Nikkei pushes to six month high on stimulus speculation

Tuesday, December 03, 2013

US markets closed lower yesterday with the S&P 500 testing support at 1,800 and the DJIA holding firm above 16,000, closing 0.27% and 0.48% lower respectively. Momentum has begun to fade as heavy discounts from retailers during the holiday period fail to entice customers, leading to lower than expected sales when compared with the same period last year which could indicate a tougher earnings season for many. The National Retail Federation estimated that the average shopper spent 3.9% less than the same period last year and expects that lower prices will see the slump continue throughout the holiday season. Markets were unable to hold on to the early gains after a better than expected ISM manufacturing reading, coming in at 57.3 in November against the 55.1 expected.

Rio Tinto is set to cut capex by half as global commodity prices continue to face significant headwinds. Sam Walsh, CEO of the miner announced in a statement that the company has pledged to cut capital spending by 20% in each of the next two years, bringing a saving of $6bn by 2015 as spending is reined in to around $8bn. Vale, the world’s largest iron ore producer cut its investment budget for a third straight year yesterday to just under $15bn, the lowest level since 2010.

Regulators will meet on 10th December to discuss the final version of the Volcker rule, according to Bloomberg. The rule, which will ban banks from making speculative bets with their own money will hopefully be approved by the Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. with the CFTC and SEC the two other agencies that must to approve the rule but not necessarily at the same time. Banks have until 21st January to implement the Volcker rule but industry representatives remain confident that the deadline will be extended.

Asian markets rallied higher, with the Nikkei gaining for the fourth straight session after stimulus speculation boosted risk appetite. Market chatter that the BoJ would increase its stimulus programme sent the yen above 103.00 against the dollar for the first time since May this year, spurring the benchmark index 0.6% higher as it posted a fresh six month high.

ISM manufacturing PMI pushes to levels last seen in April 2011

NAPMPMI Index ISM Manufacturing 2013 12 03 07 37 29

A weaker yen supports the Nikkei 225 higher

NKY Index Nikkei 225 2013 12 03 07 50 25

Events for today: Tuesday, 3 December 2013




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Topics: DJI, Nikkei, SP 500, BoJ
More from: Kash Kamal