Good morning,

Markets are called to open lower this morning. This is what's happening today:

  • The yen rebounded from near the lowest since June 2010 after comments by Japan’s economy minister stoked speculation the nation won’t try to further weaken the currency. Asian stocks outside of Japan fell;
  • Apple declined to the lowest price in 11 months in US trading. Sharp Corp., which makes display panels for the iPhone 5, dropped as much as 7% in Tokyo trading, the most since Dec. 25. TDK Corp., a battery maker, tumbled as much as 4.1%. LG Display Co. and chipmaker SK Hynix Inc. dropped more than 2.5%;
  • So-called extraordinary measures the Obama administration is taking to avoid breaching the federal debt ceiling would work only until mid-February to early March, Geithner said yesterday;
  • 10-year Italian debt is yielding 4.189%, 10-year Spain is yielding 5.014% and 10-year Portuguese debt is yielding 5.014%;
  • German GDP out today;
  • Brent is trading at $111.53/bbl;
  • Gold is trading at $1671/ t oz;
  • Apple closed the session at $501.75

Two reasons for the negative opening in European markets this morning. The first reason for the negativity in the market is the statement made by Timothy Geithner. The US Treasury Secretary said the so-called extraordinary measures he’s taking to avoid breaching the debt ceiling would work only until mid- February to early March and warned that failure by Congress to raise the limit could “impose severe economic hardship” on the country. “Congress should act as early as possible to extend normal borrowing authority in order to avoid the risk of default and any interruption in payments,” Geithner said in a letter today to House Speaker John Boehner.

It is interesting to note however that US Treasury bond investors who most directly bear the risk of a government default haven’t been alarmed. The 10-year yield touched 1.83 percent, the lowest level since Jan. 3. Bond investors were also unrattled during a debt-limit debate in 2011. Yields on 10-year U.S. Treasury notes declined from 2.96% on July 22 to 2.56% on Aug. 5, 2011, the day Standard & Poor’s downgraded the US credit rating. Yields continued to drop, reaching 1.72% on Sept. 22 of that year.

The second reason for the negative sentiment in the market is the rebound in the Yen after the Japanese economic minister said Japan faces risks from declines in the Yen after it weakened 3.6% this year against a basket of developed market currencies. The world has gone massively short yen on the idea that Japan is going to be more aggressive with its stimulus under the new prime minister. “The world has gone massively short yen on the idea that Japan is going to be more aggressive with its stimulus under the new prime minister,” said Imre Speizer, an Auckland-based strategist at Westpac Banking Corp. “Comments like Amari’s are likely to spook those holding yen shorts.” A short position is a bet a currency will decline in value.

I'd like to end this blog with a comment on Apple. The market is like a herd. They hear news and the sell on the rumor. There was a report out in the market saying that the demand for iphone parts were down 50%. Anyone can say what he wants on the internet BUT at the end of the day what’s important is who said it. And guess what – unidentified executives at parts suppliers!

From Bloomberg – Exaggerated Reports – BOCI Research Ltd. analyst Tony Yang in Hong Kong said checks with Apple suppliers failed to produce any signs of “a huge iPhone 5 shipment drop.” Barclays Plc analyst Jones Ku also said there were no indications of a large order cut for speakers made by Shenzhen, China-based AAC. “The actual order cut for iPhone 5s in the first quarter is exaggerated,” Ku said in Hong Kong. “The large cut for displays is mainly due to the over-purchase of displays in the fourth quarter.”

It doesn’t matter where the price goes on speculation. Results are soon with us on 23.01.13. Knowing that Tim Cook has to deliver after Steve Jobs passing, makes Apple an even more interesting story. Rather than issuing sweeping statements why don’t people try and understand why Tim Cook visited China twice already and the new products which are expected to come out in 2013. At the end of the day we are talking about the largest company in the world which still has a lot to offer and is trading a PER of 11.4x with a gross dividend yield of 2.11%!

Good day and happy trading!

Kristian Camenzuli