Comment: PBoC Cash Injection Props Up Risk Appetite/Defensive Stocks Sit On Unjustifiable Valuations
January 21, 2014 6:48 am
China’s central bank injecting cash into money markets kicks up risk appetite overnight, propping Asian share markets. China’s interbank lending rates ease as the central bank attempts to prevent a cash squeeze ahead of the Chinese new year. This comes a day after Chinese growth for 2013 eased, indicating that the central bank there stands ready to act with measures to ease credit conditions in the face of stalling growth – markets have taken heart to this.
Weakness in the Japanese yen helps the Nikkei 225 index advance despite general hesitancy ahead of the Bank of Japan’s communiqué due Wednesday though the market does not expect changes to policies. US markets were closed to Martin Luther King Jr Day; DJIA and S&P500 stock futures are currently posting healthy gains ahead of Wall Street’s open later in attempt to play catch-up with Asian and European peers.
Across other asset classes; traditional safe-havens are being shunned for riskier investments; UK gilts and German bunds are lower in the core government bonds space whilst gold is off over 2 bucks. In FX, the euro inches a little higher, the USD stable and the yen drops
Here in Europe, the chirpy price-action in Asia helps regional markets steady ahead of Germany’s ZEW survey and the UKs CBI industrial trends data. We also have the IMF’s report in which many anticipated growth forecast upgrades for developed nations [reports yesterday surfaced over the UK economy getting a nice bump up for growth estimates by the IMF].
At the moment, traders are absorbing the raft of earnings out of Europe’s leading blue-chips which on the whole have been downbeat, hampering the broader markets’ enthusiasm to build on gains. Alstom, Remy Cointreau, SABMiller and SAP to name a few all disappointed with earnings for the Q4. Shares for these companies are trading lower, with Alstom leading the falls after it cuts operating margin and cash flow for 2014.
Most of today’s major company reports are that of defensive companies from the food and beverage or pharmaceutical sectors – all of which are sitting on expensive forward P/Es but with earnings that cannot justify the valuations. It’s the same story for US corporates too with many in the market of the view that last year’s stunning multiple stock market expansion has left some equities in the US sitting on inflated and unjustifiable valuation; later today, we have numbers from Johnson&Johnson, Verizon, IBM and Texas Instruments.
China’s central bank injecting cash into money markets kicks up risk appetite overnight, propping Asian share markets. China’s interbank lending rates ease as the central bank attempts to prevent a cash squeeze ahead of the Chinese new year. This comes a day after Chinese growth for 2013 eased, indicating that the central bank there stands ready to act with measures to ease credit conditions in the face of stalling growth – markets have taken heart to this.
Weakness in the Japanese yen helps the Nikkei 225 index advance despite general hesitancy ahead of the Bank of Japan’s communiqué due Wednesday though the market does not expect changes to policies. US markets were closed to Martin Luther King Jr Day; DJIA and S&P500 stock futures are currently posting healthy gains ahead of Wall Street’s open later in attempt to play catch-up with Asian and European peers.
Across other asset classes; traditional safe-havens are being shunned for riskier investments; UK gilts and German bunds are lower in the core government bonds space whilst gold is off over 2 bucks. In FX, the euro inches a little higher, the USD stable and the yen drops
Here in Europe, the chirpy price-action in Asia helps regional markets steady ahead of Germany’s ZEW survey and the UKs CBI industrial trends data. We also have the IMF’s report in which many anticipated growth forecast upgrades for developed nations [reports yesterday surfaced over the UK economy getting a nice bump up for growth estimates by the IMF].
At the moment, traders are absorbing the raft of earnings out of Europe’s leading blue-chips which on the whole have been downbeat, hampering the broader markets’ enthusiasm to build on gains. Alstom, Remy Cointreau, SABMiller and SAP to name a few all disappointed with earnings for the Q4. Shares for these companies are trading lower, with Alstom leading the falls after it cuts operating margin and cash flow for 2014.
Most of today’s major company reports are that of defensive companies from the food and beverage or pharmaceutical sectors – all of which are sitting on expensive forward P/Es but with earnings that cannot justify the valuations. It’s the same story for US corporates too with many in the market of the view that last year’s stunning multiple stock market expansion has left some equities in the US sitting on inflated and unjustifiable valuation; later today, we have numbers from Johnson&Johnson, Verizon, IBM and Texas Instruments.
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