Equities pare recent gains ahead of non-farm payrolls

Friday, January 10, 2014

A mixed session for Asian equities as investors hold out for key data releases later today with Japanese stocks managing to end the day in positive territory while mainland Chinese stock indices slip lower. Despite encouraging import growth a lower than expected trade balance, coming in at $25.64bn against an expected $32.15bn for December, highlighted concerns among investors that global demand growth remains sluggish as the surplus narrowed. The CSI 300 shed 0.78% overnight while the Shanghai Composite ended the session 0.71% lower. Japanese markets managed to end the session slightly higher with the Nikkei and TOPIX closing up 0.2% and 0.13% respectively.

Major US equity indices ended the day largely unchanged yesterday despite better than expected initial jobless claims and a marginally improved Bloomberg weekly consumer comfort index. Initial jobless claims for the week ending January 4th fell by 15K w/w to 330K, 5K below analyst expectations. However, both the S&P 500 and DJIA ended the session flat after spending the majority of the day under pressure as investors absorbed the dovish comments from the ECB and switched focus to today’s key US data, notably in the US with non-farm payrolls, unemployment rate and wholesale inventories.

China’s imports accelerated to their highest level since July 2013, supporting the view that domestic demand remained on track to support economic growth. Imports gained 8.3% y/y in December against 5.3% y/y the previous month, far exceeding analyst expectations of 5% growth according to Bloomberg data. Despite liquidity concerns re-emerging in recent weeks policy makers have ensured the Chinese economy remains on a stable growth path. CPI and PPI data released yesterday indicated a gradual decline in inflation in December as Beijing’s austerity measures on excessive spending had a surprisingly large impact. CPI in December came in at 2.5% y/y against 2.7% expected by economists, however, producer prices remained weak underlying the fragile state of the recovery, with December’s PPI figure unchanged at -1.4% y/y from the month prior.

Alcoa reported lower than expected Q4 profit as excess rolled inventories for aerospace applications weighed on performance. According to a statement released yesterday after the close of regular trading the largest aluminium producer in the US reported a net loss of $2.3bn or $2.19 per share in Q4 2013. The share price closed 1.3% lower after dropping 3% intraday towards $10.50.

Chinese imports accelerate to highest levels since July 2013

CNFRIMPY Index China Import Tra 2014 01 10 07 38 55

But trade surplus narrows highlighting concerns over global demand

CNFRBAL Index China Imports 2014 01 10 07 56 30

Events for today: Friday, 10 January 2014

UK

Dec

BRC Retail sales

0500

JP

Nov

Leading Index

0930

UK

Nov

Industrial Output

1330

US

Dec

NF Payrolls & Unemployment

1500

US

Nov

Wholesale Inventories

OE:

Feb Brent Crude (ICE)

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More from: Kash Kamal