Saxo Bank (Saxo Bank)
Finance  |  September 06, 2010 10:42:07

Relaxing Labor Day


§          The S & P 500 closed just above the important level of the 1100th In our opinion it is very likely that within a week or fortnight will see testing limits the 1130th

§          Calendar this week after eventful last week rather poor. Until Thursday's meeting, we expect the BoE rather lackluster trading.

 

What is happening?

Better than expected with the number of jobs completely corresponds to that today in the U.S. celebrates Labor Day. This means that the stock markets (but not futures markets) are now closed. The activity will therefore most likely depressed, but it seems that the short-term bulls are at an advantage.

We expect the European markets opened this morning by 0.6% above, and generally for the coming week we expect the rise of stock markets. Rather than a correction back to 1060 levels, according to us likely that, due to the fact that this week will be published very little macroeconomic data, which could reverse the superiority of bulls in the market, will head the S & P 500 to the border of the 1130th

The market situation

After a hectic week, the news agency certainly think we need time to relax. At least on the calendar this week is fairly poor, if one of the few events that could potentially cuckold market, the Bank of England meeting. Tomorrow will announce its target rate RBA and BoJ and Germany will be published in the latest report on corporate orders.

The U.S. employment report was another victory for bulls and despite the relatively poor outcome index of activity outside the manufacturing sector ISM, published an hour and a half later endured a willingness to take risks in the market until the end of trading. Three days of data that exceeded expectations, was enough to make the mood completely turned, as now seems the recovery continues. We believe that stock markets are too optimistic, but the level of 1100, of which we mentioned last week, is now another obstacle waiting to break.

The positive results of the employment report include the number of jobs in the private sector hourly wage, and (partially) rate of unemployment. In August it was in the private sector created 67,000 new jobs (net), which is much more than we estimated 5 000 Negative - assuming that this number will not be revised downward - is the fact that almost all new jobs are attributable to education and health (45 000), not to produce goods (0).

In August, it released a total of 114,000 temporary workers participating in the census, which is close to our estimated 115 000th Was also released for another 7,000 state employees who are not involved in the census, which means that the number of jobs outside agriculture fell by 54 000th

The unemployment rate rose slightly to 9.6%, the overall picture, however, again distorts the level of participation in the labor market. Indeed, 550 000 people in August entered the labor market and 290,000 of them found employment. As we have repeatedly emphasized, if the increase in unemployment due to a higher level of participation in the labor market is not necessarily a negative thing because it means that more people are returning to the labor market. However, in August it was not quite as bright as most candidates find a job, working part time. This also explains why a broader measure of underemployment U-6 increased from 16.5% to 16.7%.

Index of activities outside the manufacturing sector ISM Institute, which covers about 90% of the economy outside the manufacturing sector, brought a nice disappointment, although the market seems this report never pay attention it deserves (the U.S. economy was not assessed on the basis of the manufacturing sector).In August, the index fell to 52.4 from July to 54 and most of the components has been awful. In particular, the employment component was 48.1 in their weak, which swung back to the contraction (threshold is 50). This strongly supports that decent data on the number of jobs in the private sector or on the number of applications for unemployment benefits.

Shares: close-up view

The current bull market is clearly dependent on strong, but not great macro-economic data released last week - especially the ISM report on the labor market. This week, we expect little economic news that could affect the image, and mainly because we expect that the shares will rise. We do not expect, however, that this happens in a straight line due to the existence of both technical and valuation thresholds.

The 200 moving average (DMA) is now 1116 and There certainly encounter some resistance before we get through this level. A significant shift of the 200 DMA, however, will indicate the strength of another bull, which we might pass over to the 1130th Our estimate of the fair value of the S & P500 in addition to the expected gains USD 80 per share in 2010 is around the level of 1120, implying 14násobek PE, which is completely in line with consensus.A lot of portfolio managers definitely looking at these numbers will not be marketed in the short term to support entry into the long positions well above these levels and become better at these levels to enter short positions.

Another thing that is worthy of attention to equity markets as a long-term monitored event is that of growth stocks compared to value stocks in the factThere is no premium. Usually applies to premiums provided the expected growth stocks rise (at least long term) more than hodntové. However, this premium is currently at record low, suggesting that the market is heavily engaged in value stocks (mainly producing consumer goods companies with strong dividend payouts). This equation probably will not last long and we expect movement toward growth shares, which might trigger the current optimism in the markets.


Mads Kofoed, Christian Blaabjerg, Saxo Bank




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