month High On Weak Dollar. The US Coast Guard announced today that they will open the Houston shipping channel Wednesday. The closure has delayed refineries from receiving shipments of oil.
The U.S. Coast Guard said it won't reopen the Houston Ship Channel before Wednesday, delaying the resumption of crude shipments to four refineries that have been cut off from supplies since Sunday.
The Coast Guard had previously said that the re-opening could occur late Tuesday. "I suspect it's going to be tomorrow before that's done," Coast Guard Capt. Marcus Woodring said in a phone interview Tuesday.
The channel was closed after a tug pushing three barges of scrap metal crashed into an electricity tower early Sunday. Work began Monday to stabilize the listing structure so that 14 sagging transmission lines, which had been shut off for maintenance prior to the collision, could be removed. Woodring said that four of 14 power lines have been cut and reeled in and that he hoped the remaining wires could be cleared away by "sunset or shortly thereafter." From there the damaged tower will be sheared off at its legs and lifted on to a waiting barge to be hauled away.
Ships began stacking up on both sides of a closed segment of the waterway on Sunday. By Tuesday morning there were 28 vessels waiting to enter the port and 20 in line to leave, Coast Guard Petty Officer Richard Brahm said.
Woodring has said that he expected it would take about three days to clear the backed up traffic once the waterway was reopened, but that priority would be given to incoming crude shipments.
"We understand the economic impact," Woodring said Tuesday. But it will be "at least until tomorrow" before ships are allowed to cross the 3.5-mile-long channel section that is closed. "It's a safety issue," Woodring said.
Monday, owners of the four affected refineries--Royal Dutch Shell PLC (RDSA, RDSA.LN), Petroleo Brasileiro SA (PBR, PETR4.BR), Valero Energy Corp. (VLO) and LyondellBasell Industries (LALLF, LALBF)--said the delay would not affect output. However, Woodring told reporters on Monday that some of the refineries had told him they would require shipments on Wednesday.
Together the affected refineries process about 790,700 barrels a day of crude into gasoline, diesel and other fuels, about 4.5% of the nation's total refining capacity.
Oil futures edged higher as investors responded cautiously to a rise in the euro against the dollar. Crude oil is now trading at $82.91 per barrel.
NATURAL GAS:
Futures Settle 0.4% Higher At $3.743/MMBtu
FBI Wants Backdoor into Private Sector Encryption
This past week, the Federal Bureau of Investigation (FBI) began preparing to push for a greater jurisdiction in the world wide web. They will be filing a request in federal court that would allow them the ability to wiretap encrypted communications. This mandate will affect all U.S. companies as well as foreign companies who wish to do business within the U.S.What this proposal boils down to is that the FBI wants to be able to go to any communications provider and get any communications it deems necessary in the course of an investigation. This includes providers that have encrypted services like email or peer-to-peer communications. An article on the New York Times website explores both the government's position for asking this, and the responses of the technical community.
According to Valerie E. Caproni, general counsel for the FBI, "They can promise strong encryption. They just need to figure out how they can provide us plain text."
The FBI asserts that this is nothing more than expanding the legal wiretapping of phone lines into the technological world we live in today.
The problem with this method of wiretapping is that it really would not stop anyone but the laziest of criminals. The ability to decrypt emails is worthless if the contained message is encrypted by the sender.
Anyone who is serious about secure communications already uses PGP keys (or other similar encryption methods) to keep prying eyes away. No communications company can prevent that, or fully decrypt any message that is sent in such a fashion.
The biggest worry about such a proposal is that any weakness in an encryption method would be the target of every hacker and cybercriminal alive. It would just be a matter of time before somebody found and exploited these back doors.
BEFORE THE BELL:
US Stock Futures Rise Ahead Of ISM Data
Stock Futures Signal Rebound - Drop of the US Dollar index 0.5% to 78.086.
