Market Outlook 23rd Oct 2009

INTRADAY calls for 23rd Oct 2009
+ve Script & Sector : Bombaydye
BUY AxisBank-966 for 982-997+ with sl 953
BUY BhartiArtl-337 for 347-355+ with sl 332
BUY Biocon-272 for 282-287+ with sl 268

Positional
BUY Cipla-284 for 306+ with sl 277
BUY Goldtech-31 for 36-39+ with sl 29
BUY ArvindMill-29 for 36-39+ with sl 26

 

NIFTY FUTURE LEVELS
RESISTANCE
5030
5068
5104
5175
SUPPORT
4987
4984
4949
4913
Buy TRANSPEK FINANCE;LANCO INDS

 

KM Birla says no plan to merge Century Cement operations with UltraTech
-DEN Network prices IPO between Rs 195-205/share: Sources
-IOC, HPCL, BPCL recover Rs 3,400 crore losses from upstream companies with ONGC contributing Rs 2,600 crore by way of discount on crude: BL
-Service tax department serves Rs 325 crore notice to Tata Motors for 5 years between FY05-FY09: Mint
-UP sugar millers to approach court for restraining crushers from operating in cane areas: FE ((Will help in increasing sugar production as these crushers divert material to illicit liquor industry))

 

-Everonn Education board approves increasing FII investment limit to 100%
-Birla Cotsyn board meeting on October 27 on ADR / GDR issue
-Aban comes into NSE F&O curb, Kingfisher still in curb
-Galleon fund almost halves stake in Shriram EPC, sells 9.5 lakh shares
-Tata Steel forms JV with MMTC for exploration and development of minerals

 

Strong & Weak  futures 
This is list of 10 strong futures:

Yes Bank, Bajaj Hind, Indusind Bank, Polaris, Andhra Bank, Jindal Steel, Dena Bank, Allahabad Bank, Canara Bank & Bank Of India. 

And this is list of 10 Weak futures:

Idea, Grasim, RCom,TV-18, Bharti Airtel, GTL Infra, India Cement, MTNL, JP Hydro & Ambuja Cement.
 Nifty is in Up trend
 

NIFTY FUTURES (F & O):  
Above 5030 level, expect short covering up to 5066-5068 zone and thereafter expect a jump up to 5102-5104 zone by non-stop.

Support at 4987 level. Below this level, selling may continue up to 4984-4986 zone by non-stop.

Below 4949-4951 zone, expect panic up to 4913-4915 zone by non-stop.

On Positive Side, cross above 5138-5140 zone can take it up to 5173-5175 zone by non-stop. Supply expected at around this zone and have caution.
 
Short-Term Investors: 
 Bullish Trend. 3 closes above 4790.00 level, it can zoom up to 5155.00 level by non-stop. 

BSE SENSEX:  
Higher opening expected. Recovery should happen. 

Short-Term Investors:  
Short-Term trend is Bullish and target at around 17671.82 level on upper side.
Maintain a Stop Loss at 16613.22 level for your long positions too.

SL Triggered.

 

POSITIONAL BUY:
Buy TRANSPEK FINANCE (BSE Cash & BSE Code:531254)  
Buy with a Stop Loss of 9.39. Above 12.29, it will zoom.
 

Today: May hold on gains.

1 Week: Bullish, surprisingly falling.

1 Month: Bullish, as per current market conditions.

3 Months: Bullish, as per current market conditions.

1 Year: Bullish, surprisingly falling.
 
Buy LANCO INDS (BSE Cash & BSE Code:513605) 
Buy with a Stop Loss of 42.00. Above 47.00, it will zoom.
 

Today: May hold on gains.

1 Week: Bullish, as per current market conditions.

1 Month: Bullish, as per current market conditions.

3 Months: Bullish, as per current market conditions.

1 Year: Bullish, as per current market conditions.
 

Global Cues & Rupee  
The Dow Jones Industrial Average closed at 10,081.31. Up by 131.95 points.
The Broader S&P 500 closed at 1,092.91. Up by 11.51 points.

The Nasdaq Composite Index closed at 2,165.29. Up by 14.56 points.

The partially convertible rupee INR=IN ended at 46.7350/7450 per dollar on yesterday, below its previous close of 46.485/495.
 

FUNDS DATA

FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
FII	22-Oct-2009	2540.07	3039.35	-499.28

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
DII	22-Oct-2009	1665.04	1683.11	-18.07

SPOT LEVELS

	4988.60	( -1.48 %)	-75.00
		1	2	3
Resistance		5045.75	5102.90	5141.55
Support		4949.95	4911.30	4854.15

	16789.74		( -1.29 %)	-219.43
			1	2	3
Resistance			16973.77	17157.79	17284.05
Support			16663.49	16537.23	16353.21

Interesting findings on web:
U.S. stocks advanced for the first time in three days as better-than-estimated earnings at companies from Travelers Cos. to McDonald's Corp. boosted speculation that the worst recession since the 1930s is over.

The Dow rallied 131.95 points, or 1.3 percent, to 10,081.31.

The S&P 500 increased 1.1 percent to 1,092.91.

The Nasdaq Composite Index rose 0.7 percent to 2,165.29.

RUSSELL613.388.27+1.37%

TRAN3942.681.75+0.04%

UTIL383.681.25+0.33%

S&P 100504.844.60+0.92%

S&P 400710.89.37+1.34%

NYSE7182.9175.70+1.07%

NAS 1001763.159.59

Blue chips led a bigger stock market rally Thursday, as better-than-expected results from four components pushed the Dow industrials above 10,000 again and reassured investors about the ongoing corporate reporting period.

Better-than-expected results from Travelers, AT&T, McDonald's and 3M push the Dow past 10,000 again, sparking a bigger rally.

Stocks rebounded strongly from Wednesday's sell-off thanks to better-than-expected earnings from a number of key stocks and a big rally in financial stocks.

The market may get a boost from Amazon.com (AMZN) and American Express (AXP). Third-quarter earnings were better than expected, especially the results from Amazon.com.

Investors took in stride announcements from the Federal Reserve and the Obama administration's pay czar regarding curbing executive pay.

"I do feel optimistic that profit growth is real and will spur a broader recovery," said Jeffrey Davis, who oversees $4.6 billion as chief investment officer at Lee Munder Capital Group in Boston. "You have a ton of liquidity, economic fundamentals are in place and that should be supportive for stocks."

"We're setting up for a really good market in November and December, a year-end rally where you're getting a forced move into the market by those that have lagged behind," Steve Leuthold, whose Leuthold Core Investment Fund beat 95 percent of rivals in the past five years, told Bloomberg Television. Stocks will benefit from "capitulation on the part of people who have been cautious," he said.

Leuthold, who manages $4 billion, reiterated his prediction from an October 1 interview that the S&P 500 will gain through year-end and may rise to 1,350 in 2010 as profits improve.

Financial shares extended gains after Treasury Secretary Timothy Geithner said in a statement that his goal is for bailed-out firms to repay the government "as soon as possible."

"We're on the road to repair," said Art Hogan, the New York-based chief market analyst at Jefferies & Co. "Geithner's comments are very positive for the perception of investors about the financial industry. That's giving support for banks and the overall market rally."

Stocks dipped in the early going, before managing a blue-chip led charge starting in late morning. Gains were broad based, with 26 of 30 Dow stocks rising, including 3M, McDonald's, AT&T and Travelers, all of which reported better-than-expected results.

Travelers jumped almost 8% and was one of many financial stocks that gained on the day. The KBW Bank (BKX) index rose 3.4%.

Additionally, the declines have been met with a rash of buyers eager to return. For now, those trends are still in place, said Kenny Landgraf, principal and founder at Kenjol Capital Management.

"There are still a lot of people who missed the move who are now looking to increase their risk exposure," he said. "That impact, combined with improving fundamentals, is going to keep the positive trends intact."

Obama administration "pay czar" Kenneth Feinberg called for the seven biggest federal bailout recipients to cut in half total compensation for their top executives.

Additionally, the Federal Reserve proposed a broad overhaul of pay policies at 28 of the largest U.S. banks. The review is part of its effort to temper some of the triggers to the risk taking that exacerbated the credit crisis.

The two announcements had almost no impact on the market, perhaps because an overhaul had been in discussion for months.

An index of leading economic indicators rose 1 percent in September, a two-year high and more than the 0.8-percent expected. And jobless claims rose 11,000 to a seasonally adjusted 531,000 last week, more than expected. And the previous week was also revised higher by 6,000.

"These numbers strongly suggest that a recovery is developing," said Ken Goldstein, an economist for the research organization. "However, the intensity of that recovery will depend on how much, and how soon, demand picks up."

The U.S. pay czar announced that executives at 7 bailed-out firms would have their pay cut by as much as 90 percent. The companies are: AIG, Bank of America, Citigroup, General Motors, Chrysler, GMAC and Chrysler Financial.

Dow component Travelers (TRV, Fortune 500) said its quarterly profit more than tripled, easily topping analysts' estimates. The insurer also lifted its full-year forecast to a profit of between $5.30 and $5.50 per share. Shares jumped 7.7%.

Travelers reported lower losses related to severe weather and said a rebound in its investment portfolio contributed to a jump in the insurer's profit for the third quarter.

Traveler's earned $1.61 a share on revenue of $5.42 billion, compared with 55 cents a share and revenue of $5.45 billion a year ago.

Wall Street had estimated $1.31 a share on $6 billion in revenue.

Travelers also boosted its quarterly dividend 10% and authorized an additional $6 billion share repurchase program, citing improved stability in capital markets.

Fellow Dow component AT&T (T, Fortune 500) reported a better-than-expected third quarter profit thanks to the impact of Apple's iPhone, for which it has been the exclusive carrier. Wireless revenue jumped 10% in the quarter. Shares gained 0.6%.

Dow component McDonald's (MCD, Fortune 500) reported higher third-quarter earnings that topped estimates on weaker third-quarter revenue that missed estimates. Shares rose 2%.

McDonald's said third-quarter earnings were $1.26 billion, or $1.15 per share, up from $1.19 billion, or $1.05 per share, in the same period a year ago, topping expectations by 4 cents.

Revenue fell 4% to $6.05 billion, in line with expectations.

Shares were up 2% to $59.50.

3M (MMM, Fortune 500), also a Dow component, said third-quarter earnings and revenue fell from a year ago, but both were above analysts' estimates. Shares gained 3.2%.

3M said third-quarter net income was $957 million, or $1.35 per share, which topped analysts' expectations of $1.17 per share. In the same quarter last year, 3M earned $991 million, or $1.41 per share.

Revenue fell to $6.19 billion from $6.56 billion, but that also beat the Street's estimate of $5.77 billion.

3M also raised its full-year profit outlook to between $4.50 and $4.55 a share, up from the prior range of $4.10 to $4.30 a share, which sent the stock up 3.2% to $78.79.

Amazon.com shares, meanwhile, jumped 14.5% to $107 after hours after handily beating analyst estimates. If that price holds on Friday, it will be an all-time high. As important, the stock price will have more than doubled on the year.

The company earned $199 million, or 45 cents a share, on revenue of $5.45 billion in the third quarter. Earnings were up 68%; revenue was up 28%.

Analysts had expected 33 cents a share in earnings on revenue of 5.03 billion.

American Express shares slipped 0.5% to $36.25 after hours after rising 3.8% to $36.44 in regular trading.

The credit card company reported a 21% profit decline. But results beat analyst estimates. The stock had risen 3.8% to $36.44 in regular trading.

American Express reported earnings of $640 million, or 53 cents a share, down from $815 million, or 70 cents a share, a year earlier.

Earnings from continuing operations excluding a 10-cent accounting benefit fell to 44 cents from 74 cents.

Revenue, net of interest expense, dropped 16% to $6.02 billion.

Analysts had expected earnings of 38 cents on revenue of $5.92 billion.

Results that also beat estimates came from the Cheesecake Factory (CAKE), railroad Burlington Northern (BNI), insurance company Chubb (CB) and networking manufacturer Juniper Networks (JNPR).

Burlington Northern shares were alone among these four to fall in regular trading and after hours. It was off to $84.62 in regular trading and fell 4.3% to $81 after hours.

Cheesecake Factory rose 1.5% to $18.14 and an additional 2.5% to $18.60 after hours. Chubb was up 5.2% to $53.79 in regular trading and slipped after hours to $52.77. Juniper, up 1.4% to $28.22 in regular trading, rose an additional 3.8% to $29.40 after hours.

Other big stocks boosting the Dow included Boeing (BA, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Exxon Mobil (XOM, Fortune 500), Procter & Gamble (PG, Fortune 500) and IBM (IBM, Fortune 500).

Merck (MRK, Fortune 500), the fifth Dow component to report Thursday morning, said its earnings and revenue rose from a year ago and topped estimates. Shares of the drugmaker were barely higher.

Pharmaceutical giant Merck, meanwhile, earned $3.42 billion, or $1.61 a share, in the third quarter, more than triple the $1.09 billion, or 51 cents a share, it earned in the same quarter last year.

The jump in profit was mostly due to the sale of its interest in the animal health care unit Merial.

Excluding items, Merck earned 90 cents per share, beating expectations by a dime. Revenue rose 2% to $6 billion, ahead of the $5.97 billion estimate.

Merck said it now sees 2009 earnings per share coming in between $3.69 and $3.89 and adjusted earnings per share of $3.20 to $3.30.

Merck shares were up 0.6% to $32.87.

So far, 167 companies, or 33% of the S&P 500, have reported results. Profits are currently on track to have fallen 19.2% versus a year earlier, according to the latest from Thomson Reuters. Revenue is expected to have dropped over 10% from a year ago.

Microsoft (MSFT, Fortune 500) launched the newest version of its operating system, Windows 7. The tech behemoth, a Dow component, is hoping that users who have been running XP for years will switch to the new system -- and forgive it for the disappointing performance of Windows Vista in 2007.

Microsoft reports quarterly results Friday.

After the bell today, we'll get reports from Amazon, American Express, Broadcom and Capital One, among others.

Friday continues the big week of earnings. Among the biggest reports due before the market open are Microsoft (MSFT), Honeywell (HON), Whirlpool (WHR) and Schlumberger (SLB).

Five stocks -- Travelers, 3M, McDonald's, American Express and IBM (IBM) -- contributed 80 points of the Dow's gain.

PNC Financial [PNC  50.69    5.73  (+12.74%)   ] rallied 13 percent after the regional bank beat expectations.

McDonald's [MCD  59.52    1.19  (+2.04%)   ] gained 2 percent after the fast-food giant topped forecasts and said it expects same-store sales to remain positive in October.

AT&T [T  26.10    0.16  (+0.62%)   ] rose 0.6 percent after the telecom beat expectations, helped by the iPhone, but revenue slipped from a year earlier.

AT&T (T) earned $3.19 billion, or 54 cents per share, down slightly from $3.23 billion, or 55 cents a share, a year earlier. The consensus estimate was for 50 cents per share on revenue of $30.89 billion. AT&T said operating revenue fell 1.6% to $30.86 billion.

AT&T reported a 2 million increase in total wireless subscribers -- its best third quarter yet.

AT&T shares were 0.6% higher to $26.10.

"The iPhone has been a share shifter in the U.S.," Chris Larsen, a Piper Jaffray analyst, told Bloomberg News. "Consumers can see a handset. They can't see a network, so I'm going to buy what I can see."

AT&T has been the exclusive carrier for the iPhone in the U.S. since its debut in 2007.

Merck [MRK  32.83    0.15  (+0.46%)   ] added 0.6 percent after the drug maker said its net tripled in the quarter, helped by stronger sales and the sale of its animal-health business, which was required for its purchase of Schering-Plough. That acquisition is going to catapult Merck from the No. 8 drugmaker to No. 2.

More upbeat earnings reports after the bell late Wednesday from eBay [EBAY  23.97    -1.06  (-4.23%)   ] and Amgen, [AMGN  56.84    -2.56  (-4.31%)   ] both of which saw earnings beat Wall Street estimates.

Other factors are waylaying the stock market's recent advances—ranging from Walmart's [WMT  50.45    -0.18  (-0.36%)   ] price cuts to analyst Richard Bove's downgrade of Wells Fargo [WFC  30.17    1.27  (+4.39%)   ] to rising oil prices.

J.Crew (JCG), the retailer best known because Michelle Obama is a fan, was up 15.2% to $43.49 after boosting third-quarter guidance.

New York Times Co. had the biggest gain in the S&P 500, surging 23 percent to a one-year high of $10.72.

Fifth Third added 6.8 percent to $10.80, while SunTrust advanced 5.3 percent to $21.85.

VIX20.69-1.53-6.

