Morning note, data, events, bonds and earnings 3rd October 2012

Good morning

I start the morning run down on a sad note. ING closed the last of the old Baring's equity business yesterday. It is certainly the end of an era.

Markets overnight saw volumes ease as investor sentiment weakens, despite stronger New York ISM and Eurozone PMI.

In bonds markets, we saw Spanish yields continue to fall, now at 5.60% and Italy looking to break the 5% level. These are still running after the Spanish bank stress test showed the 100m Euro set aside by the EFSF is enough to cover its current short fall. Spain will take the capital injection, it has to. But there could be some delay over terms. The ECB will move quickly to ease these fears.  

Equity markets again saw defensives outperform. The recent run in basic materials came to an end, despite the Euro holding above 1.29 against the green back. Again, this is in keeping with an increasing equity exposure, but with a defensive stance.

I would like to turn your attention to a news story out of Nigeria. Late last night, tensions started to raise in the north east, where extremists(suspected to come from Niger), started attacking a local town. This might seem far way from most of us over the world, but the impact quite certainly escalate. The group, called Boko Haram, have been attacking communication masts also, which is strange, given many like to get the word out. This is picking up pace and could impact business in not just Nigeria, but also Africa.

Current oil reserves are estimated at between 16-22 billion barrels, with production levels of 2.4m per day targeted by the government. A large concentration of that coming from Niger delta. Given these possible threats, and the US$ weakening, I would be looking to reduce exposure to oil companies in the region, and long crude at these levels.

Markets.

Asian markets mixed as markets such as HK and India re-open. Japan sold off early open, but has since recovered and is trading up on the day. I was a little keen yesterday, wanting to buy the AU$ after the RBA cut rates 25bps, its now trading at 1.023 and I still want to buy it. 

Outperforming sectors are defensives such as utilities. The financial sector is looking extremely rich here with NAB not far off a 52week high. I would be looking to short here, as the over supply of basic materials will see earnings in Australia slow, and the housing sales stagnate.

Data   (BST+7hours)

15:00 Turkey CPI, PPI

15:15 Spain PMI

15:45 Italy PMI

15:50 France PMI

15:55 German PMI

16:00 EU PMI

16:30 UK PMI

17:00 Eurozone retail sales

20:15 ADP employment change

22:00 US ISM

Events - WTO council meeting

Bonds

11:35 Japan 3 month auction

17:30 India 3+12 month auction

Earnings

Tecso(UK), Monsanto(US), Sportingbet(UK), Family Dollar Stores(US), OCZ Tech(US), Centrotherm Photovoltaics(GE), Sareum(UK), Gold Oil(UK), Gemfields(UK), Avanti Comm(UK), Lawson(JP), Sollers(RU), RiTe Uglihevik(RU)

Stoddart