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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Late Day Stock Market Rally Lifts Indices

Stock-Markets / Financial Markets 2009 Apr 16, 2009 - 06:53 AM GMT

By: PaddyPowerTrader

Stock-Markets Best Financial Markets Analysis ArticleMarkets were choppy all day yesterday until the end. Despite lacking a clear catalyst, the Dow Jones picked up over 100 points in the hour before close to finish the day up 1.38%. Just five of the index’s 30 components failed to join the rally, including three tech stocks. The bear market rally rolls on for now. Note that the Dow Futures are off about 0.8% this morning after a weak European open and Asian session.


Today’s Market Moving Stories
  • The Germans still haven’t decided on what shape their bank recovery plan will take. Finance minister Peer Steinbrück does not want to include toxic assets that are the heart of the problem in the plan. This goes against the option taken by most other Western countries. Instead Steinbrück wants the state to only assume the risks associated with illiquid, but otherwise quite good, assets.
  • US economic data released yesterday was mixed. US industrial production fell an unexpectedly sharp 1.5% in March and US consumer prices posted their first 12-month drop in nearly 54 years, which stoked further fears of deflation. However, the Fed’s Beige Book, which offers an anecdotal look at economic activity in its 12 districts, said that the economy is still in bad shape, but there are signs that the recession may be bottoming.
  • U.S. Treasury Secretary Timothy Geithner refrained from labelling China a manipulator of the yuan’s exchange rate, backtracking from an assertion he made during his confirmation hearings in January. Never able to please everyone, this shift may anger U.S. lawmakers, companies and trade unions who have sought measures to punish nations perceived to have undervalued exchange rates.
  • The number of American households threatened with losing their homes grew 24 percent in the first three months of this year and is poised to rise further as major lenders restart foreclosures after a temporary break.
  • Car registrations in Europe fell for the eleventh straight month, with March sales dropping 9% despite car scrappage measures in Germany, France and Italy that boosted sales in those countries.
  • As reported by Gazza P, the profit that Goldman Sachs surprisingly revealed for Q1 is a little ropey to say the least. It turns out that Goldman changed their Q1 to January to March from December to February. This change meant that December 2008 turned into an orphan month that was simply ignored. Needless to say, December featured lots of writeoffs with the pre-tax loss for the month being $1.3 billion.
  • Rumour has it that the Fed is mulling the idea of post-decision press conferences, like their counterparts at the European Central Bank.
  • The financial war against Iceland. Being defeated by debt is as deadly as outright military warfare. It’s a pretty long read but it’s really interesting.
  • Top investor Dennis Gartman with an interesting audio presentation.

Will China’s Economy Be V Or W?
China’s GDP, battered by collapsing exports, grew by 6.1% in Q1, the slowest pace in almost 10 years. That’s way down from the double digit levels of recent years. But economists are cheerful as manufacturing output, up 8.3% yoy, is growing at a healthy clip again. Plus the huge Chinese stimulus spending package will start to hit very soon.

So the question becomes V or W? In a V-shaped recovery, China would return quickly to the high-level growth of recent years. But in a more W-shaped, the government spending package would peter out and China’s longer term structural issues would resurface. With its huge reserves, many feel that the government will simply continue to pump money into the economy to prevent a V-shaped recovery from turning W-shaped. But in the helpful external factors, namely a resumption of Western demand for Chinese exports, this can only go on for so long.

Equities

  • AIG could announce a deal to sell a car-insurance unit to rival Zurich Financial Services for about $1.5bn - $2bn as early as tomorrow.
  • Loss-making General Motors unit Saab said it had signed confidentiality agreements with 27 potential suitors in its efforts to find a new owner to help it survive the downturn.
  • Sun Microsystems would be willing to resume takeover takeover talks with IBM if IBM made a stronger commitment to closing a deal. IBM withdrew a $7bn offer for its smaller rival earlier this month.
  • eBay plans to pay as much as $1.2B for a 67% stake in South Korea’s top online marketplace Gmarket, potentially one of the company’s largest acquisitions as it moves to expand in Asia.
  • Sergio Marchionne, Fiat’s chief executive officer, has signaled for the first time that he would be willing to run Chrysler, the troubled US carmaker.
  • China Eastern Airlines, one of China’s three major state-owned carriers, said it suffered a $2.2B loss for 2008 due to high fuel costs, lower passengers and wrong-way bets on oil.
  • Always looking to cause a stir, Ryanair has called on Gordon Brown to scrap his £10 tourist tax as BAA March figures confirm the decline of passenger traffic to and from the UK.

Economic Data And Earnings Today
Today starts off with Eurozone CPI (expected 1.4% yoy) and Eurozone industrial production (expected -18% yoy) at 10:00.

Later at 13:30, there’s a whole host of data released from the US – March’s building permits (expected 549K), March’s housing starts (expected 540K) and the weekly initial (expected 658K) and continuing jobless numbers (expected 5858K). Of the four, the initial jobless number is probably the most important, but watch out for any significant deviation from the consensus from any of them. Then at 15:00, the Philly Fed manufacturing survey is released.

Busy day on the earnings front too. Before the US market opens today, we’re going to see Harley Davidson (expected EPS $0.51), Southwest Airlines ($-0.01), Baxter International ($0.81) and JPMorgan Chase ($0.32) report their Q1 earnings. This will set the tone for the day’s trading. Later this evening, after U.S. closes, Google ($4.93) and Biogen Idec ($1.01) will reveal their Q1 numbers.

And Finally… I’ll Sue Ya

Disclosures = None

By The Mole
PaddyPowerTrader.com

The Mole is a man in the know. I don’t trade for a living, but instead work for a well-known Irish institution, heading a desk that regularly trades over €100 million a day. I aim to provide top quality, up-to-date and relevant market news and data, so that traders can make more informed decisions”.

© 2009 Copyright PaddyPowerTrader - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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