Oil,Gold & Currencies:

U.S. light crude oil for December delivery fell 18 cents to settle at $81.19 a barrel on the New York Mercantile Exchange, edging off a one-year high.

COMEX gold for December delivery fell $5.90 to settle at $1,058.60 an ounce.

The dollar fell against the euro, weakening again after it fell to a 14-month low Wednesday. The dollar gained versus the yen.

The dollar traded near a 14-month low against the euro as a recovery in corporate earnings and improved prospects for the global economy revived demand for riskier assets.

The greenback is set for a third-weekly drop against the 16-nation currency before reports today forecast to show improvements in German business confidence and U.S. home sales. The pound rose to a five-week high against the dollar on speculation a U.K. report today will show the British economy grew for the first time since March 2008.

"Risk appetite is strong, buoyed by a series of better- than-expected profit reports and a brighter outlook for the global economy," said Masahide Tanaka, senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan's second- largest bank. "Money will continue to shift away from the dollar, now the most-favored funding currency, and flood into higher-yielding assets."

The dollar traded at $1.5033 per euro at 10:22 a.m. in Tokyo, unchanged from yesterday in New York. It earlier reached $1.5060, the weakest since August 2008. The greenback rose to 91.54 yen from 91.30 yen. The euro was at 137.61 yen from 137.24 yen.

The U.S. currency was at 1.0051 Swiss francs from 1.0045 yesterday after earlier touching 1.0034, the lowest since July 2008.

The pound rose to $1.6658 from $1.6624, after earlier hitting $1.6678, the highest since Sept. 14. It was at 152.49 yen from 151.76 after earlier rising to as high as 152.57 yen, the strongest level since Sept. 11.

Home Sales

The greenback weakened beyond $1.50 versus the euro for the first time in February 2008 and stayed there until August 2008 after reaching $1.6038 that July. The dollar strengthened as investors sought the safety of U.S. government debt after the Sept. 15, 2008, bankruptcy of Lehman Brothers Holdings Inc. froze credit markets, with the U.S. currency reaching a 2 1/2- year high of $1.2330 on Oct. 28, 2008.

The euro headed for a third weekly gain against the yen on optimism that the 16-nation economy is on the mend.

The Munich-based Ifo institute's business climate index, based on a survey of 7,000 executives, climbed to 92 in October from 91.3 in the previous month, according to a Bloomberg News survey before the data release today.

European Central Bank council member Erkki Liikanen said this week on Finland's YLE Radio Suomi that the euro area's economy is no longer weakening.

Sales of existing homes in the U.S. rose in September to an annual rate of 5.35 million, a two-year high, from 5.1 million in the previous month, according to the median forecast of 76 economists in a Bloomberg survey. The report from the National Association of Realtors is due at 10 a.m. in Washington.

Pound's Rally

The pound is for a second weekly gain versus the dollar as the Office for National Statistics will say today that the U.K. economy expanded 0.2 percent in the third quarter from the previous period, according to a Bloomberg survey of economists.

The Bank of England should pause its 175 billion-pound ($292 billion) bond-purchase program as the U.K. exits its economic recession, the National Institute for Economic and Social Research said on Oct. 21. Gross domestic product will probably expand 0.7 percent in the fourth quarter, the London- based institute said.

"There is a perception among some in the market that the U.K. economy is recovering," said Shinichi Hayashi, a Tokyo- based dealer at Shinkin Central Bank, the central institution for Japan's financial cooperatives. "There's talk that the pound is being bought on this view."

U.K. policy makers will reassess the scale of their asset- purchase program at their Nov. 5 decision, minutes of the October meeting showed this week.

Stocks Advance

The dollar is poised for a third weekly decline against the currencies of Australia and New Zealand as regional equities extended an earnings-sparked rally in U.S. shares.

The MSCI Asia Pacific Index of regional shares rose 0.5 percent today. The Standard & Poor's 500 Index increased 1.1 percent yesterday. Profits have topped estimates at 79 percent of the companies in the S&P 500 that have released results, according to Bloomberg data. That would mark the highest proportion in data going back to 1993.

Benchmark interest rates are 3.25 percent in Australia and 2.5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations' higher-yielding assets. The risk in such trades is that currency market moves will erase profits.

Australia's dollar was at 92.71 U.S. cents from 92.69 cents yesterday, heading for a 1.1 percent gain this week. It climbed to 93.29 cents on Oct. 21, the highest level since August 2008.

New Zealand's dollar was at 75.70 cents, from 75.78 cents yesterday and set for a 2.1 percent surge for the week. It advanced to 76.35 cents on Oct. 21, the strongest since July 2008.

Bonds:

Treasury prices tumbled, raising the yield on the 10-year note to 3.42% from 3.38% late Wednesday. Treasury prices and yields move in opposite directions.

What to expect:

FRIDAY: Fed chief Bernanke speaks; existing-home sales; Fed's Kohn speaks; Earnings from Microsoft, Honeywell and Ingersoll-Rand

Amazon.com's Profit Soars as Kindle Outsells Rivals

Yuan Pegged Spurs China Exports Luring Pimco as Dollar Weakens

Amazon Beats Profit Forecast; Shares Soar on Sales Outlook

American Express Profit, Sales Beat Expectations

Galleon Insider-Trading Informant Roomy Khan Said to Have Worked at Intel

BNP Paribas Said to Weigh Management Changes, Salary Cuts in Japanese Unit

Blackstone Is Said to Back Asia's Biggest Hedge Fund Startup Since 2007

Hynix Reports First Profit in Two Years on Increased Memory-Chip Prices

Obama Says Wall Street Pay Curbs `Step Forward' at Taxpayer-Funded Firms

Pakistan Must Spend Military Aid on Fighting Taliban, U.S. Congress Says

Treasuries Fall a Third Day as Asia Stocks Gain, U.S. Homes Sales to Rise

Netflix 3Q earnings rise 48 pct, but stock falls

Omnicell 3Q profit falls as sales slide

Hynix records first net profit in 2 years on chips

$ PepsiCo Exec's $2.4 Million Sale

SunPower: Q3 Tops Ests; Tightens '09 Outlook; Stock Tumbles

Broadcom Slumps As Q3 EPS Whiffs On Higher Compensation Costs

CA FY Q2 EPS Edges Estimates

Verizon To Unveil Droid Oct. 28; Ships Nov. 9

Network Equipment Technologies Sharply Lower On Gloomy FY Q3

LPS earnings up 39%

MEMC swings to loss, buys SunEdison for $200M

Wal-Mart Forecasts Modest Sales Gain

Nokia Sues Apple Over iPhone

Xerox Earnings Fall 52% as Outlook Remains Soft

Friday Look Ahead: All eyes on MSFT, Bernanke

Tail winds from Thursday's rally and some after hours earnings could help stocks Friday.

But ahead of the opening bell, there are some key events that could affect trading. Microsoft [MSFT  26.59    0.01  (+0.04%)   ]reports its earnings and Fed Chairman Ben Bernanke speaks at the Boston Fed's annual conference. Bernanke starts speaking on financial regulation and supervision at 8:30 a.m. and takes questions after his speech. Existing home sales for September, released at 10 a.m., will also be important.

Stocks Thursday started off mixed before staging a mid-afternoon rally that took the Dow [.DJI  10081.31    131.95  (+1.33%)   ]back above 10,000. The Dow finished at 10,008, a 1.3 percent gain. The S&P 500 rose 11, or 1 percent to 1092.

The dollar was mixed against major currencies, and the dollar index was slightly firmer. But much of the dollar's gains evaporated as stocks rose. The euro continued to dance around the psychologically important $1.50 level.

Oil gave up some of its gains, with NYMEX crude [US@CL.1  81.14    -0.05  (-0.06%)   ] finishing at $80.63, off 0.8 percent. Metals and other commodities though mostly traded higher.

Thursday's market was also driven by better earnings reports from major companies and several Dow components - McDonald's[MCD  59.52    1.19  (+2.04%)   ], 3M[MMM  78.79    2.46  (+3.22%)   ], AT&T [T  26.10    0.16  (+0.62%)   ]and Merck[MRK  32.83    0.15  (+0.46%)   ] -- among them. After the closing bell, shares in online retailer Amazon.com[AMZN  93.45    0.03  (+0.03%)   ] jumped sharply after the company reported a 68 percent increase in profits to $199 million, or $0.45 per share, on sales of $5.45 billion, well above estimates.

American Express[AXP  36.44    1.34  (+3.82%)   ], also reporting after the bell, saw its shares rise on stronger-than-expected profits. Its net fell though, coming in at $640 million or $0.53 per share, from $815 million, or $0.70 per share last year.

Other companies reporting earnings Friday include Schlumberger[SLB  68.52    0.51  (+0.75%)   ], Honeywell[HON  38.53    1.57  (+4.25%)   ], Whirlpool[WHR  73.55    1.72  (+2.39%)   ], Fortune Brands[FO  43.09    0.94  (+2.23%)   ] and Ingersoll-Rand[IR  35.35    0.69  (+1.99%)   ].

In addition to Bernanke's speech, Fed Vice Chairman Donald Kohn speaks at the Boston Fed conference at 11:30 a.m.

Treasurys lost some steam Thursday as stocks moved higher. The market also focused on the Treasury's announcement of record new issuance at next week's auction of 2-, 5- and 7-year notes. A total $123 billion will be auctioned next week, topping the previous record of $115 billion in July.

"It was a pretty big increase in supply, and a little counterintuitive that the big supply issues are trading well on the curve, on the day," Cantor Fitzgerald's Brian Edmonds said.

Dollar Bottoming?

Market guru Laszlo Birinyi appeared on "Squawk on the Street" Thursday and said the dollar at $1.50 per euro may be about the bottom for now.

"If you look at the ETFs that trade against foreign exchange, these things are starting to show a little bit of relative strength," he said. Birinyi also said the quickness and aggressiveness of the dollar's move has been "throwing the market for a loop."

But he did say he thinks the move against the euro is about over for now. "If only for technical reasons, this is going to be about it," he said.

Birinyi also said he thought oil, moving higher as the dollar weakens, is getting overpriced. He said he has sold some oil ETFs and cut back on energy stocks.

For US and Others, How Much Is Too Much Government Debt?

When it comes to borrowing trillions of dollars, it helps to have a golden reputation, a steady income stream, and plenty of rich, trusting friends.

As the world's wealthiest nations pile on debt at a pace that in less developed countries would alarm investors, they appear to have ample supplies of all three—for now.

That helps explain why a $1.4 trillion U.S. budget deficit announced last week drew gasps from politicians but didn't rattle investors who remain willing to loan money to the U.S. government at low interest rates.

It also explains why Japan and Italy can carry debt that exceeds their annual output, while emerging market economies such as Argentina in the past crumbled under such burdens.

Across all the Group of Seven rich nations, debt as a percentage of gross domestic product will rise in 2009, and probably stay elevated at least through 2012, according to International Monetary Fund data.

Some of that is a consequence of the global recession. Government spending soared to bail out banks and resuscitate economies, while tax revenues fell.

Governments are trying to strike a delicate balance between doing enough to end the crisis without digging an inescapable debt hole. "It is the central economic choice of our time," U.S. Treasury Secretary Timothy Geithner told Reuters Tuesday.

Geithner, speaking at the Reuters Washington Summit, said it was imperative to do whatever it takes to restore economic growth and stop a recession from becoming a depression. "For that to work over time, people need to understand and be confident that you will have the will and the ability to get back to living within your means when you have growth established," he said.

Confidence comes from decades of fiscal responsibility, but it can vanish almost overnight.

While financial markets show little sign of losing faith in the United States right now, concerns about inflation are on the rise.

That suggests some degree of discomfort about whether Geithner, President Barack Obama, and Federal Reserve Chairman Ben Bernanke can safely navigate the economic and political obstacles to corralling rising deficits in the coming years.

"As long as there is confidence, things can be just rolling along," said Kenneth Rogoff, a Harvard University economist and former chief economist for the International Monetary Fund. "If confidence evaporates, for whatever reason, you're dead meat."

What Kills Confidence?

If the rich world mismanages its debt position, the consequences will be severe and widespread. For the United States, the early signs of trouble would probably come in the form of a sharp decline of the U.S. dollar, a steep rise in inflation, and a spike in Treasury debt yields.

Investors appear willing to give the United States and other major economies the benefit of the doubt as long as the global economy remains weak and unemployment elevated.

With the exception of gold, which is considered an inflation safe haven and recently jumped to more than $1,000 per ounce, the traditional inflation gauges look tame.

The U.S. dollar, while weakening, has not suffered an unnervingly swift decline. Yields on 10-year U.S. Treasury notes are still well below 4.0 percent, suggesting investors see little risk of runaway inflation in the next decade.

Polls such as the Reuters/University of Michigan survey of consumers show households expect modest price increases in the coming years.  The major credit ratings agencies have maintained their top-tier "AAA" sovereign debt rating on the United States.

Still, Moody's lead U.S. analyst warned that the top-notch rating "is not guaranteed" and the government must reduce its budget gap in the next three to four years. And Japan lost its last remaining "AAA" rating in May.

What causes investor confidence to evaporate is not fully understood. Economists have sought to establish early warning systems, but most studies have focused on emerging markets, which have been the primary source of sovereign debt crises.

Paolo Manasse, an economics professor at the University of Bologna who co-authored a paper with New York University's Nouriel Roubini on rules of thumb for predicting debt crises, said reputation and confidence go hand in hand.

Italy has a debt-to-GDP ratio slightly above 100 percent, yet its borrowing costs are manageable, in part because the country hasn't defaulted since the Benito Mussolini era. That history, plus the perceived protection that comes from being part of the euro zone, helps Italy sustain its debt burden.

Manasse said reputation was also working in the United States' favor, although he stressed that Obama's administration would soon need to detail how it plans to shore up finances.

"If the United States can announce credibly a plan for fiscal retrenchment and commit to it, then a temporary jump in the budget deficit and debt wouldn't scare anybody off," he said in a telephone interview.

Keeping Friends Happy

Mario Blejer, who was governor of Argentina's central bank in 2002, knows first-hand how difficult it is to restore investor confidence once it is blown. Argentina defaulted on its debt eight years ago, and is only now trying to return to global debt markets.

Blejer, who is now an economic consultant, said that at the height of the debt crisis, his central bank initially had to offer interest rates of 130 percent to entice investors to extend seven-day loans. "We needed to do things that would create a situation where greed would exceed panic," Blejer said in an interview.

Argentina's experience shows that debt-to-GDP ratios alone don't always provide an early warning signal of impending default— something Manasse's research shows as well.

The United States has the advantage of being the world's safe haven in times of panic, and as long as it retains that reputation, its debt sustainability won't be in doubt. U.S. debt held by the public stood at $7.53 trillion as of Oct. 19, amounting to 53 percent of total output and up by about $1.5 trillion from one year ago.

Recent debt auctions have generally been well-received, and major foreign investors including China and Japan have maintained their purchases. Those two countries together held $1.53 trillion in U.S. Treasury debt as of August, up from $1.13 trillion a year earlier, according to Treasury data.

Geithner has taken pains to ensure that China in particular understands the U.S. commitment to bringing down future deficits —and is comfortable investing a large chunk of its $2 trillion in reserves in dollar-denominated assets.

U.S. Recovery in 2010 to be Weak: Fed's Evans

The U.S. Federal Reserve is concentrating on keeping the economic recovery on track and is in no rush to pull back its extensive life support measures, senior Fed officials said on Thursday.

"We have to think about our exit policy and are looking at it very carefully, but at the moment, that's not our first order concern, at the moment, it's policy accommodation," Chicago Fed President Charles Evans said while speaking on a panel at the University of Michigan's Ford School of Public Policy.

"I think that the recovery is going to be very unsatisfactory in 2010," he said.

His colleague, Boston Fed President Eric Rosengren, voiced a similar view.

"We need to wait for more progress (on the economy) before we take some stimulus away," Rosengren told CNBC in an interview on the sidelines of the Boston Fed's annual conference on Cape Cod.

Evans's and Rosengren's comments are in line with other Fed officials who view the recovery as tepid despite signs growth resumed in the third quarter and worry that a high and rising unemployment rate will sap spending and confidence.

Evans, who will vote on the Fed's policy-setting panel in 2010, said he expects unemployment to rise above ten percent.

Rosengren, also a Fed voter in 2010, said policy-makers would need to see private consumption, including housing, pick up before the Fed can remove monetary stimulus.

The Fed has cut rates to near zero and pledged to hold rates ultra-low for an extended period to support the recovery. Its next policy-setting meeting is Nov. 3-4 and it is not expected to signal any movement toward an exit then.

