16/1/09

The Dow Jones added 12.35 points to close at 8,212.49, the S&P 500 edged 1.12 points higher to end at 843.74. The Nasdaq rose 22.2 points to finish at 1,511.84.

Many financials finished massively down, but off their lows of the session after a broad market turn around. Citigroup and Bank of America continued to slide on fears that the troubled banks will need further government assistance. Citi finished 15.5% lower, having been off as much as 25% while Bank of America sank 18.4%, recovering from a low which saw it 26% off its starting mark. JPMorgan Chase surprised investors by reporting a quarterly profit, however, income was down 76% and the company's CEO warned that the economy and sector will weaken further. Shares in the company swung between losses and gains, only to finish 6% lower.

Elsewhere, Motorola announced 4,000 job cuts on top of the 3,000 it made at the end of 2008. Shares rallied 6%. After the bell, Intel climbed 2.1% after results came in in line with estimates following a revenue warning last week.

US light crude oil for February delivery dropped $1.88 to settle at $35.40 a barrel. COMEX gold for February lost $13.40 to $807.30 an ounce. Treasury prices fell, raising the yield on the 10 year note to 2.21% from 2.2%.

The Nikkei jumped 206.84 points to close at 8,230.15 this morning as investors took strength from the US government's continued rescue operation for the economy. The falling yen helped exporters, with Honda gaining almost 8%, while tech shares were lifted by the positive comments from Intel. 

The Hang Seng edged 12.55 points higher to 13,255.51 this morning. Banks were boosted by news that China's sovereign wealth fund has been buying shares in the nation's three largest banks. Although in contrast to its sector, HSBC fell 2.7% after Goldman Sachs cut its rating to sell.

The FTSE 100 is currently 79.70 points higher at 4,200.81 this morning with banks stronger following the US governments plans to prop up the ailing banking system. Royal Bank of Scotland adds 6%, Lloyds climbs 4.5% while Barclays is up 2.5%. Unlike its Hong Kong listing, HSBC manages a small gain after Dresdner Kleinwort advised clients to buy shares of Europe's biggest bank , saying a dividend cut is already "fully discounted" in the share price.

Economics
US CPI (Dec) 13.30 gmt

Headline CPI is expected to fall 0.9 percent, taking the year on year rate to -0.2 percent from 1.1 percent. The gasoline CPI is expected to have fallen by around 17 percent and that household energy costs (HSBC EST -3 percent) decline for the fifth consecutive month. Food CPI inflation has been drifting lower and a flat reading is expected in December. For the core CPI, a rise of 0.12 percent is expected, higher than the 0.01 percent outcome in November. Public transport costs probably fell again, but hotel costs might not fall again after declines of over 1 percent in both October and November. The financial services component also showed an unusually large decline of 6 percent last month which is unlikely to be repeated.

US Net long term TIC flows (NOV) 14.00 GMT

Net long term securities purchase in October totalled only USD1.5bn. Private sector foreigners sold a net USD33bn in US agency bonds and USD14bn in US14bn In US Corporate bonds, while the foreign official sector sold an additional USD17bn in agency bonds. These trends probably continued in November, and we would not be surprised to see another flat or negative reading for long term securities purchases in November.

US Industrial production (Dec) 14.15gmt

December's ISM manufacturing fell to 32.2, the lowest level since 1980. This indicates that the broad based decline in November manufacturing output was likely repeated in December. Auto production should fall back sharply, as end of year factory shutdowns were started earlier than usual. Total industrial production fell by 0.7 percent, while the capacity utilization rate may fall to 74.8 percent from 75.4 percent. Further recovery in the aerospace category following the end of the Boeing strike will be one of the few factors preventing an even bigger drop. Boeing deliveries rose to 41 in December from just 4 in November, suggesting that production activity has returned closer to normal.

US University of Michigan confidence (Jan, prelim) 15.00 gmt

The 5 point rise in December Michigan sentiment was almost entirely driven by a 28 points rise in the buying conditions index. In particular, many consumers cited prices discounts on vehicles and household durables. The improvement in buying conditions could be partially reversed this month. Meanwhile, the series on current and expected personal finances could be about unchanged, with ongoing job losses offsetting the modest rise in equity markets so far in January. Overall, consumer sentiment is expected to fall slightly to 59. 5 Year median inflation expectations fell to 2.6 percent in December, the lowest since September 2002. The 1 year median fell from 2.9 percent to 1.7 percent in December and is likely to decline even further.