U.S. Stocks Rise; China Defends US, Europe Pressure

Arthi Gupta
11 Oct, 2010
New York City

U.S. stocks traded higher amidst hopes of fresh monetary easing from the U.S. Federal Reserve. Chesapeake agreed to sell stake in Eagle Ford project to CNOOC for $1.08 billion. Pension fund controlled by Ontario, Canada contemplates rival bid for Potash. Cognizant inked deal with 3M.

[R]9:35 AM New York – U.S. stocks traded higher amidst hopes of fresh monetary easing from the U.S. Federal Reserve. Chesapeake agreed to sell stake in Eagle Ford project to CNOOC for $1.08 billion. Pension fund controlled by Ontario, Canada contemplates rival bid for Potash. Cognizant inked deal with 3M.[/R]

Asian and European markets advanced on optimism of global economic recovery.

This week investors are anticipating U.S. retail sales, inflation data, trade balance and minutes of the recent FOMC meeting in addition to earnings from banks and tech companies including JP Morgan, Intel and Google.

A summit of global finance ministers at the International Monetary Fund headquarters in Washington over the weekend failed to ease speculation on the slowly evolving ""currency war.""

Youssef Boutros-Ghali, Chairman of the International Monetary and Financial Committee said, ""There are structural changes that need to be implemented, a rebalancing between surplus countries and deficit countries. There are frictions, obviously.""

However, the IMF Chief Dominique Strauss-Kahn said the fund will tighten its monitoring of advanced economies such as the U.S., Japan, and euro-zone, as ""spill-over"" effects from these economies could have a large impact in the rest of the world.

On the other hand, U.S. Treasury Secretary Timothy Geithner pressed China to let the yuan rise more freely against other currencies. So far, China has resisted the demands and said that sudden appreciation will close down many of its factories and cause widespread job losses.

Speaking at the annual International Monetary and Financial Committee meeting in Washington, Geithner said countries that undervalue their currencies posed a threat to the future health and stability of the global economy.

He further added, ""It is critical to see more progress by the major emerging economies to more flexible, more market-oriented exchange rate management. This is particularly important for those countries whose currencies are significantly undervalued."" His comments were directed at China.

The Bank of Japan Governor Masaaki Shirakawa called on the world''s advanced economies to stick with an easy monetary policy to drive the recovery.

Rating agency Standard and Poor''s said that the absence of appropriate budgetary adjustment, additional reforms to pension and health-care systems, or structural measures to improve sovereigns'' growth potential, will raise future fiscal burden significantly across the world.

S&P estimates that median general government net debt as a percentage of GDP in 49 countries will be on ""explosive"" path to almost 245% by 2050, up from the current below 40% of GDP. Government spending may rise to almost 60% of GDP in 2050, up from the current 44.2%.

Chesapeake Energy Corporation, the natural gas producer agreed to sell one-third of its undivided interest in South Texas-based Eagle Ford Shale project to CNOOC International Ltd., a wholly-owned subsidiary of China based CNOOC Ltd. for $1.08 billion in cash.

Chesapeake, the operator of the project, will conduct all leasing, drilling, completion, operations and marketing activities for the project. Hong Kong-based CNOOC further agreed to fund 75% of Chesapeake''s share of drilling and completion costs until an additional $1.08 billion is paid, expected to happen by end of 2012.

Talisman Energy Inc., the Canada-based oil and gas company and Statoil ASA, an integrated energy company based in Norway agreed on a joint-venture to acquire 97,000 net acres of high-quality, liquids rich Eagle Ford shale properties from Enduring Resources for a total consideration of $1.325 billion.

The companies agreed to create a 50/50 joint venture across the Eagle Ford shale play, with Talisman as the initial operator.

Ontario Teachers'' Pension Plan, the Canadian pension fund is considering a bid to rival mining giant BHP Billiton Group''s hostile $40 billion takeover bid for Canadian fertilizer maker Potash Corp. of Saskatchewan, Inc., according to media reports.

OTPP is reportedly in talks with Temasek, Singapore''s sovereign wealth fund, about plans to launch a rival bid along with Canada-based mining company Teck Resources Ltd. The two funds are said to be considering an outright takeover or buying a minority stake at a higher price than that offered by BHP.

Cognizant Technology Solutions Corp. said it entered into a multiyear, multimillion-dollar agreement with 3M.

Earnings Review

Bank of McKenney ((BOMK.OB)), the Virginia-chartered community bank reported third quarter net income was $316,000 or 17 cents per diluted share, compared to a net loss of $417,000 or 22 cents per share in the prior-year period.

Bank of South Carolina Corporation ((BKSC)), the state-chartered financial institution reported third quarter net income surged 501.81% to $821,601 or 19 cents per diluted share, compared to net income of $136,521 or 3 cents per share for the year-ago quarter. The increase is mainly the result of a $1.11 million allocation the company made to its reserve for loan losses in the third quarter of 2009, compared to $190,000 in the third quarter of 2010.

Burnham Holdings, Inc. ((BURCA.PK)), the manufacturer of boilers and related HVAC products and accessories reported third quarter net sales grew 2.7% to $50.16 million from $48.85 million for the comparable period last year. Net income for the quarter increased 15.8% to $1.61 million or 36 cents per diluted share compared with net income of $1.39 million or 31 cents per share in the year-ago period.

LDK Solar Co., Ltd. ((LDK)), the producer of solar wafers said for the third quarter of 2010, it expects to report revenue in the range of $610 million to $640 million, up from the company''s prior guidance of $570 million to $600 million.

OCZ Technology Group Inc. ((OCZ)), the provider of high performance solid state drives and memory modules for computing devices and systems reported second quarter net revenues increased 0.7% to $38.04 million from $37.79 million last year. Net loss in the quarter widened 338% to $7.58 million or 29 cents per diluted share, compared to a net loss of $1.73 million or 8 cents per share a year ago.

Schmitt Industries, Inc. ((SMIT)), the company that designs, manufactures and markets computer-controlled vibration detection and balancing equipment reported first quarter sales soared 96.6% to $2.40 million from $1.22 million in the same quarter last year. Net loss in the quarter narrowed 80.3% to $113,000 or 4 cents per diluted share, compared to a net loss of $575,000 or 20 cents per share in the year-ago quarter.

TSR, Inc. ((TSRI)), the company engaged in the business of providing contract computer programming services reported first quarter net revenue rose 3.0% to $9.36 million from $9.09 million in the prior year. Net income in the quarter declined 65% to $22,000 or 1 cent per diluted share, compared to net income of $63,000 or 2 cents per share in the same quarter last year.