21.09.12 Friday Morning

This week will likely be remembered for opportunistic investors indulging in a bout of profit taking amongst markets which ended last week on near 6–month highs. Monday set the tone for the week as the global markets opened pessimistically after investors scrambled to take profits from last Friday’s surge following the announcement of further QE from the US. 

Tuesday also began depressingly as investors woke up to the idea that stimulus for the US alone would not save the global economy.  News reports that Spain was resisting officially asking for a bailout, which would make the debt ridden nation ineligible for Draghi’s bond-buying scheme, spooked investors and brought the Eurozone debt crisis back to the front of investor’s minds.

However, midweek, the markets were delivered another stimulus gift to help boost sentiment.  The Bank of Japan opted to boost asset purchases in a bid to help foster growth.  Despite this, the initial optimism slowly disintegrated throughout the day as investors returned to their fixation over the Eurozone debt crisis.  Positive data from the US in the form of better-than-expected housing starts and building permits provided some boost to the housing sector, but not enough to catalyse any substantive gains for the markets.

Yet, once again, a string of positive global data was stopped in its track, earlier than bulls would have hoped!  Data released on Thursday showed Chinese manufacturing data came in worse than expected as did Japanese trade balance figures.  A string of poor manufacturing data from France also followed suit, but Eurozone’s export saviour Germany managed to buck the trend with better-than-expected manufacturing data.  Nevertheless, worse-than-expected weekly unemployment claims from the US once again reminded investors that taking profits in this market may not necessarily be hasty.

The last trading day of the week proved fruitless.  European markets began the day positively, building on a strong Asian trading session overnight owing to rumours that Chinese officials will step in, again, and announce more measures to foster growth.  However, the excitement proved short-lived as fears over the Eurozone debt crisis as well as volatility owing to options expiration retraced earlier gains.  Furthermore, with a lack of economic data out on Friday, investors will likely spend today pondering their move for next week rather than engaging in a market with tight ranges and sceptical scope.

Equity, or in this case equities of the week, would probably go to two shares.  However, the award would probably be awarded for bringing closure to a merger saga which has lasted almost seven months.  News reports on Thursday showed both Xstrata and Glencore were holding respective board meetings on the merger which, if approved, would give birth to a commodities titan.  Announcements were expected on Friday, yet at the time of writing the markets have heard little.  The UK takeover panel has also thrown some urgency, and indeed excitement, into the mix by demanding an official announcement over the merger.

Next week we have a selection of global data to whet investors’ appetite for risk.  These include results for a 10-year Italian bond auction, UK current account results as well as final GDP data from the UK and US.