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Global Market Review - 22 September 2010

|Includes: Advanced Micro Devices, Inc. (AMD)

Global stocks ended mostly down, with Nikkei 225 ended lower at 9,566.32 or down 0.37%, Hang Seng Index gained 45.12 points to end at 22,047.71, the European shares plummeted a FTSE and DAX fell 0.44% and 1.08%, respectively, and the Dow fell 21.72 points to 10,739.31. The tech stocks retreated to 2,334.55, while the S&P 500 ended at 1,134.28. Fingers were pointing at the interpretation of the FOMC’s decision earlier that the Fed’s monetary stimulus will mean that the Fed will print more money and flush them to the system. Fed’s statement that it is ready to take steps to support growth was also interpreted as the sign that the economic outlook at the moment remains gloomy.

 
Countering the complaints from its European and American counterparts, China said that its trade surplus were not caused by yuan value but rather, the surplus were driven by the investment and savings structure in China. Chinese PM Wen Jiabao said that China did not pursue a trade surplus intentionally. Wen will meet with Obama at the United Nations General Assembly in New York on Thursday.
 
Following the Fed’s stance to keep interest rates steady at 0.5%, Hong Kong Monetary Authority also kept its base rate at 0.5%. The HKMA also said that growth will be at moderate pace in Hong Kong throughout the end of the year, boosting the local stock market. The boost faded near the closing as Hong Kong investors readied for a holiday on Thursday.
 
On the economic data front, Eurozone industrial new orders slowed to 11.2% year-on-year from 22.7% in  July. Month-on-month, July’s new orders slipped 2.4% after gaining 2.4% in previous month. Meanwhile, the consumer confidence stayed at -11 in September, below the expected -10.
 
Bank of England’s MPC minutes showed the 8 members of the Committee were in favor of holding the rates steady while Andrew Sentence again, favored for increasing the rates.
 
US data was thin with only house price index for July featured. The month-on-month index fell 0.5% in July, worse than the expected 0.2% decline and the 0.3% fall in June.
 
Nissan Motor and Renault SA announced their plan to jointly develop platforms for a minimum of 10 models. The collaboration will reduce parts procurement costs for midsize autos by 30%, saving a few hundred billion yen annually. About 70 key components would be standardized as a part of the plan. Nissan ended at ¥702 on Wednesday, down 1.54%.
 
Toyota Motor offered $1.29 billion in bonds backed by auto loans. The biggest part worth $347.1 million to mature in 1.9 years, with a yield of 18 basis points. Toyota fell to ¥3,040, or 0.98%.
 
Cheung Kong Holdings will sell its apartments in Hong Kong’s Ma On Shan district with the price ranging from HK$4.87 million and HK$9.1 million per unit. The sales will commence at the beginning of October and will involve 108 units from a total of 1,143 units being developed. The price per square foot has been set at HK$6,438, below the consensus price. The shares finished at HK$112 after gaining 2.56%.
 
China Overseas Land was downgraded to NEUTRAL from OVERWEIGHT by HSBC, sending the shares to HK$17.36 by the of the day, or down 0.46%.
 
Hong Kong Exchanges & Clearing (HKEX) was boosted by the news that AIG has gained approval for an IPO of its AIA worth US$ 10 billion to US$15 billion. This will be the second biggest IPO in the world. HKEX settled at HK$142.50, up 1.4%.
 
Daimler AG was reportedly offered a bid for Fiat Industrial SpA, the Fiat’s truck and tractor unit. La Repubblica, which reported the news did not specify the sources of the information. Daimler however, denied the news. On another news, the company said that it would start selling loans worth 7 billion euros to refinance its debt. Daimler sliped 1.72% to €44.85.
 
Volkswagen planned a new engine plant in Mexico which would have a capacity of 330,000 units. The investment will cost the company $550 million, according to VW’s Otto Lindner. At the closing time, VW hovered at €80.37, 1.63% lower than Tuesday’s close.
 
