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Global equities are in consolidation mode

There is an acceptance that US equities will be in a consolidation phase, despite the better economic data.

This is a reflection from investors adjusting their expectations to a stock market that is without QE. The Fed will be going ahead with the tapering timetable whether the fundamental data supports it or not.

US equities ended last week on a low after earnings from companies had missed their estimates. The economic data from housing and manufacturing pointed to an expansion despite showing a lower number for December, compared to November.

JOLTs was the data that investors found most exciting as it showed job openings had climbed to the highest level, since 2008.

It is also one of the data monitored by Janet Yellen. The quits rate rose up to 1.8%, which indicates mobility in the labour market. This is a positive sign that workers are now more optimistic about getting another job, and it is another piece of the puzzle that the recovery process in the job market had showed in the beige book.

In Asia today, the major event would be China’s GDP. China’s economic expansion has slowed down, since its height of double-digit growth. China is no longer in a win-win situation where meeting forecast would be met with a cheer. Instead, what everyone is looking out for is how much of a slowdown it will be during the fourth-quarter.

The government has targeted 7.5% as the annual rate and any number above it will be seen as an edge down. Other data’s such as the business climate index, industrial production and retail sales would provide clues on how the underlying economy is faring, given that the slowdown is anticipated.

Last year, we saw a distinct preference from foreign investors into North Asian countries such as South Korea, Japan and Taiwan. In South Asian countries other than India, the rest had muted inflows.

Tracking the fund-flows, there’s a slight change at the start of this year while Taiwan remains favoured there is a marked withdrawal of funds from South Korea and Japan. In South Asia, India continues to enjoy foreign interest and Indonesia is the outlier picking up some momentum with inflows totalling $259.5m as of 17 January.

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