08 MAY 2013: ASIAN SHARES RISE ON CHINESE TRADE DATA

The positive sentiment in global equity markets received a new boost on better than expected Chinese trade data. Asian shares rose to their highest level in two years after China reported a 14,7% export increase in April. Imports were up 16.8% with a trade surplus of USD 18,16 Billion for the month. The Chinese data comes on top of new Wall Street highs with Dow Jones closing above 15 000. In Germany industrial orders showed unexpected strength last week and pulled the Dax index into record territory.

The Australian Reserve Bank became yesterday the last central bank to cut interest rate creating an opening for parity between Australian and US dollars. Share prices are helped by decreased bond returns. The cut in interest rates play into the hands of equities. The Asian Pacific MSCI-index rose 0,8% and reached the highest level since August 2011. Global market sentiments were helped by strong quarterly results by one of the world leading banks, HSBC, and a profit jump for the US Disney. Cut in the labor seems to be the driving force behind HSBC’s result.

The Chinese trading numbers are likely to ease recent concerns about weakness in the recovery in the world second-largest economy. Doubts remain, however, over real demand in China, and the accuracy of their figures. Oil and commodity prices are trading firmer after the Chinese data. A successful bond trade in Portugal supported the upbeat mood and strengthened the Euro. Euro/USD is steady at 1.3080. There is still no breakthrough in USD/JPY which sticks to the 99 yen a dollar level. USD/British sterling, GBP is trading at 1.5479 slightly down from yesterday.

Gold continues to be under pressure. Gold lost one percent during yesterday’s trade. It has recovered to 1455. Gold backed exchange traded funds fell to their weakest level since 2009 indicating that investors money is leaving gold for booming stock markets. This suggests that the super cycle of commodities might be over and that tough times might lie ahead especially for metals. Analysts see that commodity prices in the future probably may be more determined by normal supply and demand balances than by speculative money flows.

Gold traders take an opposite opinion. The present equity boom is driven by low interest rates and central banks money printing. This will create inflationary pressure and challenges for the market system as witnessed by the financial crisis in the autumn of 2008. In such an environment investors will still use gold and precious metals as a hedge. Gold bulls, therefore, stress that a rebound to the USD 1700 level is most likely also in a shorter term perspective.

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14 March 2013: Retail report boosts DOW to new high

Surprisingly strong retail sales helped the Dow Jones Industrial to rise for the ninth straight session in a stock rally not seen since 1996. The new record high posted for DOW is 14 455. Also Nasdaq edged higher to 3 245. Trading volume was light with investors consolidating positions after a strong run up in the three first months of the year. Sign of strength in the economy and the Federal Reserve’s (FED) monetary easing have accelerated the advance of US equities, but many investors are asking whether we are in for a technical correction. The retail sales report helped underscore the impression that the economy is gaining momentum.

Asian shares fell for the second day in row with regional factors outweighing the positive sentiments from another Wall Street record close. The MSCI-index for Asia-Pacific was down 0,6%. Australia plunged 1% in spite of positive employment numbers. The Australian dollar reacted positive to the employment news and hit a five-week high. The Japanese Nikkei bucked the negative trend and added 0,4%. Net inflows in Japanese mutual funds reached USD 11 billion in February. A domestic stock rally for the last four months have increased investor’s appetite for Japanese stocks.

Monetary policy direction remains diverse in Asia as countries also watch development in Chinese economy and North Korea closely. Japan wants powerful monetary easing to get out of a vicious deflation spiral harming its economy for two decades. Other central bankers are fearful of inflation. South Korea has been holding the interest rate steady at 2,75% for the last half year.

The Australian dollar jumped to USD 1,0383 after employment soared by 71 000 in February. JPY continues to gain strengthen against USD trading at 96,03 down from its 96,71 peak on Tuesday. Euro/JPY has also retreated from its record high on Tuesday. The brighter forecast for the US economy has negatively affected the Euro trading down to 1,2947. The yield on Italian short and long term bonds increased during yesterday’s auction, the first after the rating agency Fitch downgraded Italy’s credit rating in February. Investor’s attention will today turn to the Spanish bond auction.

Oil prices, gold and silver have dropped since yesterday. NYMEX crude trades at USD 92,28 a barrel. Brent crude is down to 108,40. Gold trades at USD 1586 an ounce.

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