News and Research Update

November 9, 2009, 12:00 AM - Data Source: UBS Wealth Management Research

Research in focus:

Daily Market News:

Economic News

USA: Wholesale inventory depletion continues (November 6, 2009, 5:23 PM)
Wholesale inventories fell in line with the consensus expectation by 0.9% m/m in September, while sales rose 0.7%. This pushed the inventory-to-sales ratio down from 1.20 to 1.18 (this cycle's peak: 1.34). With a normal level being closer to 1.15, the inventory depletion cycle is very advanced.

USA: Labor market still ailing in October. (November 6, 2009, 4:28 PM)
Nonfarm payrolls fell 190k in October. Taking into account a net revision to the prior two months' data of +91k, the release was better than expected. However, the unemployment rate jumped from 9.8% to 10.2% and the workweek stalled at a very low 33.0 hours.

Taiwan: Disinflation persists in October (November 5, 2009, 5:35 PM)
Taiwan's CPI dropped 1.8% y/y in October, compared to a 0.9% y/y drop in September, given last year's high base effect and declining food prices. Core inflation also slipped 0.9% y/y after a 1% y/y drop in September. We expect Taiwan to show mild disinflation in the coming months.

USA: Strong productivity gorwth in 3Q09 (November 5, 2009, 5:35 PM)
Business nonfarm productivity rose a very strong 9.5% q/q annualized in 3Q09, stronger than expected. As compensation per hour grew a moderate 3.8%, unit labor costs fell 5.2%. This combination is a boon for businesses. But hiring will have to resume in order to keep final demand from faltering.

USA: Firm downtrend in initial claims (November 5, 2009, 5:34 PM)
Initial jobless claims rose 512k last week, down from +532k in the prior week. The 4-week average fell from 527k to 524k, its lowest print since early January. The downtrend in claims points to further improvement in nonfarm payrolls. Claims will have to fall to 425k to signal positive payrolls.

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Equity Markets EU

Daily European Equity Market Comment (November 6, 2009, 4:00 PM)
European markets pared their early gains, after data showed that the unemployment rate in US rose to the highest level since 1983. The DJ STOXX 600 index dropped as Oil & Gas, Basic Resources and Telecom stocks dragged. In the DJ STOXX 600, 60% of the companies that have reported results for this quarter have exceeded analyst expectations. Also in the US, 82% companies in S&P 500 index have reported better-than-expected results. World's largest cement maker Lafarge tumbled after the company's net income declined 37% y/y and it predicted a 6-8% drop in cement sales for this year. Royal Bank of Scotland advanced after the bank reported a loss for the quarter due to hefty charges to cover bad debts, but said that there were some signs of improvement.

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Equity Markets Asia

Daily Asia-Pacific Market Comment (November 6, 2009, 11:46 AM)
On Friday, Asian markets gained taking cues from the strong global markets. Better-than-expected employment and business productivity data from US restored investor confidence over global economic recovery. Hong Kong markets were the best performers for the day led by gains in banking and property stocks. We expect strong economic activity and good earnings by companies to support Asian equities, especially relative to those of developed markets. The third-quarter results of Asia ex-Japan companies have exceeded consensus expectations so far. Some 62% of the companies that have reported led to consensus earnings upgrades. Amongst regional equities we particularly like China, Hong Kong and Singapore.

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Forex Markets

AUD: lifted by RBA's economic forecast upgrade (November 6, 2009, 4:30 PM)
The AUD benefited from RBA's raise of GDP and inflation forecasts. As the language resembled that of the policy meeting statement, it remains a close call whether the next hike will take place in December or later. In our view, the increasing interest rate differential should remain AUD positive.

CAD: suffers from weak employment data (November 6, 2009, 4:29 PM)
CAD came under pressure following disappointing Canadian employment figures. We keep our positive call on the CAD. Although the road ahead will remain bumpy for USDCAD, and we think it will continue to react sharply to fresh economic data and shifts in risk sentiment.

G20: Brazil will propose FX measures (November 5, 2009, 5:43 PM)
At the upcoming G20 meeting, Brazil will propose measures to avoid overvaluation of the BRL, AUD, NZD and ZAR against USD and CNY, according to a Brazilian newspaper. While a cautious stance makes sense, it is unlikely they would do anything beyond possibly mention the issue, in our view.

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