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US Market Reports
Stocks have shown considerable volatility over the course of early trading
on Tuesday but have maintained a positive bias as traders go bargain hunting
following the sell-off seen in the previous session.
The major averages have moved to the upside in the past few minutes and are
currently posting strong gains. The Dow is up 163.25 points or 1.5 percent
at 10,973.10, the Nasdaq is up 46.29 points or 2 percent at 2,403.98 and the
S&P 500 is up 20.49 points or 1.8 percent at 1,139.95.
While bargain hunting is contributed to some strength on Wall Street,
traders seem somewhat reluctant to make any significant moves ahead of the
Federal Reserve's interest rate announcement later in the day.
While the Fed is widely expected to leave interest rates unchanged at
near-zero levels, traders will be paying close attention to the central
bank's accompanying statement, looking for any indications about the
possibility of further quantitative easing.
Trading may also be impacted by reaction to comments from Federal Reserve
Chairman Ben Bernanke, who is due to speak at a press conference following
the release of the statement.
On the economic front, the Labor Department released a report showing a
smaller than expected drop in labor productivity in the second quarter,
although the report also showed that the productivity growth in the first
quarter was revised to show a drop.
According to the Labor Department, worker productivity fell by 0.3 percent
in the second quarter compared to a revised 0.6 percent decrease in the
first quarter.
Most economists had predicted an even steeper 0.7 percent decline in
productivity in the second quarter compared to the 1.8 percent increase that
had been reported for the previous quarter.
The report also showed that unit labor costs rose by 2.2 percent in the
second quarter following a revised 4.8 percent increase in the first
quarter. Economists had been expecting costs to increase by about 1.9
percent compared to the 0.7 percent increase that had been reported for the
first quarter.
Despite the volatility in the broader markets, considerable strength is
visible among banking stocks. The KBW Bank Index has risen by 3.6 percent,
bouncing off a two-year closing low.
Steel, health insurance, and gold stocks are also seeing significant
strength in early trading, with gold stocks moving higher along with the
price of the precious metal. Most of the other major sectors have also moved
to the upside.
In overseas trading, stock markets across the Asia-Pacific moved mostly
lower on Tuesday in reaction to the sell-off seen on Wall Street overnight.
Japan's Nikkei 225 Index fell by 1.7 percent, while Hong Kong's Hang Seng
Index plunged by 5.7 percent.
Meanwhile, the major European markets have seen some volatility over the
course of the trading day. While the U.K.'s FTSE 100 Index is just above the
unchanged line, the French CAC 40 Index and the German DAX Index are down by
0.8 percent and 1.3 percent, respectively.
In the bond market, treasuries are giving back some ground after seeing
considerable strength in the previous session. Subsequently, the yield on
the benchmark ten-year note, which moves opposite of its price, is up by 3.2
basis points at 2.371 percent.
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Canadian Market Reports
TSX May Open Higher On Relief Rally
Canadian stocks may open higher Tuesday on value buying, after falling
heavily in the past three sessions, and steady energy prices. Traders will
be closely following the Federal Reserve's policy setting committee, the
FOMC, meeting later today to see whether the Federal Reserve will ease
monetary policy further in wake of the current downgrade.
U.S. stock futures were pointing to a higher open.
On Monday, the S&P/TSX Composite Index extended losses for a third session,
plummeting 491.21 points or 4.04 percent to 11,690.56 amid global sell-offs
on fears over a double dip recession. The main index lost over 1,100 points
or nearly 10 percent in the past three sessions.
The price of crude oil was lingering near $80 Tuesday morning as traders
fret over demand growth after OPEC trimmed its global oil demand growth
forecast. The Organization of the Petroleum Exporting Countries foresees
slightly lower world oil demand growth. In its monthly Oil Market Report
released today, the OPEC said demand for crude was expected to reach 88.14
million barrels per day or mbd in 2011, down from a previous estimate of
88.18. For next year, demand projections was trimmed to 89.44 mbd from 89.50
mbd. Crude for September edged up $0.52 to $81.83 a barrel.
Meanwhile, the price of gold was extending gains as traders fret over
intensifying sovereign debt issues in both sides of the Atlantic. Gold fro
December gained $39.40 to $1,752.60 an ounce.
