TSX Edges Up As Commodities Recover - Canadian Commentary
Canadian stocks were hovering just above the unchanged line Tuesday morning supported by manufacturing data out of China and the recent batch of deal making.
However, gains were capped amid escalating concerns over the euro zone financial situation as investors fret over the possibility of a Spanish sovereign bailout. Adding to the worries, Moody's Investors Service downgraded its rating outlook on Germany, the Netherlands and Luxembourg to 'negative' from 'stable' due to intensified uncertainty regarding the outcome of the debt crisis.
The S&P/TSX Composite Index edged up 12.20 points or 0.11 percent to 11,557.74, after shedding 120 points or 1 percent in the past two sessions.
Coal miner CIC Energy Corp. (ELC.TO) surged nearly 15 percent after announcing that it would be acquired by India-based Jindal Steel & Power Ltd in exchange of C$2.00 per share, representing just over 25 percent premium to its latest closing price.
Nexen Inc. was holding on to its previous session's gains, adding 1 percent. Yesterday, the stock skyrocketed over 50 percent after Chinese oil major CNOOC Ltd. (CEO) said it would acquire Nexen Inc. for $27.50 per share in cash.
Rogers Communications Inc. (RCI_A.TO, RCI_B.TO) gained over 5 percent after reporting second quarter earnings above street estimates. The communications and media company reported a marginally lower second-quarter net income of C$400 million or C$0.75 per share compared to C$410 million or C$0.74 per share in the same quarter last year. However excluding items, adjusted net income from continuing operations grew to C$478 million or C$0.91 per share from C$469 million or C$0.85 per share in the year-ago quarter. Analysts were expecting the company to report earnings of C$0.86 per share for the quarter.
The price of gold was flat as the euro was struggling after data out of the euro zone revealed contraction in private sector activity. gold for August edged up $0.20 to $1,577.60 an ounce.
Among gold stocks, international gold miner Eldorado gold Corp. rose over 4 percent after announcing that Greece lawmakers revoked the "Provisional Order" issued on June 29, 2012, which temporarily suspended the surface clearing activities of Hellas gold S.A., a 95 percent owned unit of Eldorado, in Halkidiki, Greece.
Agnico-Eagle Mines moved up 2 percent, while Royal gold was adding nearly 1 percent.
Healthcare services provider Centric Health Corp. (CHH.TO) moved up 1.50 percent after announcing d that it has appointed David Cutler as its President and Chief Executive Officer. Cutler will assume his responsibilities during September 2012.
The price of Crude oil was ticking higher Tuesday morning after data out of China that revealed minor recovery in the nation's manufacturing sector. Preliminary results of HSBC's monthly survey of manufacturers revealed the contraction in Chinese manufacturing eased in July, with the .Purchasing Managers' Index rising to 49.5 from 48.2. Crude for September was up $0.45 to $88.59 a barrel.
In the oil patch, Pacific Rubiales Energy and Encana Corp. were down around 2 percent each.
In economic news, Statistics Canada said retail sales rose 0.3 percent to $38.9 billion in May, missing economists estimates for a 0.5 percent growth. Gains were reported in 6 of 11 sub-sectors, representing 53 percent of retail trade. Overall, retail sales have been relatively flat since November 2011. In volume terms, retail sales rose 0.7 percent.
Elsewhere, the euro zone private sector economy contracted for the tenth time in the last eleven months, with the rate of decline unchanged on June, Markit Economics said. The flash composite Purchasing Managers' Index remained unchanged at 46.4 and matched the consensus forecast. A reading below 50 suggests contraction in the sector.
Further, Germany's private sector continued to shrink in July, marking the weakest performance since June 2009, Markit Economics said. The flash composite output index fell for the sixth month running in July, to 47.3 from 48.1 in June. The index has posted reading below 50 in each month since May.
| European Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  |  |  |  | | Please click on the images to view our interactive charts | | European Markets Finished Mixed With Focus On Bernanke
The European markets struggled to find a direction on Tuesday. The markets ended the session mixed, as attention focused on the testimony of U.S. Federal Reserve Chairman Ben Bernanke began his testimony before the Senate.
