TV

Owen Thomas
"I'm very worried about China; it's a massive credit bomb that needs to be defused"; the words of Michael Ingram, Market Strategist at BGC Partners. His comments come as latest data shows manufacturing in China is still shrinking, albeit at a slightly slower rate.
Article / 04 October 2011 at 6:05 GMT

Market Preview - 4 October 2011

SaxoBankUK SaxoBankUK
Saxo Capital Markets UK
United Kingdom
Forex Overnight: EUR trading higher
The Euro has strengthened against the USD this morning, despite looming concerns over the Greek debt crisis. In a meeting yesterday, European finance ministers signaled that bondholders might have to bear bigger losses on Greek debt, and agreed that Greece could wait until mid-November for the next installment of the bailout. At 6 am, the EUR has gained 0.2 percent and 0.1 percent against the USD and the GBP, to trade at $1.3203 and £0.8546, respectively.
The JPY is trading 0.3 percent lower against the EUR. Japanese Finance Minister, Jun Azumi, has cautioned that Euro’s weakness against the JPY is “extreme” and is not good for the stability of the global economy.
The AUD has declined 0.3 percent against the USD, after the Reserve Bank of Australia (RBA) retained its key interest rate and signaled a cut in rates in the future.

UK Stocks: Expected to open in negative territory
The FTSE 100 is likely to open 92 points lower.
Construction Purchasing Managers’ Index (PMI) is the key economic indicator scheduled for release today.
Wolseley, St Ives, Walker Greenbank and Waterman Group are scheduled to report their results later today.
Bloomberg has reported that HSBC Holdings would consider selling its general insurance operations in Asia and Latin America separately, though potential buyers could also submit bids for the global business.
BP has announced plans to build a $800.0 million wind farm in Kansas next year, in a move that would provide a boost to the U.S. wind power industry.
Diageo is seeking to acquire half the stake of its Indian partner, Radico Khaitan, in its five-year-old joint venture (JV) Diageo Radico Distilleries.
Hewlett-Packard has completed its $12.0 billion acquisition of Autonomy, wherein the latter would operate as a separate business unit.
Bloomberg has reported that 3i Group is exploring whether to bid for the private-equity fund unit of insurer, AXA SA.

Asia: Trading weaker
Persistent concerns over sovereign debt crisis in Eurozone, have continued to weigh on Asian markets this morning.
In Japan, Mitsubishi Corporation and Mitsui Company & Limited have retreated, tracking softer commodity prices. Kawasaki Kisen Kaisha Limited has declined, after it forecasted a net loss for the full year. Toyota Motor Corporation has slid, following a decline in its U.S. car sales in September. Komatsu Limited has edged lower, after a broker reduced its target price on the stock. At 6 am, the Nikkei 225 is trading 1.4 percent lower at 8,422.5.
In South Korea, markets are trading sharply lower, with Poongsan Corporation plunging, following weak copper prices, while SK Innovation has declined, tracking the movement in crude oil prices. Woori Finance Holdings and Hana Financial Group have slumped, as risk appetite amongst investors waned. Hyundai Motor and Kia Motors have registered losses, after their combined U.S. car sales rose less-than-expected in September. In Hong Kong, retailers, Li & Fung Limited and Esprit Holdings have retreated. In China, markets are closed on account of a holiday for National Day Golden Week.

US Stocks: Futures trading firmer
At 6 am, S&P 500 futures are trading 2.8 points stronger.
Factory Orders for August is the key economic indicator scheduled for release today.
Yum! Brands, Global Payments and Resources Connection are scheduled to announce their results today.
Mueller Water Products, Qihoo 360 Technology, NN and Magnum Hunter Resources, the major gainers in after hours trading session yesterday, surged 65.9 percent, 11.1 percent, 10.4 percent and 10.3 percent, respectively. Somaxon Pharmaceuticals rallied 42.5 percent, after it stated that the clinical and regulatory guidance, recently provided by the U.S. Food and Drug Administration, would provide a clear path toward an OTC version of insomnia drug, Silenor. Team Incorporation gained 4.3 percent, after it reported higher-than-expected profit for the first quarter. On the other hand, Lone Pine Resources, PowerSecure International and Complete Production Services slumped 13.4 percent, 10.6 percent and 5.0 percent, respectively.
In the regular trading session yesterday, the S&P 500 index declined 2.9 percent, on persistent worries over Eurozone sovereign debt crisis. Micron Technology plunged 14.1 percent, amid speculation that the company's price-fixing trial against Rambus might not turn out positive for Micron Technology. Amongst other semiconductor sector stocks, Advanced Micro Devices and MEMC Electronic Materials slumped 10.8 percent and 9.4 percent, respectively. Financial sector shares were also hit, with Citigroup, Bank of America Corporation, Regions Financial Corporation and Morgan Stanley plunging 9.8 percent, 9.6 percent, 9.3 percent and 7.7 percent, respectively, amid receding risk appetite amongst investors. Resources sector stocks, Alcoa Incorporation and Cliffs Natural Resources declined 7.0 percent and 5.6 percent, respectively, amid fears of a slowdown in demand. Yahoo! Inc advanced 2.8 percent, after Jack Ma, the CEO of Alibaba Group Holdings, stated that he would be interested in buying the company.