In corporate news from Canada, molybdenum miner Thompson Creek Metals
(TCM.TO) reported that its second quarter net income declined to $116.8
million or $0.68 per share from $126.5 million or $0.87 per share last year,
as lower margin, reduced one-time gain, and increased income tax payment
offset growth in revenues. However excluding items, adjusted net income was
$56.4 million or $0.33 per share, up from $517 million or $0.36 per share in
the prior year. Analysts were expecting the company to report earnings of
$0.28 per share for the quarter.
International gold mining company Golden Star Resources (GSC.TO) reported
second-quarter net loss of $5.0 million or $0.020 per share, compared to a
net loss of $5.6 million or $0.022 per share in the same period last year.
Analysts were expecting the company to report loss of $0.01 per share for
the quarter.
Base-metals miner First Quantum Minerals (FM.TO) swung to profit in second
quarter, reporting net earnings of $155.3 million or $1.64 per share
compared to net loss of $182.0 or $2.27 per share a year ago. The company
said quarterly results were helped by better prices for copper and gold
which more than offset a decline in volumes.
Richmont Mines (RIC.TO) announced that its second-quarter net earnings
increased significantly to C$5.0 million or C$0.16 per share, from of C$0.3
million or C$0.01 per share a year ago.
Oil fields services provider Trican Well Service (TCW.TO) reported improved
second quarter net income of $30.1 million or $0.21 per share compared to
$8.9 million or $0.06 per share in the prior-year period. On an adjusted
basis, net income was $33.3 million or $0.23 per share compared to $12.7
million or $0.09 per share in the prior-year period. Analysts were expecting
the company to report earnings of $0.10 per share for the quarter.
Oil exploration company Pace Oil & Gas (PCE.TO) reported a lower second
quarter net income to C$9.0 million or C$0.19 per share from C$16.4 million
or C$0.50 per share in the year-ago quarter.
Juvenile products and bicycle company Dorel Industries (DII_A.TO) reported
second-quarter net income of $23.0 million or $0.70 per share, down from
$32.9 million or $0.99 per share in the year-ago quarter. The company
declared its regular quarterly dividend of $0.15 per share.
In economic news, Canada Mortgage and Housing Corporation said the
seasonally adjusted annual rate of housing starts was 205,100 units in July,
boosted by construction of condos and apartment complexes on the coasts.
This is up from a revised annual rate of 196,600 units in June.
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European Market Reports
European Markets Mixed
The European markets are mixed in afternoon trading Tuesday, as the
bloodbath continued in global markets, following the lowering of U.S. credit
rating by S&P. Weaker than expected economic data in Germany and the UK also
impacted market sentiment. Crude is declining, while gold continues to be
firm.
The Euro Stoxx 50 index of eurozone bluechip stocks is declining 1.31
percent, while the Stoxx Europe 50 index, which includes some major U.K.
companies, is dropping 1.19 percent.
The German DAX is losing 2.47 percent, the UK's FTSE 100 is falling 1.06
percent. and Switzerland's SMI is declining 1.99 percent. The French CAC 40
is gaining 0.90 percent, reversing early losses.
Among the DAX components, diversified chemicals maker K+S is leading the
decliners by plunging 15.21 percent. Merrill Lynch cut the stock to
"Neutral" from "Buy" and reduced the price target to 42 euros from 65
euros.
Utilities EON and RWE are losing 5.8 percent and 5.5 percent, respectively.
RWE reported a 22 percent drop in first-half profit, impacted by the
shut-down of nuclear power stations and related higher provisions following
the government's decision for a nuclear phase-out. The company also lowered
its fiscal 2011 forecast to see further decline in earnings.
Deutsche Bank is dropping 3.7 percent and Commerzbank is falling 2.4
percent.
Metro is falling 2.15 percent. Goldman Sachs reduced its price target for
the department stores operator to 51.70 euros from 53.20 euros.
Allianz is up 0.6 percent, even though JPMorgan cut its price target on the
stock to 107 euros from 109 euros.
Outside the main index, Heidelberger Druckmaschinen is up 0.5 percent. The
manufacturer of sheet fed offset printing machines for the print media
reported a narrower loss for the first quarter, adding that it still expects
break-even pre-tax result.
Aareal Bank is falling 1.9 percent. The real estate lender reported a rise
in profit for the second quarter, in spite of a challenging market
environment, and also affirmed its outlook for 2011.
Demag Cranes is adding 0.4 percent. The company reported a loss for the
third quarter, but revenue grew 27 percent. The company also lifted its
revenue outlook for 2011.