High unemployment and low inflation rates both indicate that policy accommodation is in order, Evans said.

The unemployment rate, which touched a 26-year high of 9.8 percent in September, is likely to retreat only slowly, Evans said.     

"It is not going to feel like a recovery for some time," he said.

With modest economic growth, household spending will be restrained and businesses will face weaker demand for their goods and services, Evans said.

Some on the Fed worry that a long period of very low interest rates, coupled with the massive expansion of cash available to the economy, pose dangerous risks of igniting inflation when the recovery gets firmly going.

But Evans said that with weak labor markets and ample idle factory capacity, there is a sufficient slack in the economy to set aside inflation fears.

If anything, low levels of inflation are a concern, he said. He said inflation is expected to remain below his preferred level of around 2 percent for some time.

However, Evans said recent volatility in the dollar -- which recently fell to 14-month lows against a basket of currencies amid concerns about the ballooning U.S. federal budget deficit and exploding debt -- would not have much impact on inflation in the current environment.

"At the moment inflationary pressures are pretty muted so I am not especially concerned about whatever implications those movements (in the dollar) might have for inflationary pressures," he said.

Still, he said the Fed is monitoring swings in the U.S. currency.

New York Fed President William Dudley said on Thursday the U.S. central bank may not lose money on the emergency programs it put in place to fight the crisis while Fed Vice Chairman Donald Kohn said many of the emergency facilities were winding down. Both officials took part in the Boston Fed's Cape Cod meeting.

Asia:

Asian stocks advanced as earnings reports from Australia to South Korea to Japan boosted speculation the global economy is exiting recession.

Wesfarmers Ltd., Australia's second-largest retailer, surged 7.2 percent after first-quarter sales of food and liquor climbed. Kia Motors Corp., South Korea's No. 2 automaker, gained 3.5 percent after posting a record quarterly profit. Daiwa House Industry Co. and Tokyu Land Corp. climbed at least 4 percent in Tokyo after reporting higher-than-forecast earnings.

The MSCI Asia Pacific Index rose 0.6 percent to 119.89 as of 11:03 a.m. in Tokyo, with more than twice as many shares advancing as retreating. The gauge has climbed 70 percent from a five-year low on March 9 on signs the global economy is recovering from the worst slump since World War II.

"First-half profits look likely to exceed expectations, however I'm not confident that demand is there to support earnings in the second half," Hiroyasu Ito, a Tokyo-based fund manager at Dai-Ichi Mutual Life Insurance Co., which holds $296 billion of assets. "The momentum behind stocks is still good, even though shares aren't really cheap."

Japan's Nikkei 225 Stock Average advanced 0.6 percent, with Kirin Holdings Co. adding 3.9 percent after Morgan Stanley boosted the stock to "overweight." Australia's S&P/ASX 200 Index gained 0.9 percent. Benchmark indexes rose in all Asian markets open for trading.

U.S. Stocks Rise

Futures on the Standard & Poor's 500 Index advanced 0.2 percent. The U.S. benchmark gauge jumped 1.1 percent in New York yesterday, led by insurers and banks as quarterly profit at insurer Travelers Cos. quadrupled and banks including PNC Financial Services and Fifth Third Bancorp said lending was becoming more profitable as they paid less on deposits.

In the past five days, the MSCI Asia Pacific Index has advanced 0.1 percent, set for a third weekly gain. Signs corporate earnings were improving prompted investors to shift to higher-yielding assets, spurring Treasuries to fall. The yield on the benchmark 10-year note rose two basis points to 3.43 percent, according to data compiled by Bloomberg.

The MSCI Asia Pacific Index has climbed 33 percent this year, headed for its biggest annual increase since 2003. Stocks in the gauge are valued at 1.6 times book value, compared with 2.3 times for the S&P 500 and 1.7 times for Europe's Dow Jones Stoxx 600 Index.

Wesfarmers surged 7.2 percent to A$28.33. Food and liquor sales rose 7.3 percent in the three months through Sept. 27 as the company attracted customers to redesigned fresh-produce sections at its Coles supermarkets, Wesfarmers said.

Property, Drinks

Kia jumped 3.5 percent to 17,750 won. Net income totaled 402 billion won ($340 million) in the three months to Sept. 30, compared with a loss a year earlier, the company said today.

Daiwa House gained 4.3 percent to 1,010 yen, and Tokyu Land, which develops houses and condominiums, added 4.1 percent to 408 yen. First-half profit was probably more than twice its forecast, Daiwa House said in a preliminary earnings report yesterday. Tokyu Land probably produced net income that's 31 percent more than its target, according to the company's preliminary report.

Kirin, Japan's largest beverage maker, rose 3.9 percent to 1,456 yen. Morgan Stanley boosted its investment rating on the stock from "equal weight," citing "solid" sales.

Nikkei 225 10,330.43     +63.26 ( +0.62%). (08.48 AM IST)

The Nikkei average rose 0.6 percent on Friday, with a rebound on Wall Street helping to boost investor confidence, while some exporters received additional support from a weaker yen.

Nippon Yusen KK (9101.T: Quote, Profile, Research) and other shipping firms rose after the Baltic Exchange's main sea freight index .BADI, which tracks rates to ship dry commodities, rose above 3,000 points for the first time since August.

Elpida Memory (6665.T: Quote, Profile, Research) gained after its bigger South Korean rival Hynix Semiconductor Inc (000660.KS: Quote, Profile, Research) said it expected a shortage in dynamic random access memory chips in 2010, but Canon (7751.T: Quote, Profile, Research) fell following a report its quarterly operating profit likely halved from the previous year.

Trade lacked direction on the whole, however, as investors waited to see how Japanese earnings announcements would pan out, market players said.

"Investors are holding back as Japan's earnings season hits its peak next week and there's the weekend," said Tsuyoshi Segawa, an equity strategist at Mizuho Securities.

In light trade, the benchmark Nikkei .N225 gained 63.26 points to 10,330.43, after ending down 0.6 percent the previous day.

The broader Topix .TOPX was flat at 909.46.

"Investors will be looking at whether Japanese companies' earnings forecasts for the second half will be revised up and if that would lead to better earnings prospects for the next business year," said Kazuhiro Takahashi, general manager at Daiwa Securities SMBC.

U.S. stocks rose on Thursday after quarterly results from insurer Travelers Cos Inc (TRV.N: Quote, Profile, Research) and regional bank PNC Financial Services Group Inc (PNC.N: Quote, Profile, Research) gave a boost to financial stocks. [.N]

SHIPPERS GAIN

The dollar edged up to trade around 91.60 yen JPY= in Asian trade. Many Japanese exporters have set their currency rate assumptions at 90-95 yen for the year to March.

Sony Corp (6758.T: Quote, Profile, Research) rose 1.3 percent to 2,685 yen and Olympus Corp (7733.T: Quote, Profile, Research) gained 1.7 percent to 2,780 yen. Industrial robot maker Fanuc Ltd (6954.T: Quote, Profile, Research) added 1.1 percent to 8,110 yen.

Nippon Yusen rose 0.8 percent to 362 yen, Mitsui O.S.K. Lines (9104.T: Quote, Profile, Research) gained 1.8 percent to 575 yen and Kawasaki Kisen Kaisha (9107.T: Quote, Profile, Research) added 1.3 percent to 380 yen.

Elpida advanced 1.2 percent to 1,398 yen after the comments by Hynix Semiconductor.

Mitsui Engineering & Shipbuilding Co (7003.T: Quote, Profile, Research) jumped 4.8 percent to 241 yen after the shipbuilder raised its group recurring profit forecast for the April-September first half to 19 billion yen ($208 million) from 10 billion yen, citing an increase in sales.

But Canon slipped 0.6 percent to 3,630 yen after the Nikkei business daily said a stronger yen and sluggish sales of copiers and laser printers likely weighed on its earnings.

Some 872 million shares changed hands on the Tokyo exchange's first section, below last week's morning average of 956 million.

Advancing stocks outnumbered declining ones, 824 to 676.

HSI 22515.59 +305.07 +1.37%.(08.51 AM IST).

Hang Seng Index opens 228 points higher on Fri

Hong Kong stocks rose on Friday morning, with the benchmark Hang Seng Index opening 228 points higher at 22,438.90.

The Hang Seng China Enterprise Index, which tracks the overall performance of 43 mainland Chinese state-owned enterprises on the Hong Kong Stock Exchange, opened 136 points higher at 13,096. 34.

China Mobile<0941><CHL> increased 1.18% from the previous closing to HK$77.2. China Unicom (Hong Kong) Ltd<600050><0762><CHU> rose 1.51% and opened at HK$10.76.

Chinese stocks open 0.2% higher on Fri

Chinese stocks opened higher on Friday morning.

The benchmark Shanghai Composite Index, which covers both A shares and B shares on the Shanghai Stock Exchange, opened at 3,057.39 points, up 0.2% or 5.98 points from the previous closing.

The Shenzhen Component Index on the smaller Shenzhen Stock Exchange opened 0.25% or 31.64 points higher at 12,656.32 points.

Xinjiang oil field targets 3.6 bln cu m of gas output this year (23 Oct) 

BYD cars now available in Qatar (23 Oct) 

China Unicom, Telefonica complete US$1 bln share swap (23 Oct) 

Hang Seng Index opens 228 points higher on Fri (23 Oct) 

CBA increases shareholding in China's CCS to 13.17% (23 Oct) 

Vice Chairman Owen Hegarty raises stake in G-Resources to 1.51% (23 Oct) 

T. Rowe Price Associates cuts stake in Guangshen Railway (23 Oct) 

Barclays raises shareholding in BYD to 5.41% (23 Oct) 

Chinese stocks open 0.2% higher on Fri (23 Oct) 

AU Optronics' net profit hits NT$7.42 bln in Q3 (23 Oct) 

China Minmetals to start construction of Galeno mine in 2010 (23 Oct) 

China Shipping Dev't posts 81% decline in Q3 net profit (23 Oct) 

China Overseas Land's revenue hits HK$21.05 bln in 1st 9 months (23 Oct) 

CNPC to issue RMB 20 bln in 6-month bills on Thu (23 Oct) 

Asus aims for 3rd place among top global notebook PC makers (23 Oct) 

Sichuan Hydropower Investment & Management to issue bills (23 Oct) 

Huadian Power Int'l to raise up to RMB 3.5 bln (23 Oct) 

CIRC relaxes rules on corporate bond investment (23 Oct)

Chinese home appliance giant Haier net profit up 49% in 3Q
 
INVESTMENT VIEW
Dhampur Sugar-Wildcard

BSE 500119
 
 
-Late rains in the Gangetic belt have bettered prospects for cane supply.

-High Retail price of Rs 40 per kg is leading to a paradigm shift in Sugar Industry profits.

-Even if SMP for Cane is fixed at Rs 200 per quintal, there will be a margin of Rs 8-10 per kg between input cost and wholesale selling price, which should sustain for atleast 2 years.

-Dhampur carries a debt of Rs 600 crore, but improved cash flows will allow the corporate to pay-off the same, making it debt free. 

Financials 

Dhampur Sugar reported robust numbers for the nine months ending April 2009, results with a massive increase in net profit to Rs 42.3 crore (Loss of Rs 3.9 crore) led by an improvement in average sugar realisations to Rs 20.5 per kg, thereby offsetting lower sales volumes. The company should have done exceedingly well in the Q4 to June 2009, as Retail prices first rose to Rs 30 per kg and now range between Rs 35 and Rs 40 per kg.  

Inspite of tinkering by the Centre and the State Government in Cane pricing as also fixing a higher levy quota based on FRP, the corporate should report bumper profits due to sizeable gains on inventory. 

Dhampur held a sugar inventory of 2.3 lakh tonnes valued at Rs 18.9 per kg as of March 2009. This will enable it to benefit from the rising sugar price scenario.  

In Q2SY09, the company altered its depreciation policy wherein depreciation charges for the full year were allocated during periods in which the co-generation plants were expected to operate, thereby increasing depreciation provisioning. 

Valuations 

At the current price of Rs 107.10, the stock is trading at 8x its SY09E EPS of Rs 14 and 5x its SY10E EPS of Rs 21.1. Given the company's large inventory holding and recent decision to import raw sugar we believe the company is well set to benefit from the rising sugar prices.
 

(Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.)

--
Arvind Parekh
+ 91 98432 32381

Market Outlook 22nd Oct 2009

NIFTY FUTURE LEVELS
SUPPORT
5070
5046
5022
4998
RESISTANCE
5081
5084
5110
5134
5158
5182
Buy CHEMCEL BIO TECH;PRITISH NANDY CO 

 

Strong & Weak  futures  

This is list of 10 strong futures:

Polaris, Yes Bank, Canara Bank, Andhra Bank, Indusind Bank, Bajaj Hind, HDIL, Dena Bank, Jindal Steel & Jindal Saw.

And this is list of 10 Weak futures:

RCom, Idea, Bharti Airtel, Grasim, TV-18, MTNL, Ambuja Cement, DishTV, Hind Petro & India Cement.

Nifty is in Up trend

 

NIFTY FUTURES (F & O):  
Below 5070 level, selling may continue up to 5046-5048 zone by non-stop.

Hurdles at 5081 & 5084 levels. Above these levels, expect short covering up to 5108-5110 zone and thereafter expect a jump up to 5132-5134 zone by non-stop.

Cross above 5156-5158 zone, can take it up to 5180-5182 zone by non-stop. Supply expected at around this zone and have caution.

On Negative Side, rebound expected at around 5022-5024 zone. Stop Loss at 4998-5000 zone.
 
Short-Term Investors:  
Bullish Trend. 3 closes above 4790.00 level, it can zoom up to 5155.00 level by non-stop. 

BSE SENSEX:  
Lower opening expected. Recovery should happen. 

Short-Term Investors:  
Short-Term trend is Bullish and target at around 17671.82 level on upper side.
Maintain a Stop Loss at 16613.22 level for your long positions too.

SL Triggered.
 

INVESTMENT BUY:
Buy CHEMCEL BIO TECH (BSE Code:533026) 
Buy with a Stop Loss of 10.80. 

Above 12.90, it will zoom.
 
Buy PRITISH NANDY CO (BSE Code:532387) 
Buy with a Stop Loss of 35.35. 

Above 37.20, it will zoom.
 

FUNDS DATA

FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
FII	21-Oct-2009	2729.21	3241.02	-511.81

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
DII	21-Oct-2009	1366.28	1657.19	-290.91

 

Global Cues & Rupee 
 The Dow Jones Industrial Average closed at 9,949.36. Down by 92.12 points.
The Broader S&P 500 closed at 1,081.40. Down by 9.66 points.

The Nasdaq Composite Index closed at 2,150.73. Down by 12.74 points.

The partially convertible rupee INR=IN ended at 46.485/495 per dollar on yesterday, below its Tuesday's close of 46.11/12.
 

Interesting findings on web:
The Dow Jones industrial average fell 92.12, or 0.9 percent, to 9,949.36.

The broader Standard & Poor's 500 index fell 9.66, or 0.9 percent, to 1,081.40.

The Nasdaq composite index fell 12.74, or 0.6 percent, to 2,150.73.

RUSSELL605.11-8.30-1.35%

TRAN3940.93-104.18-2.58%

UTIL382.430.51+0.13%

S&P 100500.24-4.28-0.85%

S&P 400701.43-7.50-1.06%

NYSE7107.21-51.06-0.71%

NAS 1001753.56-2.63-0.15%

Stocks finished lower after well-known banking analyst Dick Bove downgraded his rating on Wells Fargo.

Wells Fargo, the largest U.S. home lender this year, slid 5.1 percent after Bove of Rochdale Securities cut the shares to "sell" and said earnings were boosted by mortgage-servicing fees rather than improving business trends. Wal-Mart Stores Inc., the world's largest retailer, tumbled 2.1 percent after saying it expects a "tough" holiday shopping season. The Standard & Poor's 500 Index reversed a 0.9 percent advance as nine of 10 industry groups retreated, led by financials.

"Wells Fargo's downgrade spooked investors," said Michael Nasto, the senior trader at U.S. Global Investors Inc., which manages about $2 billion in San Antonio. "Investors are concerned because that's one of the biggest in the industry and most of the recent news has been positive so far. So that could be an indication of problems ahead for other big names."

Wells Fargo slumped 5.1 percent to $28.90, erasing a gain of as much as 2.2 percent. Bove said servicing fees on mortgages lifted profits by 15 cents a share, while a 2.2 percent lower tax rate gave a 2-cent boost. Wells Fargo reported third-quarter earnings of 61 cents a share, excluding some items, beating the average analyst estimate of 39 cents.

