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CMC Markets – Evening Update 30/11/12

By Donal Nee
CMC Markets Singapore

Asian equity markets had a good performance this week as all of the regional indices posted strong gains. Helping boost markets earlier in the week was the growing optimism that President Obama and Congress were coming close to an agreement over the US “fiscal cliff” burden which has rocked investor confidences over the last few weeks.

Both parties are attempting to come to agreement over raising taxes on the wealthier percentile of Americans. A deadlocked however is still in place as the powers that be still remain in loggerheads over $600BN worth of year-end tax increases not to mention spending cuts which are due to be implemented in the new year.

Adding fuel to the fire however were comments made last night by Republican Speaker of the House John Boehner who warned of a lack of progress in the talks aimed at breaking an impasse. These comments brought U.S markets back in line as the Dow Jones finished up 0.28%, 40 points off its high. The S&P 500 finished the session in the same fashion as it too closed up 0.43% which was 4 points off its high.

As always, a week doesn’t go by where the Greek Debt issue is not at the forefront, however this week there was some positive news as European leaders agreed on terms of a third financial assistance programme for the country.

Japan’s Nikkei finished up 0.5% today as the Index hit 7 month highs hitting 9,446. On the data front, Japan’s factory output beat analysts’ expectation as it rose the most since December on production of parts for devices, most notably parts for the new Apple’s iPhone.

Industrial production in October increased 1.8% from the previous month, where it dropped 4.1 % compared against analysts’ estimates for a 2% fall. Production of electronic parts and devices rose 14.7 % from September, the biggest advance since 1998. For the week the Nikkei closed up 0.8%.

Australia’s ASX 200 advanced 0.63% hitting 3 week highs and bringing weekly gains to 2.1% as the index marched through the 4500 level. Today shares in Lynas jumped out of the blocks as the stock rose 6.7% after an announcement that operations are underway in its Malaysian plant however these gains were short lived as the stock plunged to be down 5% nearing the close in what was a choppy day of trading for the mining company.

The large turn around was on the back of reports that the Malaysian high court will not hear the company’s application to carry out production on its mines until February next year. Elsewhere Rio Tinto was today’s top performer as the stock climbed 2.75%. Hong Kong also followed the other regions as the Heng Seng posted gains of 0.49% today, adding to the positive returns of 0.5% for the week.

The local Singapore market extended its winning streak to close up over 1% today as it added to gains of 3% for the week. Commodities traders Olam international grabbed all the headlines this week as the stock plunged over 11% in the last 2 weeks.

The falls came after the company strongly defended accusations made by Muddy Waters on its accounting irregulars which were likened to that of the Enron collapse. Global logistics properties, who have warehouses in Japan, benefited today from the strong Industrial production numbers out of the Japanese region, the stock traded up 2.2% today.

Despite a relatively flat trading session on Friday, Gold was heading to its biggest weekly loss since the start of the month, falling around 1.4% over the course of the week. Interest in Gold has been fairly subdued and dented by the continued uncertainty of talks surrounding any progress in the US Fiscal cliff. The fact that Gold was unable to push substantially above $1750 earlier in the week, has left it looking vulnerable from a technical perspective.

In Forex, month end flows for balancing look to have favoured the likes of the EUR and USD/JPY. The EUR has held up relatively well throughout the week, gaining close to 0.5%, trying to keep above the 1.30 handle and largely supported by Mondays decision by Euro leaders to unlock a third tranche of funds to Greece, which removed some of the uncertainty that had been hampering the currency.

The USD/JPY was again strong on the week, also gaining 0.5%, edging closer to the 83 handle. Growing sentiment that we will see a new Government formed when Japan goes to the polls mid-December with a bias towards policies promoting a weaker Yen have kept the cross pair bid.

Next week again all eyes will be back on the U.S as the “fiscal cliff” drama will continue to unfold however tomorrow we see China’s PMI figures with analyst forecasting a reading of 50.8, any deviation from this figure may have a large bearing on how markets open for trade on Monday.

Next week is a busy week of data as Australian Retails sales is due out on Monday then later that night we will see both the UK and U.S Manufacturing PMI numbers. Tuesday we will see the Australian Cash Rate decision with analysts expecting the rate to stay unchanged at 3.25%.

Then at the end of the week all the attention will be on the U.S for Friday night’s Non-Farm Payroll with many hoping to see momentum build as the country looks to get back on its feet.