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Friday, 12 October 2012

TSX lower amid strong JPMorgan earnings, rising consumer confidence

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TORONTO - The Toronto stock market was slightly lower late morning Friday with buyers inclined to do little at the end of a negative week amid rising oil prices and a strong earnings report from American banking giant JPMorgan Chase.

The S&P/TSX composite index eased 28.02 points to 12,205.93, while the TSX Venture Exchange was 5.85 points lower at 1,294.09.
The Canadian dollar shed early gains and was unchanged at 102.18 cents US.
New York markets were also listless as JPMorgan handed in a record quarterly profit of US$5.7 billion, up 34 per cent from a year ago as the bank set aside less money for bad loans. Earnings were $1.40 per share, far exceeding the $1.21 predicted by analysts polled by FactSet.
Revenue rose six per cent to $25.1 billion, beating expectations of $24.4 billion.
JPMorgan stock dropped 37 cents to US$41.73. However, the stock has already come back strongly from a low of $31 in early June after the bank announced a surprise trading loss that ballooned to $6 billion.
Indexes also failed to find support from a strong consumer confidence reading.
The Dow Jones industrials climbed 10.94 points to 13,337.33 as the University of Michigan's index for October came in at 83.1, up from 78.3 in September.
The Nasdaq composite index slipped 0.76 of a point to 3,048.65, while the S&P 500 index was down 2.22 points at 1,430.62.
Earnings expectations are low for the third quarter as the eurozone debt crisis continues to take a toll on economies in Europe, affecting the results of multinationals. The malaise has also spread to developing economies such as China.
Analysts expect a 2.1 per cent year-over-year decline in S&P 500 operating earnings, which would be the first year-over-year drop since the recession that followed the 2008 financial collapse.
Traders also took in better than expected earnings from U.S. bank Wells Fargo. It posted third-quarter earnings per share of 88 cents, beating estimates by a penny. Revenue rose eight per cent to $21.21 billion, which was slightly lower than analysts expected and its shares fell $1.23 to US$33.95.
The TSX is set to end the week lower in the wake of a gloomy assessment of the global economy by the International Monetary Fund, which reduced its growth forecast for the world economy to 3.3 per cent this year from its previous estimate of 3.5 per cent.
Still, the TSX is up over seven per cent from the market lows of early June, largely because of a commitment from European Central Bank president Mario Draghi to do whatever it takes to preserve the monetary union and another round of quantitative easing by the U.S. Federal Reserve.
"There had to be a letdown and we are getting it," said Pat McHugh, senior managing director and Canadian equities strategist at Manulife Asset Management.
"This move from the time Draghi made his comments (in early August) to now has all been policy driven, it hasn’t been earnings driven, it hasn’t been fundamentally driven. For the near term, I’m afraid I don’t see any triggers that will move this market."
The tech sector led TSX advancers with MacDonald Dettwiler and Associates (TSX:MDA) ahead 63 cents to $50.53.
The energy component rose 0.13 per cent as fears that the conflict in Syria could widen and threaten oil shipments from the Mideast continued to push crude prices higher. The November contract on the New York Mercantile Exchange rose 23 cents to US$92.30 a barrel. Canadian Natural Resources (TSX:CNQ) gained 19 cents to C$30.20.
The telecom component was down 0.3 per cent as BCE Inc. (TSX:BCE) gave back nine cents to $42.92.
The base metals sector was flat as metal prices backed off with December copper down three cents to US$3.72 a pound. Gold stocks were also little changed as December bullion was off $4.40 to US$1,766.20 an ounce.
It was a light day on the economic calendar.
In the U.S., a second month of sharp gains in gasoline costs drove wholesale prices higher in September. But outside of the surge in energy, prices were well contained. Wholesale prices rose 1.1 per cent in September following a 1.7 per cent gain in August.
European bourses were weak as London's FTSE 100 dipped 0.28 per cent, Frankfurt's DAX was down 0.3 per cent and the Paris CAC 40 declined 0.44 per cent.
Earlier in Asia, markets were mixed by the close.
Japan’s Nikkei 225 index ended a bad week with another 0.2 per cent decline. Telephone company Softbank led the way lower after it plunged 16.9 per cent on news that it is in talks to take a substantial stake in U.S. carrier Sprint Nextel Corp.
Hong Kong’s Hang Seng advanced 0.7 per cent and South Korea’s Kospi was flat.

