28 October 2014 at 8:32 GMT
By Peter Garnry
Below is a short recap of my comments from our internal morning call.
- Record short selling in Japanese equities... with around 35% of daily trading volume being shorted. Normally the most shorted single stocks outperform the general market, so this might be a signal that the market is too pessimistic on Japanese equities and we could see a short-term, short-covering rally.
- The market does not believe the European Central Bank... with all banking stocks yesterday erasing early gains following the better-than-expected stress-test results. The truth lies probably in between, with the ECB being a bit too optimistic and investors a bit too pessimistic. Overall, our view is that the stress test will improve valuations among certain banking stocks, such as Commerzbank and Deutsche Bank which are trading at half their book value.
- Amgen delivered solid third-quarter earnings after US market close... with EPS at $2.30 vs. an expected $2.11. The company is raising its full-year guidance. We highlighted the stock on yesterday's morning call and we remain very bullish on Amgen.
- Twitter Q3 EPS was in line... but the valuation is grotesque given the lack of user growth. We are negative on the stock.
- BP issues an implicit profit warning... but the market does not care, sending the stock up around 1% in early London trading as Q3 net income came in a tad better than expected (but Q3 profits were down 19% year-over-year). Gulf of Mexico oil spill costs are now $20 billion but could go as high as $50 billion. Management is issuing a small profit warning due to the sanctions against Russia. BP owns 20% of OAO Rosneft, Russia's largest oil producer.
- Lloyds Banking sees a 41% jump in profits... but investors are sending the stock down 1.5% despite announcements of jobs cut and positive trends in impairments. Our quant model is neutral on Lloyds Banking but very bullish on Royal Bank of Scotland, which is reporting its Q3 earnings on Friday. Given today's results from Lloyds, we expect positive results from Royal Bank of Scotland.
- Gilead Sciences reports Q3 earnings at 20:00 GMT... with the Street expecting $1.91. Our quant model is extremely bullish on Gilead Sciences and the stock is on our conviction buy list for North America equities.
- Facebook reports Q3 earnings after US market close... with analysts expecting earnings to rise 61% y/y on margin expansion and increased monetisation of its international user base. Our quant model is very bullish on Facebook and we will elaborate on our view later today on Saxo TV.
-- Edited by Michael McKenna