Bove said the "most disturbing" thing about Wells Fargo's results is that loan losses seem to be accelerating. Assets no longer collecting interest climbed 28 percent to $23.5 billion from the second quarter, Wells Fargo said, while the reserve to cover future loan losses grew by $1 billion from the second quarter to $24.5 billion.

"It's definitely had an effect on the market," said Tim Smalls, head of U.S. trading at Execution LLC in Greenwich, Connecticut. Bove "has a very good following and very long track record of consistency," he said.

Bove said recently that Goldman Sachs was the best-managed company in the sector but Citigroup was the most attractive stock.

Financial shares in the S&P 500 slumped 1.9 percent after Morgan Stanley's results helped lift the group as much as 1.3 percent earlier. JPMorgan Chase & Co., Bank of America Corp. and Goldman Sachs Group Inc. each lost at least 2.9 percent.

Morgan Stanley rallied as much as 7.6 percent before trimming gains, leaving the stock up 4.8 percent at $34.08. The sixth-largest U.S. bank by assets reported its first profit in a year, surpassing analysts' estimates on higher investment- banking fees. 

Wal-Mart dropped 2.1 percent to $50.63. The world's largest retailer expects customers to delay holiday purchases, said John Fleming, chief merchandising officer. Walmart plans to reduce prices as the season advances in areas including home, food and gifts, Fleming told analysts today at a conference in Rogers, Arkansas.

Boeing Co., the second-largest maker of commercial aircraft, fell 2.4 percent to $50.63 after booking $3.5 billion in charges for the delayed 787 Dreamliner and 747-8 jumbo jet programs. Its largest-ever net loss of $1.56 billion, or $2.23 a share, exceeded the $2.10-a-share average estimate of 18 analysts in a survey.

Merck & Co. had the steepest decline in the Dow average, falling 3.1 percent to $32.68. The pharmaceutical company's Gardasil vaccine, used to protect girls from a virus linked to cervical cancer, shouldn't be given routinely to boys, a U.S. advisory panel said.

Genzyme Corp. declined 6.2 percent to $51.43. The world's largest maker of drugs for rare genetic disorders reported third-quarter profit excluding some items of 31 cents a share, missing the average analyst estimate by 28 percent. Genzyme also lowered its full-year forecast of earnings to $2.26 a share, down from $2.35 to $2.90 a share on July 22.

Allegheny Technologies Inc. had the biggest drop in the S&P 500, falling 8.4 percent to $34.81. The specialty-metals producer that supplies titanium to Boeing reported third-quarter profit and sales that fell short of analysts' estimates as customers kept their metal inventories low during the recession.

Yahoo rose 2.9 percent to $17.66. Third-quarter profit excluding some expenses was 15 cents a share, beating the average prediction of 13 cents by analysts in a Bloomberg survey. Sales, excluding fees passed on to partner sites, were $1.13 billion, exceeding projections.

SanDisk Corp. soared 9.5 percent to $23.53. The biggest maker of flash-memory cards used in digital cameras and mobile phones forecast fourth-quarter sales that beat analysts' estimates as chip prices rebounded.

Apple Inc., maker of the iPhone mobile phone, iPod music players and MacIntosh computers, rose 3.1 percent to a record $204.92. The gains added to a 4.7 percent advance yesterday after Apple posted earnings and sales that topped analysts' estimates.

Eli Lilly [LLY  33.665    -1.575  (-4.47%)   ] beat expectations on both earnings and sales of prescription drugs and raised its outlook. But shares fell 4.5 percent as the company didn't raise the fourth-quarter outlook by as much as they beat in the third.

Elan [ELN  6.35    -0.11  (-1.7%)   ] fell, even after the drug maker raised its earnings guidance for the year.

The double dose of good news from tech had buoyed the Nasdaq for much of the day but the index eventually succumbed to the selling pressure.

This followed similar outlooks from Intel [INTC  19.86    -0.32  (-1.59%)   ] and Texas Instruments [TXN  22.985    -0.675  (-2.85%)   ], citing signs of improvement in business spending.

And Dell [DELL  15.15    -0.20  (-1.3%)   ] says PC sales should start to get a boost from Windows 7 starting in mid-2010.

Sun Microsystems [JAVA  8.73    -0.28  (-3.11%)   ] said it's cutting 3,000 jobs ahead of the planned takeover by Oracle [ORCL  22.03    -0.16  (-0.72%)   ]. Sun shares lost more than 3 percent.

Freeport-McMoRan shares [FCX  79.95    1.32  (+1.68%)   ] rose 1.4 percent after the gold and copper miner reported its profit soared in the third quarter, helped by higher metals prices and volume. Though revenue slipped.

On the M&A front, General Electric [GE  15.53    -0.05  (-0.32%)   ] and Comcast [CMCSA  15.11    -0.25  (-1.63%)   ] said they were continuing discussions about a possible deal but that there was no timetable for completion. GE shares slipped.

US Bancorp [USB  24.47    0.67  (+2.82%)   ] is considering acquiring FBOP, which owns eight banks and could be put up for sale by the Federal Deposit Insurance Corp, according to a report in the Wall Street Journal.

Morgan Stanley may hand over its Crescent Real Estate Equities unit to Barclays Capital, the Journal reported.

And Geely Automotive's talks to buy Volvo from Ford Motor [F  7.80    0.09  (+1.17%)   ] have reportedly stalled.

Shares of Gentex surged 18% on Wednesday after its third-quarter earnings beat analyst expectations. Baird analyst David Leiker maintained a Neutral rating and said the results showed the company is more profitable at lower volumes that previously thought. "We believe the company has the potential for double-digit revenue growth (plus-or-minus production) over the longer term from growing penetration, which is currently in the low-20% range, and improving mix from better feature adoption," he wrote in a research note. The Zeeland, Mich.-based company makes automatic-dimming rearview mirrors and commercial fire-protection products.

So far, 122 companies, or nearly one-fourth of the S&P 500, have reported results. Profits are currently on track to have fallen 20.9% versus a year earlier, according to the latest from Thomson Reuters. Revenue is expected to have dropped 10.4% from a year ago.

The Dow 30's results are expected to be weaker, Thomson said, with profits due to slide just short of 30% versus a year ago.

In economic news, the Fed said economic conditions either stabilized or improved in most of the country, according the Fed's "beige book" report, based on reports from its regional branches. Though it also showed consumer spending remains weak.

This morning, the Mortgage Bankers Association reported another drop in home-loan applications as interest rates continue to edge higher.

All 50 states and the District of Columbia reported big jumps in unemployment rates in September versus a year ago, according to state-by-state data released Wednesday. Fifteen states reported jobless rates above 10% in September, with Michigan's unemployment topping the list at 15.3%.

Strong

industrial REITs; agricultural products; electronic equipment; autoparts; personal products; coal and consumable fuel; diversified metals and miners; independent power producers

Weak

employment services; advertising; broadcasting; building products; airlines; diversified banks; department stores; food retailers; diversified chemicals; hotels

VIX22.221.32+6.32.

Oil,Gold & Currencies:

U.S. light crude oil for December delivery rose $2.25 to settle at $81.37 a barrel on the New York Mercantile Exchange.

COMEX gold for December delivery rose $5.90 to settle at $1,064.50 an ounce.

The euro jumped to a 14-month high against the dollar, extending its recent run against the U.S. currency. The dollar inched higher versus the yen.

The dollar traded near a 14-month low versus euro as evidence of a global economic recovery damped demand for the U.S. currency as a safe haven.

The euro rose against 10 of its 16 major counterparts before reports forecast to show an index of U.S. leading indicators gained and German business confidence improved. The yen traded near a two-month low versus the euro after a report showed Japan's exports fell at a slower pace in September, encouraging investors to seek higher-yielding assets overseas.

"People still feel safe in selling the dollar as the economy recovers," said Toshiya Yamauchi, manager of the foreign-exchange margin-trading department at Ueda Harlow Ltd. in Tokyo. "Higher-yielding currencies, including the euro will benefit from this risk trade."

The dollar traded at $1.5018 per euro at 10:18 a.m. in Tokyo from $1.5016 in New York yesterday when it touched $1.5046, the weakest level since August 2008. The U.S. currency fetched $1.6626 per pound from $1.6608 yesterday when it slipped to as low as $1.6637, the weakest level since Sept. 15.

The greenback was at 91.03 yen from 90.97 yen. The euro traded at 136.71 yen from 136.61 yen.

The Conference Board's index of leading economic indicators increased 0.8 percent in September, according to the median forecast of 60 analysts in a Bloomberg survey. A sixth consecutive gain in the index would mark the best performance since 2004. The report from the New York-based group is scheduled for release at 10 a.m. in New York.

Ifo Index

Adding to signs that the economic recovery is gaining traction, the Ifo institute's business climate index, based on a survey of 7,000 executives, climbed to 92 in October from 91.3 the previous month, according to a separate survey. The Munich- based institute will release the report tomorrow.

European Central Bank council member Erkki Liikanen said on Finland's YLE Radio Suomi this week the 16-nation euro area economy is no longer weakening.

"The euro-zone's economy appears to be recovering more quickly than we're seeing in the U.S. and Japan," said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan's largest currency broker. "The euro will likely gain further."

ECB Policy

Traders maintained bets the ECB will keep its benchmark interest rate at 1 percent until the end of the first quarter next year. The implied yield on the three-month Euribor futures contract for March 2010 delivery was 1.07 percent yesterday, little changed from Oct. 20.

The yen slid for an 11th day against the euro, its longest losing run since December 2004, after a Finance Ministry report showed Japan's shipments abroad fell 30.7 percent in September from a year ago, compared with a 36 percent drop in August.

"In Asia, it does seem that the pace of deceleration in exports is slowing, which is encouraging," said Thomas Harr, a senior currency strategist at Standard Chartered Plc in Singapore. "The yen will tend to underperform other major currencies except for the dollar when risk appetite is pretty strong."

Japanese exporters are benefiting from a global trade rebound that's being driven by interest-rate cuts and more than $2 trillion in government spending.　Today's export numbers were part of an improvement in shipments across Asia that suggests world trade is picking up, led by demand from China.

China's factory output probably climbed 13.2 percent in September from a year earlier following a 12.3 percent gain in the previous month, according to a Bloomberg News survey of economists before the data release today. The world's third- largest economy grew 9.0 percent in the third quarter following a 7.9 percent gain in the second, according to a separate Bloomberg News survey before the data release today.

Bonds:

Treasury prices rallied, lowering the yield on the 10-year note to 3.41% from 3.34% late Tuesday. Treasury prices and yields move in opposite directions.

What to expect:

THURSDAY: Weekly jobless claims; leading indicators; Fed's Rosengren, Lockhart and Dudley speak; Earnings from AT&T, Bristol-Myers, McDonald's, Merck, MMM, Travelers, UPS, Schering-Plough, Xerox, Amazon, AmEx, Braodcom and Capital One

FRIDAY: Fed chief Bernanke speaks; existing-home sales; Fed's Kohn speaks; Earnings from Microsoft, Honeywell and Ingersoll-Rand

Feinberg to Order 50% Cuts in Compensation for Bailed-Out Firms

China's Economy Expands 8.9%, Fastest Pace in a Year on Stimulus, Lending

Galleon Will Liquidate Hedge Funds, Is Said to Get Approaches About Assets

Japan Exports Drop at Slowest Pace This Year on Chinese Stimulus Spending

Toyota, Honda, Nissan May Increase Overseas Production Amid Stronger Yen

House Panel Approves Derivatives Bill to Regulate $592 Trillion Industry

Iran Says It's Ready to Accept Deal for U.S., Russian Shipments of Uranium

Stimulus Spending Has Saved One Million Jobs: Pelosi

Microsoft befriends Twitter in Google search duel

Locals raise bid for Philadelphia papers to $87M

Ex-manager testifies in slaughterhouse trial

Production of swine flu vaccine is way behind

QLogic earnings fall 41%

FDA requests additional studies for Amgen drug

Pactiv posts higher profit, raises outlook

Visa names John Partridge president

Panel: Auto dealers exempted from consumer agency

Copper hits 13-month highs on weak dollar, BHP

Windows 7 may help kickstart delayed corporate spend

Facebook to Add Music Sales

BofA Agrees to Sell First Republic

Amgen Profit Rises 23% on Higher Margins

Pay Czar to Slash Compensation

F5 Rallies On Beat-And-Raise FY Q4

Equinix To Buy Switch & Data For $689 Million In Cash And Stock

Citrix Q3 Results Inch Past Estimates; Shrs Slip

Novellus Q3 Tops Estimates; But Stock Slides

VMware: Q3 Revs, EPS Beat; Q4 Rev View Tops Ests

San Diego group buys Moana Vista

Brigham Exploration Company Prices Offering of 16,000,000 Shares of Common Stock at $10.50 per Share

Cape Bancorp, Inc. Reports Third Quarter 2009 Results

Harvest Energy Trust Agrees to C$4.1 Billion Sale to Korea National Oil Corporation

DOCOMO Capital and Mobile Internet Capital Invest in Stoke

Fed Beige Book Says Economy Making 'Modest' Gains

Federal Reserve district banks identified commercial real estate as the weakest part of the economy, while most saw "stabilization or modest improvements" in areas including housing and manufacturing.

All 12 district banks reported a weak or declining commercial real estate market, the central bank said today in its Beige Book business survey, published two weeks before officials meet to set monetary policy. The banks observed "little or no" price pressures, while demand for bank loans was "weak or declining" and many districts reported a "further erosion of credit quality."

The survey indicates that the economy, while gaining momentum, has yet to overcome weaknesses in banking and employment. Unemployment rose last month in 23 U.S. states, the Labor Department said today, while earlier reports showed declines in wholesale prices and lower-than-forecast housing starts, giving central bankers more reason to hold the main interest rate at a record low to stoke a recovery.

"The Beige Book was more pessimistic than what I expected," said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina. "Economic improvements are modest at best with significant downside in terms of banking and bank loans. The Beige Book says the Fed is nowhere near ready to raise rates for any reason."

Today's report cited continued "weak or mixed" labor markets. Unemployment rose to a 26-year high of 9.8 percent in September and is forecast by economists to hit 10 percent by the end of the year.

'Small, Scattered'

"Reports of gains in economic activity generally outnumber declines, but virtually every reference to improvement was qualified as either small or scattered," the Fed said today.

Stocks erased early gains after analyst Dick Bove downgraded Wells Fargo & Co., the largest U.S. home lender this year. The Standard & Poor's 500 Index lost 0.9 percent to 1,081.4 at 4:07 p.m. in New York after earlier climbing above its highest close of the year.

Treasuries fell, with 10-year notes snapping three days of gains. The 10-year note yield rose four basis points, or 0.04 percentage points, to 3.39 percent at 4:21 p.m. in New York.

The jobless rate hit records in Nevada, Rhode Island and Florida, the Labor Department said today in Washington.

The Fed report reflects information collected through Oct. 13 and summarized by staffers at the Richmond Fed.

Comments from Fed district bank presidents today reflected the mixed picture in the report.

'Tough Slog'

Dallas Fed President Richard Fisher said "bad numbers are getting less worse." Growth next year will be a "tough slog" and "significantly below potential," he said in an interview with The Toronto-based BNN television network.

"I am pretty confident we are going to see positive growth in the first half of 2010," Jeffrey Lacker, who heads the Richmond Fed, told reporters at a conference.

Economic growth will average 2.8 percent in the second half of this year, according to a Bloomberg News survey of economists this month. The world's largest economy shrank at a 0.7 percent annual rate from April through June, the best performance in more than a year, according to government figures.

Fed policy makers have been warning that commercial real estate remains a weak spot, even as the nation emerges from the worst recession since the 1930s.

Loan Defaults

Defaults on commercial real estate loans totaled $110 billion, or 6 percent of all such loans, in the second quarter, about 11 times the level in the fourth quarter of 2006. Defaults may rise to $170 billion by the fourth quarter of 2010, according to Foresight Analytics LLC, a real-estate market consulting firm.

"Demand drivers for all asset classes of commercial real estate stink right now," said Allen Greer, managing member of Greer Advisors LLC in Los Angeles and a former Bank of America Corp. official. "With no jobs, you have no demand. I don't see businesses spending. I see no end in sight for the lack of job growth."

Declining real-estate values caused by rising vacancies, falling rental rates and weak sales are contributing to losses, Comptroller of the Currency John Dugan, the regulator of national banks, told Congress on Oct. 14.

The Richmond Fed's Lacker said that troubled commercial real-estate loans are a "manageable" problem for the U.S. banking industry and don't require a government solution.

