Monday's Brew - Jan 8
While the NASDAQ market benefits slightly from the International Consumer Electronics Show in Las Vegas and some speculation in early cyclical shares like that of semiconductor equipment producers, other major indices have rebounded as well through 3:00 p.m. Monday.
OVERSEAS MARKETS
Markets in Japan were closed today for "Coming of Age Day." The Hang Seng Index slipped 0.9% Monday, still sluggish after last week's government decree requiring Chinese banks to reserve another 0.5% of capital, raising the reserve requirement to 9%. However, this does not explain the rise of mainland Chinese shares as evidenced by the Shanghai-Shenzhen 300 Index's 2.83% increase Monday. We continue to believe the rise of mainland Chinese shares is partly due to a growing comfort level in investment there. PricewaterhouseCoopers LLP issued a report last week indicating that Shanghai's bourse could attract $26 billion in IPO funding in 2007, compared to $19.3 billion for Hong Kong. Mainland Chinese shares have been hot all year, and we believe it is partly due to capital flowing out of Hong Kong and into shares traded on the mainland. There is also speculation that there is a growing interest in companies traded in Hong Kong to list shares on mainland exchanges as well.
The Taiwan TAIEX Index fell 1.26%, perhaps partly due to the new Chinese capital restriction and partly due to Chinese criticism of the U.S. in allowing Taiwan's President to spend an evening in San Francisco en route to Nicaragua. India's BSE SENSEX 30 slipped 1.5% today. We see concern among money managers that last year's high flying emerging markets may be poised for correction. Certainly, we believe that conflict with Iran will severely impact Indian and Chinese shares. We anticipate that after Iran's nuclear facilities are attacked, it will resort to oil warfare, perhaps striking out at critical Kuwaiti and/or Saudi Arabian facilities. This would likely lead to repercussions on Iranian facilities, or at least increase concern of such actions. India and China are key markets for Iranian oil, and we suspect their stock market would greatly reflect the risk of decreasing reliability of that oil flow. We expect the Iranian issue to come to a head within the next year and a half, before the Bush Administration leaves office, and Israel could speed that process.
European shares mostly drifted lower on the day, ahead of meetings of the European Central Bank and the Bank of England scheduled for later this week. Before declining, oil had been climbing early this morning, pressuring European shares before they closed. The DJ STOXX 50 Index fell 0.22%, while the FTSE 100 Index declined 0.42%. The hottest market was once again found in new EU player, Bulgaria, where the SOFIX climbed 3.59%. Germany's DAX increased modestly, despite a threat to its oil supply from Russia, due to a Belarusian move to cut the flow on a taxation issue. Markets in Russia are closed for the Russian Orthodox calendar celebration of Christmas, which fell on this past Sunday.
ECONOMIC DATA & ANALYSIS
The most important economic data release on tap for the day was the 3:00 p.m. EST posting of November consumer credit. A poll conducted by Bloomberg News shows that the consensus expert opinion on credit saw a rise of $6.4 billion for the month, compared to October's decrease of $1.2 billion. Also Monday, the Treasury will announce the 10-year TIP's auction.
Fed Vice Chairman Donald Kohn addressed a group on the American economic outlook today, and indicated that it is still too early to look past inflation. In our view, it is unlikely that the Fed would reduce interest rates in March, barring any significant need to do so created by an unforeseen event. We believe the Fed will carefully watch worker productivity, and if productivity gains do not keep up with recent average hourly income growth, the Fed will become more concerned about inflation. Depending on the health of the housing market and GDP growth, the Fed may become inclined to raise rates over reducing them, to moderate inflation, in our view. In international events, EU officials are scheduled to meet with President Bush today in Washington.
COMMODITY MARKETS
Crude oil, which started the day higher, is now down 0.71% to approximately $55.91 per barrel. Recent data indicates that OPEC has not effectively reduced production as much as it agreed upon in meetings late last year. With its credibility in question, skepticism is abound concerning the further 500,000 barrel production cut planned for early February. We continue to expect oil to base here, and rise as more normal weather patterns sweep across the eastern U.S. We recommend readers see our discussion in this week's "The Greek's Week Ahead" for further detail concerning our view for higher energy prices. Gold is higher today by 0.48%, likely driven by the weekend's controversial news that Israel may be planning the use of tactical nuclear weapons against Iran.
STOCKS IN THE NEWS
Monday kicked off the International Consumer Electronics show in Las Vegas, and new product introductions could help the shares of producers of these new and exciting toys. The ailing auto industry is attempting to renew product enthusiasm as the International Auto Show runs in Detroit. Earnings season official begins tomorrow with the report from Alcoa.