Stock index futures pointed to a higher open on Wall Street on Tuesday, with futures for the S&P 500 up 0.4%, Dow Jones futures up 0.2% and Nasdaq 100 futures up 0.4% at 0950 GMT (5:50 am EDT).
U.S. stock-index futures signaled opening gains for Wall Street on Tuesday, with key ISM non-manufacturing data on tap and gold pushing higher in the wake of a Bank of Japan policy move.
The ISM non-manufacturing data for September, scheduled for release at 10 a.m. Eastern time. Economists surveyed by MarketWatch are forecasting the index to rise to 52.3 from 51.5 in the prior month.
"After the disappointing ISM number last week, people will watch very carefully what is happening with this index, the main factor to drive the market on the economic front," said Francois Savary, economist and director of investments at the Reyl Group.
Futures for the Dow Jones Industrial Average rose 31 points to 10707 while those for the Nasdaq 100 advanced 9.75 points to 1977. Futures for the S&P 500 gained 4.50 points to 1134.80.
Stocks in focus for Tuesday include Yum Brands Inc. (YUM) , which will report third-quarter earnings after the market closes.
Central banks delivered some surprises in overnight markets with the Bank of Australia holding steady on interest rates and the Bank of Japan dropping its policy interest-rate range to between zero and 0.1%, saying it plans to buy a variety of assets. Stocks in Japan largely shrugged off the news while the Australian dollar fell but stocks there pared earlier losses.
Gold pushed higher to an intraday record of $1,329.60 an ounce. The dollar sank against the yen after getting only a brief BOJ-related boost. The dollar and gold tend to move in different directions.
Canadian Market:
Toronto Indexes, Volume; 3 PM EDT Composite Up 165.27
S&P/TSX Composite 12488.21 up 165.27 or 1.3%
S&P/TSX 60 Index 722.36 up 9.47 or 1.3%
Financials 177.62 up 1.99 or 1.1%
Materials 396.98 up 9.39 or 2.4%
Energy 290.31 up 4.01 or 1.4%
Industrials 105.01 up 0.95 or 0.9%
IT 28.55 up 0.48 or 1.7%
Volume Tuesday Monday
2-3 64.1M 34.9M
9:30-3 418.8M 292.8M
TORONTO:
The province of Saskatchewan would lose more than the estimated $2 billion in tax revenue if BHP Billiton PLC's hostile bid for Potash Corp. of Saskatchewan (POT) succeeds, Potash Corp. argued in a filing with the U.S. Securities and Exchange Commission.
Toronto Most Actives At 3:15 PM EDT
Kinross Gold 14,849,930 19.77 up 0.49
Arise Technologies 9,258,425 0.23 up 0.03
Yamana Gold 7,441,794 12.02 up 0.47
OceanaGold Corp. 5,192,581 3,71 off 0.13
Western Coal 5,456,037 6.54 up 0.49
Lundin Mining 5,396,199 5.50 up 0.47
Horizons NYMEX Natural Gas Bull 5,319,956 3.50 up 0.10
iShares Cdn S&P/TSX 60 Index 5,127,965 18.14 up 0.28
Great Panther Silver 4,623,640 1.17 up 0.17
Crowflight Minerals 4,512,812 0.06 unchanged
South American Markets:
BRAZIL:
Brazil Real Closes At 25-Month High
Brazil Stocks Open Higher On Commodities
Brazilian stocks opened higher Tuesday on rising international commodities prices and firm European stocks, ignoring a government decision to raise taxes on foreign investment inflows into the fixed-income market.
Brazil's benchmark Ibovespa stocks index opened 0.78% higher at 70,931 points.
International metals and oil prices rose Tuesday while European stocks advanced. Higher commodities prices are crucial for revenues of major Brazilian exporters.
Traders said the Brazilian market was largely ignoring a government decision Monday night to raise the IOF financial operations tax on foreign inflows into the fixed-income market. The government boosted the tax from 2% to 4%.
The tax does not apply to inflows into stocks or investments by multinational companies in plant and equipment in Brazil.
