Weekly Market Outkook for 26-30th Oct 2009

Strong & Weak  futures  26th Oct Monday
This is list of 10 strong futures:

Yes Bank, Bajaj Hind, Indusind Bank, Asian Paints, Polaris, Andhra Bank, Hind Zinc, Dena Bank, Allahabad Bank & Jindal Steel. 

And this is list of 10 Weak futures:

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

SPOT LEVELS FOR MONDAY 26TH OCT

	4997.05	( 0.17 %)	8.45
		1	2	3
Resistance		5040.25	5083.45	5111.95
Support		4968.55	4940.05	4896.85

	16810.81		( 0.13 %)	21.07
			1	2	3
Resistance			16956.65	17102.50	17198.22
Support			16715.08	16619.36	16473.51

 

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	23-Oct-2009	2731.87	3210.67	-478.8

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
DII	23-Oct-2009	1352.82	1179.83	172.99

 

Index Outlook: Commodities steal the thunder
 

Sensex (16,810.8)

Market participants straggling in to trade last Tuesday were shaken out of their festive stupor by stocks doing a volte-face and heading southwards. Sensex ended the week below 17,000 while Nifty closed below 5,000. Investors should brace themselves for a roller-coaster ride next week as October derivative contracts roll into expiry against the back-drop of the RBI's monetary policy review and the continuing flow of earnings announcements.

Attention shifted from equities to commodities last week as a weakening dollar sent most commodity prices sky-rocketing. CRB Index that tracks the movement of commodities rose above 470 as crude topped $80 a barrel and gold climbed above $1,060 an ounce again. We retain the view that the CRB index can rise to 480 or 518 before this leg of the rally terminates. The implication for equities would be that the global funds can start chasing commodities again, allowing stocks to take a breather.

Volumes were tepid and breadth too was indifferent through last week. FIIs were net sellers in the second half of the week while domestic institutional investors were net sellers all through.

Interestingly, though the Sensex moved beyond the 61.8 per cent retracement of the previous fall at 16200, BSE 500 has only just reached this level and is facing difficulty moving beyond it. BSE mid-cap index has retraced only half of last year's losses while the small-cap index has not even reached the half-way mark yet in recouping its losses. Oscillators continue to advise caution. Three consecutive down closes last week resulted in the 14-day relative strength index declining below 55. Weekly momentum indicators continue to exhibit negative divergence, but they are moving sideways since August. The Sensex has alternated monthly gains with losses since June this year. October appears set to continue this pattern since the index is already down over 300 points this month.

A five-wave pattern did come to an end last week and the Sensex is currently in a corrective mode. Since the up-trend that has been in place over the last two months is currently being corrected, the decline can persist for a couple of weeks more. But possible levels where this correction can halt are 16,650 and 16,419, which are not very far away.

A rebound above these levels can make the correction take the shape of a sideways move between 16,400 and 17,500.

The move outlined above will retain the bullish medium term perspective and keep open the possibility of a surge to the 17,800 or 18,000 before the rally from 13,219 terminates. Close below 16,000 is needed to signal the end of the medium term up-trend.

A rocky ride is expected next week as the presence of a slew of supports in the vicinity will provide the platforms from where bulls can stage a recovery. The Sensex can decline to 16,650, 16,482 or 16,419 in the early part of the week.

A rebound is possible from either of these levels. But a decline below 16,419 will take the index to the key medium term support of 16,230. Resistances will be at 17,198 and 17,500. Bears will have the upper hand as long as the index trades below the first resistance.

Nifty (4,997)

The Nifty declined from the peak of 5,182 recorded on Tuesday to end the week 3 per cent lower.

The short-term trend in the index is down and traders can initiate short positions in rallies with a stop at 5,100.

Move above 5,100 will turn the short-term view neutral again. It, however, needs to be borne in mind that there might not be a deep decline in the near term since the index has the immediate targets of 4,926 and 4,862.

The 50-day moving average at 4,805 will also be a reliable support in declines and traders holding short positions need to be extra vigilant of reversals from these levels.

As explained last week, one leg of the up-move from August 19 low could have ended in the Muhurat session and the correction that follows is expected to last at least couple of weeks more. The cut can however be shallow and halt in the zone between 4,850 and 4,900.

The intermediate term view for the Nifty stays positive as long as it holds above 4,700. But a sideways move between 4,800 and 5,300 is envisaged for a few more weeks as the move that began in July completes itself.

Global Cues

Equities had a turbulent week but most benchmarks held on to the gains made in the previous weeks. Markets with greater concentration of commodity stocks performed well .

Dow appeared a trifle nervous at the 10,000 mark and closed the week marginally in the red. But the short and medium-term trends in the index continue to be up.

Close below 9,830 is required to turn the short-term outlook negative for this index.

If this level holds, medium-term target remains between 10,350 and 10,500.

Since crude oil has moved beyond the resistance at $75, next target for the commodity is $90. 1:1 extrapolation of the move from February lows makes even $100 a barrel possible soon.

Pivotals: Reliance Industries (Rs 2047.3)

Muhurat session on the Indian exchanges saw the RIL stock whizzing up to a high of Rs 2,304 but it could not sustain there for long and closed the session at Rs 2,224. The slide that followed in the stock reiterates the importance of the resistance at Rs 2,200. We retain a cautious medium term view for this stock and the downward targets for this period stay at Rs 1,727 or Rs 1,667. We need to get an emphatic close above Rs 2,200 to mitigate this view.

The short-term trend in the stock is down and it has closed below its 50-day moving average as well as the previous trough at Rs 2,070. Traders can go short in rallies with a stop at Rs 2,115. Downward targets are Rs 1,930 and Rs 1,880.

