Most markets turned lower after strong US data overnight suggested that Central Banks would start tightening earlier than previously expected
Market opened flat but dipped initially then traded sideways (7,430 to 7,390) but then trended lower to 7,343 around 3pm and then saw a small bounce at the end to close -51pts (-0.7%) @ 7,370.
The biggest drag on the market was Commonwealth Bank -8% off-setting gains in 9 of the 11 sectors. Miners +VE as Iron Ore prices rebounded and oil ticked higher.
Platium Asset Mgt -1.8% as shareholders revolt against executive pay
Lending Index Oct 0.16% MoM vs -0.01% Sept revised (F/cast was 0.1%)
Wage Price Index Q3 0.6% QoQ vs 0.4% Q2 (F/cast was 0.3%)
Wage Price Index Q3 2.2% YoY vs 1.7% Q2 (F/cast was 1.9%)
Nikkei opened higher but sold down dropping to 29,624 before a bounce into lunch. PM has tracked higher and currently -80pts (-0.3%) @ 29,731
Topix traded in a similar pattern, low was 2,037 and currently -9pts (-0.4%) @ 2,042
Leaders Miners, Precision Instruments, Metal products and Oil/Coal
Laggards Airlines, Services, Glass/Ceramic, Pharma
Yen dips to near 115 but poor export numbers and inflation concerns outweigh. Talk that Govt may be considering increasing capital gains tax -VE for sentiment.
Toshiba weak as S&P places it on ‘watch’ negative on spin off.
Data pre market
Balance of Trade Oct ¥-67.4B vs ¥-624.1B Sept revised (F/cast was ¥-460B
Exports Oct 9.4% YoY vs 13% Sept (F/cast was 12%)
Imports Oct 26.7% YoY vs 38.6% Sept (F/cast 33%)
Machinery Orders Sept 0% MoM vs -2.4% Aug (F/cast was 1.3%)
Machinery Orders Sept 12.5% YoY vs 17% Aug (F/cast was 20%))
Local Institutions net sellers focused on large caps, Foreigners largely sidelined but continue to buy Internet and Tech.
Kospi opened higher at 3,004 but sold down, initially saw some support around 2,970 but then trended lower currently -34pts (-1.1%) @ 2,965
Kosdaq followed a similar pattern currently -5pts (-0.5%) @ 1,030
Laggards Pharma, Insurance and Shipping.
Leaders Games on hopes of a windfall from NFT’s
Taiex opened higher and traded sideways in choppy trading, range was 17,764/700 to close +71pts (+0.4%) @ 17,764
Leaders Financials, Healthcare, Consumer.
Laggards Energy, Materials, Shippers
CSI 300 opened flat but initially sold down to 4,865 around 10am but then spiked back to 4,891 and then trended lower into lunch. PM opened at flat but again dipped lower.
Baijiu weak ahead of earnings but ZJ Sanhua at one point limit down after news its customer Gree is to acquire competitor Dun’an (limit up).
Lithium plays +VE on price rises
Leaders Lithum, Solar, Rare Earth
Laggards Liquor and Agri
Pre market opened @ 25,668 -46pts vs -89pts ADR’s but sold down to 25,520 around 10am but then rebounded but resistance around 25,650 and eased back to 25,600 at lunch time. PM opened higher but trending lower, seeing some support around 25,550
Tencent +VE continued southbound flows but other Ecommerce names weak. Alibaba weak on news it’s leading a group looking to takeover Unigroup for $8bn. Netease weak despite good results and news of a buyback.
Techtronics shorts squeezed after good numbers from Home Depot
Chinese Developers remain weak along with Tech hardware makers.
Expect market to open lower as investors react to increase inflation pressure.
Eurozone Construction Output, Core Inflation Rate, Inflation Rate
UK Inflation Rate, Core Inflation Rate, Retail Price Index, PPI Core Output, PPI Output, PPI Input
Opened Dow +35pts S&P and NDX flat ahead of earnings from Target and Lowe’s.
MBA Mortgage Applications and 30 yr Mortgage Rate, MBA Purchase Index, MBA Mortgage Refinance Index, Housing Starts, Building Permits, EIA Oil Report
Earnings NVIDIA, Target, Cisco Systems, Baidu, Lowe’s, Copa Holdings, Bath & Body Works, Victoria’s Secret, Sonos
Fed Speaker Chicago Fed President Charles Evans
Greece renews sculpture plea
The Greek PM asks UK PM Johnson to return the Elgin Marbles. But the UK PM says it is a matter for the museum.
