Morning note, data, events, bonds and earnings 23rd October 2012

Good morning,

Its another dark but warm Tuesday morning on the shores of Singapore. The navy and coast guards warm their boats along the little stretch next to Ports Authority of Singapore's vast container dock, and yet, although this is nothing new, it has a feeling of a great machine firing up for the day ahead.
Given the number of ships docking here lately, including 2 rather massive cruise ships last, it will be a busy day.

Equity markets over night seemed lacking in support. European markets opened easier, but soon moved into positive territory in the first half of the session. This came to end in the later stages of the session, as the US opened, leaving Europe trending easier after lunch and closing at day lows.
Volumes fell by an average of 20%, with little increase going into the close, which is worrying, given I would expect some short covering with this kind of price action.
Despite weakness in equity markets, the Euro rallied against the greenback, whilst European debt markets remained relatively unchanged.

FTSE -0.2% low volume; O/P: cons.goods, financial  U/P: industrial, O&G
CAC -0.6% low volume; O/P: cons.services, financial  U/P: cons.goods, basic mat
DAX -0.7% low volume; O/P: financial, industrial  U/P: tech, cons.services
IBEX -0.5% low volume; O/P: O&G, tech  U/P: telco, basic materials

Despite the market closing lower and volumes easing, the sector performance shows investors looking at higher growth sectors. Financials continue their run, as the outlook for credit growth improves, due to the new banking union, expected on 1st Jan.

US markets, as mentioned earlier, opened unchanged but trended lower throughout the session, before seeing a short bounce into the close, leaving them flat on the day. Yesterdays earnings came in relatively strong, with VF Corp and Caterpillar slightly beating and Peabody Energy beating estimates by 49%. Then after the close Yahoo beat estimates by 37% and Texas Inst by 13%.
All US indices seemed to mirror the US$ index, which given its aims to export its way out of its current debt mountain, the US$ weakness will have an increasing impact on demand for its products.

S&P flat avg volume; O/P: tech, basic materials  U/P: O&G, telco

Once again tech outperforming, in particular hardware, with Apple up 4% trailed by EMC and HP, up +1.9% and +1.6% respectively. With crude oil selling down below the $90 level, it is now at major supports and with the Euro maintaining its strength, I expect the $89 mark to hold as inflows to hedge against the US$ increase.

Worth noting that the S&P actually broke the 200 day moving average last night, which on average volumes will have the technical analysis camp, pushing for a short position. With the US elections coming up, volumes should start easing, so expect a pick up in volatility on both and index and single stock level. Near term short looks to be the position, however, after the election sentiment should be improved. I would not want to be short for long, however, nothing in the fundamentals has changed.
Data over night saw a huge fall in Spanish mortgages on houses, down -28.5%, which to be honest, no one was expecting this number to be good. 2011 Eurozone debt to GDP number came in at 87.3%, which although high, is little changed from the previous year, plus its for 2011!

Markets.HK closed today. Expect other markets to show relative weakness on the open, in line with that of the US. Finanacial stocks seem to want to outperform, I'm looking to short into this strength.
Oil stocks in HK/China still look rich. Longer term play I like as a US$ hedge and improving GDP however, in the near term(3 months) e should see them give back some of the recent gains.
Insurance seems to be a hot sector and will continue, as earnings growth is maintained. Optimism on the A'share market should also support its investments domestically. BUY
Australia, I still want to short the banks as housing markets look increasingly toppy. We could see a push for greater previsions, so watch the transaction data for falling sales.
Markets to open at the lows early session, then trend slightly firmer as the US$ continues to weaken, before leveling off and trading sideways. Expect a drop in volumes.

Data.13:00 Japan small business sentiment
13:00 Singapore CPI
14:45 France production outlook
15:30 Netherlands consumer spending
19:30 Turkey industrial confidence/capacity utilization
22:00 Eurozone confidence
22:00 US Richmond FED

Events.EU parliament Mersch ECB nomination
Spain short sell ban ends
16:00 WTO dispute settlement body meets

Bonds.13:30 Philippines 7yr auction
16:30 Spain 3, 6 month auction
17:00 Indonesian 1, 6, 10, 20 year auction
23:30 US 4 week auction

Earnings.Virgin Media(US), Lexmark(US), RadioShack(US), AK Steel(US), United Tech(US), Whirlpool(US), Coach(US), Harley-Davidson(US), Xerox(US), 3M(US), UPS(US), Aflac(US), Polycom(US), Hanesbrands(US), Illumina(US), Flagstar Bancorp(US), Amgen(US), Norfolk Southern(US), Facebook(US), KPN(NL), Norsk Hydro(NO), Swedbank(US), Mobistar(SP), Schindler(GE), Enagas(SP), Whitbread(UK), ARM(UK), Kone(FI), Stora Enso(FI), STMicro(NL), OSIM(SP)

Stoddart