Good morning all,
One of the many things I love about this industry is, that you are continually seeing the news headlines. Including some more obscure ones, such as this:
50 Shades Under the Tree Means Holiday Surge for Sales of Sex Toys: Retail
Now being the trader that I am, should you wish to get exposure to this industry, the only name I can think of is ASC AU, or alternatively you could look at buying rubber futures.
Overnight saw continued strength in the equity markets as the Euro pushed through the 1.30 level where it remains currently. Despite the weakness in the US$, oil eased slightly back below at 86, now trading 85.81.
European bonds saw Greece continue to firm with 10 yr yields now trading at 12.67%. Spain and Italy continued to see yields fall with current 10yr yields at 5.42% and 4.7% respectively. Spreads between French/German and southern European states continue to tighten and as expected, we are seeing rotation into higher yielding assets as sentiment in Europe improves and investors look to reduce exposure to US debt as budget talks continue.
In Europe, equity markets saw a strong rebound after the sell off in Italian financials on Monday. Opening at around the flat level, indices trended firmer throughout the session closing at day highs. Volumes also remained close to average, which going into year end is quite interesting given normally we see risk appetite pull back in December.
FTSE +0.1% low volume: O/P:basic mats, utilities U/P:cons.goods, industrials
CAC +0.9% avg volume: O/P:telco, utilities U/P: tech, financials
DAX +0.8% avg volume: O/P:utilities, cons.services U/P:health, financials
IBEX +1.5% good volume: O/P:health, cons.services U/P:tech, industrials
Sectors overnight all look relatively defensive. We are seeing some rotation into basic materials in all indicies however, it with the market now moving to a more neutral stance on Europe, and growth looking limited until the latter stages of 2013 at best, investors are looking at defensive, yielding assets as opposed to cyclical.
Given growth estimates are so downbeat, I expect rotation into higher cyclical industrials in the early parts of 2013 and polices and budget data becomes known, and analysts become more upbeat.
In the US, equity markets were strong on the back of wholesale inventories and job openings. After opening slightly firmer, we saw an initial spike higher,followed by markets flattening off and trading sideways for the rest of the session. Volumes were quite strong, up 13% on average.
The High/low index also remained strong with 30 companies in the S&P making 52 week new highs and no new lows.
S&P +0.7% good volume; O/P: tech, telco U/P:utilities, cons.services
Heavy weight Apple was up 2.1% overnight helping the tech sector, which also saw a strong rebound in semiconductors as DRAM prices continue to firm. Intel +2.8%
Basic materials also saw inflows, as did oil and gas but I was expecting a stronger rebound in that sector as investors look to short cover and in some cases move to a more overweight position, especially in upstream oil plays.
Data in the US, saw whole sale inventories increase 0.6% vs expected 0.4% highlighting optimism in the recovery, whilst the Jolts job openings came in at 3675 vs estimates 3600.
US trade balance came in at $42.2b vs estimates of $42.7b.
Markets.Asian markets are following in the foot steps of the US, with indices up around 50bps. I expect to see them ease back early in the session before finding support and trending sideways.
Consumer goods, especially in Japan, saw a strong pull back yesterday and are now rebounding. Given the JPY is continuing to weaken and currently trading at 82.60, we should see continued inflows into this sector. Power companies also look cheap at currently levels however, given the review of nuclear power, the market is pricing in possible negative news. BUY
In HK, with such strong performances of China banks and property, I expect some profit taking at current levels, and infact I would be looking to go short these 2 sectors despite government intervention.
I would be looking at increasing exposure to A'shares over H, and on a sector level, long coal, oil&gas and with Chalco(2600) due to be kicked out of the index, it is an opportunity to pick an industry leader at discounted levels.
Data.11:00 S.Korea money supply
13:30 India industrial production
15:00 German CPI
15:45 France CPI
16:00 Spain property transactions (possible upside surprise)
17:30 UK jobless claims and earnings
18:00 EU industrial production
20:00 US MBA mortgage apps
21:30 US import prices
01:30 FOMC rates/budget
Events.12:30 RBA's Stevens speaks at Bank of Thailand
21:30 EU ministers meet on banking supervision
OPEC meeting in Austria
Bonds.11:00 Thailand 9, 15 year auction
11:35 Japan 2month auction
17:30 India 3, 12 month auction
18:00 Italy 12 month auction
00:30 US 10 year auction
Earnings.Joy Global(US), Costco(US), Restoration hardware(US), Inditex(SP), Imagination group(GB), Darty(GB), Alpha Bank(GR), Eurobank Engasis(GR)
Stoddart
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