Washington and Beijing agree to hold talks on nuclear arsenals
• Pledge from Biden-Xi call • US wary of China build-up • First easing of security tensions
One of the more positive results from the virtual summit. But tension remains over Taiwan after ‘Biden said he backed the “one China” policy, in which Washington recognises Beijing as the sole seat of government of China, but voiced concern about military activity near the island. Xi warned him that anyone who supported advocates of Taiwanese independence was “playing with fire” and would “burn themselves”.’
Gas prices climb as Germany defers approval of Nord Stream 2 pipeline
Raising gas prices but it appears to be over a technical point in that the EU requires “unbundling” which requires companies producing, transporting and distributing gas within the bloc are separate entities. Nord Stream 2 intends to comply but Germany will not approve the pipeline until staff and assets have been transferred.
China faces $6.5tn green investments target to help world win climate fight Heavy burden placed on Beijing to wean planet’s biggest polluter off coal.
An interesting look at the challenges facing China and the costs involved. Notes ‘China, the world’s factory, accounts for about 30 per cent of global greenhouse gases with fossil fuels comprising 85 per cent of the country’s energy mix.’
But the key is ‘Two unanswered questions, experts said, were whether state lenders could funnel an unparalleled and sustained torrent of cash to renewable energy, and how Beijing would manage the decline of the sprawling fossil fuels industry.’
Some still question Beijing’s commitment but without doubt its actions will determine the success or otherwise of the global hopes on climate control.
Biden readies climate legislation after summit
Post Glasgow Biden now has to try and get legislation passed in Congress which is lilkely to be a much more difficult process. The Economist has a good article which points out that over the years the US has committed itself to many international agreements but failed to ratify them at home. It will be interesting to see if this time it is different.
UK announces full probe of Nvidia’s $54bn Arm takeover
• Deal triggers national security fears
• EU also examines antitrust concerns
Key for Softbank investors is that the level of investigation suggests that approval will not be easily given and the timeline for the deal to complete will probably need to be extended. It concludes ‘Masayoshi Son, the chief executive of Arm’s Japanese owner SoftBank, nevertheless told investors this month that he expected the deal to be cleared.’
Cathay tries to mitigate HK’s strict Covid rules
After having 3 pilots who had been in Frankfurt tested positive for covid this week, another 130 pilots who had stayed in the same hotel and tested positive were ordered to spend 21 days in quarantine. Putting pressure on Cathay’s cargo capabilities. Consequently Cathay are considering asking pilots to live outside HK to avoid the requirements of the ‘zero tolerance’ policy. The article notes ‘“They have downsized staff in terms of staff and pilots and rightly so as they needed to cut costs, but now that’s coming back to bite them,” said David Yu, an airline valuation expert at New York University in Shanghai.’
The airline remains under pressure but its off the August lows and trading around HK$7.27 level but it is difficult to see much upside for the company in the months ahead, certainly until China/Hong Kong relax their policy on living with covid.
Fed policy must adjust for inflation by Martin Wolf
Even if the price rises we are seeing could be transitory, they risk becoming permanent.
Believes the current policy is overly optimistic. Concludes ‘I very much hope this inflation will vanish. But hope is not enough. Present policy settings look inappropriate. The Fed needs a new senior management prepared to stand back and think through where the US and world economies actually are. A faster shift towards monetary sobriety now could prevent having to go cold turkey later on.’
Well worth a read, I think that he is right in saying that even if the current price rises are transitory they risk becoming permanent. I think the biggest risk is that the ordinary man in the street is not an economist and he certainly is not prepares to wear transitory price rises without asking for more wages.
FT BIG READ. INVESTMENT
China crackdown prompts pivot to India
Paytm’s $2.5bn listing is expected to be India’s largest-ever IPO. Investors spooked by Beijing’s interventions are diverting funds to the country’s start-up sector, but can it replicate the same success?
looks at how policy changes in China are prompting investors to choose India instead. But that is not without its risks too. An interesting read.
War reporter and poet who predicted rise of al-Qaeda
Mark Huband Journalist 1963-2021
Worth a read ‘Deeply emotional and ferociously intelligent, he was a meticulous reporter. Ann Treneman, foreign editor of the Observer when he reported for the paper in the 1990s, described him as “intellectually and physically brave, willing to take risks others wouldn’t”. Fellow journalist and friend Stephen Smith said: “He was not someone who could report a story, then forget about it. Everything went very deep and close to the bone.”’