Market Outlook October 5th - October 9th

Market Outlook

- US : The S&P500 dropped 1.8% last week driven by strong WoW losses in the Auto (-5.87%), Banks (-4.86%) and Real Estate (-4.3%) sectors. The Food & Staples Retail and Food, Beverage. & Tobacco sectors were the only sectors that posted a WoW gain. Technically, the break of 1032 level on the S&P 500 has triggered a consolidation. The risk is now a decline to 1000 and 990. The VIX bounced to its highest level since early September, reinforcing the downside risk. The 3Q earnings season will kick off on Wednesday with Alcoa's results therefore there should be plenty of action from that date.

- EUROPE : In Europe, the main indices have started a consolidation. Shares in Technology, Banks and Basic Resources led the decline. The insurance sector was the only sector to show a weekly gain (+1.1%). From a technical point of view, the STOXX 600 has broken its 238/236 support area and this should lead the index down to 230/225. Only a rise above 245/248 would reinstate a positive momentum for the European market.

  October 5th - October 9th

 Market Round up

 Foreign Exchange

Euro/dollar : The pair has struck against its MT bullish channel upper boundary but remains on the upside. LONG above 1.41 towards 1.4950 & 1.5250.

Dollar/yen : The pair is on the downside and is approaching its bearish channel lower boundary, the RSI is badly directed. SHORT @ 94.70 with 88.50 or even 87 in sight.

Company preview

 Tesco (GBp 390 ; 0.75% ; TSCO ; TSCO.L)
Tuesday, Tesco plc, the UK food retailer is expected to deliver 1H pre-tax profit of £1.3bln compared to £1.43bln a year ago on sales of £28.3bln vs £25.6bln. Recently the FT reported that the Co was in talks about selling a property portfolio to a new investment company. Last week, the Co was rated "sell" at Citigroup. Technically, the stock still remains positively oriented above a MT support at 378p. Hence, a further bounce can be expected to 402 (strong resistance) and 420 in extension.

 Yum! Brands (USD 33.15 ; 2% ; YUM ; YUM.N)
On the same day in the US, Yum! Brands, the quick-service restaurant chains owner, may release 3Q EPS of $0.58 compared with $0.57 a year ago on sales of $2.78bln vs $2.83bln. Last week the Co increased its quarterly dividend by 11% to $0.21 and authorized a $300m share repurchase plan. From a technical point of view, the Co is currently testing its medium-term support around $32.5. Below $34.5, the risk is now a slide below this level, which should trigger a downside acceleration towards $31.5 and even $30.

 Alcoa (USD 12.82 ; -1.99% ; AA ; AA.N)
On Wednesday, Alcoa could post a 3Q LPS of $0.11 compared to a profit of $0.37 a share last year. Last week, the Co's CEO Klaus Kleinfeld forecast the Co would turn cash flow positive by the end of this year. Furthermore, the Co was upgraded to "buy" from "hold" at Deutsche Bank on higher metal prices. From a technical view, the stock is still on the upside, backed by an ascending trend line and a rising 50d moving average. Above $12.5, further advance may occur to $14 and 14.84 in the forthcoming weeks.

 Costco Wholesale (USD 56.47 ; 0.34% ; COST ; COST.O)
The same day, Costco Wholesale, the largest US warehouse club, is expected to announce 4Q EPS of $0.76 compared with $0.96 a year earlier on sales of $22.4bln vs $23.1bln. Earlier, the Co's price target was raised to $55 from $50 at Goldman Sachs with a "neutral" rating unchanged. Technically, the stock consolidated last week but remains above a support base at $55, hence there may be further upside in sight to $57.5 and $58.8.

 Pepsico (USD 60.9 ; 3.78% ; PEP ; PEP.N)
On Thursday, Pepsico may report 3Q EPS of appx. $1, almost in line with a year earlier. Sales could reach $11.25bln, unchanged YoY. Early this month, Chairman and CEO Indra Nooyi announced higher advertising spending next year and new Gatorade products to increase consumption. Technically, the stock broke above its former resistance at $60 last Friday. In which case, a bullish acceleration is highly expected towards $63 and $65. Only a drop below $58.4 would call for a consolidation.

Selection of those events which may affect the stock prices of international Large Caps

Corporate Calendar October 5th - October 9th

Economic Calendar (CET) October 5th - October 9th