2010 09 27

Pretty slow day again in terms of economic data.

One notable piece of data – although it was no surprise – is falling Japan exports no doubt exacerbated by strong yen. Japan’s economy continues to be a mess but it is quite tricky how to play this market now. There is building expectation that a massive stimulus on the way and BoJ would undertake greater currency intervention. Even though it makes no sense to me, BoJ intervention efforts did result in a rather sizeable rally in Nikkei. In fact, Japan is the best performing stock market in the developed world this year.

Investors are piling onto dividend stocks and investment grade corporate bonds seeking both some safety and yield. I used to hold LQD – investment grade corporate bond ETF – in IQ UCITS until I got rid of them in order to make room for Porcupine in the portfolio (there is a limit to how much total non-UCITS approved securities we can hold). I would add a little of both LQD and DVY (iShared dividends ETF) to IQ BVI in September.

Bond markets (treasuries and bunds) rallied hard today on an exceptionally good 2-year treasury auction in US. It drew the highest level of demand since August 2007. This is partially due to expectation of more Fed buying.

Outside bond market price moves are pretty muted everywhere else.

The biggest news tomorrow is US consumer confidence for Sep. A great month for stock market (this has been the best September in 70 years) should have served as a tailwind but dismal employment picture is expected to push confidence lower.




August Japan Trade Balance – trade surplus falls on slowing exports
• The Japanese economy reported today a narrowing trade surplus in August, as imports increased and the nation’s exports -which are the main pillar of the growth- grew at a slower pace as global demand cooled.
• Breaking down by region exports to US were particularly slow and there is every reason to expect Asia would follow as Asian economy still depends hugely on US consumption.
• Both slowing global economy and strong yen are proving to be a major drag on Japan exports.

Dry U.S. Midwest to spur corn, soybean harvest
• SINGAPORE, Sept 27 (Reuters) - Much-needed dry weather forecast for much of the U.S. Midwest this week is likely to encourage farmers to boost corn and soybean harvesting, a forecaster said on Monday.
• "The outlook calls for dry weather during the next 7 days," said Mike Palmerino, agricultural meteorologist for Telvent DTN in a forecast for the western Midwest.

Shanghai copper hits five-month peak; tight supply
• SINGAPORE, Sept 27 (Reuters) - Shanghai copper hit a five -month high on supply tightness as the market reopened following a public holiday last week.
• "The backwardation, however small, shows that supply in the global market is expected to be tight through the year-end," said a Shanghai-based trader, adding that buying from China was not very active due to unfavourable price differentials.