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China flash PMI, positive earnings and easy money rekindle stock and gold rallies

CMC Markets

After a one day pause for consolidation and reflection, stock markets around the world have resumed their upward course. Flash PMI out of China beat the street and helped to reignite interest in Asia Pacific markets and ease some of the fears about bank liquidity that had shaken markets in the region yesterday. Better than expected earnings out of the US on balance today has also helped to boost spirits once again. Today is the first big day for earnings out of Canada where results have been more mixed. Overall earnings remain supportive but selected disappointments and guidance cuts could be punished today. A shift towards more dovish stances at central banks around the world also has been shoring up support for world stock markets. While the expected delay of QE tapering to at least March remains a primary driver, some of the previously more hawkish central banks have softened this week. Sweden’s Riksbank joined the Bank of Canada in backing away from a tightening tone toward a more neutral stance. It maintained its repo rate at 1.00% as expected but cut its rate forecast for a year from now to 1.15% from 1.25%. It also indicated it does not expect to raise the repo rate until late 2014 and that it needs to keep rates low “until the economy is stronger and inflation rises”. The potential for easy money to stick around longer than previously thought has emboldened European indices to shrug off regional flash PMI disappointments and to focus on liquidity. This also has given gold and silver a boost today. Currency markets have been mixed today. Resource Dollars (CAD, AUD and NZD) remain under pressure on the potential for a shift toward easier monetary policy. Surprisingly SEK and NOK, on the other hand have been outperforming other majors despite the Riksbank comments. In commodities today, the energy group remains under pressure but we could see some activity in natural gas later this morning when weekly storage comes out. With temperatures dropping this week, anticipation of heating season could pick up in the coming days. Corporate News Potash $0.41 in line with recent profit warning. Cut FY guidance to $2.00-$2.20 from $2.45-$2.70. Teck $0.44 ex items vs street $0.38 Goldcorp $0.23 vs street $0.20 Cenovus cash flow $1.23 vs street $1.20 Precision Drilling $0.10 vs street $0.16 Rogers Comm $0.97 ex items in line Shaw Comm $0.24 vs street $0.33 Domtar $1.25 ex items vs street $1.19 Ford $0.45 vs street $0.37 3M $1.78 vs street $1.75 PulteGroup $0.45 ex items vs street $0.36 McKesson $2.27 ex items vs street $2.04, raised FY guidance ex items to $8.40-$8.70 from $8.05-$8.35 Xerox $0.26 ex items vs street $0.25 Symantec $0.50 ex items vs street $0.44, guidance $0.41-$0.43 vs street $0.51 way short Citrix $0.70 vs street $0.69 guidance $0.95-$1.00 vs street $1.05 AT&T $0.66 vs street $0.65 Economic News Significant economic announcements released yesterday afternoon and overnight include: US jobless claims 350K vs street 340K US trade balance ($38.8B) vs street ($39.4B) US flash PMI street 52.5 China flash PMI 50.9 vs street 50.4 France flash manuf PMI 49.4 vs street 50.1 France flash service PMI 50.2 vs street 51.3 Germany flash manuf PMI 51.5 vs street 51.4 Germany flash service PMI 52.3 vs street 53.7 Eurozone flash manuf PMI 51.3 vs street 51.4 Eurozone flash service PMI 50.9 vs street 52.2 Sweden interest rate decision 1.00% no change as expected Norway interest rate decision 1.50% no change as expected NZ trade balance ($199M) vs street ($680M) Economic reports due later today include: 10:30 am EDT US natural gas storage street 82 BCF

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