31/08/10 - 15:30
Ben Potter, Research Analyst
Afternoon thoughts from the Trading Room – 3.30pm
Across Asia, regional markets are all lower this Tuesday following the weak US leads. Disappointing personal income data in the US ignited further fears over the potential for a double-dip recession. The Nikkei 225 is the worst performer, down 2.7% while the Shanghai Composite, Kospi and Hang Seng are all lower between 0.5% and 1.3%.
In Australia, the ASX 200 is 0.8% weaker at 4418.5 having traded to a low of 4413. Despite a brief rally following the better-than-expected building approvals and retails sales data, falls have largely been broad based. The heavily weighted financials, materials and energy names are doing most of the damage as investors shy away from cyclical stocks, instead choosing to bid up more defensive sectors like healthcare and telecommunications.
We’re seeing some decent outperformance from the local market today. The strong economic data releases mid morning and likely end-of-month fund buying are probably the main drivers. The selling on Wall St lacked conviction, with volumes continuing to be muted at best.
US markets and sentiment continues to be very skittish. For example, Friday saw good gains following the stronger-than-expected GDP read and Bernanke’s reassurances. Yet yesterday, all the good from Friday’s session was forgotten, with the market selling off heavily on a slightly weaker personal income report; even though this followed a good consumer spending report.
At the end of the day, we’re continuing to see a battle between the bulls and bears – those who believe we’re headed for a double dip and those who believe it’s a soft patch in a bigger recovery.
Ahead of European Open
Selling was the order of the day during Monday's trade for global equities and has been sustained during the Asian session. As London-based dealers return to their desks after the long weekend, the pressure is going to be heaped on the downside for the FTSE. Some optimism may be forthcoming in the better than expected UK consumer confidence data that was released overnight but there's going to be this need to play catch up and also the idea that any rampant growth we're seeing now is merely going to end up as being the peak between two recessionary troughs.
As the day progresses, US consumer confidence will be very much in focus amidst what has been some rather lacklustre economic data from Washington. On the earnings calendar, retail giant Carrefour is due to report in Paris shortly. It almost goes without saying that as the week progresses, Friday's non - farm payrolls out of the US will take on added significance. So, as northern hemisphere markets emerge from the summer break, we're calling the FTSE down 35 at 5167, the DAX down 52 at 5860 and the CAC down 34 at 3453.
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