Market Preview - 3 October 2012; Eurozone Retail Sales on tap

Forex Overnight: EUR trading lower
The EUR has weakened against the major currencies this morning as worries over the Spanish debt crisis escalated after the Spanish Prime Minister, Mariano Rajoy, indicated that the country was not seeking a bailout in the immediate future. Additionally, investors remained cautious ahead of the Eurozone retail sales data scheduled later today which is expected to indicate a monthly decline in August. At 5 am GMT, the EUR has dropped 0.2 percent and 0.1 percent versus the USD and the GBP to trade at USD 1.2895 and GBP 0.7997, respectively.

The AUD has declined 0.5 percent against the USD after data indicated that the trade deficit in Australia widened more-than-forecast in August.

The JPY has weakened 0.1 percent against the USD while it has risen 0.1 percent versus the EUR.

UK Stocks: Expected to open in negative territory
The FTSE 100 is likely to open 9 to 14 points in the red. Halifax House Prices, Services Purchasing Managers’ Index (PMI) and Change in Official Reserves are the major economic indicators scheduled for release today.

Tesco and Sportingbet are scheduled to report their results today.

According to Bloomberg, Glencore International has sought the European Union’s approval to buy Xstrata.The Financial Times has reported that 3i Group plans to sell or float its Civica business and has appointed Rothschild to conduct a strategic review. Bowleven has stated that production from its Etinde oil project in Cameroon is expected to commence in 2015 instead of 2013.

Asia: Trading mostly weak
Asian markets are trading mostly lower this morning amid lingering concerns over Spain’s bailout.

In Japan, Toyota Motor has advanced on the back of its better-than-expected US auto sales in September. Fast Retailing has gained value amid expectations of robust sales for the full year ending August 2013. NEC Corporation and Orix Corporation have advanced amid news that the companies would start renting large capacity storage batteries to households to encourage domestic solar power use. On the flip side, Daiichi Sankyo has lost value after ArQule Inc. stated that it would discontinue the study of a lung tumor treatment conducted in collaboration with the company. Nippon Paper Group has lost value amid reports that the company’s first half year operating profit might miss its own forecast. At 5 am GMT, the Nikkei 225 has declined 0.6 percent to trade at 8,732.5.

In Hong Kong, financial sector stocks, Bank of China and China Construction Bank are trading higher. New World Development Company has gained after realtors indicated a rise in demand for homes amid expectations of a prolonged low interest rate regime. Cathay Pacific Airways, Belle International Holdings and Esprit Holdings have also added value. Markets in China and South Korea are closed today on account of a public holiday.

US Stocks: Futures trading in the red
At 5 am GMT, S&P 500 futures are trading 3.5 points weak. ADP Employment Change, ISM Non-Manufacturing Composite Index and MBA Mortgage Applications are the key economic indicators slated for release later today.

Monsanto, Marriott International, Family Dollar Stores and RPM International are scheduled to announce their results today.

InterMune rallied 10.2 percent in the after hours trading session yesterday following an approval from Health Canada for its Esbriet drug used in the treatment of mild to moderate idiopathic pulmonary fibrosis in adult patients. Resources Connection climbed 4.6 percent on the back of robust first quarter profit. MetroPCS Communications continued its regular session gains and advanced 2.0 percent after Deutsche Telekom indicated that it is in talks with the company to merge their US wireless units. On the contrary, Xyratex plummeted 13.8 percent following downbeat third quarter earnings and after it projected a loss in the fourth quarter. Antares Pharma plunged 10.7 percent after it announced a public offering of its common stock.

Yesterday, the S&P 500 index gained 0.1 percent in the regular trading session. However, gains were limited amid persistent concerns about Spain’s debt crisis. MetroPCS Communications was the top gainer on the S&P 500 index and surged 17.8 percent. Wellpoint jumped 4.3 percent after it announced the pricing of its USD 1.4 billion offering of senior convertible debentures due 2042. Citigroup advanced 1.6 percent following a broker upgrade on the stock to “Out-Perform” from “Market- Perform”. On the downside, Sprint Nextel retreated 5.4 percent after a broker downgraded its rating on the stock to “Market-Perform” from “Out-Perform”. Chipotle Mexican Grill and JC Penney Company dropped 4.2 percent each following downbeat broker comments. Lower-than-expected first quarter results led Mosaic to slide 3.9 percent.

European Stocks: Likely to open mixed
The DAX is likely to open around 8 points higher while the CAC is expected to open 6 to 8 points lower. Eurozone Composite PMI & Retail Sales and Eurozone, German, French, Italian & Spanish Services PMI are the major economic indicators scheduled for release today.

Bastide le Confort Medical SA, Cerep SA and Notrefamille.com SA are scheduled to report their results today.

Corrado Passera, Itlay’s Industry Minister, has stated that he would prefer an Italian bid for Finmeccanica SpA’s AnsaldoEnergia unit for which Siemens AG had emerged a favourite bidder last week. Deutsche Telekom AG has indicated that it is in talks to merge its T-Mobile USA unit with MetroPCS Communications and take a majority stake in the combined wireless service provider. Reuters has reported that Piraeus Bank has struck a preliminary deal with Societe Generale SA to acquire the latter’s loss-making Greek unit, Geniki. According to the Financial Times, a bid from Areva SA and China’s Guangdong Nuclear Power Corporation Holding for the 6-gigawatt Horizon nuclear joint venture did not materialise.

Macro Update
UK shop price inflation eases
The British Retail Consortium has reported that annual shop price inflation in the UK has eased marginally to 1.0 percent in September compared to a 1.1 percent rate recorded in the previous month.

Chinese non-manufacturing activity deteriorates
The non-manufacturing PMI in China has declined to a reading of 53.7 in September, the lowest level since March 2011 and compared to a reading of 56.3 posted in August.

US total vehicle sales rise
Seasonally adjusted total vehicle sales in the US have risen more-than-expected to 15.0 million units in September compared to a downwardly revised 14.5 million units sales recorded in the previous month.

Australian trade deficit widens
The seasonally adjusted merchandise trade deficit in Australia has widened more-than-expected to AUD 2.0 billion in August compared to a downwardly revised AUD 1.5 billion deficit reported in July.

Australia’s new home sales decline
The Housing Industry Association has reported that new home sales in Australia have dropped 5.3 percent M-o-M in August, reaching the lowest level in 15 years and compared to a 5.6 percent drop recorded in July.

Australian service sector activity contracts further
The Australian Industry Group’s index measuring the performance of the service sector in Australia has declined to a reading of 41.9 in  September compared to a reading of 42.4 reported in August.

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