Stocks Up On New Home Deals, Job Growth Prospects (30Dec)

Stocks up after new home contracts rise and unemployment claims suggest hiring could pick up

US Market:

U.S. stocks rose, restoring the yearly gain for the Standard & Poor’s 500 Index, as economic data signaled the U.S. is weathering Europe’s debt crisis. The euro erased an earlier loss versus the dollar and European shares gained. Treasuries rose.

The Dow Jones industrial average shot up 135.63 points, or 1.12 per cent, to 12,287.04 at the close. The Standard & Poor's 500 Index gained 13.38 points, or 1.07 per cent, to 1,263.02. The Nasdaq Composite Index advanced 23.76 points, or 0.92 per cent, to 2,613.74.

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Singapore Market:

The STI advanced 0.24% to 2672.8, Euro Stoxx 50 added 1.65%, the S&P500 rose 1.1% to 1263.

Record liquidity provision by the ECB has seen much of the money parked right back at the ECB, but some of it has surely been channaled into sovereign debt as Italy managed to meet its refinancing needs even if costs at the long end of the curve remain high. This "backdoor" QE, is putting some confidence back in global equities. But we warn that the year ahead is not all clear as underlying causes - economic divergence under a single monetary policy - has yet to be tackled in a big way. Measures of systemic risk still remain elevated.

US data continues its positive streak with unemployment claims hitting a 3yr low. Non-farm payrolls will provide a nice new year gift as net hirings increase. That said we have reservations going into 2012 for the US as incomes may not increase fast enough to offset increased fiscal tightening. 

Furthermore, the ex-USA industrialised world's slowdown is a bit concerning, as the EZ seems to be in recession, while China, Japan, S. Korea, Taiwan and Singapore post weak output data. Singapore itself is likely to see a 4q11 q-q contraction.

Good US data is likely to put some legs behind the S&P's short term rally (we have low conviction on it) but we suspect the STI will underperform given Singapore's GDP slowdown; we remain bears on the larger trend for the STI and S&P500 unless (1) the Eurozone process for fiscal integration actually addresses its suboptimal growth path, and (2) lead econ indicators globally improve.

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Stocks Slide; S&P 500 Turns Negative For Year (29Dec)

Stock fall on European banking worries; S&P 500 index turns negative for year

US Market:

U.S. stocks fell more than 1 percent on Wednesday after a hefty year-end rally and the S&P 500 erased gains for the year on renewed concerns about the euro zone's financial health. The selloff followed the euro's slide to an 11-month low against the U.S. dollar as regional debt worries prompted a wave of selling, with thin trading exacerbating volatility.

The Dow Jones industrial average fell 139.94 points, or 1.14 percent, to end at 12,151.41. The Standard & Poor's 500 Index dropped 15.79 points, or 1.25 percent, to 1,249.64. The Nasdaq Composite Index lost 35.22 points, or 1.34 percent, to 2,589.98.

Volume was light in the post-Christmas period and ahead of the New Year's Day holiday. Composite volume on the New York Stock Exchange, the Nasdaq and Amex was 4.31 billion shares, well below the year's daily average of around 7.9 billion shares. On both the NYSE and the Nasdaq, about four stocks fell for every one that rose.

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Singapore Market:

The STI lost 0.3% to 2666, Euro Stoxx 50 dropped 1.54%, the S&P500 also lost 1.25% to close 1249, below its 200 day ma again.

The ECB revealed a balance sheet enlarged to record amounts as European banks took advantage of its unlimited liquidity programme of unlimited 3yr loans and accepting lower rated collateral, as European banks have been increasingly shut out from credit markets. Given that most of the money was parked right back at the ECB indicates the inability to lend out the money, underscoring an economy in recession.

STI's relative under-performance could continue due to Singapore's and Asia's slowing growth outlook, but is the ECB news enough to take the wind out of the S&P500 short term rally? Given that the S&P responds recently more to US data, perhaps not, but we'll be agnostic on this given that we remain bears on the larger trend for the S&P500 and STI unless (1) the Eurozone process for fiscal integration actually addresses its suboptimal growth path, and (2) econ indicators globally corroborate a turnaround.

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Stocks Barely Changed In Light Holiday Trading (28Dec)

Stocks barely changed in light holiday trading; Consumer confidence surges, Sears plunges

US Market:

U.S. stocks were little changed, following the longest rally since September, as better-than- estimated consumer confidence data overshadowed a decline in home prices and concern about Europe’s debt crisis.

The Dow Jones industrial average was down 2.65 points at 12,291.35, Standard & Poor's 500 Index was up 0.10 points at 1,265.43, Nasdaq Composite Index was up 6.56 points at 2,625.20.  About 3.6 billion shares changed hands on U.S. exchanges, or 53 percent below the three-month average.

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Singapore Market:

The STI added 0.11% to 2673.6 in light trading, Euro Stoxx 50 dropped less than a point while the S&P500 added 0.1% to 1265.4.

More interestingly the Shanghai Composite continued its relentless 3yr decline and is about to challenge its 3yr low, valuations are lower than the Lehman crisis. The index sells on every piece of negative news it can find and the latest is profit growth is slowing. Concerns remain for a hard landing on real estate prices and export slowdown. On the plus side, income growth is still high, the consumer underlevered, and govt fiscal position aided by record revenues. We put hard landing odds at 50-50. Time for a tax cut and RRR we think.

Italian 10yr yield is poking its head around the 7% level again. Libor-OIS and Euribor-OIS are still creeping up every week. Despite the lack of European headlines to roil markets, this crisis is still not over.

