All posts by admin

09Jun/14

060914 – CGI Morning Market Views: Buy 10Y EuroBonds, Sell $, Sell US Equities

060914 CGI Morning Market Commentary & Weekly Charts Buy 10Y EuroBonds, Sell US$, Sell US equities, Buy $WTI, $NATGAS

 

Carlo Besenius analyzes the European Bond markets and sees further support for periphery bonds in the coming months. Equity markets have become parabolic, with downside risks increasing greatly.

05Jun/14

060514 – CGI Morning Market Commentary: USD/EUR, Euro rates

060514 CGI Morning Market Commentary Buy Euro, Sell US$, Buy Bonds, Sell select equities’ indices into period of seasonal weakness

Global Strategist Carlo Besenius looks at the Euro/$USD rate in light of the recent moves by the ECB to lower rates, and the dynamics of the US trade deficit. We keep our year end forecast of $1.42.  Equity indices are entering their period of seasonal weakness.

04Jun/14

140604 – The Perfect Storm

CGI 140604 Strategy Update:

Global Strategist Steve Gluckstein takes an in depth look at the debate over inflation has become increasingly polarized—perhaps due
partially to the distortive impact of accommodative monetary policy by the world’s leading central banks during the past five years. Nonetheless, when looking out over the distant horizon 24-30 months from now we see several factors coalescing into a
“perfect storm” that will likely propel inflation materially higher and cause significant challenges for central bank monetary policy three to five years from now.Rising deficits, resurgent wage growth and rising money velocity should all re-emerge as potent inflationary economic forces.

02Jun/14

060214 – CGI Global Markets Commentary and Weekly Charts

060214 CGI Morning Market Commentary & Weekly Charts Buy 10 Y treasuries, Sell equities in US and UK,

Carlo Besenius explains his current views on the global markets. Equity markets are entering a period of increased volatility during the summer months, as investors reduce exposure in favor of bonds. The compression of yields is a global phenomenon. Expect to see further compression of European periphery yields in the coming months

02Jun/14

053014 – European Elections – Plus ca Change

053014 – CGI European Strategy- Plus ca change

Trish Twining reviews the impact of the European Parliamentary Elections across Europe. While the Euro-skeptics won 143 streets, the headlines imply greater impact than reality at present. Fragmentation between parties is significant, largely playing to their home audience. More significant is the need for both individual Member States and the EU to focus on jobs growth and restarting the economic engine. Infrastructure initiatives already in process by the European Commission and the European Investment Bank (EIB) to stimulate public private partnerships (PPP’s) may provide interesting opportunities.

30May/14

053014 – CGI Global Automotive Demand Atlas, May

05 30 2014 CGI – GADA – May 2014 edition

Analyst Sabine Blumel reviews Global Automotive Demand by major market globally. SAAR revised down slightly due to the worsening outlook in a number of emerging markets,the FY14E forecast is a 3.5% increase to some 87.3m; this implies a deceleration from last year’s restated +3.9% growth to 84.36m.

22May/14

052214 – CGI Seasonality Analysis

052214 CGI Morning Market Commentary Buy Bonds, Sell equities into period of seasonal weakness, Buy Oil

We review the seasonality factors impacting global debt and equity markets over the summer. Equities are expected to see a period of weakness, with good probability for an increase in volatility mid summer.

08May/14

050814 – CGI Market Commentary: Breakdowns!: Sell NASDAQ, $USD, Buy EURO

050814 CGI Morning Market Commentary EURO testing critical resistance, US$ retesting support

Global Strategist Carlo Besenius reviews market technical patterns. For the past month we have voiced concerns over the market, and feel that the markets are set for a correction over the summer months. See our full report for Index and Sector recommendations.

 

07May/14

050714 – BMW 1Q14 Results Commentary – BUY

05 06 2014 CGI – BMW – 1Q14A results comment

 

1Q14A group results in line with 1Q14E. Strong result at Automotive segment, despite front-loaded costs.  We keep FY14E estimates virtually unchanged and confirm those for 2015E-16E. Our 2016E EPS is EUR 10.34 and our YE14 target price of EUR 110.00 implies a 25% upside potential for BMW shares.

The short term technical outlook for BMW shares is neutral/negative.  The risks of BMW shares not holding support at that level are high, and we expect for BMW shares to test the next support level at the 200-day moving average at EUR 82. The long term positive outlook for BMW shares remains positive.

05May/14

05052015 – BMW 1Q 2014 Results Preview

05 05 2014 CGI – BMW – 1Q14E preview

Automotive Analyst Sabine Blumel presents 1Q 2014 Results preview.

Our 1Q14E EBIT estimates are EUR 1.67bn/9.7% for the Automotive segment and EUR 2.10bn/11.2% for the group.

Our 2016E EPS is EUR 10.34 and our YE14 target price of EUR 110.00 implies a 24% upside potential for BMW shares.

1Q14E group: we expect that a 6.9% yoy increase in revenue to EUR 18.76bn generated yoy increases of 3.0% in EBIT to EUR 2.10bn/11.2% and 5.0% in net profit to EUR 1.37bn. We thus expect that BMW management will confirm their bullish guidance for FY14 of a ‘significant increase in its group’s pre-tax profit’, driven by ‘a significant increase in sales’.

