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Wall Street Strategies has been providing independent stock market research since 1991 to individual, retail and institutional clients through a balanced approach to investing and trading. Charles Payne, our founder and chief analyst, is routinely sought after for his stock market, political,... More
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  • THE CALM BEFORE THE DATA By WSS Research Team 0 comments
    Jan 14, 2013 1:48 PM

    Carlos Guillen

    Equity markets are holding on to the modest gains made toward the end of last week as today's session lacks in terms of economic data. Perhaps this can be considered a positive as the debt ceiling debates intensify and the deadline gets closer and closer.

    At the moment it is apparent that nothing has changed and, once again, no one is reaching a compromise. In a statement made over the weekend, the White House said there are only two options to deal with the debt limit: Congress can pay its bills or it can fail to act and put the nation into default. The consequences of the failure to raise the limit can also be that it may force the government to delay payments to employees, Social Security recipients, contractors and others. The failure to raise the debt limit will certainly throw a wrench into the gears of the U.S. economy, at least in the near term.

    On a slight positive note today was that according to Charles Evans, a top Fed official, the U.S. economy will grow by 2.5 percent in 2013 followed a growth of 3.5 percent in 2014. On the jobs front, Evans conveyed that 200,000 jobs per month added to the economy would be a substantive improvement over the 150,000 achieved per month so far, but reaching an unemployment rate of 6.5 percent would take a long time even at that rate, probably until the middle of 2015.

    So at the moment stock markets are experiencing some calmness, but the rest of this week will be filled with economic data including retail sales, housing data, industrial production, and Michigan sentiment to mention a few.

    David Urani

    Last week I noted that, based on the first week of 2013 data on equity inflows, investors look hungry for stocks, with inflows into equity funds showing the second largest gain ever, including the largest-ever inflow to emerging market funds. As it turns out, China may be ready to feed that appetite as they look set to raise the amount authorized for foreign investment into stocks.

    The China Securities Regulatory Commission says they would like to increase the amount of money allowed to go through the Qualified Foreign Institutional Investor Program (QFII). In other words, foreigners are likely to be allowed to buy more equity in Chinese companies. Currently $80 billion is authorized for foreigners to invest, which accounts for approximately 1.5% of total investment in the stock and bond markets. Details are scarce, although chief regulator Guo Shuqing says they could multiply the amount of investment by 10 times.

    This is a great signal to foreign investors that more money may be put to use in the Chinese markets, and it's also a nod to a Chinese government that's becoming more tolerant of foreign "influence" for lack of a better word. The Shanghai Composite was up 3.1% following the news, continuing an impressive run in the Chinese markets over the past month.

    (click to enlarge)


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