European and North American Markets Review – September 1st 2010

Bulls Ruled Europe and North America

Better-than-expected economic data from China and US triggered hefty gains in Europe and North America on Wednesday. DAX index jumped 158.68 points to end at 6,083.90 or up 2.68%, while FTSE 100 rallied towards 5,366.41 or gained 2.70%. North American markets also rallied, with the Dow ended at 10,269.47 after leaping 254.75 points throughout the day, Nasdaq Composite gained 2.97% to settle at 2,176.84, while S&P 500 landed at 1,080.29 after a 2.95% rise.

Data, Data, Data …

After China PMI triggered a mood swing towards positive in Asia, the effect still lingered throughout midday Europe (for China data, read previous post). Then, US data were out, and despite the ADP report went in below the expectations, ISM data posted a better-than-expected reading and thus further powered the rally among European and North American shares.

ADP report showed that 10,000 jobs were cut in August, against a gain of 37,000 jobs in the previous month. The market had expected an addition of 20,000 jobs into the private sector in August. The missed result was unable to stop the rally that already brought over 100 points of gains on Dow Jones index.

The boost came from the Institute for Supply Management (ISM) index for the manufacturing sector that beat the expectation of a fall towards 53.00. Instead of falling, the index rose from 55.5 in July to 56.3 in August, indicating that manufacturing activity remained robust throughout August.

Final piece of the economic data on Wednesday was construction spending that declined 1% to $805.2 billion. June’s figure was revised down to -0.8% against prior estimate of +0.1%.

Earlier, European data showed unimpressive results. German PMI for manufacturing sector was stagnant at 58.2 in August, the same as July’s level. UK’s PMI for manufacturing unexpectedly fell from 56.9 to 54.3, below the expected rise to 57.0. Meanwhile, retail sales fell 0.3% (m/m) in Germany while on the year-on-year basis sales grew 0.8% after a 4.7% jump in prior month.

More data to come on Thursday, as US jobless claims and pending home sales will grab the market’s attention aside from other data coming from Europe. Claims were expected to rise again to 478,000 after it dropped towards 473,000. Pending home sales were expected to fall 1.5% in July, at a better pace than June’s -2.6%.

Daimler AG gained significantly to €40.46 or 5.46% higher than Tuesday’s close after UBS raised its rating from SELL to NEUTRAL.

BMW beat Toyota’s Lexus at the American market for luxury cars in August as the sales climbed to 19,540. 1 Series and 7 Series had their sales up by 53% and 42%, respectively. Lexus however, declined 15% to 19,465. Daimler’s Mercedes sales were up 10% to 18,826 units, as the E-Class contributed a month-on-month increase of 26% in August while since the start of the year its sales were up 71%. BMW gained 2.99% at €42.91 while Volkswagen advanced 2.24% to €73.36.

Among the three, Lexus was on top with 145,490 units (+11%), Mercedes in the second place with 139,867 units (+18%), and BMW next at 139,236 units (+7.8%). Further down, Ford Motor Co. had 6,428 units of Lincoln models sold (+9.4%), Volkswagen’s Audi with 9,182 units (+14%) along with its Porsche’s sales of 2,032 units (+33%). Honda’s Acura and Nissan’s Infiniti sales were a 11,534 units (+20%) and 9,428 units (+22%), respectively.

BP will resume the work of plugging of its well in the Gulf of Mexico on Thursday which had been held by rough seas since August 30th. BP’s shares hovered at 388.75 pence at the end of the session.

Shares with significant gains in Europe were Daimler at the top (+5.46%), Barclays Plc. (+4.33%) and Deutsche Boerse (+3.69%).

Eyes on Apple

Apple demonstrated its new iPods, iTunes and Apple TV. It also introduced iTunes software with more social-networking features that enable users to see their friends’ downloading activities. Apple TV’s set-top box was revamped, video rentals fees were lowered, and Netflix’s content was made available for streaming. Apple unveiled iOS 4.1 at the event, which would be available next week for iPhone and iPod touch via free download. The OS will include GameCenter for multiplayer gaming. Subsequent version, iOS 4.2 will be launched later in November and it would be for iPad, with features like wireless printing, streaming videos and photos. The new iPod Nano will be 46% smaller, 42% lighter, with 24 hour audio playback battery life. The new iTunes 10 will include Ping, as music social network. Apple’s CEO Steve Jobs also said that Disney’s ABC and News Corp’s Fox are available on Apple TV. The new Apple TV will cost $99, has no storage management, and can stream content from computer. It will be available in four weeks time. Apple was placed with an OUTPERFORM rating at MP Securities with price target at $290. Apple gained nearly 3% and ended the day at $250.33.

Amazon.com led the North American gainers on Wednesday as it leaped to $132.49 - over 6% gains – as the company was reportedly approaching media companies to start an online video-subscription service to compete with Netflix. One of them was Time Warner Inc.

From Citigroup, the bank will lower the balance requirements of its basic account to reach more customers. The Citigold customers can now be free from monthly fees if the balance requirements are met, which was set at $50,000. Citigroup was up 3.73% at $3.85.

Other ratings revisions were Wal-Mart which was downgraded to SELL from BUY at Crowell Weeden, while Siemens AG downgraded to HOLD from BUY by Deutsche Bank. Wal-Mart ended up 2.11% at $51.20 and Siemens ended at €73.89 or up 2.94%.

Other top gainers were Bank of America with 6.08% jump to $13.21 and Halliburton Co. at $29.73 or up 5.39%.