At the dominant Automotive segment, we expect that in 1Q14E a reported a 8.7% increase in retail sales to 487.0k units (that include 108.0k sales in China, 62.5k of which were sold by a JV) generated a 9.3% increase in PBT to EUR 1.66bn/9.6%. We expect that a reported 4.8% yoy increase in fully consolidated retail sales to 424.5k units (incl. 45.5k cars imported to China) generated increases of 8.0% in revenue to EUR 17.18bn and of 5.3% in EBIT to EUR Continue reading

01May/14

0501 2014 – Daimler 1Q14 Results Commentary

05 01 2014 CGI – Daimler – 1Q14 results review

Automotive Analyst Sabine Blumel comments on Daimler 1q 2014 results: 1Q14A EBIT in line with 1Q14E: EUR 2.07bn for the group & EUR 1.18bn at M-B Cars. Some disappointment: at M-B Cars, a lower than expected 7.0% margin and at Trucks, lower than expected EBIT (EUR 0.35bn/4.9%) due to country-mix. We fine-tuned our FY14E EPS to a 19% increase to EUR 5.93. Our YE14 TP of EUR 82.00 implies a 24% upside potential for Daimler shares.

01May/14

050114 – Seasonality Trends and Mid Year Allocation Strategies

050114 CGI Seasonality of various Asset Classes and Mid Year Strategies

Short and intermediate technical indicators for most global markets and sectors are overbought and rolling over. We are advising investors to use any temporary market strength is an opportunity to take profits, keeping seasonal trends of the various shown equity indices, bond indices and currency indices in mind. We believe that it would be prudent for investors to reduce exposure in US & European equity markets in economically sensitive sectors at current prices.

We have been focusing on various type of alpha generating strategies since our early days; however, one of the most effective strategies we constantly attempt to refine and adapt to maximize outperformance is the “seasonality affect” of various asset categories.Although there are defined seasonal trends for equities, bonds, currencies, and commodities, they are not directly correlated, nor inversely correlated. It takes more detailed analysis in order to get a better understanding on the “why’s and why not’s” of seasonality factors for each asset class.

We welcome the opportunity to work with you directly to create appropriate portfolio hedging strategies to take advantage of these seasonality trends.

28Apr/14

042814 – Ford Results Quick Response

Quick Response: 1Q14 EPS miss blamed on ‘accumulation of unusual factors’ that understate the underlying strength of business. Confirmation of FY14 guidance implies 1) stronger 2-4Q14 results; 2) upgrade for FY14 Asia & Pacific and Europe; downgrade for FY14 South America outlook.

We consider management’s FY14 guidance and the underlying market assumptions realistic and also conservative enough for the company to surprise on the upside in the next quarters. More importantly, we are of the opinion that Ford is well on track implementing its global growth strategy and should be able to resume earnings growth from 2015 onwards. We consider Ford a ‘fundamental’ buy with a medium-term target price of USD 20, but short-term technical headwinds for the sector, inclusively Ford should give investors renewed opportunity to buy into Ford at lower prices. (See p.3.)

28Apr/14

042814 – CGI Morning Market Commentary: Alstom/GE or Alstom/Siemens?

We see better medium to long-term value creation in the Siemens proposal than in the GE possibility, both for Alstom, and also for either of the other two possible winners. This proposal is an unique opportunity to create two strong European Champions with global leadership aspiration in the fields of energy and transport, providing for a compelling industrial story while protecting the interests of both groups’ shareholders, employees, respective home countries France and Germany and ultimately the European interests as well. We do believe that Siemens is the most suited partner for Alstom, and clearly the favorite over GE, if any, however, there will be serious “antitrust” issues affecting any potential transaction, and we are advising for investors to rather focus on Siemens as an investment opportunity, rather than on any potential merger benefits, as we see little likelihood of neither takeover bids materializing.

25Apr/14

-42514 – CGI Market Commentary: Eurozone Deflation Fears Overdone, US Markets Peak, AAPL fails to lift $NDX and $

Numerous Strategists and news commentaries have focused on the risk of deflation in the Eurozone. CGI’s Global Strategist Carlo Besenius discusses why deflation does not always lead to lower growth and employment. The ECB has numerous tools left to stimulate prices should they choose to in the coming months.  As CGI has stated for several weeks, the equity markets have peaked. AAPL’s rise of 8% yesterday failed to lift the NASDAQ in spite of the company’s 7.5% weighting in the index. Take profits and reduce equity market weightings, particularly in the US.

042514 CGI Market Commentary- Eurozone deflation hype, US equity markets have peaked, AAPL is proof

11Apr/14

041114- CGI Morning Market Commentary: Greek Bonds, STOXX, CRB, $USD

Yesterday’s Greek Bond auction was a far cry from the turmoil facing the country less than two years ago. CGI recommended purchasing European periphery debt in the fall of 2012, and contested the notion that the EU was at risk of failure. We continue to see European equity markets as fertile territory for institutional investors.

The $USD Index continues to weaken. A fall below $79 sees risk to $73.

The CRB continues to strengthen.

041114 CGI Morning Market Commentary – Greek Bonds, STOXX, CRB, $USD

24Jan/14

Morning Market Commentary – Buy Chinese Equities $SSEC bottoming, Euro equity benchmarks continuing to gather momentum vs SPX

Global manufacturing data remains strong and it cannot be ruled out that the data out of China is distorted as a result of the upcoming Chinese New Year. Manufacturing activity in China typically declines into the Chinese holiday, which this year is on January 31. Despite the unexpected data point from China, manufacturing numbers continue to show signs of improvement, both in the US and Europe. Overshadowed by China’s disappointing manufacturing PMI report, January Flash Manufacturing PMI in the Euro-Zone was reported at the highest level since June 2011 at 53.9, firmly in expansion territory.

