Good Morning,
Press over the weekend should have give the markets some positive sentiment, as China factory output and retail sales came in slightly better, see below:
CPI 2.0% vs expected 2.1%
PPI -2.2% vs expected -2.0%
Industrial production 10.1% vs expected 9.8%
FAI 20.7% vs expected 20.9%
Retail sales 14.9% vs expected 14.6%
Other headlines in the press should also help support Europe, with officials commenting "Greece is close to reaching targets for buying back its existing debt". Current yields continue to fall, currently 13.85% whilst German yields remain unchanged. Expect investors to continue to look a the spread, as further policies continue to support the Southern European states.
The UK continue down a similar route to that of the US, chasing multi-nationals that are avoiding taxes through overseas holding companies and structures. Already we have seen a number of companies publicise they will be reviewing tax procedures, I assume so that the politicians will loosen the noose and potential fines for their existing practices.
Other news, was driven by Friday's data. Greece GDP came in at -6.9% vs expected QoQ unchanged at -7.2%.
The UK industrial production and manufacturing came in surprisingly weak, ind production was -0.8% vs expected +0.8% MoM, Manufacturing -1.3% vs expected -0.2% MoM.
In the US, markets enjoyed some optimism on the back of stronger jobs data. change in non-farm payrolls increased to 146k, vs estimates of 85k in November, helping ease the unemployment rate down to 7.7% vs expected 7.9%. Wages and hourly earnings came in as expected at 34.4 or +1.7%.
The only number to disappoint was the Uni of Michigan confidence indicator which came in at 74.5 vs expected 82.0.
Markets. Despite the optimism and strong data/headlines, the correction in the Euro regardless of bond inflows leaves me nervous that a pull back in equities is due, however, the JPY remains steady, so would could see Asian markets outperform as investors look at improving exports helping to increase growth.
With pull back in EURUSD, gold seems unaffected still trading above the $1700 level, whilst oil sold of $2 back to 86 last week.
Over the last month, I have received a number of requests from clients for physical gold. 2 reasons, 1. Possible regulation on commodity derivatives, 2. Avoiding costly futures rolls and management fees, instead choosing to pay the fees on depository. This trend will continue and should you want to know the codes and different options, please email me.
With oil coming off and the Euro trading at major support levels, I would be looking to buy upstream oil plays, as at currently levels, they look cheap. GDP estimates and forecasts are too aggressive to the downside and I expect upward revision in early 2013.
With China now trading back above 2000, its time to look at A-share premium/discount. I would look at shorting HSCEI vs either the A-share tracker 2823 HK, or CSI 300 2827 HK at these levels.
China property names have also been huge outperforms as the government looks to support prices and possibly look at taking on inventory. The sector however, is benefiting from an artificially market, where large inventories will still exist and growth within the sector will continue to fall.
These policies will help banks improve balance sheets, as current properties on the banks books can be repackages and sold on. But given the recent performance of the sector, this looks priced in.
Data. 08:30 Australia home loan, investment lending
12:30 Japan bankruptcies
13:00 Japan consumer confidence
14:00 Eco watchers current/outlook
15:00 Germany import/export/trade balance
15:45 France BoF business sentiment/Industrial/manufacturing production
16:00 Turkey GDP/industrial production
17:00 Italy industrial production
17:30 EU sentix investor confidence
18:00 Italy GDP
Greece industrial production/CPI
China imports/exports/trade balance
Watch for coal imports and the Australia index.
Events.19:30 EU foreign ministers meet
21:45 US FDIC systemic resolution advisory committee
Obama speaks about US budget
IMF;s Lagarde visits LatAm
Bonds.10:30 S.Korea 5 year auction
13:30 Philippines 3,6,12 month auction
18:30 Netherlands 3,6 month auction
22:00 France 3,6,12 month auction
03:00 US 3,6 month auction
Earnings.Peregrine Pharma(US), Teavana(US), Converse Tech(US), China Sandi(CH), Indika Energy(IJ)
Stoddart
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