European Stocks: Likely to open in the red
The DAX and CAC are expected to open 100 points and 54 points lower, respectively.
Eurozone’s Producer Price Index is the key economic indicator scheduled for release today.
Bonduelle SA is scheduled to report its results later today.
Cinco Dias has reported that Telefonica SA, through its Brazilian unit Telecomunicacoes de Sao Paulo SA, has acquired an additional 30.0 percent stake in Brazilian pay television company, TVA, raising its stake to 49.99 percent.
GDF Suez SA has stated that it has finalised the sale of its G6 Rete Gas unit in Italy to a consortium comprising F2i infrastructure fund, AXA Private Equity and Enel Distribution, in a deal worth €772.0 million.
Handelsblatt has reported that Martin Winterkorn, the CEO of Volkswagen AG, has stated that the company plans to invest €3.4 billion in its Brazilian operations through 2016.
Vinci SA and Hitachi Limited have bagged a contract to build the first phase of the Berjaya Central Park residential and office complex in Kuala Lumpur, Malaysia.
Bloomberg has reported that RWE AG and E.ON AG are planning to build new nuclear reactors in the U.K., after the German government ordered the shutdown of nuclear plants in Germany.

Macro Update
RBA keeps rates on hold

The RBA has retained its key benchmark rate at 4.75 percent.
Greek haircut under review, no new aid until November
Eurozone finance ministers in a meeting yesterday, indicated that they are reviewing the size of the private sector's involvement in a second international bailout package for Greece, and also agreed that the country could wait until mid-November until it receives the next tranche of aid.
EU determined to avoid Greek default, says Juncker
Jean-Claude Juncker, the Prime Minister of Luxembourg and President of the Eurogroup of Finance Ministers said that members of the Eurozone will do everything to avoid a Greek debt default. He also said that EFSF ceiling should not be raised.
More quantitative easing could do harm, say Fed officials
Richmond Fed President, Jeffrey Lacker, and Dallas Fed President, Richard Fisher, reiterated their opposition to further Fed monetary policy easing, and cautioned that it would do more harm than good.
Australian trade surplus rises
Australia’s seasonally adjusted trade surplus increased to A$3.1 billion in August, compared to an A$1.8 billion surplus posted in July.
Australian building approvals rise
Australian home-building approvals rose 11.4 percent in August from a month earlier.

Economic Calendar

Country

BST

Economic Indicator

Relevance

Consensus/*Actual

Previous

Frequency

Japan

0:50

Monetary Base (YoY) (Sep)

P

16.70%*

15.90%

Monthly

Japan

2:30

Labour Cash Earnings (YoY) (Aug)

P

0.60%*

-0.20%

Monthly

UK

9:30

Purchasing Managers' Index Construction (Sep)

PP

51.60

52.60

Monthly

Eurozone

10:00

Producer Price Index (MoM) (Aug)

PPP

-0.20%

0.50%

Monthly

Eurozone

10:00

Producer Price Index (YoY) (Aug)

PPP

5.80%

6.10%

Monthly

US

15:00

Fed Chairman Bernanke to Testify Before JEC

PPP

-

-

-

US

15:00

Factory Orders (MoM) (Aug)

PP

0.00%

2.40%

Monthly

Note: PPPHigh           PPMedium           PLow


Corporate Calendar

Country

Company Name

Index

Announcement

UK

Carillion Plc

FTSE All Share

Trading

UK

St Ives Plc

FTSE All Share

Prelim

UK

Wolseley Plc

FTSE All Share

Prelim

US

Yum! Brands Inc

S&P 500

Q3 Earnings Release

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