REAL WEAKEN
The Brazilian real opened slightly weaker Tuesday after a government decision Monday night to increase taxes on foreign investment inflows headed for fixed-income accounts.
The real opened at BRL1.6985 to the dollar, weaker against the Monday close of BRL1.6917. Later in trading, the real recouped some of its losses, trading at BRL1.6925.
Monday night, Brazil's government raised its financial operations tax on fixed-income inflows to 4% from the previous 2%. The tax was originally instituted at 2% late in 2009.
CHILE:
Chile Imacec Index Gains 7.6% On Year In August
The Chilean economy continues to grow at a robust pace, as last year's recession and the devastating February earthquake begin to fade into the proverbial woodwork.
The country's monthly economic activity index, or Imacec, surged 7.6% on the year in August, the central bank said Tuesday.
The monthly growth was slightly lower than the 7.8% increase analysts expected, according to the median estimate in a Dow Jones Newswires survey of nine economists. Estimates had ranged from increases of 6.5% to 8.0%.
MEXICO:
Mexico's Stocks Open Higher, Testing New Heights
Mexican stocks opened higher Tuesday, testing new all-time highs as investors were encouraged by gains in U.S. markets after the Bank of Japan cut interest rates and unveiled other monetary easing measures to help economic growth.
The market's IPC index of leading shares was up 0.4% to 34,170 points around 10:15 a.m. EDT. The index briefly touched a new intraday high of 34,327 points before relenting, but still appeared on track to beat its previous closing high of 34,134 on April 15. Volume was 35.7 million shares worth 1.17 billion pesos ($93.4 million).
The gains in the IPC were led by media conglomerate Televisa (TV, TLEVISA.MX), which reached agreement to expand and extend its programming license agreement with U.S. Spanish-language broadcaster Univision, and to take a 30% in the U.S. concern. Televisa CPO shares were up 5.3% to MXN50.26.
Televisa said it has agreed to invest $1.2 billion in Univision for a 35% stake--a 5% stake and debentures convertible into an additional 30%. The agreement increases the amount of Televisa content that Univision will run on its networks, and also gives Univision rights to Televisa's online, pay television and network content for its online and other interactive platforms.
The deal, expected to close in the first half of 2011, raises the royalties that Televisa will receive for its content and extends the agreement to 2020 from 2017, and then to 2025 if certain conditions are met.
Bellwether America Movil (AMX, AMX.MX) L shares were up 0.4% to MXN34.34, while leading retailer Wal-Mart de Mexico (WMMVY, WALMEX.MX) V shares were down 0.3% to MXN32.05.
The positive start for equities was also supporting gains in the peso, which was quoted in Mexico City at MXN12.5210 to the dollar, compared with MXN12.5825 Monday.
European Markets:
London Shares Close Up; US Data Key
FTSE 100 5635.76 +79.79 +1.44%
FTSE 250 10681.96 +118.15 +1.12%
DJ UK Smaller Companies 904.51 +6.23 +0.69%
LONDON:
The U.K.'s dominant services sector expanded at a faster pace in September than August, calming fears over a double-dip recession, but the outlook remains muted as uncertainty over public sector spending cuts continued to weigh on new business, data showed Tuesday.
Tesco PLC (TSCO.LN), the world's third-largest retailer by sales, Tuesday posted forecast-beating first-half profit, as growth from its overseas operations, in particular Asia, offset a sluggish U.K. home market.
British Airways PLC (BAY.LN) Tuesday reported an increase in passenger traffic in September, typically one of the busiest months for business travellers, the first rise since February and before strikes plagued the airline.
U.S. private-equity firm Harbinger Capital Tuesday said it sold a 14.1% stake in Inmarsat PLC (ISAT.LN) in an institutional share placing, cutting its 28% stake in the U.K.-based satellite communications provider by half and dashing hopes the investment firm might eventually buy the entire company.
