Trader Talk: An Analysis of the Markets this Morning

Good morning,

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

WHAT TO WATCH:

• Goldman, Allianz to Bid for Yorkshire Water Stake, Times Says

• Danone May Have Imported Tainted Fonterra Goods {NSN MR1CW66KLVRI <go>}

• Vodafone Seeks EU1b in Damages From Telecom Italia

• RBS Minority Investors Won’t Support Break Up: Sunday Telegraph

• Norway’s $740b Oil Fund May Be Restructured, Solberg Says

• Japan Drives Asian Stocks Lower as Bonds Gain

• London Recruiter Says City Job Vacancies Fell 12% Last Month

• Saxon Energy Hires Banks for $918 Million London IPO, Sky Says

• Jazz Seen Next Target Amid Ireland’s Drug Deal Frenzy

• Berlusconi Shockwaves in Italy Pose Threat to Euro-Crisis Lull

• Groupe Arnault, Colony Capital Simplify Carrefour Shareholding

• Immofinanz FY Net EU110.8m vs EU271.2m Y/y

• Merkel Challenger Says Alienated Voters Key to Unseating Her

EARNINGS

• FCC (FCC SM) pre-mkt, 1H, no ests.

• PostNL (PNL NA) 7:30am, 1H, no ests.

• Essar Energy (ESSR LN) 8:00am, 1Q trading

• Ultra Electronics (ULE LN) 8:00am, 1H, no ests.

• Alent (ALNT LN) 8:00am, 1H adj. EPS est: GBP 0.125 (1 est.)

• Veolia Environnement (VIE FP) 8:30am, 1H adj. EPS est: EU0.11 (2 ests.)

• HSBC (HSBA LN) 10:15am, 1H adj. EPS est: $0.54

• Impregilo (IPG IM) 1H, no ests.

• Pirelli (PC IM) 1H adj. EPS est: EU0.36 (1 est.)

China

China’s economy is showing signs of stabilizing after slowing for two straight quarters, with official manufacturing and services indexes rising and gains in gauges of business expectations. The non-manufacturing Purchasing Managers’ Index rose to 54.1 in July from 53.9, the first acceleration since March, government data showed Aug. 3, following last week’s unexpected gain in a manufacturing PMI. Readings above 50 indicate expansion. A services index from HSBC Holdings Plc and Markit

Economics was unchanged at 51.3, a separate report showed today.

US

Two years after Standard and Poor’s tripped the U.S. of its top rating, America’s credit quality is etting a boost from economic growth outpacing that of the 12 nations graded AAA. The gap between Treasury five- and 10-year note yields is wider than that for the higher-rated sovereigns, showing fixed-income investors anticipate the U.S. will grow faster than its peers, according to data compiled by Bloomberg. Other measures also show the U.S. improving, as the cost to insure against default is the lowest since 2009, the dollar has risen the most since 2008 and the S&P 500 Index reached a record on Aug. 2.

Stock to watch: Toyota

Prime Minister Shinzo Abe has been urging Japan’s companies to spend their growing piles of money to bolster the country’s economy. Toyota Motor Corp., with cash swelling to about $37 billion, is beginning to comply. The carmaker said on Aug. 2 that net income almost doubled to 562.2 billion yen ($5.7 billion) last quarter more than General Motors Co. and Volkswagen AG combined as U.S. sales rose and the weaker yen boosted overseas profit. Cash and marketable securities rose 11 percent and totaled the most of any non-bank in Japan, according to data compiled by Bloomberg.

Toyota is starting to spread the wealth. The company is raising capital spending and research expenditure 10 percent this fiscal year, paying workers the highest bonuses since 2008, and planning higher dividends as income surges. The moves show how Abe’s efforts to revive Japan’s economy are gaining support from the country’s biggest exporter and may foreshadow spending by more Japanese companies.

Good day and happy trading!

Kristian Camenzuli