Morning note, events, data and earnings 26th September 2012

Morning,
Volumes are starting to fade in Europe, with an average of 25% reduction. Feels like the run is losing steam as investors look to data to see improvements.

European equity markets up between 0.16 and 0.5% despite the Euro falling to 1.29 against the greenback.
This correlation will correct, giving either a boost to the Euro, or equity markets give back some of the recent gains; I suspect the latter. 

DAX: Outperformers: Utilities, basic materials and industrials
     Underperformers: Telecom, consumer goods and healthcare

CAC: Outperformers: Consumer goods, telecoms and financials
     Underperformers: Utilities, basic materials and O&G

IBEX: Outperformers:Consumer services, utilities and financials
      Underperformers: Healthcare, industrials and telecoms

UKX: Outperformers: Tech, consumer services and utilities
     Underperformers: Basic materials, industrials and financials

European data saw Italian wages grow, 0.1% MoM or 1.6% YoY. Wage growth should be taken as positive, however, its job creation we need to start seeing coming through in southern Europe.... plus if people are working, they have less time to protest.

European bond yields continued to see spreads between Spain/Italy tighten against France/Germany. Yields of the southern European states continue to fall, which against a falling Euro, suggests this is region re-balancing rather than overseas inflows.
10yr yields: Spain 5.69%, Italy 5.08%, France 2.27%, Germany 1.58%, UK 1.82%

US markets saw volumes remain stable, dropping just 3% on the S&P, despite markets falling 1%. The nasdaq underperforming, which given its outperformance over the last quarter, is not surprising. Feels like risk off again.

S&P: Outperformers: Healthcare, utilities and telcoms
     Underperformers: Basic materials, technology and financials

Data out in the US saw some strong positive data. Richmond fed increased 4 vs expected -5, however house prices came in slightly lower at +0.2% vs expected +0.6%. Given the purchasing of mortgage debt by the US government, we could see the competition increase in the loan space, encouraging both transactions and prices to increase. 

Today. Japan and Korea both weaker on the open. Tension over China and Japan sees the Nikkei off 1.7% whilst Korea down 1%. Despite basic materials underperforming in the UK, Australia is holding up well, down just 0.5%. Utilities and industrials outperforming there.

I expect HK to come off sharply after the recent strength in the HSI. Old support levels remain at 20400 and 20100 for the HSI, 9650 and 9550 for the HSCEI.

I continue to like some of the short squeeze names as investors reduce risk and take cash off the table.
BUY DF(489), Hengdeli(3389), Maanshan(323), Angang(347), Chalco(2600)
SHORTS SHK(16), China Banks

In Japan, with the re-balances due, I am looking to BUY Japan Airlines(9201 JT) at these levels... I've been called mental, given the current dispute over the islands and China's new anti-Japan uprising. I am not falling in love with an airline, just pure short term play.

Events.17:00 China 20 year auction
17:35, German 10 year auction
17:00 Indonesian 5 year auction
EU's Van Rompuy speaks to the UN general assembly

Data.14:45 France consumer confidence
16:00 Italian retail sales
19:00 US MBA mortgage apps
20:00 German CPI
22:00 US New home sales
00:00 France Jobs

Earnings:
Providence Res(ID), Esprit(330), Nitori(JP), New World Dev(HK), Boshiwa(HK), Polo Res(UK), CD Projekt red(PW), Echo Inv(PW)