Recent spat of good US data is likely to put some momentum behind the rally for the S&P500 (which we think is short term), but the STI's relative under-performance could continue due to Singapore's slowing growth outlook; so we remain bears on the larger trend for the STI and S&P500 unless (1) the Eurozone process for fiscal integration actually addresses its suboptimal growth path, and (2) econ indicators globally corroborate a turnaround. 

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Stocks Close Higher; S&P Turns Positive For 2011 (27Dec)

Stocks close higher after quiet, pre-holiday trading; S&P 500 turns positive for the year

US Market:


The Dow Jones industrial average was up 124.35 points at 12,294.00, Standard & Poor's 500 Index was up 11.33 points at 1,265.33, Nasdaq Composite Index was up 19.19 points at 2,618.64, on Friday.

The US markets were closed on Monday.


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Singapore Market:


The STI, Euro Stoxx 50, and S&P500 last market action were all before Christmas on Friday, the STI +0.44% to 2676, Euro Stoxx 50 +0.78%, and the S&P500 +0.9% to 1265, on positive US econ data.

Its hard to stay negative about the US economy into 2012 when firings abate, housing continues to gain (new home sales confirms existing home sales and starts), and new orders for durables and capex continue to rise. But with disposable income resuming its downtrend, and the fact that consumption has been all out of a reduced savings rate, we can't be too positive either. Fiscally, things next year will be tighter whether or not payroll tax cuts get extended beyond the 2 months. US mfg we suspect is also possibly held up by the 100% depreciation incentive, and when that expires year end, perhaps Asia and Europe's slowdown might filter thru.

Asia's general manufacturing weakness is underscored by Singapore posting horrendous declines in industrial production -25.2%m-m and -9.6%y-y, suggesting that 4q11 GDP number is on course for a contraction - not a good sign for the STI. Ability for MAS to loosen further is also held back as inflation advanced 0.7%m-m and 5.7%y-y.

That said, recent spat of good US data is likely to put some momentum behind the rally for the S&P500 (which we think is short term), but the STI's relative under-performance could continue due to Singapore's slowing growth outlook; so we remain bears on the larger trend for the STI and S&P500 unless (1) the Eurozone process for fiscal integration actually addresses its suboptimal growth path, and (2) econ indicators globally corroborate a turnaround.



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Stocks Close Higher On Better Job Market News (23Dec)

Stocks close up after claims for unemployment benefits drop to the lowest since April 2008

US Market:

Stocks rose on Thursday, putting the S&P 500 on the cusp of finishing out the year higher as another decline in jobless claims pointed to further improvement in the labour market.

The S&P rose for a third day in seasonally light volume that has contributed to sharp swings recently. With the benchmark index near break-even year-to-date and the Dow already higher for 2011, US stocks appeared on track to outperform such major overseas markets as China, Brazil and Europe, all of which are down more than 10 per cent year-to-date.

The latest bit of optimism on Wall Street came from a drop in weekly claims for jobless benefits to a 3-1/2-year low. Also helping equities, US consumer sentiment improved in December, hitting its highest level in six months as Americans felt better about the economy's prospects.

The Dow Jones industrial average was up 61.91 points, or 0.51 per cent, at 12,169.65. The Standard & Poor's 500 Index was up 10.28 points, or 0.83 per cent, at 1,254.00. The Nasdaq Composite Index was up 21.48 points, or 0.83 per cent, at 2,599.45.

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Singapore Market:

The STI fell 0.32% to 2664.8, Euro Stoxx 50 added 1.3%, the S&P500 rose 0.8% to 1254.

A last minute back down by Republican congressmen to agree with the bipartisan deal cut in the Senate to extend the payroll tax cut and extended unemployment benefit by 2 months has occured. So we can all go away for Christmas and breathe easy as expiration of the programmes would have most certainly caused a selloff into the new year if not renewed.

US economic data continues to improve with unemployment claims going down. Housing also seems to have begun a modest recovery. So are we still pessimistic? Our chief worry is that disposable incomes are not rising as fast, as even as incomes are rising, as fiscal supports are tightening, and we have witnessed stagnation there. Also a weak global economy may weigh on its mfg exports.

That said, the good data might put us in for a little short term rally for the STI and S&P500, but we remain bears on the larger trend for the STI and S&P500 unless (1) the Eurozone process for fiscal integration actually addresses its suboptimal growth path, and (2) lead econ indicators globally improve. 

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Stocks End Mixed; Oracle Miss Drags Down Tech (22Dec)

Stocks close mixed; Oracle earnings miss leads technology companies lower, other sectors rise

US Market:

Technology shares slumped on Wednesday and pushed the Nasdaq down 1 per cent after Oracle reported results that cast doubts on the sector's health, even as broader markets closed mostly flat in a thinly traded day.

Outside the Nasdaq, the market recovered from early losses as some recent fears over Europe faded. Traders tried to build momentum for a year-end rally and possibly erase the S&P 500's 1.1 per cent losses so far in 2011.

The Dow Jones industrial average rose 4.16 points, or 0.03 per cent, to 12,107.74. The Standard & Poor's 500 Index gained 2.42 points, or 0.19 per cent, to 1,243.72. The Nasdaq Composite Index slid 25.76 points, or 0.99 per cent, to 2,577.97.

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Singapore Market:

The STI advanced 2.25% to 2673, Euro Stoxx 50 fell 0.8%, the S&P500 rose 0.2% to 1243. 

Significantly the Nasdaq retreated 1% as tech stocks declined on Oracle's sales and profit miss. US tech sector, which comprises 20% of the S&P500 declined 2% offsetting gains in oil related stocks, and defensives like consumers staples and healthcare. Global weakness and the Eurozone crisis have started to weigh on investment decisions.

