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European and North American Markets Review - September 16th 2010

|Includes: BP p.l.c. (BP), BT

Mixed US data brought a small gains in Dow Jones Industrial Average and Nasdaq Composite while S&P 500 fell. DJIA added 22.10 points or 0.21% to end at 10,594.83 on Friday. Nasdaq also advanced slightly to 2,303.25 or up 0.08%. S&P 500 however, fell 0.41 points to end at 1,124.66. European shares mostly fell with FTSE 100 ended 15.42 points lower or down 0.28% to 5,540.14 due to worse than expected UK retail sales. German DAX also fell to 6,249.65 or 0.2% below Thursday’s close.

UK retail sales declined in August, dumbfounding the consensus of a rise. Headline sales fell 0.5% after a rise of 0.8% in July. The year-on-year reading showed a slowdown to 0.4% from a 1.0% rise in prior month. Initially, m/m and y/y data were expected to show gains of 0.3% and 1.9%, respectively. Core sales, which excluded autos and fuel sales were also missed the consensus. Month-on-month core sales fell 0.4% from a rise of 0.7%, worse than the expected 0.2%, while the year-on-year data showed a slowdown to 1.9% from 2.3% against the expected acceleration to 2.8% rise in August. Meanwhile, a survey by the Bank of England indicated that inflation expectations rose in UK to 3.4%. In June, the inflation expectations were 3.3%. In August, inflation was at 3.1%, above the Bank of England’s threshold of 3.0%.

In the Eurozone, trade balance for July grew to €6.7 billion from €2.2 billion in June.  Seasonally adjusted, the balance was at 0.2 billion of deficit in July, shrinking from June’s deficit of 1.4 billion.

Another relief came as jobless claims fell further to 450,000, better than the consensus of a rise to 460,000. However the claims data was offset by Philadelphia Fed Index of Business Activity which improved to -0.7 in September from -7.7 in August, lower than the expected rise to 2.0. PPI data for August showed gains in the headline data of 0.4%, up from 0.2% in July. Year-on-year, the headline PPI slowed to 3.1% from 4.2%. Core PPI, which excluded food and energy, slowed to 0.1% and 1.3%, for its month-on-month and year-on-year readings, respectively.

Mercedez-Benz, a unit of Daimler AG’s was reportedly under the investigation by the UK antitrust regulators. The company’s facility in UK was raided, although the Office of Fair Trading said that it would not conclude yet whether the law has been broken or not until all the available evidence investigated. Other companies were also being investigated such as Fiat SpA’s Iveco, Scania AB and Volvo AB’s Volvo and Renault subsidiaries. Daimler’s shares were down 0.15% to €44.06.

Still in the auto industry, BMW announced its plans to add specific models for Chinese market and open a vehicle-leasing division in the country. New models would include the extended version of its 5-series, smaller cars, and also the its electric car Megacity which would be put in the Chinese market in 2014. According to CFO Friedrich Eichiner, the leasing business will start in 2012. In addition, Eichiner expected sales to rise around 10% for the entire 2010 to 1.4 million units. The company’s concern over the potential slowdown in the 3Q was not as bad as it had expected earlier. BMW was up 0.21% to end at €47.35.

Volkswagen’s CEO hinted that the company aimed to triple sales in the US by 2018. The company’s rating was upgraded to OVERWEIGHT from NEUTRAL by HSBC. VW shed 0.29% however, to end at €78.77.

Bernstein rated both BASF and Bayer AG at OUTPERFORM, but Bayer AG fell 0.52% to 51.40 while BASF gained 0.40% to 45.20.

Siemens AG rose 2.94% to €78.02 after Morgan Stanley raised its rating from EQUAL WEIGHT to OVERWEIGHT, while it was also added to Goldman Sachs’ CONVICTION BUY list from its prior BUY rating.

Deutsche Post AG projected its fiscal 2Q net income to be around $1.15 to $1.35 per share, below its average consensus of $1.37 per share. The announcement knocked the shares down by 1.78% to €13.22.

BT Group was downgraded to EQUAL WEIGHT from OVERWEIGHT  by Morgan Stanley. BT tumbled 3.05% to 140 pence on Thursday’s session.

According to Citigroup, Cnooc was said to be offering $10.2 billion to BP Plc to buy the British oil giant’s stake in Pan American Energy. BP’s shares were up 1.08% to 408.45 pence.

HSBC Holdings Plc. was upgraded to NEUTRAL from UNDERPERFORM by Exane BNP. Despite the upgrade, followed FTSE’s decline to 675.40 pence or 0.18% lower.

Boeing indicated that its production of the 737 model would be increased to 38 units per month in 2Q 2013 from 35 per month at the start of 2012. Boeing fell 0.24% to $62.58 at the end of the session.

Oracle reported net income for the quarter ended August of $0.27 or $1.35 billion, up from $0.22 per share or $1.12 billion last year. Revenue hit $7.5 billion, up 48%, while excluding one-time items, earnings were $0.42 per share. The results were above the consensus of $0.36 per share excluding one-time items, or $7.3 billion in revenue. For the current quarter, net profit is expecte at $0.45 to $0.47 per share, above the consensus of $0.45 per share. Sales growth is seen at 43% to 47% or around $8.4 billion, also above the average forecast of $8.21 billion. Oracle fell to $25.36 during the regular session, but post earnings report the shares were up 4.34% to $26.46.

Merck has been initiated at HOLD by Jefferies, with price target set at $39. Merck slipped 0.22% to $36.43.

Motorola bought Aloqa GmbH, putting it in its Motorola Mobility, to be separated from Motorola Inc. in 1Q 2011. Aloqa utilize user’s context such as location, identity, and social relationships. Its product is also applicable to Google’s Android. Motorola advanced 0.59% to $8.41.

Texas Instruments planned to buyback shares worth $7.5 billion and boost dividend to 13 cents per share. At the moment, the company already authorized to buyback shares worth $1.3 billion. The shares gained 1.26% to $24.98, after another 3.12% during the extended hours to $25.76.

Friday Preview

After PPI, CPI will be the focus for Friday’s economic releases. Headline CPI is expected to show an increase of 0.3% (m/m) and 1.1% (y/y) in August. Meanwhile, Core CPI is seen rising 0.1% (m/m) and 1.0% (y/y). Another key data will be the University of Michigan Confidence index which is expected to show a rise to 70.0 in September from 68.9 in August.

From Europe, German PPI is due on Friday and is seen to show gains of 0.3% in August from a month earlier, while against the same month last year PPI is expected to slow from 3.7% to 3.5%.


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