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Workday leaps in trading debut on the New York Stock Exchange

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NEW YORK — Shares of Workday rocketed higher Friday in their first day of trading on the New York Stock Exchange.
The stock climbed $20.33, or 72.6 percent, to $48.33 in midmorning trading.Workday I
The shares opened at $48.05 and traded as high as $49.23 earlier in the session.
The Pleasanton, Calif.-based company raised $637 million in the offering. It is giving the underwriters a 30-day option to buy up to an additional 3.4 million shares to cover any excess demand.
Workday said in a filing with the Securities and Exchange Commission that it plans to use the offering’s net proceeds for working capital and other general corporate purposes. It may also use some of the proceeds for acquisitions.
The shares are trading under the “WDAY” ticker symbol.
Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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Thursday, 11 October 2012

Direct Line shares rise on London Stock Exchange debut

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Direct Line shares open higher on London debut
Direct Line shares open higher on London debut
Royal Bank of Scotland said it had raised £787m sterling from the sale of 30% of the company's shares.
The initial public offering was priced at 175 pence per share, close to the middle of the range originally set and valuing the business at £2.6 billion.
The shares were trading at 181 pence in early deals.
RBS said it would sell 450 million Direct Line shares, representing 30% of the business, with a 15% over-allotment option.
There had been concerns that investor appetite for the initial public offering would be damaged by British competition regulators investigating the car insurance market, due to suggestions that consumers were being overcharged.
However, UK analysts said the price for Direct Line stock was a "reasonable outcome".
The sale benefited from strong demand from British retail investors, who have had few opportunities to participate in large-scale IPOs in recent years.
On a conference call with reporters, Direct Line chief executive Paul Geddis said retail investors had purchased between £5,000-6,000 worth of shares on average and had taken up 15% of the shares sold.
RBS is selling Direct Line in return for winning approval from European Union regulators for a bailout during the 2008 financial crisis that left it 82% state-owned. The price was near the mid-point of the 160 to 195 pence range set by the British bank when it launched the IPO on September 28.
RBS has been under pressure to secure a good price for the business, with taxpayers sitting on a loss of £21.5 billion after Britain pumped in £45 billion to rescue the bank.
"This is another important milestone in RBS Group's restructuring plan," said RBS Finance Director Bruce Van Saun.
RBS said it would hold a 65.3% stake in Direct Line, assuming the overallotment option was taken up. Under the EU directive, RBS must sell more than 50% of Direct Line by the end of 2013 and the rest of its holding a year later.

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Markets get lift from US jobs figures

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  • Specialist Fabian Caceres works at his post on the floor of the New York Stock Exchange Tuesday, Oct. 9, 2012. Another dire prediction about global economic growth is sending stocks lower on Wall Street in early trading. Photo: Richard Drew / AP

    LONDON (AP) — A surprisingly big drop in weekly U.S. jobless claims helped shore up financial markets Thursday despite a downgrade of Spain's sovereign credit rating.The Labor Department reported that claims last week fell by 30,000 to 339,000, the lowest level since February 2008. The figures were another indication that the world's largest economy is over its summer soft patch and may be gaining traction.
    "Are things that much better all of a sudden? Perhaps. But we're going to wait for some corroborating data points before making a judgment one way or the other," said Dan Greenhaus, chief global strategist at BTIG.
    Following the figures' release, so-called riskier assets — such as stocks, the euro and oil, which investors tend to buy when more optimistic — posted solid gains.
    In Europe, Germany's DAX was up 1.2 percent at 7,286 while the CAC-40 in France rose 1.3 percent to 3,409. The FTSE 100 index of leading British shares was up 1 percent at 5,835.
    In the U.S., the Dow Jones industrial average was 0.4 percent higher at 13,392 while the broader S&P 500 index rose 0.6 percent to 1,441.
    The euro was up 0.7 percent at $1.2938, while the price of a barrel of benchmark oil rose $1.09 to $92.34 a barrel.
    The optimism generated by the jobless claims data helped investors brush aside Wednesday's downgrade of Spanish government debt by the Standard & Poor's agency.
    S&P reduced its rating on Spain from BBB+ to BBB-, the lowest investment grade level. A non-investment grade would make it more expensive for the Spanish government to borrow money as some investors, like pension funds, would have to sell the bonds from their portfolios.
    That concern weighed on Spanish stocks, which were underperforming their European counterparts. Madrid's main IBEX index was up only 0.5 percent
    S&P warned of the impact of the deepening economic recession in Spain and rising levels of social discontent, adding that the government's hesitation in requesting help was "potentially raising the risks to Spain's rating."
    The Spanish government has so far refused to tap a new European Central Bank bond-buying facility that has been largely designed to keep a lid on the country's borrowing rates.
    Some analysts think the downgrade will help push the government to finally request the help, despite the political humiliation that would represent.
    "Investors appear to be drawing the conclusion that this coupled with increasing yields in recent sessions leaves Spain no option but to formally request a bailout," said Mike McCudden, head of derivatives at Interactive Investor.
    The downgrade prompted a retreat across much of Asian financial markets before the mood improved during the European trading session.
    Though the crisis in the eurozone remains a key focus of attention in the markets, investors are also looking for direction from the third quarter U.S. corporate earnings results season. JPMorgan Chase & Co. takes center stage Friday when it will be the first major bank to report.
    Earlier this week, aluminum company Alcoa Inc. kicked off the earnings season with upbeat figures but warned that its outlook was being hurt by waning demand, particularly in Asia.
    Earlier in Asia, Japan's Nikkei 225 index fell 0.6 percent to finish at 8,546.78. South Korea's Kospi shed 0.8 percent to 1,933.09 but Hong Kong's Hang Seng, however, rose 0.4 percent to 20,999.05.
    Mainland Chinese shares lost ground, with the Shanghai Composite Index shedding 0.8 percent to 2,102.87 while the Shenzhen Composite Index lost 1.5 percent to 867.21.