In the Eurozone, there was record participation by banks in the ECB's three year loan and other liquidity backstop programmes, which underscores how much EZ banks have been shut out of short term credit markets. Measures of systemic risk, Libor-OIS, continue to creep up every week. This crisis is not over yet - looking forward, markets will have to contend with rising debt-GDP ratios as countries miss budget deficit targets this year and post GDP contractions for 2H11 (Italy just posted negative 3q11, 4q will be worse).

We remain bears on the larger trend for the STI and S&P500 unless (1) the Eurozone process for fiscal integration actually addresses its suboptimal growth path, and (2) lead econ indicators globally flip positive.

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Stocks Soar On Europe Hopes, Strong Housing Starts (21Dec)

Dow jumps 337 points following strong Spanish debt sale; US housing starts surge 9.3 percent

US Market:

Stocks rallied nearly 3 per cent on Tuesday as investors bought surging banks, homebuilders and networking companies, though low volume was seen as amplifying the market's move.

Investors jumped on a banking sector that was already riding high, extending gains after the US Federal Reserve released new capital proposals that turned out to be less onerous than the market feared.

The Dow Jones industrial average was up 335.73 points, or 2.87 per cent, at 12,103.58. The Standard & Poor's 500 Index was up 35.95 points, or 2.98 per cent, at 1,241.30. The Nasdaq Composite Index was up 80.59 points, or 3.19 per cent, at 2,603.73.

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Singapore Market:

The STI retreated slightly by 0.14% to 2614, while Euro Stoxx 50 rose 2.7% and the S&P500 rose 2.98% to 1241.

German business confidence rose for its 2nd month and US housing starts beat consensus by a wide margin, 9.3% vs 1.1%, the increase in new residential conatruction is nearly all in multi-family homes (read apartments) as Americans downsize and rent. The category is volatile as compared to the mainstay of single family home construction. Nonethless, its a good report and we acknowledge that housing may start to contribute in a more meaningful way to GDP.

Recent spat of data globally has seen declines reduce in pace or at least stall, so the question of whether we are at turning point will be addressed in further notes. US faces policy risk in that the payroll tax cut is looking to expire by year end - Republicans in Congress voted to reject the Senate deal to extend the cuts by 2 months to give more time to work out a funding solution.

We remain bears on the larger trend for the STI and S&P500 unless (1) the Eurozone process for fiscal integration actually addresses its suboptimal growth path, and (2) lead econ indicators globally flip positive. We have some semblance that (2) is at least not getting worse at a faster pace.

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US Stocks Drop; BofA And Other Big Banks Fall Hard (20Dec)

Financial stocks lead way lower; BofA slides 4 percent, the biggest drop in the Dow

US Market:


Banks dragged the stock market lower on Monday, with losses accelerating late after Bank of America's stock price fell below US$5 for the first time in nearly three years.

Warnings of deteriorating conditions in the euro zone and concerns about tougher capital rules that could cut into big banks' profits pressured the financials throughout the day.

Comments from Mario Draghi, president of the European Central Bank, weighed on sentiment after he said the economic outlook contained substantial downside risks, adding that 2012 would be a difficult year for banks.

The Dow Jones industrial average was down 100.13 points, or 0.84 per cent, at 11,766.26. The Standard & Poor's 500 Index was down 14.31 points, or 1.17 per cent, at 1,205.35. The Nasdaq Composite Index was down 32.19 points, or 1.26 per cent, at 2,523.14.


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Singapore Market:


The STI fell 1.55% to 2618, Euro Stoxx 50 rose 0.1%, the S&P500 fell 1.17% to 1205.

Some political risk we warned about is creeping into the US economy: Congress may not vote in line with the Senate extending pay roll tax cuts and unemployment benefits for 2 months till Feb12, after it became clear a bipartisan compromise would not be reached before year end. At issue is how to pay for the extensions, which cost more than $200 billion over a year. Democrats want to cover at least part of the bill’s cost by imposing a new tax on income exceeding $1 million while Republicans want to pay for the measure by reducing the federal workforce and freezing the pay of government employees.

North Korean leader Kim Jong Il has passed away leaving succession to his 29 year old third son, Kim Jong Un. It remains to be seen if he is acceptable to the military. We can add this to the growing list of geopolitical uncertainties including Iran, and perhaps even a challenge to the Saudi succession.

We remain bears on the larger trend for the STI and S&P500 unless (1) the Eurozone process for fiscal integration actually addresses decisively its suboptimal growth path, and (2) lead econ indicators globally flip positive.


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Friday Early Rally Fades; Stock Market Down For The Week‎ (19Dec)

US Market:

An early rally faded on the stock market, leaving indexes down 3 per cent for the week as worries resurfaced about a breakup of the euro. The Dow Jones industrial average closed down 3 points on Friday, less than 0.1 per cent, at 11,866.

The Dow had been up as many as 99 points after the Italian government won a confidence vote on austerity measures. It turned mixed after Fitch warned that it might downgrade the debt of six euro countries. The Standard & Poor's 500 rose 4, or 0.3 per cent, to 1,220. The Nasdaq rose 14, or 0.6 per cent, to 2,555. 

The Dow is down 2.6 per cent for the week. About three stocks rose for every two that fell on the New York Stock Exchange. Volume was average at 4.7 billion shares.

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Singapore Market:

The STI advanced on Friday 0.97% to 2659, while Euro Stoxx 50 fell 1% and the S&P500 gained 0.32% to 1219.