In Paris, utility EDF is falling 5.3 percent. Suez Environnement and Veolia
Environnement are dropping 3 percent and 2.2 percent, respectively.
Axa is falling about 2 percent. Morgan Stanley cut its price target on the
stock to 15.50 euros from 18.35 euros in the prior year.
Total is declining 2.5 percent. Technip is falling 1.8 percent.
Among banks, Credit Agricole and Societe Generale are losing, while Natixis
and BNP Paribas are gaining.
In London, Barclays is plunging 6.3 percent, Lloyds Banking is retreating
5.85 percent and Royal Bank of Scotland is plummeting 9.2 percent.
Among miners Anglo American is falling about 2 percent, BHP Billiton is
down 2.2 percent and Rio Tinto is falling 1.8 percent. A report released by
China showed that consumer price inflation edged up further to 6.5 percent
in July, climbing to a fresh 3-year high.
BP and Royal Dutch Shell are retreating 3.6 percent and 3.9 percent,
respectively, as oil prices took a hit.
InterContinental Hotels is adding 2.1 percent. The company reported an
increase in adjusted profit before tax for the second quarter and lifted its
interim dividend by 25 percent, as strong performances in all three of its
geographies boosted revenues.
International Power is falling 6.4 percent. The company posted an increase
in profit for the first-half of the year.
In economic news, U.K. manufacturing output fell unexpectedly in June,
while industrial production remained flat, data from the Office for National
Statistics showed.
Germany's exports declined more than expected in June, data from the
Federal Statistical Office revealed. Exports fell by 1.2 percent
month-on-month in June, following May's 4.4 percent rise. The expected rate
of decline for June was 1 percent.
Across Asia/Pacific, most major markets ended in the red. Hong Kong's Hang
Seng index fell 5.7 percent, Japan's Nikkei 225 index dropped 1.7 percent
and China's Shanghai Composite Index ended down 0.03 percent. However,
Australia's All Ordinaries added 1 percent on some bargain hunting.
In the U.S., futures point to a higher open on Wall Street. Following the
conclusion of a 1-day meeting, the Federal Open Market Committee is expected
to release the post-meeting policy statement at 2:15 PM ET.
In the previous session, U.S. stocks plunged sending the major averages
crashing to their worst levels of the year as traders reacted to the news of
the downgrade of the U.S. credit rating. The Dow plummeted 5.6 percent, the
Nasdaq slumped 6.9 percent and the S&P 500 tumbled 6.7 percent.
In the commodity space, crude for September delivery is dropping $0.77 to
$80.54 per barrel, while December gold is rising $52 to $1765.2 a troy
ounce.
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Asia Market Reports
Indian Market Ends Off Day's Low
The Indian market extended its recent losses on Tuesday after staging an
intra-day recovery in afternoon trading. Joining a global rout, the
benchmark 30-share Sensex ended down 132 points or 0.78 percent at 16,858,
with 18 of its stocks declining.
Reports that oil marketing companies might cut petrol prices and
expectations of higher FII inflows helped the market cut its loss in late
trading.
Capital markets regulator Securities and Exchange Board of India today
allowed foreign investors to invest up to $10 blln in mutual fund equity
schemes, a move that will further liberalize the portfolio investment route
and widen the foreign investor base of the domestic equity markets. Overseas
investors have also been permitted to invest an additional $3 blln in mutual
fund debt schemes that invest in infrastructure bonds.
The BSE Sensex fell to a multi-month low of 16,432 in early trading before
rising to a high of 17,135 at one point of time, tracking a rise in the U.S.
index futures and gains in the European markets. Subsequently, European
shares failed to hold on to initial gains and the U.S. stock futures also
reversed advances. The major European averages were last trading down by 2-6
percent ahead of a Fed meet later today.
Elsewhere in Asia, the benchmark indexes in Japan, South Korea and Hong
Kong closed down between 1.7 percent and 5.7 percent, tracking steep losses
on Wall Street overnight. U.S. stocks plunged overnight sending the major
averages crashing to their worst levels of the year as traders reacted to
the news of a downgrade of the U.S. credit rating. The Dow plummeted 5.6
percent, the Nasdaq slumped 6.9 percent and the S&P 500 tumbled 6.7 percent.
