Market Gazer Hong Kong - Japan - Germany - UK - North America
market review : europe & us
European shares saw red while US shares
ended marginally higher led by tech stocks
after surviving another disappointing data
on consumer sentiment. German DAX
index fell 39.89 points or 0.64% at
6,209.76 and FTSE 100 finished 31.69
points lower or down 0.57% at 5,508.45.
Tech stocks led US shares on Friday as
Nasdaq Composite gained 0.54% or 12.36
points to 2,315.61, while Dow Jones
Industrial Average posted a marginal
gains of 13.02 points or 0.12% to end at
10,607.85. S&P 500 index inched 0.08%
higher to 1,125.59.
Irish Finance
Ministry denied
rumors that the
country was in need
for International
Monetary Funds’s assistance to help its
ailing banking sector. The rumor sent the
Irish credit default swap to hit 425 basis
points, a record high. Ten-year bond yield
also rose to around 6.5%, as well as yield
premium over German Bunds to 410 basis
points, also a record high. EURUSD was
shot down from mid-1.31s to the lower
1.30s after the news before it stabilized at
1.3040s at the end of the day. Despite the
denial, the news – which was based on
Barclays’ research note – brought back
the concerns over the fiscal health over
European countries.
Consumer Sentiment took a blow in
September as the index from The
Thomson Reuters/University of Michigan
17 September 2010
reported it falling to 66.6 from 68.9 in
August. Current economic conditions was
nearly unchanged in September as it
stood at 78.4 against the August reading
of 78.3 Consumer expectations index
declined to 59.1 in September from 62.9
in August. All three indexes were below
the consensus : the sentiment index was
initially expected at 70.00, while current
economic conditions index and consumer
expectations index were forecast at 79.0
and 64.2, respectively.
Another data due on Friday was
Consumer Price Index (CPI) which showed
a month-on-month gains of 0.3% in
August. Its core measure, which omitted
the prices of food and energy was
unchanged. Market consensus initially
expected the headline CPI to rise 0.2%
while the core index to also gain 0.1%.
Year-on-year, headline index was up 1.1%
and the core index was up 0.9% in August.
Timid readings would mean that the
Federal Reserve - which is going to meet
again next week – is most likely to keep
interest rates on hold at 0.25%.
European data on Friday featured German
Producer Price Index which was flat in
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 Market Gazer Hong Kong - Japan - Germany - UK - North America
August on month-on-month terms, slower
than July’s 0.5% gains. Compared to a year
earlier, PPI also slowed to 3.2% in August
from 3.7% gains in July. Construction
output in Euro-Zone fell 3.1% in July after
rising 1.8% in June on month-on-month
basis, but suffered from a worse fall of
7.5% in year-on-year terms after gaining
1.9% in June.
Post-earnings
report, several
houses revised their expectations on
Oracle Corporation. Piper Jaffray raised
Oracle’s target to $31 from $30 and
maintaining its OVERWEIGHT rating;
Citigroup also raised the price target to
$30 from $28; FBR Capital kept Oracle at
OUTPERFORM while raising its target to
$32 from $30; RBC Capital also hold its
rating at OUTPERFORM with target raised
to $32 from $28; and JMP Securities set
price target at $33 and raised its rating to
OUTPERFORM from MARKET PERFORM.
Oracle leaped 8.36% to settle at $27.48 on
Friday.
Johnson & Johnson is to acquire Crucell
for $2.3 billion. The bid for the vaccine
maker worth 24.75 euros per share, which
means a premium over 50%. Opening up
the door to the vaccine market will put
J&J in competition with the drug giant
GlaxoSmithKline Plc. J&J rose 0.46% to
$61.57 on Friday.
Citigroup Inc. sold its
student loan business to
Discover Financial Services and SLM Corp.
(a.k.a. Sallie Mae). Discover will pay $600
17 September 2010
million for the stake, including $4.2 billion
worth of loans, and Sallie Mae will acquire
$28 billion of assets, including 1.3 million
new customer. Citigroup will bear a loss
worth $500 million, which will be included
in the Q3 report. Citigroup ended at $3.95
or down 0.5%.
