Good morning,
Gosh, the press is all over the show. I want to get excited about Obama meeting Mitt. The budget is huge issue for the US and despite Obama winning a second term, a joint effort is needed to pass a number of bills, helping America reduce its deficit.
The the next story I read is BP, which is now banned from new US contracts. I know they are British, so my view many will question as slightly bias, however, BP is one of the leaders in its field. Yes, they have made some mistakes, but the development in drilling and exploration techniques would not be were it is today without this industry leader.
My fear is, that the US see growth through protectionism. Looking after your own is all well and good, but going back over history, it tends to make a samll number wealth, reduces R&D and stops much needed foreign investment. As mentioned yesterday, France is going down that route, and it is not advised.
Argentinian debt has also come up recently. What they dont realise is, although defaulting would solve a number of problems, as an investor, I would not touch their debt from here on. Even if yields were 20%, it doesnt matter if I dont see my principle back. Therefore, it makes it terribly difficult to raise funds in the overseas market, setting their growth back at least 10 years. I suggest playing by the rules.
Markets overnight saw Europe weaker throughout the session barr the last hour, where a short rally pushed many of the indices back into positive territory. The Euro sold off sharply but has since bounced making up those loses, now trading at 1.2950. Sectors in Europe look like this:
FTSE +0.1% avg volume; O/P: tech, telco U/P: basic materials, utilities
CAC +0.4% low volume; O/P: utilities, Oil&gas U/P: telco, tech
DAX +0.2% low volume; O/P: basic materials, cons.goods U/P: utilities, financial
IBEX -0.3% v.good volume; O/P: cons.services, tech U/P: utilities, telco
Sectors tell us very little. I like the volume pick up in Spain, where defensive names underperform leading to the idea that inflows are finally coming. Albeit at hugely discounted rates.
In the UK, VOD LN just paid its dividend and yet the telco sector remains strong.
In the US, markets opened on the lows and trended firmer, and on good volume.
S&P +0.8% avg volume; O/P: cons.services, oil & gas U/P: utilities, basic mats
Oil and Gas is finally outperforming over financials and tech, partly due to the Aplle rally running out of steam. In the tech space, I like innovative companies and for me, Apple has lost that. Short it at your peril, but at these levels, Microsoft looks more interesting. The next to fall from grace is Samsung, where the good times are over... whats next for them, they make a 20 inch phone?
Markets.
Asia is rallying on the back of indices closing at day lows and the rebound in currencies such as US$EUR. Expect markets to see some rotation today and over the next fortnight as investors cover shorts and optimism that the US budget will get passed first time, which I think it will.
We should see basic materials and oil&gas run on US$ hedge and growth sentiment improving.
Time to buy Petrochina(857), where I plan to put the Stoddart retirement fund, should I find an odd lot broker that doesnt have a 5% spread.
Data.
15:00 UK nationwide house prices
16:00 Spain housing permits
16:55 German unemployment - major number!
18:00 EU confidence... big number but, nothing says confidence like increasing inventories
21:30 US consumption, jobless claims and GDP, expected 2.8%
Events.
16:00 EU votes on bank oversight
17:00 EU pact with Japan, Canada and Singpaore... island dispute and deals with Japan...risky
18:30 UK BoE financial stability report
20:30 OECD's Gurria speaks, 1st question, why lowering growth tgts?
23:0 US hearing on Basel pt 3
Bonds.
11:35 Japan 3 month auction
18:00 Italy 5 and 10 year auction, yields already sub 5%
02:00 US 7 year auction
Earnings.
Tiffany(US), Dixons(UK), Natl Bk of Greece(GR), Fraser Prop(SP), Choi Tai Fook(HK)
Stoddart
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