My Diary 544 --- Should We Celebrate?

Trading Diary (April 02, 2009) --- Should We Celebrate?

US Equities turned around following ISM (36.3 in March) and home data (2.1% mom), which offset early negative sentiment due to WTE job losses in the private sector (742K vs cons=663K) and the GM’s ‘controlled’ bankruptcy news. While some may find comfort in an ISM bottoming sign, others will fear the rising unemployment rise. But I am not sure whether it is the time to cheer for signs of strength or to celebrate when banks are allowed to mark NPLs at par when market trades significantly lower? …Why don’t the authorities just mark S&P at 1000? That is simple and easier, isn’t it?

In details, while the headline rise in ISM was rather small – from 35.8 in February to 36.3 in March (low was 32.9), the key is on component index – 1) New orders significantly rose to 41.2 in March from 33.1; 2) the sharp drop in inventories (32, the lowest reading since 1982) is good for future growth. In addition, US Mar vehicle sales is BTE at 9.9m units vs. cons=9.2m, but brand sales is terrible with Toyota Mar sales -39%, Honda -36%, Nissan -38%, Hyundai -4.8%....In Asia, export orders continue to look horrid with India Feb exports -21.7% yoy (vs -16% in Jan), Indon Feb exports -32.8% yoy (vs -35.5% in Jan) and Korean Mar exports -21.2% yoy (vs -18.3% in Feb). The shocker actually came from China where Mar manufacturing PMI fell to 44.8 (vs 5.1 in Feb) when consensus expected a reading above 50.

Back to HK, I saw quite a few +ve headline on big cap sectors – 1) Chinese ppty is likely to rise after media reports that new home sales(11.5mn sqm) in SH hit a 16-month high in March; 2) China Insurance also likely sees a bid given potential tax benefits for the sector; 3) Rumors that NDRC will help raising coal prices by 4% but based on low levels in 2008; 4) Chalco, a out-of-favor stock, raises prices by 4.5% ( to 2300/ton) and rallies after being placed on -ve Ratings Watch by S&P. With HSBC ADR up nearly 7% overnight, I guess Hangseng may go up 300ppt today.

Overseas Market Reviews

Global equities rose 1.7% O/N, with + 3% in Japan, +1.4% in EU, +1.6% in US and +1.7% in EMs. Elsewhere, USTs were about flat with 2yr yield up 1bp to 0.80% and 10yr down 1bp to 2.65%. That said, the decline in UST yields has helped push down 30yr conforming FRM rate 26bp vs 10 days ago to 4.89%, according to Bankrate. USD was flat vs EUR to $1.32 and -0.5% to YEN98.5. 1MWTI oil slid $1.27 to $48.39/bbl, down $4 wow.