European and North American Review – August 30th 2010

DAX and Dow Started the Week on a Weak Note

German DAX and the three North American indexes tumbled on Monday as economic data were unable to defend gains from last Friday’s rally. The DAX index settled the day at 5,912.41 or falling 0.65%, the Dow Jones index tumbled 140.92 points or 1.39% to end at 10,009.73, within striking distance to the psychological support at 10k, while Nasdaq Composite and S&P 500 indexes fell to 2,119.97 and 1,048.92, respectively.

Personal spending and personal income data released on Monday showed spending increased by 0.4% in July, while personal income rose as well by 0.2%. While the personal income was below the expected 0.3% increase, the personal spending was slightly above the expected increase of 0.3%. The mixed results turned the market’s attention to the next data, especially the non-farm payrolls which will be announced on Friday. Tuesday will see Chicago PMI data falling from 62.3 to 57.5, while consumer confidence data is expected to rise from 50.4 to 51.0.

European auto shares fell after Renault-Nissan’s CEO Carlos Ghosn said that auto sales in the US are to be below the expected level, while global sales are also not as smooth as previously expected. In addition, German’s Der Spiegel reported that the sales of Daimler’s Smart are to be below 100,000 units against last year’s sales of 114,000 units. Weak demand from US and also lack of model variations were cited as the culprits. Daimler fell 0.73% to 38.12 euros, BMW and Volkswagen fell 1.33% and 0.45%, respectively.

More on M&A activities, Intel announced that it bought Infineon’s wireless unit for $1.4 billion in an effort to strengthen its position in the mobile phone business. Intel could potentially equip each of its PC with 3G feature which would put the company in a direct competition with Qualcomm who dominates the 3G business currently. Recently, Intel also bought McAfee for $7.68 billion. Intel’s rating however, got mostly downgraded. Credit Suisse downgraded Intel’s estimates, RBC Capital downgraded Intel’s target to $26 from $30, Deutsche Bank also did the same, revising its target to $25 from $27 but maintaining the BUY rating, while Lazard Capital put Intel to HOLD from BUY. Wedbush also lowered Intel’s target to $25 from $29. Intel fell 2.23% to end at $17.96.

IBM also bought its next company: Storwize after recently it bought Sterling Commerce. Its real-time data compression technology would be expandable to help IBM clients to improve data storage efficiency by up to 80%. IBM fell 1.07% to $123.40, however.

The pharmaceuticals industry will see Pfizer and Bayer AG to compete for the second spot after Boeringer Ingelheim’s Pradaxa in a blood-thinner market with the potential of $10 billion to $20 billion annually. Both companies will present their data at the meeting of European Society of Cardiology to be held on Tuesday. Afterwards, on September 20th the American regulatory body will also review the drug. Pfizer worked together with Bristol-Myers developing apixaban, while Bayer teamed up with Johnson & Johnson working on Xarelto.

Meanwhile, at Susquehanna, Texas Instruments was downgraded to NEUTRAL from POSITIVE. The shares ended at $23.25 or 3.73% below Friday’s close, joining AMD and Home Depot as worst performers of the day with AMD falling nearly 5% and Home Depot slipping 2.61%. At the top, the competing tech giants Hewlett-Packard and Dell led at 1.47% and 1.12% gains, respectively. Apple also went up slightly by 0.36%.