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Pre-market briefing, including "UK house prices rise in January, indicates Rightmove"

UK Market Snapshot

UK markets finished higher on Friday, as upbeat Chinese GDP data outweighed UK’s weak retail sales data. Despite reporting lower steel production in the fourth quarter, Evraz Plc advanced 4.5%, as the Chinese GDP data raised expectations of rising demand for metals.  Meggitt gained 1.5%, following a broker’s upgrade to ‘Overweight’ from ‘Equal weight’. Retailers, Diageo and Unilever, climbed 1.0% and 0.3%, respectively. Kentz Corp jumped 9.1%, after it reported a strong order book as of December 2012 and guided to double digit full year 2013 earnings growth. Spectris soared 6.7%, after the company reported higher same store sales growth in its fourth-quarter and for fiscal 2012. Bucking the trend, Ashmore slipped 3.2%, following a broker downgrade to ‘Neutral’ from ‘Buy’. International Consolidated Airlines declined 1.6%, after London’s Heathrow airport cancelled 347 flights amid heavy snowfall in southern Britain. The FTSE 100 advanced 0.4%, to close at 6,154.4, while the FTSE 250 rose 0.8%, to settle at 12,946.1.

US Market Snapshot

US markets closed mostly higher on Friday, after House Majority Leader Eric Cantor stated that Republicans would propose temporary increase in debt ceiling in order to give Congress time to pass a budget. General Electric advanced 3.5%, as the company reported fourth quarter earnings ahead of market expectations. Life Technologies surged 10.6%, amid reports that it has hired Deutsche Bank and Moelis to assist in a strategic review of the biotechnology company. Morgan Stanley soared 7.9%, after the bank swung to a higher-than-expected profit in the fourth quarter. However, Apple slipped 0.5%, ahead of its quarterly results report due on 23 January. Intel plunged 6.3%, as the company reported a third consecutive quarter of declining sales. The S&P 500 Index gained 0.3%, to settle at 1,486.0, while the DJIA Index rose 0.4%, to close at 13,649.7. Meanwhile, the Nasdaq Index slid 1.3 points, to finish at 3,134.7.

Europe Market Snapshot

Other European markets finished lower on Friday, as an unexpected decline in the US consumer confidence index outweighed stronger than expected Chinese GDP data. Metro AG slipped 1.4% following a broker downgrade to ‘Underperform’ from ‘Neutral’. Drug maker, Sanofi and Bayer declined 1.3% and 0.6%, respectively. Carmakers, Daimler, BMW and Volkswagen retreated 1.2%, 1.0% and 0.3%, respectively, amid weak demand outlook. On the flipside, Mediaset SpA rose 5.8%, after a brokerage predicted a recovery in the advertising market. Renault gained 4.4%, after the company announced that it has set a record for selling cars outside Europe for 2012. The FTSEurofirst 300 Index declined 0.2%, to close at 1,163.6. Among other European markets, the German DAX Xetra 30 slid 0.4%, to close at 7,702.2, while the French CAC-40 shed 0.1%, to settle at 3741.6.

Asia Market Snapshot

Markets in Asia are trading mostly higher this morning, amid optimism over the US debt ceiling talks. However, Japanese markets are trading lower, on expectations that the central bank would take aggressive anti-deflation measures. In Japan, exporters, Fuji Heavy Industries, Sharp Corp and Mitsubishi Motors are trading 3.4%, 2.6% and 2.1%, lower, respectively. In Hong Kong, mining stock, Citic Pacific is trading 2.3% higher, while ports operator, Cosco Pacific is rising 2.3%. Gome is trading 5.1% lower, after confirming that it is closing Gome- branded stores in the city. In South Korea, LG Electronics is trading 2.0% higher. However, Korea Petrochemical Industrial Co is trading 4.7% lower, after it reported a loss of $9.82 mln in 2012. The Nikkei 225 Index is trading 0.9% lower, at 10,815.1. Hang Seng Index is trading 0.1% higher, at 23,631.9, while the Kospi Index is trading 0.2% higher, at 1,990.7.