Although gold is not presently within its period of seasonal strength, which runs from July through to September, the metal typically does benefit from strength in metal prices at this time of year due to improving manufacturing demand.

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20Jan/14

Morning Market Commentary & Weekly Charts – EAFE cont. to outperform US equities, Oil, Commodities,

Short and intermediate technical indicators for most equity markets and sectors remain overbought. Look for a renewed seasonal buying opportunity in economic sensitive sectors on weakness in the month of January. We continue to recommend to add towards sectors which continue to show seasonal strength such as… Continue reading

16Jan/14

Morning Market Commentary – Buy Intl. equities, Germany trade balance

Germany has a trade balance second to none on earth. Germany recorded a trade surplus of EUR 18.10 Bn in November of 2013.  Germany is world leader in current account surplus in 2014.

We are expecting for the DAX 30 equities’ outperformance to extend through 2015. EPS expectations should stabilize alongside global GDP growth. We are forecasting DAX EPS FY 2014 to rise by 16% yoy to 760. (Vs. consensus 729) .  Continue reading

15Jan/14

Morning Market Commentary – DAX, German surplus

We are expecting for the DAX 30 equities’ outperformance to extend through 2015. EPS expectations should stabilize alongside global GDP growth. We are forecasting DAX EPS FY 2014 to rise by 16% yoy to 760. (Vs. consensus 729).

In the past 30 years that we have been active in the global equities capital markets arena, Germany has been focusing like no other nation and its corporate sector in re-inventing and restructuring and repositioning itself and its economy by constantly upgrading through technological, intellectual value-added, and by high capital expenditure driven innovative research and development. This has lead to the point that the majority of German companies to-date are world class leaders, second to none.

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14Jan/14

Morning Market Commentary – Buy into mini global equities’ correction

Short and intermediate technical indicators for most equity markets and sectors are overbought and showing signs of peaking. Midterm US Presidential Cycle years show that US equity markets show an average correction by the S&P 500 Index of 1.7% in the month of January followed by strength into mid-April. History appears to be repeating itself. Look for renewed seasonal buying opportunities in economic sensitive sectors following a brief period of weakness into January.

Our preferred equity markets like Germany, France, Spain, and Japan continue to outperform US benchmarks. We advise clients to add towards those countries’ equities and towards our favorite sectors, which continue to show seasonal strength, such as: …. Continue reading

13Jan/14

Morning Market Commentary – European Stocks to continue to outperform

European stocks gained after global regulators eased the leverage-ratio rule for banks. The Basel Committee on Banking Supervision diluted a planned debt limit for banks following a meeting in Switzerland yesterday. The committee said the leverage ratio, which penalizes low-risk financial activities and curtails lending, was adjusted after thoroughly analyzing bank data. Banking stocks posted the second-biggest gain on the Stoxx 600 after the news. Deutsche Bank and Barclays were among the big risers. We like the EURO STOXX BANKS Index at current levels, and are advising our clients to add towards European Banking stocks. Continue reading

10Jan/14

Morning Market Commentary – $hanghai Index ready for a major breakout, Metals, Silver, WTI, NatGas

China became the world’s biggest trader in goods for the first time last year, overtaking the US for all of 2013 and finishing the year with record trade figures in December. Trade with the rest of Asia and increasing flows with the Middle East represent a shift in power away from the US, still the world’s largest economy.

Chinese imports of crude oil grew by the least in almost a decade in 2013, new government data show, posing a challenge to exporters from the Middle East to Africa who are competing to sell more oil into the world’s second-largest economy.

We are advising clients to allocate new funds towards Chinese equities. As the chart shows, there has been a tug of war between the bulls & bears for over 6 months now, and we believe the $SSEC is ready for a major breakout to the upside in the short term. Our 2014 price target for the $SSEC is 3,000. Continue reading

04Nov/13

Morning Market Commentary & Weekly Stocks – Global Stocks enter positive seasonal period, German Stocks to outperform

German Equities are at an all-time high. The DAX 30 Index is +20% ytd, after +29% in 2012. Our CGI Global 50 includes 12 German stocks, of which all are in positive territory for 2013.

We think so, particularly when looking at the anemic bond yields that European, US and Japanese government and corporate bonds are offering.  We are seeing but one way for German investors, namely to increase equities investments, albeit late, however not too late to the plate, and invest now in their own equity market. Continue reading

12Sep/13

Morning Market Commentary – SPX & DOW in seasonal correction AAPL “Sell/short” note

US equity markets have entered their annual period of seasonal weakness. Seasonal tendencies for stocks turn firmly negative on September 16; average loss for the S&P 500 Index over the three weeks to follow is -2.5%. The DJIA has more often underperformed during the May to October time frame with a brief counter-trend rally occurring in July. September remains clearly the worst calendar month for stock market performance.

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12Sep/13

AAPL Apple Sell Recommendation

Apple (AAPL), the biggest company still by market capitalization in the US, didn’t have the sort of effect it was hoping for with the launch of two new smart phones: its share price fell sharply as analysts expressed their disappointment with the latest gadgets: the iPhone 5S and iPhone 5C.

Apple, once the technological and applications leader has become an innovation follower, and it proves our point more and more, as the company management is struggling with its corporate vision and business plan and original strategy. Recent product announcements, like the iWatch, and “cheaper” iPhones are confirming our 2012 concerns, which we published in our leading “Sell/short” AAPL report on October 3rd 2012 (AAPL US$ 685). Apple’s business model has run out of momentum, growth is declining, and AAPL is forced by market and consumer trend dynamics to test smaller, cheaper, and lower value added gimmicks, which are going to be having a negative affect on AAPL’s margins, which we identified as unsustainable, in our last years original report.

