Daily Market Commentary: (Evening Report)
Markets start 2013 in bullish mood
Market Movers
techMARK 2,157.14 +0.29%
FTSE 100 6,047.34 +0.33%
FTSE 250 12,651.25 +0.31%
Market Movers
techMARK 2,157.14 +0.29%
FTSE 100 6,047.34 +0.33%
FTSE 250 12,651.25 +0.31%
London’s blue-chip index was able to build on Wednesday’s massive surge today in the aftermath of the Fiscal Cliff deal Stateside on New Year’s Day.
Market analyst Michael Hewson from CMC Markets said this afternoon: “While currency markets appear somewhat dismissive of the agreement on the fiscal cliff, equity markets have still managed to hold on to a good chunk of yesterday’s gains, helped by better than expected German and Spanish unemployment data and some extremely robust US ADP payrolls numbers for December.”
Stock markets across the globe rallied strongly on Wednesday after US politicians decided to allow some tax increases on America's wealthiest workers and delay specifics on spending cuts by two months. The FTSE 100 jumped 130 points, or 2.2%, yesterday.
However, despite the strong end to today’s session, the Footsie started out with slight losses early on as investors digested the agreement and what it means for the US economy in the coming months.
Market strategist Ishaq Siddiqi from ETX Capital said today that the agreement “only addressed certain facets of the fiscal cliff”. He said: “Lawmakers will need to kick-off another round of negotiations to compromise on a matter that both Republicans and Democrats are at total opposite ends; longer term spending cuts.”
In other news, the yield on a 10-year UK bond surpassed 2% for the first time since May 2012. The borrowing rate has jumped from 1.83% to 2.07% over the past three days since the fiscal cliff deal, as the demand for safety diminished.
Market analyst Michael Hewson from CMC Markets said this afternoon: “While currency markets appear somewhat dismissive of the agreement on the fiscal cliff, equity markets have still managed to hold on to a good chunk of yesterday’s gains, helped by better than expected German and Spanish unemployment data and some extremely robust US ADP payrolls numbers for December.”
Stock markets across the globe rallied strongly on Wednesday after US politicians decided to allow some tax increases on America's wealthiest workers and delay specifics on spending cuts by two months. The FTSE 100 jumped 130 points, or 2.2%, yesterday.
However, despite the strong end to today’s session, the Footsie started out with slight losses early on as investors digested the agreement and what it means for the US economy in the coming months.
Market strategist Ishaq Siddiqi from ETX Capital said today that the agreement “only addressed certain facets of the fiscal cliff”. He said: “Lawmakers will need to kick-off another round of negotiations to compromise on a matter that both Republicans and Democrats are at total opposite ends; longer term spending cuts.”
In other news, the yield on a 10-year UK bond surpassed 2% for the first time since May 2012. The borrowing rate has jumped from 1.83% to 2.07% over the past three days since the fiscal cliff deal, as the demand for safety diminished.
Economic news comes in mixed
Providing some support to stocks early on was the China non-manufacturing purchasing managers' index (PMI) which rose from 55.6 to 56.1 in December, "providing yet more evidence that the turnaround of the Chinese economy is gaining pace with stronger economic growth likely in the months ahead," according to Markus Huber, the head of German HNW trading at ETX Capital.
However, sentiment was dampened slightly after Markit's construction PMI for the UK dropped from 49.3 to 48.7 in December, missing forecasts for a slight rise to 49.5. Nationwide also reported that UK average house prices fell by 0.1% month-on-month in December; forecasts were for no change.
German unemployment increased by 3,000 in December, well below the 10,000 gain expected. Meanwhile, Spain registered its first drop in unemployment in four months in December, down 59,094, much to the surprise of economists who had forecast a 62,000 increase.
However, sentiment was dampened slightly after Markit's construction PMI for the UK dropped from 49.3 to 48.7 in December, missing forecasts for a slight rise to 49.5. Nationwide also reported that UK average house prices fell by 0.1% month-on-month in December; forecasts were for no change.
German unemployment increased by 3,000 in December, well below the 10,000 gain expected. Meanwhile, Spain registered its first drop in unemployment in four months in December, down 59,094, much to the surprise of economists who had forecast a 62,000 increase.
