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Good morning,

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

  • China PMI rises to 49.5. China’s stocks fell, dragging the benchmark index to its lowest level since 2009, on concern the slowing global growth will hurt earnings. The Shanghai Composite has fallen 13 percent from this year’s high on March 2 amid concern an economic slowdown is deepening. It’s valued at 9.5 times estimated profit, compared with the average of 17.5 since Bloomberg began compiling the data in 2006;
  • Moody’s Investors Service said it cut Germany, the Netherlands’ and Luxembourg’s Aaa credit rating outlooks to negative, citing “rising uncertainty” about Europe’s debt crisis;
  • Spain’s bailout of its regions risks pushing the nation closer to needing a full international rescue as it struggles to maintain market access with 10-year bond yields hovering at 7.5%;
  • Spain to auction up to E6bln in 3 and 6 month bills;
  • Greek stocks tumbled the most since 2008 amid doubts that the country will abide by the commitments needed to obtain further financial aid. National Bank of Greece SA, the country’s largest lender, plummeted 11%. Hellenic Telecommunications Organization SA plunged 17% and Public Power Corp. tumbled 17%;
  • EURUSD 1.2126;
  • 10-year Italian debt is yielding 6.337%, 10-year Spain is yielding 7.50% and 10-year Portuguese is yielding 10.831%

Markets are called higher this morning in Europe however we have withnessed a fierce sell off in the markets yesterday after we got to know that Spain's regions are now asking for bailout money and the probability of Greece leaving the Eurozone is now realistic.

As if the markets didn't have enough bad news to deal with, Moody’s Investors Service said it cut Germany, the Netherlands’ and Luxembourg’s Aaa credit rating outlooks to negative, citing “rising uncertainty” about Europe’s debt crisis.

A report released from China showed its PMI in July grew at its fastest in nine months, helping lift the HSBC Flash PMI to a five-month peak. The flash PMI is the first indicator that China's economy may show some improvement in the third quarter of this year. Still this is the ninth straight month that the figure has been in the contraction zone.

Apple report results today after the closing bell. Deutsche Bank came up with the following a few days before the results: AAPL: We expect Apple to post in-line to slightly below consensus revenues and an EPS beat supported by commodity led GM upside (Street at $37.4B and $10.34; DB at $37.7B and $10.15). We believe iPhone units could be 1-2m units light (DB at 30M) due to a demand pause in front of the iPhone 5 product transition later this year. We also expect in-line iPad (DB at 15M) and Mac (DB at 4.4M). Rev guidance is likely to be very conservative due to the combination of weaker Euro demand and the iPhone product transition. We expect consensus estimates to trend down on materially lower September Q iPhone units as Apple clears inventory in front of the iPhone 5 launch (we expect Oct).

Stock to watch: Inchcape, Price 360.4p, DB Price Target 480p

INCH sits on a low valuation because the market views it as hyper-cyclical like auto manufacturers. We believe it is better quality than this: its distributor-led model has more stable margins, higher ROCE's and better profit growth than autos and many of the UK General retailers. Newsflow is healthy with INCH's new car markets up 4.4% YTD v. INCH's 1.5% forecast, and INCH Australia benefiting from a likely 20% sales rebound after the 2011 tsunami-delayed deliveries. INCH has £200m cash, some of which may be returned to shareholders. EPS CAGR '11-14 of 10% & a 3.3% dividend yield should deliver a good return – even better would be a re-rating to 11x PE, giving 30% upside.

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

Good day and happy trading!

Kristian Camenzuli