Good morning. Equity markets were modestly higher on Wednesday with low volumes and volatility recorded. The Federal Reserve released the Beige Book during the session with indications that the Japanese and Libyan events have had significant impact on growth and economic efficiency. Retail Sales data recorded a 0.4% gain, which was in line with initial estimates. Crude Inventory levels also contracted slightly from the previous period. US President Obama announced that health care was an important issue that required significant reform. The proposed medicare changes would have dramatic impact on the biotech and pharmaceutical sectors. Across the Atlantic, European Central Bank officials continued to watch movements in the currency, as speculation of a rate rise had little impact on price movements. The market have cautiously watched the recent debt crisis in Portugal and the ensuing borrowing costs associated with sovereign downgrades in Greece and Ireland. Economic news set to be released on Thursday includes PPI and Initial Claims.
On the equity market front, the S&P500 closed the session flat with mixed corporate leads from the tech and financial sectors contributing to movements. Riverbed Technology finished the day on a strong note with an upgrade in broker 12 month estimates driving gains. IBM and Microsoft also rose in trade with the sector receiving a boost in market sentiment. Biotechnology company Biosante Pharmaceuticals was a stand out performer, with the company reacting to Obama’s medicare reform comments.
On the currency front, the Euro weakened against the US dollar on Wednesday, with debt concerns playing on the minds of traders. Portuguese woes and the potential for further bailout measures led to a discourse in the Euro currency. Economists have also factored in the potential for a tightening in monetary policy. This has recently been supported by gains in GDP growth and employment. Risks that have been highlighted in the region include sovereign debt and borrowing costs. Greece, Ireland and Portugal have felt the effects of a surge in costs. The EURUSD traded at 1.4446. Swiss Producer Price Index data supported gains in the currency. Trading at 0.8961, the Statistics office announced that PPI fell in line with initial estimates of 0.4%. Market Analysts were comfortable with the figure, indicating the potential for further GDP growth in the short term. The recent appreciation in the currency has been watched with anticipation, as traders factor in the potential for a tightening in global interest rates. Yield attraction and aversion to the carry trade pushed the greenback higher against the Japanese Yen. Trading at 83.84, the market initially factored in the nuclear disaster into the equation, with the currency falling against most of the majors. Recovering late in the session, the Japanese Yen received support from covering trades. The market continues to be cautious in its estimation of economic growth and interest rates in light of the recent disasters.