Liams Last Post : Chaotic markets , Euro very weak , Dollar stocks should do well when markets settle.

Good Afternoon

 

Another chaotic day in the markets. The Dow Jones dipping below the 10,000 level gives an indication of the scale of the turmoil and nervousness.  The US unemployment data showed the unemployment rate falling but the absolute numbers unemployed up and significant negative revisions to the last month numbers suggests an erroneous data collection methodology an the market reacted negatively as the expectation was for a decrease in the job loss numbers.   

 

The Irish Financials throwing in weird and wonderful totally erratic performances up and down on a whim. Irish Life closed +2% after being down -4% at the opening , nearly a 10% trading range today.

 

What is for sure though is that there will be opportunities in abundance when calm returns , Many stocks have fallen very quickly to the bottom end of trading ranges and with the fundamentals still apparently improving this will prove interesting buy opportunities. Across Europe the patter is the same , I started of to look for stocks that have some performance left in them to see if there was an opportunity to construct a bear case and create some switching opportunities. There are a few of those. Ryanair is one , we have been cautious of this one and I fear being tagged a bear when the consensus ix stampeding with the bull argument however it is notable that Ryanair has such high exposure to Ireland , UK , Spain , Italy , exactly the economies where economic austerity measures are going to be felt the most in the next while so it is a legitimate question to ponder the challenge for Ryanair to grow fares and improve profits overall against the macro backdrop which is getting ever more challenging in their key markets and where they have double digit capacity additions coming on stream and higher fuel costs. The market got very bullish with their recent raised guidance ...I wonder...  have to say hand on heart that there might be a decent short trade in this one...with plenty of time to capture any special one off cash dividend before it actually gets paid...   

 

Dollar exposed stocks in Europe should do well also , The Euro is at the lowest level against the dollar since May 2005...CRH chould be one of the winners , Aryzta also and it should also benefit from the dollar and the weakness in Wheat prices.   

 

Greencore found favour today at the 1.35 level ahead of the numbers next week..... lets just say that I have been surprised that the Stock exchange never examines its share price action...it usually moves in the right direction ahead of time...and this is telling us the numbers will be strong. In the last two years the stock has perfectly anticipated both negative news as well as very good news ahead of time. Worth watching...

 

Smurfit did like I thought it would and did drop -6% at oe stage , recovered to close -3% today. I think I would like to buy smurfit at around 6.20 level.

 

Elan Tsyabri now has had 31 cases of PML recorded against it , the market is sort of taking this in its stride with the JC virus test expected to make risk assessment easier to do in the next few months.

 

In terms of research, it is quite quiet on the corporate news flow front , We trimmed our forecasts for United Drug to take account of the cuts in Drug prices in Ireland , this is well factored into market expectations though so ahead of the IMS next week , the stock rallied marginally against the trend.

 

So while equities perform nervously , the sovereign CDS spreads show the extent to which Greece and then Portuguese spreads have blown out with Spain now above Ireland . Ireland looks like it has persuaded the markets that the authorities here are serious...

 

Once again we depart wondering what the USA has in store for us this evening.

 

Have a good weekend ... 6 nations time again ... 

 

Liam

 

 

 

 

___________________________________________

Liam Boggan

　

Merrion Stockbrokers

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