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Europe & North America Markets Review - October 5th 2010

Reversing Monday’s losses, shares in Europe and U.S. soared on the back of Bank of Japan’s surprise interest rate cut and also a better-than-expected ISM index on non-manufacturing activity in the U.S. The Dow Jones Industrial Average jumped 193.45 points or 1.8% to 10,944.72, Nasdaq Composite climbed 55.31 points to end at 2,399.83, or 2.36% above the prior close. S&P 500 also advanced 23.72 points or 2.09% to 1,160.75. Both DAX index and FTSE 100 also gained 81.62 points and 79.79 points, respectively. DAX finished the day at 6,215.83, FTSE settled at 5,635.76.
 
Bank of Japan’s surprise move has set the market expectation tilted towards global follow-ups of interest rates cut and towards more stimuli to support the economy. Later, ISM for non-manufacturing industry was reported at 53.2 in September. The reading beat the expectation at 52.0 and up from 51.5 in August. European PMI also enjoyed the same story as German, UK, and Eurozone were all seeing better-than-expected PMI for service industry. Only France and Italy failed to beat the market consensus.
 
Perhaps the weak point of the current market rally lies at the European issue, specifically Ireland which on Tuesday had Moody’s warnings that the credit rating may be downgraded one level from the current Aa2 rating.
 
Credit Suisse recommended Deutsche Boerse, sending the stock climbing to €48.44 or up 2.7%. The rating was kept at OUTPERFORM.
 
BMW continued to rise, ending the day at €49.96 or up 3.6%. BMW was supported by the news that its 5 series has one of the highest ratings among other carmakers in U.S.
 
American Express’s long-term credit rating was held steady by Fitch Ratings. Long-term Issuer Default Rating remained at A+ with STABLE rating outlook in the near term despite the company is being sued by the U.S. Department of Justice. Fitch however, warned that the resolution of the lawsuit will take a long time to settle. American Express continued to fall to $38.28 or 1.97%.
 
Yahoo said that it had signed agreement to buy Dapper, a company providing the technology platform of dynamic display ad creation and optimization. Yahoo rose on the back of the news, to end the day at $14.61, or up 2.31%.
 
Home Depot has been lowered to NEUTRAL by Goldman Sachs based on valuation and soft channel checks. Home Depot was up 0.22% to end at $31.74.
 
Oracle acquired Passlogix, while on the same day Google asked Oracle to withdraw the company’s lawsuit on Android platform while denying Oracle’s claims of patent infringement. Elsewhere, Oracle was set at BUY by Canaccord as organic growth is seen boosted during the upgrade cycle as well as valuation was viewed as reasonable. Target has been set at $32. At the end of Tuesday, Oracle stood at $27.30, up 1.49%.
 
After being downgraded by Goldman, Microsoft has been downgraded as well by Janney Montgomery from BUY to NEUTRAL. Microsoft was seen as incapable to utilize its desktop franchise into mobile. Target has been set at $28. Microsoft staged a rebound however, as it settled at $24.35 on Tuesday, up 1.84%.
 
Motorola was set at HOLD by Jefferies, price target was seen at $9.50. Shares were up by 2.13% at $8.64.
 
Jefferies also started Apple at BUY with target price set at $365. Apple soared 3.7% to finish the day at $288.94.
 
ECONOMIC DATA PREVIEW
 
Today, all eyes will be focused on the ADP Employment Report which is expected to show an increase by 20,000 in private hiring compared to last month’s decline by 10,000. A better-than-expected reading will boost shares as the next Friday’s nonfarm payrolls will also be expected to show similar upbeat result.
 
Other economic data releases are Euro-zone GDP for 2Q and also German factory orders for August. 

Disclosure: No positions