Recent data points to Nov seeing some let-up in the pace of slowdown in the global economy and Singapore was no exception. Non-Oil Domestic Exports posted a stronger than expected on-month expansion of 5.9% for Nov11. A harbinger of better things to come? Well, the big elephants, Europe and the US saw declines on-year and China saw a very weak expansion. We're still rather concerned about growth going forward, we need the pace of contraction to keep easing globally for markets to get more positive.

In China, official data points to widespread on-month falls in property prices: new homes in notable Tier 1 cities like Beijing and Shanghai fell 0.3%m-m while existing homes declined 0.7%m-m in Beijing and 0.5% in Shanghai. While this is finally what officials want to happen, it comes at an inopportune time given the poor external environment, and so raises the prospects of a hard landing. We're still holding out that rapid income gains and policies to encourage consumption will avert such a scenario.

In the US, payroll tax cut and extended unemployment benefits got a reprieve extension to Feb, so all this does is push out the moment of truth by 2 months. Inability to agree on how to fund these fiscal supports risks knocking out a major crutch of the US economy.

We remain bears on the larger trend for the STI and S&P500 unless (1) the Eurozone process for fiscal integration actually addresses decisively its suboptimal growth path, and (2) lead econ indicators globally flip positive.

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Better Manufacturing, Jobs News Send Stocks Higher (16Dec)

Stocks edge higher, breaking three-day losing streak; FedEx earnings soar, jobless claims fall

US Market:

U.S. stocks rose, snapping a three- day decline in the Standard & Poor’s 500 Index, as data on jobless claims and manufacturing signaling a strengthening economy overshadowed concern over Europe’s debt crisis. “The news on the U.S. front is surprisingly positive and provides some counterbalance to the uncertainty in Europe,” Eric Teal, chief investment officer at First Citizens Bancshares Inc., which manages $4 billion in Raleigh, North Carolina, said in a telephone interview. “We’re focusing increasingly on the domestic economy which looks to be on the recovery track.

The Dow Jones industrial average was up 45.33 points, or 0.38 percent, at 11,868.81. The Standard & Poor's 500 Index was up 3.93 points, or 0.32 percent, at 1,215.75. The Nasdaq Composite Index was up 1.70 points, or 0.07 percent, at 2,541.01.

About 6.72 billion shares changed hands on the New York Stock Exchange, NYSE Amex and the Nasdaq. On the NYSE, advancers beat decliners by a ratio of 18 to 11, and on the Nasdaq, 13 shares rose for ever 10 that fell.

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Singapore Market:

The STI fell 1.4% to 2635, Euro Stoxx 50 rose 0.86%, the S&P500 rose 0.32% to 1215.

On the bright side of data, US unemployment claims may have decisively trended below the 400k mark to 366k, indicating much reduced pace of firings. But global output surveys and data continue to be weak: Flash PMI readings for manufacturing indicate that China sees its second straight month of contraction, albeit at a slower pace, while flash readings for Eurozone manufacturing and services were for their fifth and fourth month of contraction respectively, also at a slower pace. US industrial production for Nov declined 0.2%m-m with manufacturing declining 0.4%m-m.

Although pace of declines are weakening, these could very well strengthen again given: collective austerity by the Eurozone; a rapidly cooling China; and a US fraught with policy risk. We are looking for a synchronised upturn in new order data to challenge this view.

We remain bears on the larger trend for the STI and S&P500 unless (1) the Eurozone process for fiscal integration actually addresses decisively its suboptimal growth path, and (2) lead econ indicators globally flip positive.

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Stocks, Euro Slide As Worries About Europe Persist (15Dec)

Stocks fall as Europe shows further signs of weakness; euro falls below $1.30

US Market:

Stocks fell for a third day and hit their lowest level in two weeks on Wednesday as widespread risk aversion sank commodity prices, sent the euro to an 11-month low against the dollar and drove Italy's borrowing costs to a euro-era high. Investors are disappointed the European Central Bank is not buying more bonds of troubled European countries, a move that was widely seen as a requisite next step after leaders at last week's EU summit agreed to strengthen fiscal unity in the bloc.

The Dow Jones industrial average dropped 131.46 points, or 1.10 percent, to 11,823.48. The Standard & Poor's 500 Index fell 13.91 points, or 1.13 percent, to 1,211.82. The Nasdaq Composite Index lost 39.96 points, or 1.55 percent, to 2,539.31.

Volume was moderate at 7.8 billion shares on the NYSE, Amex and Nasdaq, about 5 percent below the 200-day moving average -- a further sign of the difficulties traders and investors face in current market conditions.

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Singapore Market:

The STI fell 0.5% to 2672, Euro Stoxx 50 fell 2.4%, the S&P500 fell 1.1% to 1211.8. Risk assets fell across the board - equities and commodities, while dollar and treasuries rose.

Equity Markets are waking up to the fact that the "fiscal compact" as proposed by Eurozone leaders is hardly enough as dollar cost funding continues to soar and the Euro gets hammered below 1.30. Our position remains that collective austerity does not address the true causes the crisis: that multispeed economies under a monetary union will always produce subpar growth outcomes (as the debts are too large to austere away, growth is the only option). The Eurozone needs a collective investment objective to equalise competitiveness, and this is best implemented thru a fiscal union of shared revenues, liabilities and oversight. That is politically very hard to achieve, and we wonder if it will come about only after a complete market revolt.

Crude Oil has been a worry for us, as threatened sanctions on Iran due to their supposed persuit of nuclear capability risks an attack by Israel, and the closing of the Straits of Hormuz. But OPEC last night upped production provoking a strong selloff of about 5% (now ~US$95). While markets may forget about this for a while, geopolitical risk is on the radar.

