By Donal Wee
Business Operations Analyst
CMC Markets Singapore
Markets traded marginally higher today without much conviction until we received word that Euro zone finance ministers had ended their discussions on the next round of loans to Greece without agreement again.
They have postponed the decision for a second time, this time until Monday next week and the drawn-out nature of the whole affair was enough to send a mini shock wave through markets that are jumpy at the moment.
Asian equity markets all came off early highs after the news broke of the postponement with the Australian market being the first to close and the worst affected by the news. At the close the Australian market was down 0.4% and the healthcare sector was the worst affected with big name players CSL, Sonic Healthcare and Cohlear all down 2% or more.
The Nikkei came off its early session high but still finished 0.9% higher as global worries are somewhat abated by hopes for a change in government and a change in policy in the near future. It finished at 9222 which was a 2 month high at a time where most markets are 5% or more off their recent highs.
The Hang Seng rallied late to finish the day 1.3% higher with much of the boost coming from Chinese listing in Hong Kong after the mainland indices all rallied hard into the close. There was also talk today that the government owned People’s Insurance Company (PICC) are planning a listing that will value the insurer at over USD20bn.
They are looking at a float of around USD4bn worth to begin with and if successful, it will be the biggest IPO in Hong Kong this year.
On the local front the Straits times Index looks like it will finish virtually unchanged. The biggest news story is the price action in agricultural commodities company Olam International which initially opened weaker again before rallying strongly as the company strongly refuted the assertion by Muddy waters that there were irregularities in their accounting practices.
The situation in Europe drove investor into the safety of the US dollar with the dollar index gaining 0.3% against a basket of key currencies. Unsurprisingly the Euro took a bit of a dive on the news and currently sits around 0.5% lower on the day and if uncertainty around the next round of loans continue there could definitely be more weakness in the common currency.
The Yen has also continued its slide on expectations that a new government will aggressively push the Bank of Japan to expand monetary stimulus. It hit a low of 82.12 to the dollar which is its weakest level since early April.
Dollar strength also out pressure on Gold which was down as much as 0.4% before recovering after the dust settled. It now sits at 1,725.50/oz which is essentially back where we started.
With a shortened trading week in the US this week for Thanksgiving there is a bit of data due out tonight including MBA Mortgage Application which will give us insight into the US housing market and Initial Jobless Claims which give us a peek into the job market. Later in the session we are also expecting the results of the German 10 year bond issue.
Tomorrow during the Asian session we will get the HSBC estimate for Manufacturing PMI and we are expecting a reading of 49.5 which means it would still be contracting.
During European hours we will see the French and German Flash PMI reading with both expected to come in below 50 meaning there is contraction but both expected to return higher than the last reading indicating the rate of contraction is slowing. We are also expecting a Spanish 10 year bond auction. Friday we will see the German 3rd Qtr final GDP reading which is expected to come in at 0.4%.