A bright spot in the Beige Book survey was its assessment of manufacturing. Most of the Fed banks reported stronger activity in September over August, with the New York, Richmond, Minneapolis and Kansas City district banks all noting a pick-up in production, the survey said.

Production Gains

Industrial production rose for a third straight month in September, rising a better-than-forecast 0.7 percent, a Fed report showed last week.

Caterpillar Inc., the world's largest maker of bulldozers and excavators, this week posted third-quarter earnings that beat analysts' estimates and issued a full-year forecast that exceeded the highest prediction.

"We believe the third quarter marked the low point for Caterpillar sales and revenues in what has been the toughest recession since the 1930s," Jim Owens, chief executive officer of the Peoria, Illinois, company, said in a statement. "We are seeing encouraging signs that indicate a recovery may be under way."

The Federal Open Market Committee next meets in Washington Nov. 3-4. At their prior meeting last month, officials said the economy had "picked up," while maintaining their pledge to keep the target interest rate exceptionally low for an "extended period."

The Fed lowered its main interest rate almost to zero in December while switching to asset purchases and credit programs as its main policy tools. Investors expect the central bank to begin raising rates next year, according to trading in futures contracts.

Asia:

Asian stocks fell as concern about rising loan losses at banks fueled speculation that an equity rally since March had outpaced earnings prospects.

Sumitomo Mitsui Financial Group Inc., Japan's second- largest bank by market value, lost 3 percent. U.S. bank shares tumbled yesterday after analyst Dick Bove downgraded Wells Fargo & Co. on concern loan losses may be accelerating. BHP Billiton Ltd., the world's largest mining company, rose 0.8 percent after oil topped $80 per barrel yesterday and metals rallied.

The MSCI Asia Pacific Index lost 0.6 percent to 119.81 as of 11:15 a.m. in Tokyo. The gauge has climbed 70 percent from a five-year low on March 9 on signs the global economy is recovering from the worst slowdown since World War II.

"Investors have become too optimistic," said Tomokatsu Mori, chief fund manager at Fukoku Capital Management Inc., which manages about $11 billion. "There's simply too much production capacity out there that's not going to be coming back on-line, and without that happening the economy can't spring back to life. How can stocks go up if that's the case?"

Japan's Nikkei 225 Stock Average slumped 1.2 percent as a government report showed the country's exports slumped 30.7 percent in September. South Korea's Kospi Index declined 0.5 percent, while New Zealand's NZX 50 Index lost 0.8 percent.

China's Shanghai Composite Index was little changed following economic data released this morning. Gross domestic product grew 8.9 percent in the third quarter from a year earlier, less than the 9 percent gain expected by economists in a Bloomberg News survey. Separate reports showed industrial production and retail sales grew at a faster pace in September.

China Economic Data

Futures on the Standard & Poor's 500 Index lost 0.1 percent. The gauge sank 0.9 percent yesterday, the most since Oct. 1 even after Wells Fargo posted a record quarterly profit. Bove, an analyst at Rochdale Securities, cut the stock to "sell" and said accelerating loan losses were "disturbing."

The MSCI Asia Pacific Index has surged 35 percent this year, outpacing gains by the S&P 500 and Europe's Dow Jones Stoxx 600 Index. Companies in the Asian benchmark trade at 1.6 times book value, near the highest level since September 2008.

Sumitomo Mitsui slumped 3 percent to 3,210 yen. Mitsubishi UFJ Financial Group Inc., Japan's biggest publicly traded bank, dropped 2.9 percent to 473 yen.

BHP gained 0.8 percent to A$40.15 and Rio Tinto Group, the world's No. 3 mining company, rose 1 percent to A$67.25.

Crude oil climbed 2.8 percent to $81.37 a barrel in New York, the highest settlement since Oct. 9, 2008. The London Metals Index, a measure of six metals including copper and zinc, surged 3.2 percent yesterday as the dollar weakened against currencies such as the euro.

Nikkei 225 10,210.78     -122.61 ( - 1.19%). (08.53 AM IST)

Japan's Nikkei average fell 1.2 percent on Thursday, with stocks hit across the board after a warning from a banking analyst prompted a sell-off in U.S. financial shares.

Amid caution ahead of the upcoming Japanese earnings season, exporters such as Kyocera Corp (6971.T) as well as banking stocks shed recent gains.

Japan Airlines Corp (JAL) (9205.T) dropped after a newspaper reported that the company's net loss may balloon to as much as about $5.5 billion for the year ending in March, while KDDI Corp (9433.T) slid after a brokerage downgrade.

"The stock market is taking a breather. Earnings reports have been in line or above expectations, but the stock market has already factored that in and climbed to high levels," said Kenichi Hirano, operating officer at Tachibana Securities.

"We'll have to be careful that positive factors might not be reflected in stock moves 100 percent from now on."

In moderate trade, the benchmark Nikkei .N225 slipped 122.61 points to 10,210.78. It hit a three-week closing high on Tuesday.

The broader Topix fell 1.3 percent to 901.68.

Japan's earnings season will swing into full gear next week.

"The market lacks energy and there are few reasons to buy Japanese stocks, particularly because the new government's policies have yielded little results so far," said Hiroichi Nishi, general manager of equity marketing at Nikko Cordial Securities.

"But at the same time, falls should be limited as the global economy is on track for a recovery and global stocks are on an upward trend. Investors also want to see how Japanese earnings will pan out."

U.S. stocks fell on Wednesday as Wells Fargo (WFC.N) slid after Rochdale Research analyst Richard Bove cut his rating on the stock saying loan losses were mounting, though it was among several banks posting quarterly earnings above Wall Street's forecasts.

Kyocera slipped 1.5 percent to 8,010 yen, while Advantest Corp (6857.T) fell 1.7 percent to 2,365 yen and Tokyo Electron Ltd (8035.T) shed 0.9 percent to 5,630 yen.

Banking stocks fell, with Japan's top lender Mitsubishi UFJ Financial Group (8306.T) skidding 3.1 percent to 472 yen.

JAL shares fell 2.4 percent to 123 yen. The Yomiuri newspaper said the struggling carrier plans to book hefty restructuring charges, which would likely lead to a bigger loss.

The Nikkei business daily also reported that a government-appointed task force crafting a revival plan for JAL has asked the Development Bank of Japan to provide more than 50 billion yen ($550 million) in debt waivers and debt-for-equity swaps.

KDDI fell 3 percent to 489,000 yen after Citigroup Global Markets Japan cut its rating on Japan's No. 2 phone operator to "hold/medium risk" from "buy/medium risk" and lowered its target price to 550,000 yen from 650,000 yen.

Analyst Hiroshi Yamashina said he saw little in the way of share price catalysts.

But retailer Uny (8270.T) gained 2.3 percent to 669 yen after the company said trading house Itochu (8001.T) is planning to take a stake in it as part of a business tie-up.

The Nikkei business daily said Itochu plans to spend about 4 billion yen to acquire a 3 percent stake from the market. Uny said it plans a news conference later in the day.

Some 982 million shares changed hands on the Tokyo exchange's first section, roughly in line with last week's morning average of 956 million.

Declining stocks outnumbered advancing ones by more than 6 to 1.

HSI 22080.31 -237.8 -1.07%. (08.56 AM IST)

Hong Kong's stock market declined in early trade Thursday, with investors chewing over Chinese economic data showing growth of 8.9% on year for the third quarter. Hong Kong's Hang Seng Index was down 0.5% at 22,209.5 after 15 minutes of trade, with the mainland-Chinese-focused Hang Seng China Enterprises Index down 0.4% at 12,950.7. Telecoms were among the loss leaders, with China Unicom Ltd. /quotes/comstock/22h!e:762 (HK:762 10.76, -0.22, -2.00%) /quotes/comstock/13*!chu/quotes/nls/chu (CHU 14.02, -0.03, -0.21%) down 1.5%, and China Telecom Corp. /quotes/comstock/22h!e:728 (HK:728 3.62, -0.10, -2.69%) /quotes/comstock/13*!cha/quotes/nls/cha (CHA 47.91, -0.88, -1.80%) losing 2.7%. Energy shares improved, however, amid rising crude-oil futures, with PetroChina Co. /quotes/comstock/22h!e:857 (HK:857 10.08, -0.10, -0.98%) /quotes/comstock/13*!ptr/quotes/nls/ptr (PTR 131.39, -0.56, -0.42%) and Cnooc Ltd. /quotes/comstock/22h!e:883 (HK:883 12.18, -0.02, -0.16%) /quotes/comstock/13*!ceo/quotes/nls/ceo (CEO 156.57, -2.34, -1.47%) both edging up 0.2%. On the mainland, however, the Shanghai Composite turned positive after the data release, rising 0.1%. Among top gainers there was Aluminum Corp. of China /quotes/comstock/28c!e:601600 (CN:601600 14.44, -0.02, -0.14%) , up 1.6%. 

Chinese stocks open nearly flat on Thu

Chinese stocks opened nearly flat on Thursday morning.

The benchmark Shanghai Composite Index, which covers both A shares and B shares on the Shanghai Stock Exchange, opened at 3,068 points, down 0.06% or 1.91 points from the previous closing.

The Shenzhen Component Index on the smaller Shenzhen Stock Exchange opened 0.17% or 21.75 points lower at 12,670.97 points.

China's retail sales up 15.1% in Jan¬-Sep (22 Oct) 

China's value-added industrial output up 8.7% in Jan-Sep (22 Oct) 

China's PPI down 6.5% in Jan-Sep (22 Oct) 

China's CPI down 1.1% in Jan-Sep (22 Oct) 

China's GDP up 7.7% in Jan-Sep (22 Oct) 

New World Dev't to redevelop flagship commercial complex in HK (22 Oct) 

Capital Group raises stake in China Shenhua Energy (22 Oct) 

UBS raises stake in Sino Prosper to 5.59% (22 Oct) 

Jingtou Yintai to raise RMB 1.43 bln for Changsha project (22 Oct) 

Yahoo not to sell assets in Yahoo Japan, Alibaba.com: CFO (22 Oct) 

FMR raises stake in Sino Gold to 5.14% (22 Oct) 

Yum Brands to raise stake in Little Sheep (22 Oct) 

Chinese stocks open nearly flat on Thu (22 Oct) 

CNOOC receives 1st LNG delivery from Qatar (22 Oct) 

VisionChina Media renews 3-year contract with Hangzhou (22 Oct) 

JPMorgan cuts shareholding in Air China to 4.92% (22 Oct) 

BOC Int'l launches private bank in HK (22 Oct) 

SOHO China's Sanlitun project reaps RMB 6.74 bln as of Oct 19 (22 Oct) 

BOE starts construction of 8G TFT-LCD plant in Beijing (22 Oct) 

Intel adds US$75 mln to Chengdu plant (22 Oct)  
 
INVESTMENT VIEW
Ruchi Soya-Agri Wildcard
  
 Ruchi Soya's numbers for the quarter Q1FY10 were significantly ahead of estimates with revenues growing 11% at Rs31bn, EBITDA growth of 8% at Rs1.17bn and PAT growth of 18% at Rs502m.

The surprise were the EBITDA margins at 3.8% (at the same levels of Q1FY09, albeit lower edible oil prices) driven by stable edible oil price movement and partly on account of

opportunistic trading activities.

While manufacturing business accounted for just 60% of the revenues (90% of the revenues in Q1FY09), revenues from trading activities have increased from 10% of the revenues to 40% of the revenues (4x increase in trading activities).

Though edible oil prices continue to remained lower by 25% on yoy basis, prices were higher by 20-25% on qoq basis and more importantly the prices are trending upward.

With limited soya availability during the quarter, favourable parity for imported palm oil and upward moving price trend favourable for trading operations, there is substantial change in composition of sales in favour of palm oil refining and trading.

Edible oil portfolio during the quarter grew by 44% at Rs25.5bn, whereas vanaspati revenues were down by 25% at Rs2.2bn and seed extraction revenues are down by 57% at Rs2.4bn.

Higher refining capacity utilization (90%+) and favourable price movement has resulted in EBIT margin expansion of 28bp at 3.12% (245bp improvement on qoq basis).

While parity continues to be unfavourable in seed extraction business (margin erosion of 140bp at 4%), stable seed prices and increasing soya prices during the quarter have helped seed extraction business come back in positive zone (EBIT loss of Rs92m in Q4FY09).

In anticipation of increase in customs duty during Union Budget, edible oil players had increased palm oil inventory. However, as the customs duty remained unchanged, there is correction in edible oil prices since then – 10% since June 2009 and ~20% since May 2009.

The stock remains a wildcard, despite it's dramatic run-up in the summers.

(Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.)
 

--

Arvind Parekh

+ 91 98432 32381

 

 

Market Outlook for 21st Oct 2009

INTRADAY calls for 21st Oct 2009
+ve Script & Sector : Dredgcorp, Brigade, TFCILtd
BUY Jindalsaw-822 above 827 for 854+ with sl 820
BUY LicHousing-840 above 847 for 859-865+ with sl 838

BUY DLF-470 above 473 for 487+ with sl 467
BUY FedBank-265 for 277+ with sl 261

Positional
BUY STCIndia-368 for 417+ with sl 355
BUY STAR-184 for 210+ with sl 174 

 

Strong & Weak  futures  

This is list of 10 strong futures:

State Bank Of India, Jindal Saw, Allahabad Bank, Indusind Bank, Indian Bank, Andhra Bank, Sesa Goa, Dena Bank, Bajaj Hind & Yes Bank.  

And this is list of 10 Weak futures:

RCom, Bharti Airtel, Idea, Grasim, TV-18, MTNL, Ambuja Cement, Suzlon, Jaiprakash Hydro & DishTV.

Nifty is in Up trend

 

NIFTY FUTURES (F & O):
Profit Booking may continue up to 5079-5081 zone by non-stop.

Hurdles at 5114 & 5120 levels. Above these levels, expect short covering up to 5149-5151 zone and thereafter expect a jump up to 5178-5180 zone by non-stop.

Cross above 5208-5210 zone, can take it up to 5237-5239 zone by non-stop. Supply expected at around this zone and have caution.

On Negative Side, rebound expected at around 5050-5052 zone. Stop Loss at 5021-5023 zone.
 
Short-Term Investors:
Bullish Trend. 3 closes above 4790.00 level, it can zoom up to 5155.00 level by non-stop.
3 closes above 5155.00 level, it can zoom up to 5520.00 level by non-stop.
 
BSE SENSEX:
Lower opening expected. Recovery should happen. 

Short-Term Investors:
Short-Term trend is Bullish and target at around 17671.82 level on upper side.
Maintain a Stop Loss at 16613.22 level for your long positions too.

SL Triggered.

POSITIONAL BUY:
Buy XPRO INDIA (BSE Code:590013) 
Buy with a Stop Loss of 27.50. 

Above 39.50, it will zoom.
 
Buy NOIDA TOLL BRIDGE (BSE Code:532481) 
Buy with a Stop Loss of 44.40. 

Above 45.85, it will zoom

Global Cues & Rupee
The Dow Jones Industrial Average closed at 10,041.48. Down by 50.71 points.
The Broader S&P 500 closed at 1,091.06. Down by 6.85 points.

The Nasdaq Composite Index closed at 2,163.47. Down by 12.85 points.

The partially convertible rupee INR=IN ended at 46.11/12 per dollar on yesterday, stronger than Friday's close of 46.29/30.
 
Interesting findings on web:
Stocks dipped Tuesday as a stronger dollar and some disappointment about DuPont and Coca-Cola's results gave investors a reason to retreat from the recent rally.

Disappointing housing and inflation figures have overshadowed good earnings results from Apple and machinery maker, Caterpillar.

The Dow Jones Industrial Average finished the trading day at 10,041.48, down 50.17 points (0.5 percent).

The S&P 500 closed at 1,091.06, down 6.85 points (0.62 percent).

The NASDAQ Composite finished at 2,163.47, down 12.85 points (0.59 percent).

RUSSELL613.41-8.93-1.43%

TRAN4045.117.37+0.18%

UTIL381.92-5.78-1.49%

S&P 100504.52-2.23-0.44%

S&P 400708.93-6.67-0.93%

NYSE7158.27-63.94-0.89%

NAS 1001756.19-0.49-0.03%

A weaker-than-expected housing market report added to the downward pressure.

Mixed profit reports, a stronger dollar and a weaker housing market report are among the factors dragging on Wall Street.

"I'm impressed we've managed to stay above 10,000 as I would have expected a bigger pullback after the last few days," said Gary Webb, CEO at Webb Financial Group.

Webb said that after better-than-expected quarterly results last week from the likes of Goldman Sachs (GS, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Intel (INTC, Fortune 500) raised investors' expectations for the reports this week. As such, even companies that have reported strong results this week have seen a mixed stock reaction.

