Market Outlook October 4th - October 8th Print

Market Outlook

- WALL STREET:
US Indices ended the week in the negative territory. The DJIA & the S&P 500 ended slightly down while the Nasdaq dropped 1.35%. On the Economic front, most of the releases were better than expected. The following exceptions are to be made: September consumer confidence which fell to its lowest level since February at 48.5 (52.1 expected) from 53.2 in August and September ISM Manufacturing declined to 54.4 (54.5 expected) from 56.3. However, 2Q GDP rose 1.7% (+1.6% expected) vs. 3.70% in 1Q. Personal Consumption rose 2.2% (+2% expected) vs. 1.9% in 1Q. September Chicago PMI jumped to 60.4 (55.5 expected) from 56.7 in August. August Personal Income rose 0.5% (+0.3% expected) vs. +02% in July. September University of Michigan Confidence was revised higher to 68.2 (67 expected) from 66.6 and 68.9 in August. Construction Spending rose 0.4% in August MoM (-0.4% expected) vs. -1.4% in July. Finally, September domestic Vehicle Sales rose to 8.82m (8.70m expected) from 8.66m in August. Regarding sectors, energy stocks bounced 2.47% during the week, whereas household & personal goods lagged behind with a 1.95% decline. Regarding technical, the S&P 500 is currently basing below the 1150 resistance area. An upside breakout of the key level would open the way towards 1178. Alternatively, a break below 1110 would call for a drop to 1040.

- EUROPE:
Moody's Investors cuts Spain credit rating to Aa1 from AAA with a stable outlook. The rating agency mentioned weak economic growth, the difficulty of cutting the budget deficit and higher borrowing needs. As a result, the Ibex was the worst performing index in the European area, declining 2.59% while the Ca eased 2.39% & the Eurostoxx 50 2.28%. On the opposite, the FTSE 100 eased only 0.1%. Regarding sectors, like in the US, oil & gas stocks gained the most with a 1.63% weekly gain. On the opposite, banks dropped 4.50%. From a technical point of view, the Stoxx 600 remains in an ascending channel whose current lower boundary stands at 250.

 

October 4th - October 8th

Market Round up

 

Weekly chg (%)

Last

Dow Jones

-.3

10829.7

Nasdaq 100

-1.3

1996.6

Dax Xetra

-1.4

6211.3

Cac 40

-2.4

3692.1

border=0 Foreign Exchange

Euro/dollar : the pair has broken above its previous high and should reach its next resistance as the RSI is well directed. LONG above 1.29 towards 1.3815 & 1.4250.

Dollar/yen : the pair has struck against its bearish channel upper boundary and should face a further weakness. SHORT @ 85.8 with 83 or even 80.50 in sight.

 

Company preview

Tesco (GBp 428.1 ; -2.48% ; TSCO ; TSCO.L)
On Tuesday, Tesco, the UK food retailer is expected to deliver 1H pre-tax profit of £1.58bln compared to £1.42bln a year earlier on sales of £30.1bln vs £27.8bln. Earlier, the Co would launch its products online in China, Poland and the Czech Republic. In addition, the Co was upgraded to "overweight" from "equalweight" at Barclays. Technically, the stock price consolidated last week following reaching its key resistance at 440p. A re-test of this threshold is more likely to occur in the forthcoming days before a new rally to 455p.

Yum! Brands (USD 46.48 ; -0.04% ; YUM ; YUM.N)
The same day in the US, Yum! Brands could release 3Q EPS of appx. $0.73 vs $0.7 a year earlier on sales of $2.9bln vs $2.8bln. Recently, the Board approved a 19% increase in the Co's quarterly dividend to $0.25 per share from $0.21 previously. Last week, the Co's price target was raised to $53 vs $49 at UBS. From a technical view, the stock might be well forming a "bullish flag" pattern (not confirmed yet), backed by a rising 20D MA. Above $44, look for a further up move towards $50.

