Strength in global equity markets coming on the tail end of the successful campaign for change of President-elect Obama has reversed sharply the morning after as profit-taking amid economic uncertainty and yet another set of extremely poor economic data in the US soured the bullish case. Dow, S&P, and Nasdaq started the day moderately lower and were sold off much deeper in the final hour of trading to end the session lower by over 5% across the board. Private employment survey from ADP saw a loss of 157K in October, a poor precursor to Friday's crucial jobs data for October - the month that a number of indicators point to going from bad to worse for the job sector. ISM Services index that has been relatively immune to steep contraction seen in manufacturing data in recent months data earlier this week was also a tremendous disappointment at 44.4 - a record decline and far below the neutral 50.0 mark. These indicators are said to be leading in nature and therefore appear to support the case for a deep economic US recession.
The list of first-tier companies reporting earnings was spread across a number of sectors, with Cisco, Sunoco, Hertz, and News Corp reporting in the afterhours session. CSCO beat Q1 estimates on the top and bottom line, but guided Q2 sharply lower, forecasting a 5-10% y/y decline that was said to be 10-15% below street estimates. CEO John Chambers voiced uncertainty over the likelihood of Q1 being the "kitchen sink" quarter as shares fell over 5% after hours. Sunoco was the notable outperformer amid a consistently upbeat set of results from this quarter's energy sector names. SUN reported Q3 EPS at $4.70 and Revenue of $16.1B, well above the forecasted $2.46 and $12.8B respectively, sending its shares up by over 2%. Meanwhile, HTZ and NWS results were both extremely poor, coming well short of estimates on the top and bottom lines while encouraging a respective 9% and 11% afterhours decline. News Corp CEO Murdoch stated that 2009 profit may drop to low to mid teens while Hertz also resigned to not being able to meet prior guidance for FY08 with media giants suffering amid TV/newspaper advertising revenue drought and car rentals dragged down by steep contraction in business travel.
Weakness in US equities extended into Thursday Asian session where equities have unanimously reversed their bullish tone. Nikkei and Hang Seng shed over 6% while Korea led the selloff among regional bourses with an over 8% drop as fears over consumer-led recession in the US were felt acutely in export dependent Asian economies. Mitsubishi and Toyota were among the most notable of Tokyo names: the former was seen guiding H1 profit at ¥2.94B v ¥4B and sales ¥198.3B v ¥205.2B expected, while the latter came well short of estimates on the bottom line, forcing the world's largest automaker to slow production and cut staffing costs amid a sharp decline in overseas demand. Furthermore, Japan's Sumitomo Realty confirmed poor housing sector outlook depicted in the early October BOJ meeting minutes as it cut FY Net est to ¥58B from ¥65B forecasted earlier.
In currencies, risk averse flows returned with a vengeance, boosting Japanese Yen and European high yielders across the board. USD/JPY was last seen trading at November lows below 98.00, EUR/USD retained early session selling pressure toward 1. 2840 support, and GBP/USD was back below 1.60 after peaking around 1.62 in mid-US session. Both European Central Bank and Bank of England are expected to cut rates in Thursday's European session by at least 50 points, with a number of analysts calling for a much deeper cut from the UK. Key yen crosses were also seen approaching November lows, with GBP/JPY trading in a downsloping week-long channel toward 153.70 support and EUR/JPY dropping by over two big figures in Asia session. Commodity FX traded in line with sharp selloff in oil as USD/CAD gained nearly three big figures from just under 1.15 all the way above 1.17. Both AUD and NZD were briefly lifted by better than expected jobs data from Australia and New Zealand, however those gains were pared on risk aversion and continued market expectation of deeper rate cuts by respective central banks. Emerging Asian currencies were predictably weaker, as USD/SGD gained over big figure to 1. 4870 and USD/KRW gapped from 1260 back above 1320 level.