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Wednesday, 10 October 2012

Asian stock markets fall after gloomy global forecasts, Spain worries, earnings jitters

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Lucia Cuttone works with fellow traders on the floor of the New York Stock Exchange Tuesday, Oct. 9, 2012. Another dire prediction about global economic growth is sending stocks lower on Wall Street in early trading. (AP Photo/Richard Drew)
 
BANGKOK - Worries about Europe's debt crisis, signs of weak global growth and expectations of lower U.S. corporate earnings sent Asian stocks down on Wednesday.
Japan's Nikkei 225 index tumbled 1.7 per cent to 8,625.26. Hong Kong's Hang Seng index fell 0.4 per cent to 20,850.25. South Korea's Kospi lost 1 per cent at 1,958.41. Australia's S&P/ASX 200 shed 0.4 per cent to 4,488.30.International Monetary Fund said Tuesday that Spain's economy — already in double-dip recession — will contract by 1.3 per cent next year — more than double its previous prediction.
Spain, with near 25 per cent unemployment, has introduced a series of austerity and labour measures in a desperate bid to bring down its deficit and convince investors it can manage its finances without outside help.
Madrid is now pushing for the European Central Bank to intervene in the secondary market and bring down its borrowing costs, but the ECB insists the country must formally apply for aid first.
"Spain remains the major focal point and in this regard there is no progress in the country moving forward with a bailout request," analysts at Credit Agricole CIB in Hong Kong said in a market commentary. "The market tone will continue to remain cautious but we don't expect a major relapse in risk appetite."
The IMF also cut its estimates for global economic growth, warning that mature economies are at risk of recession.
Investors on Wall Street were discouraged by the IMF report as well as expectations of lower corporate earnings. Analysts expect earnings for Standard & Poor's 500 companies to be lower than a year ago — the first time that has happened in almost three years.
The Dow Jones industrial average fell 0.8 per cent to 13,473.53. The Standard & Poor's 500 index fell 1 per cent to 1,441.48. The Nasdaq composite index fell 1.5 per cent to 3,065.02.
Benchmark oil fell 31 cents to $92.08 per barrel in electronic trading on the New York Mercantile Exchange.
The price of oil rose more than 3 per cent Tuesday on concerns about supplies from the Middle East and the North Sea. The contract rose $3.06 to finish at $92.39 per barrel.
In currencies, the euro fell to $1.2861 from $1.2880 late Tuesday in New York. The dollar rose to 78.25 yen from 78.22 yen.