Rolls-Royce Plc. announced that it will supply Trent 700 engines to Deutsche Lufthansa AG and Swiss Airbus. The deal won worth $560 million. The shares however, shed 2.04% to 576.50 pence.
 
Prudential’s unit Prudential Financial Inc. planned to buy two Japanese insurers from AIG: AIG Star Life Insurance Co. and AIG Edison Life Insurance Co. Both companies will worth $4 billion to $5 billion, and the plan is part of AIG’s program to repay its bailout which cost the government $182.3 billion. Prudential was at 614.50 pence at the end of Wednesday’s session.
 
Disappointment over Adobe’s forecast over revenue savaged the stock as it plunged 19% to end at $26.67. Various houses downgraded Adobe on Wednesday, with Credit Suisse now puts Adobe at NEUTRAL, down from OUTPERFORM with target at $32.50, lower than prior $39. Deceleration in revenue and lack of catalysts in the near-term were the factors behind the downgrade. FBR Capital also revised its rating on Adobe, putting it at MARKET PERFORM from OUTPERFORM. ThinkEquity reduced Adobe’s price targetto $30 from $43 while lowered its rating to HOLD from BUY. Bank of America/Merrill and UBS both also downgraded Adobe to NEUTRAL from BUY. UBS cited reduced growth, lack of catalysts and potential for more compression. Price target was lowered to $30 from $45. Going further, UBS also recommended Oracle instead of Adobe. RW Baird was also brought Adobe to NEUTRAL from OUTPERFORM.
 
Microsoft’s 2.2% decline was triggered by its below-than-expected dividend amount to be paid which worth $5.5 billion. Analysts pointed that the giant software maker will have to be clear on how the company will use the surplus cash that it holds. Microsoft ended at $24.61.
 
Deutsche Bank downgraded Goldman Sachs’ 3Q EPS estimate to $1.95 from $3 but kept the BUY rating on the stock. Weak 3Q earnings would be due to poor trading conditions and “soft investment banking”. Goldman tumbled 2.2% on the downgrade, sending it to end at $148.07.
 
Starbucks ended down 0.88% at $25.93 on Wednesday. The company said that soaring price of green coffee and also rising commodity costs may lead to increases in the prices of some of its products in some certain markets. The company will also continue to promote its products through the My Starbucks Rewards program which has started in January. On its earnings outlook, the forecast announced last July was reaffirmed. EPS for fiscal 2011 is expected to be at $1.36 to $1.41 per share. The forecast already factored in the rise in commodity costs.
 
AMD’s earnings estimates were lowered by Gleacher & Co. to $0.71 from $1.01 for fiscal 2011. Despite the downgrade, Gleacher’s forecast is still above the consensus estimate of $0.56. AMD was kept at BUY, but the price target has been lowered from $16 to $12. AMD was up 1.44% to end at $6.26. Other than AMD, Gleacher also maintained Google at NEUTRAL. Google ended at $516.00 or up 0.49%.
 
American Express was started at POSITIVE with price target set at $53 by Susquehanna. Amex inched higher by 0.02% to $42.79.
 
Thursday Preview
 
Hong Kong and China will be closed on Thursday. While Hong Kong will resume trading on Friday, China will be back on next Monday.
 
Today’s data coming from US will include jobless claims, existing home sales, and leading indicators. Claims are expected to stay at 450k, existing home sales are seen rising to 4.1 million from 3.83 million, or up 7.1% from a steep fall of 27.2% in July, while leading indicators are seen to advance 0.1% in August, the same pace as July’s.
 
European data will cover Purchasing Manager Index for manufacturing and services, which will be released in France, Germany, and Eurozone. The September PMI for manufacturing are seen at 55.0, 57.6 and 54.5 for France, Germany and Eurozone, respectively. All below prior month’s readings. Service sector PMIs are seen at 60, 57.2, and 55.5 for France, Germany, and Eurozone, respectively. Eurozone’s Composite PMI is seen lower at 55.7 from 56.2.


Disclosure: No positions