Market Preview - 24 October 2012; Eyes on European PMIs

Forex Overnight: EUR trading flat
The EUR is trading almost unchanged against the major currencies this morning ahead of manufacturing and services Purchasing Managers’ Index (PMI) data across Europe scheduled to be released later in the day. Investors are also keeping a tap on German business confidence data and the outcome of the Federal Reserve’s (Fed) monetary policy meeting slated later today. At 5 am GMT, the EUR is trading flat against the USD and the GBP at USD 1.2985 and GBP 0.8144.

The AUD has gained 0.5 percent versus the USD after data indicated that the HSBC preliminary manufacturing PMI in China rose to the highest level in three months in October. Additionally, consumer price inflation in Australia accelerated more-than-expected in the third quarter of 2012.

UK Stocks: Likely to open in positive territory
The FTSE 100 is expected to open 11 points in the green.

CBI - Business Optimism, Total Orders and Selling Prices Indices are the key economic indicators slated for release today.

Reckitt Benckiser Group, Home Retail Group and Punch Taverns are scheduled to report their results later today.

The Financial Times has reported that BHP Billiton is considering selling its Pinto Valley copper mine in Arizona.

Bloomberg has reported that BP has urged the US District judge to approve a proposed USD 7.8 billion settlement of thousands of claims by coastal businesses and property owners who sued the company over economic damages from the 2010 Gulf of Mexico oil spill.

Asia: Trading mostly firmer
Asian markets are trading mostly higher this morning.

In Japan, Sharp Corporation has advanced amid news that the company plans to sell 10.0 million smartphones developed with Hon Hai Precision Industry. DeNa and Gree have gained value after US based Facebook posted better-than-expected third quarter results. On the other hand, Kawasaki Heavy Industries and JTEKT Corporation have dropped on the back of downbeat half year operating profit. Canon and Ricoh Company have also lost value after Xerox Corporation reported dismal third quarter revenue and slashed its full year earnings outlook. At 5 am GMT, the Nikkei 225 has gained 0.1 percent to trade at 9,025.5.

In China, markets are trading higher after the HSBC manufacturing activity index in China climbed for October. China Vanke has advanced after it posted more than twofold rise in its third quarter profit. China Eastern Airlines is trading higher amid reports that it would report robust earnings. In South Korea, POSCO has declined after it reported dismal third quarter profit. On the flipside, SK Hynix has advanced after it posted better-than-expected third quarter earnings. In Hong Kong, Esprit Holdings has lost value after it unveiled plans to raise USD 677.0 million for its restructuring. GOME Electrical Appliances Holdings is trading lower after it stated that it might report a first half year loss.

US Stocks: Futures trading in the green
At 5 am GMT, S&P 500 futures are trading 7.5 points stronger.

New Home Sales, Markit Manufacturing PMI and MBA Mortgage Applications are the major economic indicators scheduled for release today. Markets await the US Federal Reserve’s interest rate decision due later today.

AT&T, Bristol-Myers Squibb, Boeing, EMC, Kimberly-Clark, NextEra Energy, Lockheed Martin, General Dynamics, American Electric Power and Thermo Fisher Scientific are scheduled to announce their results today.

Facebook rallied 12.9 percent in the after hours trading session yesterday after it posted better-than-expected third quarter results. Upbeat second quarter results and a buoyant third quarter outlook led RF Micro Devices to surge 12.0 percent. Gilead Sciences gained 2.9 percent on the back of robust third quarter results and buoyant full year revenue forecast. Amgen edged 2.4 percent up after it reported better-than-expected third quarter results and boosted its full year financial guidance. On the flipside, Netflix slumped 16.3 percent after it posted dismal third quarter earnings and forecast a loss for its fourth quarter. United Therapeutics tumbled 8.2 percent after the US Food and Drug Administration did not approve the company’s new drug application to treat high blood pressure. Dow Chemical eased 0.7 percent after it unveiled plans to trim its global workforce by about 5.0 percent.

On Tuesday, the S&P 500 index declined 1.4 percent in the regular trading session following a slew of disappointing US corporate earnings. Monster Beverage tumbled 10.2 percent after a broker removed the stock from its “Conviction Buy” list. E.I. du Pont de Nemours and Company plunged 9.1 percent after it reported a sharp decline in its third quarter net income and announced plans to trim 1,500 jobs worldwide. A cut to its full year earnings outlook led Xerox to retreat 5.1 percent. 3M slid 4.1 percent after it posted downbeat third quarter revenue and slashed its full year earnings estimate. On the contrary, better-than-forecast third quarter profit and a hike to its full year earnings outlook led Whirlpool to rally 8.7 percent. Harley-Davidson jumped 7.7 percent after it announced that new models would be unveiled by 2015. Yahoo! Inc. surged 5.7 percent after its CEO, Marissa Mayer, unveiled her turnaround strategy for the company. United Parcel Service rose 3.0 percent after it posted third quarter earnings in line with market expectations.

European Stocks: Expected to open higher
The DAX and the CAC are likely to open 16 points and 25 points in positive territory, respectively.

Eurozone, German & French Manufacturing & Services PMI, Eurozone Composite PMI & Government Debt and German Import Price Index, IFO - Business Climate, Current Assessment & Expectations Indices are the key economic indicators scheduled for release today.

Volkswagen AG, Nordea Bank AB, Iberdrola SA, Telenor ASA, Volvo AB, Atlas Copco AB, Trelleborg AB and Storebrand ASA are slated to release their results today.

The Wall Street Journal has reported that UBS AG plans several thousands of job cuts in its investment banking division.

Reuters has reported that the German government is stressing ahead with its plan to acquire a stake in EADS NV from Daimler AG. The government has also asked the parliament to release EUR 1.6 billion for the purchase.

Reuters has reported that AK Steel Holding has indicated its interest in buying the two steel mills in Brazil and the US that ThyssenKrupp AG has put up for sale.

Macro Update
BoE open for more stimulus, indicates King
Mervyn King, the Governor of the Bank of England (BoE), has stated that the central bank stands ready to inject additional monetary stimulus, if the nation’s economic recovery fades.

Chinese manufacturing activity contracts
The HSBC preliminary manufacturing PMI in China has risen to a reading of 49.1 in October, the highest level in three months and compared to a reading of 47.9 recorded in September.

Australian consumer price inflation accelerates
The annual consumer price inflation in Australia has climbed more-than-expected to 2.0 percent in the third quarter of 2012 compared to a 1.2 percent rate recorded in the previous quarter.

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