Home > Blog > Trader talk > Trader Talk: An Analysis of the Markets this Morning

Good morning,

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

  • Euro-area finance ministers cut Greece’s interest rates and gave it more time to pay back loans while dismissing calls for debt relief that may be needed to keep the country afloat over the longer term;
  • Profit growth at China’s industrial companies quickened to 20.5% in October from 7.8% the previous month, the government reported today, adding to signs of a pickup in the world’s second-biggest economy;
  • The euro touched $1.3009, the strongest since Oct. 31 and 0.3% higher than the close in New York yesterday;
  • 10-year Italian debt is yielding 4.748%, 10-year Spain is yielding 5.602% and 10-year Portuguese debt is yielding 7.877%;
  • Brent is trading at $111.19/barrel;
  • Gold is trading at $1750/toz;
  • Apple closed the session at $589.53

In the fourth Greek crisis meeting in two weeks, euro-area finance chiefs persuaded a skeptical International Monetary Fund that they have a formula for putting the country that triggered the debt crisis onto a path back out of it. Greece was also cleared to receive a E34.4 billion loan installment in December. I can go on and on about Greece but no one is really bothered. All the market is interested in is that they get the bailout money and are put on the back burner. Despite the E34.4bln bailout package, Citigroup are still of the view that Greece will exit the Eurozone in the next 12-18 months. More of the same for Greece.

But the market isn't thinking of the next 12-18 months. The market is pleased that Greece got the money and we can stop talking about it at least for the short term. What investors really want to know is in what to be invested in going into the close of 2012 and start off 2013. The sectors I think will outperform are financials, tech, gold (ETF), the Dax (ETF), basic materials, energy and cyclicals. I will also give you a name in each of the sectors which in my opinon will continue doing well in 2012 and 2013. Keep in mind that these are just a few of the stocks we follow. To discuss the following stocks further or get to know other stocks and bonds which may fit your risk-reward profile, contact your advisor.

There are the stocks:

  • Financials – BNP
  • Tech – Apple
  • Cyclicals – Foot Locker
  • Gold – SPDR Gold Shares
  • Index – DAX
  • Basic Resources – Arkema
  • Energy – Halliburton

When Obama was re-elected there was a selloff in the US markets. Institutions crystalised gains to pay tax this year and not the higher tax next year. Though all the money that came out has to go back in and we are seeing these large swings as money is being injected back into equities. I remain overweight equities and high yield at this point in time. I also remain overweight the EURO vrs USD. There are many arguments for a weakening dollar going into 2013. A weakening Dollar is also an investment case for basis resources and energy stocks since they are negatively correlated.

Everyone was worried about the US though the truth is data is coming in good. On Black Friday alone Americans spend E59bln! That's 13% higher than in 2011. We are seeing consumption pick up, unemployment is coming down and property prices are also picking up. Although the US economy is not growing at phenomenal rates, growing close to 2% in this environment is respectable to say the least.

An investor should be in and not out of the markets despite the volatility we see in the short term. Taking a 1 month view on equities never works. You need to take at least a 3-5 year view. In the immediate short term everything is possible. That's why you have to continue holding on to the winners and have a portofolio that is well diversified.

I'd like to end this blog with a comment made by IBM on Apple. On Sunday IBM released data from its Smarter Commerce initiative that illuminated some interesting trends from the weekend’s shopping. Data showed that 24% of consumers used a mobile device to visit a retailer’s website compared to 14.3% last year. IBM’s data backed Apple’s view that the iPad is clearly the leading tablet for Internet use, calling into question what other tablets are being used for as over 88% of tablet traffic for shopping on Black Friday came from an iPad.

Stock to watch: United Internet (Price E16.70, Price Target E19)

In 2010 United Internet (UI) entered into a heavy investment cycle to secure growth opportunities. As a result, FY12 will likely mark the third consecutive year of flat earnings and contracting margins. While we expect a strong performance in "Access" results will be held back by the expansion in hosting. However, as UI delivers on net ads targets (+1.1-1.2m) the inherent scalability of the model, reflected in FY13E EPS guidance (+30% y/y) should be fully discounted. Hence, we see a re-rating of the shares as imminent.

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

Good day and happy trading!

Kristian Camenzuli