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Trader Talk: An Analysis of the Markets this Morning

Good morning,

Markets are called to open lower this morning. Today is an important day for the markets because:

  • The Fed is scheduled to release minutes of its January meeting, where policy makers agreed on a further $10 billion reduction in monthly bond purchases after announcing in December it would start paring stimulus by the same amount.
  • The Bank of England will release minutes of its Feb. 5-6 meeting when policy makers kept the interest rate at a record-low 0.5 percent.
  • Credit Agricole, Iberdrola, Lafarge, Peugeot report earnings.

Stock to watch: Deutsche Lufthansa

We just updated our research report on Deutsche Lufthansa. We have increased our Price Target of Deutsche Lufthansa from €18.65 to €21.38. The previous price target factored-in a difficult 2013; expect subdued FY13 results as result of higher operating costs from the SCORE program and lower revenue from negative forex movements. We expect revenue FY13 to remain flat over FY12. However, we believe that on the 13th of March, positive company guidance, as opposed to results, will be the catalyst for the positive momentum in the price movement. For a copy of our report login to webtrader.

The DAX

  • JP Morgan predicts the DAX will climb 5.6% this year. “Growth will be strong, earnings will be strong. We don’t think that fundamentals in the DAX have really changed in the last few weeks.”
  • Deutsche Bank AG was the most bullish, estimating a 14% jump to 11,000.
  • Barclays Plc, calling for a 13% increase to 10,900.

Opinion: We remain bullish on the equity markets with particular reference to European equities. The main reasons being:

    • The International Monetary Fund raised its forecast for this year’s global growth to 3.7% on Jan. 21, up from an October estimate of 3.6% as the U.S. expansion accelerates.
    • We do not expect to see the rally we have seen in the Euro against a basket of currencies like we have seen in 2013. Although we are not expecting an immediate reversal, nor are we expecting continued strength.
    • We expect growth to continue improving in Europe up to 1% in 2014 compared to -0.4% in 2013.
    • We expect European companies to report favorable results in 2014 and beyond.

    For more information on the stocks mentioned in this report or other stocks and bonds we follow, contact our offices on 25688688.

    Good day and happy trading!

    Kristian Camenzuli

    The Calamatta Cuschieri Traders Blog is available daily on CC WebTrader. Other market coverage including coverage of the International Bond Markets is also available.

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