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Markets are called higher this morning, This is what's happening today:
The DAX is up 14.63% for the year, the CAC is up 1.68% and the FTSE is up 4.31%. The Nikkei is up 11.17%, Hang Seng 15.86% and the S&P is up 11.79%. China and the US reported better than expected PMI data for April. The probability of further QE is diminishing in the US. This is a good sign for a strengthening Dollar which was weakening of the back of expected further expansionary monetary policy. The EURUSD is now trading at $1.3225/E. I remain of the view that investors should be overweight the US and emerging markets as opposed to Europe. Plus I remain bullish on the Dollar as opposed to the Euro.
A Chinese manufacturing index rose in April, signalling growth may be starting to rebound in the world’s second-biggest economy. The 49.3 final reading of a purchasing managers’ index from HSBC Holdings Plc and Markit Economics today compares with a preliminary 49.1 reported April 23 and a final 48.3 in March. A separate index released yesterday by China’s statistics bureau and logistics federation was at 53.3, indicating the fastest growth in a year. Improvements in manufacturing may encourage Premier Wen Jiabao to extend a two-month pause in lowering banks’ reserve requirements. Wen is seeking to rein in property and consumer prices without sending the economy into a so-called hard landing. Gross domestic product increased 8.1% last quarter from a year earlier, the least since 2009.
In the US, the Institute for Supply Management’s index of manufacturing rose to 54.8 in April, the highest since June, from 53.4 a month earlier. Readings above 50 signal growth. The odds of more Federal Reserve stimulus diminished yesterday as four central bankers said it probably won’t be needed and an unexpected acceleration in US manufacturing provided fresh evidence of economic strength. The FOMC left policy unchanged after its April 24-25 meeting, and Chairman Ben S. Bernanke signalled that further easing is unlikely unless the economy unexpectedly deteriorates. Bernanke said it would be “reckless” to pursue policies that would drive up inflation when it’s already near the Fed’s target, while noting he’s “prepared to do more” should conditions worsen.
French President Nicolas Sarkozy gets his last chance to turn the tide against Socialist challenger Francois Hollande tonight in the campaign’s only debate. Hollande, who leads polls with between 53% and 56% of support before the May 6 runoff, rejected Sarkozy’s bid to hold three debates, agreeing to the standard in French elections. Sarkozy said Europe’s financial crisis compelled the candidates to contrast their stands on debt and competitiveness.
Substantiating my argument to invest in Indonesia
On May 1, the Jakarta index was trading at 14.3 times estimated earnings compared with an emerging-markets average of 10.6. In the longer term, Indonesia is clearly highly favorable but from the shorter-term perspective, it is one of the more expensive emerging markets.
Indonesia is the world’s No. 1 exporter of power-station coal, tin and the palm oil that greases one-third of the world’s frying pans and woks. It’s also home to the largest gold mine and the single biggest recoverable copper reserve and is the world’s second-biggest exporter of liquefied natural gas. Foreign direct investment, the biggest source being neighboring Singapore, jumped 20% last year to a record $19.3 billion. In the space of five weeks in December and January, both Fitch Ratings and Moody’s Investors Service raised Indonesia’s debt to investment grade.
Stock to watch : Abercrombie & Fitch (Price $53.02, Citi's Price Target $58)
Despite a host of issues in its U.S. segment, ANF's foreign stores are running 5x to 7x avg. domestic sales productivity, which accounted for most of FY11's square footage growth, and will continue to in FY12, we believe. With the downside case for ANF stock well known (i.e. no U.S. stabilization, near-term deterioration in Europe as well), we believe the bigger 2012 focus will be on Intl. store growth, mix shift to the higher-margin internet category, and forthcoming (2H12) declines in product cost (up to 15% y/y).
For further information on Abercrombie & Fitch and other stocks we follow, contact our offices on 25688688.
Good day and happy trading!
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