We remain bears on the larger trend for the STI and S&P500 unless (1) the Eurozone has fiscal union that actually addresses risks to growth, and (2) lead econ indicators globally flip positive. 

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Stock Gains Fade As Fed Warns of Market Strains (14Dec)

Stocks drop as Fed refrains from new steps, cautions of strains in financial markets

US Market:

Stocks fell for a second straight day on Tuesday after the Federal Reserve gave no hints of new stimulus measures to offset the effects of the worsening European debt crisis. Though the Fed did leave the door open to further easing next year, as it has done after recent meetings, it gave no indication it was any more inclined to provide new economic stimulus. The Fed left monetary policy on hold and said financial market turbulence posed threats to economic growth. It also characterized the U.S. economy as expanding moderately despite an apparent slowing in global growth, though it added that unemployment remains elevated and housing activity depressed.

The Dow Jones industrial average slid 66.45 points, or 0.55 percent, to end at 11,954.94. The Standard & Poor's 500 Index dropped 10.74 points, or 0.87 percent, to 1,225.73. The Nasdaq Composite Index lost 32.99 points, or 1.26 percent, to close at 2,579.27.

Volume was light, with about 7.28 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, below last year's daily average of 8.47 billion. More than two stocks fell for every one that rose on the New York Stock Exchange, while on the Nasdaq, about 74 percent of issues closed lower.

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Singapore Market:

The STI fell 0.6% to 2685, Euro Stoxx 50 fell 0.37%, the S&P500 fell 0.87% to 1225.

US retail sales advanced 0.2%mm, below the consensus 0.6%. We remain skeptical of the consensus verdict that the US will post 3% growth next year as we see the gradual withdrawal of fiscal supports being a drag on disposable incomes, and a rapidly slowing global economy as headwinds to US mfg. This month, capex incentives, payroll tax cut, extended unemployment benefit, are all up for renewal, so expect volatility in the coming weeks as these measures get debated. If they do not get renewed, expect a strong selloff.

Crude Oil is starting to be a worry for us, as threatened sanctions on Iran due to their supposed pursuit of nuclear capability risks the closing of the Straits of Hormuz, and an attack by Israel. Crude advanced by over 2% last night and hovers at the $100 mark, and has been trending quite the opposite from industrials and agris, which is to us a red flag for geopolitical risk as commodities tend to be led by economic growth, supply constraints notwithstanding.

We remain bears on the larger trend for the STI and S&P500 unless (1) the Eurozone has fiscal union that addresses risks to growth, and (2) lead econ indicators globally flip positive. 

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Stocks Fall As Rating Agencies Knock Euro Deal (13Dec)

US stocks fall as rating agencies knock Europe's fiscal pact; fears about debt crisis persist

US Market:

Stocks tumbled on Monday, as concerns about Europe returned to the forefront after major credit ratings agencies warned that European leaders had not done enough to tackle the region's debt crisis. The decline was broad. All l0 S&P industry groups ended in negative territory, and most dropped more than 1 percent. Banks took the biggest hit, while technology shares also fell after Dow component Intel, the world's largest chip maker, lowered expectations for quarterly revenue.

The Dow Jones industrial average was down 162.87 points, or 1.34 percent, at 12,021.39. The Standard & Poor's 500 Index was down 18.72 points, or 1.49 percent, at 1,236.47. The Nasdaq Composite Index was down 34.59 points, or 1.31 percent, at 2,612.26.

About four stocks fell for every one that rose on the New York Stock Exchange, while on the Nasdaq 72 percent of issues fell. Volume was light, with about 6.28 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, below last year's daily average of 8.47 billion.

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Singapore Market:

The STI advanced 0.27% to 2701, Euro Stoxx 50 fell 3.1% as Moody's has put most Eurozone nations credit rating up for review given poor debt-growth dynamics. The S&P500 fell 1.5% to 1236.

China posted economic data which was a bit like last month's: rapidly cooling industrial production and investment, in addition to weak export growth posted over weekend. Only consumption as proxied by retail sales was only just at trend growth sequetially. Throw in a recession looking Europe, and markets we believe will worry about this issue well into next year. Expect Chinese policy makers to gear policy even more strongly toward consumption next year.

Although the US remains the odd one out globally as its mfg and job market data has been reasonably good, many stimulus supports are up for renewal by year end (capex incentives, payroll tax cut, extended unemployment benefit), so expect volatility in the coming weeks as these measures get debated. If they do not get renewed, expect a strong selloff.

We remain bears on the larger trend for the STI and S&P500 unless (1) the Eurozone has fiscal union that addresses risks to growth, and (2) lead econ indicators globally flip positive. 

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Stocks Close Higher As Europe Nears Budget Pact (12Dec)

Stocks close sharply higher as most of Europe agrees to fiscal coordination plan

US Market:

Stocks rallied on Friday, finishing the week higher after European Union leaders agreed on a plan to toughen the region's budget rules to help restore market confidence after a two-year sovereign debt crisis.

The Dow Jones industrial average ended up 186.56 points, or 1.55 percent, at 12,184.26. The Standard & Poor's 500 Index was up 20.84 points, or 1.69 percent, at 1,255.19. The Nasdaq Composite Index rose 50.47 points, or 1.94 percent, at 2,646.85.

Trading volume was 6.71 billion shares on the New York Stock Exchange, NYSE Amex and Nasdaq, below the year's daily average of around 7.95 billion shares. Advancing stocks outnumbered declining ones by a ratio of 6 to 1 on the NYSE, while on the Nasdaq, advancers beat decliners by a ratio of 5 to 1.

