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Commentary: Markets go defensive to finish off January
00:00, 31 January 2014
This weekend’s Super Bowl features the NFL’s top offence (Denver) against the league’s top defense (Seattle) battling it out for the championship. In the markets this week, however, it is clearly the defensive side that has been winning. Stock markets in many countries have gone into retreat once again as traders assess what the prospects for continued Fed tapering through the year means for overextended stock markets and emerging market currencies. European indices are trading lower with the FTSE, DAX, IBEX and MIB all down over 100 points while in this side of the pond, the Dow has been trading down over 150 points. On the flip side, gold has rallied back above $1,250 while JPY and CHF have climbed to the top of the currency league tables. A rallying JPY and falling Nikkei suggests that traders have taken last night’s flurry of very strong economic announcements to suggest that the Bank of Japan’s QE program is working making additional stimulus beyond that already planned less likely. With the month wrapping up today it appears that a number of traders have been squaring positions to get them off the books. While this selloff could set the stage for some bargain hunting later today or Monday, the first down January since 2010 sends another bearish omen for trading through the rest of the year. On Monday, we will look at what the January and Super Bowl effects may potentially mean for trading in 2014. Corporate News Wal-Mart issues profit warning, EPS to come in near or below bottom of previous $1.60-$1.70 guidance range. Google $12.01 vs street $12.24, announced stock split and division into voting/non-voting share structure, selling Motorola handset business to Lenovo, keeping patents Amazon $0.51 vs street $0.74, sales guidance $18.2-$19.9B vs street $19.6B MasterCard $0.57 vs street $0.60 Mattel $1.07 vs street $1.19, raises dividend by 5.6% Chevron $2.57 as expected Canadian National $0.76 vs street $0.77, 16% dividend increase to $0.25 Canadian oil Sands $0.40 vs street $0.51 Celestica $0.24 vs street $0.23 Economic News Significant economic announcements released yesterday afternoon and overnight include: Canada GDP 2.6% as expected US personal income 0.0% vs street 0.2% US personal spending 0.4% vs street 0.2% US PCE core inflation 1.2% as expected India GDP 4.5% vs previous 6.2% NZ trade balance $523M vs street $500M Japan manufacturing PMI 56.6 vs previous 55.2 Japan unemployment rate 3.7% vs street 3.9% Japan consumer prices 1.6% vs street 1.5% Japan industrial production 7.3% as expected Japan housing starts 18.0% vs street 13.6% Japan construction orders 4.9% vs street 2.2% Germany retail sales (2.4%) vs street 1.9% France consumer spending 1.4% vs street 0.9% Spain consumer prices 0.2% vs street 0.3% Italy unemployment rate 12.7% vs street 12.8% Greece retail sales 0.0% vs previous (1.9%) Eurozone unemployment rate 12.0% vs street 12.1% Eurozone consumer prices 0.7% vs street 0.9% Economic reports due later today include: 9:45 am EST US Chicago PMI street 59.0 9:55 am EST US Michigan consumer cnfdnce street 81.0 8:00 pm EST China manufacturing PMI street 50.5 vs previous 51.0