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Market to re-focus on economy this week | | | | From: NetResearch Asia [mailto:postman@netresearch-asia.com] Sent: Monday, November 12, 2012 10:00 AM To: NetResearch Asia 12 Nov 2012 Subject: Market to re-focus on economy this week Pre-Market Open Commentary for 12 November 2012 ( CO. REG. NO. 199904258C ) DJIA: 12815.39 +4.07 Nasdaq Composite: 2904.87 +9.29 Good morning, fellow investors US stocks eked out modest gains last Friday but failed to make up losses from last Wednesday and Thursday when attention turned from the presidential election to the coming negotiations over the “fiscal cliff”. Market outlook brightened in early trading after a slew of stronger than expected economic reading helped alleviate some worries. A report on consumer sentiment was significantly better than expected. The University of Michigan preliminary consumer sentiment index for November climbed to 84.9, the fourth consecutive increase and exceeding expectations of 82.0, up from 82.6 in October. Improving job conditions and rising home values are brightening consumers’ moods and lifting prospects for spending. A separate report showed that wholesale inventories for September also increased by 1.1%, the largest gain in 2012 and ahead of expectations of a 0.4% increase, after a gain of 0.8% in August. The reading is signaling that businesses are growing more optimistic about demand. Further, US import prices rose 0.5% in October, more than expectations but price hikes for imported oil slowed, rising 1.3% in October (well below the 4.7% gain in September and the 6.2% increase in August), pointing to only modest inflation pressures. However, market gave up some gains after hearing from President Barack Obama and House Speaker John Boehner, about the fiscal cliff. President Obama spoke about raising taxes on the wealthiest Americans and the White House also reiterated that Obama would veto any bill that extended the Bush tax cuts for the top 2% of wage earners. In separate public remarks, both the House speaker and the president made it clear that partisan sparring would likely dominate the next several weeks. On the corporate front, J.C. Penney reported a higher than expected loss, marking the third straight quarter of larger than forecast losses as CEO Ron Johnson struggles to remake the company. The shares tumbled 5% following the results. Late Thursday, Walt Disney reported earnings that were in line with expectations but sales of the entertainment company was below expectations, sending the shares 6% lower to US$47.06 and dragging on the Dow Jones Industrials. For the past week, all three major indices logged in losses with the Dow Jones Industrial Average declining 2.12% while the S&P 500 fell 2.43% to 1379.85. The Nasdaq lost 2.59% last week. In the week ahead, besides concerns over the “fiscal cliff”, market will further take leads from a fresh batch of economic that will provide further insights on how the US economic recovery is gaining momentum. Several reports on the manufacturing sector are due this week, including producer price, business inventories and industrial production. The manufacturing sector which had been a weak spot globally in 2012, have recently displayed signs of a turnaround with the ISM index for the US manufacturing sector expanding in October for the second consecutive month. The pace of factory activity in China also showed signs of a pick-up in October. However, euro manufacturing activity continues to slide. Also due this week are reports on consumer prices, an inflation gauge, as well as retail sales readings which could provide an early indication of consumer behaviour on holiday spending this year. On the corporate front, several retailers are set to report their quarterly earnings this week including Target, Wal-Mart, TK Maxx, Sears and Home Depot. Additionally, on Wednesday, the Federal Reserve will be releasing minutes from the October meeting by Federal Open Market Committee and although there are no major fresh announcements expected, market will parse through the minutes for signs of how long the Fed will continue with the monthly plans of buying US$40 bil in mortgage-backed securities to stimulate the economy. Crude oil for December delivery rosel US$0.98 a barrel, or 1.15% to settle at US$86.07 a barrel and for the past week, crude oil for December delivery added US$1.21 a barrel, or 1.43%. In Singapore today: Asian stock markets extended losses last Friday following a second consecutive day of declines on Wall Street as worries over the risk of a recession in the world's largest economy as the US faces a looming fiscal crisis cropped investors’ risk appetite. The Nikkei 225, the Kospi and the Hang Seng index fell 0.90%, 0.52% and 0.85% respectively while the Shanghai Composite index edged lower by 0.12%. Mirroring weakness in the regional bourses, the STI index sank to an intra-day low of 2994.76 points but pared losses in afternoon trading. A slew of positive economic data out of China could have led to short covering and bargain-hunting. China's annual industrial output growth quickened more than expected in October, growing 9.6% YoY against expectations of 9.4% and faster than a 9.2% growth achieved in September. Year-to-date fixed asset investment also rose at an annual 20.7%, stronger than growth of 20.5% reported for January-September and just ahead of expectations of growth of 20.6%. Annual consumer inflation eased to 1.7 % in October from 1.9% in September, providing scope for policymakers to further ease monetary policy if necessary to shore up growth. At the closing bell, the STI index dipped a mere 2.69 points at 3009.56 points and for the past week, the STI index retreated 31.19 points, or 1.03%. On Sunday, Greece's ruling coalition secured enough votes in parliament to approve the 2013 budget law. The parliament had already approved a new package of austerity measures worth €13.5 bil, a precondition for the troika to release the next installment of funds under Greece's second bailout. With Sunday's vote in favour of Prime Minister Antonis Samaras' coalition government, Greece is likely to receive two more years to meet budget targets set out in the original program in March, and gain access to €31.5 bil that Greece needs to stabilize its banks and redeem a key short-term debt due on Nov 16, 2012. The news is positive for markets. With this crucial budget law approved, Greece can now have access to stalled international bailout programme, removing market concerns that Greece will plunge into insolvency. Expect sideway drift marked by quiet trading on the local bourse today as investors are not likely to take on fresh positions in light of a public holiday tomorrow. 1. Chartzones – 9 November 2012 (premium) Conglomerate / Industrial and Property Stocks [read the report] 2. Asia Enterprises - 3Q12 results update (free) Rough ride ahead for steel sector [read the report] 3. Riverstone Holdings Ltd - 3Q12 results update (free) Demand for customised medical gloves still high [read the report] | |
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