They are talking about $775B of spending primarily through infrastructure and tax reliefs.


MAJOR HEADLINES – PREVIOUS SESSION

  • US Nov Construction Spending -0.6% m/m vs -1.3% expected

  • US Domestic vehicle sales 10.3 mln units vs 7.5 mln expected

  • UK Nationwide Consumer Confidence 47 vs revised 51 prior

  • AU AIG Services Index 39.3 vs 37.8 prior


THEMES TO WATCH – UPCOMING SESSION

Events Today:

UK Nationwide House Price Index (0700)

EU Services PMI (0900)

UK Services PMI (0930)

EU Flash CPI (1000)

Market Comment:

President-elect Barack Obama spoke last night about the stimulus package he wants to sign and implement post-inauguration. It now seems likely that the package will comprise USD775 bln worth of programs, including USD310 bln in tax cuts and other job creation schemes and infrastructure spending.

The USD rose in late NY on the back of this and has held onto gains during a quiet and calm Asian session. EUR continues to be the whipping boy of the markets, mired near o/n lows after the fall from 1.39+ levels. A growing sense of deeper, faster ECB rate cuts following benign CPI data from Italy and Spain together with concerns over an unfolding bond scandal in Italy contributed to the weakness. Germany is expected to decide on a second stimulus package worth EUR50 bln on Jan 12.

The poor outlook for Euroland retailers continues, following on from talk of UK’s M&S suffering its worst Dec sales in over 80 years, 250 year-old crystal/chinaware maker Wedgwood fell into receivership. Elsewhere, a UK think-tank report expects over 1,600 UK retailers to go bust in H1 2009, potentially 1 in 10 shops.

Britain's FSA said that its ban on short-selling of financial stocks would expire on Jan.
16, but that it would reintroduce the ban without consultation if needed. The FSA also said it would extend rules requiring net short positions in financial stocks to be disclosed until June 30, although disclosure will only be required at 0.1 percent bands. The rules currently require any change in a net short position in a financial sector stock to be disclosed. The FSA introduced its ban on shorting financials in September after the practice was blamed for confidence-sapping declines in the share prices of major financial institutions.

Note: the support/resistance levels used in the matrix’s of this document are levels derived from yesterday high, low and close. Reference in the text to other support/resistance levels will occur.