The Federal Reserve is prepared to take further action to jump start the sluggish U.S. recovery, the nation's top central banker told lawmakers Tuesday morning. However, Fed Chairman Ben Bernanke offered no hints that the central bank is specifically planning another round of quantitative easing.
"Reflecting its concerns about the slow pace of progress in reducing unemployment and the downside risks to the economic outlook, the FOMC made clear at its June meeting that it is prepared to take further actions as appropriate to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability," Bernanke said in delivering his twice-a-year testimony to the Senate Banking Committee.
The International Monetary Fund Monday said it approved a fresh loan to Portugal after the country passed a monetary review in connection with its bailout program. The IMF approved the disbursement of EUR1.48 billion after completing its fourth review of the Portuguese economy under an extended fund facility (EFF) arrangement with the government. With the release of fresh funds the total disbursements under the EFF arrangement will reach around EUR21.13 billion.
Just three days after it downgraded the country's sovereign credit rating by two notches, rating agency Moody's Investors Service on Monday lowered the long-term debt and deposit ratings of ten Italian banks and the issuer ratings for three Italian financial institutions by one to two notches. All of the banks and financial institutions affected by the ratings cut have a 'negative' outlook, which may increase the likelihood of future downgrades.
Spanish borrowing costs declined on Tuesday in its first debt auction since the government announced the latest round of austerity measures last week in a bid to attain deficit targets amid a severe recession.
The Spanish Treasury sold a total EUR 3.56 billion of 12- and 18-month bills, slightly exceeding the target of EUR 2.5 billion - EUR 3.5 billion set for the sale. The country placed EUR 2.6 billion worth of 12-month T-bills to yield 3.918 percent, which was much less than the 5.074 percent paid at the previous auction on June 19.
The euro Stoxx 50 index of eurozone bluechip stocks declined by 0.21 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 0.34 percent.
The DAX of Germany climbed by 0.18 percent and the SMI of Switzerland increased by 0.11 percent. The CAC 40 of France decreased by 0.09 percent and the FTSE 100 of the U.K. dropped by 0.72 percent,
In Paris, Alcatel-Lucent sank by 20.19 percent after the telecom equipment maker forecast an operating loss excluding certain items in its second quarter.
Technip climbed by 1.57 percent, after it was awarded a contract by Marathon Oil Norge.
In London, Royal Dutch Shell Plc finished down by 0.50 percent. The company said it would not revise its 220 pence per share offer to acquire Cove Energy and not take part in the auction process to complete the potential acquisition.
British lender HSBC Holdings fell by 1.88 percent after the British lender and top U.S. bank regulator, the Office of the Comptroller of the Currency, drew stinging criticism in a Senate report on money-laundering.
Shares of CSR Plc surged by 33.72 percent. Samsung Electronics agreed to acquire its handset connectivity and location development operations and technology for $310 million in cash.
Rio Tinto declined by 2.68 percent after the mining giant reported second quarter iron ore production that was almost flat with last year.
G4S dropped by 5.66 percent, after it was downgraded to "Neutral" from "Buy" by Bank of America.
Wolseley decreased by 2.15 percent. The company announced that it will explore strategic options for its businesses in France.
National Grid fell by 3.08 percent, after Societe Generale lowered its price target on the stock.
German investor sentiment declined for the third month in a row to its lowest level in six months, adding to signs that the euro area debt crisis is hurting the outlook for the region's biggest economy. The ZEW Indicator of Economic Sentiment dropped to minus 19.6 points from minus 16.9 in June. That was slightly better than economists' forecast for a score of minus 20.
U.K.'s annual consumer price inflation eased for a third straight month in June to the lowest level since November 2009, helped by falling fuel prices and heavy discounting to boost sales, the latest figures from the Office for National Statistics showed Tuesday. Consumer price inflation fell to 2.4 percent in June from 2.8 percent in May. Economists expected the rate to remain unchanged at the May level.