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09Sep/13

Morning Market Commentary & Weekly Charts – Energy, Gold, Precious Metals to improve

Our recommended investment strategy is to maintain a healthy cash position for possible entry into the favorable seasonal trade in October. Seasonally, equity markets hold up rather well during the first half of September, posting gains of 1.3% on average over the last 20 years. The weakest three weeks of the year occurs during the last two weeks of September and the first week of October. Declines over this three-week period reach 2.5%, on average, based on the same 20-year time-span. Contradicting this calendar tendency is the “Sell Rosh Hashanah and Buy Yom Kippur” tendency, which runs through to this Friday. Loss for the S&P 500 between these key dates on the Jewish calendar averages 1.25%. Whichever scenario plays out, caution is warranted as seasonal volatility fuels erratic returns over the weeks ahead.

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04Sep/13

Morning Market Commentary – Currency & trade balance observations

As previously stated, we had expected the deficit to climb back to US$ 40 Bn after an unusually sharp decline in the prior month. The trade gap sank more than 20% in June to the lowest level since the fall of 2009. Although the increase in imports suggests strengthening demand in the US, a larger trade gap usually means slower economic growth at home since America is buying more goods and services from other countries. Continue reading

03Sep/13

Morning Market Commentary & Weekly Charts

Looking forward to the next couple of months, equity markets are entering the weakest period of the year.  Over the last 20 years, the S&P 500 index has averaged a loss of 0.20% for the month of September; positive results were realized in only 11 of the past 20 periods. The weak return in September ties it for the third weakest month of the year, behind February and August. The month that September ties with is June as investor reallocate portfolios at the end of the second quarter, just ahead of earnings season at the start of July. A similar reason is culprit for lackluster returns in September as the third quarter concludes. The weakest stretch of the entire year is a three week period that spans the last two weeks of September and the first week of October as investors buy and sell positions ahead of the volatile and uncertain third quarter reporting season.   Continue reading

29Aug/13

Morning Market Commentary & Weekly Charts – Summer breeze to continue for global equities?

Equity markets have just completed a traditional period of strength from the last week in June to the third week in July. Since the low on June 24th, gains have been extraordinary. The S&P 500 Index gained 8.44%, the Dow Jones Industrial Average improved 6.82% and the TSX Composite Index advanced 5.76%. It’s time to take trading profits in equity index based investments. Sectors with traditional positive seasonality are the exceptions. Gold, gold equities, biotech and utilities are bucking the trend by moving higher as well as outperforming equity indices.

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26Aug/13

Morning Market Commentary & Weekly Charts – “Tough labor” Day ahead for investors

US equity markets reached an intermediate peak on August 2nd.  Short-term momentum indicators for equity markets may rebound early this week from deeply oversold levels, but seasonal trends are expected to re-assert themselves in September.  We advise our clients to maintain high cash positions for possible entry into favorable seasonal trades into increasing downside volatility between now and October.  We advise our clients to continue to hold/accumulate precious metal and precious metal equity ETFs. They continue to move contrary to equity market trends.

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05Aug/13

Morning Market Commentary & Weekly Charts – Global equity observations for August

Four major factors in Europe are improving: Euro GDP has bottomed, Consumer spending has bottomed (car sales show signs of improvement, Manufacturing starts to increase and Central Bank policy is becoming more stimulating. Hence, why we are recommending for our clients to increase weightings in European Equities.

31Jul/13

Morning Market Commentary – August historically a down-month

Historically, the month of August has been cruel to equity investors. August during the past 62 periods is the fourth worst performing month of the year for the S&P 500 Index, third worst for the TSX Composite Index and Dow Jones Industrial Average and second worst for the NASDAQ Composite Index. Weakest part of the month occurs in the first half. Worst performing country in the month of August, of the established international equity markets, is the German DAX, posting an average decline of -2.0% over the past 20 years; positive returns remained evident more times than not with only 8 of the past 20 periods ending with a loss.

Best performing country is the United Kingdom with the FTSE posting an average gain of 0.8% in the month of August, positive 14 of the past 20 years.

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29Jul/13

Morning Market Commentary & Weekly Charts – Summer breeze to continue for global equities?

It’s time to take trading profits in equity index based investments. Sectors with traditional positive seasonality are the exceptions. Gold, gold equities, biotech and utilities are bucking the trend by moving higher as well as outperforming equity indices.

We continue recommending to “buy” EADS shares at the current price of EUR 44.34, and still continue to prefer EADS over Boeing, as we have for the past 6 years, since inclusion of EADS in the CGI Global 50. Our 12 months price target for EADS shares is EUR 54.

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21Jun/13

Morning Market Commentary – Global equities summer blues?

 

Markets opened in positive territory on Friday as the FTSE 100attempted to rebound after a dramatic three per cent drop the day before following the Federal Reserve’s announcement to scale back stimulus later this year.

 

London’s benchmark index tumbled an eye-watering 189 points on Thursday, falling 2.98% to 6,160 as markets reacted to comments from Fed Chairman Ben Bernanke, who said that quantitative easing could come to a complete halt in 2014 if the economic recovery gains momentum. Disappointing factory-activity data from China also hammered sentiment yesterday, sending the UK index to lows not seen since mid-January.

 

Equity markets outside of North America recorded significant technical deterioration.

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20Jun/13

Morning Market Commentary – Buy Agri-commodities, Corn, Oil, NatGas

The US$ had been tremendously overbought, both versus the Yen, but also against the Euro, as we had highlighted in our Q2 Global Strategy Outlook, and reiterated this fact “ad nauseum” since March 2013.

