Thursday, February 6, 2014


Market Comment

US indices fell on Wednesday pressured by shares in the Pharmaceuticals, Biotechnology & Life Sciences, Energy and Telecommunication Services sectors. The S&P 500 (1751.64) remains below its 20d moving average (1809.5 - negative slope) and its 50d moving average (1810.1 - negative slope).

European markets are expected to start on a positive note.

Foreign Exchange

US Dollar was mixed against most of its major counterparts on Wednesday. On the US economic data front, MBA Mortgage Applications for the week ended January 31st rose 0.4%. Companies added 175K workers (185K expected) in January after a downwardly revised 227K increase the previous month according to the ADP report. Finally, ISM non-manufacturing rose to 54.0 (53.7 expected) in January from 53.0 the prior month.

The Euro was mixed against its major counterparts. In Europe, euro zone PMI composite was 52.9 in January in final estimation vs 53.2 in prior one. It was 52.1 the month before. PMI services was 51.6, vs 51.9 expected, vs 51 in December. Separately, euro zone retail sales fell 1.6% in December after a 0.9% gain in November (revised from +1.4%). Economists anticipated them to be down 0.7%. In Germany, PMI services was 53.1 in January vs 53.6 anticipated and 53.5 a month earlier.


After the close of Wall Street, WTI Crude Future (MAR 14) was about flat to $97.21. The contract was below its 20D MA (@ $98.29) and above its 50D MA (@ $96.59). The US Department of Energy reported that, for the week ended 31 January, crude oil inventories increased 440k barrels compared to the previous week. 

Gold was up $3.2 to $1257.9. The precious metal was above its 20D MA (@ $1251) and above its 50D MA (@ $1235).

Copper Future (MAR 14) on Comex was about flat to 319.35c/lb. The contract was below its 20D MA (@ 330.62c) and below its 50D MA (@ 326.76c). In Europe, the London Metal Exchange reported its copper inventories decreased 2050 tons to 311225 tons.

UK Market News

AstraZeneca posted 4Q LPS of $0.42 vs EPS of $1.21 a year earlier and operating loss of $591M vs profit of $2.0B on revenue of $6.8B, down 6% (-4% at constant exchange rates), citing "the $1,758M intangible impairment related to Bydureon ($1.10 per share)". FY13 EPS plunged 59% to $2.04 and operating profit was down 54% to $3.7B. The Board declares a second interim dividend of $1.90 per share, bringing the dividend for the full year to $2.80.

Vodafone Group issued a December quarter Interim management statement: "Group revenue for the quarter declined 3.6% to £11.0B, including a 2.1 percentage point impact from adverse foreign exchange movements and a 2.8 percentage point positive impact from M&A and other activity. On an organic basis, Group service revenue decreased 4.8% or 2.4% excluding the impact of mobile termination rate cuts. Emerging markets continued to generate strong organic growth supported by rapidly increasing mobile internet users and data usage. The environment in Europe remains challenging and we have continued to experience intense macroeconomic, regulatory and competitive pressures in the quarter. (...) Organic service revenue in AMAP grew 5.5% in the quarter, with continued strong revenue growth across the majority of our markets. (...) we remain on target to deliver adjusted operating profit of around £5B and free cash flow in the £4.5B- £5.0B range, based on the pro forma guidance given on 2 September 2013."

European Markets

ECB: Governing Council meeting, press conference 2:30pm CET.

Hannover Re announced: "Of the total premium volume booked in the previous year in non-life reinsurance (excluding facultative business and structured reinsurance) amounting to E6,028M, roughly two-thirds of the treaties with a volume of altogether E3,913M were up for renewal as at 1 January 2014. Of this, a premium volume of E3,393M was renewed, while treaties worth E520M were either cancelled or renewed in modified form. Including increases of E401M from new or modified treaties and thanks to improved prices, the total renewed premium volume thus came in at E3,832M - equivalent to a decrease of 2%. Despite various moves by the market to induce softening, Hannover Re was able to write its business at broadly unchanged conditions." On the 2014 outlook the Co said: "The Co has budgeted an amount of E670M for major losses incurred in 2014. Assuming that major loss expenditure does not significantly exceed this expectation and provided there are no unforeseen downturns on capital markets, Hannover Re is looking to generate Group net income of around E850M for the 2014 financial year. The Co is targeting a return on investment of 3.2%."

Daimler, Sky Deutschland, Heidelbergcement, GEA Group FY results expected

Media: Axel Springer (+1.42% to E47.48) reached a new 3-month relative high against the Dax.

DE - Stock/Benchmark ratio(s) 50D MA cross over: Hannover Re (+0.95% to E59.56), Stada Arzneimittel (+1.67% to E35.85).
Vinci announced that FY13 net income grew 2.3% YoY to E2.0B (EPS flat at E3.54) and EBITDA rose 3.3% to E5.6B on revenue of E40.3B, up 4.4%. The Co proposed maintaining dividend at E1.77 per share. It added: "VINCI is expecting stabilisation of its revenue on a constant structure basis in 2014. In Concessions, the Group is expecting the continuation of the positive trends in motorway and airport passenger traffic seen in 2013. In Contracting, despite an on-going difficult economic environment in 2014, especially in France, VINCI has good visibility on activity thanks to the high level of its backlog. The SEA (HSR Tours-Bordeaux) project is expected to continue to materially contribute to the top line, similar to 2013. On an actual structure basis, revenue will be impacted by the deconsolidation of CFE in 2013."

Sanofi reported 4Q business net income up 16.8% to E1.8B (EPS +17.1% to E1.37) on net sales of E8.5B, down 0.8% (+6.5% at constant exchange rates). FY13 business net income fell 17.5% to E6.7B (EPS -17.8% to E5.05). The Co proposed a dividend of E2.80 per share. It pointed out: "In Q4 2013, Emerging Markets sales recorded double digit growth (+10.4%). In 2013, Emerging Markets sales were E10,957M, an increase of 4.4% (+7.1% excluding Brazil generics). (...) Diabetes sales were up 19.0% in Q4 2013. Diabetes recorded strong double digit growth (+18.7%) to E6,568M in 2013 driven by the performance of Lantus (+20.0% to E5,715M). (...) Vaccines sales were stable in Q4 2013 as supply improved for Pentacel and Adacel in the US from mid-October. In 2013, Vaccines sales were stable at E3,716M as record flu vaccines sales offset US supply constraints on Pentacel and Adacel. (...) Genzyme recorded a robust performance in Q4 2013 with sales up 31.4%. In 2013, Genzyme recorded sales of E2,142M, up 25.9% driven by 16.6% growth of the rare disease franchise and by Aubagio (E166M)." It provided a 2014 guidance: "The continued performance of growth platforms, investments in new product launches and in late-stage pipeline should lead to a 2014 business EPS growth between 4% and 7% at CER."

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