Morning note, data, events, bonds and earnings 8th November 2012

Good morning,

Welcome to your second term President Obama - markets sell off.

Lets start by looking at Europe. After the US election, markets opened relatively strong, trending slightly firmer during the first half. With the open of the US markets, came some heavy selling pressure. Headlines attribute this to budget talks and getting it passed the republican controlled house.
Investors are reminded of the problems faced with the banking bailout, and the trouble they had to pass a bill supporting its finance industry.

FTSE -1.6% good volume; O/P: tech, com.goods U/P: basic mat, financial
CAC -2.0% v.good volume; O/P: financial, cons.goods U/P: health, tech
DAX -2.0% v.good volume; O/P: cons.goods, telco U/P: utilities, financial
IBEX -2.3% good volume; O/P: industrial, tech U/P: financial, oil&gas

From the sector data, it would indicate some repositioning as investors reduce beta. The strong rally in US treasuries last night was the 10year firm 10bps to 1.65%, as the market again starts looking at yield, on lower growth expectations.
Data overnight saw Spain industrial output fell 7.0%, vs expected -3.5%. Eurozone retail sales came in slightly easier at -0.2% MoM vs expected -0.1%

In the US, markets opened at the highs and sold off in the first 2 hours, before finding its level and trending sideways. We did see a pick up in selling pressure in the last 30 minutes, causing the S&P to close at day lows.

S&P -2.4% good volume; O/P: cons.services, cons.goods U/P: financial, oil&gas

Sectors tell the story perfectly. Defensive. Profit taking in the financial, tech and telecom sectors puts them as the worst performing on the day. Given the aggression of the sell off, I would be looking at these sectors to pick up as the pressure looks climatic.
Data saw weekly mortgage applications -5.0%, which given we were going into an election, this number should be discounted to a certain extent.

Markets.
Expect an aggressive early sell off. I suspect the day lows are due in the first hour, where we should see support and trend firmer throughout the day.
I'm looking to buy HK/China oil names on the crude sell off. Consumer electronics should see a bounce after some heavy selling.
Risk off today should see profit taking in banks, railway and shipping.

Data.
08:30 Australia employment
11:00 S.Korea money supply
12:30 Japan bankruptcies
15:00 German trade balance, import/export
15:45 France trade balance
16:00 Turkey industrial production
16:30 Netherlands CPI, industrial production
20:00 UK Bank of England rates
20:45 ECB deposit facility, interest rates
21:30 US trade balance, jobless claims
Greek unemployment, could be a high impact number today, given the budget.

Events.
23:15 Germany's Merkel addresses EU parliment

Bonds.
11:00 China 7year auction
11:00 Thailand 9 year auction
11:35 Japan 6 month auction
18:30 German 5 year auction
02:00 US 10 year auction

Earnings.
Westlake(US), Advanced auto parts(US), First energy(US), Firstenergy(US), Duke energy(US), Kohl's(US), Nordstrom(US), Energizer(US), Repsol(SP), Commerzbank(GE), Siemens(GE), Deutsche post(GE), KBC(BB), SG(FP), Adidas(GE), Coca cola helenic(GR), Aegon(NL0, Swisscom(SW), ProSiebenSat(GE), Skanska(SW), Endesa(SP), Deutsche tel(GE), Gamesa(SP), SAS(SW), Tate & Lyle(UK), C&W(UK), Experian(UK), Daiwa house industry(JP), Rohm(JP), Disco(JP), NTT(JP), Shinsei bank(JP), Noble(SG), Parkson(HK), Petra foods(SG), Johnson elec(HK), UoL(SG), S-oil(SK), Lotte shopping(SK), Samsung fire & Marine(SK), AAC Tech(HK), Lenovo(HK), Oil and nat gas(IN), Kingfisher airlines(IN), Ranbaxy ind(IN), reliance comms(IN), Cummins (IN), Netia(PW), Mobile telesystems(RU), TNK-BP(RU), Akbank(TR)

Stoddart