Jo san,
Friday is here and there is a certain buzz in the GTO office. I'm already pricing the US up around 50bps on tonights close, where I was instantly hit by all but one of my colleagues.... but he was in the toilet so missed the price.
With TV's, newspapers and ever other note I read mentioning the "fiscal cliff", its feels like the investment community is heading down the Kardasian route, and dramatising ever event.
Agreed, Obama is having to play Robin Hood, taking from the rich, and giving to the poor. But the markets view that these tax increases will hit consumer spending is incorrect, infact, its the lower end of the income chain that spend the highest percentage of their earnings. Consumer spending and improved credit markets are the key to jobs growth.
Equity markets overnight were all easier, with little direction, however, volumes remain strong in major indices. In the currency markets, Eur continued to firm against the US$, testing the 1.28 level, currently 1.2780. The JPY also continued to weaken vs the US$, now 81.14. Very mixed signals from equity and currency markets, given these moves look bullish.... will correlation between currencies and equities correct back to normal.... I'd bet on it.
In bonds, we saw Spanish and Italian 10yr yields tighten around 4bps, whilst UST's widened from 1.5900 to 1.5930, which will also help support the Eur, as outflows from the US move across the pond.
In Europe, markets traded sideways in a 60bps range on around average volumes, leaving indices up just 5% year to date.
FTSE -0.8% avg volume; O/P: heath, financial U/P: cons.services, tech
CAC -0.5% avg volume; O/P: telco, cons.services U/P: tech, utilities
DAX -0.9% avg volume; O/P: telco, financial U/P: cons.services, tech
IBEX +0.3% avg volume; O/P: oil & gas, tech U/P: health, basic materials
Sector maps again looking relatively defensive, however, oil&gas which has been one of the worst performers over the last few weeks, is finally in the upper end of the table on all indices. Expect to see a short squeeze as we see sector rotation in to oil and commodities as the US$ continues to weaken against majors.
Data overnight saw French GDP come in at 0.2% vs expected flat. Spanish GDP came in as expected at -0.3, whilst Italy's was better at -0.2% vs expected -0.5%.
UK retail sales were weak at -0.7% vs estimates -0.1%, partly blamed on the cold weather but I suspect its more to do with credit remaining tight in the UK.
Euro-zone CPI was inline with expectations at 1.5%, as was the GDP number at -0.1%.
US markets opened positive on the open but drifted to day lows early session as jobless claims came in higher, blamed on hurricane Sandy.
S&P -0.2% avg volume; O/P: cons.goods, financial U/P: telco, basic materials
Financial stocks rebounding after Wednesdays sell off. Tech continuing to under perform but mostly due to Apple and Microsoft, as others in the sector like hardware are all outperforming. With the market getting super bearish Apple products, which I agree, the new Microsoft platform looks impressive, its time to short cover here.
Data in the US as CPI inline @ 0.1%. Empire manufacturing came in stronger than expected but still down, -5.22 in November vs estimates -8.00. US jobless claims increased 439k, vs estimates 375k.
Slightly concerning was the number of delinquencies, which have seen little improvement at 7.4%, with foreclosures still above the 4% level in the 3rd quarter.
Markets.Expect markets today to open flat to small down, but with the US$ weakening, we should see them trend firmer throughout the day, closing just off highs.
NB, oil heavy weight indices like HK will see additional strength as Petrochina outperforms...its still not to late to buy the sector, including chemicals.
Data.15:00 EU new car registrations
16:00 Turkey consumer confidence
16:30 HK GDP
17:00 ECB current a/c
17:00 Italy trade balance
18:00 EU trade balance
22:00 US foreign net transactions
China FDI, Japan monthly economic report
Events.17:00 Italian cabinet meets
23:15 US Obama meets lawmakers
Bonds.11:35 Japan 1 year auction
18:00 German 1,3 and 6 month auction
Earnings.Foot locker(US), Henkel(GE), LSE(GB), F&N(SP), YTL(MK), IOI(MK), Thai Bev(TH), KOC holding(TR), Trakya Cam Sanayi(TR), Turk Hava Yollari(TR), Philip Morris(CZ), Bank Forum(RU), Truly Intl(HK), City eSolutions(HK), Parkson(HK), Shandong Weigao(CH)
Stoddart
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