Trader Talk: An Analysis of the Markets this Morning

Good morning,

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

• Jobs report out in the US expected to show the smallest gains in hiring since June as hurricane Sandy hit the labor market;

• Apple to create jobs in the US – The Mac will be made in the USA;

• Chinese data on Dec. 9 may show industrial production, retail sales and fixed asset investment gained in November, according to economists estimates;

• The European Central Bank cut its growth and inflation forecasts yesterday, leaving the door open to further interest-rate cuts;

• Industrial production in China probably accelerated for a third month to 9.8% in November from a year earlier, while retail sales probably rose 14.6%, the most since March, according to median estimates in Bloomberg News surveys;

• The MSCI Emerging Markets Information Technology Index advanced 1.1% to the the highest level since the peak of the dot-com bubble in 2000. Samsung Electronics Co. climbed 2.4%, sending the South Korean company’s market value above $200 billion;

• 10-year Italian debt is yielding 4.566%, 10-year Spain is yielding 5.456% and 10-year Portuguese debt is yielding 7.442%;

• Brent is trading at $107.28/barrel;

• Gold is trading at $1702.10/t oz;l

• Apple closed the session at $547.24

Before Steve Jobs died he told Tim Cook – 'Never ask the question what I would have done to just do what's right!'

Sunday is an important day for China because they are issuing industrial production and retail sales data for November. This would determine the sentiment for the Monday session. But today its all about jobs in the US for the month of November and industrial production for the UK and Germany. Job growth in November was likely sluggish as Sandy battered the economy after slamming the east coast. The consensus forecast of economists is that 93,000 nonfarm payrolls were added in November, down from 171,000 in October, and the unemployment rate is expected to hold steady at 7.9% according to analysts.

Regarding data out of China this Sunday, industrial production probably accelerated for a third month to 9.8% in November from a year earlier, while retail sales probably rose 14.6% the most since March, according to analysts.

Japan's Nikkei share average rose to a seven-month high for the second day in a row today as persistent speculation of further monetary easing by the central bank under a likely new government supported the market.

In Australia the markets also rallied after data today showed the nation’s building industry shrank at a slower place last month as the housing sector showed signs of recovery after the central bank cut borrowing costs. A separate government report showed the trade deficit widened less than economists predicted in October.

Some interesting share movements in the Asian session today are as follow:

• Sharp surged 10.6% to a three-month high, extending the previous session's 9.9% jump on short covering after Hon Hai Precision Industry's chairman said Qualcomm's tie-up will not affect Hon Hai's position to become Sharp's biggest shareholder;

• Digital Garage soared 3.2% to a 1-1/2 month high after the IT company raised its outlook for H212 due to strong online ad sales;

• Prada shares surged 7.2% in Hong Kong after reporting a 30% rise in third-quarter net profit, as wealthy tourists and overseas growth lifted holiday sales;

• Market heavyweight Samsung Electronics rallied 2% after a US district court hearing began on a range of issues including rival Apple request to ban sales of some Samsung devices.

Barclays came out with a report on what they expect from the markets going into 2013. What Barclays are saying is basically 2013 is not going to be an exciting year (this is what most analysts are saying apart from JP Morgan who are always more bullish than everyone else). More like jogging on the spot and not going anywhere as yields on high yield and sovereigns have hit record bottom.

A small extract from the report summarizing the report ‘As 2013 approaches, financial markets are in better shape than they were a year ago. Most equity indices are up for the year, sovereign yields in Southern Europe are down sharply from the levels of 12 months ago, and equity and interest rate volatility is near pre-crisis lows. But this benign outcome is not due to strong data or because of a resolution of the European debt crisis. Growth has disappointed in most economies, and forecasts have been repeatedly revised down over 2012. Instead, asset prices have been supported by unprecedented easing by central banks across the world.

But most regions still face very significant challenges, not least on the growth front. In this environment, interest rates should stay low and range-bound in 2013, and fixed income investors will likely feel like they spent the year running in place.’

Stock to watch: Arkema (Price E80.03, New Price Target E92)

With its restructuring completed and the Vinyls exit expected in mid-2012, Arkema should deliver above-peer-average levels of profitability/returns. We now expect EPS to be driven by structural growth prospects (Thiochems, Technical Polymers) and improved Acrylics downstream integration following the Total deal. Arkema trades at the bottom of its peer group despite offering above-average levels of profitability and returns and the strong growth potential of its portfolio. We rate the company a Buy.

Good day and happy trading!

Kristian Camenzuli