Thursday, 18 November 2010
The Very Good News of November 18
o The equity markets of Japan and China were up today (before the good news in the US). Materials did well again on the higher commodity prices ex steel and people are less afraid for the price controls. Fear for monetary tightening in China went down considerably after the explanation that interest hikes were not necessary when you had price controls; hikes are difficult when you almost peg the yuan at the dollar and QE2 continues). So the rice of the chinese equity market was an underreaction to the good news.
The a touch lower yen(the Japanese minister of economic affairs Kaieda told that the yen had not gone down enough) even against the euro helped Japanese equities including the financials. Maybe it is a late reaction on the good Q3 GDP growth in Japan. Or maybe it is just the buying of the laggards, what of course also is favourable for financials, even while in the past quarter hedge funds have done their utmost to get rid of financials.
o Copper was up almost 2% and seems to attack its all time highs again. Dr. Copper is not that ill as eralier this week was feared.
o Bonds have quite ugly charts last weeks. They go down pause a bit with some recovery and go down again. Losing support levels again and again. 30 year euro swap rate was again 3.24%, quite favourable for the (Dutch) pension funds. equities show the opposite of bonds, their charts are solid, resilient. Support levels rise. Many pauses with small retrenchament and then it goes up again.
o The central bank of Ireland expects support packages of tens of billions euro’s, now the irish government has yet to capitulate. China is salivating to buy Irish bonds at 8%+.
o The most important US retailers say that retail sales in November are up and better than they had indicated before.
o OECD was lowering its growth expectations for the world in 2011 from 4.5 naar 4.2%, but sees 4.6% growth in 2012. That are big numbers and it is not pointing to a double dip or a delayed double dip.
o Growth Taiwan 9,8% (8,4% was expected) in Q3. Singapore expects 15% in 2010.
o Initial claims in US 439,000, a touch better than expected. The trend is improving, but too slowly for the Fed.
* Phillyfed was +22, way better than expected and pointing to a strong number for the ISM, while after the bad Empire state numbers there was a lot of fear the ISm should go down considerable. The Philly Fed is way more important for forecasting the ISM than the Empire State survey.
So the news is very good: China not hiking rates or will hike not much in the coming quarters, world economic growth improving as copper prices indicate, Japan not falling further in a black hole, Ireland crisis going in the right direction and strength of ISM in US confirmed by strong Phillyfed and retail sales.