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Singapore Market:

The STI fell 1.2% to 2694, Euro Stoxx 50 rose 2.4% and the S&P500 rose 1.7% to 1255.

Eurozone: More of a pact than a union. EZ nations will have to keep to sturctural deficits of 0.5% GDP with automatic cutbacks should they stray; if a 3% threshold is breeched, the member would then face intrusions into taxation and spending. This 'union' is all well and good for austerity, but there is nothing addressing its growth problem - as debt is too large already, risks are that it may grow faster than the economy next year especially since the EZ faces recession. After the optimism we fear reality may pressure markets to revolt down the line. Perhaps this is why stopgap measures were increased as 150b euros from EZ central banks and 50b from govts were funelled to the IMF for emergency lending. The 500b ESM was also brought forward to complement the EFSF.

On the economic front China posted weak export growth which may be Asian markets new focus of a rapidly slowing China.

We remain bears on the larger trend for the STI and S&P500 unless (1) EZ has fiscal union that addresses risks to growth, and (2) lead econ indicators globally flip around. 

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Lack of ECB Bond-Buying Plan Sends Stocks Lower (09Dec)

Denial of bond-buying plan from European Central Bank sends stocks and euro lower

US Market:

Wall Street fell on Thursday after the European Central Bank dashed hopes that policy-makers were preparing a financial 'bazooka' to contain the debt crisis, and Germany rejected some proposals to add power to the euro zone's bailout fund.

The Dow Jones industrial average tumbled 198.67 points, or 1.63 per cent, to end at 11,997.70. The Standard & Poor's 500 Index fell 26.66 points, or 2.11 per cent, to 1,234.35. The Nasdaq Composite Index lost 52.83 points, or 1.99 per cent, to close at 2,596.38.

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Singapore Market:

The STI fell 1.95% to 2728, as property counters were hammered due to the extra 10% stamp duty on foreign purchases of homes. Research units in general fell over themselves predicting >20% declines in physical prices to be expected. Unfortunately our property analyst is on holiday! What luck! In any case he has had a neutral bearish view on the resi sector for sometime.

Euro Stoxx 50 declined 2.4%, while the S&P500 declined 2.1% to 1234, as a 25bp rate cut by the ECB, extended liquidity support for EZ banks (3yr loans, lower collateral, reserve requirement cut), and a sharp drop of ~20k in US unemployment claims were offset by ECB president suggesting that even if there was Fiscal Union, unlimited bond buying is NOT to be expected.

Its quite quite clear that the ECB-France-Germany are going to tackle this crisis the old fashion way - austerity, prudence. So what is proposed this weekend's summit is crucial. Positive sign is that Fiscal Union is on the agenda, we are however expecting that the road to fiscal union is going to be a muddle through long drawn out affair, in the course of which a EZ recession could easily happen. Short term now looks more uncertain to us as its clear markets were anticipating bond buying which isn't going to happen.

We remain bears on the larger trend for the STI and S&P500 unless (1) EZ gets on the road to fiscal union, and (2) lead econ indicators globally flip around.

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Stocks Close Mixed As Traders Await Europe News (08Dec)

Stocks close mixed after trading in narrow range; traders await news from meetings in Europe


US Market:


Hopes the euro zone will figure out a solution to its ongoing debt crisis inspired enough buying to push stocks to a third day of gains on Wednesday in light trading. Euro zone nations are expected to vote on Friday on an agreement hashed out between Germany and France to tighten fiscal controls for member nation. Equities and other markets have hinged on euro zone sovereign debt crisis headlines for weeks, with markets expected to become increasingly volatile as more details leak as the summit draws closer. Traders are looking to position themselves ahead of an escalation of the crisis or a clear, manageable plan to keep it under control.

The Dow Jones industrial average gained 46.24 points, or 0.38 per cent, to 12,196.37. The Standard & Poor's 500 Index added 2.55 points, or 0.20 per cent, to 1,261.02. The Nasdaq Composite Index shed 0.35 points, or 0.01 per cent, to 2,649.21. Advancing stocks outnumbered decliners on the New York Stock Exchange by a ratio of about 1,567 to 1,403, while on the Nasdaq, decliners outpaced advancers 1,326 to 1,149.


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Singapore Market:


The STI climbed 1.2% to 2782, Euro Stoxx 50 fell 0.5%, while the S&P500 added 0.2% to 1261.

Singapore residential property counters may take a hit today, especially for those exposed to the high end market as foreigners and corporate entities will have to pay an additional 10% stamp duty, the government said in a statement released after the market closed. The extra levy will be 3% for permanent residents purchasing a second home, as well as for citizens buying their third residential property. The taxes apply from today. Our view on the physical residential market has been neutral bearish in view of the large supply coming on and numerous tightening measures in force.

Despite the recent coordinated action of central banks to cut US$ funding worldwide, Libor-OIS and Euribor-OIS spreads have not inched down, still climbing, as banks are no less weary of each other given the sovereign debts weighing on balance sheets. At bottom, this is a solvency problem, so we look forward to what Merkel-Sarkozy will put on the agenda this weekend. So far, the rhetoric is Fiscal Union, though the extent of which proposed is mere deficit penalty oversight, not yet shared revenue and investment objectives. We maintain that complete fiscal union is needed to ensure the bloc ceases to be a multi-speed entity under a single monetary policy, otherwise suboptimal growth will prevent the zone from growing out of its debt.