U.K.-listed Kazakh miner Kazakhmys PLC (KAZ.LN) Tuesday announced that Chairman Vladimir Kim sold almost one third of his shares in the company to the Kazakh authorities for more than $1.3 billion, raising concerns over the government's increasing influence over the group.
Royal Bank of Scotland Group PLC (RBS) and Sempra Energy (SRE) are nearing the sale of their joint venture's North American gas-and-power trading book to JPMorgan Chase & Co. (JPM), people familiar with the deal said Tuesday.
Several private equity firms are interested in buying the GBP3 billion real estate loan portfolio being sold by Royal Bank of Scotland Group PLC (RBS), people familiar with the situation told Dow Jones Newswires.
British Airways (BAY.LN) shares +3.8% at 248p, a little firmer following the release of September traffic statistics. An analyst describes the figures for the month of September as 'a good set', with revenue passenger kilometers up 1.3% and passenger capacity, measured in available seat kilometers, up 0.3% on September 2009. Says management note of strong yield performance in both premium and non-premium cabins.
EUROPEAN UNION:
European stocks closed sharply higher Tuesday
The Stoxx Europe 600 index ended up 1.3% at 261.18. The U.K.'s FTSE 100 closed up 1.4% at 5635.76, Germany's DAX gained 1.3% to 6215.83 and France's CAC-40 closed 2.3% higher at 3731.93. At the time of the close of European equity markets, the Dow Jones Industrials Average was up 1.5% at 10918.19.
The combination of strong data and aggressive Japanese policy moves helped investors shrug off recent worries about debt-riddled euro-zone countries. That includes a statement by ratings agency Moody's it may downgrade Ireland's credit rating, as the country's financial stability is weakened by the cost of bank rescues, rising borrowing costs and likely low growth.
The central bank also said it would pump some of its $60 billion temporary fund into corporate debt. Investors in Europe will now look to see if the Bank of England, European Central Bank and the Federal Reserve will take similarly radical steps to boost uneven growth. The Bank of England and ECB have policy meetings on Thursday.
These moves by central banks sparked a strong move for the euro, which rose to a fresh six-and-a-half month peak against the dollar. At 1550 GMT, the euro rose 1.1% against the dollar, to $1.3833. The British pound gained 0.5% to $1.5908.
In other asset classes, spot gold jumped as the euro strengthened against the dollar, reaching a new record at $1341.20 a troy ounce. The gold market found support in the dovish policy moves by the Japanese and Australian central banks.
By the close of European equity markets, the most-actively traded gold contract, for December delivery, was up $22.10, or 1.7%, at $1,338.90 an ounce on the Comex division of the New York Mercantile Exchange.
Oil Stocks rose with light, sweet crude for November delivery was up $1.18, or 1.5%, at $82.64 on the New York Mercantile Exchange, gaining on the weaker dollar and bullish moves in global equities.
Shares of U.K.-based Tesco had a choppy session and finished up 0.3% as the impact of stronger-than-expected earnings was partially offset by relatively slow growth in the retailer's home market.
In major market action: Bank stocks gained throughout the session, with EFG Eurobank rising 5.6% in Athens, following reports from a credit conference in Warsaw that Moody's Investors Service sees the risk to Greece's sovereign rating forecast "on the upside" if the country continues to reform its finances.
Airline stocks were some of the best performers in Europe, with auto stocks also mostly higher after being hit hard as markets weakened over the previous couple of sessions.
BMW shares climbed 3.6% after Santander started coverage of the company with a buy rating. Renault advanced 3.6% in Paris.
Shares of British Airways outperformed most rivals, rising 6.5% after a solid set of traffic statistics for September. The airline reported its first increase in passenger traffic since February. Air France-KLM rose 4.8% and Ryanair gained 3.5% in Dublin.
Morning European Stocks Move Higher
In Europe, stocks moved higher, with the Stoxx Europe 600 index gaining 0.2%. The market shook off news that Moody's Investors Service has put Ireland's credit rating under review for a possible downgrade.
