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Daily Market Summary & Analysis, SEPT 09, 2010

Asian equities market closed mixed in today trading session. The Shanghai Composite Index down -1.44% to 2,656.35; the Shanghai 180 A share index  down -1.83% to 6,154.57; Taiwanese market TWSE, down -0.20% to 7,835.54; Hong Kong Hang Seng, up +0.37% to 21,167.27; Singapore STI up +0.36% to 3,022.28; Japan Nikkei up +0.82% to 9,098.39; South Korea, the Kospi up +0.29% to 1,784.36; Australia (the S&P/ASX 200) up +0.99% to 4,582.24; and India market, the S&P/CNX 500 up +0.42% to 4,740.35. Adrian Mowat, MD & chief EM strategist at J.P. Morgan is bullish on India’s growth prospects, citing emerging economies have survived stress test. And it’s possible that India grows even faster than China, said Mowat.

U.S. equities had a higher opening after a better-than-expected drop in jobless claims last week. According to the Labor Department, initial jobless claims down -27,000 to 451,000 versus the consensus of 470,000. This is the lowest level in almost two months. Peter Boockvar, equity strategist at Millar Tabak, said “it’s a relief to see this number.” However, he remained cautious, citing the market is going through a PE compression period. Historically, the S&P 500 trades at a PE of 15, “but we might see a PE of 10-12. I don’t know the exact number,” he said. Anthony Scaramucci, Managing Partner of Skybridge Capital, is more optimistic. “The Street is increasingly negative with double-dip fear; but the likelihood for that is very low. Double-dip recession has happened only one time in the last 30 years, and corporates are sitting on ton of cash,” he explained.  Suni Harford, a Managing Director and Citi’s Regional Head of Markets agreed. Fundamentals for capital raising are strong. With high inflows and cash on the balance sheet, we could see a strong surprise to the upside for Q4-2010, said Harford.

The S&P 500 touched one month high to 1,110.27 midday. However, when the index fell to climb above the 200d-MA at 1115 range, sellers stepped in pushing the index lower. The financial sector was also strong at the open, but profit-taking kicked in after 1PM. Breaking news came from Deutsche Bank (DB) as Germany’s largest bank said it’s planning to raise capital with €9 billions shares sale or about a quarter of DB’s market value. DB shares dropped -3.11% immediately after the unwelcomed news released. And selling accelerated by the closing bell; DB shares closed down -3.44% to $59.83. BAC and JPM were up more than 3% but both stocks also gave some of the gain, closed at $13.50(+1.03%) and $40.04(+2.34%), respectively.

Today besides the DB surprised news, we also had more selling pressure due to bad macroeconomic data. A survey of 50 economists suggested that the GDP growth for the U.S. would be down to 2.7% y/y, 0.2 of a percentage poin less than a month ago and 0.6 of a percentage point less than predicted in June. Consensus forecast for GDP growth in 2011 was also cut to 2.5%, down by 0.3 of a percentage point from a month ago. In addition to that, the World Economic Forum (WEF) ranking for the U.S. also fell from number two to number four in competitiveness. This is behing Brazil, India, and China, due to deficit balloon and consumer spending fall. Nouriel Roubini, Chairman of Roubini Global Economics, said “double-dip risk is still greater than 40%, despite the better-than-expected data from the Labor Department today”.

The DOW closed up +0.27% to 10,415.24, the Nasdaq up +0.33% to 2,236.20, and the S&P 500 up +0.48% to 1,104.19. Technically, this market needs to clear the June high at 1131.23 in order to convince institutional investors that the bull is in charge. If not, we would likely to be in a trading range between 1010 to 1,100. Next resistance are the 200d-MA at 1115, 1120 and 1131. Supports now are the 50d-MA at 1183.93, the 20d-MA at 1176.53, and the 1050-1060 range.

Best regards to all, and good luck in your trading. 
Disclosure: No positions in stocks mentioned right at the moment
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