Constellation Brands (USD 17.77 ; -1.88% ; STZ ; STZ.N)
Wednesday, Constellation Brands, may publish 2Q EPS of around $0.49 compared with $0.54 a year ago on sales of $850m vs $877m. Earlier, the Co's unit, Constellation Wines US announced an expansion of its solar energy initiative and planned to invest in three new solar energy installations across California. From a chartist view, the price remains above a major support zone between $17 and $17.5. As long as this area is not penetrated, a new bounce is highly expected to $19 and $19.65 in extension.

Vedanta Resources (GBp 2209 ; -3.16% ; VED ; VED.L)
On Thursday, Vedanta Resources is expected to unveil 1H pre-tax profit of $1.25bln compared to $604m a year earlier. Last month, the Economic Times reported the Co could consider increasing its offer price for Cairn India. Furthermore, the Co was downgraded to "neutral" from "buy" at UBS and was also cut to "hold" from "buy" at Deutsche Bank. Technically, the shares are still under pressure below the bearish gap on August 12, 2010. Below 2400p, a further pullback towards 2200p should be in sight.

Alcoa (USD 12.23 ; 0.25% ; AA ; AA.N)
On the same day, Alcoa is scheduled to deliver its 3Q results. The US producer of primary aluminum could say 3Q EPS reach $0.06 compared with $0.07 a year ago. Recently, the Board declared a quarterly common stock dividend of 3 cents per share. Earlier, the Co received contracts to supply 5XXX-series alloy sheet and plate through 2014 for all AUSTAL USA vessels. Technically, the stock broke above a key level at $12 and the 20D MA is crossing over the 50D MA, which should call for a further rebound to $13.2 and $14.

Selection of those events which may affect the stock prices of international Large Caps


Corporate Calendar October 4th - October 8th

Date

Market

Company

Event

Monday, October 4th

   

No major earnings expected

 

Tuesday, October 5th

 

UK

Tesco

1st-Half results

 

SW

Industrivarden AB

3rd-Quarter results

 

US

Yum! Brands

3rd-Quarter results

Wednesday, October 6th

 

US

Monsanto

4th-Quarter results

 

US

Constellation Brands

2nd-Quarter results

 

US

Marriott International

3rd-Quarter results

 

US

Costco Wholesale

4th-Quarter result

Thursday, October 7th

 

UK

Vedanta Resources

1st-Half results

 

US

Micron Technology

4th-Quarter results

 

US

Pepsico

3rd-Quarter results

 

US

Alcoa

3rd-Quarter results

Friday, October 8th

   

No major earnings expected

 


Economic Calendar (CET) October 4th - October 8th

Date

Market

Economic data

Period

Expected

Last

Monday, October 4th

11:00:00

EC

Euro-Zone: PPI (MoM)

AUG

0.2%

0.2%

16:00:00

US

Factory Orders

AUG

-0.4%

0.1%

Tuesday, October 5th

11:00:00

EC

Euro-Zone: Retail Trade (MoM)

AUG

NA

0.1%

16:00:00

US

ISM - Non Manufacturing

SEP

51.9

51.5

Wednesday, October 6th

11:00:00

EC

Euro-Zone: GDP (QoQ)

2Q

1%

1%

16:30:00

US

Crude Oil Inventories (WoW chg)

W39

NA

-475

Thursday, October 7th

 

UK

GDP Estimate (NIESR)

SEP

NA

.007

08:45:00

FR

Trade Balance (Mln)

AUG

NA

-4180

12:00:00

GE

Industrial Production (MoM)

AUG

.007

.001

13:00:00

UK

BoE: Rates decision

 

.005

.005

13:45:00

EC

ECB: Rates decision

 

.01

.01

14:30:00

US

Initial Jobless Claims (Thsd)

W39

455

453

Friday, October 8th

08:00:00

GE

Trade Balance (Bln)

AUG

11.4

13.5

08:45:00

FR

Central Govt. Balance (Bln)

AUG

NA

-93.07

14:30:00

US

Unemployment Rate

SEP

.097

.096

14:30:00

US

Change in Nonfarm Payrolls (Thsd)

SEP

1.28

-54

14:30:00

US

Change in Manufact. Payrolls (Thsd)

SEP

6

-27

16:00:00

US

Wholesale Inventories

AUG

.005

.013