Morning note, data, events, bonds and earnings 19th October 2012

Good morning,

After such a strong bounce on Wednesday, equity markets traded flat to down overnight, however, all put through good volumes.
Spain's bond auction saw the nation increase borrowing more than expected. This had the opposite effect and 10yr yields fell to new lows of 5.3%.
European equity markets saw German and France both stay in positive territory, but both lagged on Wednesday and were playing catch up. Strong earnings from Bankinter and Nokia(!) helped boost the market, as did investors increasing risk, with sectors such as basic mterials and industrials outperforming. Financials continued to hold up we with DB closing at day highs, up over 40% since July!!

FTSE +0.2% good volume; O/P: basic materials, telco U/P: cons.goods, tech
CAC +0.2% v.good volume; O/P: tech, health  U/P: cons.goods, cons.services
DAX +0.6% v.good volume; O/P: cons.services, industrial  U/P: utilities, telco
IBEX -0.3% v.good volume: O/P: tech, basic mat  U/P: industrial, financial

Data yesterday saw Spain's trade balance com in higher than expected, -3145.1m vs expected -2500m. With the aim of seeing Spain reduce its debs by increase exports, we wan to see this number improving to a positive.
UK retail ex fuel sales came in strong at +0.6% vs expected +0.3%, lets hope we see this number continue to improve as UK retailers have been struggling for some time as discretionary spending remains low.
In the US as string of strong earnings from Capital One, SanDisc, Verizon, Keycorp, PPG ind and Morgan Stanley help support equity markets. Google missed its estimated earnings by 15% leaving tech stocks down and the Nasdaq -1%. We have been use to seeing tech outperform over teh last 6 months, its now time to rotate out back into other sectors such as industrials.

S&P -0.2% good volume; O/P: telco, utilities  U/P: tech, cons.goods

Sector performanc ehere indicates a more risk off approach, however, basic materials was the 3rd best performing sector, highlighting negativity towards growth is starting to ease and investors expect GDP to start improving.
US data overnight saw jobless claims increase at a fast rate than expected to 388k vs prior month 339k. The market was looking for 365k. With the elections coming up, jobs are a major issues and I think Obama could really have done with that coming out better.
But this data was soon overshadowed by the Phily Fed, which came in at 5.7 vs expected 1.0. Whilst the headline looks strong, we did see the employment index and new orders drop, leaving this number looking seasonal. We did, however, see a small increase in inventories and prices paid, but we need to see this increase further and encourage jobs growth.

Markets.
Equity markets today look set to give up some of the recent gains. I still continue to like the consumer electronics names in Japan, with so much negativity on the sector, we should see a short squeeze, added to th e weaker yen supporting overseas sales.
Basic materials should continue to run, although coal will see outflows due to is recent performance, steel and cements seem to be to hot spot for those flows to head into.
I still want to short financials due to the HUGE run they have had. Yes margins are improving as are deal flows but with the overhang of the Libor claims, I want to short HSBC. Australian banks will also struggle with a rather toppy housing market, and minimal previsions.
I expect markets to open flat for the first hour and trend easier to the close.

Data.
12:30 Japan all industry activity
13:00 Japan leading index
14:00 Germn Producer prices
15:30 Thai reserves
16:00 EU current a/c
16:00 Italian industrial orders
16:30 UK public sector net borrowing
22:00 US existing home sales
also due, China FDI

Events.
16:00 EU leaders conclude summit
Portugal's Coelho attends EU council meeting

Bonds.
18:00 UK 1, 3 and 6 month auction

Earnings.
Schlumberger(US), GE(US), Honeywell(US), McDonalds(US), Shaw grp(US), Ziggo(NL), Elisa(FI), Alpha bank(GR), Capitamall(SG), China State construction(CH), Hana fin(TT), LG Dis(KR), Kumho pet(KR), LG Chem(KR), Bursa Malaysia(MK), Powerchip(TT), DiGi(MK), Bk of Moscow(RU), Turkcell(TU), Bank Forum(RU), Philip morris(CZ)

Happy friday
Stoddart