Good morning,

Markets are called to open flat this morning. This is what's happening today:

  • Expectations the Bank of Japan will expand stimulus have driven the yen down 12% against the dollar and 17% against the euro since Nov. 14, when elections were announced;
  • China’s stocks rose, driving the benchmark index to the highest level in seven months, after industrial profits climbed for a fourth month in December;
  • South Korean consumer confidence climbed to the highest level in eight months this month;

Companies in Europe reporting results today: Ryanair, Mitie Group, Colruyt

Companies in the US reporting results today: Caterpillar, Yahoo! VMware, DR Horton, AK Steel, Corning

A good vibe to the start of the week. The Shanghai composite is up 2% this morning in China after industrial profits for December climbed for a fourth month. China is coming in good and all those investors that are invested in Chinese stocks are seeing positive moves in their portfolio.

I'll take some time talking about Caterpillar which reports results today. Caterpillar had reported a decline in December retail sales in more than 2.5 years after a slowdown in Asian demand. Global machine sales in the three months through December fell 1% compared with the same period a year earlier. It saw a 7% drop in the Asia-Pacific region and a 6% decline in North America, while other regions posted gains. Sales have slowed with rising machinery inventories and excess manufacturing capacity in China.

The company, an economic bellwether, idled production in some plants last year and in October forecast 2013 sales will be 5% lower to 5% higher than 2012.

  • Goldman expects 2013 EPS forecast $8.50, “modestly below consensus,” though expectations “already low”
  • BMO sees risk to CAT shrs; 2013 EPS forecast may be in $8.25-$8.75 range and possibly back-end loaded
  • Jefferies expects 4Q earnings for machinery sector to disappoint, 1Q and 2013 outlooks to be “muted”

The slowdown in sales is not something which is unexpected considering the very high growth rates we have seen in the past years and the buildup of inventories. The slowdown from the Asian Pacific and North America is being supported by the increases in sales in Latin America. The slowdown is sales in the US can be explained because of the uncertainty caused by the US elections. Caterpillar also had a tough year-ago comparison because its sales were picking up rapidly in 2011 and 2010.

Barclays are still bullish on Caterpillar with a price target of $111/share.

Another stock I would like to talk about today which is also in the CC equity list is Priceline. The shares were up 5.8% on Friday and have gained 21% in the last quarter. This is one of the top pick stocks of may analysts including Barclays and JP Morgan. Here is what JP Morgan have to say about the stock – Priceline: Overweight, $740 PT. We expect Priceline’s strong International bookings growth to continue in 2013 as the company steps up investment and benefits from a somewhat more stable macro environment. We think continued European hotel share gains, and bigger contribution from high-growth LatAm and APAC could help Priceline stabilize or perhaps even accelerate International bookings in 2013.

For more information on Caterpillar and Priceline, or other stocks and bonds we follow, contact our offices on 25688688.

Good day and happy trading!

Kristian Camenzuli