Key Economic News

UK retail sales declined unexpectedly in December

On a monthly basis, retail sales (excluding fuel) in the UK dropped 0.3% in December, compared to an upwardly revised 0.2% growth recorded in November. Market had expected the retail sales (excluding fuel) to rise 0.1% MoM in December. On an annual basis, retail sales (excluding fuel) rose 1.1% in December, slower than the 2.0% gain recorded in November. Similarly, on a monthly basis, retail sales including auto fuel fell 0.1% in December, compared to a flat rate recorded in the previous month. Market had expected the retail sales including auto fuel to rise 0.2% MoM in December. On an annual basis, retail sales including auto fuel rose 0.3% in December, following a 0.9% increase recorded in November.

UK house prices rise in January, indicates Rightmove

Rightmove reported that, the average asking price for a home in the UK rose 0.2% to £229,429 in January, compared to a 3.3% drop recorded in December. On a yearly basis, house prices climbed 2.4% in January, following a 1.4% growth recorded in the previous month.

BoE's McCafferty: QE May Have Lost Effectiveness

Bank of England Monetary Policy Committee (MPC) External Member Ian McCafferty stated that, the effectiveness of the UK central bank's asset purchases as a stimulus tool may have waned over the months. In a speech in London, he noted that, “the confidence on the asset purchases tool, otherwise called the quantitative easing, was the strongest when it was first introduced”. However, the policy maker told that, “the novelty of the instrument and the MPC's readiness to act quickly to loosen policy further at a time of ultra-low interest rates no doubt acted to lift "animal spirits"

IMF's Lagarde urged nations to focus on growth that can deliver jobs

International Monetary Fund (IMF) Managing Director, Christine Lagarde urged nations to focus on real economy and on growth that can deliver jobs. Speaking at a news conference in Washington, Lagarde stated that, policymakers have more work to do to and cannot revert to business as usual, though they succeeded in avoiding an economic collapse following the global financial crisis.

US consumer sentiment fell unexpectedly for the second consecutive month in January

According to a report released by Thomson Reuters and the University of Michigan, the preliminary reading on the Consumer Sentiment Index for January came in at a reading of 71.3 in January, hitting its lowest level since December of 2011 and compared to the final reading of 72.9 recorded in December. Market had expected the index to rise to a reading of 75.0 in January. Meanwhile, the preliminary rate of inflation expectations increased 3.4% in January, compared to a rate of 3.2% estimated earlier.

US ECRI Leading Index increased last week

The Economic Cycle Research Institute (ECRI) reported that, for the week ended 11 January 2013, its Leading Index in the US rose 6.1% to a reading of 130.4, compared to a downwardly revised 5.0% growth recorded in the previous week.

Canadian manufacturing sales rose more-than-expected in November

On a seasonally adjusted monthly basis, manufacturing sales in Canada rose 1.7% in November, from an upwardly revised 1.2% drop recorded in the preceding month. Market had expected the manufacturing sales to rise 1.0% in November, compared to a 1.4% drop originally recorded in the previous month.

Japan industrial output retreated in November

On a seasonally adjusted monthly basis, industrial production in Japan fell 1.4% in November, slower than the 1.7% fall estimated earlier. On an annual basis, industrial production dropped 5.5% in November, compared to a 5.8% decline estimated earlier. Similarly, on a monthly basis, capacity utilization dropped 0.2% in November, compared to a 1.6% rise recorded in the previous month.

BOJ should slow easing if Yen weakens too much, says Koichi Hamada

Koichi Hamada, one of Prime Minister, Shinzo Abe's special advisers stated that, the Bank of Japan (BoJ)   will need to slow monetary easing if the effects on prices and the yen go too far. Appearing with Economy Minister, Akira Amari on NHK television, he told that, policy makers are “working hard to raise prices and influence the Yen “If it goes too far, it should be stopped”.

Chinese business climate rose in 4Q FY2012

The Business Climate Index in China rose to a reading of 124.4 in the fourth quarter of 2012 (4Q FY2012), up 1.6 points from a reading of 122.8 recorded in the previous quarter. Meanwhile, the Entrepreneur Confidence Index improved to a reading of 120.4 in 4Q FY2012, compared to a reading of 116.5 recorded in 3Q FY2012.


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