Morning,
Equity markets once again, remain lack luster, as the FED indicates that rates will remain low and asset purchases will continue as far out as 4th Quarter 2013.
European markets, which were closed when the FOMC announced rates, saw a limited rebound, after such a sharp sell off on Tuesday. Volumes, however, did leave a number of concerns, as they continue to fall.
FTSE +0.1% avg volume; O/P: tech, cons.goods U/P: telco, utilities
CAC +0.6% low volume: O/P: tech, industrials U/P: financial, telco
DAX +0.3% avg volume; O/P: tech, cons.goods U/P: utilities, cons.services
IBEX +0.6% low volume; O/P: health, tech U/P: oil&gas, telco
After some rather aggressive selling at the start of the week, yesterday saw strong inflows back into tech with names like SAP, up 4.2%. The tech sector continues to be one of the best performing this year, as demand for consumer electronics remains buoyant. I expect some window dressing into month end for tech stocks, but would use this as an opportunity to reduce, as we enter the US general election.
The financial sector, which over the last month, has been the top performing sector, is finally starting to lose steam. As interbank lending looks set to improve and governments aim to improve the credit market, investors have looked at the banks on improving revenues and margins, where low rates and reduced competition compared to 2006/7, should support the sector. This many be the case but little has actually changed, and the recent strength looks set to correct back, as the market looks for clarity from Spain and the ECB, that a soft bailout will take place, and the terms placed on it.
Data in Europe came in slightly weaker, with the German business climate of 100 vs expectations of 101.6. PMI's in Italy and for the Eurozone came through inline, whilst in the UK, the CBI was weaker with busniess optimism coming in at -12 vs the expected fall of -2.
In the US, I was expecting to see some relative strength, but I was denied this bounce as volumes eased and the market sentiment remained weak. With the S&P breaking the 50 day moving average, technical traders saw this as a signal to not just reduce holdings, but also look at taking a near term short position, as recent sector performers such as technology and financials, are starting to look rich. Despite this, finanacials was one of the better performing sectors, but as mentioned earlier, are starting to lose steam. Time to short.
S&P -0.3% avg volume; O/P: health, financials U/P: utilities, oil&gas
Data in the US saw a sharp drop in mortgage apps, down -12% vs last week, down -4.2%. Despite this data, September new home sales came in slighlty stronger at 389k vs expected 385k, however this number was over-shaddowed by the FOMC announcement at 2am Singapore time, which although rates remained at 0.25%, they did highlight expectations that asset purchase programs are to last until 4Q 2013, longer than the market was looking for. This triggered some negativity that growth is still slowing, prompting further action required by FED.
Markets.
Asia was relatively strong yesterday, given the sell off's in other regions. I expect some rather aggressive selling on the open. For the short term trades, this should provide a good opportunity to pick up stocks, particularly basic materials, oil & gas and construction materials.
We should also see the JPY firm, which we should look to be shorting into. With Europe close to a resolution for Spain, which should trigger inflows to French, Spanish and Italian debt, the Euro should continue to firm over the next 6-12 months.
Expect markets to open at the lows and trade sideways in the first hour, before trending firmer into the close.
Data.
10:00 China leading index
13:00 Singapore industrial production
15:00 Spain industrial production
16:30 HK import/export data
16:30 UK GDP
17:00 Italian retail sales
20:30 US Chicago fed
20:30 US durable goods, jobless claims
22:00 US pending home sales
23:00 US Kansas fed
Events.
15:30 Portugal weekly cabinet meeting
17:15 UK's FSA at UK parlimentary banking standards
19:00 EU's Van Rompuy meets UK's Cameron
Bonds.
11:00 China 10year auction
17:30 German 10 year auction
01:00 US 5 year auction
Earnings.
Coca-cola(US), Nobel energy(US), ITT ed(US), Sherwin-williams(US), McKesson(US), Biogen(US), Watsco(US), National oilwell(US), P&G(US), Percision castparts(US), Aetna(US), Zimmer holdings(US), Sprint nextel(US), Colgate-palmolive(US), Janus(US), ConocoPhilips(US), Freanklin Resources(US), Apple(US), Amazon(US), Coinstar(US), Chubb(US), Expedia(US), United continental(US), ABB(SW), Credit Suisse(CH), BASF(GE), Novartis(CH), Ranstad(NL), Skandiaviska Enskilda(SW), DNB(NO), Solvay(NL), Astrazeneca(UK), Sandvik(NO), Banco Santander(SP), Debenhams(UK), Shire(UK), Hitachi metals(JP, Advantest(JP), Canon(JP), CapitaMalls(SP), Mapletree Commercial(SP), Neptune orient(SP), Suntec REIT(SP), COSCO (HK), C.Unicom(HK), Korea Air(KR), Taiwan mobile(TT), Samsung Engineering(KR), Korea Zinc(KR), China oilfield services(HK), AU Ops(TT), BBMG (HK), Bank of China(HK), TSMC(TT), Maanshan Iron(HK), CSR(HK), ZTE(HK), DAtang power(HK), Holcim(IJ), Astra agro(IJ),
Stoddart
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