Morning note, data, events, bonds and earnings 11th December 2012

Good morning,

Market volumes appear to be slowing down and Europe is seeing outflows as we go into year end.

After speaking to a number of Prime Brokerage desks, banks are looking to reduce risk substantially, leaving many funds in need to find other financing desks willing to lend. Naturally, this will see a number funds having to close out positions. This was expected but it does mean, volumes are set to ease as credit to hedge funds tighten.

Overnight Greek yields continued to fall, now trading at 13.24%, from 16% just last month. Italy and Spain are rising slightly, now 4.8% and 5.52%.

The Euro firmed after last weeks aggressive sell down, yesterday firming 40pips at 1.2937. I expect this run to continue. The JPY remains steady at 82.38 despite headlines that Japan is now in a technical recession. Government officials have warned investors about "reading too much into the data".

In Europe, equity markets sold down aggressively on the open but firmed throughout the session closing just off the highs. Italy came under some heavy fire as banks were heavily sold down. Intesa Sanpaolo -5.2%, Banco Pop -5.7%.

FTSE +0.1% v.low volume; O/P: health, oil&gas U/P: industrials, financial
CAC +0.2% avg volume; O/P: tech, oil&gas U/P: financial, utilities
DAX +0.2% avg volume; O/P: health, basic mats U/P: cons. services, utilities
IBEX -0.6% good volume; O/P: basic mats, industrial U/P: tech, financial

Sector maps highlight a sell down in the financial sector, which given its performance over the last 6 months, was expected. Good to see oil and gas outperforming. As mentioned into November end, we will see sector rotation, and with the US$ weakening against majors and government policy set to support GDP, oil is the perfect US$ & growth play. Upstream is also looking cheap at these levels.
Data overnight saw mixed results across the region. German trade balance was strong at Eur15.8b, with exports increasing 0.3% vs estimates -0.3%, and imports 2.5% vs expected 0.4%.
French industrial production missed at -0.7% vs expected +0.2% and manufacturing production -0.9% vs expected -0.1%. This does not bode well for Hollande's aim of GDP supporting government spending. More downgrades to come??
Turkey, where growth over the last 2 years has been extremely strong, saw GDP miss estimates at 1.6% vs expectations of +2.5%. Given its strength in consumer goods such as apparel, be cautious on European retail sales.
Italy's industrial production fell -1.1% vs estimates of just -0.3% which certainly wont help the existing political problems, however GDP came in as expected at -0.2% (seasonally adjusted).
Greek industrial production was strong!!! up 2.0% YoY vs last month -7.3%, which will certain ease some concerns with EU leaders.

In the US, equity markets opened slightly firmer and traded sideways throughout the session, closing just off flat on the close. Volumes were on average 10% lower.

S&P flat low volume; O/P: basic mats, tech U/P: cons.services, telco

Basic materials finally seeing inflows and tech performing with software leading the sector as Microsoft launches its new windows operating system, and i must say, it looks very good, hence names like Nokia running (up over 40%) in 2 months.

Markets.Asia has opened slightly weaker, down roughly 0.2%. In Japan, utilities and financials are leading us weaker whilst oil and gas outperforms.
Electricity names look attractive here such as 9502 and 9503, down around 6% today.
Market should trend easier early session but find support after the first hour and then trade range bound. HK is looking extremely rich here and with HSBC headlines on the fine, we should see weakness again today. A'shares discount looks attractive vs H'share at these levels.

Data.09:00 Philippines exports
14:30 France non-farm payrolls
15:00 German wholesale prices
18:00 German Zew survey
20:30 US NFIB small business optimism
23:00 US wholesale inventories, Jolt jobs
China money supply expected today.
Indian import/export expected

Events.17:00 EU general affairs ministers meet in Brussels
17:30 UK Osborne's Autumn statement
19:15 World bank president holds press conference
20:00 Greece buyback ends
WTO general council meets

Bonds.
11:00 Thailand 1,3,6 month auction
17:30 Spain 1,2 yr auction
18:00 Greece 1,6 month auction
18:30 UK 10yr auction
00:30 US 1 month auction

Earnings.Peregrine Pharm(US), Teavana(US), KIT(US), Dollar Gerneral(US), ThyssenKrupp(GE), Ashtead group(UK), Victrex(UK), Inditex(SP)

Stoddart