Inflation fears grow among investors

MARKETS

- US: markets were under pressure last week. The August trade deficit was slightly better than expected ($59bln vs $59.5bln expected) but higher than expected September import prices (+2.3% vs +1.0% anticipated) continued to fuel anticipation for further rate hikes.

Investors remain increasingly concerned about higher inflation, disappointing 3Q & 4Q earnings and a property market bubble. Technically, US indices reached new lows and the S&P 500 could drop down to 1153 and then 1130 before a bounce can be considered. On the Nasdaq 100, the current risk is for 1485 and 1430 in extension.

- EUROPE: markets fell further in line with Wall Street. On Tuesday, the key ZEW economic sentiment indicator for October in Germany and in Europe will be released. Friday's French consumer spending will be watched anxiously as it is expected to show a month on month decline as higher oil prices hurt confidence. Technically, European indices should remain under pressure and after a quick pause could resume their down trend towards the August lows.

COMPANY PREVIEW

Citigroup (USD 45.04 ; -0.82% ; C ; C.N)

Today, Citigroup is expected to report before market 3Q/Sep EPS of $0.99 compared to $1.02 in the same period last year. Higher credit-card defaults and short-term interest rates should pressure earnings at its retail division.

Motorola (USD 20.16 ; -6.67% ; MOT ; MOT.N)

On Tuesday, Motorola should report 3Q EPS of $0.28 compared to $0.20 last year. Sales should rise 5.8% to $9.12bln, driven by demand for its mobile phones. Earlier this month it announced 1900 job cuts as it reorganise its plants.

Novartis (CHF 66 ; -0.45% ; NOVN ; NOVN.VX)

The same day, Novartis will announce its 3Q results. A new research showed the benefits of its Elidel drug in eczema patients who require an alternative to conventional steroid treatment. Oddo raised its rating on the pharmaceutical company to 'buy' from 'accumulate', the stock is up 15.5% year to date.

Akzo Nobel (EUR 36.02 ; -1.18% ; AKZA ; AKZO.AS)

On Wednesday, the drug and chemical maker Akzo Nobel reports its 3Q results. The stock was raised to 'overweight' from 'neutral' last week by JP Morgan. The company will supply its injectable contraceptive Magestron to the US Agency for International Development next year.

SAP (EUR 142.6 ; 0.83% ; SAP ; SAPG.DE)

On Thursday, SAP will announce its 3Q results. Net income is seen rising 13.4% to 330 million euros. Licence revenue will be a key data to watch (expected to rise around 13%). The stock is trading 29 times its FY earnings compared to 15 times for Oracle (I/B/E/S).