31 August 2010 at 7:53 GMT
Equity continues to follow the macro agenda in terms of overall risk sentiment. Monday it was driven lower by less-than-expected US personal income data. Tuesday, there is a string of major economic numbers due and very little company-specific news.
There was one, however. Carrefour released earnings short of expectations (EUR 82 M vs. EUR 292 M expected). Another big company adding to the negative trend in earnings outlook (following Intel’s downward revision of their sales forecast last Friday) will clearly weigh negatively on the opening of the European markets. We expect European markets to open 1% lower.
Intel announced yesterday that they will buy Infineon’s wireless solutions and this marks another set of M&A - which we see picking up. However, a pick-up in M&A is not necessarily good news as usually this indicates lower equity markets (M&A volume is negatively correlated with equity markets).
German unemployment will the first major economic number released and it could be a good one given the continuous stream of good numbers coming from this country - contrary to all the bad news hitting the street now. It should pull equities higher, but not into positive territory. We are in line with consensus on the Case-Shiller, so this should be non-event.
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