Equity markets rallying hard today on…
Well, it seems nowadays the market just wants to run. As we debated the macro picture in today’s investment meeting, I reckon the theme is just not go against the trend.
For stocks we had JPM and Intel both with solid numbers. European markets are doing especially well after Eurozone industrial production surprised to the upside – it’s a good thing we switched out of Nikkei into DAX this has gotten us a lot of positive performance in the past few days.
Energy having a solid day after it was known that Chinese September oil import was very strong. But the rally could be due to dollar weakness or just momentum. Copper is also up a decent amount.
Gold right at $1370 today.
Bit of weakness for bonds with corn and wheat taking a break from the recent rally.
We seem to be in an environment where if economic news is good markets rally, and if the news is bad then the markets rally on expectation of additional stimulus and monetary loosening.
The key question now is : how much of the QE is priced in? There is really no precise mathematical way to measure it. Global equity market has gained well over a trillion dollars in market cap since the announcement of QE2. Is that enough?
I think for the remainder of the week we ride out the trend and consider becoming more defensive next week after re-examining the data and market conditions.
Japan machinery orders unexpectedly increase in Aug for third month in a row
• Core machinery orders, a closely-watched indicator of future business investment, rose 10.1% in August. The result was far better than the 4% drop economists had predicted.
• Much of this support came from domestic demand which is holding up well BUT overseas demand, an indicator of prospects for Japanese exports, fell 3.7% in its first decline for four months.
Australian consumer sentiment bounces back in Oct
• Consumer confidence in Australia rebounded in October following the Reserve Bank of Australia's surprise decision to keep rates unchanged for a fifth straight month.
• Strong jobs growth, the delay in the tightening cycle, and the rally in both equities and the AUD all suggest confidence will remain robust this month - despite the ongoing softening in house prices.
UK employment picture looks mixed
• Unemployment rate fell but initial jobless claims rose for the second straight month in Sep.
• The rise in the more timely claimant-count measure doesn't bode well for the economy, particularly as it comes a week ahead of the coalition government's comprehensive spending review.
Eurozone industrial production up 1% in Aug
• Industrial output in the 16 countries that use the euro rose by a monthly 1 percent in August, official figures showed Wednesday, easing concerns that the sector's recovery was grinding to a halt.
• The rise reported from Eurostat, the EU's statistics office, is likely to ease fears that the eurozone economy is facing a sharp slowdown in the wake of the faltering recovery in the United States. Much of the eurozone's economic growth in the second quarter of the year was based on a bounceback in the industrial sector, particularly in Germany.
• Make no mistake however that the data points to significant slowdown – just not as bad as feared. If you look at details though you see peripheral Europe- Spain, Greece, Portugal all seeing big declines.
China trade surplus just keeps growing and growing
• China’s Sep surplus came in at $17B which made Q3 the biggest surplus quarter since 2008.
• Exports grew 25.1% from a year earlier and imports climbed at 24.1%.
• This will further flame US’s stance that China is a currency manipulator and must revalue Yuan. Chinese really wouldn’t care whatever US has to say. While this build up in political tension is definitely a key issue it wouldn’t impact the asset markets at least not in short term.
Tomorrow we will see US PPI and initial jobless claims. I do not expect either to be a major market mover.
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