Good Morning,
Firstly, a big hats off to the rescue services in HK, who risk their lives in very aggressive under-currents of the HK habour, and saved so many.
Equity markets saw a strong rebound overnight, on relatively stable volumes.
European markets moved aggressively higher as the Euro rallies back above the 1.2940 level, now trading slightly easier at 1.2895.
France:+2.4% avg volume, o/perform Health,Utilities; u/perform O&G,Con.Service
Spain: +1% volume +32%, o/perform health,basic mat; u/perform O&G,Telco
Germany:+1.5% volume -22%, o/perform basic mat,financial; u/perform telco,tech
UK: +1.4% avg volume, o/perform financial,basic mat; u/perform teclo,heath
Defensive outperforming as investors increase weightings in Europe, but with the correct level of caution. The financial sector seeing inflows as the European debt situation improves. Spain got a strong boost as stress test showed banks needed considerably less than the Eur 100b set aside by the EFSF.
With Spanish 10 year bonds trading at 5.83%, its not the lowest they have traded recently, but possible delays in Spain taking funds from the ECB have seen CDS's increase of late, expect yields to fall as Spain negotiates terms for the use of the EFSF.
With the US$ weakening, basic materials are seeing inflows. With prices making or trading near multi year lows, inflows are 1. bottom fishing 2. US$ expectations helping support prices. I doubt, with current inventory levels, that anyone can expect demand driven price increases for the next 6/12 months.
US markets traded small up, however, tech under pressure as heavy weight Apple continues to ease. Given were is has come from, and the hype, I would still be happy to short this name.
S&P: +0.3% avg volume, o/perform health, cons.goods; u/perform utilities,telco
NASDAX flat, volumes -5%
US markets followed Europe with demand for defensive names. Factory orders data last night showed orders growing (a number over 50), which is a very strong performance, but we are going into a high demand period. That said, the market will be more optimistic with future data. Sentiment right now is "wait and see" if the data improves ahead of stimulus working its way through. After being burnt before, I still little interest from interestors in rushing to get long growth.
Bernanke plays to sentiment by highlighting that low rates until 2Q 2015 does not mean low growth... this will certainly be true, and given comments, I expect rates will not be considered until will see GDP above 3%, the last thing they want is to spook the market, enjoying high to hyper inflation over a deflationary enviroment.
Markets.
Korea, Australia and Japan all trading firmer, but the do feel like they are running out of steam... in line with the Euro.
I expect Europe to give up some of yesterdays gains on the open so Asia should start to trend easier from current levels.
Defensive will continue to see inflows, basic materials also, as short sellers are quick to cover.
Data:09:30 Japan earnings
12:30 Australia RBA rate announcement, expect no change but talks of possible rate cuts if the market continues to ease. Limited inflationary pressure currently.
14:00 UK house prices
14:30 RBA commodity price index
15:00 Spain unemployment, big jump expected to 57k MoM, but upside surprise last time round
16:30 UK PMI construction
17:00 EU PMI
21:45 US ISM New York
Bonds.10:30 S.Korea 3yr auction
11:00 Tahi 1/3/6/12 month auction
17:30 UK 10yr auction
23:30 US 4 week auction
Earnings.Wolsely(UK), Mosaic(US), Mechel(RU), Xyratex(US), Bonduelle(FR), St Ives(UK), HALS Development(RU), Tatneft(RU)
All times British Summer Time(BST) +7 hours
Stoddart
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