Global Markets Overview – 11/29/13

End of the month

With the US markets closing early for Thanksgiving and another indifferent night in Europe (except for the DAX which made another all-time high) leads in the Asian region are few and far between.

It is also the last day of the trading month and we are now four weeks from the end of the year. I would expect trading movements to follow fund managers book dressings rather than any specific news, and the fact that volumes for the month are averaging $3.87 billion versus the year-to-date average of $4.26 billion means market-moving fund flows can be lighter than usual and still get the results required.

It has been a slow month; the ASX will log its first monthly loss since June, however the loss will be modest - current sitting at 1.54%. I did expect November to be a cherry red month since it's ex-dividend month for three of the major banks, macro drivers have settled down and market momentum peaked in late September suggesting a pullback was only a matter of time.

It's also interesting that the losses have come from the financial space, which has lost 1.3% over the month; not bad considering this sector took around 50 plus points out of the market through dividend payments. The materials space is off 1.2% and has been heavily affected by the gold space that has lost over 72% year-to-date.

The real disappointment of the month has been the energy space, which is down 5.07% in November. The fall in oil hasn't helped, however this is one sector that I believe has real value over the medium term. Next year STO and OSH will start production at their PNG plants and STO is 18 months from GLNG being completed; these will all be cash flow positive projects.

What I now turn my attention to is the year end. Currently the ASX is up 14.75% year-to-date, and has been as much as 17% at the top of the market. To put the ASX's performance in perspective, the FTSE is up 12.83% and considering the amount of material stocks listed on the FTSE it's a reasonable gauge of the ASX's performance however, when comparing it to other European markets. The CAC is up 18.16% and the DAX is up 23.32% which shows it is only in the middle of the pack. Both nations are export nations with high end manufacturing drivers (healthcare, high end transport, telecommunications etc.) and this is not surprising considering the ECB has tried to stimulate the region. The moves in the CAC are interesting considering France is still struggling on the national economic front.

Moving to the other side of the Atlantic, the DOW is up 22.84% and the S&P is up 26.72% as the Fed continues to pump money into the markets. However, the part of the Americas that has not done so well are nations with very similar sectors to Australia. The TSX is up 7.61% year-to-date as coal and goal stocks drag. I should also point out that TSX has been outstripping the local market for the past three years while Brazil, with its massive iron ore and copper miners, is down 14.94% as investors turn off emerging markets and the 'China story'.

However, the story of the year is Japan. The Nikkei is up a massive 51.29% and the major macro movements for today due from the north Pacific nation. Japan is set to release seven pieces of economic data today and we will be watching the CPI and industrial production figures for insight into how Abenomics is tracking and whether three arrow strategy is taking effect. If Japan doesn't see inflation move up then expect further stimulus measures to be announced over the coming months from the BoJ and the central government.

What does this mean for the end of the year? I believe the market will most likely bounce back from its small consolidation, my reason is due to the support seen in the banks over the last week and the fact BHP has held above $37 dollars which had been a long term resistance level over the year.

I think the market will move back towards 5400 points in the next four week, however the fact volumes remain subdued in the fourth quarter and we are approaching seasonality issues with summer holidays etc. the price action moves are like to be thin and easily corrected if they look over done.

Ahead of the Australian open

Ahead of the open the ASX 200 looks like finishing the week and the month on a high as 5351 up 17 points, however as I mentioned earlier, be aware price action will be government by window dressing rather than any conviction calls.

BHP's ADR pointing high by four cents to $37.23, but again I am actually aware the materials space is down 1.2% for the month and that is likely to influence the window dressing of the last trading day of the month.

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