FTSE up as banks, defensives gain; volumes thin.Travel shares help Europe stocks end losing run. EU urges faster yuan rise Euro area policymakers pressed China on Tuesday for a faster appreciation of its currency.
Eurozone Retail Sales Unexpectedly Fall in August
Retail sales in eurozone unexpectedly drop 0.4 pct in August, suggesting fragile confidence.
Retail sales in the 16 countries that use the euro unexpectedly fell during August, official figures showed Tuesday, in another sign that consumer confidence remains fragile despite a stronger than anticipated economic recovery.
Eurostat, the EU's statistics office, said eurozone retail sales dropped by 0.4 percent in August from the previous month, in contrast to market expectations for a 0.2 percent increase. August's decline was the first since April, though the monthly increases since then have been small.
As a result, the year-on-year rise in retail sales eased to 0.6 percent from July's 1.1 percent rate.
Analysts say that the eurozone's economic recovery can only be sustainable if consumers start to spend more, especially as the U.S. economy has lost momentum.
GERMANY:
GERMANY SEES REAL ESTATE BOOST
German Property Market Gets Boost Form International Buyers
International property investors are providing a welcome boost to the German real-estate market, which they see as an attractive alternative to popular destinations like Paris and London.
While Paris and London property markets recovered faster from the recession and saw the greatest increases in capital values, those rates of growth have slowed. Higher prices amid increased competition in those cities have sent investors to Germany's five main markets--Frankfurt, Munich, Berlin, Hamburg and Duesseldorf. Property consultancy Savills PLC (SVS.LN) anticipates that interest will continue into 2011.
International investors accounted for 40% of total transactions in Germany in the first half of the year, compared with only 15% in the same period last year.
They have boosted property transactions in Germany by 148% in the first half, which should result in total commercial real-estate investment there for the year of EUR16 billion compared with EUR11.2 billion in 2009.
GREECE:
Greek 2009 Budget Deficit Likely To Be Revised Up
Greece's 2009 budget deficit is likely to be revised even higher than the current estimate of 13.6% of gross domestic product, but this won't derail deficit slashing efforts, a senior person familiar with the matter said Tuesday.
"There may well be an upward revision by Eurostat because state controlled organizations could have made larger accounting losses than previously thought," the senior person told Dow Jones.
Greece promised to slash its deficit to 8.6% in 2010 under the EUR110 billion memorandum with the International Monetary Fund and the European Union. It has repeatedly been warned by the European Commission about providing inaccurate statistics.
IRELAND:
The rating agency also announced that Ireland's credit rating is on review for a possible downgrade due to the rising cost of recapitalizing the country's banks. Bank of Ireland rose 0.8%, but underperformed the rest of the sector.
Asian Pacific Markets:
JAPAN:
JAPAN CENTRAL BANK LOWERS INTEREST RATE TO ZERO
Unanimous Vote to Cut Interest Rates
In a surprise move Tuesday, the Japanese central bank lowered its benchmark interest rate to a range of 0 percent to 0.1 percent, a tiny change from its previous target of 0.1 percent but a significant move back to 0%.
Tuesday's decision drives the BOJ closer to full quantitative easing it conducted between 2001 and 2006, under which it flooded market systems with excess cash and left markets to decide the overnight call rate.
But on Tuesday the BOJ said it would keep paying 0.1 percent interest on excess reserves held with the central bank, providing a floor for market rates and suggesting it would only temporarily allow rates to fall below 0.1 percent.
"My first impression was that Governor Shirakawa used the phrase 'comprehensive easing' instead of 'quantitative easing', so I think there is still some negative implication of the previous quantitative easing. He liked to differentiate from the previous easing measures," said Susumu Kato, chief economist at Credit Agricole in Tokyo.
The decision to cut interest rates was made by a unanimous vote, but board member Miyako Suda opposed the inclusion of government bonds among the types of assets the BOJ could buy using its pool of funds.
