Lack of Market Direction | December 31, 2010

December 31, 2010 By

USDCHF

Good morning. Equity and Commodity markets closed lower on Thursday with investors cautious after mixed economic news in the US. Weekly Jobless Claims figures highlighted a fall of 34,000 for the period, which exceeded initial expectations. Coming in at 388,000, the drop represented a significant adjustment in the labour market. Pending Home Sales data also indicated a solid trend and possible recovery with a 3.5% rise in November. Economists prior to the release were forecasting a flat figure for the period. Although the results were quite positive, market sentiment was governed by thin trade volumes and concerns over Europe debt and Japan. Early in the day, the Japanese government released disappointing PMI Manufacturing figures. A slight rise for the period, the result still indicated a slight contraction in the economy.

On the equity market front, the Dow Jones was flat leading up to the end of the year.  Trading in and out of positive territory for much of the session, thin volumes were recorded due to lack of corporate direction. Speculation by media sources that BHP Billiton will look at making a bid for Anadarko Petroleum, led to heightened volatility in the sector. Technology company Groupon announced a $500 million raising, with Directors in the company divesting $350 million. The cash injection is expected to assist in short term marketing and growth plans.

On the currency front, The Japanese Yen was range bound on Thursday with traders eyeing PMI Manufacturing Data. The rise to 48 for the December period was above expectations, however the result indicated that the economy was still contracting. The USDJPY opened weaker in the morning session before stabilising at 81.46. Recent speculation that the BOJ would intervene in the currency markets also helped weaken the yen during the trade day, with economists highlighting the potential for extreme volatility in light of the possible move. Export data was disappointing with new orders falling to 46 for the December period. The Canadian dollar held onto its gains on Thursday with the currency sitting below parity.

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Potential Intervention and the Yen | December 30, 2010

December 30, 2010 By

GBPJPY

Good morning. Markets were buoyant on Wednesday, leading up to the New Year end. European and Asian equities led the pack with the CAC in France and IBEX in Spain standout performers. Base metal prices rose considerably with Gold touching 1412 an ounce and silver recording an 82% rise for the year to date. Inflationary worries due to increased money supply from the Fed and ECB have been highlighted as the key contributing factors. On the economic front, US Business expansionary data is expected to be announced on Thursday with mixed forecasts for the period. Existing home sales will also be released. In China, government officials announced that taxes would rise on automotive vehicle purchases to stem the level of demand and growth. Raising the rate for small cars to 10%, the move is expected to couple the recent interest rate rise in slowing the economy.

On the equity market front, the S&P500 was 0.3% firmer intraday with traders eyeing a strong finish for the end of year. Fast food company McDonalds rose 1% with analysts highlighting a 24% return for the year to date due to better than expected market conditions. This sector benefits from weaker macro economics. Rumours of a takeover for BJ Wholesale sent the company 6.5% higher intraday.

On the currency front, the greenback weakened against the yen on Wednesday with speculation of possible intervention having little impact on the price. Yesterday’s comments only added fuel to the fire, with traders continuing to move towards safety assets leading up to the end of the year. In September of this year, the Japanese government intervened in the currency markets with 24.7 billion purchase of US dollars. This temporarily had an impact on the pair, before economic concerns pushed the yen higher. Mixed global economic news coupled with debt concerns in Europe have been highlighted as key contributors to the rise. The USDJPY traded at 81.98 in the afternoon session.

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Gold Breaks $1400 An Ounce | December 29, 2010

December 29, 2010 By

Gold Breaks $1400

Good morning. Gold led the equity and commodity markets higher on Tuesday with the precious metal breaking through $1400 an ounce. Continued speculation over Housing prices and demand was highlighted in the Case Shiller index with a significant fall for the October period recorded. Traders were disappointed with the result pushing the greenback lower against the major base currencies. This translated into a flight to safety and a stronger gold price. Falling 1.3% for the month, the housing index highlighted potential long term economic problems and a growing divide between Main and Wall Streets. Consumer confidence figures also weakened considerably. In contrast to this result, retail sales for the December and Christmas periods are expected to reach record levels. Across the atlantic, Europe was relatively quiet with London closed for a public holiday and limited economic news. Fears of debt contagion continue to plague traders minds with the Euro swinging violently throughout the session.