"When we see an economy that's going in the right direction at a stronger pace, we'll see a more positive reaction to the profit reports," he said.

Since bottoming at a 12-year low on March 9, the S&P 500 has risen more than 62%. But some worry that the Dow's move above 10,000 has been a ruse and that investors should beware.

"We've traded up on some optimism about the global recovery and there are technical reasons why the market could keep rallying," said Brian Battle, vice president at Performance Trust Capital Partners.

However, he said that a lot of the improvement in the economy and profits is being clouded by the enormous amounts of government stimulus. "Once you remove all the stimulus, the underlying economy is not as strong."

Housing starts rose to a 590,000 unit annual rate in September, versus a revised 587,000 in the previous month. Economists expected starts at a 610,000 unit annual rate.

Building permits, a measure of builder confidence, rose to a 573,000 unit annualized rate in September from a revised 580,000 unit annualized rate in August. Economists surveyed by Briefing.com thought starts would rose to 595,000 unit annualized rate.

"We remain optimistic for 2010 but the next couple of months will be tricky," Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote in a note to clients.

The housing data "is a bit of a surprise, the consensus going in was for a positive tone," said Keith Wirtz, chief investment officer at Fifth Third Asset Management Inc., which oversees $20 billion in Cincinnati. "The disappointment will have an impact on the market. The market at these valuation levels is susceptible to news flow each and every day."

The Producer Price Index (PPI), a measure of wholesale inflation. PPI slipped 0.6% in September versus forecasts for a flat reading. PPI rose 1.7% in the previous month. The core PPI, which strips out volatile food and energy prices, fell 0.1% after rising 0.2% in the previous month. Economists thought it would rise 0.1%.

Tuesday brought quarterly results from five Dow components: DuPont, Pfizer, Coca-Cola, Caterpillar and United Technologies. Apple and Texas Instruments were among the names who reported after the closing bell Monday.

DuPont (DD, Fortune 500) reported higher third-quarter earnings that topped estimates on weaker revenue that missed forecasts. The chemical maker used cost-cutting to temper the impact of weak sales and surging crude and energy costs.

Looking forward, DuPont narrowed its full-year earnings guidance to a per-share range of between $1.95 and $2.05. Shares fell 2.2%.

Coca-Cola (KO, Fortune 500) reported modestly higher third-quarter earnings that met estimates on weaker revenue that missed forecasts. The company was hit by weaker sales amid the impact of the recession.

Coke was also hurt by the comparatively strong dollar, at least versus a year ago. A stronger dollar hurts companies like Coke because the majority of its profit comes from sales overseas. Those sales then convert back to less U.S. dollars. Coke shares fell 1.3%.

Pfizer (PFE, Fortune 500) reported higher third-quarter earnings and weaker revenue, both of which surpassed analysts' estimates. Although the maker of Lipitor, Viagra and other drugs saw a decline in sales due to the recession, that was offset by aggressive cost-cutting. Shares fell 0.3%.

Caterpillar (CAT, Fortune 500) reported weaker quarterly earnings that topped estimates on weaker quarterly revenue that missed forecasts, due to lower sales. But the heavy-equipment maker also lifted its full-year earnings forecast to a range of $1.10 to $1.30 per share, versus its previous guidance of 95 cents per share. Caterpillar gained 3%.

United Technologies (UTX, Fortune 500) reported weaker quarterly earnings and revenue that missed estimates. Looking forward, the company said it expects earnings of $4.10 per share, in the middle of its previous guidance. UTX runs jet engine maker Pratt & Whitney, Otis elevators and other businesses. Shares were little changed.

Boston Scientific (BSX, Fortune 500) reported a profit versus a year-ago loss, but results were shy of forecasts. The medical device maker also cut its full-year 2009 earnings forecast due to slower sales of defibrillators and other products.

Shares fell 15.7% in very active NYSE trading.

So far, about 100 of the S&P 500 companies have reported earnings; 79 percent have beaten expectations, while 11 missed.

More than 130 companies in the S&P 500 were scheduled to report third-quarter results this week. Earnings have surpassed analysts' projections for 79 percent of the companies that released results so far, according to Bloomberg data. More than 72 percent beat the average estimate in the second quarter, matching the highest proportion in data going back to 1993.

"We're getting to the point in this market where we're going to have to see revenues come through," said Warren Koontz, head of large-company value stocks at Loomis Sayles & Co. in Boston, which manages $140 billion. "Though they're not declining as much as they were, to continue this move up, we have to start to see the evidence of revenues following, because we can't cut our way to prosperity in earnings management."

Sales have fallen 2.2 percent at S&P 500 companies that reported third-quarter results since Oct. 7 and have trailed analysts' estimates by 0.9 percent, Bloomberg data show.

"Earnings reports have been decent so far, but the way it works is that earnings reports have to come in good now because the market over the past few months has been forecasting better earnings," said Robert Stimpson, a money manager at Oak Associates Inc. in Akron, Ohio, which manages $800 million.

Companies in the S&P 500 will report a ninth straight quarter of declining profits, the longest streak since the Great Depression, before returning to growth in the final three months of the year, analysts' estimates compiled by Bloomberg show.

Pacific Investment Management Co. expects nominal economic growth of 3 percent to 4 percent and returns on assets to be half of what they were in the prior decade as consumers curb spending and increase savings.

"We are leaving the world where the U.S. dominated consumption and was the engine of global growth," Bill Gross, co-chief investment officer of the world's biggest manager of bond funds, wrote in a commentary on Pimco's Web site. "Now the rest of the world, whether it's China, Brazil, or other future tigers, will begin to dominate and must in turn replace their export-driven growth with internal demand-generated growth."

U.S. gross domestic product shrank at a 0.7 percent annual rate from April to June, the best performance in more than a year. China's GDP grew at a 7.9 percent rate in the second quarter and is forecast to exceed 10 percent in the first quarter of next year, according to the Development Research Center, an affiliate of that nation's State Council.

After the close, Yahoo (YHOO, Fortune 500) reported higher quarterly earnings that beat forecasts on weaker revenue that also beat forecasts.

Also after the close, Sun Microsystems (SUN, Fortune 500) said it was cutting 3,000 jobs related to its purchase by Oracle (ORCL, Fortune 500).

Of 10 key S&P indexes, utilities and materials were the biggest decliners, down more than 1 percent. Information-technology was the best performer, finishing flat.

Boeing [BA  51.90    -1.55  (-2.9%)   ], Home Depot [HD  26.96    -0.67  (-2.42%)   ] and DuPont were the biggest drags on the Dow.

Over on the Nasdaq, Apple [AAPL  198.76    8.90  (+4.69%)   ] shares surged more than 5 percent after the iPod and iPhone maker blew past earnings and revenue expectations.The company said it earned $1.82 a share on revenue of $9.87 billion. Analysts polled by Reuters had expected earnings of $1.42 a share on revenue of $9.21 billion.

Analysts said the earnings indicate that consumer spending is coming back. Apple was also upbeat about the holiday season, which is usually a blockbuster quarter for the company. Analysts seemed to agree.

"These are huge numbers ... Apple is probably the best growth story in tech, maybe one of the best growth stocks in the market. I bet this stock can go to $250 in six to nine months," Jane Snorek, analyst at First American Funds, told Reuters. "Usually Christmas and back-to-school are correlated and Apple usually has a gigantic Christmas quarter. This makes me think Apple will have a great Christmas."

On the M&A front, staffing company Adecco [ADO  0.0080  ---  UNCH  (0)   ] is buying MPS Group [MPS  13.51    2.37  (+21.27%)   ] for $1.3 billion or $13.80 a share, a 24 percent premium over the most recent close for MPS.

Morgan Stanley [MS  32.54    -0.57  (-1.72%)   ] is selling its retail asset management division to Invesco for $1.5 billion — that division includes both the Morgan Stanley and Van Kampen brand names.  Morgan Stanley will get a 9.4 percent stake in Invesco.

Two other Dow stocks, Exxon Mobil and Chevron, were off more than 1% as oil slipped from Monday's 12-month high above $US80 a barrel.

Pulte Homes Inc. and Home Depot Inc. led builders and retailers lower as the Commerce Department report signaled the housing market may slow once tax incentives expire.

Coca-Cola Co. lost 1.3 percent after sales trailed estimates.

Lockheed Martin Corp. tumbled 6.5 percent to $71.99 after its 2010 forecast trailed analyst estimates. The world's largest defense company's third-quarter profit was 5 percent higher than the average estimate.

Boston Scientific Corp. fell the most in the S&P 500, slumping 16 percent to $8.57. The maker of Taxus heart stents lowered its 2009 sales forecast, prompting Wells Fargo & Co. to downgrade the stock to "market perform" from "outperform."

State Street Corp., the world's largest money manager for institutions, fell 8.4 percent to $47.84 after lowering its earnings forecast for the current year.

Results from Marshall & Ilsley Corp. and Zions Bancorp deepened losses for regional banks in the S&P 500, the sixth- worst performer among 154 industry groups this year. Marshall & Ilsley, Wisconsin's largest bank, fell 8.8 percent to $6.55 after posting a third-quarter loss on housing-related credits and loans to other bank holding companies.

Zions, Utah's biggest bank, reported a fourth straight quarterly loss as more borrowers fell behind on payments and writedowns on debt securities increased. The shares fell 6 percent to $17.23.

Raw-materials producers in the S&P 500 slumped 1.1 percent as a group. Copper retreated from a one-year high as the housing data spurred concern demand will abate. Energy shares declined 0.9 percent as crude oil for November delivery declined 0.7 percent to $79.09 a barrel in New York as the rebound in the dollar reduced the appeal of commodities as an alternative investment.

Exxon Mobil Corp., the world's biggest energy company, and Alcoa Inc., the largest U.S. aluminum producer, retreated at least 0.8 percent.

VIX20.9-0.59-2.75%.

Oil,Gold & Currencies:

U.S. light crude oil for November delivery fell 52 cents to settle at $79.09 a barrel on the New York Mercantile Exchange.

COMEX gold for December delivery rose 50 cents to settle at $1,058.60 an ounce.

The dollar gained versus the euro and the yen, reversing the direction after its recent slide versus a basket of currencies.

The dollar gained for a second day versus the euro as regional stocks extended losses in U.S. shares, sapping demand for higher-yielding assets.

The euro also retreated from a 14-month high against the dollar on speculation European policy makers will today reiterate concerns that the currency's gains are slowing the region's economic recovery. The New Zealand dollar pared earlier declines as central bank Governor Alan Bollard said strength in the so-called kiwi isn't an impediment to raising rates.

"The stock market continues to dominate the currency market and affect its direction," said Toshiya Yamauchi, a manager of the foreign-exchange margin-trading department at Ueda Harlow Ltd. in Tokyo. "We need to watch for a possible reversal of risk trades or short positions on the dollar." A short position is a bet that an asset will fall.

The dollar traded at $1.4895 per euro at 11:20 a.m. in Tokyo from $1.4945 yesterday in New York, when it touched $1.4994, the weakest level since August 2008. The greenback was at 90.82 yen from 90.78 yen. The euro bought 135.27 yen from 135.66.

New Zealand's dollar was at 74.72 U.S. cents from 74.96 cents yesterday after earlier falling as much as 0.4 percent. It yesterday touched 75.76, the most since July 2008.

The MSCI Asia Pacific Index of regional shares slid 0.7 percent and Japan's Nikkei 225 Stock Average lost 0.3 percent. The Standard & Poor's 500 Index lost 0.6 percent yesterday in New York, retreating from a one-year high.

Stocks Decline

Stocks fell after the U.S. Commerce Department said housing starts rose to an annual rate of 590,000 in September, lower than the median economist forecast for a 610,000 rate. Prices paid to factories, farmers and other producers fell 0.6 percent, the second drop in three months, the Labor Department said.

Demand for the euro abated after Henri Guaino, an aide to French President Nicolas Sarkozy, said yesterday a euro exchange rate of $1.50 "is a disaster for the European economy and manufacturing sector."

That echoed comments by European Central Bank President Jean-Claude Trichet on Oct. 19 that "excessive volatility" in currencies is "bad for economic development."

"European officials are expressing worry that the euro's appreciation is making things difficult for their economy," said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe Generale SA, France's third-largest bank. "This is causing the euro to undergo a downward correction."

Sarkozy will hold a weekly cabinet meeting at 10 a.m. in Paris, and European Commission President Jose Barroso will speak to the European Parliament at 9 a.m. in Strasbourg, France.

The euro has strengthened 15 percent versus the dollar in the past 6 months, making the region's exports more expensive to overseas buyers.

IFO

Losses in the euro may be limited before a report this week forecast to show business confidence in Germany improved, adding to signs that the recovery is gaining momentum.

The Ifo institute's business climate index, based on a survey of 7,000 executives, climbed to 92 in October from 91.3 the previous month, according a survey of economists. The Munich-based institute will release the report Oct. 23.

The kiwi trimmed earlier losses after Radio New Zealand reported Governor Bollard told parliament the currency's gains are being driven by a weak U.S. dollar and money markets. He said on Sept. 10 he didn't expect to raise rates until "the latter part of 2010."

Traders are betting that New Zealand's central bank will boost its benchmark rate by 2 percentage points over 12 months, according to a Credit Suisse Group AG index based on swaps.

Benchmark interest rates are 2.5 percent in New Zealand and 3.25 percent in Australia, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations' higher-yielding assets. The risk in such trades is that currency market moves will erase profits.

Tax Relief

A Japanese tax break on overseas dividends may underpin yen strength as exporters bring home more profits, according to Daiwa Institute of Research Ltd.

"Dividend profits have grown relative to reinvested earnings since the beginning of this fiscal year, suggesting the tax-system change is making an impact," said Yuji Kameoka, senior economist at Daiwa Institute of Research in Tokyo.

As of March 2007, Japanese companies had accumulated 17 trillion yen ($190 billion) in overseas earnings, based on data from the Trade Ministry. Those profits are now at about 20 trillion yen, according to estimates by Kameoka.

Bonds:

Treasury prices rallied, lowering the yield on the 10-year note to 3.34% from 3.38% late Monday. Treasury prices and yields move in opposite directions.

What to expect:

WEDNESDAY: Weekly mortgage apps; weekly crude inventories; Fed's beige book; Fed's Rosengren speaks; Earnings from Boeing, Eli Lilly, Wells Fargo, Altria, AMR, Continental, Morgan Stanley, USBancorp and eBay

THURSDAY: Weekly jobless claims; leading indicators; Fed's Rosengren, Lockhart and Dudley speak; Earnings from AT&T, Bristol-Myers, McDonald's, Merck, MMM, Travelers, UPS, Schering-Plough, Xerox, Amazon, AmEx, Braodcom and Capital One

FRIDAY: Fed chief Bernanke speaks; existing-home sales; Fed's Kohn speaks; Earnings from Microsoft, Honeywell and Ingersoll-Rand

Core TARP Programs Ending: Geithner

The Obama administration will shutter programs at the heart of a $700 billion financial bailout but remains focused on supporting a fledgling economic recovery, Treasury Secretary Timothy Geithner said on Tuesday.

"We are now at the point where we can begin to wind down the programs that really defined TARP in its initial stages," Geithner told Reuters in an interview, referring to the Troubled Asset Relief Program.

Instead, the administration will focus on "more-targeted programs directed at what are the principal areas where there's still weakness in access to credit," he said, specifically citing housing and small businesses.

While some programs would wind down, Geithner said the administration has not yet made a formal decision on whether to extend the life of the overall bailout program passed its scheduled expiry at the end of this year.

A Treasury official said three programs will be shut down by year-end: the Capital Purchase Program that was used to pump funds into banks, a rejigged version called the Capital Assistance Program that was never tapped and the Targeted Investment Program that supplied $40 billion of additional capital to prop up Citigroup [C  4.43    -0.11  (-2.42%)   ]and Bank of America[BAC  17.02    -0.14  (-0.82%)   ].

The official also said the total of bailout funds dedicated to a Federal Reserve securities loan program and to a public-private investment program for so-called toxic assets would be capped at $30 billion each.

Congress approved the financial rescue fund a year ago as the financial crisis was raging to allow Treasury to buy up troubled assets clogging bank balance sheets, but then-Treasury Secretary Henry Paulson quickly decided pumping money into banks was more critical.

Paulson called leaders from the nine largest U.S. banks to the Treasury and forced them to accept taxpayers funds, fearing that if only the weakest banks were given support they might be tainted in the public's eye.

