Morning Market Update
Abacab Fund Sees Mispricing In Options As Black-Scholes Has Become “Inadequate”
Abacab Asset Management's flagship investment fund, the Abacab Fund, had a "very strong" 2020, returning 25.9% net, that's according to a copy of the firm's year-end letter to investors, which ValueWalk has been able to review. Commenting on the investment environment last year, the fund manager noted that, due to the accelerated adoption of many Read More
- US: Dow Futures: 13103.00 (0.28%), S&P 500 Futures: 1397.30 (0.53%), NASDAQ Futures: 2706.00 (0.73%)
- Europe: CAC: 3440.74 (1.14%), DAX: 6948.87 (0.43%), FTSE: 5813.42 (0.08%)
- Asia-Pacific: Australia: 4291.60 (0.44%), China: 2157.62 (0.13%), Hong Kong: 20072.55 (0.37%), India: 5336.70 (1.03%), Japan: 8803.31 (0.87%).
- Metals: Gold: 1617.90 (0.11%), Silver: 28.04 (0.62%), Copper: 3.44 (1.55%)
- Energy: Crude Oil: 92.65 (0.45%), Natural Gas: 2.94 (1.17%)
- Commodities: Corn: 8.06 (-0.31%), Soya Bean: 15.96 (-2.66%), Wheat: 9.10 (0.41%)
- Currency: EUR/USD: 1.2430 (-0.26%), GBP/USD: 1.5677 (-0.48%), USD/JPY: 78.5450 (0.37%)
- 10 year US Treasury: 1.546% (-0.015)
Financial and Economic News Update
U.S. stock-index futures trading higher: U.S. stock index futures are pointing to a higher open on Tuesday after Federal Reserve Bank of Boston President Eric Rosengren said the Fed should launch further stimulus measure to boost the economy. Investors are also hoping that the European Central Bank will take steps to address the region’s debt crisis. The Dow Jones industrial average, S&P 500 and NASDAQ futures were all trading in the green.
European markets trading higher: European markets are trading higher on Tuesday with the German DAX (INDEXDB:DAX) up 0.4 percent at 6948.87, the FTSE 100 (INDEXFTSE:UKX) gained 0.1 percent to 5813.42, and the CAC 40 (INDEXEURO:PX1) rallied 1.1 percent to 3440.74. The euro zone blue-chip ESTX 50 PR.EUR (INDEXSTOXX:SX5E) (Euro Stoxx 50) was jumped 1.2 percent.
Asian markets end higher: Asian markets closed higher on Tuesday with Japan’s NIKKEI 225 (INDEXNIKKEI:NI225) closing 0.9 percent higher at 8803.31. The HANG SENG INDEX (INDEXHANGSENG:HSI) ended up 0.4 percent at 20072.55, while the SSE Composite Index (SHA:000001) closed up 0.1 percent at 2157.62. The S&P/ASX 200 (INDEXASX:XJO) index rose 0.4 percent to 4291.60. The benchmark Indian 30-share BSE SENSITIVE (INDEXBOM:SENSEX) index jumped more than 1 percent.
Stocks in Focus
· Drugstore chain CVS Caremark Corporation (NYSE:CVS) reported second- quarter profit excluding certain items of 81 cents a share, one cent above estimates. Revenue increased 16 percent to $30.71 billion, also in line with expectations. The company raised its full-year profit forecast.
· Fashion accessories maker Fossil, Inc. (NASDAQ:FOSL) reported second-quarter earnings of $57.3 million, or 92 cents per share, on revenue of $636.1 million. Analysts were expecting earnings of 78 cents per share, on $634.9 million in revenue.
· Marsh & McLennan Companies, Inc. (NYSE:MMC), the world’s second-largest insurance broker, posted second quarter earnings excluding items of 61 cents per share, three cents above estimates, while revenue stood at $3 billion, trailing estimates of $3.08 billion.
· Tenet Healthcare Corporation (NYSE:THC) reported second quarter profit of $42 million, or 10 cents per share, on revenue of $2.23 billion. Analysts were expecting a profit of 4 cents per share on revenue of $2.27 billion.
· Emerson Electric Co. (NYSE:EMR) reported third quarter net earnings of $770 million, or $1.04 per share, against estimates of $1 a share. Revenue increased 3 percent to $6.48 billion, but missed Street estimates of $6.61 billion. The industrial conglomerate also lowered its full-year earnings forecast.
· Church & Dwight Co., Inc. (NYSE:CHD) reported second quarter net income of $79.3 million, or 56 cents per share. Revenue increased 3.2 percent to $696.4 million. Analysts were looking for earnings of 55 cents per share on $702.7 million in revenue. The consumer goods maker forecast third-quarter profit that was below Street estimates.
· Pfizer Inc. (NYSE:PFE) and Johnson & Johnson (NYSE:JNJ) have abandoned further studies of an intravenous formulation of a drug to treat Alzheimer’s disease after the treatment failed in two late-stage clinical trials.
· Sprint Nextel Corporation (NYSE:S) has slashed the price of the iPhone 4S by $50 to $149.
· Chevron Corporation (NYSE:CVX) said a massive fire struck at its Richmond refinery, in the state of California.
