Morning note, data, events, bonds and earnings 4th December 2012

Good morning,

Mixed performances on the first trading day of the month. Equity markets were expected to be slightly weaker, as stocks sold down after some rather aggressive window dressing on month end.

Bond markets saw a HUGE rally in Spanish, Greek and Italian, with 10yr yields currently Spain: 5.216%, Italy: 4.435%, Greece: 14.56%. Greece start the session at 15.8% but due to the bond repurchase announcement, we saw a it fall 128 bps.

Equity volumes remained strong across the southern states of Europe, whilst the rest of the region remained around average. Markets opened slightly firmer, trended higher until the US opened, which saw them sell back down again. Mostly due to the firmer US$, as brief details of new tax policies hit the press.

FTSE +0.1% low volume; O/P:health, industrials U/P:telco, financial
CAC +0.3% avg volume; O/P:utilities, health U/P: financial, telco
DAX +0.4% avg volume; O/P:tech, basic materials U/P: utilities, consumer goods
IBEX -0.6% v.good volume; O/P:basic materials, tech U/P:cons.services, financial

Sectors here showing us very little. The UK is looking at some rather nasty tax policies on high end property, which should make the market nervous.

Desperately chasing down overseas investors and offshore banking, the UK really has to be careful not to discourage inflows. The thought is the tax should help dispersion, where property prices in London are considerably more than that in the north of England.

The finance sector has been very strong over the last 6 months, due to politicians continued work on policies to support the heavily indebted members of the EU. With such a large amount of liquidity in the market, when credit eases, the new loan market will be extremely strong as banks increase lending.

Data overnight and maybe missed was the Spanish PMI data, which came in at 45.3 vs expected 43.9. This number actually means it is still contracting, but I like the fact it is contracting at a lower rate than expected. Stoddart = forever optimistic.

The rest of Europe also saw PMI contract, with German, France, Italy and the region all with a score under 50. Greece however, was very weak, with a PMI of 41.8, which raises questions about its ability to buy back 10 Billion Eur of bonds which it announced yesterday.

Italy came through with a strong budget balance, coming in at -4.3b vs October at -13.1b, however, new car sales were at -20% highlighting austerity is hitting the consumer market at present.

In the US, equity markets trended easier throughout the session, closing at day highs as the US$ continues to firm. Surprisingly, we also saw UST's weaker, whilst gold and crude oil remained relatively unchanged.

S&P -0.5% avg volumes; O/P:telco, tech U/P:basic materials, industrials

Sector maps in the US look very defensive, with telco, tech and health care all outperforming. Apple continues to squeeze, however, it is now approaching major resistance levels, which could weigh on the S&P.

Markets.
Asian markets are all slightly easier, with volumes lower by about 20%. As the US$ and JPY continue to firm against majors, equity markets are turning defensive.

Shanghai continues to sell down, currently 1954, -6pts, where health, consumer goods and services are all dragging the index low. Utilities and Oil & gas remain top performing sectors but are barely flat on the day.
The question on everyones mind is, where is the intervention?

I continue to like upstream oil plays at these levels. We should be looking for US$ hedges at these levels, where crude remains strong and should see a number of countries continue to build inventories.
China property looks rich at these levels, and with talks of the government taking on inventory and supporting prices, the market remains artificially high and doesnt reflect the "real" demand.

Data.11:30 Australia RBA cash target
11:30 Thailand consumer confidence
16:00 Spain unemployment MoM
17:30 UK PMI construction
18:00 Eurozone PPI
22:45 US ISM NY
UK Halifax house prices

Events.16:00 EU finance ministers meet
19:00 ESM's Regling speaks at Think Tank
22:30 US FDIC releases quarterly banking survey
Clinton meets NATO

Bonds.13:30 Philippines 10year auction
19:00 EFSF 3month auction
00:30 US 4week auction

Earnings.Toll brothers(US), Big lots(US), Autozone9US0, Vail resorts(US), Panadora Media(US), Elekta(SS), TUI Travel(UK)

Stoddart