Good morning all,
As night turns to day, here in Singapore, I'm kindly reminded of where I live by one of Maersk's finest container ships, ringing his horn in what can only be described as, some kind of African mating call.
Despite this, nothing can dampen the fact its Friday. And with US markets putting through a "stella" (super strong) performance, the container ship to my south full to the brim and freight rates still as high as a 70's teenager, there is a lot to be optimistic about. See picture attached.
Apart from my home country, the UK, European markets saw volumes fall considerably, in part due to All Saints Day, with the average fall around 30%.
FTSE +1.4% v.good volume: O/P: tech, financial U/P: health, utilities
CAC +1.4% v.low volume: O/P: health, tech U/P: telco, utilities
DAX +1.0% V.low volume: O/P: cons.services, cons.goods U/P: health, utilities
IBEX +0.6% v.low volume: O/P: basic mats, cons.services U/P: health, industials
The sector maps clearly share my optimism. The signal here is positive growth, with defensive names under performing in favor of consumer spending. Financial's continue to run, which is no surprise given central banks determination to ease credit markets, encouraging increased lending. I suspect the wonderful people at Banco Santander will be less likely to pass this on to my variable mortgage, increasing their margins, on higher sales.
Basic materials also strong across the board, as the Euro remains firm at the 1.2950 level.
Bond yields were little unchanged in Europe, with Spain stil yielding 5.6%, despite the recent firming of the CDS. NB the EU have recently banned naked short selling of CDS's.... finally. It begs the question, have they not read the book, the big short, or are they just slower than Joey from Friends?
The US markets were boosted by postive earnings by companies like Pfizer, not that surprising given they make Viagra...things are on the up!(sorry, couldnt help that). Despite distrupitions, investors clearly still find time to buy and sell equities, pushing volumes 1 to 12% above daily averages, and leaving equity markets closing at day highs.
SPX +1.1% avg volume: O/P: basic mats, industirals U/P: utilities, oil&gas
Interesting to note on the sector map, that basic materials are strong but oil and gas remains weak. After huricane Sandy not hitting the oil produces in south America, crude has remained unchange, despite cracking spreads in gasoline and diesel starting to rise. After looking at Siemens beautiful new 8000h fan turbine genorator, I'm thinking this is purely due to the demand for inventories on the east coast. Global demand hasnt increased that much, despite my optimism for 2013.
Data overnight saw UK house prices fall less than expected at -0.9% vs survey -1.2%. Whilst US markets also recieved a boost in both jobless claims and non-farm productivity. Jobless claims came in at 363k vs expected 370k, and productivity came in at +1.9% vs expected 1.8%. The US ISM was also strong, at 51.7 vs expected 51.0, anything above 50 indicates growth...waa hey!
Markets.
Given the strength in European and US markets overnight, today should see Asian markets continue their strong run. With basic materials outperforming overnight, Australia should see the most of the rewards, and consumer goods in Japan still feel like saying a dirty word in Church. Despite this, I actually still like the sector and believe, problems aside, they have weathered the storm well, with sales due to increase on globl demand at margins set to improve thanks to a weaker Yen.
I really want to own oil producers here. I do beleive that the creation of a banking union in the EU will support the consumer credit market, giving rise to increased borrow, and with a bit of luck, the Euro. Oil is my "postive growth" US$ hedge.
China railways and container ships are starting to look rich here. Stimulus boosted earnings in the railway sector leaves only contracts for management, which is a hugely corrupt and competitive market. Despite the Economists view that China construction plays are and will remain number one, overseas contracts will be given to EU trading partners. Now yes, we have Africa, but with current problems in North East Nigera, plus other countries struggling with bombing and up risings, this will be slow to grow.
Container rates have been strong through 2012, however, lets not forget the new capacity coming online in early 2013. Maersk, those wonderful guys that woke me up this morning, have a considerable amount of new ships being delievered, meaning as supply increases, margins will fall. I doubt new sales in 2013 will make up for the fall in rates, leaving anaylsts forward earnings models looking like a bad transexual at miss world.
Markets open at the highs, push slightly firmer around the first hour, then see profit taking...ADR flippers should do well, if they cover over the day or around the close.
Data.
08:30 Australia PPI
15:30 Thailand reserves
16:45 Italy PPI
17:00 EU PPI
20:30 US payrolls and unemployment
22:00 US factory orders, expected bounce from -5.2 last month, to +4.6% in Sept
Events.
EU competition policy
BoJ minutes
Bonds.
08:00 Austalia 5 year auction
11:00 China 3 month auction
19:10 UK 1, 3 and 6 month auction
Earnings.
Och Ziff(US), Hess(US), McGraw(US), Ralph Lauren(US), WABCO(US), Chevron(US), Alcatel-Lucent(FR), Beiersdorf(GE), RBS(UK), Piraues Bk(GR), Mitsubishi Corp(JP), ITOCHU(JP), Mitsui(JP), JAL(JP), Kubota(JP), Kirin(JP0, Starhub(SP), COSCO Sing(SG), Sing Air(SG), Daewoo ship(KR), Daelim(CH), F&N(SG)
Have a great weekend
Stoddart
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