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

Good morning,

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

  • Premier Wen Jiabao said promoting investment growth is the key now to stabilizing China’s economic expansion, signaling officials may boost spending to counter a
  • slowdown that probably extended into a sixth quarter;
  • The BOJ will begin a two-day policy meeting later on Wednesday. Although some market players are hopeful that the central bank may introduce further easing steps, an increasing number see it standing pat after it released an unexpectedly positive economic review last week;
  • Applied Materials Inc., the U.S. chipmaking-equipment provider, reduced its fiscal 2012 sales and profit forecasts amid weakness in Europe, China and the personal-computer market;
  • China Southern Airlines Co., the nation’s biggest carrier by passengers, slumped after saying first-half profit may fall more than 50%. China needs to maintain “a certain amount” of economic growth and promote “reasonable” growth in investment, Wen said late yesterday;
  • 10-year Italian debt is yielding 6.105%, 10-year Spanish debt is yielding 7.062% and 10-year Portuguese debt is yielding 10.437%
  • Apple closed the session at $608.21 and Priceline closed the session at $648.65;
  • EURUSD 1.2258

Companies reporting Q212 results today:

  • Healthcare Services Group Inc
  • Marriott International Inc/DE
  • Chevron

The markets are trading lower this morning on the back of disappointing earnings data coming out of the US yesterday. The US markets closed the session lower with the markets down 1% on average. To add to the disappointing figures issued by the companies yesterday one has to add the reduction in imports and exports in China. The markets are feeling the pressure from a slowdown in Europe. The good news is that the Chinese Premier Wen said that more easing needs to be done in China in order to make up for the lack of demand from developed countries.

What isn't in our favor is that we are in the summer months and to add to the uncertainty is the low liquidity of the summer months. Investors want more certainty from Europe and until we get it, we will see volatile markets. Stay invested in non-cyclical and defensive names for the summer and keep on holding on the the dollar which is now trading at $1.2258 to the Euro! And from what I've been reading, the dollar should continue strengthing till we get more good news.

Stock to watch: Chevron ($103.88, Price Target $130)

We believe that US crude prices (WTI) will remain structurally discounted to international prices (Brent) on a long term basis, which is positive for Brent-levered oil companies such as Chevron. Despite a mild medium-term growth outlook (around 1% pa production growth out to 2014), Chevron's project portfolio is robust and long-term production growth should be solid. We rate Brent-levered, discounted, and defensive Chevron a BUY.

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

Good day and happy trading!

Kristian Camenzuli