Good morning,

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

  • The US markets are open today. So far 44 are reported dead in New York due to hurricane Sandy;
  • South Korean industrial output increased and home prices gained;
  • Figures due tomorrow may show a manufacturing gauge based on a survey of purchasing managers in China, the world’s second biggest economy, climbed to 50.2 this month from 49.8 in September, according to the median estimate of economists surveyed by Bloomberg;
  • 10-year Italian debt is trading at 4.985%, 10-year Spain is trading at 5.652% and 10-year Portuguese debt is trading at 8.023%;
  • Brent is trading at $109.17/barrel

Today the US markets are open after two days of being closed because of hurricane Sandy. Expect alot of volatiility in the US markets this afternoon after the hurricane hit the US. So far the futures in the US are looking flat though the markets are expected to drift lower as trading starts in the US. You will have investors who will sell out of their holdings because they would need cash to pay for the damages caused by the hurricane. On the other hand you will have investors sell out of equities because they aree worried retailers will suffer in Q412 because of the hurricane. Also expect to see a sell-off in insurance businesses because of the disaster caused by the hurricane.

There are many US companies who suspended earning releases for Q312 and will issue them later on this week. Keep in mind that there is already a general consensus in the markets that US companies have rallied much more compared to Europe and the hurricane will only create more volatility as investors evaluate their position in US names.

Moving on to Europe we had a good sesssion yesterday with BP, UBS and Deutsche Bank all reporting good results. Here is a snapshot of what the companies reported:

  • BP Plc, Europe’s second-biggest oil company, raised its dividend as third-quarter profit beat analysts’ estimates. Net income climbed to $5.4 billion from $5 billion a year earlier as underlying earnings from refining and marketing jumped to a record, London-based BP said today in a statement. It raised the dividend by 12.5 percent to 9 cents a share.
  • Deutsche Bank increased 4.5% to E34.80. The lender said third-quarter profit rose 3% after investment-banking revenue exceeded targets. Net income climbed to E747mln in the three months through September from E725mln a year earlier, the company said. That beat the E563.9mln average estimate of seven analysts surveyed by Bloomberg.
  • UBS climbed 5.9% to SF13.89, its highest price since July 25, 2011. The bank said it plans to save about SF3.4bln ($3.7bln) in additional annual costs by the end of 2015 as it reduces headcount by 10,000 to about 54,000. The company will target a return on equity of at least 15 percent starting in 2015, compared with a previous goal of 12 -17%.
  • Erste Group Bank AG advanced 6.3% to E19.07 in Vienna. Europe’s third-biggest lender said net income rose to E143.7mln in the three months through September, after a E1.5bln loss a year earlier. That matched the average estimate of 13 analysts surveyed by Bloomberg.
  • Fiat SpA, the Italian carmaker that controls Chrysler Group LLC, slid 4.7% to E3.93 as the company cut its 2014 trading-profit goal to as much as E5.2bln from E7.5bln.
  • Telefonica Deutschland Holding AG gained 3.6% to E5.80. The German unit of Spain’s largest phone company climbed in its Frankfurt trading debut after completing Europe’s biggest initial public offering this year. The German unit priced 258.8 million shares at E5.60 each, at the top of a range that was narrowed from E5.25-E6.50.

Greece is again in the spotlight today. European officials are grappling over ways to fill Greece’s financing gap two weeks before a decision is due on whether to give the country a further round of emergency funds. While German Chancellor Angela Merkel has signaled her desire to stand behind Greece’s euro membership, Prime Minister Antonis Samaras’s coalition is still at odds over the steps needed to secure more money. Finance ministers will hold a conference call at 12:30 p.m. Brussels time and may release a statement afterwards.

Japan’s Finance Ministry lowered its economic assessment of eight of 11 domestic regions. The downgrades come a day after the Bank of Japan expanded its asset-purchase program by 11 trillion yen ($138 billion) and unveiled a new program of unlimited loans intended to shore up the world’s third-largest economy. The steepest fall in industrial production since last year’s earthquake and a 10 percent decline in exports are increasing the odds of a contraction in the second half of this year.

Stock to watch: Ford Company (Price $10.36, Price Target $13)

Deutsche Bank comments – Q312 profit came in well above our $0.32 est and consensus of $0.30. The upside was fully accounted for by lower-than-expected tax rate (2 cents) and higher than expected profitability in North America (pretax of $2.3 bn (12.0% margin) vs. our $2.0 bn (10.0%) est). While most of the NA upside was derived from a $200 MM warranty adj and a $100 MM commodity hedging gain, we’d note that wholesale shipments were 17k below guidance (supply bottlenecks on Fusion launch), a ~$135MM negative impact. Adjusting for these factors, underlying earnings were $0.04 better than the Street. We maintain Buy rating based on valuation.

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

Good day and happy trading!

Kristian Camenzuli