Market Daily - 3 December 2012
UK Market Snapshot
UK markets finished broadly flat on Friday, as concerns following a deal on the US federal budget overshadowed better-than-expected UK consumer confidence. Losses in miners weighed on the index, as Anglo American, ENRC and Vedanta Resources declined between 1.3% and 1.8%, on lower metal prices. Royal Bank of Scotland Group dropped 1.3%, amid reports that the planned sale of its Indian retail and commercial-banking operations to HSBC Holdings Plc had collapsed. Kingfisher lost 0.4%, on a broker downgrade to Neutral from Buy, citing near-term risks. On the flip side, Croda International and Johnson Matthey added 1.3% and 0.5%, respectively, following a broker upgrades. Vodafone Group rose 0.5%, after the company said it would accelerate the integration of Cable & Wireless Worldwide. Dixons Retail soared 6.7%, after its CEO expressed optimism that the company would profit from Comet's demise. The FTSE 100 index fell 0.1% to close at 5,866.8, while the FTSE 250 index gained 0.1% to close at 12,034.2.
US Market Snapshot
US markets closed broadly flat on Friday, as US lawmakers continued to negotiate on the federal budget and after consumer spending in the US fell in October. Wal-Mart Stores added 1.7%, after the company rescheduled its dividend payment from January to December. Supervalu climbed 4.4%, as the company stated that its strategic review is continuing. Tellabs surged 20.7%, as the company announced a special dividend. Five Below rallied 18.4%, as it swung to a fiscal third-quarter profit and raised its full-year guidance. However, Groupon plunged 8.7%, amid reports that its board meeting ended with no change to its Chief Executive position. Nexstar Broadcasting Group dropped 7.0%, after it offered eight million of its share priced at a 4.4% discount to Thursday's close. The S&P 500 Index rose 0.2 points to settle at 1,416.2, while the DJIA Index gained 3.8 points to close at 13,025.6. The NASDAQ Index fell 0.1% to finish at 3,010.2.
Europe Market Snapshot
Other European markets ended mostly lower on Friday, following disappointing economic data from the euro-zone and as concerns over the US fiscal cliff weighed on investor sentiment. Gecina declined 4.2%, after Grupo PRA sold a 1.5% stake in the company. Carmakers, Fiat SpA, Porsche, Renault and BMW climbed between 0.4% and 2.7%, on higher risk appetite among investors. HeidelbergCement AG jumped 2.3%, on a broker upgrade to Overweight from Equal weight. Luxury goods makers, Christian Dior and Financiere Richemont added 1.9% and 1.7%, respectively. Schneider Electric added 1.3%, after a brokerage raised its rating on the stock to Overweight from Neutral. The FTSEurofirst 300 index fell 0.2%, to close at 1,119.4. Among other European markets, the German DAX Xetra 30 gained 0.1%, to finish at 7,405.5, while the French CAC-40 lost 0.3%, to settle at 3,557.3.
Asia Market Snapshot
Markets in Asia are trading higher this morning, after Chinese manufacturing activity showed signs of improvement and on upbeat South Korean export data. In Japan, Shimizu Corp and Komatsu are trading 5.2% and 0.7% higher, respectively, amid speculation a deadly highway-tunnel collapse will reduce opposition to more public works spending. In Hong Kong, HSBC Holdings is trading 0.6% higher, after its plan to buy Royal Bank of Scotland Group Plcs Indian assets collapsed. Cathay Pacific Airways is trading 1.3% lower, after CNBC reported that the airlines staff was unhappy with the size of a planned salary hike. In South Korea, Hyundai Motor is trading 1.8% higher, after it stated that US vehicle sales increased last month. The Nikkei 225 index is trading 0.6% higher, at 9,501.7. Hang Seng index is trading 0.1% higher, at 22,060.8, while the Kospi index is trading 0.4% higher at 1,940.7.
Commodity, Currency and Fixed Income Snapshots
At 0431GMT today, Brent Crude Oil one month futures contract is trading 0.35% or $0.39 higher at $111.62 per barrel, on better than expected Chinese manufacturing data, improving demand prospects for the commodity. On Friday, the contract advanced 0.42% or $0.47, to settle at $111.23 per barrel, following supply concerns in the Middle East as Syrian rebels battled regime troops south of the capital.
At 0431GMT today, Gold futures contract is trading 0.47% or $8 higher at $1720.7 per ounce. On Friday, the contract fell 0.97% or $16.8, to settle at $1712.7 per ounce, amid continued negotiations aimed at resolving the so-called fiscal cliff.
At 0431GMT today, the EUR is trading at $1.3041 against the USD, gaining 0.29%, ahead of euro-zone PMI data to be released later today. On Friday, the EUR strengthened 0.24% versus the USD, to close at $1.3003, after German lawmakers approved Greeces latest rescue package. However, Moody's Investors Service lowered the rating of Euro-zone's rescue fund, European Stability Mechanism to Aa1 from Aaa and maintained negative outlook.
At 0431GMT today, the GBP strengthened against the USD, gaining 0.11%, to trade at $1.6042, ahead of UK PMI data to be released later today. On Friday, the GBP weakened a marginal 0.08% against the USD, to close at $1.6025.
In the US, long term treasury fell, pushing the yields marginally higher, as Germany approved Greeces latest rescue package, increasing risk appetite among investors. On Friday, yield on 10-year notes was unchanged at 1.62%, while yield on 2-year was flat at 0.25%. Meanwhile, 30-year bond yields increased 2 basis points to 2.81%.
