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

Good morning,

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

  • A Chinese manufacturing gauge based on a survey of purchasing managers climbed to 50.2 in October from 49.8 in September, adding to signs growth in the world’s second-biggest economy is rebounding after a seven-quarter slowdown;
  • Panasonic’s loss projection for the year to March was 30 times more than estimated and helped drag rivals Sony Corp. and Sharp Corp. lower before the companies report results today;
  • Credit markets in the U.S. are struggling to regain their footing after Hurricane Sandy knocked out electricity across the Northeast, disrupting an October rally that had spurred the most trading in seven months;
  • Slumping energy and metal prices sent commodities to their biggest monthly loss since May, lagging behind stocks, bonds and the dollar, as the global economy grew at the slowest pace since the 2009 recession;
  • 10-year Italian debt is yielding 4.952%, 10-year Spain is yielding 5.598% and 10-year Portuguese debt is yielding 8.071%;
  • Apple is trading at $595.32

When i put on my bloomberg this morning the first paragraph I read was as follows, 'Investor optimism dimmed as the International Monetary Fund cut its global growth forecast and the Federal Reserve said strains on the world economy present “significant downside risks.” China reported the seventh straight quarter of slowing growth, while services and manufacturing in the 17-nation euro area last month contracted more than economists forecast. Europe is a complete and total disaster and doesn’t appear to be solved. Greece’s coalition leaders continued to squabble over measures needed to clinch rescue funds, while in Spain, where unemployment climbed to a record, Prime Minister Mariano Rajoy weighed whether to apply for a full sovereign bailout.' Talk about being negative first thing in the morning!

We had a mixed picture in the US yesterday. Keep in mind that alot of people are still without electricity in NYC and things haven't yet started operating as normal. Infact the NYSE yesterday was running on generators. But it is not just equities which are suffering because of the storm. Credit markets in the US are struggling to regain their footing after Hurricane Sandy knocked out electricity across the Northeast, disrupting an October rally that had spurred the most trading in seven months. Volume of 2,885 trades of $1 million or more yesterday compares with a daily average of 4,319 during the three months before the storm, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. Global issuance in the past three days tumbled 66% from the same period last week according to data compiled by bloomberg.

Moving on to China, the Chinese manufacturing gauge based on a survey of purchasing managers climbed to 50.2 in October from 49.8 in September, adding to signs growth in the world’s second-biggest economy is rebounding after a seven-quarter slowdown. However we aren't seeing a rally in China because Panasonic’s loss projection for the year to March was 30 times more than estimated. Sony Corp., Japan’s biggest consumer-electronics exporter, unexpectedly posted its seventh straight

quarterly loss on falling demand for its TVs as consumers flock to Apple Inc. and Samsung Electronics Co. devices.

The Greece problem continues to haunt us. Euro-area governments yesterdat pressed Greece to make deeper spending cuts to keep aid flowing. With Greece pleading for a E31bln aid payout in November and facing a sixth year of recession in 2013, euro finance ministers said unfreezing loans for the country required more efforts in Athens to rein in the budget deficit and deregulate the economy.

Like I said yesterday, be ready for volatility in the markets as we head into the last few months of this year. There is still alot which needs to be concluded before the end of the year. Will Greece get its next bailout money? Will Spain officially ask for a bailout? Will the Chinese government stimulate the economy? Who will be the next American President? These are just some of the many questions investors need an answer to and until we get an answer expect further volatility. My advice at this point in time is to make sure you KNOW WHAT YOU HOLD in your portfolio. Make sure you are holding stocks which offer great value and will emerge as winners once we start to get some direction out of the markets. Always get financial advice when in doubt.

Stock to watch: Samsung

Deutsche Bank: We have a Buy rating on Samsung SDI. We expect SDI to maintain industry leadership in the rechargeable battery industry with R&D leadership, cost competitiveness, solid customer base, and the financial capacity to invest through the cycle. We expect weak economic conditions to reduce risk of chief competitors building excess capacity. Furthermore, for investors seeking exposure to AMOLED, we believe SDI should be a primary beneficiary given SDI's stake in SDC, the industry leader with ~90% market share.

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

Good day and happy trading!

Kristian Camenzuli