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Reports

US stock market, economy and companies update (October 21, 2014)

October 21, 2014, Tuesday
 Heartburn from lousing McDonalds and Coca-Cola results is not preventing markets from racking up impressive gains this morning, as traders home in on possible ECB stimulus talk and Apple's big quarter. Note that the September existing home numbers hit a one-year high. As of writing, the DJIA is up 0.68%, the S&P500 is up 1.27% and the Nasdaq is up 1.65%.

European stock market, economy and companies update (October 21, 2014)

October 21, 2014, Tuesday
China Q3 GDP slightly beats expectations but annual reading hits a 5 1/2 year low (Q/Q: 1.9% v 1.8%e; Y/Y: 7.3% v 7.2%e; GDP YTD Y/Y: 7.4% v 7.4%e); still bolsters case for stimulus restraint. China Sept Industrial Production rebounds from 6-year lows (Y/Y: 8.0% v 7.5%e). RBA minutes noted that: a period of stability for interest rates might be the most prudent course.

Russian stock market daily morning report (October 21, 2014, Tuesday)

October 21, 2014, Tuesday
Despite the outperforming GDP and industrial production in China, the growth rates of the economy still turned out to be low, which will be pressuring the market. The news regarding gas talks might be most important for the Russian market – breakthrough in talks might give start to the mid-term upside trend at the Russian stock exchange. However, until the elections in Rada in Ukraine on October 26, the gas issues are unlikely to be solved.

UK stock market morning note (October 21, 2014)

October 21, 2014, Tuesday
 The FTSE 100 is called to open slightly higher this morning following the mixed performances on Wall Street and in Asia with a raft of Chinese data out overnight showing GDP in Q3 slightly ahead of forecast at 7.3%, but down on the previous quarter with industrial production also better than expected at 8%, but fixed asset investment and retail sales were both slightly below expectations.

Indian stock market daily morning report (October 21, 2014, Tuesday)

October 21, 2014, Tuesday
 Benchmark share indices ended over 1% higher on Monday as the fuel reforms would further ease inflation, lower the government's subsidy bill and contain the fiscal deficit. Further, Narendra Modi-led BJP gaining victory in Maharashtra and Haryana state elections raised hopes of more reforms to boost economic growth. The 30-share Sensex gained 321 points to end at 26,430 and the 50-share Nifty surged 100 points to end at 7,879.

UK stock market commentary (October 21, 2014): This dead cat’s still got some bounce

October 21, 2014, Tuesday
 European equities are set to open modestly higher following marginal overnight gains in the US and some interesting data from China. A determined effort from across the Atlantic saw US markets claw their way tooth and nail against some bearish news to finish modestly in the green yesterday and some of that resilience is filtering through to Europe this morning.

News

    Risk and Uncertainty, Confidence and Fear

    21 October 2014
    In recent weeks, the financial markets appear to have been reacting less to weaker expectations of global growth and more to the increased downside risks – that is, to the fear that things could get a lot worse. The downside risks to Europe are considerable, but America is much less dependent on exports than most other countries and the prospects for moderately strong growth into 2015 remain promising.

    Global Worries (And Some Benefits)

    14 October 2014
    In the latest update of its World Economic Outlook, the IMF revised lower its expectations of global growth in 2014 and 2015. None of that should have surprised anyone. At this point, the IMF expects that European GDP will be relatively weak in 2014 (+0.8% 4Q14/4Q13) and should improve in 2015 (+1.6% 4Q15/4Q14). However, risks are weighted predominately to the downside. Weaker European growth and a stronger dollar will have a significant impact on many U.S. firms, but may have some benefits for the economy as a whole.

    Looking Back, Looking Ahead

    30 September 2014
    Real GDP is now estimated to have risen at a 4.6% annual rate in 2Q14. However, the second quarter’s strength must be balanced against the first quarter’s weakness (a -2.1% pace). As the third quarter ends, we still don’t have a complete picture. However, figures are likely to suggest a moderately strong pace of growth and a gradual taking up of economic slack.

    The Dots

    23 September 2014
    As was widely anticipated, Federal Reserve policymakers reduced the monthly pace of asset purchases by another $10 billion and kept the “considerable time” language. Fed policymakers revised slightly their forecasts of growth, unemployment, and inflation. However, the really interesting item in the Fed’s Summary of Economic Projections was the dot plot, the projections of the appropriate year-end level of the federal funds rate for each of the next few years. There is a huge range of uncertainty among Fed officials.

    Mind Your Language!

    16 September 2014
    The Federal Open Market Committee is widely expected to take another trip to Taper Town on Wednesday, reducing the monthly pace of asset purchases by another $10 billion, one step closer to ending the program in late October. The more interesting issue is whether we’ll see any change in the Fed’s forward guidance on short-term interest rates – specifically, whether the FOMC will jettison the “considerable time” language.

    Forex

Global Outlook

No More Black Mondays

October 21, 2014, Tuesday
In a true demonstration of impeccable and apropos timing given the recent volatility we have experienced, yesterday marked the 27th anniversary of one of the stock market’s most infamous and chronicled events. “Black” Monday, October 19, 1987 was one of those multiple standard deviation occurrences that statisticians will tell you are not supposed to ever really happen, but as is the case more frequently than most realize, it of course did happen, and its impact is still being felt today even as there are fewer and fewer investors around that actually had to suffer through it.

Turkey's Position on ISIL Misunderstood

October 20, 2014, Monday
As territory in the Middle East falls under control of the brutal fanatics of ISIL, many Americans may be wondering how this could happen in the backyard of major U.S. allies. In particular, frustration with Turkey's reluctance to move against ISIL, even as it massacres civilians and creates instability on the Turkish border, is growing rapidly. Turkey's political calculation with respect to the crisis reveals just how complex and intractable the crisis may become.

Governments Need Inflation, Economies Don't

October 20, 2014, Monday
In an article in the UK's Telegraph on October 10, veteran economic correspondent Ambrose Evans-Pritchard laid bare the essential truth of the nearly universal current embrace of inflation as an economic panacea. While politicians, CEOs and economists talk about demand stimulus and the avoidance of a deflationary trap, Evans-Pritchard reminds us that inflation is all, and always, about debt management.

The Right Question

October 14, 2014, Tuesday
In this business it has been said, “Sometimes knowing the right question is more important than actually knowing the answer.” Over the years I have found that old Wall Street axiom to serve me well. One example would be reading the footnotes in a company’s annual report. My father taught me that trick years ago along with reading the auditor’s statement. Verily, the first thing I do when opening an annual report is to read the two aforementioned items first.

Recommendations

Market Strategy - Diwali Special (October 2014)

October 20, 2014, Monday
Markets have witnessed a strong rally in the last eight months, which has so far been aided by the deeply beaten down valuations. Going ahead, we believe that acceleration in earnings growth will drive the markets forward. We expect the performance of various domestic cyclical sectors to continue improving going forward on the back of the improving economy and policy environment.

TCS 2QFY2015 performance highlights and results update

October 20, 2014, Monday
For 2QFY2015, TCS posted a 6.4% sequential growth in USD revenues to US$3,929mn V/s an expected US$3,859mn, with volume growth of 6.1% qoq. In constant currency (CC) terms the company posted a 7.4% qoq growth in revenue, of which organic growth during the period was 4.6% qoq (in constant currency terms). The EBITDA margin came in at 28.7%, lower than an expected 30.2%, posting a dip of ~6bp qoq.