To date, Treasury has invested $204.64 billion in over 600 banks with the Capital Purchase Program, and some $70.72 billion has been repaid. Insurer American International Group [AIG  40.34    -0.83  (-2.02%)   ] and automakers General Motors and Chrysler [BAC  17.02    -0.14  (-0.82%)   ]have also received government support.

Still Fragile Economy

Geithner said that while many areas of the economy showed signs of recovering from a deep recession, it was too soon to turn attention to reining in huge U.S. budget deficits. He said the administration would lay out plans to trim those deficits in its proposed budget in February.

"For there to be a recovery that's self-sustaining over time ... people have to be confident that we'll bring those deficits down over time and that's a difficult balance," he said, "Right now, the overwhelming imperative we face is still to make sure that we reinforce this nascent recovery."

The U.S. budget shortfall hit a record $1.4 trillion in the fiscal year that ended Sept. 30. At 10 percent of U.S. GDP, it was the largest budget gap since World War Two.

"The only strategy that makes sense is to make it clear that you will do what's necessary to establish conditions for growth" and then "get back to living within your means when you have growth established," Geithner said.

The prospect of continued huge budget deficits has worried some investors and has helped drive the U.S. dollar to 14-month lows against a basket of currencies.

Geithner reiterated that a strong dollar was important to the United States, and said Washington needed to pursue policies that strengthen long-term U.S. economic prospects, including putting the budget on a more sustainable track.    

He suggested that some factors pushing down the dollar were positive. As the global economy regains its footing and investors become more willing to take risks, they lighten up on safe-haven assets like U.S. Treasuries, pressuring the dollar.

Take the Money Please    

Some big Wall Street banks have already been permitted to repay capital injections they received from the government, and Geithner said more want to do so. "I think we're getting at the point where it's quite likely you're going to see significant further repayments," he said.

As banks return to better health, some that received bailout money have ignited public fury by returning to old practices of paying big bonuses to top employees and Geithner said he personally felt the public anger was justified.

"The frustration they have is completely understandable," Geithner said, though he added that there was a move among some firms to tie pay more closely to performance.

"I don't think they've gone far enough yet," he said, but he noted the Federal Reserve will soon propose sweeping rules to reform pay at banks.

Geithner said Congress was making solid progress in overhauling financial market rules -- something the Obama administration has said it wants completed by year-end. But he stressed lawmakers need to act quickly, while memories and anger over the financial crisis, that resulted in part from reckless lending, are still fresh.

Madoff Investors Sue KPMG and Major Banks

Housing Market Recovery Looks Slow in the Making

Yahoo Profit Tops Street Expectations, Sparking Shares

Consumers Buried Paul: 'Beatles Rock Band' a Sales Dud

Warren Buffett: 'Enormous Progress' Over Last Year On Economy

Warren Buffett says we've seen "enormous progress since a year ago" on the economy, but he's not making any specific predictions about what might happen in the next quarter or two.

In a video interview taped a month ago, and released today, Business Wire CEO Cathy Baron Tamraz asks Buffett what he thinks will happen with the economy in the fourth quarter of 2009 and into 2010.

His reply:

"I am not sure about exact quarters or anything of the sort. Who knows about next week or next month? We made enormous progress since a year ago. We had a real panic. And if you didn't panic, you didn't understand what was going on. What happened in September and October of 2008 will particularly be remembered for a long, long time. And while the governmental authorities malign things sometimes, they fortunately did some very right things, very important things. They did them properly, and they kept us from going over the cliff. The fallout from that financial panic hit the regular economy in the fourth quarter like a ton of bricks. We are coming back from that. The patient really went into the emergency room and it won't come out of the hospital entirely for a while."

That's in line with his comments in recent months in which he's said the economy has recovered from last fall's brink of total collapse, but remains very weak with no signs of imminent recovery.

He also repeats his belief that consumer spending won't be increasing for "a while,"  but he remains optimistic the American economic system will work "over time."

The interview (transcript) is designed to draw attention to Business Wire's new web site on the payments industry.  Business Wire, of course, is a Berkshire Hathaway subsidiary.

Wednesday Look Ahead: Choppy Trading Expected Amid Earnings Tidal Wave

Stocks could trade a bit choppy Wednesday, as investors react to a tidal wave of earnings news and watch fluctuations in the dollar and other risk assets.

Wall Street had a blah day Tuesday, with the Dow [.DJI 10041.48    -50.71  (-0.5%)   ]ending 50 points lower at 10,041 and the S&P 500 dipping 6 to 1091. While a handful of Dow components - Coke [KO  54.06    -0.73  (-1.33%)   ]and DuPont [DPT  222.79    -0.72  (-0.32%)   ]among them - reported mostly better than expected profits, the market instead focused on disappointing revenues and weaker than expected housing starts. Caterpillar was a standout, jumping sharply on stunningly better earnings but softer revenues.

In the after hours, Yahoo[YHOO  17.20    -0.02  (-0.12%)   ] added some excitement, with its stock trading higher after it reported better-than-expected earnings of $187 million or $0.13 per share, on weaker sales of $1.13 billion. Tech was the only one of the 10 S&P sectors Tuesday that gained, rising a fraction of a percent on Apple's [AAPL  198.76    8.90  (+4.69%)   ]good earnings news.

The Fed's beige book is the big economic news for markets Wednesday at 2 p.m., but there are also a bunch of major earnings before the bell, including Boeing, Wells Fargo, Morgan Stanley, Eli Lilly, Altria, AMR, Fiat, Freeport McMoran, US Bancorp, Northern Trust and Continental Airlines. After the bell, Amgen, EBay, Equifax, Citrix, Fidelity National, Lam Research, Noble, and Novellus report. 

Reporting CompaniesBA51.90-1.55-2.9%8,055,689WSC324.65-6.35-1.92%5,301MS32.54-0.57-1.72%15,069,095LLY35.25-0.03-0.09%11,635,338MO18.670.32+1.74%17,145,866AMR7.680.23+3.09%13,008,469FIATY16.75-0.15-0.89%22,047FCX78.70-0.30-0.38%13,541,344NTRS57.46-0.82-1.41%2,467,811CAL15.940.25+1.59%8,069,326AMGN58.13-2.11-3.5%9,474,489EBAY25.06-0.09-0.36%13,406,303EFX28.60-0.33-1.14%1,583,553CTXS41.61-0.73-1.72%1,898,570FNF15.860.05+0.32%2,533,783NE42.56-0.63-1.46%3,651,404NVLS21.830.04+0.18%5,136,845

Earnings have been mostly a positive catalyst for the stock market this market. As of Tuesday afternoon, 96 S&P 500 companies had reported earnings and of those,  79 percent had better than expected earnings. Actual earnings are down 12.7 percent and have come in 19.1 percent above forecasts, according to Thomson Reuters.

"It could be choppy and trend lower," said Tim Smalls of Execution LLC of Wednesday's stock market.

"There's a lot of reason for the S and P to run out of steam at these levels. There's historical reason, there's technical reasons," he said. "After this week, you have the majority of the S and P reporting earnings so there's not much to look forward to. Today and tomorrow are really the big days."

As stocks waffled Tuesday, the dollar firmed slightly against other currencies and bonds found buyers. Commodities traded lower, with oil slipping $0.52 per barrel to $79.09 and gold nearly flat at $1057.80, down $0.50 per troy ounce. Oil could be volatile Wednesday after 10:30 a.m. inventory data. API data Tuesday afternoon weighed on oil prices, after the data showed oil stockpiles rose more than expected last week.

Treasurys found buyers across the curve but the bigger moves were in shorter duration securities. David Ader, Treasury strategist with CRT Capital, said the market appears to be moving on the expectation of new issuance next week, rather than other news.

"We have no auctions this week. The next bout of supply is 2s, 5s and 7s (year notes) so to find the curve flattening between 10s and 30s, then everything makes a bit of sense purely from a supply consideration. The market is relatively thin," he said.

Watching Brazil

Brazil's stock market fell nearly 3 percent and its currency lost 2.2 percent Tuesday, after the Brazilian government moved to put a 2 percent tax on foreign purchases of stocks and fixed income instruments, a move guaranteed to chill some of the excitement about its markets.

Win Thin, currency strategist with Brown Brothers Harriman, said the tax is old news in Brazil as it's been seen before. The government had reduced the tax in October, 2008 to zero from 1.5 percent, as capital fled emerging markets in the financial crisis. Brazil officials said they imposed the tax to stem the real's appreciation and avoid a bubble in stock prices.

Thin said Brazil is not alone in being worried about the strength of its currency against the U.S. dollar. He noted that the Bank of Canada warned its currency is getting too strong, a comment that triggered a decline in the Canadian dollar Tuesday to its lowest level since Oct. 9.

Thin said he sees Tuesday's trade against risk assets as temporary, and the trade should reverse and the dollar should continue its decline.

Michael Darda, economist with MKM Partners, said it makes sense to take profits in Brazilian stocks, which are up nearly 80 percent this year. However, he said in a note Tuesday, he would not yet consider the market a "short."

"..We do believe other emerging markets now offer a better risk/reward ratio," he wrote. Brazilian equities have outperformed the iShares Emerging Market Equity Index (EEM) by 1700 bps, he points out.

Darda said the tax doesn't signal the end to foreign investment in Brazil, but it will be less attractive than other markets. "We thus recommend taking profits in Brazil and redeploying them into positions in Russia, Africa/Middle East, India and/or  various fast-growth East Asian nations."

What Else to Watch

The Labor Department releases its monthly jobs report, highlighting data from individual states, at 10 a.m.

Boston Fed President Eric Rosengren makes opening remarks at 4:30 p.m. at the Boston Fed's annual economic conference in Chatham, Mass.

The Senate Committee on Homeland Security and Governmental Affairs holds a hearing on monitoring the nation's response to swine flu.

The SEC holds a hearing to bring transparency to trading in Wall Street's dark pools. —

Fed Names Supervision Chief Who Aided Treasury Plan

The Federal Reserve named Patrick Parkinson to lead bank supervision, promoting a financial- markets specialist who helped craft the U.S. Treasury Department's plan to overhaul the industry's regulatory system.

The appointment of Parkinson, 57, who previously served as deputy director of research and statistics, is effective immediately, the Fed said today in a statement in Washington. Parkinson was on detail to the Treasury from late January to early July. He succeeds Roger Cole, who retired in August.

The Treasury plan proposes expanding the Fed's oversight to include systemically important financial firms, a move opposed by lawmakers including Senate Banking Committee Chairman Christopher Dodd. At the same time, Parkinson will help implement the Fed's own changes to bank examinations, which aim to identify potential threats across the industry.

Fed Chairman Ben S. Bernanke said in the statement that Parkinson has "deep expertise in financial markets" and will help the Fed determine how banks are "interconnected and are integrated into the financial system and the economy. Pat is the right person to lead the division as we develop these new methods."

Parkinson, a Ph.D. economist, joined the Fed in 1980 and has spent most of his career in the research and statistics division. He was manager of the bank-supervision unit's financial analysis section from 1986 to 1988. From 1993 to 2008, he served as the Fed chairman's principal staff adviser on issues considered by the President's Working Group on Financial Markets, the Fed said.

Help Oversee

Now he will be in charge of a division that supervises 5,757 U.S. bank holding companies as well as 862 state-chartered banks. The unit had about 262 employees at the end of 2008, and Parkinson will help oversee 2,600 employees in supervision and regulation throughout the 12 Fed district banks across the U.S.

"He's going to play a significant role in shaping the supervisory response to the crisis," said Gil Schwartz, a Washington banking attorney who worked with Parkinson at the Fed. "He does have quite a challenge ahead of him. Putting together a new financial structure in terms of supervision and regulation is going to require a lot of effort."

Parkinson is "very sharp, very smart," Schwartz said.

The Obama administration's financial-regulation plan, in addition to expanding the Fed's authority, would create an agency for monitoring consumer financial products and bring hedge and private equity funds under federal scrutiny. Parts of the proposal, released in June, are moving forward in the House, while the Senate has yet to fully take up legislation.

More Power

While Dodd opposes giving the Fed more power, Alabama Senator Richard Shelby, the banking panel's top Republican, said in August that the Fed's "failures as a bank regulator" should be examined by the committee as part of Bernanke's nomination to a second term.

Fed Governor Daniel Tarullo said this year the central bank's overhaul of supervision is aimed at providing an "independent perspective for what is going on among big institutions, but also in the system." It goes beyond the previous reliance on analysis of bank examiners deployed by the Fed's district banks, using the staff of the Fed's board in Washington as a new layer of oversight.

The existing structure relies on hundreds of examiners from the 12 district banks, from San Francisco to Boston, visiting lenders overseen by the central bank. Examiners make recommendations on individual banks rather than focusing on the system as a whole.

Parkinson may also supervise the Fed's plans to regulate bankers' compensation, which may concentrate on about 28 of the biggest bank holding companies and focus on the firms' safety and soundness. Bernanke said Oct. 1 that the Fed will soon issue the regulatory directive for public comment, seeking to prevent employees' and managers' pay from fueling too much risk-taking.

Esther George, the No. 2 official at the Kansas City Fed bank, had been serving as acting director of the division.

Asset-price bubble risk returns amid loose policy

The trillions of dollars in extra cash pumped into the global economy to ease the credit crisis could threaten a new asset-price bubble, finance officials say, but it's not yet time to sound the alarm bells.

"One of the things I've learned myself during this crisis is that monetary policy needs to be more sensitive and more attuned to the possibility of asset bubbles," San Francisco Federal Reserve President Janet Yellen told reporters Tuesday at a conference on Asia economic policy.

"We certainly need to be on top of understanding what vulnerabilities are developing in the financial system," she said. Read more on Yellen comments.

The steep rebound in stock markets and currencies of emerging markets, particularly those that export commodities used by industrial China, has raised fears some of the same drivers of the most recent crisis are again developing.

Many economists say a prolonged period of low interest rates in the U.S., combined with huge savings in China and elsewhere, helped create a sea of liquidity that led to an unsustainable run-up in real-estate prices and ultra-low yields on credit.

Fed Chairman Ben Bernanke earlier this week warned of a return of global imbalances, a term that refers to the uneven relationship between large and increasing current account deficits run by developed countries such as the U.S., and trade surpluses in export nations such as China. See full story on Bernanke remarks.

Andrew Sheng, chief adviser to the China Banking Regulatory Commission, said Asia is again seeing increased carry trade and capital flows.

"The spillover effects from large economies are still very complex," Sheng said

On Tuesday, the Brazilian real tumbled 1.6% after Brazil imposed a 2% on foreign purchases of fixed-income securities and equities, effective Tuesday. Guido Mantega, Brazil's finance minister, reportedly said that the government wants to reign in "speculative" investment and to "favor production." See full story on Brazilian investment tax.

"It points out the kind of problems that have been raised by the rebound in capital flows," said John Lipsky, first deputy managing director of the International Monetary Fund, in answer to a question about Brazil's move.

Before the new tax was announced, Brazil's currency had gained about 38% against the dollar since the start of this year, and the Bovespa stock index had risen nearly 80%.

In Asia, Korea's Kospi stock index has jumped 55% since early March, when many major stock markets began their recovery, while the Shanghai Composite Index has gained 59% since the start of the year.

Real estate prices in Asia have also surged. Regulators have started to curb what they see as speculative practices. Earlier this month, the Korean government asked non-bank lenders to raise debt-to-income ratios on mortgages in Seoul.

Some economists, such as such as Maurice Obstfeld of University of California, Berkeley, and Kenneth Rogoff of Harvard University maintain that global imbalances during the first part of the decade reflected and magnified underlying problems in the global economy that led to the past crisis.

In a recent paper, they argued a global environment of low interest rates contributed to the housing and credit bubbles that burst with such devastation last year. See story on Obstfeld-Rogoff paper.

Yellen said it's "logical and to be expected" that when there's a gap between interest rates across countries, and nations are recovering from a downturn at different rates, capital flows will rebound as investors seek higher yields.

She added, however, that she's "not by any means ready to call this a new dangerous asset-price bubble."

Asia:

Asian stocks declined, led by materials and consumer companies, on worse-than-forecast U.S. housing starts and declines in commodity prices.

James Hardie Industries NV, the biggest seller of home siding in the U.S., lost 2.4 percent in Sydney. BHP Billiton Ltd., the world's largest mining company, sank 1.1 percent as a gauge of metals in London fell from a two-month high. Toshiba Corp., the world's second-biggest maker of flash memory chips, gained 2.5 percent after U.S. rival SanDisk Corp. forecast sales that beat analysts' estimates.

The MSCI Asia Pacific Index lost 0.3 percent to 120.76 as of 10:10 a.m. Tokyo time. The gauge has surged 71 percent from a five-year low on March 9 amid signs the global economy is rebounding from the worst slowdown since World War II.

