Wednesday, January 02, 2013

Fiscal Cliff Averted, China Good News, Even From North Korea ... Rally Baby!!!

Shares everywhere is set to start the year on a positive note after a tentative deal to avert the "fiscal cliff" in the US and encouraging economic news from China.

Dow Jones futures were 250 points higher - about 2 per cent - after the deal was agreed in a late-night meetings in Congress, setting the scene for a good start to the trading year. The Dow Jones Industrial Average had closed 166.03 points higher at 13,104.14 on Monday after signs of a possible deal.

The ''fiscal cliff'', which was set to kick in on January 1, would have led to $US600 billion of tax increases and spending cuts. It's important to remember that there's some tightening of fiscal policy, which is good news - that's what the US economy needs given its budget position - but it's not so severe as to cause a hard landing. The elimination of a 2 percent payroll tax cut, coupled with higher income taxes on the wealthy, will help reduce growth in the first quarter to 1 percent, from 3.1 percent in 2012’s third quarter, the latest data available. The expected slowdown is a lot better than no deal at all. What markets hate most is UNCERTAINTY.

The first half slowdown will mean that the U.S. will make limited progress in reducing unemployment in 2013 - which if you remember will mean continued liquidity by Federal Reserve for a prolonged period as it will take sometime to whittle down the unemployment rate.
There were also encouraging signs from China as data showed its manufacturing activity expanding last month for the third straight month. The purchasing managers' index (PMI) remained steady at 50.6 in December, although it was slightly lower than HSBC bank's PMI survey of 51.5 - a 19-month high. The lift in manufacturing appeared to have been reflected in rising commodity prices over the past few weeks, adding to suggestions the worst could be over for the global economy.

In another boost for financial markets, China's President, Hu Jintao, said in a New Year's Eve address that the country would work towards fostering global economic growth. The country would "step up efforts to promote strong, sustainable and balanced growth in the world economy", said Mr Hu, who is set to step down as president in March.
News that the North Korean leader, Kim Jong-un, had called for a "radical turnabout" in his country's economy and offered an olive branch to South Korea would also lift the market. In a rare new year's address broadcast on state television, Mr Kim said 2013 would be a year of "great creations and changes in which a radical turnabout will be effected" and that ''the building of an economic giant is the most important task'' facing North Korea.

"An important issue in putting an end to the division of the country and achieving its reunification is to remove confrontation between the North and the South," he added.


MY Investor said...

That's good news indeed for investors as overall performance both local equity and foreign equity is going to go up up up!

bruno said...

Dali,what more to start the New Year.With such a beauty one cannot be wrong.

But the selloff in the greenback has caused for concern.So I am stepping in to pick up the pieces.Going short the Euro and Loonie for some late change for new year shopping and dinner.

bruno said...

I did some serious thinking after the deal was announced late yesterday.

As I always said before there is no such thing as a fiscal cliff,because as usual the politicians playing cat and mouse.It is only the tv networks and the media playing up this fiscal cliff thingy.Obama been the president has one card hidden up his sleeves and the republicans play chicken and folded.

I did some serious thought about this fiscal cliff rally,and before I did say resistance 13,800 in the dow will be hard to breach.I will have to really get serious about this rally if it shoots through 13,800 with strong follow through.But first it will have to get through broken resistance 13,300.For now I am staying flat on the indexes.

The whole world is expecting this fiscal cliff rally and everybody knows that there is massive funds staying on the sidelines waiting to get in.There is already an overcrowded train that has left the station,and latecomers are still jumping on it.It is these so many bulls that have made me to sit on my hands.

By the way the risk currencies have hit a brick wall.Maybe during European trading we will have enough profits to run to the bank.

Woky said...


You have ignored India. Though Malaysia do not have much going on there (except for myself), India's economy and its impact over our region cannot be disregarded.

Noticed the trend on movies (cultural impact), though small, there are more and more interested globally with it nowadays e.g. Slumdog, 3 idiots, Life of Pi,etc.

Also, you can start adding some Indian beauties to your posting too from now on. I can recommend a few such as Katrina Kaif, Aishwarya Rai..

Regards, from a Malaysian Chinese

bruno said...

In European trading we went flat euro for 40 pics profit to start the new year on a good note,leaving 20 pics from the table.It has since recovered 30pics.

The loonie is now in the red.Stop loss is at 0.9665 for a feel pain of 200 pics loss.I am not that bearish on the greenback for now and neutral on the stock market.

bruno said...

We have decided to go flat the loonie for a 2 pics profit.Things do not look that good,as we got the wrong horse.

The euro has gone south and dropped a further 130 pics after our exit.Maybe next time.

PureBULL said...

Dear DALI,
U r spot on the Fiscal Cliff settlement. U know all too well about this US amorr attitude.

Yes, we saw multi-years of Indonesia n now year of Thailand n Philippines.

Surely it will be our turn for years of Malaysia from 2013 n beyond...


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