– IBM had a shocker last night with shares in the once mighty ‘Big Blue’ down more than 7% after a massive earnings miss. This weighed on the Dow which eked out a 0.12% gain to 16,400 but the Nasdaq (+1.35%) and the S&P were higher. Indeed, the S&P 500 is back above 1,900 at 1,904 with a gain of 17 points of 0.91%.
– Interestingly though, and extremely important in judging if the markets are back to their risk-seeking best, are the moves in bond markets. Indeed, the fact that US 10-year Treasuries are down 2 points to 2.19%, German Bunds closed at 0.81%, and Gilts rallied 5 points down to 2.15%, suggests a disconnect between these two big asset markets.
– In Europe, it was a poor day on stock markets with the FTSE down 0.69% to 6,267, the DAX off 0.49% to 8,718 and the CAC in Paris down 1.05% to 3,991. Stocks in Spain and Italy fell just 0.42% and 0.86% respectively.
– The wash up locally is that once again the SPI futures are pointing to a stronger open on the ASX this morning. The December SPI 200 futures are 14 points higher to 5,264. With iron ore having another strong night – up $1.28 for the December contract to $81.28 a tonne – the miners will likely take the lead again today.
– In Asia yesterday, it was a solid day for Japanese stocks even though there were multiple resignations and scandals within the government over election funding. Rather, the hint from PM Abe about a delay to the consumption tax and an asset allocation shift at the government pension fund drove the Nikkei 3.98% higher. Chinese stocks in both Hong Kong and Shanghai were far more subdued, up just 0.2% and 0.68% respectively.
– Today is a huge day for the region with the release of the 3rd quarter GDP for China at lunch time today. The market is looking for a fall from 7.5% in Q2 to 7.2% in Q3. Other important data such as industrial production and retail sales is also out at the same time.
– On Currency markets, the Aussie dollar looks like it is getting set to break higher and is at 0.8788 this morning. Realistically the RBA minutes at 11.30am and then the Chinese data at 1pm are the short term keys. On other markets, the USDJPY rally stalled in the 107.40 region and it is back at 106.88 this morning. Likewise the euro and GBP are stronger at 1.28 and 1.6165 respectively.
– On Commodities, besides the rally in iron ore overnight gold gained on the back of the slightly weaker US dollar and it sits at $1,246 this morning. Crude is at $82.90 a barrel but copper slipped under $3 a pound to $2.98. On the Ags, corn was flat, soybeans fell 0.33% and wheat dropped a similar amount, 0.35%.
On the data front today, the market will be wondering what the RBA Board said about the dollar, growth and housing when the minutes are released at 11.30am. Equally however, they will be on tenterhooks awaiting the Chinese GDP data. Tonight, it’s really only existing home sales in the US of any note.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
If the Australian private health insurance industry looks like an attractive interest to you, Medibank isn’t the only alternative. The Medibank float could see some arbitrage activity with its junior competitor NIB Holdings if institutions start to think the IPO might go too well.
If the Medibank IPO comes in around the top of the government’s indicative range, it will be valued at a multiple of around 21 times F15 earnings. NIB is currently valued around 17.5 times.
Apart from the fact that Medibank is much bigger, another key difference between is the potential for Medibank to benefit from cost savings. While this is a benefit, it is not without some timing risk. Other companies have found the cultural transition from government to private sector can take longer than expected.
Some of the savings also require major IT projects. If you are looking for dividends, no problem. Like Medibank, NIB looks likely to pay out the majority of its profits to shareholders as dividends in future.
The NIB share price is currently testing the resistance of its 200-day moving average. A clear break above this could see a run up to test the resistance of the old trend line support.
Depending on how quickly that happened it might coincide with a 50 or 61.8% retracement of the latest downtrend.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC