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Market to re-focus on economy this week | | | | | | From: NetResearch Asia [mailto:postman@netresearch-asia.com]
Sent: Monday, November 12, 2012 10:00 AM
To: NetResearch Asia 12 Nov 2012
Subject: Market to re-focus on economy this week
Pre-Market Open Commentary for 12 November 2012
( CO. REG. NO.
199904258C )
DJIA: 12815.39 +4.07
Nasdaq Composite: 2904.87 +9.29
Good morning, fellow investors
US stocks eked out modest gains last Friday but failed to make up losses
from last Wednesday and Thursday when attention turned from the
presidential election to the coming negotiations over the “fiscal cliff”.
Market outlook brightened in early trading after a slew of stronger than
expected economic reading helped alleviate some worries. A report on
consumer sentiment was significantly better than expected. The University
of Michigan preliminary consumer sentiment index for November climbed to
84.9, the fourth consecutive increase and exceeding expectations of 82.0,
up from 82.6 in October. Improving job conditions and rising home values
are brightening consumers’ moods and lifting prospects for spending. A
separate report showed that wholesale inventories for September also
increased by 1.1%, the largest gain in 2012 and ahead of expectations of a
0.4% increase, after a gain of 0.8% in August. The reading is signaling
that businesses are growing more optimistic about demand. Further, US
import prices rose 0.5% in October, more than expectations but price hikes
for imported oil slowed, rising 1.3% in October (well below the 4.7% gain
in September and the 6.2% increase in August), pointing to only modest
inflation pressures.
However, market gave up some gains after hearing from President Barack
Obama and House Speaker John Boehner, about the fiscal cliff. President
Obama spoke about raising taxes on the wealthiest Americans and the White
House also reiterated that Obama would veto any bill that extended the Bush
tax cuts for the top 2% of wage earners. In separate public remarks, both
the House speaker and the president made it clear that partisan sparring
would likely dominate the next several weeks.
On the corporate front, J.C. Penney reported a higher than expected loss,
marking the third straight quarter of larger than forecast losses as CEO
Ron Johnson struggles to remake the company. The shares tumbled 5%
following the results. Late Thursday, Walt Disney reported earnings that
were in line with expectations but sales of the entertainment company was
below expectations, sending the shares 6% lower to US$47.06 and dragging on
the Dow Jones Industrials.
For the past week, all three major indices logged in losses with the Dow
Jones Industrial Average declining 2.12% while the S&P 500 fell 2.43% to
1379.85. The Nasdaq lost 2.59% last week.
In the week ahead, besides concerns over the “fiscal cliff”, market will
further take leads from a fresh batch of economic that will provide further
insights on how the US economic recovery is gaining momentum. Several
reports on the manufacturing sector are due this week, including producer
price, business inventories and industrial production. The manufacturing
sector which had been a weak spot globally in 2012, have recently displayed
signs of a turnaround with the ISM index for the US manufacturing sector
expanding in October for the second consecutive month. The pace of factory
activity in China also showed signs of a pick-up in October. However, euro
manufacturing activity continues to slide. Also due this week are reports
on consumer prices, an inflation gauge, as well as retail sales readings
which could provide an early indication of consumer behaviour on holiday
spending this year. On the corporate front, several retailers are set to
report their quarterly earnings this week including Target, Wal-Mart, TK
Maxx, Sears and Home Depot.
Additionally, on Wednesday, the Federal Reserve will be releasing minutes
from the October meeting by Federal Open Market Committee and although
there are no major fresh announcements expected, market will parse through
the minutes for signs of how long the Fed will continue with the monthly
plans of buying US$40 bil in mortgage-backed securities to stimulate the
economy.
Crude oil for December delivery rosel US$0.98 a barrel, or 1.15% to settle
at US$86.07 a barrel and for the past week, crude oil for December delivery
added US$1.21 a barrel, or 1.43%.
In Singapore today:
Asian stock markets extended losses last Friday following a second
consecutive day of declines on Wall Street as worries over the risk of a
recession in the world's largest economy as the US faces a looming fiscal
crisis cropped investors’ risk appetite. The Nikkei 225, the Kospi and the
Hang Seng index fell 0.90%, 0.52% and 0.85% respectively while the Shanghai
Composite index edged lower by 0.12%.
Mirroring weakness in the regional bourses, the STI index sank to an
intra-day low of 2994.76 points but pared losses in afternoon trading. A
slew of positive economic data out of China could have led to short
covering and bargain-hunting. China's annual industrial output growth
quickened more than expected in October, growing 9.6% YoY against
expectations of 9.4% and faster than a 9.2% growth achieved in September.
Year-to-date fixed asset investment also rose at an annual 20.7%, stronger
than growth of 20.5% reported for January-September and just ahead of
expectations of growth of 20.6%. Annual consumer inflation eased to 1.7 %
in October from 1.9% in September, providing scope for policymakers to
further ease monetary policy if necessary to shore up growth. At the
closing bell, the STI index dipped a mere 2.69 points at 3009.56 points and
for the past week, the STI index retreated 31.19 points, or 1.03%.
On Sunday, Greece's ruling coalition secured enough votes in parliament to
approve the 2013 budget law. The parliament had already approved a new
package of austerity measures worth €13.5 bil, a precondition for the
troika to release the next installment of funds under Greece's second
bailout. With Sunday's vote in favour of Prime Minister Antonis Samaras'
coalition government, Greece is likely to receive two more years to meet
budget targets set out in the original program in March, and gain access to
€31.5 bil that Greece needs to stabilize its banks and redeem a key
short-term debt due on Nov 16, 2012. The news is positive for markets. With
this crucial budget law approved, Greece can now have access to stalled
international bailout programme, removing market concerns that Greece will
plunge into insolvency.
Expect sideway drift marked by quiet trading on the local bourse today as
investors are not likely to take on fresh positions in light of a public
holiday tomorrow.
1. Chartzones – 9 November 2012 (premium)
Conglomerate / Industrial and Property Stocks [read the report]
2. Asia Enterprises - 3Q12 results update (free)
Rough ride ahead for steel sector [read the report]
3. Riverstone Holdings Ltd - 3Q12 results update (free)
Demand for customised medical gloves still high [read the report] | |
....
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