Morning note, events, data, bonds and earnings 27th December 2012

Good morning,

As the holiday season grinds to a halt, eyes are once again turned to the macro news, where the republicans continue to drag their feet in passing the new budget. Given the additional daily cost of interest being around US$1.25b, speed will only assist in reducing its current deficit.

With many markets off, UST's continued to firm as equity markets fell, on the back of what looks to be a stalemate on the budget. Currencies saw the Euro continue to firm, now 1.3240. The JPY continues to weaken after Abe mentioned unlimited monetary easing to support higher inflation and growth targets.

Oil and commodities rallied on the back of US$ weakness and improving sentiment towards growth, after strong housing data in the US and China released a similar report to the Beige book, indicating improving real estate, retail and mining.

US equity markets sold down overnight, as mentioned earlier, with the S&P opening at the highs and selling down in the first half. It then found support and trended sideways closing just off the lows.

S&P -0.5% v.low volume; O/P: Basic mats, telco U/P:cons.services, utilities

Sectors show some rotation into basic materials (finally), whilst defensive, telco also outperforms. Oil and gas continues to perform relatively well as crude oil firms on the back of a weaker US$ and growth estimates.

Data overnight saw S&P CaseShiller home prices increase to 146.08 in October, vs expected 145.93.
The Richmond Fed came in easier at 5 vs estimates of 8 for December. A fall in shipments and inventory levels, overshadowed strong capacity utilisation and higher prices paid. 

Markets.Japan continues its strong run once more, after Abe's new cabinet will target growth and inflation, with limited concerns on printing to achieve it. Financials and tech outperforming whilst defensives lag.
In Korea, many stocks trade ex-div today which sees the Kospi down -0.5%, however, payouts based on last year should see the capitalisation fall nearer the -1.5% level.
In HK, after China data highlighting lower commercial lending, banks could come under pressure after such a strong run, despite positive real estate data. Expect heavy inflows into steel, copper, alu, paper and oil.
Markets should open at the highs and trend easier as we get profit taking into year end. Some talks of window dressing but limited given such low volumes during the holiday period.

Data.09:30 China industrial profits
11:00 Thailand capacity utilisation
12:00 Japan housing starts, construction orders, vehicle production
15:45 France producer prices
16:00 Spain mortgage data
16:30 HK trade balance/import/export
17:00 Italy business confidence
17:30 UK loans for house purchases
21:30 US initial jobless claims
23:00 US new home sales

Events.US Senate on budget timing

Bonds.18:00 Italy 6 month auction

Earnings.China Green(HK), Berjaya(MK)

Stoddart