Equity performance in January dictates the year

<p>Equity performance in January dictates the year, or so goes the old stock market adage. Following positive employment, retail, and housing data from the world’s […]</p>

  • Equity performance in January dictates the year, or so goes the old stock market adage. Following positive employment, retail, and housing data from the world’s largest economy, global stock markets ended the first week of 2012 in the blue. The Dow Jones was up 1.2%, the DAX was up 2.46% and here in London, the FTSE 100 closed up 1.3%.

    Volume decreased as the week progressed though. 6.3 billion shares were dealt on the NYSE on Friday, which is nearly 25% less than the daily average for 2011. Market participants were cautious as European indices hit 2-month highs ahead of a busy calendar for week 2 of 2012.

    Today, the FTSE 100 is trading at 5650 at 10am and is flat on the day. Trading up 2.4% to 624p, Arm Holdings is the top gainer so far Monday. Citigroup has upgraded the company and increased its share price target to 700p from 600p. Following the release of clinical trial results, GlaxoSmithkline has announced it will file for regulatory approval for once-a-day inhaled lung drug Relovair. The stock is trading down 2.8% to 1455p and is the largest faller on the FTSE 100. Whilst warranting selling commercially, the trial data suggests the drug is not superior to GSK’s existing respiratory drug, Advair.

    The performance of the euro last week was in direct contrast to equity markets as the currency hit 16-month lows against the US dollar and 11-year lows against the Japanese yen. FX traders, keen to hear more on the plans for eurozone fiscal discipline can tune in to a joint conference from the leaders of Europe’s two largest economies.  “Merkozy” will be speaking at 1.30pm today. Also weighing on the minds of currency speculators this week are the latest attempts by two of the continent’s financially troubled countries to raise funds. Thursday and Friday bring the latest round of Bond Auctions from Spain and Italy respectively. A low take up of the allocation could see a further sell off for the euro.  The euro is, however, trading up 86 points against the USD this morning at 1.2780.

    Worries over possible supply disruptions for crude oil saw NYMEX crude jump 2.8% last week ($101.56 a barrel). Talks are ongoing over more sanctions for Iran following their announcement of new military exercises in the crucial Strait of Hormuz. Oil traders will need to keep a close eye on this story and on escalating events in Nigeria, as strikes and production outages impact on supply there.

    Q4 earnings season begins today
    In equities, Alcoa today and JP Morgan on Friday are the headliners as the first week of the US fourth quarter earnings season begins today. A positive season could lift the stock market above current overhead resistance.

    In London this week it is a busy schedule for retailers, recruiters and homebuilders as no less than 12 companies in the three sectors make announcements. Of particular interest is how the retailers and supermarkets have fared over the crucial Christmas trading period. Tesco, Sainsbury and Marks & Spencer are the highlights, but a full diary can be found in the companies reporting page.

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