With a steep drop in energy prices offset by higher prices for food, medical care, and apparel, the Labor Department released a report on Tuesday showing that overall U.S. consumer prices were unchanged in the month of June. The Labor Department said its consumer price index came in flat in June following a 0.3 percent drop in May. The flat reading on consumer prices came in line with economist estimates.
Industrial production in the U.S. increased by slightly more than anticipated in the month of June, according to a report released by the Federal Reserve on Tuesday, with the increase partly due to a rebound by output in the manufacturing sector.
The Fed said industrial production rose by 0.4 percent in June following a revised 0.2 percent decrease in May. Economists had expected production to increase by 0.3 percent compared to the 0.1 percent drop originally reported for the previous month.
Homebuilder confidence has seen a substantial improvement in the month of July, according to a report released by the National Association of Home Builders on Tuesday, with the index of homebuilder confidence rising to a new five-year high.
The report showed that the NAHB /Wells Fargo Housing Market Index jumped to 35 in July from 29 in June, marking the biggest monthly increase in nearly a decade. Economists had expected the index to edge up to a reading of 30.
| Asia Market Reports | Asian Stocks End Mixed After Chinese Data
Asian stocks pared early losses to end on a mixed note on Tuesday, helped by improved Chinese manufacturing data. With earlier easing measures starting to work, China's manufacturing contracted at a slower pace in July, flash estimates released by Markit Economics revealed. The PMI reading came in at 49.5 in July, up from 48.2 in the previous month, suggesting the slowest contraction in manufacturing activity in five months.
Besides Chinese data, investors continued to monitor news from Europe for directional cues. Adding to growing worries about Spain and Greece, Moody's Investors Service has lowered its rating outlooks on Germany, the Netherlands and Luxembourg to 'negative' from 'stable' entailing a higher risk of an actual downgrade within the next two years.
Commodities were mixed, while the euro extended its losses against the dollar and yen ahead of crisis talks between Spanish and German finance ministers in Berlin later in the day
Tokyo stocks fell slightly due to rising risk aversion after Moody's lowered its outlook on Germany. The benchmark Nikkei average eased 0.2 percent to end at a six-week low, while the broader Topix index shed 0.4 percent. Concerns over Spain's rising borrowing costs weighed on exporters, dragging Canon down 1.5 percent and Honda Motor down a percent. China-related Komatsu rose a percent, while Hitatchi Construction Machinery added 1.2 percent.
Sharp fell 1.7 percent on a Nikkei report that it may post a group net loss of roughly Y100 billion for the April-June quarter. Toshiba tumbled 5.4 percent after unveiling plans to cut production of flash memory chips by 30 percent.
China's Shanghai Composite index rose 0.24 percent, buoyed by manufacturing data. Property developers rallied after recent losses, while losses in the financial sector capped further upside. Hong Kong's Hang Seng index ended down 0.8 percent to 18,903, its lowest closing level since June 25.
Australian shares fluctuated between gains and losses before ending modestly higher, as signs of improvement in China's manufacturing output offset concerns about the economic outlook for Spain and Greece. The benchmark S&P/ASX 200 rose 0.01 percent, while the broader All Ordinaries index edged up 0.05 percent.
Retailers were in focus, with shares of Billabong climbing nearly 20 percent after U.S. private equity firm TPG launched a fresh 695.6 million Australian dollars takeover bid for the company. Woolworths rose 0.9 percent and Wesfarmer added 0.4 percent, but David Jones fell 2.6 percent and Harvey Norman declined 1.5 percent.
Resources stocks ended on a firm note, with BHP Billiton gaining 1.2 percent after the miner said it is conducting a review of contractors and staff across its mining mega-projects. Rival Rio Tinto rose half a percent, while Fortescue ended subdued near a two-year low.