- Crude oil prices are lower by more than (%) and trading below $65.00/bbl, after falling by close to 6% during the US session. As concerns about the outlook for global oil demand continue to mount, China's two largest oil refiners (PetroChina and Sinopec) reportedly have started to lower prices for gasoline and diesel at some of their filling stations, following similar moves by their private competitors. Spot Gold is lower by more than (%), on follow through selling as the metal declined by more than $14.00 during US trading. Some traders cite long liquidation for the US session decline in gold prices as the declines occurred despite the weakening of the USD. Additionally, Shanghai Copper is lower by its daily limit or 4%. Overall, commodities continue to track the trading in equities and the dollar.
The list of first-tier companies reporting earnings was spread across a number of sectors, with Cisco, Sunoco, Hertz, and News Corp reporting in the afterhours session. CSCO beat Q1 estimates on the top and bottom line, but guided Q2 sharply lower, forecasting a 5-10% y/y decline that was said to be 10-15% below street estimates. CEO John Chambers voiced uncertainty over the likelihood of Q1 being the "kitchen sink" quarter as shares fell over 5% after hours. Sunoco was the notable outperformer amid a consistently upbeat set of results from this quarter's energy sector names. SUN reported Q3 EPS at $4.70 and Revenue of $16.1B, well above the forecasted $2.46 and $12.8B respectively, sending its shares up by over 2%. Meanwhile, HTZ and NWS results were both extremely poor, coming well short of estimates on the top and bottom lines while encouraging a respective 9% and 11% afterhours decline. News Corp CEO Murdoch stated that 2009 profit may drop to low to mid teens while Hertz also resigned to not being able to meet prior guidance for FY08 with media giants suffering amid TV/newspaper advertising revenue drought and car rentals dragged down by steep contraction in business travel.
Weakness in US equities extended into Thursday Asian session where equities have unanimously reversed their bullish tone. Nikkei and Hang Seng shed over 6% while Korea led the selloff among regional bourses with an over 8% drop as fears over consumer-led recession in the US were felt acutely in export dependent Asian economies. Mitsubishi and Toyota were among the most notable of Tokyo names: the former was seen guiding H1 profit at ¥2.94B v ¥4B and sales ¥198.3B v ¥205.2B expected, while the latter came well short of estimates on the bottom line, forcing the world's largest automaker to slow production and cut staffing costs amid a sharp decline in overseas demand. Furthermore, Japan's Sumitomo Realty confirmed poor housing sector outlook depicted in the early October BOJ meeting minutes as it cut FY Net est to ¥58B from ¥65B forecasted earlier.
In currencies, risk averse flows returned with a vengeance, boosting Japanese Yen and European high yielders across the board. USD/JPY was last seen trading at November lows below 98.00, EUR/USD retained early session selling pressure toward 1. 2840 support, and GBP/USD was back below 1.60 after peaking around 1.62 in mid-US session. Both European Central Bank and Bank of England are expected to cut rates in Thursday's European session by at least 50 points, with a number of analysts calling for a much deeper cut from the UK. Key yen crosses were also seen approaching November lows, with GBP/JPY trading in a downsloping week-long channel toward 153.70 support and EUR/JPY dropping by over two big figures in Asia session. Commodity FX traded in line with sharp selloff in oil as USD/CAD gained nearly three big figures from just under 1.15 all the way above 1.17. Both AUD and NZD were briefly lifted by better than expected jobs data from Australia and New Zealand, however those gains were pared on risk aversion and continued market expectation of deeper rate cuts by respective central banks. Emerging Asian currencies were predictably weaker, as USD/SGD gained over big figure to 1. 4870 and USD/KRW gapped from 1260 back above 1320 level.
- Crude oil prices are lower by more than (%) and trading below $65.00/bbl, after falling by close to 6% during the US session. As concerns about the outlook for global oil demand continue to mount, China's two largest oil refiners (PetroChina and Sinopec) reportedly have started to lower prices for gasoline and diesel at some of their filling stations, following similar moves by their private competitors. Spot Gold is lower by more than (%), on follow through selling as the metal declined by more than $14.00 during US trading. Some traders cite long liquidation for the US session decline in gold prices as the declines occurred despite the weakening of the USD. Additionally, Shanghai Copper is lower by its daily limit or 4%. Overall, commodities continue to track the trading in equities and the dollar.