Tuesday, December 31, 2013

Morning Memo: Tuesday, December 31, 2013

"Morning Memo" begins below this "NOTE for  NEWCOMERS" to "Morning Memo"...... Each morning, we post a short bullet-point list of noteworthy events, data, etc that find their way into the assessment of global markets.  It's far from complete and is not meant to be an exhaustive reconciliation of all things that could possibly impact stocks, bonds, currencies and commodities!  Rather, it's best viewed as a cryptic memo of "highlights", noteworthy items that took place in Asia, European and US hours.....and color-coded 'Red' for seemingly negative impact on equity markets, 'Green' for positive.
This will also serve as a useful review mechanism, as scrolling through the series of "Morning Memo" posts over time ought to summarily highlight what generally drove price action.  

We hope you find this useful and informative....and as always, that you'll share feedback!!

5:00am ET...
  • Asia...with many markets already closed for New Year's holiday, China's Shanghai and Hong Kong exchanges ended slightly higher, despite ongoing concerns over yesterday's release of the audit of local gov't debt levels that have risen 67% since 2010.  The Chinese markets were also cautious ahead of tomorrow's (Wednesday's) release of official PMI data.
  • China...in the 'of interest' category:  the gov'ts cabinet issued rules banning gov't officials from smoking in gov't buildings and many other public places including offering cigarettes to others when performing official duties.   Quoting from MarketWatch:
  • Health experts have been urging China to curb smoking as deaths mount and medical costs rise. China is the world's largest consumer and producer of tobacco, home to more than 300 million smokers and 43% of the world's cigarette production, according to the American Cancer Society and the World Lung Foundation.  
  • Europe...most markets were either closed all day or traded a half day.  Very quiet activity.
  • More "of interest"
    • Coffee...wholesale prices have fallen 20% this year as higher prices several years ago brought a wave of new production on board and has now resulted in a supply glut.  Since 2011, prices are down close to 50%.  (Editorial note:  haven't you seen that same price drop in your own coffee purchases?  I can answer that:  no!  Prices at the retail level have largely stayed the same or gone up!  So who benefited from the lower wholesale prices?  Hmmmm.....Check the profit margins of some of the largest coffee companies....).
    • China....President Xi Jinping was named yesterday to head the committee overseeing China's economic reforms, an area of responsibility formerly in the hands of the number two in command, the Premier.  This elevation seemingly signals the importance of the reforms, especially on the heels of yesterday's local gov't debt audit.  How President Xi attempts to tackle the problem of a massive local government debt burden will be watched closely.  Massive borrowing by local governments in recent years did help spur economic growth, but also resulted in significant overspending and overbuilding which has left China with a big supply of unused and empty real estate and other projects.  Quoting a WSJ article: 
      The swelling debt problem presents Mr. Xi with a menu of bad choices, say economists. He can essentially try to muddle through and avoid a bust by providing somewhat more central government funds and using regulation and backroom orders to banks to tighten restrictions on loans.....Or he could attack the problem aggressively by raising taxes, selling off assets and allowing some defaults as a way to warn financial firms or local governments of the risks involved.
  • More later..... 
  • LATER:
    • US...Case-Shiller increased in October at the highest rate since February '06, but noted caution about a slowing pace of price increases ahead in '14.
    • Chicago manufacturing index falls to 59.1 in Dec fr 63, below expectations, but still significantly above 50 indication expansion.
    • Consumer Confidence (Conference Board) rises in December to 78.1 fr 72% in Nov.
Please continue to visit Soos Global Market Musings for updates.

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(Please note: This article is solely meant to be thought provoking and is not in any way meant to be personal investment advice. Each investor is obligated to opine and decide for themselves as to the appropriateness of anything said in this article to their unique financial profile, risk tolerances and portfolio goals).
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