Europe Market Report
European Markets Finished Mixed Following Yesterday's Strong Rally
The European markets ended Thursday's trading session with mixed results. The markets rallied strongly yesterday, due to the 11th hour agreement between Democrats and Republicans to avoid the fiscal cliff in the United States. With the fiscal cliff resolved, investors have now shifted their focus to the U.S. debt ceiling issue.
Banks and miners were among the biggest gainers on Wednesday, but turned in a much weaker performance Thursday. The markets pared their losses, or climbed into the green, following the release of the better than expected ADP private employment data from the United States. Investors will be watching for the release of the U.S. jobs report for December on Friday.
The U.S. reached its statutory borrowing limit on December 31, 2012 and the treasury has begun employing extraordinary measures, giving two months time to the law makers to raise debt ceiling. The debt ceiling would do more damage to the world's largest economy than the fiscal cliff. After passing the deal to avert the fiscal cliff, Republicans said they would press their demand to secure new spending cuts.
Moody's Investors Service said it expects further fiscal measures in months ahead to lower future budget deficits, which are necessary if the negative outlook on the government's bond rating is to be returned to stable.
The Euro Stoxx 50 index of eurozone bluechip stocks lost 0.34 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 0.67 percent.
The FTSE 100 of the U.K. climbed by 0.27 percent and the SMI of Switzerland surged by 2.90 percent. The DAX of Germany fell by 0.29 percent and the CAC 40 of France decreased by 0.34 percent.
Germany's unemployment increased in December, but the increase was less-than-expected, as the economy likely entered a contraction in the fourth quarter of 2012. The number of unemployed rose only 3,000 in December, following an increase of 5,000 a month ago, the Federal Labor Agency said Thursday. Economists had forecast an increase of 11,000 for December.
Spain's unemployment decreased for the first time in five months in December as service providers increased their head-counts during the holiday season, giving rise to hopes that the country might emerge from recession in late 2013, latest data showed Thursday.
The number of unemployed persons decreased 1.2 percent from the previous month to around 4.85 million in December, the Labor Ministry said.
U.K. construction sector contracted at the fastest pace in six months in December, driven mainly by a steep reduction in housing activity, data from a survey by Markit Economics and the Chartered Institute of Purchasing & Supply (CIPS) showed Thursday.
The seasonally adjusted purchasing managers' index (PMI) for the construction sector dropped to 48.7 in December from 49.3 in November, hitting the lowest level since June. Economists had forecast the index to rise to 49.5.
U.K. house prices declined in December as demand and supply conditions in the housing market remained weak, a survey by the Nationwide Building Society showed Thursday. House prices declined 0.1 percent month-on-month in December, after recording no change in the previous month. Economists had expected prices to remain flat in December.
US Market Report
After moving modesty lower at the open, stocks have moved back to the upside over the course of the trading day on Thursday. Buying interest has remained subdued, however, leading to a lackluster performance on Wall Street.
The major averages are currently turning in a mixed performance, with the Dow just below the unchanged line. While the Dow is down 5.09 points or less than a tenth of a percent, the Nasdaq is up 2.94 points or 0.1 percent at 3,115.20 and the S&P 500 is up 1.21 points or 0.1 percent at 1,463.63.
The choppy trading on Wall Street comes on the heels of the substantial rally that was seen in the previous session, which came amid news of a last-minute fiscal cliff agreement in Washington.
With the strong gains on Wednesday, the Dow and the Nasdaq reached their best closing levels in well over two months, while the S&P 500 reached a three-month closing high.
Profit taking contributed to the initial weakness, although traders seem reluctant to make any significant moves ahead of the release of the Labor Department's monthly jobs report on Friday.
An upbeat report on private sector employment may have helped to lift stocks off their lows, with payroll processor ADP reporting stronger than expected private sector job growth.
ADP said private sector employment increased by 215,000 jobs in December following an upwardly revised increase of 148,000 jobs in November. Economists had expected employment to rise by about 150,000 jobs.
On the other hand, the Labor Department release a separate report showing that initial jobless claims climbed to 372,000 in the week ended December 29th, an increase of 10,000 from the previous week's revised figure of 362,000.
Jobless claims had been expected to climb to 363,000 from the 350,000 originally reported for the previous week.
|