Microsoft’s price target was lowered to
$30 fom $35 by Oppenheimer, but
retained its rating at OUTPERFORM. The
house pointed at ‘increasing headwind’ in
both Windows PC & Office businesses as
the factor behind the revision.
Meanwhile, FBR Capital also kept
Microsoft at OUTPERFORM as well as its
price target at $32. However, slowing PC
demand led to revisions of earnings
estimates: 3Q to $0.54 from $0.56, and
for June 2011 fiscal year from $2.38 to
$2.31.
Volkswagen AG’s Czech
unit Skoda Auto AS
announced its plan to
introduce a new model
soon. The news pushed the price of its
preferred shares up 2.6% to €91.21.
Barclays Plc shed 3.2% on Friday, settling
at 304.65 pence after UBS downgraded its
earnings estimates by 8% for 2010, 13%
for 2011, and 20% for 2012.
McDonald’s was rated at
HOLD by Jefferies, with target
set at $75.
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 Market Gazer Hong Kong - Japan - Germany - UK - North America
next week preview 
Key US data for next week will be
dominated by housing data: NAHB
Housing Market Index for September,
expected to rise from 13 to 14; Building
Permits which are seen to inch higher to
560k in August from 559k in July; August
Housing Starts, with the consensus of
550k against prior 546k, slowing down
from 1.7% gains in July to 0.7% in August;
and House Price Index which is expected
to fall 0.1% in July after a drop of 0.3% in
June. More housing data due are Existing
Home Sales, expected to show a bounce
as it is seen to rise 7.1% in August to 4.1
million after a plunge of 27.2% in July and
finally, New Home Sales, which is
expected to show gains of 6.9% in August
after slumping 12.4% in July.
Other than housing data,
Federal Reserve’s FOMC
meeting will be the focus
even that the rates are
likely to stay on hold. US leading
indicators for August will be released in
Thursday, it is expected to show a 0.1%
gains, the same pace as July’s; while
Durable Goods Orders are expected to
show a rise of 1.4% after it gained 0.4% in
July. Excluding transportation items,
orders are seen rising 1% in August after it
dropped 3.7% in July.
Data from Europe will be German
Manufacturing PMI for September, seen
at 57.6 against 58.2 in August; the PMI for
Services, seen unchanged at 57.2; while
Euro-Zone PMI for Manufacturing is seen
17 September 2010
at 54.5, down from 55.1 in August; For
Services, the PMI is seen slightly lower at
55.5 in September against 55.9 in August;
and finally the Composite PMI Index is
expected at 55.7 in September compared
to August’s 56.2. Another gauge of output
for Euro-Zone, industrial new orders are
seen slowing to 16.2% (y/y) in July from
22.8% gains in June; month-on-month, the
orders are seen to have fallen 1.4% in July
after it posted gains of 2.5% in June.
Consumer confidence data will also due in
Europe. The first would be from Euro-
Zone and it is expected to improve to -10
from -11 in September, while the second
will be the German IFO index. IFO’s
business climate index is seen down to
106.4 from 106.7 in September; while the
current assessment index is seen
improving to 108.7 from 108.2; however,
the expectations index is seen falling to
104.0 from 105.2.
A day after the Fed delivers
its decision on rates, the
Bank of England will release
its latest MPC minutes on
Wednesday. The minutes will show how
the Bank assessed the economy during its
latest meeting and how the balance of
votes was. The last time, eight members
voted for no changes in rates, while
Andrew Sentance voted for a rise in rate
of 25 basis points.
Disclaimer: This report is provided for information purposes
only. It is not an offer to sell or to buy any securities. This
report has been prepared based on sources believed to be
reliable, but there is no assurance or guarantee regarding its
completeness & and accuracy. The author accepts no
responsibility or liability arising from any use of the report.
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