(TUESDAY 10TH JANUARY- 07:25- JAMES GERRISH)...The DOW JONES was up+34pts overnight while the S&P 500 was trading +0.2% higher. European mkts were lower (FTSE off -0.66%, German DAX down -0.67%, French CAC off -0.31%) while locally, the SPI FUTURES mkt is pricing a higher open up +17pts when trading kicks off here this morning.
** I'll be on SKY Business today at midday til 1pm
Commodities were pretty flat overnight with Gold off a few dollars, Copper little changed and Oil clinging above $100 a barrel.
The bigger focus on the US mkt was the unofficial start to the reporting season with Alcoa set to report after mkt (expectations for a loss of 3c per share). The actual expectations for US profits have been cut in recent months given weak earnings momentum at the back end of last year.
In aggregate, the mkt is looking for a 6% increase in per- share profit during the September-December period, which in my view, sets up for some possible upside surprise. When heading into a reporting season we want to see low expectations which gives a greater chance of upside surprise - which the mkt can rally on. I think we've seen a bit of this today with Alcoa up nearly 3% ahead of releasing its numbers.
Alcoa is of course in a JV partnership with Alumina (AWC) listed on our mkt and both stocks have been poor through 2011 amid falling Aluminium prices (-27% over last 12 months) and rising input costs (such as electricity). In the case of Alumina, I see its been removed from the Goldman Sach conviction BUY list and we've also seen Ausbil Dexia (large domestic fund) sell down 119 million shares in the company over the last couple of months.
In Europe, Merkel and Sarkozy met overnight and there wasn't a lot that came out of it. They expressed confidence that an agreement on European treaty changes could be reached by the end of the month while both leaders suggested new measures to promote growth may be enacted as part of the broader package to stabilize things.
Sarkozy did finally get some support from Merkel for the French led Financial Transaction Tax that they propose to apply to all Equity, Bond and Derivative transactions. In essence, its a revenue raising tax that has been opposed in the UK which is important given that London is the biggest financial hub in Europe. I don't see how they can roll it out without unilateral support for it given that it will decrease competitiveness of their own financial sectors. Anyway, I guess it was just nice to see them agree on something.
There was not a lot else to go on last night and it seems that investors are sitting on their hands under a vale of uncertainty from Europe and China.
We actually get a fair bit of Chinese data out this week with important Trade Data out around lunchtime today. This will be the main driver of our mkt while domestic Building Approvals will also have a say in the direction of the mkt today (expectations for +6% increase in approvals).
James Gerrish