Key Economic News
UK house prices retreated for the fifth consecutive month in November, indicates Hometrack
Hometrack reported that, on a monthly basis, house prices in the UK fell 0.1% in November, compared to the same rate of drop recorded in the previous month. On a yearly basis, house prices dropped 0.3%, in November, compared to a 0.4% drop recorded in the previous month.
UK Lloyds business sentiment remained unchanged in November
The Lloyds Business Sentiment Index for the UK, remained unchanged at 17.0 in November compared to the reading reported last month.
Euro-zone unemployment rate rose in October
The unemployment rate in the Euro-zone rose to 11.7% in October, in-line-with-market-expectations and compared to a rate of 11.6% recorded in September.
Euro-zone consumer prices eased more than expected in November
On a year-on-year basis, the Consumer Price Index (CPI) in the Euro-zone eased 2.2% in November, from rate of 2.5% recorded in October. Market had expected the rate of inflation to fall to 2.4% YoY in November.
Benoit Coeure calls for a closer political union
European Central Bank's (ECB) Executive Board member, Benoit Coeure stated that, there should be a closer political union that can deeply engage euro area citizens. Further, he noted that, the euro is a currency with a state - but it's a state whose branches of government are not yet clearly defined.
Moodys downgraded Euro-zone bailout funds triple-A rating
Moody's Investors Service lowered the rating of Euro-zone's rescue fund, European Stability Mechanism (ESM) to Aa1 from Aaa and maintained negative outlook. While the) provisional rating for the European Financial Stability Facility (EFSF) was lowered to (P)Aa1 from (P)Aaa.
Large imbalances make monetary policy conduct challenging, says Mario Draghi
European Central Bank (ECB) President, Mario Draghi stated that, the large imbalances in the Euro area would make the conduct of monetary policy much more challenging. He indicated that, the crisis has made it absolutely clear that large imbalances within the Euro area can become a fundamental issue for the stability of economic and monetary union
German retail sales fell more than expected in October
On a monthly basis, retail sales in Germany declined 2.8% in October, compared to a downwardly revised gain of 0.5% recorded in the previous month. Market had expected the retail sales to drop 0.4% MoM in October. On an annual basis, retail sales fell 0.8% in October, for a fourth consecutive month, following a downwardly revised 3.4% drop recorded in September.
France producer prices rose more-than-expected in October
INSEE reported that, on a monthly basis, Producer Price Index (PPI) in France rose 0.5% in October, following a 0.4% gain recorded in September. Market had expected the index to gain 0.2% MoM in October. On an annual basis, the PPI rose 2.9% in October, in-line-with-market-expectations and compared to a 2.9% rise recorded in the previous month.
France consumer spending fell in line with market expectations in October
On a monthly basis, consumer spending in France declined 0.2% in October, in-line-with-market-expectations and following a flat reading recorded in September. On a yearly basis, the consumer spending fell 0.5% in October, compared to a 0.3% drop recorded in September.
Swiss KOF economic barometer declined for the second consecutive month in November
The KOF Institutes economic barometer in Switzerland declined to a reading of 1.50 in November, from a revised reading of 1.64 in October. Market had expected a reading of 1.60 in November.
Chicago business barometer expanded modestly in November
Institute for Supply Management Chicago reported that, its business barometer edged up to a reading of 50.4 in November, from a reading of 49.9 in October. Market had expected the business barometer to rise to a reading of 50.3 in November.
US personal spending dropped unexpectedly in October
Personal spending in the US fell 0.2% in October, compared to a 0.8% increase recorded in September. Market had expected the personal spending to rise 0.1% in October. Meanwhile, personal income remained unchanged in October, compared to a 0.4% growth recorded in September.
Feds Stein supports current stimulus policy
Jeremy Stein, the Federal Reserve (Fed) Board Governor, has stated that the central bank should continue its monetary easing stance to boost economic growth until the US employment outlook gets considerably better. He also said that the Fed's strategy of buying mortgage-backed securities was particularly effective in helping the housing finance sector.
Canadian GDP remained unchanged in September
On a month-on-month basis, Gross Domestic Product (GDP) in Canada remained unchanged in September, compared to a 0.1% drop recorded in August. Market had expected the GDP to rise 0.1% MoM in September. On an annual basis, the GDP rose 1.0% in September, compared to a 1.2% increase recorded in the previous month. Meanwhile, on a quarterly basis, annualized GDP rose 0.6% in the third quarter of 2012 (3Q FY2012), following an upwardly revised 1.9% growth recorded in the previous quarter.
Japanese housing starts increased unexpectedly in October
On an annual basis, housing starts in Japan increased at an annualized rate of 25.2% in October, from a 15.5% rise recorded in September, and as compared to an expected rise of 10.1%. Annualized housing starts increased to 978,000 from 866,000 in September.
Japanese government approved an additional stimulus package
The Japanese government approved a 880 billion ($10.7 billion) economic stimulus plan for the nation, the second package in a little more than a month.
Japanese capital spending rose less -than-expected in 3Q FY2012
The Ministry of Finance reported that, capital spending in Japan rose to an annual rate of 2.2% in 3Q FY2012, lower than 7.7% increase recorded in the preceding quarter. Market had expected the capital spending to rise 4.4% in 3Q FY2012.
China manufacturing PMI improved in November, indicates HSBC
The HSBC Purchasing Managers Index (PMI) for manufacturing in China rose to a reading of 50.5 in November, compared to a reading of 49.5 recorded in the previous month. Market had expected the index to rise to a reading of 50.4 in November.
Chinas non-manufacturing activity rose in November
The official non-manufacturing PMI in China rose slightly to a reading of 55.6 in November compared to a reading of 55.5 posted last month.