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Toronto stock market loses ground amid disappointing Alcoa outlook

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TORONTO - Deteriorating global economic prospects continued to weigh on the Toronto stock market Wednesday as a weak outlook from resource giant Alcoa Inc. added to a pessimistic assessment from the International Monetary Fund.
The S&P/TSX composite index fell for a third session, down 23.63 points to 12,249.93 while the TSX Venture Exchange dropped 13.62 points to 1,314.19.
The Canadian dollar was off 0.01 of a cent to 102.18 cents US.
New York indexes were also negative after Alcoa predicted aluminum demand would grow six per cent this year, down from seven per cent in the previous quarter, primarily because of slower growth in China.
The aluminum producer is viewed as a broad economic bellwether as its products are used in a wide variety of industries, from vehicles to appliances.
Alcoa shares were down 3.6 per cent as the company kicked off the start of the third-quarter reporting season by posting a loss of US$143 million, largely on one-time charges, while adjusted results beat estimates. Revenue of $5.83 billion also beat expectations.
The Dow Jones industrials was 54.23 points lower at 13,419.3.
The Nasdaq shed 1.57 points at 3,063.45, and the S&P 500 index edged down 2.21 points to 1,439.27.
The International Monetary Fund on Tuesday reduced its growth forecast for the world economy to 3.3 per cent this year from its previous estimate of 3.5 per cent. The IMF forecast for growth in 2013 is 3.6 per cent, down from 3.9 per cent three months ago and 4.1 per cent in April. The IMF also reiterated its concerns over the crisis in the eurozone and warned that the recession in Spain was worse than it thought.
Expectations for third-quarter earnings have been ratcheted lower because of global growth concerns. Analysts expect earnings for Standard & Poor’s 500 companies to be lower than a year ago, the first time that has happened in almost three years.
"However, when you look at it from a glass half-full standpoint, the bar has been set really low," said Allan Small, senior adviser at DWM Securities Inc.
"And that could lend itself to some beating of expectations."
Small added that he’s looking ahead to Friday when the big banks start to report in order to get more clarity on earnings.
"Corporate earnings really don’t start until Friday when JPMorgan Chase and Wells Fargo report and that’s going to be the first indicator of the health of the U.S. banking sector, which is a huge factor in the stock market and the emotions of investors in the U.S. and that gets carried around the world," he said.
On the Canadian earnings front, pharmacy chain franchisor Jean Coutu Group (TSX:PJC.A) said Wednesday that its quarterly net profit was $51.2 million or 23 cents per share. That compared with $66.4 million or 20 cents per share in the comparable year-earlier period when it recorded an unusual gain on the sale of U.S. assets. Revenue for its fiscal 2013 second quarter rose to $658.7 million from $635.2 million in the same fiscal 2012 period and the Quebec-based company's shares were up five cents to $14.58.
The financials sector led decliners, down 0.45 per cent as Scotiabank (TSX:BNS) shed 41 cents to $53.37.
The base metals was also down 0.45 per cent as the IMF also downgraded growth prospects for China while December copper was unchanged at US$3.72 a pound. Taseko Mines (TSX:TKO) gave back seven cents to C$3.05.
The energy sector also declined, down 0.37 per cent in the face of prices that continued to find support from worries that the fighting in Syria could impact Mideast oil supplies.
The November crude contract on the New York Mercantile Exchange gained $1.16 to US$93.55 a barrel, adding to a gain of more than $3 Tuesday, even as the Organization of the Petroleum Exporting Countries lowered its forecast for global oil demand in 2012. OPEC said that world oil demand will grow by 800,000 barrels a day in 2012, down 100,000 barrels from its previous forecast. Cenovus Energy (TSX:CVE) fell 30 cents to C$33.90.
Tech stocks also weighed on the TSX with Research In Motion Ltd. (TSX:RIM) down another seven cents to $7.55. RIM stock fell 5.5 per cent Tuesday after Jeffries and Co. analyst Peter Misek published a note saying he believes it is "more likely" that RIM won’t roll out its new phones until the end of the calendar first quarter. Investors had been hoping for a January launch.
The gold sector limited TSX losses, rising 0.9 per cent as December gold declined 60 cents to US$1,764.40 an ounce. Kinross Gold Corp. (TSX:K) gained 13 cents to C$10.31.
European bourses were lower with London's FTSE 100 index off 0.34 per cent, Frankfurt's DAX down 0.26 per cent and the Paris CAC 40 down 0.39 per cent.
Traders also took in news that Britain’s BAE Systems PLC is abandoning a proposed merger with European counterpart EADS NV that would have created a global defence and aerospace giant. The deal had faced political objections from the governments of the U.K., France and Germany.
In other corporate news, Bauer Performance Sports Ltd. (TSX:BAU) is buying team uniform maker Inaria International for $7 million. The hockey and lacrosse equipment company said the deal will help expand its business to include uniforms and its shares were down 24 cents to $10.71.

