Fed rate cut boosts stocks

MARKET OUTLOOK

- US: US markets jumped on Friday after the Fed lowered its discount rate cut to 5.75%, while its fund rate was left unchanged at 5.25%. The Fed's statement shifted from a concern about inflation to a concern about economic growth. Nevertheless, all sectors were under pressure last week, except for insurance and banks which managed to outperform the market. From a technical point of view, Friday's bounce is raising the possibility of resumption of upward movement as three down waves are now complete on all major US indexes.

- EUROPE: After a weak start European markets recovered on Friday due to the Fed's discount rate cut. Shares from food and beverages and telecommunications were the best performers, while all other sectors lost ground, especially stocks from financial services, industrial goods and services, basic resources and banks. Technically, Friday's strong rebound might continue as all European indexes are posting bullish divergences on their daily indicators.

COMPANY PREVIEW

Sacyr Vallehermoso (EUR 30 ; -6.34% ; SYV ; SVO.MC)

On Tuesday, Sacyr Vallehermoso is expected to report H1 net income of E410m (E160m last year) on revenues of E2.65bn (E2.18bn). On July 24, AMF announced that Sacyr Vallehermoso doesn't have to raise its bid for Eiffage until a court decides on its appeal against a ruling that it broke market rules. The Co has received the support of the Spanish government in its takeover offer for the French Co (ABC).

Target (USD 61.18 ; -1.89% ; TGT ; TGT.N)

On the same day, in the US, Target is scheduled to report Q2 EPS of $0.79 ($0.70 a year ago) on sales of $14.74bn ($13.34bn). Last week, the Co reported that July net retail sales increased 10.8% month-on-month to $4.36bn, while comparable store sales rose 6.1% for the month. Separately, Target opened 42 new stores at the end of July.

BHP Billiton (GBp 1224 ; -2.93% ; BLT ; BLT.L)

BHP Billiton may release FY results on Wednesday. FY net income seen at $13.48bn ($10.45bn last year). BHP Billiton will plan a programme for further drilling at a gas find off the northwest coast over the next few months. At the end of July the world's biggest mining company reported Q2 thermal coal output growth had almost stalled as production in South Africa slowed and a storm in Australia cut shipments. The group's production rose 2% to 22.3m metric tons for the period.

Gap (USD 17.27 ; 3.1% ; GPS ; GPS.N)

Thursday, Gap should post Q2 EPS of $0.16 ($0.15 a year ago) on sales of $3.7bn ($3.71bn). Last week, the Co said it cut 1,100 positions in the most recent period as it tries to reduce expenses. For the year, Gap has cut a total of 2,000 jobs. The Co separately announced August net sales of $1.05bn, or up 1% when compared to net sales of July.

HJ Heinz (USD 45.19 ; 7.19% ; HNZ ; HNZ.N)

Finally, HJ Heinz should deliver Q1 EPS of $0.55 ($0.58 a year ago) on sales of $2.24bn ($2.05bn). Last week the Co announced its expectations for Q1 earnings. HJ Heinz said that profit is expected to beat analysts' estimations and reach $0.62-$0.63 with annual profit 'near the top' of its prediction of $2.54-$2.60 a share.