The fears out of Europe are once again spreading around the globe as Asian markets are down this morning as a result of the news from Friday. We are seeing two stories developing now, the first being Europe once again stealing the headlines of financial and general news outlets and the second being the trials of country building. What we are witnessing now in Europe is not much different than that which took place in the US a couple centuries ago, which itself was a debt issue. The question now is whether the Europeans will resolve the second story in time to prevent the first story from poising the world economic well. This is what has scared us the past few months, and once again our fears are coming to fruition.
Looking at the economic calendar, today investors can look forward to only the FHFA Housing Price Index on Tuesday. The only economic news that we will have to trade on will be earnings and whatever trickles out of Europe during their trading session. One point we would like to highlight this morning is that the last time this happened with awful and/or unfavorable news coming from Europe, we saw US markets open lower only to trade higher once markets in Europe officially closed. That will be something to keep in mind over the next few sessions.
Looking at Asian markets we see markets are lower:
All Ordinaries - down 1.69%
Shanghai Composite - down 1.26%
Nikkei 225 - down 1.86%
NZSE 50 - up 0.05%
Seoul Composite - down 1.84%
In Europe markets are lower:
CAC 40 - down 2.12%
DAX - down 1.79%
FTSE 100 - down 1.74%
OSE - down 2.18%
It now appears that Spain will have to continue to keep the debt on their balance sheet which they have taken on to bailout their financial sector. The new bailout will flow through them as well, not through the EU directly and this investors find troubling. Friday we saw many of the Spanish banks' shares come under pressure and one would expect this to continue moving forward as we learn more regarding Spain. When one looks at the bailout situation coupled with the lower GDP growth the government finally admitted Friday it sure appears things are getting worse and not better. In trading on Friday Banco Santander, S.A. (SAN) saw shares fall $0.45 (8.09%) to close at $5.11/share with volume rising to 19.7 million shares. Banco Bilbao Vizcaya Argentaria, S.A. (BBVA) also came under pressure seeing its shares fall $0.52 (8.47%) to close at $5.62/share. Both banks have considerable exposure to markets outside of the Iberian Peninsula, however it is that home market which will result in the dark cloud which will continue to hang over these banks and shareholders' heads. The talking heads thought that these were great buys in the teens, and even better buys in the high single digits. The shares continue to become better buys as the share price falls, however investors need to be asking themselves when these actually become real buys, and now is not the time.
The technology space has two things going for it at this point, one being that earnings and future guidance are coming in ahead of expectations while the tech IPO market is once again showing signs of life. These events are good on their own, but when paired together it makes for a bullish story. Granted we understand that there is a bit of gamesmanship involved with the IPOs and their low floats and the resulting pops, but up is up and those are the facts.
Looking at the IPOs from Friday, Kayak Software (KYAK) debuted to a 27.62% rise in its shares as investors bid shares up by $7.18 to close at $33.18/share. The company runs a platform which allows visitors to its site to compare prices across a host of sites in order to find the best deal for their trips. The company called off its earlier date for an IPO, as they were to debut right after Facebook's mishandled IPO. It was a good call as shares were actually priced $1 above the higher end of the expected range, and the resulting pop showed that shares were priced correctly with enough meat left to reward buyers and keep markets interested in potential secondary offerings for the company's shares.
Palo Alto Networks (PANW) saw its shares rise $11.13 (26.50%) to close at $53.13/share after its own successful IPO. The computer security supplier was able to price its IPO $5 above the high end of its expected range and still was able to provide investors with a significant first day rise. The company sports a great growth rate, solid management team and is in an industry which should see growth moving forward as companies seek to secure their data.
Moving from IPOs to the earnings story, investors were rewarded who owned shares of Sandisk (SNDK) on Friday. Shares rose $3.62 (10.32%) to close at $38.70/share with volume rising to 24.1 million shares. The company beat the earnings estimates on both the top and bottom lines. Not only did the company beat, but management provided an outlook which pleased investors. The company believes that the second half will see an uptick in business and this continues a trend we have seen developing. Revenue for next quarter is now expected in the $1.15-1.25 billion range.