Short term rally still possible as we are getting signals from France and Germany that ultimately fiscal union, is what they want to achieve, though if it falls short this weekend it'll sell on news cum Monday. We remain bears on the larger trend for the STI and S&P500 unless (1) EZ gets on the road to fiscal union, and (2) lead econ indicators globally flip around.


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Dow Ends Up 52 On Hopes For Wider Bailout Powers (07Dec)

Dow Jones industrial average gains 52 as hopes build for greater European bailout powers

US Market:

Stocks rose on Tuesday as investors bet European leaders would take strong steps this week to end the region's debt crisis, including bolstering its financial rescue fund. The latest source of optimism came from a Financial Times report that European leaders will discuss boosting the firepower of the  euro zone's rescue fund at the summit. The report cited senior European officials. At the summit on Thursday and Friday, France and Germany are expected to try to force changes to EU rules to impose mandatory penalties on countries that exceed deficit targets in hopes of restoring market confidence. 

The Dow Jones industrial average gained 52.30 points, or 0.43 per cent, to 12,150.13. The Standard & Poor's 500 Index added 1.39 points, or 0.11 per cent, to 1,258.47. But the Nasdaq Composite Index dropped 6.20 points, or 0.23 per cent, to 2,649.56. Volume was light with about 6.2 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, below the daily average of 7.95 billion. Advancing stocks slightly outnumbered declining ones on the NYSE by 1,498 to 1,476, while on 

the Nasdaq, decliners beat advancers by 1,405 to 1,079.

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Singapore Market:

The STI declined 0.6% to 2749, Euro Stoxx 50 also lost 0.54%, while the S&P500 added 0.1% to 1258.

Stocks were weak on Standard & Poors putting 15 euro area nations on watchlist for debt rating, including the EFSF if one of its guarantors got downgraded. The world is entering a new definitions of what it means to be AAA.

Rumours abound on increased bailout sizes to be announced this Friday. Thats all well and good, but as usual, the only true lasting solution, is FISCAL UNION.

US stocks have been looking like they want to grind higher, as US economic data has seen decent job expansion and expansion in mfg PMIs. The problem with this story is that its just at odds with everyone elses! All the major industrial nations - Eurozone, China, Japan, Korea, Taiwan (and don't forget Singapore!) - are seeing mfg PMIs in contraction. We wonder if the expiring incentives for capex has something to do with US mfg resilience. US jobs report also had far too many temp hirings for the Christmas period which sets Jan12 up for a drop.

We remain bears on the larger trend for the STI and S&P500 unless (1) EZ gets on the road to fiscal union, and (2) lead econ indicators globally flip around. We are getting signals from France and Germany that (1), fiscal union, is what they want to achieve.

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Stocks Rise Despite Threatened Germany Downgrade (06Dec)

Stock close higher, but Germany downgrade threat limits gains; traders hope for crisis pact

US Market:

Stocks gained on Monday, but the day's rally was dampened by news that Germany and other top-rated European nations could see their credit ratings cut. Stocks have tied their fortunes to a hoped-for resolution of the European debt crisis. Optimistic investors bought shares in the morning after French President Nicolas Sarkozy said Germany and France had come to an agreement on tighter fiscal controls for the euro zone, to be voted on Friday. But the reports of potential downgrades for every euro-zone nation hit markets hard by late afternoon. The Financial Times said the credit ratings of Germany, France and others would be placed on 'credit watch negative,' the step that precedes a downgrade.

The Dow Jones industrial average was up 78.41 points, or 0.65 per cent, at 12,097.83. The Standard & Poor's 500 Index was up 12.80 points, or 1.03 per cent, at 1,257.08. The Nasdaq Composite Index was up 28.83 points, or 1.10 per cent, at 2,655.76. About 7.13 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, below the current daily average of 7.96 billion shares traded per day. Advancing stocks outnumbered declining ones on the NYSE by a ratio of about 4 to 1 and on the Nasdaq by about 9 to 4.

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Singapore Market:

The STI lost 0.26% to 2766, while Euro Stoxx 50 added 1.15%, and the S&P500 added 1% to 1257.

Correction from yesterday: the 30b euros Italian savings proposal is not yet passed and Prime Minister Monti will still have to ram it thru parliament. Merkel and Sarkozy will begin the consensus building this Friday for fiscal integration, which if it goes well is a big positive to markets, as we have said in our 29 Nov Strategy report "Fiscal union or else...", fiscal union is the only real solution to the debt crisis.

US services PMI was a weak, below consensus expansion, which adds to the trend of weak or contractionary PMI readouts from the EZ to Asia. The only readout bucking the trend is US mfg, which could be experiencing last minute bookings before the purchase incentive deadline closes year end.

At the moment, short term rally on the STI still possible but we remain bears on the larger trend for the STI and S&P500 unless (1) EZ gets on the road to fiscal union, and (2) lead econ indicators globally flip around. 

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Stock Market Closes Out Its Best Week Since 2009 (05Dec)

Stocks close out their best week since 2009; US unemployment rate falls and Merkel talks tough

US Market:

Stocks ended flat on Friday but capped the best week for Wall Street bulls in almost three years after data showed the US unemployment rate dropped to a 2-1/2 year low. The market gave back a 1 per cent gain earlier in the session as traders booked profits after the S&P 500 failed to break through technical resistance near its 200-day moving average. The retreat also came on caution before key events in Europe next week, including a European Union summit aimed at solving the two-year old euro zone debt crisis. While traders were heartened by the drop in the unemployment rate, they were aware of Europe's ability to disappoint investors, especially after a more than 7 per cent gain in the S&P 500 this week.

