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Pre Market Briefing, including 'Bernanke sees improvement in economy'
UK Market Snapshot
UK markets finished higher yesterday, led by gains in mining sector stocks, amid reports of merger talks between Glencore and Xstrata and after US weekly jobless claims fell more than forecast. Xstrata and Glencore International surged 9.9% and 6.9%, respectively, after both companies confirmed that they are in talks about an all-share deal to create a combined group worth more than 50 billion. Peers, Vedanta Resources and Anglo American climbed 5.8% and 3.6%, respectively. Smith & Nephew jumped 4.5%, after the company announced 800 job cuts. Unilever dropped 4.4%, after the company reported fourth-quarter revenue growth that missed analysts estimates and expected difficult economic conditions to persist this year. The FTSE 100 advanced 0.1% to close at 5,796.1, while the FTSE 250 rose 0.6% to settle at 11,086.5.
US Market Snapshot
US markets closed mostly higher yesterday, as optimistic US weekly jobless claims report overweighed mixed quarterly earnings reports. Green Mountain Coffee Roasters soared 23.8%, after the company reported higher-than-anticipated first-quarter profit. Internet and social media companies, Zynga, Renren and Groupon surged between 7.4% and 16.8%, after Facebook filed to raise $5 billion in an initial public offering. Gap jumped 10.6%, after the company forecast fourth- quarter earnings that beat analysts estimates. Cummins climbed 7.1%, after the company reported a sales forecast that topped analysts estimates. Mastercard rose 6.7%, after the company posted 24.0% increase in its fourth-quarter profit. Merck & Co fell 0.5%, after the company posted fourth-quarter revenue below expectations. The DJIA fell 0.1% to settle at 12,705.4, while the NASDAQ advanced 0.4% to close at 2,859.7. The S&P 500 gained 0.1% to settle at 1,325.5.
Europe Market Snapshot
Other European markets finished higher yesterday, amid positive US unemployment data and on rumours of an imminent Greek debt swap deal. Strong manufacturing data from Germany and China also helped to boost investors confidence. Benetton Group surged 17.1%, after Edizione, the Benetton familys investment firm, announced a public offer to acquire all the shares of the company it doesnt own. Novo Nordisk rallied 4.3%, after the company reported a bigger-than-forecast increase in fourth-quarter profit. Deutsche Boerse gained 2.1%, amid speculation that it might pay a special dividend following its failed takeover of NYSE Euronext. Deutsche Bank fell 0.4%, after the bank reported 76.0% decrease in its fourth-quarter profit. The FTSEurofirst 300 index gained 0.2% to close at 1,059.5. Among other European markets, the German DAX Xetra 30 rose 0.6% to close at 6,655.6, while the French CAC-40 advanced 0.3% to settle at 3,376.7.
Asia Market Snapshot
Markets in Asia are trading lower this morning, amid weak corporate earnings reports from Japan and South Korea and as Greece and its creditors struggle to reach an agreement on a debt swap. In Japan, Sumitomo Metal Industries is trading 1.4% lower, after the company forecast a fiscal-year loss. Peers, JFE Holdings and Nippon Steel are trading 1.2% and 0.5% lower, respectively. In Hong Kong, Industrial & Commercial Bank of China and Bank of China are trading 0.9% lower, each. In South Korea, Hyundai Heavy Industries and Samsung Heavy Industries are trading 5.7% and 3.1% lower, respectively, after both companies reported worse-than-expected full-year earnings. The Nikkei 225 index is trading 0.2% lower at 8,863.5. Hang Seng index is trading 0.1% down at 20,719.2, while the Kospi index is trading 0.8% lower at 1,967.6.
Commodity, Currency and Fixed Income Snapshots
Crude Oil
At 0436GMT today, Brent Crude Oil one month futures contract rose 0.24% or $0.27, to trade at $112.34 per barrel. Yesterday, the contract gained 0.46% or $0.51, to settle at $112.07 per barrel, amid robust economic data from US and after Federal Reserve Chairman, Ben S. Bernanke stated that the US economy has shown signs of improvement.