SBI (Rs 2,353.8)

SBI moved past its previous life-time high of Rs 2,395 to record an intra-week peak of Rs 2,500. The evening star pattern seen in the week ended October 9 turned out to be a failure and the intermediate term up-trend appears set to unfurl to the second target at Rs 2,553.

However, failure to hold above the previous high at Rs 2,395 and a weekly close below this level is a negative.

The medium-term trend will reverse if the stock closes below Rs 2,050.

The stock is currently in a short-term decline. But it is halting above the first support at Rs 2,330. Traders can hold their longs until this level holds. Decline below this level will imply that the stock is heading towards Rs 2,278 and Rs 2,225. Resistances for the week would be at Rs 2,430 and Rs 2,500.

Tata Steel (Rs 531.0)

Tata Steel made a false break-out above the medium-term target of Rs 560 to record a high of Rs 600 in the Muhurat session. But the subsequent decline implies that this level (Rs 560) remains a formidable resistance. If we extrapolate the move from March lows, the targets for Tata Steel are Rs 540 and then Rs 676.

We retain the view that traders ought to remain cautious until the stock records another close above Rs 580. The medium-term trend in the stock will, however, reverse only if the stock records a close below Rs 495.

Short term supports for the stock are at Rs 528 and Rs 485. Resistances for the week would be Rs 572 and Rs 600. Failure to move above the first resistance would be the cue for traders to initiate fresh short positions.

Infosys (Rs 2,260.2)

Infosys has been in a gentle decline over the last month but it is too early to decide if this is the onset of a medium-term decline or just a short-term pull-back. The decline can continue to Rs 2,120 in the near-term. Investors need to start worrying only on a close below this support. Subsequent targets for the stock are Rs 1,936 or Rs 1,906.

Resistances in the week ahead would be at Rs 2,316 and Rs 2,415. Failure to move above the first resistance will imply that the weakness will prolong.

ONGC (Rs 1,175.1)

ONGC too failed to achieve the break-out targets of Rs 1,350 despite the strong move above Rs 1,230 in the pre-Diwali week.

The decline below this level last week denotes weakness and a possible move towards Rs 1,135 in the near-term.

The medium-term view will however be roiled only on a strong close below Rs 1,125. Subsequent medium-term target would be Rs 993.

Maruti Suzuki (Rs 1,517.3)

Maruti Suzuki is in a pronounced short-term down trend though it is halting at the key near-term support at Rs 1,465. Short term resistances are at Rs 1,570 and Rs 1,640. Traders can initiate fresh short positions if the stock fails to clear the first resistance. Downward targets are Rs 1,447 and Rs 1,386. —

 

Index Strategy: Playing time value to your advantage

It is not uncommon to see stock prices and indices trade erratically during the derivative expiry week. While the volatility in the markets during such times may yield many profit opportunities, trading in options becomes unusually difficult, as the option premiums tend to erode. So while this would make buying current month options foolhardy, going long in the next month options too doesn't appear very prudent now. Traders can therefore consider a short strangle. But before we go about it explaining it, it merits note that though this strategy limits your returns it involves taking significantly higher risk. And since it involves selling of options, there is a high margin requirement too. The strategy therefore may best be left for traders with a high-risk appetite and deep pockets.

The Spread

The short strangle can be set by selling Nifty Oct 5100 call that closed at Rs 19.7 and Nifty Oct 4900 put, which closed at Rs 20.9. The strategy would entail an initial credit of Rs 40.6 per share, which is also the maximum profit that can be made. The initial credit can be pocketed only if the index closes Thursday between the strikes prices of the options sold.

The strategy would turn out of money if Nifty breaches the upper or lower breakeven points. The breakeven for this spread can be calculated thus:

Upper breakeven: Call strike price + net premium received. In this case, it would be 5140.6. This means your spread would become loss making if Nifty moves beyond 5140.

Lower breakeven: Strike price – net premium received. In this case, the lower breakeven point would be 4860, breaching which the spread would be out of money.

Exit options

If anytime before expiry, Nifty breaches either of the breakeven points you can consider a premature closure of the spread to contain losses.

Stocks Strategy: Weak outlook for Tata Steel, GAIL

Tata Steel (530): The Tata Steel stock is likely to see further correction if it dips below its crucial support at 520. In that event, the stock can reach 495 first and then even 445, if the sentiment remains weak. The stock finds strong resistance at 555. As long as it stays below this level, the chances of the stock reaching the downside target levels appear bright.

Tata Steel futures (market lot 764) saw a rollover of 21 per cent, which is low compared with the previous occasions. Besides, accumulation of open position on Friday in the October series itself shows that traders were not covering their short positions. Among the options, calls were the most active in the November series, suggesting the strong emergence of call writers. The 540 November put is less active but commands higher premium as compared with the 540 call. Consider going short on Tata Steel November futures with a stop-loss at 555. Adjust the stop-loss progressively.

Alternatively, traders can also consider writing Tata Steel 540 November call, which closed the week at 25. The maximum profit here is the premium earned while the loss could be unlimited if the stock trends upwards. This strategy is only for traders who are willing to take high risk.

GAIL (364): It was the other counter that turned extremely weak. High volumes also accompanied the recent fall. The stock finds resistance at 372 and support at 360. A drop below the support could weaken it to 345 and may even take it to 325. On the other hand, a move above 372-375 could take the stock to 400-405. The latter's possibility however appears rather remote.

Rollover of open position remained poor at just 16 per cent. Option trading provides little cue, as there was no trading in November series. Even in the current month contracts, options aren't as active.

Consider going short on GAIL India November futures keeping the stop-loss at 375.

Both the short strategies are for slightly longer period.

--
Arvind Parekh
+ 91 98432 32381

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.)
 

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Arvind Parekh

+ 91 98432 32381