Analysts agree the BOJ needs to save its depleted arsenal of policy options in case the economy slips into another recession.
Growth slipped from a healthy annualized rate of 5.0 percent in the first quarter of 2010 to 1.5 percent in the second quarter. Data last week showed exports growth slipped for a sixth straight month in August.
The BOJ is not the only central bank under pressure to do more to support an economy that is showing signs of faltering.
Yen Strength Seen Hurting the Economy
Bank Of Japan reverts to zero rates, pledges to buy more assets The Bank of Japan on Tuesday pledged to pump more funds into the struggling economy and keep rates virtually at zero, surprising markets and stealing a march on the Federal Reserve in providing a fresh dose of economic stimulus.The yen initially fell in reaction to the BOJ news, but later reversed course to be firmer against the dollar than when the BOJ news broke.
For months, the central bank had eschewed government calls for more decisive action, such as buying more government bonds, focusing instead on a limited funding scheme.
But in the face of growing evidence the yen's strength was hurting the economy, the Bank of Japan carried out what Governor Masaaki Shirakawa described as "comprehensive monetary easing."
It cut its overnight rate target to a range between zero and 0.1 percent, from 0.1 percent, reinstating the so-called zero-interest policy that the BOJ ended only in July 2006, and it pledged to buy 5 trillion yen ($60 billion) worth of assets.
Core consumer prices have been falling from year-earlier levels since early 2009 and the country has been in and out of deflation for about 15 years.
"The latest measures individually may be considered as not having a major effect, but we want to maximize the effect by implementing the steps as a package," Shirakawa told a news conference, adding that the steps have both the elements of credit easing and an expansion of fund supply.
The asset purchases would roughly match the size of extra stimulus being considered by the government, which is also running out of policy options to lift the economy in the face of public debt that is twice the size of the $5 trillion economy.
The assets, ranging from government bonds and short-term government securities to commercial paper and corporate bonds, would come under a temporary scheme that would also cover 30 trillion yen of such assets as collateral under an existing loan program.
AUSTRALIA:
1:19AM Wednesday Oct 06, 2010
The Bank of Australia held steady on interest rates even as most economists expected it to boost rates. Moody's Investors Service also said it may cut Ireland's debt rating again, citing the increased cost to the government of repairing the stricken banking system, weak economic growth and rising borrowing costs.
Rio Tinto Dumps Record BHP Deal
The biggest merger in Australian history is dead, with Rio preparing to walk away from a $120 billion deal.
Westpac Moves To Stand Still with Reserve Westpac rules out raising interest rates before the RBA meeting next month, putting pressure on rivals to commit to a freeze.
Australian stocks have closed in the red but off the day's lows after recovering some of the losses in late trade.
World Markets Snapshot:
(TUESDAY, OCTOBER 5, 2010 -4:00 PM EDT )
Shanghai 2,655.66 +44.98 (1.72%)
Nikkei 225 9,518.76 +137.70 (1.47%)
Hang Seng Index 22,639.14 +20.48 (0.09%)
TSEC 8,200.43 -45.67 (-0.55%)
FTSE 100 5,635.76 +79.79 (1.44%)
DJ EURO STOXX 50 2,758.56 +57.54 (2.13%)
CAC 40 3,731.93 +82.12 (2.25%)
S&P TSX 12,498.00 +175.06 (1.42%)
S&P/ASX 200 4,606.90 -18.40 (-0.40%)
BSE Sensex 20,407.71 -68.02 (-0.33%)
WORLD FOREX CURRENCY PAIRS:
(TUESDAY, OCTOBER 5, 2010 - 9:00 AM EDT )
| EUR/USD | 1.3780 | +0.0103 (0.75%) |
| USD/JPY | 83.3200 | -0.1700 (-0.20%) |
| GBP/USD | 1.5898 | +0.0076 (0.48%) |
| CAD/USD | 0.9793 | +0.0019 (0.20%) |
| USD/HKD | 7.7566 | -0.0007 (-0.01%) |
| USD/CNY | 6.6905 | -0.0007 (-0.01%) |
| AUD/USD | 0.9611 | -0.0062 (-0.64%) |
Tuesday's US Economic Calendar:
7:45 a.m.
