Morning note, data, events, bonds and earnigns 17th October 2012

Good morning,

Europe was extremely strong overnight as Spain is now open to talks about a bailout. The issue here was that the EFSF would not disclose terms attached to the funds it offered, causing concerns that heavy austerity would hurt Spain's outlook, and the parties popularity. With protests already taking place in Madrid, there was also the fear that this could spread, should the government be seen to giving in too quickly.
This news was highly expected but as you can see by the reaction, nervous investors would rather wait for clarity, than risk a potential EFSF failure. This sentiment, will see investors wishing to remain super liquid, where unwind periods are low and exposure will be targeted towards the large, higher free float companies.
Europe

UKX +1.1% good volume, O/P: tech, financial  U/P: telco, cons. services
CAC +2.4% low volume, O/P: financial, health  U/P: cons. goods, cons. services
DAX +1.6% good volume, O/P: financial, basic materials  U/P: cons. goods, telco
IBEX +3.4% low volume, O/P: financial, oil&gas  U/P: industrial, health

Data in Europe was mixed. European new car registrations came in at -10.8% for September, putting even great pressure on France, German, Spain and Italy, which all have heavy exposure to the auto industry. Consolidation within the industry has already been talked about and with current sales so low, this could speed up the process.
Italy's trade balance came in at -598m Euro, due to a large decrease in exports of mining and quarryin, and oil related products. The was, however, an increase in textiles, clothing and leather. With the Euro weak vs major currencies, Europe is looking to export its way out of current debt, we should continue to watch the export data and look for a shift in geographic manufacturing hubs. With Asia and Turkey becoming increasingly expensive, Europe could increase its strength in the sector.
UK PPI was slightly weaker and CPI inline, both numbers having little impact on the market. AS did the EU CPI at 0.7% vs expected 0.7%.
European trade balance came in at 6.0 billion vs expected 10 billion. Spain, Netherlands and the UK seeing the biggest fall in trade not just MoM but also over 2 months (July and August).
US markets opened at the lows and trended firmer for the first half, before trading sideways in a tight range. Strong earnings from Goldmans, Coca Cola, J&J and Mattel helping support the macro data.
SPX +1.0% avg volume, O/P: basic materials, tech  U/P: utilities, telco
Interesting to note that growth sectors were strong, whilst the more defensive were the underperformers yesterday. We also see the financial sector slowing after such a strong run over the last month. With Libor claims hanging over them, we could see increased provisions putting pressure again on balance sheets.
US data saw CPI inline at 0.6% vs expected 0.5%, whilst ex food and energy was flat. Industrial production came in at 0.4% vs expected 0.2%, with utilisation unchanged in September at 78.3%.
The NAHB housing market index came in as expected at 41.

Markets.
Australia currently trading just under 1% firmer as sectors follow the US with basic materials outperforming. Expect inflows to continue but with inventory levels so high, its hard to see margins improving. A number of stories came out about investors now expecting increased stimulus in China under the new regime. This is helping boost the commodity space, as is the weaker US$, however, without clear information on how they plan to do this, it feels a little premature. I am looking to short into this move.
Equity markets trend firm in the first hour/session but see profit taking later in the day.

Data.
08.30 Singapore exports
14:00 Japan machine tool orders
15:30 Thailand interest rates
16:30 UK BoE minutes, jobless claims, earnings
17:00 EU construction output
18:00 German economic forecasts
20:30 US housing starts and building permits

Events.
15:00 Swiss government meeting
Volcker testifies at UK parliment

Bonds.
10:00 China 1 year auction
11:35 Japan 1 year auction
17:30 German 2 year auction
17:30 Portugal 3, 6 and 12 month auction

Earnings.
Halliburton(US), US Bancorp(US), Abott Lab(US), Blackrock(US), Stanley Black and decker(US), BONY(US), Knight Cap(US), Pepsi(US), BoAML(US), AMEx(US), eBay(US), Crown(US), ASML(NL), Yaskawa Elec(JP), Far East Global(HK), AREIT(SG), Keppel land(SG), HCL(IN), E-mart(SK), Public Bank(ML), VTB(RU), Turk Tele(TU)

Stoddart