Spreadex Market Analysis: European Markets Rebound

AM Analysis – “Investors glad to see a four-day decline snapped” – Max Cohen
Focusing on Asian markets, investors were glad to see a four-day decline snapped as Japanese equities were boosted by the yen weakening against the dollar and the Bank of Australia posting a surge in profit. Japan’s Topix index rose 0.8 percent today and is the best-performing developed equity market in 2013 amid optimism Prime Minister Shinzo Abe’s policies will stoke inflation.

The MSCI Asia Pacific Index climbed 9 percent this year through yesterday amid unprecedented stimulus from Japan’s central bank and optimism the Federal Reserve will continue its monthly bond buying into 2014. Fed policy makers last week signalled diminishing concern over higher borrowing costs as they maintained their $85 billion in monthly bond-buying and sought more evidence of sustained growth before paring stimulus.

Of the companies on the MSCI Asia Pacific Index that have reported quarterly results this season, about half exceeded analysts’ estimates on profit, while 53 percent posted better-than-expected revenue. The MSCI Asia Pacific Index climbed the past two months, pushing valuations on the measure to 13.6 times estimated earnings as of yesterday, up from a multiple of 12.7 at the end of August.

PM Analysis –“European markets rebounded this morning” – Alex Conroy
European markets rebounded this morning after the hysteria generated by the European Economic Forecasts yesterday and rumours of rate cuts died down. Positive European data this morning will have helped bolster the rebound with Spanish PMI, European Final Services PMI and Germany Factory orders all coming in better than forecast. The UK also added healthy Manufacturing production figures to the mix growing 1.2% as opposed to a loss of 1.2% previously. Despite these figures a lingering concern remains about the strength of the Eurozone’s recovery and continued speculation on rate cuts tomorrow are likely to cause volatility towards the end of today and tomorrow morning.

US futures are on the rise pre-open; this is being attributed to further speculation over the Fed’s tapering policy ahead of non-farm job data on Friday. With tapering seen as unlikely following recent Fed comments that more evidence is necessary before they consider tapering, investors will be keenly following economic data so expect overreactions.

[The original articles by Spreadex can be found here.]

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