Oct 2 ICSC-Goldman Sachs Chain Store Sales Index Chain Store Sales Index - WoW (previous +0.4%) Chain Store Sales Index - YoY (previous +3.6%)
8:55 a.m.
Oct 2 Johnson Redbook Retail Sales Index MoM % Change (previous -0.4%) 12MonChgPct (previous +2.6%) 52WkChgPct (previous +2.5%)
10:00 a.m.
Sept. ISM Non-Manufacturing report on business Non-Manufacturing PMI (expected 51.7) Non-Manufacturing Business Index (previous 54.4) Prices Index (previous 60.3) Employment Index (previous 48.2) New Orders Index (previous 52.4)
4:30 p.m.
Oct 1 API Weekly Statistical Bulletin Crude Stocks (Net Change) (previous -2.42M) Gasoline Stocks (Net Change) (previous +3.02M) Distillate Stocks (Net Change) (previous -2.81M) Refinery Runs (previous 83.6%)
5:00 p.m.
Oct 3 ABC News Consumer Comfort Index ABC News Consumer Confidence Index (previous -45)
Oct 2 ICSC-Goldman Sachs Chain Store Sales Index Chain Store Sales Index - WoW (previous +0.4%) Chain Store Sales Index - YoY (previous +3.6%)
8:55 a.m.
Oct 2 Johnson Redbook Retail Sales Index MoM % Change (previous -0.4%) 12MonChgPct (previous +2.6%) 52WkChgPct (previous +2.5%)
10:00 a.m.
Sept. ISM Non-Manufacturing report on business Non-Manufacturing PMI (expected 51.7) Non-Manufacturing Business Index (previous 54.4) Prices Index (previous 60.3) Employment Index (previous 48.2) New Orders Index (previous 52.4)
4:30 p.m.
Oct 1 API Weekly Statistical Bulletin Crude Stocks (Net Change) (previous -2.42M) Gasoline Stocks (Net Change) (previous +3.02M) Distillate Stocks (Net Change) (previous -2.81M) Refinery Runs (previous 83.6%)
5:00 p.m.
Oct 3 ABC News Consumer Comfort Index ABC News Consumer Confidence Index (previous -45)
Market Summary Monday, Oct. 4, 2010:
Stocks:As the US dollar began to increase in value, Investors sold off U.S. stocks. The markets sold off Monday as investors cautiously prepared for the start of an earnings season. The Dow Jones Industrial Average dropped 78.41, or 0.72%, to 10,751.27. The S&P 500 slipped 9.21, or 0.80%, to 1,137.03. The market is awaiting guidance from official jobless numbers and the start of corporate-earnings season. The Dow Jones Industrial Average was dragged down by a big tumble for American Express. Microsoft was also a major weight on the market, shedding 2.2% after Goldman Sachs cut its stock-investment rating on the company to neutral from buy.
Treasuries:
Treasury prices rose as some investors bet on the Federal Reserve to step up government-debt purchases to aid the economy. Worries about a potential terror threat in Europe, persistent concerns about sovereign-debt problems in the euro zone and weakness in U.S. stock markets also bolstered demand for relatively safe U.S. government debt. At the peak of the buying, the two-year note's yield touched a record low.
Forex:
The euro fell against the dollar as the cumulative effect of worrisome news concerning the euro zone drained some of the life from its recent highs. The euro faced headwinds after more details on the extent of Ireland's budget deficit surfaced over the weekend, alongside a hostile takeover bid for a U.S. pharmaceutical company and grim outlook by a Nobel-laureate economist.
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Labels: commodity prices, economy, equities, online consultancy network, stock market update
posted by Benjamin Train @ 4:57 AM
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