Global Markets Overview - 3 January 2012

From Morrison Securities Pty Ltd.

United States

The final Labor Department jobs report for 2011 will punctuate another holiday shortened week. In addition to the figures on joblessness some of the most closely watched indicators markets will mull over monthly sales figures from retailers for the key holiday-shopping month of December.

Major U.S. stock exchanges closed Monday in observance of the New Year's holiday the day before. Heading the slate of economic indicators this week are nonfarm payrolls data and the latest unemployment rate from the U.S. Department of Labor on Friday. The report will determine whether 2011 ends with continuing improvement in the job market. In the prior month, the U.S. unemployment rate fell to 8.6%, the lowest level since March 2009. Economists surveyed by Dow Jones Newswires predict payrolls will rise by 155,000 but the unemployment rate, which is deter-mined by a separate survey, will tick up to 8.7%.

The Institute for Supply Management releases data on manufacturing activity Tuesday and services Thursday, and the U.S. Census Bureau's factory orders report comes Wednesday. U.S. retailers will report December's same-store sales results, the broadest indication yet of how the key holiday-shopping season played out. Analysts surveyed by Thomson Reuters expect same-store sales to climb across store categories for an average increase of 4.3%. They expect discounters like Costco Wholesale Corp and Target Corp to report the strongest growth at 6% on average, with apparel retailers like Gap and Limited Brands expected to have the weakest at 2%. The auto industry will report its December U.S. sales on Wed.

Online automotive-information provider Edmunds.com expects December new car sales to rise 24% from November, although transactions slowed down by the middle of the month. It came down to the wire last Friday, but in the final minute of 2011 trading, the Standard & Poor's 500-stock index closed the year virtually unchanged from where it closed in 2010. The S&P 500 closed Friday down 5.42 points, or 0.43%, to 1257.60. The full-year decline of 0.04 of a point, or 0.0028%, was the smallest annual move since at least 1947, according to preliminary S&P calculations. S&P Indices scrambled after the close of trading to determine an extra decimal place in the 1947 data to figure out which was the slimmer move of the two years. The Dow Jones Industrial Average fared better in 2011. The Dow finished down 69.48 points, or 0.57%, to 12217.56 on Friday, but closed the year up 5.53%.

The blue-chip index closed the fourth quarter up 12%, its biggest quarterly percentage jump since 2003. The technology-heavy Nasdaq Composite fell 8.59 points, or 0.3%, to 2605.15, and closed the year down 1.8%. The year was defined by fits and starts related to Europe's sovereign-debt crisis and global economic growth concerns, prompting investors to flock to defensive and dividend-paying stocks. But Friday's moves were slim, as a dearth of news and low trading volume gave investors little incentive to take a stand ahead of the long New Year-holiday weekend.

EUROPE

European stock markets closed higher on Monday, given a boost by strong German economic data in thin holiday trade. With London and Wall Street shut for public holidays, investors had little to go on but welcomed positive employment, consumer spending and manufacturing figures in Germany, Europe's biggest economy.
In Paris, the CAC-40 index gained 1.98 percent to 3,222.30 points and in Frankfurt the DAX 30 jumped 3.00 percent to 6,075.52 points. Other markets showed similar gains with Milan up 2.42 percent as Madrid put on 1.84 percent despite Spain's new government warning that the 2011 public finances will prove to be in even worse shape than first thought.

Stock gains were led by Frankfurt after the German Chamber of Commerce and Industry DIHK said that private consumption in Germany was at its strongest level for more than a decade in 2011 despite the ongoing euro crisis. Separately, official figures showed the number of people in work hit a record 41.04 million, with more than half a million jobs created last year. The German economy appears to be holding up despite the long-running debt crisis thanks to the deep restructuring it has undertaken in recent years.

ASIA-PACIFIC

South Korean shares ended with fractional gains after a choppy first trading session of 2012, as data showing a stronger-than-expected growth in December exports supported the market despite a contraction in monthly manufacturing activity.

Taiwanese shares fell sharply, however, pressured after weak manufacturing data and concerns about unresolved debt troubles in the euro zone. Trading volumes were thin as several major regional markets, including those in Japan, China, Australia and Singapore, were closed for a holiday. U.S. and U.K. stock markets were also slated to shut Monday. South Korea's Kospi ended with a gain of less than 0.1% at 1826.37, after moving in both directions during the session.

The benchmark lost 11% of its value in 2011. Leading gainers in Seoul, heavyweight Samsung Electronics Co. rose 2.1%, and LG Display Co. added 1.8%. Those gains helped counter a 3.5% drop in Daewoo Shipbuilding & Marine Engineering Co and a 1.1% fall in Woori Finance Holdings Co.

The performance came after data released by HSBC showed South Korea's manufacturing activity shrank for a fifth-straight month in December, with the monthly Purchasing Managers' Index printing at 46.4, down from 47.1 in November. A reading below 50 shows a contraction, while a reading above 50 shows an expansion. On the brighter side, data released Sunday showed South Korea's exports rose a better than expected 12.5% in December from the year ago month, helping the nation record a $4 billion trade surplus. Shares of Hyundai Motor Co slipped 0.2% and its affili-ate Kia Motors Corp dropped 0.3% after saying they aim to grow sales by just 6.1% in 2012, compared to a 15% rise in 2011. Meanwhile, Taiwan's Taiex tumbled 1.7% to 6952.21. Taiwan's December PMI came in at 47.1, an improvement from the previous month's 43.9 reading, but still below the threshold level of 50, a separate HSBC survey showed. Shares of Cathay Financial Holdings dropped 3.1%, Asia Cement Corp fell 1.8%, and China Airlines Ltd. declined 2.7%.

COMMODITIES

The copper market may have closed the year on a positive note, ending 2011's final open outcry trade on the London Metal Exchange 2.3% higher than its previous close, but the bounce was far from enough to recover losses endured in recent months, with the red metal finishing the year down some 21%.

LME copper for three-month delivery on the exchange ended the last trading session of the year at $7,600 a metric ton. This compares with a close of $9,600/ton on Dec.

31, 2010. The red metal, which rose as high as $10,190/ton in February, and was the favorite for 2011 in many analyst forecasts last year, fell out of favor with investors as uncertainty clouded the global outlook. Instead, the best performer among the metals for the year was aluminium, which limited its losses to 18%, closing at $2,019/ton. The worst performer of the metals, meanwhile, was tin, falling 29% on the year to close at just $19,200/ton. The thinly traded metal had also been tipped to be one of the strongest performers this year, and rallied to a record $33,600/ton in April as supply concerns worried market participants.

World oil prices could soar to $200 per barrel if Iran's petroleum sector is hit with new Western sanctions. Brent North Sea crude was at $107.02 per barrel, while New York's main contract, light sweet West Texas Intermediate crude, was at $98.99 a barrel. After frantic selloffs in September and again last month, gold was in danger of snapping its decadelong winning streak. Futures came within about $100/troy ounce of 2011's break-even point Thursday before rebounding Friday. Comex February contract settled at $1,566.80, helping gold log a 10% gain on the year and the 11th-consecutive annual increase. Precious metals with more industrial applications all ended the year deep in the red. Silver fell 10%, platinum 22% and palladium 18%.