So, it is of no surprise to us that the US$ has entered the recent correction versus both the Yen, but as of later now the Euro too, on the contrary, we are expecting for the EUR/US$ to continue to its EUR/US$ 1,3650 resistance, and break above it, as the US$ has entered its weak seasonality period, between April and October.

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10Jun/13

Morning Market Commentary & Weekly Charts – Equities VIX increasing, Agris to rise further

Weekly Investment Conclusion

The intermediate corrective phase in North American equity markets remains intact.

Short-term strength provides an opportunity to reduce equity exposure, particularly in sectors that have a history of moving lower during a summer corrective phase.

These sectors included industrials, consumer discretionary, materials and financials.

The sectors, which we have identified so far, that are showing positive momentum for seasonal trades this summer are fertilizers and gold. They already are showing signs of outperformance relative to the S&P 500 Index and the TSX Composite Index.

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05Jun/13

Morning Market Commentary – All about the Nikkei

 

Fundamentally and long-term focused however, we continue to advise our clients to add towards Japanese equities.  Investors should focus on both domestic asset reflation stock plays in Japan, and on Japanese companies with strong exporting profiles, as the Yen weakness will continue to improve their overall competitiveness and earnings capabilities in the coming years. Continue reading

08May/13

Morning Market Commentary – Sell in May effect true

We continue to advise our clients to lighten up on equities, same in 2013 as in 2012, 2011 and 2010, and to wait for a better opportunity with lower global equity prices to materialize over the coming two to three summer months to re-allocate capital back into risk, as this market performance anomaly has proven to have been profitably over three decades, by choosing alpha generating investable strategies.

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01May/13

Morning Market Commentary Sell in May, AAPL reiterating sell/short; Gold & Silver to go higher

The period for seasonal strength in equity markets concludes on May 5th, after which a trendless market is the average.  Economic events over the next few days, including central bank announcements and employment report releases, are likely to set the tone for the month ahead. The technical backdrop of equity markets has shown deterioration over recent months, particularly pertaining to momentum, and the likelihood is increasing that a market correction is near based on recent warning signals that have become prominent in April.   Stocks have been up 6 months in a row. And April finished at a historic high of 1597.57.

Each May is different. And there have been some very profitable summers in years past. So it’s never wise to just take this saying at face value and truly walk away from the markets.  The resilience of stocks to be pressing all-time highs after 3 straight weeks of soft economic reports (including a scary showing for Chicago PMI in contraction territory) is making it hard to say what exactly would make stocks go lower at this stage. Meaning that investors seem quite comfortable with the ebb and flow of muddle through economic growth. And as long as the Fed is on the side of investors, with all that QE, then there is no reason to walk away?

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30Apr/13

BMW 1Q13E preview & FY13E and Valuation

BMW (EUR 70.25) – BUY – Target price (YE 2013E): EUR 86.99; potential +24%

A valuation in line with the 10-year average historic valuation of 10.2x implies a share price of EUR 88.05 at year-end 2014E and time-discounted (yield of 10-year Bund), a target price of EUR 86.99 at year-end 2013E, which is 23.8% above the current share price (EUR 70.25) and in line with our previous target price of EUR 87.24 (March 18th). (See our latest company reports ‘BMW – 1Q13E preview’ of April 30th.)

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29Apr/13

Morning Market Commentary & weekly charts SPX rolling over

Weekly Investment Conclusion: We are advising clients to use the temporary seasonal weakness to increase holdings towards select equity strategies, as equities are the better value asset class, versus cash, bonds, alternatives, combined with the lowest downside risk.

For our clients with a shorter term investment perspective, we recommend to take profits in equities sectors with seasonal weakness, as we see evidence of equity markets rolling over temporarily, and for bonds to enter their period of seasonal strength until mid summer.

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26Apr/13

Morning Market Commentary – Global/US equities sell off confirmed, Energy, Metals entering negative seasonal trend, EADS “buy”

Currently the number of US companies that have reported sales above estimates are at a mere 44.1% based on results released for the first quarter, thus far.  The current quarterly revenue beat rate is the third lowest in over 10 years, beaten only by the fourth quarter of 2008 and the first quarter of 2009, just as the recession was beginning.

We believe that the actual data, whether it relate to the broad economy, to actual negative currency impacts, or to earnings, fail to catch up to expectations, a correction in forecasts may be in order, the result of which would likely lead to a correction of stock prices as well.

Again, we see more evidence in increasing metrics for investors to brace themselves for a 6% to 10% pullback in major global equities markets, and surely also for the US markets. 

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24Apr/13

Morning Market Commentary – Currency impact on corporate earnings and equities pricing, AAPL Sell/Short reiteration

Just as an update on a major subject, which most sell side economists, strategists and analysts have grossly overlooked still so far yet, the impact of a temporary strengthening US$ against major currencies like the Yen, the Euro on US exports/imports, current account, and on corporate revenues and earnings. We had started to point to this significant subject in our Q 2 Global Strategy Outlook, and already do we see impacts of this highly overlooked and underestimated subject on earnings releases for major US companies, like Caterpillar, Coca Cola,  AAPL, JBL, BA, to name just a few.

