Good morning,
With US markets closed, and disruptions across the east coast, equity volumes fall globally. In Europe, average volumes fell by around 40% greater than that of Asia which fell around 25%
FTSE -0.7% v.low volume: O/P; tech, industrials U/P; O&G, basic materials
CAC -0.8% v.low volume: O/P; cons.goods, financials U/P; utilities, telco
DAX -0.4% v.low volume: O/P; tech, basic mat U/P; cons.services, financials
IBEX -0.6% v.low volume: O/P; health, tech U/P; telo, financials
Mixed signals from the sector maps, however, it does feel like there is a more prominent defensive theme. Italy saw the biggest fall in the region, with its main index off 1.5%, after Berlusconi threatens to bring down Monti, due to a recent court case that could see him do 2 years in prison. Once again, we see that instinct of self-survival threaten the Euro, which could cause some heavy setbacks.
With the progress made so far, including a banking union due in January, Monti has held his own against major powers. After tough budget cuts, clamping down on tax evasion and trying to reduce corruption, Monti has also managed to protect many of the state assets, which were long expected to be put up for sale to help with their debt burden.
Where does this leave us? Well, once again, Berlusconi will no doubt be given a "get out of jail free card", which he shall use immediately, unless of course the Italian prisons have "bunga-bunga Tuesdays", Dom Perignon and unlimited conjugal visits.
Under pressure from other European states, Monti will be forced into this position, which should then allow European leaders to concentrate on bailout terms and ways to stimulate growth.
Another major story overnight, was the arrest of a Greek Journalist who published a list of tax evaders. This in itself is a relatively minor event, however, 1. the documents obtained by this reporter, had infact passed the hands of Christine Lagarde and Greek finance minister; 2. Give the upset caused by austerity, the pressure is set to increase.
What is the impact? Despite freedom of the press, this could be dealt with quickly, unlike that of wikileaks. More than likely, is this could be the push needed, with public backing, to take on tax evaders. Lagarde should see this as an opportunity; support the clamp down on tax evasion.
This could, however, trigger a witch hunt, putting further pressure to restrict the use of offshore bank accounts. Already we are seeing headline of Chinese banks moving to Luxembourg to avoid UK regulation. This kind of disruption, could only further alienate EU members.
The answer is, for now, lets deal with the problem at hand. Like a banker with a new telephone, no one likes sudden change.
Markets.
With the US off today, expect volumes to continue to miss recent averages. I am also expecting some negativity which will see indices fall once more.
Honda was a big miss yesterday, Paypal job cuts highlight weak consumer spending whilst Apple management shift, shows just how sales dependent even a great giant can be.
Further noise on Libor could hit HSBC, which has been an extremely strong performer of late, as has the sector globally.
Basic materials look set to fall, again, on growth concerns. Jiangxi Copper(358) saw net income miss estimates by -13%, which given the fall in copper prices was not a surprising as that figure suggests. With the sector having a very lack luster bounce, any sell off does leave stocks looking cheap, which given governments efforts to support growth, I see as a buying opportunity. Spreads between Copper and Jiangxi Coppers share price are now at the lows, leaving the company looking cheap. Yes inventories are high, yes demand and outlook currently look weak, BUT, conditions are improving.
Oil should also see outflows, as crude oil falls. This looks like a short term move in the physical, due to Hurricane Sandy. There are still many drivers that could see oil increase back to the 95 level. BUY
Data.
07:30 Japan jobless rate
12:00 Japan vehicle production
12:30 India cash rate
16:00 Spain CPI/GDP
21:00 US Case Shiller home prices
Spain budget balance
Events.
13:30 India RBI meeting
16:00 Monti speaks at World economic forum
19:00 Portugal reports retail sales//industrial production
Japan BOJ policy meeting
Bonds.
11:00 Thai 1,3, 6 and 12 month auction
11:30 HK 1, 3 and 6 month auction
18:00 Italian 5, 10 year auction
Earnings.
Archer Daniels Midland(US), Johnson controls(US), Ford(US), DaVita(US), Avis(US), Dreamworks(US), Onyx Pharma(US), Ashland(US), US Steel(US), Valero Energy(US), Deutsche Bank(GE), Hugo Boss(GE), UBS(SF), Geberit(SF), Danske Bank(NO), Erste Bank(VI), Bayer(GE), ENI(IT), MAN(SW), BP(UK), Imperial Tobaco(UK), Ferrovial(SP), Tom Tom(NL), Fiat(IT), Seagate tech(UK), Mitsubishi motor(JP, Kobe steel(JP), Tokyo gas(JP, West Japan rail(JP), Hitachi(JP), Komatsu(JP), Japan tobaco(JP), Asahi group(JP), Ricoh(JP), Fuji heavy(JP), SIA Eng(SG), Lai Sun dev(HK), Samsung SDI(KR), KEPCO(KR), Hyundai Marine and fire(KR), Sichuan ecpress(HK), Metallurgical corp(HK), Ping An(China), China rail construction(CH), Mega fin(TT), BoCom(CH), SAIC (CH), C.Minsheng(CH), CSCL(CH), China Rail(CH), COSCO(CH), CCCC(CH), Air China(CH), Guangzhou Auto(CH), C.Shipping development(CH), Huadian power(CH), Dalian port(CH), China Eastern(CH), Quanta comp(TT), Zoomlion(CH), Tsingtao(CH), ICBC(CH), Compal(TT), petrochina(CH), CITIC sec(CH), Asustek(TT), Hon Hai(TT), Foxconn tech(HK), Shanghai Elec(CH), Chalco(CH), Taiwan cement(TT), satyam(IN), Dr Ready's (IN)
Stoddart
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