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CMC Markets – Evening Update 23/01/13

By David Fiander
Equities Risk Manager
CMC Markets Singapore

Technology giants IBM and Google reported better than expected earnings and revenue overnight giving markets a positive lead to start the day but Asia was not unified in optimism as domestic factors gave markets reason to diverge.

The Australian share market gained 0.2% on the day to hit a fresh 21 month high with market heavy weight BHP Billiton leading the charge in gaining 1.3% after reporting a rise in its quarterly iron ore production. The gains were quite evenly dispersed with investors selling defensive sectors while the Resources, Energy and Financial sectors all posted solid gains.

The Nikkei slid for a 3rd straight day after the BOJ’s latest round of monetary easing fell short of expectations for some due to the fact the open-ended purchases will only begin in 2014. The losses accelerated over the day as we saw the market finish over 2% lower with exporters wearing the worst of the pain. The Hong Kong market is down slightly on the day, trading close to its highest level since early 2011 but waiting for the next big piece of positive news before driving through the resistance levels.

The local Straits Times Index is currently up 0.3% in a quiet day of news and trade. Some decent local earnings of late have helped stabilise the market after the panic selling that initially occurred when the government announced new measures to cool the property market last week.

The slide in the Yen which saw it decline over 15% against the USD over the last 6 months has paused over the last 2 days on fears that monetary stimulus from the BOJ will take too long to help the economy push towards the 2% inflation target. The 90 Yen per USD mark seems to be a key level that could be tested again when this profit taking period is finished but it is unlikely that futures moves will be as swift and consistent as the move we saw over the last few months.

Gold was little changed during today’s session and still sits near 1 month highs on speculation the House of Republicans will vote in favour of temporarily suspending the $16.4 trillion debt ceiling until May 19. Last time Gold was this close to the $1,700/oz mark it was sold off close to 4% and while there were external factors at play with the resolution of the Fiscal Cliff negotiations, it will be interesting to see if it can break through this key psychological level again.

US reporting season resumes tonight with the world’s biggest listed company Apple among those reporting. Expectations have been dampened for their results this time around but they do have a habit of surprising on the upside so it will very interesting to see what they deliver. The World Economic Forum are also hosting their annual meeting in Davos at present. It is an invitation only meeting, bringing together CEOs from its 1,000 member companies as well as selected politicians, academics, NGO representatives and religious leaders. While they are not responsible to shaping global economic policy directly, it will be interesting to see the sentiment of some of the world largest flagship companies.