Financial market research and analysis

A surge in Asian equities owing to a poorer than expected Japanese Q4 GDP has continued in Europe. The Nikkei, under pressure over the past week owing to a strong yen has bounced back adding 7.16%,
The FTSE is up 1.6%, the Cac has added 2.95% while the Dax is higher by 2.33%.

The Shanghai Composite is the outlier, falling 0.63% as traders returned form a week celebrating the arrival of the New year. All in all, it could have been worse, Chinese exports slumped 11.2% in January while imports contracted by 18.8%.

The PBOC have reacted by strengthening the yuan’s fixing by the most in three months despite the poor export data. It would seem the bank is more concerned about capital outflow and the diminishing foreign exchange reserves for the time being.

Once again this upside relates to expectations that central banks will step in with additional stimulus. Given that markets were only temporarily satisfied with negative interest rates from the Bank of Japan, it’s difficult to see if the current move can be sustained given the lack of ammunition available.

Base metals continue to build on last Friday’s gains with copper trading at $2.08/lb but silver and gold are out of favour, down 3% and 2% respectively as a degree of risk on sentiment and bargain hunting sets in.

US crude oil has started the week trading below $30/bbl while Brent crude oscillates $33, already down 1% in early trade. This is keeping a cap on UK oil producers’ gains. Shell is lower by 0.88% while BP plc is up a mere 0.4% having initially started the morning with a 2% gain. Plans are afoot with its partner Oman Oil to develop a second phase of the Khazzan natural gas field taking the investment in the project to $16bn.

HSBC (+1%) News broke last night that the global banking giant has decided to keep its headquarters in Britain, rejecting the option of moving the HQ to its main profit generating hub Hong Kong.

Burberry (+2.6%) The British luxury fashion brand is to face a class action lawsuit in the US, claiming it used misleading price tags at its outlet stores to fool shoppers into deceiving shoppers into the notion of hefty discounts.

BAE Systems (+1.25%) Former oil Industry exec Charles Woodburn has been appointed heir apparent to Chief Exec Ian King, to head the British defence company.

Reckitt Benckiser Group PLC (+4.85%) Sales beat estimates , profit beats estimates, shares rise 5% in early trading.

With a bank holiday in the US (Presidents Day), lower trade volumes will likely help today’s move. That, along with a uncongested macro calendar could see the current move in equity indices continue to melt northwards.