Good morning,

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

  • Markets in the US are closed again today because of Hurricane Sandy;
  • Japanese stocks reversed gains after the Bank of Japan expanded its asset-purchase program to 66 trillion yen ($830 billion);
  • India’s central bank cut lenders’ reserve requirements to back a policy revamp by the government aimed at reviving growth, while leaving interest rates unchanged to fight price pressures;
  • Bayer AG agreed to buy Schiff Nutrition International Inc. for $1.2 billion in cash to add a faster-growing vitamins and nutritional supplements business to Bayer’s consumer-health unit;
  • UBS AG, Switzerland’s biggest bank, will cut about 10,000 jobs and retreat from capital-intensive trading businesses at the investment bank to boost profitability;
  • 10-year Italian debt is trading at 5.006%, 10-year Spain is trading at 5.639% and 10-year Portuguese debt is trading at 8.007%;
  • Brent is trading at $108.97/barrel;


More bad news coming out of Japan and sending the markets lower this morning. Japan’s industrial production fell a more-than-expected 4.1% in September, the steepest since last year’s earthquake and tsunami. Exports fell 10.3% and retail sales rose less than forecast in September. The Bank of Japan added to monetary stimulus for the second time in two months, the fastest pace of easing in nearly a decade, as it moves to shore up an economy at risk of contraction. There is a high chance that the BOJ will have to ease again in January or February considering the political pressure and the slowing economy.

Honda yesterday cut its full-year profit forecast after Chinese consumers shunned Japanese brands amid a territorial dispute between Asia’s two-biggest economies. Canon, Nintendo, and Kawasaki revised down their forecasts last week.

The BOJ is scheduled to announce its growth and price forecasts at 3 p.m. today in Tokyo, including its first projections for the fiscal year that starts in April 2014.

Hurricane Sandy

Hurricane Sandy sent floodwater gushing into New York’s five boroughs, submerging cars, tunnels and the subway system and plunging skyscrapers and neighborhoods into darkness. The storm shaped up to be among the worst in city history, rivaling the blizzards of 1888 and 1947. Two deaths were reported in Queens and more than 670,000 were without power in the region as of 11:30 p.m. local time yesterday, according to Consolidated Edison Inc. The company cut electricity to some areas to save its equipment and a transformer exploded at a plant on 14th Street, blacking out others. New York University evacuated its Langone Medical Center when it went dark and backup systems failed.


The projection for economic growth was cut to 5.8% for the year through March 2013, from 6.5%, on moderating investment and consumer spending, declining exports and the impact on farming of a weak monsoon season. India’s central bank cut lenders’ reserve requirements to back a policy revamp by the government aimed at reviving growth, while leaving interest rates unchanged to fight price pressures. India faces inflation of almost 8%, curbing scope to join nations from Brazil to Thailand in extending rate cuts as the global recovery falters. While the central bank resisted Finance Minister Palaniappan Chidambaram’s call for cheaper credit to back the policy overhaul, which includes steps to pare a budget deficit, it said there is a reasonable likelihood of further easing in January-to-March as inflation cools.

Stock to watch: Starbucks ($45.87, $55)

SBUX makes most of its money today through its retail store base (~85%). However, the company believes it can leverage the Starbucks brand into a much higher market share of "at home" coffee consumption (both domestically and abroad). Recent developments, such as exiting the Kraft relationship and the Green Mountain/Keurig deal, should result in a "step function" increase in growth in the high-return CPG business in coming quarters, which should support multiple expansion. We also see room for attractive growth in the core retail business, as the US system benefits from throughput initiatives, a macro recovery, and incremental pricing while the EMEA segment works to close the margin gap with the US and China Asia/Pac. International unit growth should also step up in coming years particularly in China Asia/Pac. These key investment themes are further bolstered by a compelling cash flow story, most of which we expect to go toward growing the dividend and buying back shares. Buy.

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

Good day and happy trading!

Kristian Camenzuli