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

Good morning,

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

  • Speculation monetary easing by central banks around the world will spur economic growth. The market is hoping that some stimulus measures from the U.S. and China are on the table;
  • U.S. data today may show first-time claims for jobless benefits rose, boosting prospects the Federal Reserve will increase stimulus measures. Fed Chairman Ben S. Bernanke yesterday outlined options to ease policy further in case the flagging economic recovery fails to lower unemployment;
  • The Bank of England restarted bond purchases this month to aid the economy and said the near-term outlook had “weakened.”;
  • Earnings have exceeded analyst estimates at 37% of the 51 companies in the S&P 500 that have reported results this month, according to data compiled by Bloomberg. Profits have slumped 5.5% for the group;
  • 10-year Italian debt is yielding 6.074%, 10-year Spanish debt is yielding 6.962% and 10-year Portuguese debt is yielding 10.559%;
  • Brent is trading at $105.89;
  • Apple closed the session at $606.26 and Priceline closed the session at $655.68.

The markets are trading higher on hope of further stimulusby central banks around the world. Bernanke yesterday said that there will be more stimulus in the US if the unemployment figure doesn't come down further. Ironically in a previous meeting Bernanke had said that although the unemployment rate in the US has come down from its highs, for it to continue coming down there is need of policy intervention. At this point I think the Fed is playing for time since there are the elections in US in November. The Fed is likely to implement QE3 in Q113 after the elections take place. If there is no stimulus in the US for the next five months till the end of the year, expect to see further strength in the Dollar. The Dollar has already strengthed alot with the EURUSD trading at $1.2286. Another positive for the US economy is that earning season has been positive so far. Earnings have exceeded analyst estimates at 37% of the 51 companies in the S&P 500 that have reported results this month, according to data compiled by Bloomberg.

Moving on the Europe, uncertainty remains. I remain of the view to stay out of Europe and remain invested in US bluechips. There are alot of cash rich companies in the US which although are trading on a more expensive multiple than their peers in Europe, the outlook looks much better for these companies. It is still not time to start investing in European corporates.

Spain today will auction 2014, 2017 and 2019 bonds. Spain still has E84.7bln worth of debt maturing this year. Most of the debt issued in Q112 was short dated which was financed by money from the LTRO. Now Spain has to start financing longer dated debt and we are alreadying seeing pressure on the 10-year yield as it hovers around the 7% level.

Companies reporting results today:

  • Morgan Stanley
  • Microsoft
  • Google
  • Freeport-McMoran
  • Phillip Morris International
  • Safeway

Stock to watch: Intel (Price $26.21, Deutsche Bank Price Target $33)

We believe Intel is well positioned to benefit from a solid PC demand and competitive concerns are overdone. We expect price competition to subside now that Intel has cost and technology leadership. A combination of industry and company-specific factors should permith Intel to generate record EPS and operating cash flow through 2013. Combined with an above-average dividend yield, we rate Intel a Buy.

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

Good day and happy trading!

Kristian Camenzuli