23Apr/13

Global Automotive Demand Atlas – April edition

In March, the global light vehicle markets declined 1.5% yoy to 7.96m units, after having declined 6.2% yoy in February, resulting in a 1.6% yoy increase in YTD, according to LMC Automotive. The SAAR (seasonally adjusted annualised rate) of sales was 81.26m units/year, 2.0% higher than February’s 79.68m and 5.4% down from a record 85.91m in January. YTD, the SAAR was 82.83m, 2.3% higher than FY12’s 81.00m. In FY13E, the global LVs markets are expected to grow 2.8% to 83.2m, which implies a considerable deceleration from last year’s 5.3% and is in line with our previous forecast. (See GADA March 2013 edition of April 1st, 2013.) From 2014 onwards, the markets are expected to accelerate again and to grow by almost 7% p.a. in 2014E and 2015E.

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22Apr/13

Morning Market Commentary & Weekly Charts – Global Equities running out of steam

This past weekend’s meeting of the G-20 has been described by some as highlighting that there is only minimal coordination between the main economic powers. Japan was not singled out for reprobation. The G-20 and the BoJ have made it very clear to the financial community that Japan has the green light regarding continued quantitative easing and resulting in continued Yen weakness. We expect the US$/Yen 100 level will fall soon, and moving towards our 2013 price target in coming months. Short term, we expect the US$ to run into resistance at the psychologically important US$/Yen 100 level, which it hasn’t crossed since April 2009.

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18Apr/13

Morning Market Commentary – AAPL “Sell/Short” reiteration, SPX Sell signals clear

Apple stock traded below US$ 400 for the first time since 2011, just prior to the exuberant and parabolic rise to US$ 705 in 1H 2012.   Yesterday APPL fell 5.50% following a weak sales outlook from key chip supplier to Apple, Cirrus Logic.  Shares of AAPL are down around 42% since the stock peaked in September of last year, when we put a “Sell/short” recommendation on AAPL at US$ 685, this amidst concerns that Apple is losing its market dominance.

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17Apr/13

Morning Market Commentary – US$ impact on US equities, SPX, Nasdaq, RUT continuing to weaken;

The fact is, the US$ index is down over 33% in the past 35 years. Below we have added a few charts elaborating on a major subject which we clearly part with the “so called experts” on economics, and stock markets, who are now predicting a period of US$ strength, paired with simultaneous strength and outperformance of US equities:

Well, for those “experts” and their opinions, let’s see if they have a point, as we believe a few pictures are worth a few million (wasted) words. Let’s look at the chart of the US$ versus the S&P 500 going back to 1980.

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16Apr/13

Morning Market Commentary-Major breakdowns for US stocks, sectors, Oil, Gold, Silver, WTI, another -15% downside risk

Equity markets around the world recorded significant technical weakness yesterday. Much of the weakness was recorded prior to the Boston explosions. The explosions accelerated weakness near the close. The 9.1% one-day slump for the price of gold was the steepest fall in 30 years. Gold prices had recovered by as much as 2.0% this morning. The CME Group Inc. said yesterday it was the minimum collateral requirements for trading in benchmark gold, silver and other precious-metals futures contracts. The CME also raised the margin to trade palladium by 14%, and for platinum by 19%.

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16Apr/13

Daimler 1Q13 Valuation & Preview

Daimler (EUR 39.44) – BUY  – Target price:  EUR 51.97; potential +32%

At EUR 39.44, Daimler shares are currently valued at 7.2x prospective 2013E earnings and 6.7x prospective 2014E earnings; the latter is at a 36% discount to the 5-year average historic valuation of 10.5x and at a 25% discount to the 10-year low historic valuation of 8.9x. This is inconsistent with the implication that our estimates for 2014E EPS (EUR 5.91) are 44% above the 5-year average of EUR 4.11 and 63% above the 10-year average of EUR 3.62.

A valuation in line with the 10-year low historic valuation of 8.9x implies a share price of EUR 52.63 at year-end 2014E and time-discounted (yield of 10-year Bund) a target price of EUR 51.97 at year-end 2013E, which is 32% above the current share price and 15% below our previous target price of EUR 60.91 (February 11th). (See our latest company report ‘Daimler: 1Q13E preview’ of April 16th.)

 

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15Apr/13

Morning Market Commentary & Weekly Charts – PROFIT TAKING in global equities; Commodities

Well, the profit taking has started. Despite continued resilience in the US equity markets, benchmarks around the globe have begun to trend lower, showing a series of lower-lows and lower-highs, a characteristic of a negative trend.   

“Sell in May” has come early for equity markets in Canada, Germany, France, United Kingdom, and China. Negative pressures in equity benchmarks around the globe combined with significant declines in commodity markets is resulting in an increased probability that a top in United States equity markets is near, if not already realized.   Trend line support for the S&P 500 is presently just above 1550, making this a logical point to trigger the conclusion to the seasonally favourable period for the market, which ends on May 5th, on average.

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10Apr/13

Morning Market Commentary – US$ impact on stocks & Sector rotation, into cyclicals, materials, mining

The Euro has realized rather pronounced declines since the start of February, but recently momentum indicators have diverged from the short-term price action, indicating that selling pressures were abating.   The intermediate trend is noted to have changed, but a continuation of this short-term rebound is reasonable as the currency corrects an oversold condition.   A retest of the 50-day moving average around 1.32, and even up to 1.3450 is increasingly probable as the currency exits a period of seasonal weakness that concluded at the end of March.

Euro strength has generally coincided with US$ index weakness, often seen as a positive catalyst for equity and commodity prices.

The US$ index is showing signs of rolling over from its recent positive trend. The US$ index is pushing towards its 50-day average as seasonal weakness in the month of April pressures the currency lower.

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09Apr/13

Morning Market Commentary US$ impact on EPS, EUR/US$ reversal

As per our prior warnings, sell side analysts have been like usual late to the plate with regards to currency adjustments for US companies.

