Inflation in focus for equities

MARKET OUTLOOK

- US: Last week, US markets consolidated on concern about higher interest rate after Fed comments expressing concern about higher inflation. A series of corporate profit warnings also hurt the market.

This week the market will focus on inflation data (Friday) and the start of the earnings seasons. The auto sector should be active after Delphi filled for Chapter 11 during the weekend. Technically, the break of last week lows on the S&P 500 and Nasdaq 100 will confirm a 2 to 4% short-term decline potential.


- EUROPE: European markets consolidated in line with Wall Street. On Wednesday the European Commission will publish 3Q and 4Q GDP forecasts. Technically, European indices call for a continuation of the ST pause (up gaps to be filled on the Cac 40 and Dax) before a bounce can be considered, respectively on 4477 and 4887.

COMPANY PREVIEW

Alcoa (USD 23.04; -5.65%; AA; AA.N)

Alcoa is expected to report today 3Q/Sep EPS of $0.29 ($0.34 a year ago) on revenue of $6.6bln ($5.97bln)after market. Last month, Fitch Ratings reaffirmed the aluminium maker senior unsecured debt at "A" with a stable outlook. Higher power costs (30% of the costs of aluminium) have pressured the company in the recent months.

Apple Computer (USD 51.3; -4.31%; AAPL; AAPL.O)

Apple Computer will report tomorrow its 4Q/Sep results, the market expects EPS to jump to $0.37 from $0.14 in the same period last year driven by strong demand for its iPod products.


Safran (EUR 19.1; 6.35%; SAF; SAF.PA)

Wednesday, Safran reports its 1H results. The telecommunications and aircraft engine maker already reported 1H sales up 2.3% to E4.94bln. Year to date, the stock is up 21.8%.


ASML Holding (EUR 13.71; 0.37%; ASML; ASML.AS)

The same day, ASML Holding will deliver its 3Q results. The semiconductor equipment maker report will give indication about the current state of the semiconductor industry. EPS is seen flat from last year (E0.08) on sales down around 15% (E515m).


WH Smith (GBp 329.5; -2.37%; SMWH; SMWH.L)

The following day, WH Smith will announce its FY results. In August, the retailer of stationery and magazines said it expects to meet expectations for earnings (29.5 pence EPS expected). Morgan Stanley rated last month the stock "underweight/in-line" with a price target at 350 pence. Year to date the stock is up 5.3%.