Morning note, data, events, bonds and earnings 19th November 2012

Good morning,

US markets on Friday gave us brief relief as Obama speaks to the house regarding the every nearing expiration of tax cuts and spending increases.

Its no surprise that as Obama tries to play "Robin Hood", the republicans are already putting conditions out there. They are willing to agree on increasing revenue by taxing top earners, however, this must be met by spending cuts in areas such as defense and Medicare.
Sector performances in the US point towards profit taking once more in technology and telco, whilst investors look at defensives such as utilities and consumer goods.

Interesting to note, we saw good volume pick up in basic materials. Companies like Alcoa(AA) trading at 52week lows are starting to see inflows I suspect on short covering as the fundamentals and outlook is rather bleak. That said, with some much negativity around growth, there is view that this is priced in.

Markets.The weekend press continued to highlight US debt deadlines and European negative growth. US thanks giving is also coming up on Thursday, which will no doubt leave volumes at the lower end of the range. We also have US housing numbers out this week, which will have been effected by Hurricane Sandy. We also have German GDP data, which looks set to remain flat, however, with the recent pressure on Merkel, should this come in weaker we could see pressure on the Euro once more.

Today we should see equity markets rebound after Friday afternoons sell off. Japan looks set to remain strong as US$JPY continues to trade above 81, at 81.40.

The Euro is also sitting on major support levels here, which could see equities start outperforming should we go back to test 1.28, but as mentioned, German GDP data due Thursday.
Equity markets trend firmer in the first hour, then look to flatten off, trading sideways in the afternoon.
Despite demand for defensives, oil, basic materials and industrials remain attractive here. We should see these start to squeeze as investors reduce risk into year end.

Consumer goods should benefit from the recent move in JPY, and with officials aiming for US$JPY to be at 82 by year end, we should see exporters supported. The question is, with global growth struggling, will overseas investors continue or increase purchases of JGB's.

In China, with the Shanghai indices trading around 2000, this is previous intervention levels, so watch for possible comments from government.

Data.08:00 UK Rightmove house prices
10:30 Thailand GDP
13:00 Japan leading index, coincident index, machine tool orders
16:30 HK unemployment
17:00 Italy industrial orders
18:00 EU construction output
23:00 US NHBA housing index, existing home sales
Greek current a/c

Events.16:30 EU foreign defense ministers meet
17:00 WTO dispute settlement body meets
EU's Barnier to discuss FSB with Carney
BOJ policy meeting

Bonds.10:30 S.Korea 10yr auction
11:35 Japan 2month auction
18:00 Netherlands 3,6 month auction
22:00 France 3,6,12 month auction
00:30 US 3,6 month auction

Earnings.Lowes(US), Tyson foods(US), Nuance Comm(US), Gome(HK), CSI Prop(HK), Next media(HK), Huabao(HK), Cerebos pac(SP), Tokio MArine(JP), SK holdings(SK), Korea exchange bank(SK), Korea gas(SK)

Stoddart