For now, consensus estimates show that first-quarter earnings reports released by major US companies will be sluggish. Consensus earnings estimates for the 30 Dow Jones industrial average companies shows an average (median) gain of only 3.1 per cent on a year-over-year basis.

With 25% of S&P 500 earnings coming out of Europe, and 6% coming from Japan, we think that most sell side analysts are behind the curve on this. The negative impact on first quarter earnings by international companies due to strength in the US$ on a year-over-year basis will be mentioned frequently when first quarter reports are released during the next three weeks. The US$ Index averaged approximately 81.0 in the first quarter of 2013, up from approximately 79.0 in the first quarter last year. At the end of the quarter, the Index was at 83.14 versus 79.00 last year. However, the US$/Yen has fallen by -31.5% since September 2012, which is in line with our forecasts, and this will weigh significantly on EPS for Q1 and will continue to be a negative surprise for analysts throughout 2013, particularly, as we anticipate the US$/Yen to be at 1.12 by year end 2013.

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08Apr/13

Morning Market Commentary & Weekly charts

“Sell in May & Go Away” or is it “Sell in April”, like it was in 2012?
Japanese companies see the continued weakening of the Yen as an opportunity to increase investments abroad, and are buying foreign assets. European companies are generating more than 50% of their earnings from outside of the Eurozone, and for the Eurostoxx 600, about 30% of earnings are coming from emerging markets. Hence why we see better buying opportunities in Japanese and European stocks.

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04Apr/13

Morning Market Commentary – US Markets Technical Deterioration

Japan’s economy has been hurt by a variety of factors, not least decades of deflation or falling prices. Falling prices discourage people from spending and companies from investing, and that has trapped Japan in a cycle of sluggish growth and recession. Given the slowdown in Japan’s export sector in recent years, reviving domestic demand has become ever more crucial to spurring a fresh wave of economic growth in the country. Prime Minister Shinzo Abe has also said that stoking inflation is key to boosting domestic consumption. Under pressure from the government, the central bank had doubled its inflation target to 2%, earlier this year.

The YEN fell against the US$, and Tokyo’s Nikkei 225 index rose 2.2% on the central bank’s decision, indicating markets were reacting positively to the extent of the stimulus measures.

US equity markets are slowly rolling over, yesterday some significant technical damage was done. US equity markets started to roll over. Yesterday’s technical negative action increased significantly.

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04Apr/13

Strategy Update – Return of the Virtuous Cycle

Other than in wistful missives about missed public policy opportunities, economists have had little reason to speak of the virtuous circle since 2007. Yet we suspect that it will creep back into the lexicon of the financial media shortly. But if we’ve heard little of the virtuous circle, we’ve heard plenty from its evil twin, the vicious circle. Its offspring (housing collapse, rising unemployment, falling stock prices, crisis of confidence and credit crisis) were all key components of the last recession and helped contribute to the near collapse of our financial system. Yet they have all steadied and apparently found a bottom. The best leading indicator of the group, stock prices, has been climbing for four years. Credit for both households and business has started to flow more freely, even discounting for the Fed’s pump priming. While it sounds positive, the lingering concern nagging at many investors seems to be “is this all there is?” Are we stuck in the so-called “new normal” of slow growth that is well below the economy’s potential…or worse, facing a consumer spending slowdown that some fear could pull the economy back into recession?

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27Mar/13

Morning Market Commentary – BDI, NDX, AAPL

When stocks began to peak from a substantial seasonal run that began in October of that year, the Baltic Dry index is rising as cyclicals, such as energy and materials, are weakening. The BDI provides an assessment of the price of moving the major raw materials by sea.  The diverging activity of the price of shipping materials versus the price of companies valued based upon materials they produce is made without conclusion, other than the fact that underlying fundamental influences that typically drive these cyclical sectors higher at this time of year are still occurring. Manufacturing and industrial production typically increase into the Spring, driving the BDI higher as more goods are shipped, and customarily giving strength to Materials and Energy. However, the fading relative performance of these cyclical sectors suggests that investor demand to hold these stocks is clearly absent, despite the positive fundamental influences. Once again, warning signs are beginning to emerge. With AAPL still commanding a large percentage of the Nasdaq 100 , the short trade is in AAPL.  Now after it completed it’s 10 % recovery from its lows of US$418, we are advising to short AAPL, with our next price target being US$ 380, then over the 9 – 12 months time period, we stick to our AAPL price target of US$ 320.

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25Mar/13

Morning Market Commentary & Weekly Charts

Cyprus deal done. Stocks advanced strongly on Monday morning after 11th-hour talks to save Cyprus from default resulted in a last-minute bailout deal with the Troika. Following a meeting of Eurozone finance ministers that lasted almost 12 hours, Cyprus agreed to a EUR 10 bn aid package that doesn’t include a controversial across-the-board bank-account tax but involves forcing big losses on uninsured depositors.

Cyprus is about as economically significant as the German city-state of Bremen, and yet the attention of citizens and politicians alike was focused on the debt-ridden country on the continent’s periphery last week and through the weekend. Since Cypriot parliament rejected the initial bailout plan, one crisis meeting followed the next in Berlin, Frankfurt and Brussels as concepts were presented, revised, rejected and resubmitted. In the end, the European Central Bank (ECB) imposed an ultimatum on the country. The message from ECB President Mario Draghi was that either Cyprus agrees to the bailout conditions or it could be the first member of the Eurozone to declare a national bankruptcy.