In the energy sector, Oil Search gained 0.3 percent after it maintained its full-year production guidance. Woodside Petroleum rose 1.9 percent and Santos ended up 0.8 percent. Lender ANZ gave up early gains to end down 0.3 percent and NAB edged down 0.1 percent, while Commonwealth rose marginally and Westpac added 0.3 percent.
South Korea's Kospi average finished 0.3 percent higher, led by gains in large-cap shares on positive earnings outlooks. Among the prominent gainers, mobile service provider SK Telecom soared 6 percent, while chip maker SK Hynix rallied 2.2 percent.
New Zealand shares recouped early losses to end modestly lower on concerns over Greece and Spain. The benchmark NZX-50 index ended up about 5 points or 0.1 percent at 3,461. Cloud-based accounting firm Xero tumbled 5.5 percent from a record high ahead of Thursday's annual shareholder meeting.
Fishing firm Sanford lost 2 percent on reports the U.S. could list orange roughy an endangered species. Food ingredients manufacturer Goodman Fielder rose 3.3 percent after tumbling 6.1 percent yesterday when it warned of more write-offs in the 2012 financial year.
Elsewhere, India's benchmark Sensex was last trading up 0.4 percent and Singapore's Straits Times index was gaining half a percent, while Indonesia's Jakarta Composite index slid 0.4 percent, Malaysia's KLSE Composite eased 0.2 percent and the Taiwan's Weighted average shed 0.3 percent.
On Wall Street, stocks ended notably lower overnight, as signs that Spain could require a full bailout and the rising probability of a Greek exit from the euro zone spooked investors. The Dow slid 0.8 percent, the tech-heavy Nasdaq fell 1.2 percent and the S&P 500 dropped 0.9 percent. |
| Commodities | | | | USDCAD | USDEUR | USDGBP | USDJPY |  |  |  |  | | Please click on the images to view our interactive charts | | Dollar Strengthens As European Economic Concerns Persist
The dollar has gained ground against its major competitors on Monday. Spain announced a ban on short sales of stocks for three months, while Italy banned short sales of stocks in the financial sector for one week. The situation in Greece has once again raised concerns that the country may exit the Eurozone. The Spanish economy sunk deeper into recession in the second quarter, the Bank of Spain said, while bailout concerns pushed the country's borrowing costs to euro-era highs. In its quarterly estimates released on Monday, the Bank of Spain said the economy would have contracted 0.4 percent sequentially in the second quarter. This was sharper than the 0.3 percent contraction reported in the first quarter of 2012 as well as in the final three months of 2011.
Spain's Valencia and Murcia Regions have asked for financial aid, leading to speculation that a sovereign bailout may be necessary. The yield on 10-year Spanish government bonds climbed to 7.46 percent, touching a new euro-era record.
The International Monetary Fund has signaled that it may not participate in further economic assistance for Greece, heightening the risk that the country may run out of cash by September, Germany's Der Spiegel reported Sunday citing unidentified EU officials.
The newspaper said that it is already clear to the troika, comprising the European Union, IMF and the European Central Bank, that the country will not reach the 120 percent deficit target. The troika will return to Athens for inspection on Tuesday.
In an interview to broadcaster ARD on Sunday, German Vice Chancellor Philipp Roesler said if Greece does not meet the obligations, then there can be no more payments. A Greek exit from the Eurozone has long ago lost its horror, he added.
The euro is not in danger and "is irrevocable," European Central Bank President Mario Draghi said in an interview to French newspaper Le Monde over the weekend.
Some analysts are imagining scenarios in which there is an explosion of the euro area. "That underestimates the political capital that our leaders have invested in this union, as well as the support of European citizens," he said.
The greenback climbed to a new 2-year high of $1.2066 versus the euro on Monday, but has since eased back to around $1.2125.
The British manufacturing sector is likely to contract this year as the economic turbulence in the Eurozone continues affect trade and exports, a report published by manufacturers' organization Engineering Employers' Federation showed Monday. EEF expects manufacturing output to decline 0.3 percent in 2012, faster than the 0.1 percent fall forecast earlier. It will mark the first contraction in three years. |
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