September 9th, 2013, Daily Market Bite from Ishaq Siddiqi Market Strategist.
Equities trade broadly flat Monday, with Syria and tapering concerns being balanced off by the overnight gains in Asian markets after data from China and Japan enthused the market over the outlook for both economies. Data out of China indicated that inflation remained subdued while exports data released Sunday showed a better increase than forecast, painting a better outlook for the second half of 2013 than previous anticipated. After the rocky first half of the year for China, both data points soothed worries about the economic outlook for the world's second largest economy, lifting resource shares in the European session.
Japan's Q2 GDP figures were revised higher to 0.9% from a previous reading of 0.6%, enthusing the market over Japanese PM Abe's economic framework "Abenomics" -- earlier this year, the steep drop on the Nikkei left many investors questioning the effectiveness of Abenomics, but data out of Japan during the Q3 indicates the country's finances are being repaired, instilling confidence over policy initiatives currently in place. Additionally for Japan, the market there cheered over the decision to give Tokyo the task of hosting the 2020 Olympic Games -- hosting the games is likely to see an increase in construction and infrastructure in Tokyo together with regeneration which economically, will all benefit the country's outlook.
For the European session, there's little in the way of economic and corporate news with only the euro zone August Sentix investor confidence and Greek industrial output figures worth noting. Putting aside the cheerful tone out of the Asian session, there's still the uncertainty over Syria and Fed tapering upsetting risk sentiment -- this has left the market feeling extremely vulnerable, a reason for why we are at the moment paring our opening gains. G-20 leaders failed to reach common ground on Syria with President Obama and Vladimir Putin of Russia at opposing ends on military intervention. Obama last week threw the proposal of a military strike on Syria to US Congress which reconvenes today after the summer break and debate/vote on the proposal.
Last week, reports suggested that the President has the backing of a number of US lawmakers, suggesting there's a greater will amongst US Congressmen in Washington to see a strike on the country. Traders are fearful of the implications of the military intervention by the US, particularly after Putin warned that a Western strike could be met with retaliation as he continues to support Syria financially and strategically. Fed tapering also gripping market sentiment, as usual these days, with traders re-adjusting their predictions for the prospects of QE-tapering at the September policy meeting after the damp US jobs report out on Friday. Headline August jobs number weaker than expected and July was revised lower but unemployment rate last month fell to 7.3% - a mixed result leaving the market feeling none the wiser to second guess the Fed's next move. US credit data due later Monday which will be under the spotlight amidst all this taper-talk.
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