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Good morning,
Markets are called higher this morning. This is what's happening today:
After yesterday's sell-off in the markets, today we are seeing a rebound after EU Finance Ministers are satified with the way Greece is dealing with the crisis and is increasing the probability of getting more aid. But lets not lose focus here. The markets always rebound after a sell-off. What could happen is that the rebound is short lived. At the end of the day good news of out Greece is not really something which interests investors or warrants a move in the market. Like I said before Greece's impact on the Eurozone is just 2% of GDP. If Greece had to leave, they would just do us a big favor. The only problem is the contagion effect a Greek exit will have on Italy and Spain. Until we get more information on whether Spain will formally ask for a bailout, uncertainty will remain in the markets.
The IMF yesterday said that the Euro-area inflation will fall to 1.3% in 2013. The probability of falling prices is unusually high, reaching almost 25%. This projection gives the ECB ample justification for keeping policy rates very low or cutting them further. While the ECB cut its benchmark interest rate to an historic low of 0.75% on July 5 and took its deposit rate to zero, Draghi signaled last week that further easing may have only a limited effect on the economy. The IMF warned that Europe’s sovereign debt crisis, now in its third year, could escalate and that the economic outlook has worsened. The IMF cut its forecast for growth in the euro area next year to 0.2% from its July prediction of 0.7% and said the economy will contract 0.4% this year as governments continue to reduce spending. It lowered its 2013 growth forecast for Germany, the region’s largest economy, to 0.9% from 1.4%.
US stocks are still cheap despite the rally we have seen in the markets. Banks, lenders and insurers are still down 55% since October 2007, more than three times any other industry, data compiled by Bloomberg show. Even after doubling, US stocks are trading at 14.8x earnings, a 9.8% discount to their five-decade average ratio.
Watch out as earning season kicks off today. It will give the market a guage as to where stocks will be heading towards the end of the year.
US Companies reporting results today:
Stock to watch: Alcoa
Alcoa, the 124-year-old seller of metals for use in beer cans and airplanes that plans to release third-quarter results after the U.S. market closes today, slumped about 50 percent in the past 18 months as aluminum prices dropped to an almost three-year low. That left the New York-based company trading at a lower multiple to book value than 94 percent of peers in the aluminum industry, and at a 60 percent discount to its sales, according to data compiled by Bloomberg.
For further information on Alcoa or other stocks are bonds we follow, contact our offices on 25688688.
Good day and happy trading!
Kristian Camenzuli
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