"The economic recovery is still intact, but data is showing that the pace of the rebound has started to slacken," said Kiyoshi Ishigane, a strategist at Mitsubishi UFJ Asset Management Co., which oversees about $56 billion. "Company profits are gradually returning, but we need to discern whether stock prices already reflect the improvement or not."

Japan's Nikkei 225 Stock Average fell 0.2 percent, while Australia's S&P/ASX 200 Index dropped 0.4 percent.

Futures on the Standard & Poor's 500 Index dropped 0.1 percent. The gauge sank 0.6 percent yesterday after a Commerce Department report showed housing starts rose 0.5 percent in September, missing economists' estimates.

James Hardie

James Hardie lost 2.4 percent to A$7.39. Sony Corp., which makes the PlayStation 3 game console, fell 1.1 percent to 2,625 yen on concern demand for electronic products will fall in the U.S. Shin-Etsu Chemical Co., which makes silicon wafers used in semiconductors, sank 1.3 percent to 5,350 yen.

Better-than-estimated economic and earnings figures have driven the MSCI Asia Pacific Index's seven-month rally. Stocks in the gauge are priced at 23 times estimated earnings, compared with an average of 18 times in the past three years.

BHP, Australia's largest oil producer, dropped 1 percent to A$39.51. Crude oil for December delivery fell for the first time in nine days yesterday, losing 0.5 percent to $79.09 a barrel in New York. The London Metals Index, a measure of six metals including copper and zinc, fell 1 percent, retreating from a two-month high.

Toshiba gained 2.7 percent to 539 yen. After the close of U.S. trading, SanDisk, the biggest maker of flash-memory cards used in digital cameras and mobile phones, said fourth-quarter sales will probably be between $1.1 billion and $1.2 billion, compared with analysts' estimates for $835.4 million. The shares surged 9.5 percent in late trading.

Nikkei 225 10,305.26     -31.58 ( - 0.31%).(08.37 AM IST)

Japan's Nikkei stock average lost 0.3 percent on Wednesday in thin trade as chip-linked shares such as Advantest Corp (6857.T) fell after anaemic U.S. home and producer price data prompted investors to book profits on recent gains.

Shipping lines climbed after a key shipping index rose to a more than two-month high, while heavy machinery maker IHI Corp (7013.T) rose on a media report of upbeat earnings as the start of Japan's results season nears.

New construction of U.S. homes rose less than expected in September, and U.S. producer prices posted an unexpected decline, raising concerns about the pace of economic recovery.

But analysts warned about making too much of the data, noting that global markets have been ripe for profit-taking after recent gains helped take them far from March lows. Even the Nikkei, a relative laggard, has risen some 47 percent.

"The data was really used as nothing more than an excuse for investors to lock in profits and it doesn't signal a change in trends for the markets," said Hideyuki Ishiguro, a supervisor in the investment advisory section of Okasan Securities. "The overall direction is still up, but stocks are likely to take a bit of a breather today ahead of the Chinese data tomorrow and as Japanese earnings get underway."

The benchmark Nikkei .N225 slipped 31.58 points to 10,305.26 after hitting a three-week closing high on Tuesday, while the broader Topix fell 0.4 percent to 910.01.

China's GDP figures for the third quarter are due on Thursday, with economists polled by Reuters expecting year-on-year growth of 8.9 percent, while Japan's earnings season swings into full gear next week. "While earnings are expected to be good, solid figures have already been factored in. So we may not get the lift we otherwise might from this without some really positive surprises," said Hiroaki Kuramochi, equity manager at Tokai Tokyo Securities. JAL UP, CHIPS FALL

Struggling Japan Airlines Corp (9205.T) (JAL) rose 5.1 percent to 124 yen, bringing its total gains this week close to 24 percent after falling 26 percent the week before.

A government-appointed task force crafting a revival plan for JAL is seeking to double fresh capital for the carrier to $3.3 billion by tapping public and private funds, the Nikkei business daily said on Wednesday.

Chip tester maker Advantest fell 2.7 percent to 2,380 yen and chip equipment maker Tokyo Electron (8035.T) lost 2.4 percent to 5,630 yen. Nikon Corp (7731.T), a maker of steppers, lost 1.2 percent to 1,763 yen.

Mitsubishi Corp (8058.T) and other commodity-linked shares slipped after commodity prices fell, with the Reuters/Jefferies CRB commodity index .CRB down on Tuesday for the first time in seven sessions. Oil prices also edged lower CLc1.

Mitsubishi, Japan's largest trading house, shed 0.3 percent to 2,035 yen, while fellow trader Itochu Corp (8001.T) lost 0.7 percent to 610 yen.

Shipping firms advanced after the Baltic Exchange's main sea freight index .BADI, which tracks rates to ship dry commodities, rose to over a two-month high on Tuesday helped by stronger demand for coal and iron ore cargoes.

Mitsui O.S.K. Lines (9104.T) rose 1.6 percent to 576 yen, Kawasaki Kisen (9107.T) jumped 2.7 percent to 381 yen and Nippon Yusen KK (9101.T) added 2.5 percent to 369 yen. IHI Corp jumped 3.4 percent to 181 yen after the Nikkei business daily said it was likely to report around 15 billion yen ($166 million) in operating profit for the April-September period.

Trade was light on the Tokyo exchange's first section, with 823 million shares changing hands, compared with last week's morning average of 956 million.

Declining stocks outnumbered advancing ones by more than 2 to 1.

HSI 22231.49 -153.47 -0.69%.(08.40 AM IST)

Hong Kong, China fall amid losses in metals stocks

Hong Kong's Hang Seng Index edged 0.6% lower to 22,250.18 in early action Wednesday, while the Hang Seng China Enterprises Index shed 0.7% to 12,947.68, with many metals-related stocks losing ground as futures prices for gold slipped on Globex. Shares of Aluminum Corp. of China /quotes/comstock/22h!e:2600 (HK:2600 9.10, -0.13, -1.41%) /quotes/comstock/13*!ach/quotes/nls/ach (ACH 29.47, -0.40, -1.34%) was down 1.4% in Hong Kong, and Angang Steel Co. /quotes/comstock/22h!e:347 (HK:347 16.18, -0.12, -0.74%) /quotes/comstock/11i!anggf (ANGGF 1.95, -0.05, -2.50%) was down 1.6%. In mainland China, the Shanghai Composite was down 0.3%, with Jiangxi Copper Ltd. /quotes/comstock/28c!e:600362 (CN:600362 41.38, -0.34, -0.81%) /quotes/comstock/22h!e:358 (HK:358 18.76, -0.10, -0.53%) /quotes/comstock/11i!jiaxf (JIAXF 2.35, -2.35, -50.00%) losing 1.8% and Shandong Gold-Mining Co. /quotes/comstock/28c!e:600547 (CN:600547 69.71, -1.90, -2.65%) falling 2.8%.

Chinese stocks open mixed on Wed

Chinese stocks opened mixed on Wednesday morning.

The benchmark Shanghai Composite Index, which covers both A shares and B shares on the Shanghai Stock Exchange, opened at 3,080.52 points, down 0.13% or 3.93 points from the previous closing.

The Shenzhen Component Index on the smaller Shenzhen Stock Exchange opened 0.06% or 7.49 points higher at 12,683.73 points.

Lumena Resources to raise US$250 mln via global bond offering (21 Oct)

Chairman Gordon Wu raises stake in Hopewell Holdings to 27.47% (21 Oct) 

Hang Seng Index opens 85 points lower on Wed (21 Oct) 

Hang Lung Properties to invest more in mainland (21 Oct) 

Zijin Mining buys remaining 50% stake in Zijin Copper (21 Oct) 

China-Russia trade volume down 34.9% in Jan-Sep (21 Oct) 

Chinese stocks open mixed on Wed (21 Oct) 

CLP Holdings' revenue down 11.9% in Jan-Sep (21 Oct)

Chunghwa Telecom, Microsoft to sign cloud-computing MOU (21 Oct)

Tyntek's board approves Ubilux acquisition proposal (21 Oct) 

Fosun Pharmaceutical forecasts 250% growth in net profit for Jan-Sep (21 Oct) 

China's Minsheng Bank Q3 net profit hits RMB 2.83 bln (21 Oct) 

Baidu signs wireless search agreement with China Unicom (21 Oct)

Trade fair sends strong signal of export upturn

China's 'Growth on Steroids' Raises Danger of Renewed Slowdown

China's stimulus-induced lending binge probably propelled growth in the third quarter to its fastest pace in a year. Now, policy makers have to figure out how to wean the economy off state support.

The country's rebound has been powered by 4 trillion yuan ($586 billion) of spending on railways, roads, power plants and public housing. The program ends next year, forcing Premier Wen Jiabao to find new ways to sustain the expansion with increased consumer spending and the financing of small businesses.

"This has been growth on steroids," said Michael Pettis, a Peking University finance professor and former head of emerging markets at Bear Stearns Cos. "The question now is how to stop pumping so much money into the system without a sharp reduction in growth."

State-directed support will make up more than four-fifths of growth this year, says the World Bank, spurring record iron- ore production at Rio Tinto Group and car sales in China at Volkswagen AG. An exit from the stimulus won't be easy without unnerving investors: A plunge in July loan growth sent the Shanghai Composite Index down more than 20 percent in August.

Extending the stimulus for too long risks the diversion of funds into stocks and real estate, an erosion of bank asset quality and inflationary pressures, the Asian Development Bank said in a report last month.

"Such a scenario might trigger a round of severe monetary tightening in the medium term that would pull growth down again," the lender said.

Cars and Property

     The state-driven credit boom, which led to a record $1.27 trillion in new loans in the first nine months, the stimulus plan and resulting growth in car and property sales will help the economy expand 11.2 percent in the fourth quarter, according to Frankfurt-based Deutsche Bank AG. That follows a 7.9 percent expansion in the second quarter of this year, the first acceleration in growth since the last three months of 2006.

Industrial output probably grew 13.2 percent in September and investment in properties and factories surged 33.1 percent in the first nine months, pushing gross domestic product growth to 9 percent in the third quarter. It was the fastest pace since the third quarter of last year, according to the median estimate of 34 economists surveyed by Bloomberg News. The data are due for release tomorrow.

Figures this week will probably show no signs of inflation, allowing the People's Bank of China to keep in place what it calls its "moderately loose" monetary policy. China will stick to that policy, guide reasonable loan growth to boost domestic demand and further cement the nation's economic recovery, the central bank said Sept. 29.

Consumer Prices

Consumer prices dropped an estimated 0.8 percent in September, according to the survey.

Retail sales rose 15.5 percent last month, the fastest pace since January, according to the data survey. Car sales surged 84 percent to more than 1 million units for the first time, putting China on course to overtake the U.S. this year as the biggest market for sales of new cars.

The stimulus, record lending, tax cuts and subsidies may help push China's imports 30 percent higher to $313 billion this quarter, according to Zurich-based Credit Suisse Group AG. Iron ore imports jumped to a record 64.6 million metric tons last month while copper imports rose 23 percent.

China's demand for goods from overseas can play "a critical role in some locomotive way for the world," Jim O'Neill, chief economist at Goldman Sachs Group Inc. in London, said in a Sept. 2 research note.

Loan Growth

The lending boom, equivalent to about 50 percent of China's GDP in the first half, drove public and private investment in factories and properties 33 percent higher in the first eight months, helping restore investor confidence in stocks and property after the start of the financial crisis.

The Shanghai index has soared 69 percent this year as government-influenced spending helped growth rebound from 6.1 percent in the first quarter, the slowest pace of expansion in almost a decade.

Wolfsburg, Germany-based Volkswagen, the biggest overseas carmaker in China, sold 150,000 cars last month, a monthly record, as sales for the first nine months surged 37 percent. Car sales were buoyed after the government halved sales taxes and announced 5 billion yuan in subsidies to help rural residents to buy vehicles. Volkswagen is investing 4 billion euros ($5.9 billion) to expand capacity in China through 2011.

Rio Tinto

"China is the steam engine of the world economy," Volkswagen sales chief Detlef Wittig said in a Sept. 25 interview in Frankfurt. "The lust for mobility there seems almost bottomless. We're very well positioned there and will keep investing to secure our share of the market."

Iron-ore production at London-based Rio Tinto, the world's third-largest mining company, rose 12 percent in the third quarter to a record 47.5 million tons on demand from steelmakers in China, the company said in an Oct. 14 statement.

The effect of stimulus spending will taper off starting in mid-2010; the overall impact will be less than half what it was this year, said Wang Tao, a UBS AG economist in Beijing.

On the World Bank's list for measures to reduce dependence on investment-led growth are: boosting spending on health, education and social welfare to aid low-income earners and reduce their reluctance to consume; providing greater funding for small- and medium-size enterprises; and allowing more flexibility for the yuan to appreciate, making imports cheaper.

Avoiding Instability

     "Keeping the Chinese economy growing is very important for employment generation and to avoid social instability," said Yolanda Fernandez Lommen, chief China economist at the ADB in Beijing. "The easy part has been done. The real challenge is ahead."

By developing service industries and ensuring easier access to consumer products and credit, China can boost domestic consumption by $2.2 trillion, or more than France's annual output, by 2025, the McKinsey Global Institute said in an Aug. 21 report.

Some areas of the economy may emerge as new drivers of growth even as stimulus and new lending slow. Net exports may contribute 0.5 percentage point to next year's expansion after slashing more than 3 percentage points from this year's GDP rise, said UBS's Wang.

A rebound in property construction, which contributes about a quarter of urban fixed-asset investment, will also pick up some of the slack in 2010, said Wang. Property sales jumped 73.4 percent in the first nine months of 2009 from a year earlier to 2.75 trillion yuan.

China may still have to get used to a lower average annual growth rate as reduced demand from Western nations slows exports. The World Bank estimates 2 percentage points may be shaved off the average 10 percent yearly growth recorded over the past decade, the ADB envisions a trajectory of 8 percent to 9 percent and Pettis says the economy may have to adjust to a trend growth rate of 5 percent to 7 percent.

"The government has been postponing the difficult and painful reforms," said Fernandez Lommen. "It's a huge task ahead."
 

INVESTMENT VIEW
Sugar-Sweet And Smiling
 
 
Sugar inventories are likely to fall to an all time low of 1.3 months of forward demand in SY10; this is despite an assumed 30% rebound in sugar production and an unprecedented 3mt of imports notwithstanding. The tight demand supply should last well into SY11; UP based players are best bets in the up cycle given strong leverage to sugar prices.  Bajaj Hindustan, Balrampur Chini, Dhampur and Shree Renuka Sugars will OUTPERFORM.

India's tightest sugar demand-supply

Expect India's sugar production to rebound 30% to 19mt in SY-Sept-10 after falling 44% in SY09 underpinned by a 0.5m ha increase in cane acreage (the second highest YoY increase ever) and a 90bps rise in sugar recoveries to 10.1%.

Increased imports of 3mt (an all time high) on the back of the recent decision of the government to allow duty free imports.

Sugar inventories will continue to fall, nonetheless, to 2.6mt by Sep-10. At only 1.3 months of forward demand, this will be its lowest level in the last three decades.

Demand-supply will remain tight in SY11 as well implying a 24-30 month up-cycle.

Stronger balance sheets

The last down-cycle had dented investor confidence but this was accentuated by rapid expansions and the resultant higher capital charges (depreciation, interest).

With the companies out of the capex cycle and profitability rebounding, free cash flow should rise and balance sheets will get stronger; the net debt/ equity for the main Sugar players of UP will fall to 50% by SY11.

Further, by-product integration projects would also reduce future cyclicality.

Sugar gross margins to rise above Rs8/kg

The tight demand-supply should reflect in higher sugar prices but the underlying cyclicality is reflected more in sugar gross margins (sugar price – cane costs). 

This allows the players to pass on higher cane costs in an up-cycle; this should dampen the impact of irrational cane cost increases over the next two years.

Consequently, normative margins will rise to Rs8/kg in SY10; this is 15-20% higher than the previous up cycle given the tighter demand-supply.

(Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.)
 

 

 FUNDS DATA

FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
FII	20-Oct-2009	3079.01	2803.12	275.89

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
DII	20-Oct-2009	1195.77	1336.57	-140.8

 

SPOT LEVELS

	5114.45	( -0.53 %)	-27.35
		1	2	3
Resistance		5163.38	5212.32	5242.68
Support		5084.08	5053.72	5004.78

	17223.01		( -0.59 %)	-103.00
			1	2	3
Resistance			17391.83	17560.66	17664.05
Support			17119.61	17016.22	16847.39

 

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Arvind Parekh

+ 91 98432 32381