The Dow Jones industrial average dipped 0.61 point, or 0.01 per cent, to 12,019.42. The S&P 500 shed 0.30 point, or 0.02 per cent, to 1,244.28. The Nasdaq Composite edged up 0.73 points, or 0.03 per cent, to 2,626.93. About 7 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, below the current daily average for the year of 7.96 billion. Advancing stocks outnumbered declining ones by more than three to two on both the NYSE and Nasdaq.

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Singapore Market:

The STI advanced 0.42% to 2773.4, while Euro Stoxx 50 added 1.42%, and the S&P500 lost 0.02% to 1244.3.

US nonfarm payrolls added 120k jobs, not a bad result but still below what is needed to put the economy at another level. On a sour note, the unemployment rate fell from 9% to 8.6% mainly due to workers leaving the workforce.

The curious thing now is that the US seems to be the only major economy posting positive data especially where PMIs are concerned. We've had contractions across the EZ and Asia but not the US, which makes us skeptical that cum Jan12, when the capex incentives in the US expire, markets could be in for a spat of weak data.

Positive development in the EZ is that Italy has appeared to pass 30b euros of budget cuts and hiring incentives relatively fuss free, yet we stress again - fiscal union is the only real long term solution. So far Germany's Merkel, and the ECB seem to be the only ones serious about it.

At the moment, short term rally on the STI still possible but we remain bears on the larger trend for the STI and S&P500 unless (1) EZ gets on the road to fiscal union, and (2) lead econ indicators globally flip around.

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Stocks Waver, A Day After Biggest Rally In 2 Years (02Dec)

Market rally on hold; Dow and S&P 500 are little changed as unemployment claims rise again

US Market:

Stocks treaded water on Thursday after the previous day's massive gains, but traders worried that recent strong data could set the market up for a selloff should Friday's jobs report fall short of hopes. Both the Dow and the S&P 500 dipped and the Nasdaq ended with a slight gain following Wednesday's rally of more than 4 percent on an agreement from central banks to provide cheap dollar loans to struggling European banks.

The Dow Jones industrial average fell 25.65 points, or 0.21 percent, to 12,020.03. The S&P 500 lost 2.38 points, or 0.19 percent, to 1,244.58. The Nasdaq Composite gained 5.86 points, or 0.22 percent, to 2,626.20. About 6.8 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, below the current daily average of 7.97 billion shares traded per day. Declining stocks outnumbered advancing ones on the NYSE by a ratio of about 3 to 2, and despite the overall gains on the Nasdaq just under 7 shares fell for every four that rose.

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Singapore Market:

The STI added 2.2% to 2761, Euro Stoxx 50 lost 0.7% while the S&P500 lost 0.2% to 1244.6.

While US mfg PMI posted an acceleration on both output and new orders, China, Taiwan, South Korea, Japan, posted contractions on output, new orders and new export orders. EZ is probably in recession. We continue to see global recession risks rising.

This 4q11 expansion in US mfg may also be nothing more than US companies putting last minute buys of capex to meet the 100% depreciation write off deadline. Its an outlier at present. Looking into 2012, as we have said, disposable income is likely to decrease as fiscal stimulus programmes unwind and are not likely to be renewed as Republicans have no interest to cooperate given the election year. Generally even if the US skirts recession, its an uphill struggle for growth. 

Short term rally still possible but we remain bears on the larger trend for the STI and S&P500 unless (1) EZ gets on the road to fiscal union, and (2) lead econ indicators globally flip around.

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Move By Central Banks Exhilarates Wall Street (01Dec)

Move to lower cost of borrowing exhilarates Wall Street, sends Dow soaring 490 points

US Market:

The Dow posted its best day since March 2009 after the Federal Reserve, the European Central Bank and other major central banks stepped in to head off escalating funding pressures that threaten the key arteries of the world's financial system. The S&P 500 scored its best daily percentage gain since August.

The Dow Jones industrial average shot up 490.05 points, or 4.24 percent, to end at 12,045.68. The Standard & Poor's 500 Index jumped 51.77 points, or 4.33 percent, to 1,246.96. The Nasdaq Composite Index soared 104.83 points, or 4.17 percent, to close at 2,620.34. The day's volume was high, with nearly 10 billion shares changing hands during the day on U.S. exchanges compared with the daily average of 7.96 billion shares. Advancers beat decliners on the NYSE by nearly 7 to 1 and on the Nasdaq, by about 5 to 1.

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Singapore Market:

Markets look set for a sugar high as the Fed lowered the cost of emergency dollar funding, by reducing the rate to OIS plus 50bp instead of 100bp. Under the dollar liquidity-swap program that was set up during the last crisis, the Fed lends dollars to the ECB, BOC, BOE, BOJ, SNB, in exchange for currencies including euros. The central banks then lend the dollars to commercial banks in their jurisdictions through an auction process. If you recall, the Libor-OIS and Euribor-OIS spreads have been soaring as banks withhold dollars from each other in view of the EZ debt crisis.

Euro Stoxx 50 jumped 4.31% on the news, as did the S&P500 add 4.33% to close 1247. The STI is likey to add on to yesterday's 0.53% move up to 2702.

We have said this week that some positivity has crept back into markets as France and Germany could be planning a roadmap to fiscal union. Ultimately, that will solve the crisis, not liquidity injections by central banks, so we need more than liquidity injections for the rally to be more than a sugar high.

On top of this, we have the global outlook weakening, which has prompted central banks to ease monetary policy, the latest being China which announced a 50bp cut to its reserve ratio to 21%.

Short term rally should have some strength as we have bounced on major support levels. But our position remains bearish over the larger trend unless (1) roadmap to fiscal union, and (2) forward econ indicators globally flip around. 

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