· Billionaire investor Nelson Peltz has decreased his stake in diversified manufacturer Ingersoll-Rand PLC (NYSE:IR) to 6.8 percent from 7.05 percent stake, according to a Securities and Exchange Commission filing.
· Fitch Ratings and Standard & Poor’s have both cut electronic retailer Best Buy Co., Inc. (NYSE:BBY)’s credit ratings to junk. The stock was trading 2 percent lower in New York pre-market trading.
- Standard Chartered PLC (LON:STAN) (HKG:2888) plunged 23 percent in London trading after the New York State Department of Financial Services accused the bank of colluding with Iran to hide transactions worth at least $250 billion.
- Banking stocks in Europe were trading lower on the back of the news. HSBC Holdings plc (ADR) (NYSE:HBC) (LON:HSBA) (HKG:0005) slumped 1.4 percent, Royal Bank of Scotland Group plc (ADR) (NYSE:RBS) (LON:RBS) fell 2.3 percent and Barclays PLC (ADR) (NYSE:BCS) (LON:BARC) shed 1.8 percent. In Germany, Commerzbank AG (ETR:CBK) (FRA:CBK) lost 2 percent and Deutsche Bank AG (USA) (NYSE:DB) (ETR:DBK) (FRA:DBK) was off 1.8 percent. BNP Paribas SA (EPA:BNP) and Societe Generale SA (EPA:GLE) were also trading significantly lower in Paris.
- Anglo-Swiss diversified mining group Xstrata PLC (LON:XTA) reported a smaller than expected 31 percent drop in first half profit, despite the adverse impact rising costs and falling prices. Revenue for the quarter declined 7 percent to $15.55 billion. The company delayed some of its capital expenditure for this year, but reaffirmed that its merger with Glencore International Plc (LON:GLEN) was well on track.
- Legal & General Group Plc (LON:LGEN), Britain’s fourth-biggest insurer, reported a better than expected 5 percent rise in half-year operating profit and said business will remain strong, despite predicting more macro-economic shocks across the world.
- Muenchener Rueckversicherungs-Ges. AG (ETR:MUV2) (FRA:MUV2) (Munich Re), the largest reinsurer in the world, reported forecast-beating second net profit, bolstered by fewer expenses for natural disasters, rising premiums and improved underwriting performance, and raised its full-year profit outlook.
- InterContinental Hotels Group PLC (NYSE:IHG) (LON:IHG), the world’s largest provider of hotel rooms, reported a 6 percent rise in half-year operating profit to $286 million, in line with estimates, and increased the interim dividend by 31 percent.
- China Vanke Co., Ltd. (SHE:200002) , the country’s largest property developer by sales, reported a 25 percent rise in first-half net profit, as the house builder slashed prices to revitalize sales amid the market slowdown.
- Taiwanese technology manufacturing giant Hon Hai Precision Industry Co., Ltd. (TPE:2317) is reportedly in talks to acquire a bigger stake in struggling Japanese TV maker, Sharp Corporation (TYO:6753), as part of a renegotiated investment deal between the two companies.
- China Life Insurance Company Ltd. (ADR) (NYSE:LFC) (HKG:2628) (SHA:601628), the world’s largest insurer by market value, said it expects a significant decline in first-half net profit due to lower investment returns and higher impairment losses from the sluggish domestic capital markets.
- BHP Billiton Limited (ADR) (NYSE:BHP) (ASX:BHP) (LON:BLT) is in talks with Canadian mining and retail group, Harry Winston Diamond Corporation (USA) (NYSE:HWD) (TSE:HW), about a possible sale of its diamond business, the Financial Times reported.
- Dreamworks Animation Skg Inc (NASDAQ:DWA) and its Chinese joint venture partners will build a 20 billion yuan ($3.14 billion) theme park in Shanghai by 2016, as the movie giant seeks to increase its presence in the fast growing Chinese entertainment market.
- Honda Motor Co Ltd (ADR) (NYSE:HMC) (TYO:7267) ended 1.2 percent higher after reporting that its sales in China more than doubled last month.
- Chinese resources giant Hanlong Group has slashed its takeover offer for Australian miner Sundance Resources Limited (ASX:SDL) by 30 percent to 1.2 billion Australian dollars ($1.27 billion), Reuters reported.
- Struggling fashion house Esprit Holdings Limited (HKG:0330) has named Jose Manuel Martinez Gutierrez, the former group director of distribution and operations, at rival Inditex SA (MCE:ITX), as its new chief executive on Tuesday. Esprit ended 28 percent higher in Hong Kong trading.
- Japanese telecom major Nippon Telegraph & Telephone Corp (ADR) (NYSE:NTT) (TYO:9432) said group net profit for the April-June quarter increased 2 percent to 156.5 billion yen. Sales were up 2 percent to 2.57 trillion yen, while operating profit edged 1 percent higher to 352.3 billion yen.
Economic Calendar for Tuesday, August 07, 2012:
02:30 P.M. ET: Federal Reserve Chairman Ben Bernanke speaks.
03:00 P.M. ET: Consumer Credit Change (June)