Asia Follows Down U.S. Markets

Asian stocks were in decline overnight following a dreary US performance on Wall Street and ahead of a key US jobs report tomorrow. Figures from China showed that consumer prices rose less than expected and whilst Japanese consumer sentiment worsened in December.

The markets were expecting a 2.7% in Chinese CPI yet prices only rose 2.5% in December. However, all is not lost as a worse figure could ease market fears of monetary policy tightening in China. The US dollar touched a four-month high as signs of improvement in the labour market supported expectations the US economy will be strong enough to support a reduction in the Federal Reserve’s bond purchases. Further job data, in the form of unemployment claims, will shed further light on how well the economy is performing. We are forecasting an unchanged reading of 337,000 claims before the all-important Non-farm payrolls tomorrow.

No doubt investors will be focusing on the UK retail market after Tesco, Morrison’s and Marks & Spencer reported Christmas trading reports, with all three showing signs that Christmas remained tough. Tesco, the world’s third biggest retailer, posted a heavy drop in underlying sales in its main British market during the Christmas period. They reported a 2.4 percent drop in sales (excluding fuel and VAT sales tax) for the six weeks to January 4.

– Lee Mumford

PM Analysis
The FTSE 100 has registered small gains this morning
The FTSE 100 has registered small gains this morning on the back of better than expected Marks and Spencer results and strength in the energy sector. M&S was amongst the top gainers in Britain’s top equity index after the upmarket retailer reported organic growth in food sales in the Christmas quarter, offsetting a weak show for its clothes business, which reported a 10th consecutive quarter of falling sales. The energy sector also provided support for the index as the oil price firmed, with Tullow Oil among top gainers after an upgrade by HSBC.

Worryingly for the gambling sector, Labour party ministers called for greater regulation of the gambling industry in the UK. Regulatory change has always been a key driver of sentiment toward the sector, so unsurprisingly both William Hill and Ladbrokes are trading lower this afternoon. William Hill has been downgraded to equal weight from overweight by Barclays.

With the ECB holding a press conference at 13:30 today, policymakers were given a timely boost after a report showed Euro zone economic sentiment rose more than expected in December and inflation expectations picked up. This will ease the pressure on the ECB to loosen monetary strings further. Analysts said the improving sentiment suggested the recovery gained traction in the last quarter of the last year.

Meanwhile, U.S futures have climbed throughout the morning as investors await Alcoa’s financial results marking the unofficial start of the fourth-quarter earnings season. Analysts predict that companies in the S&P 500 will increase their earnings by 9.7 percent on average this year and their sales by 3.8 percent.

– Max Cohen

The original articles by Spreadex can be found here.

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