China's Shanghai Composite closed little changed on Tuesday after falling
around 3.5 percent in the morning session, with bargain hunting in large-cap
stocks helping the index claw back most of its loss. Likewise, the
Australian market staged a remarkable recovery, with the big banks helping
the benchmark S&P/ASX 200 index end 1.2 percent higher following a 5.5
percent plunge early in the session.
The Federal Open Market Committee meets tonight and expectations are
growing that the Federal Reserve will announce some stimulus measures or
liquidity support to help keep the economy moving forward and ease market
turmoil sparked by last week's U.S. credit downgrade.
Back home, the broader Nifty index fell by 46 points or 0.89 percent to
5,073 after a spectacular comeback in the afternoon. The BSE mid-cap index
eased 1.27 percent and the small-cap index shed a little over 2 percent.
IT, technology, metal, healthcare, oil/gas and consumer durable stocks led
the decliners, while FMCG stocks rose on defensive buying. Banking and
realty stocks also saw selective buying.
Among the top losers, Reliance Industries, Hindalco Industries, Sun Pharma,
Coal India, Wipro, Cipla, Infosys, TCS, Tata Motors and Tata Steel fell by
2-5 percent. Reliance Industries lost almost 2 percent after the energy
giant said it received government approval for a $7.2 billn deal with BP
Plc.
Among those that gained, Mahindra & Mahindra climbed 4.3 percent, DLF rose
2.5 percent and ITC gained 2.4 percent, while HDFC, Jaiprakash Associates
and Bajaj Auto ended up around 2 percent each. Maruti Suzuki, ONGC and BHEL
closed up over a percent each, HDFC edged up 0.7 percent and SBI gained half
a percent.
State Bank of Bikaner and Jaipur tumbled nearly 4 percent after raising its
lending rates. Piramal Life Sciences fell 1.5 percent after its Q1 net loss
widened to Rs 44.71 crore from Rs 36.85 crore in the year-ago period. Ipca
Laboratories lost 3.2 percent after announcing an overseas acquisition.
Jindal Poly Films rose 2.5 percent after it proposed to consider a share
buyback. Polyplex added 2.4 percent on reporting a 58 percent jump in
consolidated net profit for the first quarter ended June.
India's finance minister Pranab Mukherjee on Tuesday said the domestic
economy was moving in a positive direction and hoped that prices of oil and
other commodities will decline further, helping the government tame
inflation and cut subsidies. India's economic fundamentals remain strong and
are capable of meeting any challenges posed by the downgrade of the U.S.
economy and the crisis in some eurozone nations, he maintained.
Separately, the government today approved a two year extension for RBI
Governor Duvvuri Subbarao until September 2013, opting for continuity at a
time of global economic uncertainty.
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Forex Top Story
Euro Slides Closer To Parity With Swiss Franc
The euro continued its downward spiral against the Swiss franc on Tuesday,
as frightened investors flocked to safer assets amid mounting concerns about
the health of the global economy.
Focus has turned to the Federal Reserve for the reaction of U.S. policy
makers to the bloodletting on Wall Street over the past few sessions.
Economists predict that U.S. interest rates will be held at effectively
zero, but the markets will be listening intently for clues about a potential
third round of quantitative easing.
Meanwhile in Europe, markets remain rattled by an escalating debt crisis
that threatens to eventually cost Germany and France its AAA ratings.
While the European powerhouses are fiscally sound, exposure to the debt of
Italy and Spain are making them a riskier bet.
S&P downgraded U.S. debt last Friday, sparking a global sell-off of stocks
and resource commodities.
The euro was steady near $1.4250 versus the dollar ahead of the Fed's
interest rate decision at around 2 pm ET. The pair has wobbled near that
level for the past few months.
The euro dropped to a new record low of CHF 1.0530 against the Swiss franc,
and appears bound for parity unless Italy and Spain make meaningful
structural reforms.
Choppy dealing left the euro little changed near GBP 0.8740 versus the
sterling. U.K. house prices increased in July amid record low interest
rates.
Germany's exports declined more than expected in June, data from the
Federal Statistical Office showed Tuesday.
Exports fell by 1.2 percent month-on-month in June, following May's 4.4
percent rise. The expected rate of decline for June was 1 percent.
Inflation in China continued its relentless rise in July, climbing to its
highest level in three years on the back of spiraling food costs, latest
release from the National Bureau of Statistics showed Tuesday. The rate of
inflation rose to 6.5 percent in July from 6.4 percent in June.
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