A decline in the ISM manufacturing report from the US on Monday soothed nerves over an immediate withdrawal of liquidity by the Federal Reserve, boosting Wall Street. European stock markets Tuesday morning are reacting accordingly, trading modestly higher following previous session weakness but have come off intraday highs since the market open. Stimulus friendly remarks by Atlanta Fed head Lockhart aided the markets’ rebound with the Fed member suggesting the central bank remains committed to accommodative easing.
There’s little on the economic data plate today other than euro zone PPI and US trade balance so market participants are likely to remain hypersensitive to Fedspeak Tuesday with governor Sarah Raskin, Kansas Fed head Esther George and Dallas Fed chief Richard Fisher all scheduled to speak. Much of the attention is now switching to Friday’s nonfarm payrolls report which should provide a chance at spread betting profit taking and a better gauge of the Fed’s stance on stimulus at this month’s policy meeting.
Overnight, stocks in Asia traded cautiously but Japan’s Nikkei 225 staged a bit of a rebound on hopes that PM Abe will seek a review of the investment strategy of the GPIF and a large number of other semi-government funds at his update on growth strategy on Wednesday. The Nikkei’s move higher was largely on the back of market talk that Abe could prop up the country’s equity market by making the government’s pension fund buy more domestic stocks, rotating out of bonds. The USD strengthened versus JPY, moving back above Y100 [it dropped below Y100 for first time since May 9] further helping the Japanese stock market.
Over in Australia, the RBA left policies unchanged [the rate has been kept at a record low of 2.75%] a mild surprise to traders who had expected the central bank to react to the weakening of the Aussie dollar on the back of China’s slowdown. But, the RBA still reckons the Aussie dollar is too strong even after recent falls and would rather wait and see further weakness in the currency before cutting rates. But, with the Australian economy running below trend and with regional growth expected to slow further, it’s a matter of time before the RBA will have to cut rates further.
Over in Turkey, the main stock index there is stabilising Tuesday following a 10.5% plunge on Monday as nationwide protests rocked sentiment with investors fearful that this could be Turkey’s “Arab Spring”. Turkey’s PM is under pressure over his policies but financial markets are largely dismissing this as Turkey’s “Arab Spring” as the country’s government is democratic and not a dictatorship. The threat of an escalation of violence has receded somewhat overnight since the start of protests but the country’s largest trade union has announced a two-day strike which has the potential to cause further flare-ups.
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William Hill was a bit of a darling in 2012, with its shares soaring during 2012. Yesterday saw a halt to this march at around the 350 level, with investors waiting for more news on some acquisitions the bookmaker was undertaking. Ahead of a market update on Friday, expect to see more support for the bookie.
Little known Litebulb Group rocketed up by 14.4% to 0.715, on the news that Tesco will be using the manufacturer for its first order of children’s scooter accessories. The company’s rape alarm product was also gaining attention, with QVC USA reordering the product and QVC Deutschland also debuting the product this week.
In bond news, UK government gilts dropped lower on the news that the US may be one step closer to reaching another short-term fix to its debt ceiling/budget troubles. The March gilt ticked 33 points lower to the 116.63 level, showing that investors are becoming slightly more confident in riskier assets, such as shares.
Keep your eye on Phones4u. They’re the latest mobile provider to launch a bespoke 4G brand, after the Kevin-Bacon led EE.
The disgrace of the UK banking sector rolls on, with Lloyds this time in the firing line. Former senior figure Helen Weir issued a groveling apology over the PPI misselling scandal. Now with the John Lewis Partnership, Weir also apologise for the misselling of insurance that also occurred on her watch at the UK bank. She told the Banking Standards Commission (BSC) that she was sorry for her role in the ongoing scandal, which is expected to cost the bank at least £6 billion.
Looks like Rio Tinto is the star of Earnings Season so far. The miner released encouraging production figures, with its iron ore output beat its own estimates in rising 4% in 2012 to 253 million tonnes. Can’t say I saw that coming, given the crises in China and Australia during the summer months.
Looks like it’s China that’s now picking up the slack, accounting for the surge in commodity prices in during the last quarter. The pickup has been staggering, it’s been around about an 80% increase in iron ore prices since September. With signs of recovery in the Chinese economy, as shown by finally expanding manufacturing PMIs, it looks as though it’s all systems go and I wouldn’t be spread betting against further gains.
Rio will be happy too – as this Chinese demand will surely rekindle mining investment. In other figures released by Rio, copper production went up 6%, but aluminium production went down 10%. Within the figures, mined copper production for 2012 rose 6% while thermal coal output was up 16% for the year. However, hard coking coal production fell 9%, and aluminium production was down 10%. I’ve long been hesitant to take a position on copper, but Rio – as one of the flagship miners – looks like it’s in for a promising 2013.