Stocks Turning In Lackluster Performance After Initial Drop
After
moving modestly lower in early trading on Tuesday, stocks have turned
in a lackluster performance over the course of the morning. The major
averages have climbed well off their lows for the session and are
lingering near the unchanged line.
While profit taking contributed to the early weakness on Wall Street following
the recent strength in the markets, selling pressure remained subdued
amid some uncertainty about the near-term outlook for the markets.
Traders seemed reluctant to sell stocks and miss out on any further
upside.
The subsequent recovery was
partly due to the release of a report from the National Association of
Home Builders showing that homebuilder confidence jumped to a six-year
high in September.
Most of the major
sectors are showing only modest moves in late morning trading, although
notable weakness remains visible among airline stocks. The NYSE Arca Airline Index is down by 1.5 percent, with Republic Airways leading the way lower.
Oil
service, railroad, and trucking stocks are also seeing continued
weakness on the day, while considerable strength has emerged among
tobacco stocks.
The major averages are currently turning in a mixed performance, with the Dow posting a most gain. While the Dow is up 22.84 points or 0.2 percent at 13,575.94, the Nasdaq is down 1.49 points or 0.1 percent at 3,177.18 and the S&P 500 is down 0.78 points or 0.1 percent at 1,460.41.
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TSX Flat As Traders Await Fresh Cues - Canadian Commentary
9/18/2012 11:21 AM ET
Canadian stocks were little changed Tuesday morning as euphoria over
the Federal Reserve's stimulus package waned and trader shift their
focus on fundamentals. Meanwhile, worries over euro zone debt
situation resurfaced amid uncertainty about Spain's desire for an
international aid package. Analysts opine that the delaying tactics by
Spain to opt for financial aid could put upward pressure on yields.
The S&P/TSX Composite Index eased 6.85 points to 12,440.01, a day after snapping its four-session winning streak.
The Diversified Materials Index was the major loser, shedding nearly 1 percent. Teck Resources lost 3 percent, while Inmet Mining and First Quantum Minerals were slipping around 1 percent each.
Coal
miner SouthGobi Resources (SGQ.TO) announced Ross Tromans as its chief
executive officer and president with immediate effect. The stock dived
12 percent.
The price of Crude oil was
extending losses Tuesday morning on demand concerns amid reports that
Saudi Arabia is pumping at high rates to dampen prices. Yesterday, oil
dropped dramatically in the last few minutes of regular trade to end
sharply lower amid rumors of oil release from the Strategic Petroleum
Reserve after prices galloped following the Federal Reserve announcement
of additional quantitative easing measures last week. Crude for October was down $0.14 to $96.48 a barrel.
In the oil patch, Crescent Point Energy , Cenovus Energy , Vermilion Energy and Baytex Energy Corp. were down around 1 percent each.
Meanwhile, gold stocks were paring early trading losses as the price of bullion steadied. gold for December added $2.60 to $1,773.20 an ounce.
Seabridge gold rose over2 percent, while Royal gold and Allied Nevada gold were adding over 1 percent each.
Transportation equipment maker Bombardier Transportation
(BBD_A.TO, BBD_B.TO) said it signed $367 million contracts with Talgo
SA to develop and supply components for 36 very high speed trains for
Saudi Arabia. Th stock was trading flat at C$3.840
Electronic
equipment maker Dynetek Industries Ltd.(DNK.TO) gained over 2 percent
after announcing that it has been fully acquired by Luxfer Holdings Plc
through its wholly-owned subsidiary Luxfer Canada Limited.
In
economic news from the U.S., a report from the National Association of
Home Builders showed that the NAHB/Wells Fargo Housing Market Index rose
to 40 in September from 37 in August. Economists had been expecting the
index to show a more modest increase to a reading of 38. With the much
bigger than expected increase, the index rose to its highest level since
coming in at 42 in June of 2006.
From the euro zone,
Germany's economic sentiment improved in September after easing for
four straight months, the Mannheim-based ZEW said. The ZEW Indicator of
Economic Sentiment rose 7.3 points to -18.2. However, the negative
reading indicates that the financial market experts expect the German
economy to lose momentum over the next six months.
Meanwhile,
a survey report from the Office for National Statistics revealed that
house price inflation in the U.K. eased more than expected in July. The
ONS house price index rose 2 percent year-on-year in July, slower than
2.3 percent gain in June. This was also weaker than the 2.1 percent rise
forecast by economists.
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European Markets Continued To Slide Following Last Week's Rally
The
European markets added to yesterday's losses on Tuesday, following the
strong rally at the end of the previous trading week. Much of the
weakness can still be attributed to profit taking, but there were also
concerns about the situation in Spain. Shares of banks were under
pressure Tuesday, as well as miners, automakers and oil companies.
