Morning note, data, events, bonds and earnings 29th October 2012

Good morning,

As hurricane Sandy heads up the east coast, its path includes North Carolina, Virginia, Maryland, New Jersey, Pennsylvania, New York and Connecticut, it seems that storms this year could have a greater impact on the more northern states.
Interesting to note, that many geologists have been pushing this theory, as cold winds from the north become warmer due to global warming, and wind patterns around the world shift. Is this a one off?
Despite the relative strength in Europe on Friday, volumes dropped by an average of 20%, which always makes me nervous. The US was slightly stronger after better than expected growth, as GDP came in at 2.0 vs expected 1.8% QoQ. Although personal consumption came in slightly easier, at 2.0 vs expected 2.1, markets liked the data, and with Romney attacking Obama on growth, this number should help his campaign, especially, given the headlines over the weekend.
As the US presidential election ends the final phase, and hurricane Sandy batters the east coast, markets should and will remain nervous. China government spending was more than expected in the first 9 months and yet, revenue gains moderated. Fiscal revenue rose 10.9% vs 29.5% for the same period in 2011. With pressure on the Chinese government to further support the domestic growth, China looks like it is suffering at a great rate than expected due to falling global trade. This will cause some concerns on China's ability to meet growth estimates.

Markets.
With such a strong run in Asia of late, markets look set to give back some of these gains. I suspect this will be after month end "window dressing", as funds look set to lock in gains as we approach holiday season, which is well known for easing volumes, due to lack of interest/commitment from fund managers to risk the years performance, going into the final furlong.
With hurricane Sandy already causing contingency plans with exchanges, offices and power stations; expect some short selling in related companies. Insurance companies will also come under pressure as there are very few that dont have exposure to the east coast. Despite the news, oil remains at 2 month lows, which looks cheap, given the GDP figure and possible supply issues not just in the US but also, Nigeria and Iran.
I expect rotation out of property, which has seen very strong returns in the last 6 months, as global interest rates look set to remain low, whilst dividend yields of companies such as Suntec,, Capitamalls, Wheelock and Henderson, are around 2-6%. Investors will choose to lock in capital gains, rather than hold the yield.
Other areas, like IPP should also see outflows, however, with China winter here and factories busy with orders pre CNY, this should give us an opportunity to accumulate.
Banks have also seen inflows as governments globally look to ease credit markets, however, there has been little noise on bad/non-performing loans. Ow how quick we are to forget. Australian property prices are still looking toppy, watch for a slow down and possible impact on the financial sector.
Markets open unchanged and trend slightly easier today. Expect lighter volumes and currencies to also give back some of the recent gains. This is a good time to short the JPY vs Euro.

Data.
07:50 Japan retail sales
08:00 UK hometrack housing survey
15:00 German CPI
16:00 Spain retail sales
17:30 UK net lending, money supply
20:30 US personal income/spending
22:30 US Dallas fed
Also due, China leading index

Events.
19:00 Spain's Rajoy meets Italy's Monti
IMF meet in Egypt to discuss loan

Bonds.
12:30 Taiwan 6 month and 20 year auction
13:30 Philippines 3, 6 and 12 month auction
18:00 Italian 6 month auction
18:35 German 12 month auction
21:00 France 3, 6 and 12 month auction
23:00 US 3 and 6 month auction

Earnings.
Burger King(US), Gardner Denver(US), Harris Corp(US), Linde(GE), TNT Express(NL), Assa Abloy(SW), Deutsche Boerse(GE), Misubishi Tanabe Pharma(JP), Honda(JP), Renesas elec(JP), Keyence(JP), Aquarius Plat(AU), Hankook Tire(KR), SK Holdings(KR), Hyundai development(KR), China tel(CH), New China Life(CH), Formosa plastic(TW), China Citic(CH), AU ops(TT), Manila elec(PH), Poly real estate(CH), Sany heavy(CH), Sinopec shanghai chem(CH), Jiangxi copper(CH), Shanghai Pharma(CH), BYD(CH), Baoshan I&S(CH), CBM(CH), China Steel(TW), First tractor(IJ), Uni-president(TW), Bakrie tel(IJ), Bharat heavy(IN), Colgate-palmolive(IN), Baidu(CH), Budimex(PW)

Stoddart