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CMC Markets – Evening Update 14/12/12

By Donal Nee
CMC Markets Singapore

Asian equity markets started today mostly lower after following the U.S. markets’ negative lead which ended firmly to the downside however by midday these losses where short lived as the regional Indices bounced back on better than expected Chinese Flash PMI figures.

U.S. equity markets fell last night as the powers that be continue to bicker over a deal which will see large tax hikes and spending cuts being set for the start of the year. Talks are still ongoing and will continue to have investors on edge, if a deal is not brokered by the end of the year many believe the US economy will surely fall into recession.

Last night the Dow Jones fell 0.6%, the S&P 500 followed suit, dropping 0.6% as the index capped its 6th session winning run. Last night’s session however was not all doom and gloom as the U.S Labour Department’s report showed initial claims for jobless benefits fell by 29,000 to 343,000 last week, exceeding expectations as many analysts expected claim to only fall to 370,000.

Over the last few weeks, the weekly claims data has been quite volatile due to disruption caused by Hurricane Sandy not to mention the holiday season coming up.

Chinese manufacturing data continued its upward trend as we saw further improvements in December as an initial reading of HSBC’s Purchasing Managers’ Index had it rising to 14-month highs today. Today HSBC’s manufacturing PMI for December which is a closely watched indicator of the world’s 2nd largest economy came in at 50.9, compared against a reading of 50.5 for the month of November. PMI readings above 50 indicate an improvement in activity, while readings below 50 represent contraction. Today’s positive reading helped lift sentiment across Asia, with most equity markets posting gains.

Japan’s Nikkei rose marginally by 0.1%, adding to a 1.7% gains from yesterday, the positive gains were affected today by reports from the Bank of Japan’s Tankan index, which signals confidence among goods producers had worsened. This now raised expectations for the possibility of more monetary stimulus if the opposition party win support over this weekend’s vote.

Japan’s biggest manufacturers became the most pessimistic since March 2010. The Tankan index fell to minus 12 in December from minus 3 in September; a negative figure means pessimists outnumber optimists. On the week the Nikkei was up over 2.2%.

In Australia stocks had finished the day flat in a session influenced by good news out of China and bad news out of the US. At the close, the ASX200 index was 0.3 points, or 0.01 % at 4,583.1, Australian trading saw banks advance, with Commonwealth Bank of Australia rising 0.6% to near an intraday high not seen for over 20 years.

The materials sector also posted gains with BHP Billiton finishing 0.19% higher, Rio Tinto up 0.4% and Fortescue Metals climbing 1.4%. Today’s fractional gains brought the ASX 200 Index up 0.7% on the week. Hong Kong’s Hang Seng finished up 0.7 % today to bring the weekly gains to 1.8% for the week.

PetroChina Co. the nation’s biggest oil producer added 1.9% after agreeing to set up a venture with Canada’s Encana Corp. The local Singapore market also followed the other regional indices by posting gains of 0.27%, the Straits Times Index managed to round out the week up over 3.2% as it continued its 8th straight winning session. Today’s top performers were property firms City Development and Global Logistics who own warehouses in China and Japan, both stocks were up over 3% on the back of the positive HSBC PMI figures out of China.

Gold came off 0.4% this week, its 3rd straight week of losses as yearend profit taking and the protracted nature of Fiscal Cliff negotiations cause an overhang which more than offset the Fed’s announcement of additional asset purchases earlier in the week. Gold had previously been well supported below the $1,700 level but it went as low as $1,689 overnight and its attempt to brake back above $1,700 today was rebuffed.

The Japanese Yen continued its slide losing ground against all of the major currency pairs on speculation that the opposition party led by Shinzo Abe will win the election over the weekend in a landslide victory and push the BOJ to expand monetary easing. Against the USD it was 1.7% lower on the week which marked its fifth straight week of losses and takes it to its lowest level in almost 9 month.

Towards the end of the Asian session we will get a look at the preliminary PMI reading for France, Germany and the EU with expectations that all will continue to show contraction with readings below 50. Later in the session we will get a look the Eurozone and US inflation readings for November, with both expected to drop into negative territory given the current state of play.

Lastly the US will release their Industrial Production reading for November which is expected to come in at 0.3% after have a negative reading the previous month. On Sunday we have the Japanese general election where the Liberal Democratic Party led by Shinzo Abe is expected to unseat the incumbents.