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Tuesday, 9 October 2012

U.S. Stock Futures Down with China, QE3 in Focus

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U.S. stock market futures tracked global equities and commodities south on Monday after the World Bank cut its China growth view, while last week's strong jobs data raised questions about Federal Reserve stimulus.
Investors were awaiting a meeting of euro-zone finance ministers.
Futures for the Dow Jones Industrial Average fell 43 points, or 0.3%, to 13,493, while those for the Standard & Poor's 500 index fell 5.1 points, or 0.4%, to 1,450.40.
Futures for the Nasdaq-100 index fell 12.75 points, or 0.5%, to 2,791.50.
"The week isn't looking to get off to a pretty start on Wall Street as those upbeat nonfarm payroll figures already seem to have been forgotten and a lower growth forecast from the World Bank for China is now very much front of mind," said Fawad Razaqzada, market strategist at GFT Markets, in a note.
Asia stocks fell, led by resource companies, after the World Bank on Monday cut its forecasts for East Asia growth, saying the Europe crisis is posing a major threat to the region. It cut China's growth forecast to 7.7% in 2012 from an estimate of 8.2% in May.
Downbeat sentiment fed through to Europe, where the Stoxx Europe 600 index fell close to 1%. Commodities fell as investors headed for the perceived safe-haven of the dollar with crude for November delivery down $1.06, or 1.2%, to $88.85 a barrel and gold for December delivery off $8.40, or 0.5%, to $1,772.40.
Along with China worries, investors were also questioning Monday how long the Federal Reserve will extend its quantitative-easing program in the wake of Friday's unexpected drop in the U.S. jobless rate to 7.8%, the lowest level since January 2009.
"It's all adding up to be something of a perfect storm for investors who have seemingly become hooked on round after round of central bank stimulus, but with the ammunition now seemingly depleted from the Fed, ECB [European Central Bank] and BoE [Bank of England] to a case of "more of the same," perhaps the key question is whether the World Bank's verdict will now fire Beijing back into action," said Razaqzada.
Wall Street stocks finished mixed on Friday as enthusiasm over jobs data gave way to caution ahead of the start of quarterly earnings. Alcoa Inc. (AA) will kick off the third-quarter reporting season on Tuesday after the closing bell.
The S&P 500 index finished down 0.47 point to 1,460.93, while the Dow industrials rose 34.79 points, or 0.3%, to end at 13,610.15, the highest closing value since December 2007.
Europe was also in focus again with a meeting of euro-zone finance ministers set for Monday in Luxembourg amid rising concerns over Greece's next aid payment and continuing questions over when, and if, Spain will ask for a bailout. As well, Japan will host meetings of the Group of Seven leading industrialized nations in Tokyo this week.
The dollar benefited ahead of that euro-zone meeting as investors backed away from perceived riskier assets. The ICE dollar index, which measures the U.S. currency against a basket of six rivals, jumped to 79.587 from 79.350 in late North American trading on Friday.
There are no U.S. data on the calendar for Monday as state and federal offices will close for Columbus Day.
Among stocks in focus on Monday, Zynga Inc. (ZNGA) could come under pressure after dropping 14% in late trading on Friday on continuing fallout from a cut in its full-year forecast.

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Sensex trims gains on weak European cues

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Led by a weak opening in the European markets, Indian markets shed some of its initial gains in the mid-session on Tuesday.
The BSE Sensex was trading at 18,774.43, up 65.45 points or 0.35 per cent. The NSE Nifty was trading at 5,694, up 18 points or 0.32 per cent.
Among BSE sectoral indices, healthcare, capital goods, consumer durabes and FMCG were up, while auto, oil & gas, power and PSU were down.
Among the Sensex stocks, the top five gainers were L&T, Tata Power, Cipla, Dr Reddy's and Sun Pharma. The top five laggards were BHEL, Tata Motors, Hindalco, Bharti Airtel and Bajaj Auto.
European stocks were down as investors awaited a meeting of the region’s finance ministers in Luxembourg. US index futures were little changed, while Asian shares excluding Japan rose.
Asian markets remained positive on Tuesday as speculation that China will add to stimulus measures outweighed concerns after the International Monetary Fund cut its global growth forecast.
The International Monetary Fund has cut its global growth forecast to a 3.3 per cent expansion for 2012, down from its July estimate of 3.5 per cent.
The IMF has also said that China's economic growth is expected to weaken to 7.8 per cent this year, warning of risks to emerging Asia if the euro zone crisis persists.
The euro zone finance ministers had launched their permanent €500-billion bailout fund on Monday but said Spain, was taking steps to overhaul its economy and did not need a bailout for now.