On the equity market front, the Dow Jones closed 21 points higher, with the energy and commodity sectors boosted by a weaker greenback. Surprisingly several retailers including Macys struggled during the session, with the tech sector continuing to underperform. Automotive giant General Motors rose 2% in normal trade hours, with Barclays and Credit Suisse raising their forecasts for the stock.

On the currency front, comments from Japanese Finance Minister Noda had a dramatic impact on the currency pair on Tuesday. Falling to 81.88 after lunch, speculation that the BOJ would intervene in the currency market had little stabilising effect. The recent depreciation in the USDJPY has led to concerns over the impact of bond purchasing measures and the growing discourse of public debt in Japan. Economists have reassessed their forecasts for the Japanese economy in light of the current conditions and the impacts of a strong yen on the export market. The question of when the Japanese government will enter the market again will drive volatility in the currency.

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Impact of China’s Rate Rise on Aussie | December 28, 2010

December 28, 2010 By

AUDUSD

Good morning. Equity and Commodity markets continued to react to thin volumes and mixed economy news, with little movement recorded on Monday. Over the weekend China announced that Interest Rates would be raised to tame inflationary pressure. Economists forecasted a shift in monetary policy before the New Year break. Concerns however were raised over a potential bubble in the housing and consumer markets, with credit growth outpacing previous estimates. Traders on Monday were undecided as to their risk appetite with mixed leads on both the currency and equity market fronts. Tomorrow’s key unemployment and CPI data in Japan will define the trend leading up to the New Year. In the US, blizzards continue to cause havoc in New York and much of the North East and Central regions. Expectations of more snow and wild weather conditions, could well contribute to extended light trading volumes on the markets.

On the equity market front, the S&P500 was flat on Monday with mixed corporate news pushing the index into a range. AIG announced that it had secured credit lines and funding, boosting the stock during the session. H&R Block in contrast, weighed on the sector with a 7% fall after the company announced disappointing earnings.

On the currency front, the AUDUSD traded in a volatile range for much of the session. Trading at 1.0022, the Aussie dollar was temporarily impacted by China’s rate rise decision. The news sent ripples across the equity and currency markets, with economists focusing on the growth forecasts for the global giant. Commodity prices also assisted in supporting the currency for much of the trade day, with gold bouncing back from previous lows. The Japanese Yen strengthened after the Christmas break, with news that China would increase interest rates to combat inflation. Economists expected the announcement, with speculation that the overheating of the economy could impact Japanese export earnings. Trading at 82.92, the currency pair strengthened mid morning before traders locked in profits.

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Will The Christmas Break Help Gold? | December 27, 2010

December 27, 2010 By

Gold

Good morning. Traders pushed the equity markets into a range on Thursday, leading up to the Christmas break. Speculation of a possible correction due to weakened economic conditions in Europe had little impact on major equities. China over the weekend announced that interest rates would rise to combat possible inflationary pressures. Increasing the rate to 5.81, the central bank highlighted a sharp jump in CPI for the November period. Economists were concerned over the dramatic 5% increase, with the potential for an overheating economy. Japan is forecast to announce key employment and Consumer Price Index data early this week. Expectations of a contraction in inflation could spark further stimulatory measures from the BOJ. Currency market volatility could ensue, if the central bank decides to increase bond purchases or target the yen appreciation.

On the equity market front, the Dow Jones was slightly firmer on Thursday with a 14 point rise. With the equity markets closed on Friday, there was limited key corporate news over the break.

On the currency front, Choppy start to the holiday break with the Japanese Yen trading at 82,886. Direction was governed by light volume for much of the session. The Japanese government in a movement that was not anticipated by economists passed a key economic budget that would be aimed at boosting the local economy. The recent speculation over public debt and deflation have cause significant volatility in the currency. Consolidating for much of the session, the AUDUSD tracked the general market sentiment. Trading at 1.00417, economists highlighted the possibility of continued parity with interest rate and inflationary pressures valuing currency levels. Flat commodities after a lack lustre US session also contributed to the disappointing session for the AUDUSD.

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