(disclosure)OVERSEAS MARKETS
Markets in Japan were closed today for "Coming of Age Day." The Hang Seng Index slipped 0.9% Monday, still sluggish after last week's government decree requiring Chinese banks to reserve another 0.5% of capital, raising the reserve requirement to 9%. However, this does not explain the rise of mainland Chinese shares as evidenced by the Shanghai-Shenzhen 300 Index's 2.83% increase Monday. We continue to believe the rise of mainland Chinese shares is partly due to a growing comfort level in investment there. PricewaterhouseCoopers LLP issued a report last week indicating that Shanghai's bourse could attract $26 billion in IPO funding in 2007, compared to $19.3 billion for Hong Kong. Mainland Chinese shares have been hot all year, and we believe it is partly due to capital flowing out of Hong Kong and into shares traded on the mainland. There is also speculation that there is a growing interest in companies traded in Hong Kong to list shares on mainland exchanges as well.
The Taiwan TAIEX Index fell 1.26%, perhaps partly due to the new Chinese capital restriction and partly due to Chinese criticism of the U.S. in allowing Taiwan's President to spend an evening in San Francisco en route to Nicaragua. India's BSE SENSEX 30 slipped 1.5% today. We see concern among money managers that last year's high flying emerging markets may be poised for correction. Certainly, we believe that conflict with Iran will severely impact Indian and Chinese shares. We anticipate that after Iran's nuclear facilities are attacked, it will resort to oil warfare, perhaps striking out at critical Kuwaiti and/or Saudi Arabian facilities. This would likely lead to repercussions on Iranian facilities, or at least increase concern of such actions. India and China are key markets for Iranian oil, and we suspect their stock market would greatly reflect the risk of decreasing reliability of that oil flow. We expect the Iranian issue to come to a head within the next year and a half, before the Bush Administration leaves office, and Israel could speed that process.
European shares mostly drifted lower on the day, ahead of meetings of the European Central Bank and the Bank of England scheduled for later this week. Before declining, oil had been climbing early this morning, pressuring European shares before they closed. The DJ STOXX 50 Index fell 0.22%, while the FTSE 100 Index declined 0.42%. The hottest market was once again found in new EU player, Bulgaria, where the SOFIX climbed 3.59%. Germany's DAX increased modestly, despite a threat to its oil supply from Russia, due to a Belarusian move to cut the flow on a taxation issue. Markets in Russia are closed for the Russian Orthodox calendar celebration of Christmas, which fell on this past Sunday.
ECONOMIC DATA & ANALYSIS
The most important economic data release on tap for the day was the 3:00 p.m. EST posting of November consumer credit. A poll conducted by Bloomberg News shows that the consensus expert opinion on credit saw a rise of $6.4 billion for the month, compared to October's decrease of $1.2 billion. Also Monday, the Treasury will announce the 10-year TIP's auction.
Fed Vice Chairman Donald Kohn addressed a group on the American economic outlook today, and indicated that it is still too early to look past inflation. In our view, it is unlikely that the Fed would reduce interest rates in March, barring any significant need to do so created by an unforeseen event. We believe the Fed will carefully watch worker productivity, and if productivity gains do not keep up with recent average hourly income growth, the Fed will become more concerned about inflation. Depending on the health of the housing market and GDP growth, the Fed may become inclined to raise rates over reducing them, to moderate inflation, in our view. In international events, EU officials are scheduled to meet with President Bush today in Washington.
COMMODITY MARKETS
Crude oil, which started the day higher, is now down 0.71% to approximately $55.91 per barrel. Recent data indicates that OPEC has not effectively reduced production as much as it agreed upon in meetings late last year. With its credibility in question, skepticism is abound concerning the further 500,000 barrel production cut planned for early February. We continue to expect oil to base here, and rise as more normal weather patterns sweep across the eastern U.S. We recommend readers see our discussion in this week's "The Greek's Week Ahead" for further detail concerning our view for higher energy prices. Gold is higher today by 0.48%, likely driven by the weekend's controversial news that Israel may be planning the use of tactical nuclear weapons against Iran.
STOCKS IN THE NEWS
Monday kicked off the International Consumer Electronics show in Las Vegas, and new product introductions could help the shares of producers of these new and exciting toys. The ailing auto industry is attempting to renew product enthusiasm as the International Auto Show runs in Detroit. Earnings season official begins tomorrow with the report from Alcoa.
posted by The Greek | 3:37 PM
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