Disappointing US holiday retail sales weigh heavy on markets

Monday, December 02, 2013

Asian markets displayed mixed performance in overnight trading despite the Chinese flash PMI figure coming in slightly higher than expected. The reading came in at 50.8 in November against the 50.5 expected while a separate gauge compiled by the National Bureau of Statistics calculated the reading to be 51.4. Despite the better than expected PMI figures, Chinese indices struggled to build on the support with the CSI 300 and Shanghai Composite both closing markedly lower, by 0.83% and 0.59% respectively. Fundamental weakness in small businesses and a fragile employment market present significant headwinds to policy makers despite the recent increase in investment and manufacturing activity.

Japanese indices were little changed with both the TOPIX and Nikkei closing flat after wild swings between gains and losses throughout the day. The recent yen weakness has supported equity markets higher with exporters benefiting in particular as the currency pushed past 102.50 against the dollar for the first time since May. However, both the Nikkei and TOPIX seem to be struggling with direction and markets could be poised for a downward correction as the upward momentum wanes.

Commodity prices are set to soften further by year end as prices head for their first annual loss since 2008. According to Bloomberg, the S&P GSCI Spot Index of 24 raw materials fell in December 83% of the time since 1971. The average December loss was 3.9% and if this materialised would bring annual losses to 7.8%. Precious metals and grains are leading the declines with gold headed for its first annual loss since 2000 and silver on track for its worst decline in almost 30 years.

3-month LME aluminium prices are approaching levels last seen in 2009 as stocks in Shanghai and London increase. 3-month prices have declined in all but three of the last 16 sessions as prices dipped below $1,750 on Friday, facing significant pressure from rising warehouse inventories, currently around 5.47m tonnes.

Market participants will gain further prompts from eurozone and UK PMI data due out later this morning as well as ISM manufacturing data and construction spending in the US this afternoon. After disappointing retail sales figures for the holiday period which saw sales increase 2.3% on Thanksgiving and Black Friday, posting the weakest holiday result since 2009, investors will be paying close attention to employment data due out later this week as they try to second guess any shift in policy from the Fed.

 

Aluminium prices are under considerable pressure from rising inventories

LMAHDS03 Comdty LME ALUMINUM 3 2013 12 02 08 18 02



Events for today: Monday, 2 December 2013

 

0200

CN

Nov

Manufacturing PMI

0855

DE

Nov

Manufacturing PMI

0900

EZ

Nov

Manufacturing PMI

0930

UK

Nov

Manufacturing PMI

1500

US

Nov

ISM Manufacturing

1500

US

Oct

Construction Spending

FN: 

Nov Heating Oil & RBOB (NYMEX)

OE: 

Dec  Cocoa (NYBOT)

View Economic Market Calendar

More from: Kash Kamal