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To regulate rapid traders, US Securities and Exchange Commission turns to an Indian insider

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RED BANK: As billions of shares course through the stock market each day, investors rely on the government to keep up with Wall Street's rapid-fire traders. 

But in an acknowledgment that the Securities and Exchange Commission has fallen behind the traders it regulates, the agency is turning to one of those high-frequency trading firms for help. 

Tradeworx, a 45-person firm based in New Jersey, will dispatch its experts to Washington this month to tutor regulators on a sophisticated computer program that will give the SEC its first real-time window into the stock market - something firms like Tradeworx have had for years. The SEC program, designed by Tradeworx, is set to go into operation at the end of this year. 

The program, called "Midas" by the SEC, is part of a broader effort at the agency to monitor the proliferation of new technologies and to crack down on practices that have given sophisticated traders an advantage over ordinary investors. The agency recently hosted public meetings on computerized trading to examine some of the recent failures in the market, like the malfunction at Knight Capital that wreaked havoc on stock prices in August. Last week, the Nasdaq exchange had to cancel errant trades after a technical problem caused shares of Kraft to soar. 

The SEC's rudimentary technology has hobbled its ability to untangle these events and police the automated trading firms. With the Tradeworx program, the agency will gain access to every bid to buy stocks and every offer to sell shares on each of the nation's 13 public exchanges. The system, akin to an X-ray machine for the stock market, could enable regulators to detect whether trading firms are overwhelming the market's plumbing when they rapidly submit and cancel orders. 

"The average person on the street thinks that the SEC has these massive computers that all orders are going through," said Gregg Berman, the agency official leading the effort. "That has not been the case, but we hope to now have that with this new system." 

Some industry experts have said that the Tradeworx program is the quickest and, at a cost of $2.5 million this year, the cheapest way for the agency to catch up with the high-speed trading industry, which has gone from being a niche player a decade ago to being responsible for more than half of all trading in U.S. stocks today. But the initiative raises a new set of questions about whether the industry is the best source for unbiased information about the markets. 

David Lauer, a former employee of other high-speed trading firms, wrote in recent testimony to a Senate subcommittee that the Tradeworx program was "reminiscent of the fox guarding the hen house." 

"You don't rely on the subject of your study to build the device you are going to be studying them with," Lauer said in an interview after the hearing. 

The SEC said it sought out other bids and even considered building its own database, an effort that would have taken several years and cost millions of dollars more than the Tradeworx project. Berman added that the agency looked to Tradeworx only for data feeds that were the same no matter who provided them. 

Tradeworx CEO Manoj Narang argued that if he sold bogus data to the government, it would be obvious. More important, he said, the SEC has few alternatives. 

"Where else are they going to be able to get these capabilities?" Narang said. "They are not available from anywhere other than high-speed trading firms. We're the only ones who possess it." 

Today, the SEC relies on the official trading record, known as the consolidated tape, which includes the price of every trade executed on any of the nation's stock exchanges. Most sophisticated trading firms bypass the official record by buying data directly from the exchanges. The firms compile a full record milliseconds before the consolidated tape is assembled and obtain a wider range of information, including orders that are submitted but never executed.

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Sunday, 15 April 2012

Regional stocks are likely to outperform

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Investors follow stock market activity at the Dubai Financial Market


Abu Dhabi: The region's stock markets will likely outperform the global markets in the near-term supported by high crude prices and on the back of robust health of the oil exporting countries, say experts.

"The global backdrop will continue to affect the region, but to a lesser extent. The underlying economies are doing very well, supported by high energy prices," Rami Sidani, Middle East Head of Investments at Schroders, told Gulf News.

"The regional markets will continue to perform well, given the regional and domestic liquidity. The UAE markets have outperformed global markets... the market is up 20 per cent, supported by the strong local economy and high energy prices," he added.

On Friday, Brent crude futures for June delivery slipped 31 cents to $121.21 (Dh445) a barrel. US May crude fell 81 cents to $102.83 a barrel.

Gary Dugan, chief investment officer, private banking at Emirates NBD, said in his latest weekly research note that investors remained in a state of flux.

‘Resilience'

"Equity markets are still trading around their highs but in the absence of a flow of good news there is a fear that there could be some rapid profit-taking. We think the markets will probably hold in. Central banks and policymakers continue to provide reasonable support for the markets even if their support is increasingly just words.

"The flow of economic data recently has been less supportive of the view of a strengthening global economy. However in the coming weeks we believe that investors will draw comfort from data that will show a far more vibrant Chinese economy than was previously feared," said Dugan.

