Good morning,

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

  • US data today may show home prices rose in July;
  • Data due today is forecast to show French business confidence worsened, while other reports may show consumer sentiment in Germany and Italy stagnated;
  • The Ifo institute yesterday said yesterday German business confidence slid to the lowest in more than two and a half years in September;
  • The MSCI Asia Pacific Index of regional shares swayed between gains and losses today. The measure climbed 5% this quarter through yesterday as central banks from Europe, the U.S., Japan and China took action to stimulate economic growth;
  • LG Display Ltd. fell 2.9% in Seoul, leading declines among suppliers to Apple Inc., after the smartphone maker reported debut sales for the iPhone 5 that fell short of some analysts’ estimates;
  • Apple closed the session at $690.79
  • 10-year Italian debt is trading at 5.039%, 10-year Spain is trading at 5.652% and 10-year Portuguese debt is trading at 8.511%;
  • Brent is trading at $109.96

German 10-year yields matched a record 1.127% on July 23, three days before Draghi promised to do “whatever it takes” to defend the euro. The Sept. 6 announcement of a plan to buy bonds of countries that request aid helped drive the rate to 1.73% on Sept. 17, the most since April 26.

Spanish 10-year yields, which reached a euro-era high of 7.75% on July 25, have fallen more than 2 percentage points to 5.69% yesterday, while Italian 10-year yields have dropped to 5.05% from 6.71% that day.

The euro also rallied following Draghi’s comments, climbing 5.1% against the dollar since July 26, and strengthening by 4.7% against the yen.

However, even as policy makers strive to end the three-year debt crisis, the region’s economic outlook is weakening. Euro-area surveys on Sept. 20 showed services and manufacturing output fell to a 39-month low in September adding to evidence the economy is heading for a recession. Figures yesterday showed German business confidence unexpectedly fell to the lowest in more than two and a half years in September. We are in a period where the ECB has laid down its framework to save the euro but the fundamentals will ultimately creep back in and you will see new problems flare.

Stock to watch: Edison International (Price $45.98, Price Target $50)

We have a Buy rating based on its strong regulated growth profile and merchant coal option, which should not be negative for value since the segment is ring-fenced. EIX consolidated EPS includes a very weak earnings outlook for EME, which we do not believe is particularly relevant to EIX's shareholder value since the segment is ring-fenced and its obligations are non-recourse to EIX. We remain confident that management will not support EME with parent funding based on management comments and their track record of requiring challenged businesses to stand on their own. Thus, we believe headline valuation metrics (P/E for example) obscure the fundamental mis-pricing of EIX's utility.

For more information on Edison International or other stocks and bonds we follow, contact our offices on 25688688.

Good day and happy trading!

Kristian Camenzuli