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22Mar/13

Morning Market Commentary

Global equity markets have had a very mixed performance so far, the question begs, is it time for the inevitable correction?

Or is there a bit more room on the upside?

If all the BRIC countries are struggling, that is a big concern. Maybe the SENSEX rallies from here. The chart above shows a very important pattern that usually identifies major tops. Taiwan and Singapore are starting to soften on the ETF’s. Most of the commodities looked like they were at a pivotal point too, be it related to the US$’s recent temporary strength.  The Rest of the World dragged down the US market in 2011. If commodities, and emerging markets are not rallying from here onwards, then we see cause for a softening of US equities in a rather large move down through the summer. $COPPER would suggest the move is to the downside. US housing starts and Transports would suggest the move is to the upside.

We do not say that the trend for global equity markets has reversed, but surely a correction of 5% – 8% is not far ahead, and we are advising our clients to add towards strategic equity positions when it will occur. When looking at aggregate performance since January 1st 2012, the Nikkei 225 is up 48%. In the last three weeks alone, the Nikkei has risen 8%. Frankfurt’s Xetra Dax is second best, with a gain of 36%. The Nasdaq is next, followed by the S&P 500. Continue reading

18Mar/13

BMW (EUR 70.00)-BUY

A valuation in line with the 10-year average historic valuation of 10.3x implies a share price of EUR 88.52 at year-end 2014E and time-discounted (yield of 10-year Bund), a target price of EUR 87.24 at year-end 2013E, which is 24.6% above the current share price (EUR 70.00) and 2.7% below our previous target price of EUR 89.69 (March 12th). (See our latest company reports ‘BMW – 4Q/FY12A prel. results comment’ of March 18th and ‘BMW – 4Q/FY12E preview’ of March 12th.)

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18Mar/13

BMW: 4Q/FY12 Preliminary Results Comment & Model

BMW shares – our view: The current BMW share price of EUR 70.00 values BMW at 8.7x 2013E prospective earnings and at 8.1x prospective 2014E earnings; the latter is a 21% discount to the 10-year average historic valuation of 10.3x. This is inconsistent with the implication that our 2014E EPS estimates (EUR 8.63) are 11% above FY12’s record EUR 7.77 and 100% higher than the 10-yr average (EUR 4.31). (See pp.11-12.)  Continue reading

15Mar/13

Morning Market Commentary – Natural Gas Breakout

The energy sector was buoyed by a breakout in natural gas prices. Natural gas prices surged by 3.59% to US$ 3.812 mBTU’s after the Energy Information Administration reported that inventories fell by 145bn cubic feet last week, 18.5% below the same level last year. The consensus estimate was for a 137bn cubic-feet fall. Nat Gas prices have risen by over 9% month to date, with the market betting on a tighter supply and demand situation following a cold winter season, signs of a recovery in the US economy, a drop in drilling rigs, growing uses for the fuel, and a shift away from coal-fired plants.

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13Mar/13

Morning Market Commentary – EU Budgetary

In the past 6 months, we have been advising our clients to increase weightings towards equities, at the expense of reducing weightings in bonds. We repeatedly have reiterated this call, in the face of many other strategists who have called for a major 7% – 10 % correction for equities since late January 2013.

Several short term technical aspects are showing further evidence that this outperformance for equities might continue, well into the seasonal period of weakness starting in May, “Sell in May & Go Away”, when particularly European Balanced Fund managers are switching from particularly high-yielding equities, which are paying their annual dividends (unlike the US and UK corporates which are paying quarterly dividends)  from late February – late June. Continue reading

12Mar/13

BMW: 4Q/FY12E Preview

BMW shares – our view: The current BMW share price of EUR 72.65 values BMW shares at 9.0x 2013E prospective earnings and at 8.4x prospective 2014E earnings; the latter is a 20% discount to the 10-year average historic valuation of 10.5x. This is inconsistent with the implication that our 2014E EPS estimates of EUR 8.63 are 16% above 2011’s record EUR 7.45, 74% higher than the 5-year average of EUR 4.97 and 123% higher than the 10-year average of EUR 3.87. (See pp. 21-22.)

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11Mar/13

Morning Market Commentary & Weekly Charts – Global Equity Markets

Weekly Investment Conclusion:

Strength in US equity markets last week triggered by surprising strength in economic indicators was unexpected. US equity markets quickly regained short term momentum. Positive psychology related to the Dow Industrials reaching all-time highs also helped. This week, economic data is expected to be positive again and the S&P 500 Index (a more significant US equity index) will have a chance of reaching its all-time high at 1,576.09, despite short and intermediate technical indicators once again have returned to overbought levels.

Selected sectors with favorable seasonality at this time of year remain attractive purchases candidates on weakness. The trigger could be a rollover of the US$ from a highly overbought level. When it happens, and we do think this will happen within days, commodity stocks including metals & mining, energy, coal and steel stocks will come alive. All recorded exceptional gains on Thursday and Friday.

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08Mar/13

Morning Market Commentary – GDP improvements, US$ Weakening

More support for global equities due to slowly but gradually improving global economic expectations and economic outlook.

GDP in the Euro area as a whole, we think might surprise on the upside and are expecting a +0.2% GDP number for 2013, and +1.0% GDP for 2014, as we are seeing more evidence of government policies in Europe, but also around the world starting to make progress, and hence why we are expecting for global GDP growth to accelerate in 2014, albeit slowly for Europe, the UK, the US, but more rapidly in Japan, China, India, Africa, Brazil, Russia and emerging economies like the Philippines, Thailand, Turkey, Poland. Continue reading