Dugan said the Dubai debt market continues to surprise investors with its resilience in the face of perceived challenging debt refinancing in 2012.

"Dubai's recovery story so far has seen many corporate entities meet their obligations or successfully restructure their debts. In recent weeks, DIC has reached a final agreement with its lenders to restructure $2.5 billion worth of liabilities. To date, the company has repaid a 250 million Swiss franc bond on time [July 2011] followed by the repayment of a $500 million bond in February 2012," he said.

Dugan added: "The good news flow for Dubai stands in sharp contrast to the ongoing problems in the Euro zone. Hence, we have seen a sharp improvement in the standing of Dubai credits in the markets.

"The cost of insuring Dubai debt against default has fallen sharply to less than 350 basis points compared to the peak of 450 bps seen at start of the year. Although there is a temptation to take profits in the bond market we expect further international interest to support the local bond market at current levels," he added.

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Tech Stocks Lead Worst Week in 2012 on Growth: Israel Overnight

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Israeli stocks traded in New York had the biggest weekly decline this year on concern slower growth in China and the U.S. will erode earnings for technology companiesNice Systems Ltd. (NICE) (NICE) and Allot Communications Ltd. (ALLT) (ALLT)
Nice, a maker of analytical telecommunications software, slid 2.3 percent to $38.30 in New York last week, widening the discount (NICE) to its Tel Aviv shares to the most among dually traded shares. Allot rose 1 percent today after dropping 2.4 percent for the week in New York to $23.73, narrowing its premium to 22 cents. The Bloomberg Israel-US Equity Index (ISRA25BN) had the largest weekly decline since Nov. 25, dropping 2.3 percent last week to 87.53. Nice shares fell 1.9 percent at 9:50 a.m. in Tel Aviv today.
The highest valuations in at least eight months are spurring investors to sell Israeli technology stocks after China posted the smallest economic growth in almost three years and U.S. consumer confidence weakened, according to Chardan Capital Markets LLC. Allot sold (ALLT) about 35 percent of its products in Asia and the U.S. in 2010, while 63 percent of Nice’s revenue is derived from companies in the Americas.
“Any kind of data that suggests a slowdown globally, especially in China, where so much of the tech products are getting sold into or manufactured from, brings a lot of nervousness,” Jay Srivatsa, the managing director of equity research at Chardan, said by phone last week. “We still don’t know if the recovery in the U.S. market is for real or not.”
Hod Hasharon, Israel-based Allot’s U.S. stock is valued at 64 times reported earnings (ALLT), about four times the 17.7 ratio for shares on the Nasdaq Composite Index. (CCMP) The company’s valuation has fallen from a multiple of 66 on April 9, the highest level since Aug 1.

EZchip Drops

Nice’s Tel Aviv shares declined to 143.20 shekels today, the equivalent of $38.21, or 42 times reported profit.
EZchip Semiconductor Ltd. (EZCH) (EZCH), the Yokneam, Israel-based manufacturer of network processors, rose 1.2 percent today to 164 shekels, or the equivalent of $43.76. The shares in New York fell 0.6 percent last week to $43.41, paring its valuation to 68 times earnings.
U.S. stocks posted their largest weekly loss this year. The Standard & Poor’s 500 Index (SPX) slid 2 percent in the week and the Nasdaq Composite lost 2.2 percent. Israel’s benchmark TA-25 index (TA-25) slid 0.9 percent to 1,121.29 after a 1.2 percent decline last week in trading shortened by the Passover holiday. The gauge dropped 0.9 percent today.
Allot, which Chardan rates a buy, derived 13 percent of its sales from U.S. customers in 2010 and 22 percent from Asia and Oceania.
The company will get “multi-million dollar revenues” from U.S. carriers in 2012, Rami Hadar, Allot’s chief executive officer, said on a Feb. 7 conference call with analysts.

ClickSoftware Falls Short

EZchip got 40 percent of its 2011 revenue (EZCH) from China and Hong Kong and 19 percent from North America.
ClickSoftware Technologies Ltd. (CKSW) (CKSW) slid 17 percent last week to $10.46, the worst performance since October 2009. The Petach Tikva, Israel-based maker of order-tracking software said first quarter revenue will be about $21.6 million, falling short of the $22.5 million median of four analysts’ estimates compiled by Bloomberg before the company’s announcement.
Mellanox Technologies Ltd. (MLNX) (MLNX) rose 0.9 percent in Tel Aviv today to 153.50 shekels, or the equivalent of $40.96. The 59- cent premium (MLNX)afforded the stock last week in New York was the largest among the biggest dual-listed Israeli companies.
Mellanox, which developed a technology used to transfer and store data, will probably say on April 18 that first-quarter adjusted net income rose 39 percent to 33 cents a share, according to the median estimate (MLNX) of eight analysts surveyed by Bloomberg.

