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Political wrangling over fiscal cliff weighs on US market | | | | | From: NetResearch Asia [[email protected]]
Sent: Wednesday, December 05, 2012 9:55 AM
To: NetResearch Asia 5 Dec 2012
Subject: Political wrangling over fiscal cliff weighs on US market
Pre-Market Open Commentary for 05 December
2012
( CO. REG. NO.
199904258C )
DJIA: 12951.78 -13.82
Nasdaq Composite: 2996.69 -5.51 Good morning, fellow investors
US stock market closed modestly in the red in a quiet trading session on
Tuesday as uncertainty over the ongoing political wrangling over the
“fiscal cliff” put investors on edge.
The market has been sensitive to rhetoric from Washington, as a failure to
reach an agreement to avoid a US$600 bil package of tax hikes and federal
spending cuts that would begin on Jan 1, 2013 could push the economy into
recession. Optimism for progress on the budget negotiation was dented on
Tuesday after Congressional Republicans recently proposed steep spending
cuts to bring down the budget deficit, but gave no ground on President
Obama's call to raise tax rates on the wealthiest Americans. The proposal
which included tax reforms, changes to Medicare and other spending cuts
worth $2.2 trillion over the next decade, was quickly dismissed by the
White House. Despite the stalemate, market remained hopeful that a deal to
avert the “fiscal cliff” will be reached at the eleventh hour.
Expectations of higher taxes on dividends beginning in 2013, should
lawmakers fail to address the fiscal cliff before the end of the year, have
led many companies to pay special dividends this year or accelerate their
next dividend payback. On Tuesday, Coach, American Eagle and Carnival
announced revised date to their dividend payback. In particular, Coach
announced plans to make its second, third and fourth quarter dividend
payments for fiscal year 2013 this month.
On the corporate front, Netflix surged 14% to US$86.65 following a
high-profile deal with Walt Disney which gives Netflix exclusive TV
distribution rights to Disney movies from four of its subsidiaries, Walt
Disney Animation Studios, Pixar Animation Studios, Marvel Studios and
Disneynature, starting in 2016.
The major US indices closed marginally weaker with the Dow Jones Industrial
Average dipping 0.11% while the S&P 500 lost 0.17% to 1407.05. The Nasdaq
Composite index retreated 0.18%.
Market will have a sense of the employment conditions from payroll
processing firm ADP’s employment report on Wednesday. The other major
economic readings due on the same day include weekly mortgage applications,
factory orders and ISM non-manufacturing index.
Crude oil January delivery lost US$0.59 a barrel or 0.66%, to settle at US
$88.50 a barrel.
In Singapore today:
Asian stock markets closed largely lower on Tuesday as disappointing US
factory readings overshadowed signs of the euro zone sovereign debt crisis
easing as Greece announced a 10 bil euros (US$13 bil) debt buyback program
in a bid to reduce its ballooning debt. The Institute for Supply
Management's (ISM) factory index decreased to 49.5 in November, the lowest
since July 2009, marking a contraction in the sector and was also below
expectations of a reading of 51.4.
Singapore shares opened in the red and drifted marginally lower throughout
the session. At closing, the STI index slipped a marginal 3.62 points, or
0.12%, to close at 3062.12 points. Market breadth was flat with equal
number of gainers and losers. Turnover was 2.21 bil shares with a value of
$1.28 bil traded.
Singapore's manufacturing economy remained in contraction in November from
the previous month, underscoring the view that the Singapore economy may
slip into a mild technical recession in 4Q2012. According to Singapore
Institute of Purchasing and Materials Management, the overall PMI reading
improved to 48.8 in November from October's 48.3 but remained under 50, due
to further declines in new orders and production output. The PMI for the
key electronics sector also pointed to a continued contraction, slipping to
47.4 in November from 47.5 in October. The latest reading stands in
contrast to a recent string of positive economic news from Asia after the
purchasing manager’s indices of China, South Korea and Japan signaled a
recovery in the production and export data.
Expect another day of range-bound trading on the local bourse in the
absence of positive economic leads to lift sentiment. Further, the
political wrangling in the US budget talk and the start of the year end
lull are likely to keep investors staying on the sidelines.
This morning, we have parts 1 and 2 of our 4-part banking sector report on
our website.
1. Singapore Banks Quarterly: 3Q12 Results Review (Part 2) (premium)
Interest Income - NIMs contraction narrowing [read the report]
2. Chartzones – 5 December 2012 (premium)
Technology Stocks [read the report]
3. Chartzones – 4 December 2012 (free)
Media, China Stocks and Technology Stocks [read the report]
4. Singapore Banks Quarterly: 3Q12 Results Review (Part 1) (premium)
Strongest and most profitable bank [read the report]
5. Hisaka Holdings - 2H12 results update (free)
Recovery delayed [read the report]
6. Etika International Holdings - 4QFY12 results update (free)
Reaping fruits of labour in FY13 [read the report] | |
....
|
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MARKET WATCH 5th Dec 2012
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