Good morning,

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

  • US payrolls rose by 155,000 workers last month following a revised 161,000 advance in November, which was more than initially estimated. The median estimate of 82 economists surveyed by Bloomberg had called for an increase of 152,000. The unemployment rate held at 7.8 percent, matching the lowest level since December 2008;
  • Minutes released last week from the Federal Reserve’s Dec. 11-12 meeting showed that board members said they’ll probably end $85 billion in monthly bond purchases, the third round of so-called quantitative easing, some time in 2013;
  • 10-year Italian debt is yielding 4.259%, 10-year Spain is yielding 5.037% and 10-year Portuguese debt is yielding 5.037%;
  • Brent is trading at $111.15/barrel;
  • Gold is trading at $1661.84/ t oz;
  • Apple closed the session at $527 – results out of 23.01.2013 (After the bell)

In the Friday session, traders increased their conviction that the Fed will cut quantitative easing in 2013 for two main reasons. The first is the unemployment figure which came out at 7.8% for December 2012. "While a 150,000-170,000 per month trend in payrolls is far from booming, it is strong enough over time to keep the unemployment rate moving down," said Jim O'Sullivan at High Frequency Economics. The second is the ISM figure. The Institute of Supply Management said its service index rose to 56.1 in December, from 54.7 the previous month. Any reading above 50 suggests expansion. The December reading was the highest since February and was stronger than analysts had expected.

However, there are always contrarians to every arguement. Quoting from an article titled ‘Some Members See QE End Before End of 2013: Fed’ – by reuters 'Pimco's Bill Gross told CNBC it was "a little bit of a surprise" that there was some dissension but that he expected the three Fed members that drive policy — Bernanke, Yellen and Dudley — would continue maintain control. After announcing new targets that centred around 6.5% unemployment and 2.5% inflation for one to two years, Gross said, "Unless we broached 6.5% unemployment on the downside and unless inflation was accelerating beyond 2.5% that quantitative easing would continue. We simply think they have very little choice absent those two conditions."

Tomorrow, earning season kicks off with Alcoa being the first company to report results. Citi came up with a report on the company this morning before the results. These are the salient points, 'Alcoa starts off the earnings season after the market closes next Tuesday. We expect the company to post EPS of $0.04, below the consensus estimate of $0.06 that will likely settle lower before the company issues results. Compared to 3Q EPS of $0.03, the improvement in aluminum pricing should be somewhat offset by a weaker USD and seasonal slowdown in the downstream businesses. Given the modest earnings expectations relative to AA’s share price, we doubt a penny beat or miss will matter much. What should matter more is the company’s downstream business outlook given that Rolled Products and Engineered Products combined accounts for an estimated 65% of segment EBITDA and 93% of segment ATOI in 2012.'

Stock to watch: BMW

Bloomberg – Bayerische Motoren Werke AG’s BMW sales surged 39% in the U.S. in December to top Daimler AG’s Mercedes-Benz in luxury-auto deliveries for the year as U.S. light-vehicle sales reached the highest level since 2007. With a 72% increase in 5 Series deliveries last month, Munich-based BMW boosted its annual total by 14 percent to a record 281,460, edging out Mercedes for a second straight year. Toyota Motor Corp.’s Lexus, the U.S. luxury champ for 11 years until 2011, was third at 244,166 after a 23% jump.

Growing sales by the top luxury brands helped push the industry to a total of 14.5 million deliveries, the most in a half-decade and the first three-year streak of at least 10% increases since 1973. Last year’s 13 percent increase was the biggest since 1984. Analysts project further growth this year to 15.1 million annual light-vehicle sales, the average of 18 estimates in a Bloomberg survey. “The U.S. is ready to become the cash cow again,” said Rebecca Lindland, analyst with IHS Automotive in Norwalk, Connecticut. “Right now, we are the brightest bulb in the chandelier.”

U.S. automakers General Motors Co., Ford Motor Co. and Chrysler Group LLC all beat estimates for December sales while major Asian automakers missed. For the year, GM’s share fell to the lowest level since 1924, while Chrysler surprised analysts by gaining more market share than any automaker other than Toyota and Honda Motor Co.

For further information on BMW or other stocks and bonds we follow, contact our offices on 25688688.

Good day and happy trading!

Kristian Camenzuli