The
European Central Bank will assume the role of a banking supervisor only
if it is fully equipped, ECB Governing Council member Ewald Nowotny
reportedly said Monday. He said it is ambitious to expect the ECB to
take on the responsibility of overseeing major banks by mid-2013.
European
Central Bank Governing Council member Luc Coene said on Monday that the
central bank has a number of options to ease policy, including cutting
deposit rate below zero and offering more cheap loans to banks.
Negative
rate on deposits at the ECB is one of the possibilities, reports said
citing his remarks during a seminar in London. Coene, who heads the
Belgian central bank, said extending the long-term refinancing
operations (LTROs) is another option before the ECB to ease monetary
policy, if required.
Coene also
warned that rising bond yields may force Spain to place a bailout
request. "If the markets see that Spain is not going to" ask for
financial assistance, "it will not be long before spreads will rise
again and Spain will be forced to come back" on its decision to request
bailout and submit to ECB conditions, Coene said.
Spain's
borrowing costs declined on Tuesday in the first debt auction since the
European Central Bank announced plans to buy peripheral bonds earlier
this month. The country is set to face a tougher challenge on Thursday,
when it auctions a benchmark 10-year bond and a new three-year bond.
Despite
the favorable auction results, Spanish bond yields remain high, given
the lingering uncertainty as to whether the country would seek a
bailout, paving way for the ECB to keep the Spanish yields lower by
buying the country's bonds.
The euro Stoxx 50 index of Eurozone bluechip stocks declined by 0.84 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, finished up by 0.15 percent.
The DAX of Germany fell by 0.76 percent and the CAC 40 of France lost 1.15 percent. The FTSE 100 of the U.K. dropped by 0.18 percent and the SMI of Switzerland decreased by 0.23 percent.
In Frankfurt, Deutsche Bank declined by 4.58 percent, after a brokerage downgrade. Commerzbank also finished lower by 3.22 percent.
Automakers
were weak after data released by the European Automobile Manufacturers'
Association showed registrations of new passenger cars in Europe
dropped at a faster rate in August. BMW fell by 1.93 percent, Daimler lost 1.08 percent and Volkswagen decreased by 1.81 percent.
In Paris, Renault dropped by 4.04 percent and Peugeot declined by 4.32 percent.
Societe Generale finished down by 3.72 percent Tuesday. BNP Paribas decreased by 1.64 percent and Credit Agricole lost 3.11 percent.
In London, BHP Billiton fell
by 1.43 percent. The mining giant said its chief executive officer
Marius Kloppers' total pay fell to $9.82 million in fiscal 2012 from
$11.63 million in fiscal 2011.
Vedanta Resources closed lower by 1.46 percent, Kazakhmys declined by 2.17 percent and Rio Tinto lost 0.70 percent.
BT
Group lost 0.09 percent, after the communication services provider
named Luis Alvarez as chief executive officer of BT Global Services,
effective October.
Aviva declined by 3.95 percent, after Bank of America downgraded the stock to "Underperform" from "Neutral."
Barclays decreased by 1.14 percent and Royal Bank of Scotland fell by 2.48 percent. Lloyds Banking Group dropped by 2.40 percent and HSBC lost 0.93 percent. Shares of Standard Chartered finished lower by 1.92 percent.
German
economic sentiment improved in September after easing for four straight
months, as the European Central Bank's bond purchase plan calmed
analysts' fears of a looming break-up of the region, results of a
closely watched survey revealed Tuesday.
The
ZEW Indicator of Economic Sentiment rose by a better-than-expected 7.3
points to -18.2, data from the Mannheim-based Centre for European Economic Research showed. The score was forecast to rise to -20 in September.
U.K.
inflation slowed marginally in August despite an increase in fuel
prices, which may provide room for more monetary policy easing.
Nonetheless, inflation remains above the 2 percent target. Annual
inflation eased to 2.5 percent in August, in line with expectations,
from 2.6 percent in July, data from the Office for National Statistics
revealed Tuesday.
Homebuilder
confidence in the U.S. increased for the fifth consecutive month in
September, according to a report released by the National Association of
Home Builders on Tuesday, with the index of homebuilder confidence
rising to its highest level in over six years.
The
report showed that the NAHB/Wells Fargo Housing Market Index rose to 40
in September from 37 in August. Economists had been expecting the index
to show a more modest increase to a reading of 38.