Gold
At 0436GMT today, gold futures contract marginally lost 0.02% or $0.40, to trade at $1,758.90 per ounce, ahead of a key US employment report scheduled for release later today. Yesterday, the contract gained 0.56% or $9.80, to close at $1,759.30 per ounce.
Currency
At 0436GMT today, the EUR weakened against the USD, marginally losing 0.06%, to trade at $1.3128. Yesterday, the EUR fell 0.25% versus the USD, to close at $1.3136, as Greek debt negotiations appeared to have stalled.
At 0436GMT today, the GBP strengthened against the USD, marginally gaining 0.04%, to trade at $1.5809. Yesterday, the GBP fell against the USD, losing 0.27%, to close at $1.5803, after the construction Purchasing Managers Index (PMI) in the UK dropped to 51.4 in January, compared to 53.2 posted in December.
Fixed Income
In the US, long term treasury prices remained flat, as investors await the highly anticipated monthly US non-farm payrolls report. Yesterday, yields on 10-year notes decreased 1 basis point to 1.86%, while yields on 2-year bonds remained unchanged at 0.23%. Meanwhile, 30-year bond yields remained flat at 3.01%.
Key Economic News
UK construction PMI fell more-than-expected in January
On a seasonally adjusted basis, the construction Purchasing Managers' Index (PMI) in the UK dropped to a reading of 51.4 in January, marking the lowest level in four months and compared to a reading of 53.2 posted in December. Market had expected the index to drop to a reading of 52.5.
Euro-zone producer price inflation slowed in December
On an annual basis, the Producer Price Index (PPI) in the Euro-zone rose 4.3% in December, matching market estimates and compared to a 5.4% rise recorded in November. On a monthly basis, the PPI fell 0.2% in December, compared to a 0.2% increase recorded in the previous month. Market had expected the index to fall 0.1% MoM in December.
Swiss trade surplus narrowed more-than-expected in December
Trade surplus in Switzerland narrowed to CHF2.07 billion in December, compared to a downwardly revised surplus of CHF 2.95 billion recorded in November. Market had expected the trade surplus to narrow to CHF2.85 billion in December, compared to an initially reported surplus of CHF3.0 billion in November.
US weekly jobless claims fell more-than-expected
For the week ended 28 January 2012, initial jobless claims in the US fell to 367,000, compared to the previous week's revised figure of 379,000. Market was expecting the claims to drop to 370,000, following 377,000 claims originally reported for the previous week. Additionally, for the week ended 21 January 2012, continuing claims in the US fell to 3.437 million, compared to the preceding week's revised level of 3.567 million.
US labor productivity increased in 4Q FY2011
On a sequential basis, non-farm labour productivity in the US increased 0.7% in the fourth quarter of 2011 (4Q FY2011), compared to a revised 1.9% increase recorded in 3Q FY2011. Market had expected labour productivity to rise by 0.8% QoQ in 4Q FY2011. Additionally, output per hour rose by 3.6% in 4Q FY2011.
US Consumer Outlook Index fell in February, indicates RBC
The Royal Bank of Canada (RBC) stated that its US Consumer Outlook Index declined to a reading of 45.1 in February, from a reading of 45.8 posted in January.
Bernanke sees improvement in economy
Federal Reserve Chairman, Ben S. Bernanke stated that the economy has shown signs of improvement while remaining vulnerable to shocks, and urged the lawmakers to lower the long-term US budget deficit. He however added that, the pace of the recovery has been frustratingly slow, particularly from the perspective of the millions of workers who remain unemployed or underemployed.
Fisher tags rate forecast as guess
Dallas Fed President, Richard Fisher, has cautioned that the central banks interest rate forecasts are "ultimately pure guesses". However, he indicated that he is "delighted" by the Feds decision to specify an inflation rate target of 2.0 percent.
Japanese composite PMI rises
The composite Purchasing Managers Index (PMI) in Japan climbed to a reading of 51.1 in January, compared to a reading of 50.1 posted in December.
China non-manufacturing sector growth slows
The non-manufacturing PMI in China dropped to a reading of 52.9 in January, following a reading of 56.0 recorded in the previous month.