Microsoft Boost

Microsoft Corp. (MSFT) (MSFT), the world’s largest software maker, and Intel Corp. (INTC) (INTC), the largest semiconductor company, are scheduled to announce earnings this week.
While analysts expect Redmond, Washington-based Microsoft to report that fiscal third-quarter sales rose at a slower pace than the previous year and that Santa Clara, California-based Intel will say revenue fell in the first quarter, the companies may indicate positive outlooks, providing a boost for technology stocks, Chardan’s Srivatsa said.
“We’re going to need to wait to see how Intel and Microsoft and those guys come out,” he said. “My sense is that the first quarter for the most part appears to be bottom for a lot of the tech names.”

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Saturday, 14 April 2012

EMERGING MARKETS-Latam stocks sharply on China, Europe

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* Chinese economy grew at its slowest pace in 3 years
* Brazil Bovespa down 1.51 pct; Chile's IPSA down 0.49
* Mexican exchange corrects close after brokerage error
By Rachel Uranga and Jean Arce
BRASILIA/MEXICO CITY, April 13 (Reuters) - Latin American stocks fell across the board on Friday on worries the global economy may slow afterChina reported lackluster growth and fears over Europe's debt problems resurfaced in Spain.
The MSCI Latin American stock index was down 2.03 percent, losing 2.35 percent for the week in its sharpest weekly fall in more than a month.
"There is a lot of volatility out there because investors are still worried about Europe and the global economy," said Andre Perfeito, analyst with Gradual Investimentos in Sao Paulo.
"Any string of bad news is used as an excuse for profit-taking right now."
In Mexico, traders were puzzled by a drop of 1.7 percent in the index in the 15 minutes before the close. After trading ended, Mexico's exchange concluded that the abrupt drop was caused by a brokerage error and they set to work to adjust the index.
Mexico's IPC stock index officially closed at 39,137, officials said late on Friday. That tally came hours after the surprise fall that saw the index down 2.32 percent to 38,444 points.
Indexes that include the IPC also face revision.
Latin American stocks have risen about 10 percent this year after a sharp fall in 2011 when the European debt crisis threatened to sink the global economy.
On Friday, some of those fears crept back up when the cost of insuring Spanish government bonds hit an all-time high. Investors fretted about the finances of Spain, a country that has replaced Greece as the center of the crisis.
"The root of the problems for global markets is more based on the same old fears that we had last year: sovereign debt. It's clearly returning to focus," said Oliver Leyland at Mirae Asset Global Investments in Sao Paulo.
Next week, Spain will continue to test investors' confidence when it tries to sell new 2- and 10-year bonds at an auction being closely watched by investors of riskier assets, who tend to shed those assets when the global outlook turns sour.
Also pressuring shares, the Chinese government reported first-quarter growth came in at 8.1 percent, the slowest pace in three years and below the 8.3 percent consensus forecast of economists polled by Reuters.
China is the world's leading consumer of raw materials, and slower growth would dent demand and prices of commodities that are at the heart of many Latin American economies.
Latin America is a key source of global commodities like oil, copper, iron ore, soy and corn.
Brazil's benchmark Bovespa stock index was down 1.51 percent on Friday, its fourth drop in five days. The index fell 2.4 percent this week, its fourth consecutive week of losses.
Bank shares were being pressured by Brazil's toughened tone on private sector banks to bolster lending and lower interest rates, Leyland added.
Banks Itau Unibanco and Banco Bradesco both fell, losing 3.88 and 2.01 percent respectively.
In Mexico, shares of retailer and bank company Elektra fell sharply for the second straight day after the local exchange announced rule changes that will reduce the company's weighting in the benchmark index.
Elektra slipped 16.41 percent. The company's shares account for about 4 percent of the index's weight.
Chile's blue-chip IPSA stock index dropped 0.49 percent. The index logged its biggest weekly drop for the year, falling 2.5 percent.
The IPSA has been steadily falling, and a trader called it "an expected and healthy correction." The index had closed at an 8-1/2-month high on the first trading day of April.

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