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Asian Markets Trade Weak On Profit Taking
Asian
stock markets are mostly trading lower on Tuesday with investors
choosing to take some profits after recent strong gains. The overnight
weak close in the U.S. and European markets and a lack of fresh triggers
are also contributing to the subdued trend in the region.
The Australian stock market is trading weak with investors indulging in some profit taking after recent gains.
Energy,
property trusts and industrial stocks are mostly trading weak. Consumer
staples and financial stocks are trading mixed, while healthcare stocks
are moving higher.
The benchmark S&P/ASX 200 index,
which drifted down to 4,383,3 around mid morning, is currently trading
at 4,393.4, down 9.1 points or 0.2 percent from its previous close. The
broader All Ordinaries index is down 7.8 points or 0.2 percent at 4,414, off the day's low of 4,406.1.
Top miners BHP Billiton (BHP,) and Rio Tinto (, RIO.L) are trading lower by 0.8 percent and 0.6 percent, respectively.
Among bank stocks, ANZ Bank () and Commonwealth Bank of Australia are trading flat. National Australia Bank is up marginally and Westpac () is gaining about 0.7 percent.
In the energy sector, Woodside Petroleum, Santos and Caltex Australia are down 1 to 1.4 percent. Oil Search is losing about 2.4 percent, while Origin Energy is bucking the trend and trading marginally higher.
Atlas Iron is down more than 5 percent. Toll Holdings is trading lower by 4.6 percent. Fairfax Media, Boart Longyear and Iluka Resources are down 3 to 3.3 percent.
Paladin Energy, Monadelphous Group, Incitec Pivot, Whitehaven Coal, Leighton Holdings, Computershare and Beach Energy are also trading sharply lower.
Fortescue
Metals shares are up more than 17 percent following the company
securing a new credit facility of A$4.31 billion. The company said it
will use the funds to refinance its looming bank debts.
The
troubled iron ore miner had been in negotiations with its lenders about
potential waivers of its bank facilities, and on Tuesday said the new
credit, to be provided by Credit Suisse and JP Morgan, would extend the maturity profile of its debts.
Sonic Healthcare is gaining about 2.8 percent. CSL, Duet Group, Cochlear, Bluescope Steel and Arrium are up 1.8 to 2 percent.
According
to the minutes of the Reserve Bank of Australia's September 4 meeting,
the central bank decided to keep the cash rate on hold at 3.5 percent
despite concerns about falling iron ore and coal prices as well as the
high value of the Australian dollar.
However,
it said the current inflation outlook, which is expected to remain
within the RBA's target range of two to three per cent through to 2013,
meant it had room to cut rates again if necessary.
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RBA Minutes: Domestic Economy Growing As Expected
Members
of the Reserve Bank of Australia's monetary policy committee felt that
the Australian economy was growing at trend, minutes from the board's
September 5 meeting revealed on Tuesday.
The members further noted a Sharp fall
in commodity prices, which figures to affect the Australian economy -
although the effect of the current monetary policy continues to be
successful.
"Of particular note this month was the recent Sharp decline
in some bulk commodity prices," the minutes said. "At the same time,
though, the domestic economy appeared to be growing at around trend pace
and there were signs that the effects of earlier reductions in the cash
rate were still working their way through the domestic economy."
They
also agreed that conditions were slowing on other parts of the world -
particularly China - although the U.S. economy had shown signs of slight
improvement.
"Information that
became available over the past month pointed to slightly softer
conditions in many parts of the global economy," the minutes said.
"Ongoing weakness in the advanced economies appeared to be weighing on
exports from Asia, although a number of indicators of activity for the
U.S. economy were a little more positive over the past month. A month
earlier, members had noted that there were some tentative signs that
Chinese growth might be stabilizing at a more sustainable pace."
At
the meeting, the RBA kept its benchmark cash rate unchanged at 3.50
percent for a third consecutive month - calling the current monetary
policy stance "appropriate."
The
decision was in line with forecasts. The RBA reduced the cash rate by 50
basis points in May and by a quarter-point in June, following two
back-to-back rate cuts towards the end of 2011.
Even
after a cumulative 125 basis point reduction in cash rate since
November last year, Australia has the highest borrowing costs among the
developed economies.
"The current
assessment of the inflation outlook continued to provide scope to adjust
policy in response to any significant deterioration in the outlook for
growth," the minutes said. "At this meeting, the Board judged that, with
inflation expected to be consistent with the target and growth close to
trend, but with a more subdued international outlook than was the case a
few months ago, the stance of monetary policy remained appropriate."
Upon
the release of the data, the aussie slipped further against major
counterparts, trading near 1.0443 against the U.S. dollar, 1.2546
against the euro, 1.2676 against the kiwi and 82.07 against the yen.
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