Morning note, data, events, bonds and earnings 14th November 2012

Good morning,

Equity markets mixed overnight. Strong volumes and rebounds in Europe were overshadowed by a weaker US market.

As Greece avoids default, equity markets receive a boost whilst bond yields in Spain and Italy hold current levels. CDS's in Europe over the last 20 days have been creeping higher into the Greek budget announcement, which took place on Monday. Since then, investors had expected bonds to firm as CDS's eased back to mid September levels, however, we are yet to see this.
Strongest performers overnight were Spain's IBEX and Italy's FTSE MIB, both up around 1.5% on strong volume, despite the Euro remaining unchanged at 1.27.

FTSE +0.3% v.good volume; O/P: financial, cons.goods U/P: telco, utilities
CAC +0.6% avg volume; O/P: financial, tech U/P: utilities, telco
DAX flat v.good volume; O/P: financial, cons.services U/P: utilities, cons.goods
IBEX +1.7% avg volume; O/P: financial, telco U/P: basic materials, tech

Sectors clearly pointing to a more positive stance. Financial's continue to run due to optimism on growth. With the banking union due in Jan 2013, and the date again confirmed by Italy's Monti, the market is expecting 1. credit markets to start improving, 2. banks will now be protected by Trokia, who are looking to encourage lending.
Earnings from Vodafone yesterday saw a GBP 6bn writedown on Italy and Spain, weighting down on the FTSE as the stock sold down 2.5%, despite a huge buyback program. This didnt stop a strong rebound in Telefonica, boosting Spain's IBEX.

Data in Europe saw the UK RPI come in slightly higher at 0.6% vs expected 0.2% MoM, raising possible fears on inflation. Bloomberg headlines highlight a strong UK property market as overseas buyers continue to purchase high end homes.
Germany's Zew survey saw economic sentiment come in at -15.7 vs expected -10.0, whilst current situation was 5.4 vs expected 8.0.

In the US, equity markets opened in negative territory and sharply rose to the positive, where we saw them range for most of the session. Only in the last hour did we see them sell back down, with the S&P ending the day just 3 points off day low.

S&P -0.4% avg volume; O/P: utilities, cons.services U/P: tech, financial

The sector map shows a polar opposite to Europe. The recent run in financials continues to see outflows, as does technology, which is one of the top performing sectors this year. Heavy selling in Microsoft and Intel hitting the sector hard, whilst defensive names like Home Depot outperforming after strong earnings.
Data in the US, we had small business optimism which came in at 93.1, vs expected 93.0

Markets.Given the news coming out of Europe, I mentioned over the last 2 weeks, I would be looking to go long Euro. In addition to this, basic material names are trading at some rather attractive levels, and with the creation of the banking union in January, we should growth estimates increased in medium term.
Equity markets in Asia have come under some pressure of late, this should see us trend firmer today, opening at the lows and getting to day highs in first session. With currencies remaining steady, I suspect we flatten off in the second session, with indices trading in a tight range.

Stock picks to own today, Yangzhou Coal(1171), Natl Australia Bank(NAB AU), Petrochina(857), Angang Steel(347 HK).

Data.08:30 Australia wage cost
14:30 India monthly wholesale prices
15:45 French CPI
16:30 Netherlands retail sales
17:30 UK jobless claims, earnings
18:00 Eurozone industrial production
18:30 UK BoE inflation report
20:00 US MBA mortgage apps
21:30 US PPI, retail sales
23:00 US business inventories (big number)
03:00 US FOMC minutes
China FDI

Events.15:30 EU budget framework
18:00 Bank of Italy public finance supplement
20:45 EU regional aid recipients hold meeting
22:30 Greek finance minister meets EU lawmakers
22:45 Italy's Monti meets UK's Cameron

Bonds.11:00 Thailand 1,3 and 6month auction
11:45 Japan 5 year auction
17:00 Netherlands 10 year auction
18:00 Greece 1,3 year auction
00:30 US 3,6 month auction

Earnings.
Staples(US), Abercrombie & Fitch(US), Williams-sonoma(US), NetApp(US), Spectrum Brands(US), RWE(GE), Infineon(GE), J Sainsbury(UK), Solarworld(GE), Natixis(VX), CSR(HK), OLAM(SP), Global logistic(SP), Vtech(HK), City dev(SP), China pharm(HK), CIMB(MK), Jollibee(PH), San Miguel(PM), Citic SEc(CH), PTT(TH), MOL(HU), Turkiye IS Bank(TR), Dogan Yayin(TR), Bank BPH(PW), Echo Inv(PW)

Stoddart