Home > Blog > Trader talk > Trader Talk: An analysis of the markets this morning

Good morning,

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

  • Chinese Premier Wen Jiabao said there was room to adjust monetary policy in the world’s second-largest economy;
  • A U.S. report today is forecast to show new home construction remained near a four-year high and the number of building permits rose;
  • US weekly jobless claims out today;
  • Cisco increases quarterly dividend by 75% to 14 cents a share;
  • 10-year Italian debt is yielding 5.769%, 10-year Spain is yielding 6.642% and 10-year Portuguese debt is yielding 9.898%;
  • Brent is trading at $116.20/barrel;
  • Apple closed the session at $630.83 and Priceline closed the session at $575.31

Two reasons for the markets to rally and both have to do with expansionary monetary policy. The markets are optimistic that the ECB will carry out some for of easing in its next meeting next week. To add to this feel good factor, Premier Wen Jiabao came out saying that there is need for additional stimulus in China.

All this is positive news for the markets. The markets want leaders to intervene and help the cause. The ECB was always on the sidelines seeing the markets get hammered but was doing nothing to help the situation. Then a couple of weeks ago Draghi was quoted saying that he will do all he can to save the Euro and the markets started to rally. The ECB will eventually act and Deutsche Bank and Socgen have been saying time and time again that the Chinese economy will see some form of monetary policy this year which will help boost growth in the economy.

European stocks particularly banks are doing well on the optimism that the ECB will do something to help improve the situation in Europe. Though when analysing whether to enter the market or not particularly in European stocks, make sure that there is visibility and a strong fundamental background in the stock you are buying.

I recommend that investors get a copy of our CC equity and bond list to understand our strategy and what names we are bullish on. It is always important to contact your adviser before taking a decision to discuss whether the constituents fit into your risk/reward profile.

Stock to watch: Cisco (Price $17.35, Price Target $22)

Cisco Systems Inc. increased its quarterly dividend by 75 percent to 14 cents a share. “Cisco has the financial strength and flexibility to effectively invest in our business, pursue strategic opportunities, such as acquisitions, as well as return a minimum of 50 percent of our free cash flow annually through dividends and share repurchases to our shareholders,” said Frank Calderoni, chief financial officer, in a statement

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

Good day and happy trading!

Kristian Camenzuli