Personal consumer expenditure (PCE) rose 0.2% in April in line with market expectations. This represented a slowing in growth from the 0.4% gain seen in March. Personal income rose 0.2%, a touch faster than market expectations, although down from the 0.4% gain in March.
On a volumes basis, spending was down slightly in April. The level of spending was essentially unchanged in April compared to the first-quarter average. Consumer spending growth should accelerate through the second and third quarters as the rebate cheques (which equate to roughly 12% of personal income) buoy income levels.
From a policy perspective, this report does not alter the landscape in any substantial way. In the near-term, we expect the Fed to remain on hold as it assesses the impact on the economy of their substantial policy actions and the sizeable fiscal stimulus package.
Friday, May 30, 2008
Stocks Finish Week Mostly Higher
The Dow flirted with the flat line all day and finally succumbed to selling pressure in the final half hour of the session to post its first loss - though marginal - in the past four days. All other major indices finished the week on a positive note, though gains were well-confined..
Volume was pedestrian, as it had been all week, giving rise to concerns that the markets once again are poised to fall.
Dow 12,638.32 -7.90; NASDAQ 2,522.66 +14.34; S&P 500 1,400.38 +2.12; NYSE Composite 9,401.08 +29.21
Advancing issues finished ahead of decliners once more, 3425-2850. There were more new lows than new highs (155-145). As has been the case all week, the indicators gave few clues to market direction, and with little impetus from economic news or government data, the markets continue to drift.
Oil rebounded slightly, gaining 73 cents to settle at $127.35. Precious metals also recovered from yesterday's bloodbath, with gold gaining $9.80 to $891.50 and silver up 35 cents to $16.87. Both are well off their recent highs.
As noted above, volume is telling. Friday's volume was in line with the limited trade of the entire week.
NYSE Volume 1,327,792,000
NASDAQ Volume 2,135,954,000
Volume was pedestrian, as it had been all week, giving rise to concerns that the markets once again are poised to fall.
Dow 12,638.32 -7.90; NASDAQ 2,522.66 +14.34; S&P 500 1,400.38 +2.12; NYSE Composite 9,401.08 +29.21
Advancing issues finished ahead of decliners once more, 3425-2850. There were more new lows than new highs (155-145). As has been the case all week, the indicators gave few clues to market direction, and with little impetus from economic news or government data, the markets continue to drift.
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As this week was mostly the result of a small snap-back rally following last week's 600+ point decline (Dow Jones Industrials), the see-saw should shift back to the bears in the first week of June.Forex Foreign Currency Exchange Trading Beginner's Resource Center.
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Oil rebounded slightly, gaining 73 cents to settle at $127.35. Precious metals also recovered from yesterday's bloodbath, with gold gaining $9.80 to $891.50 and silver up 35 cents to $16.87. Both are well off their recent highs.
As noted above, volume is telling. Friday's volume was in line with the limited trade of the entire week.
NYSE Volume 1,327,792,000
NASDAQ Volume 2,135,954,000
Thursday, May 29, 2008
Three In a Row for US Stocks
Investors received a rare double dose of good news today as the government announced a revision of first quarter GDP - from +0.6% to +0.9% - and oil prices skidded on supply-demand issues and the report of a wide=ranging investigation by the Commodity Futures Trading Commission.
While the Energy Department explained that the drop in oil supply was due merely to delays in unloading tankers in the Gulf of Mexico, the CFTC revealed that an investigation into trading practices had been underway since December. The Commission also announced some initiatives which would make commodity trading more transparent.
All of that contributed to a better-than $4 decline in the price of light, sweet crude on the NY Merc. It was the largest one-day drop in more than a month.
Responding to the positive news, Wall Street extended its rally into a third straight day, though once again, gains were not impressive.
Dow 12,646.22 +52.19; NASDAQ 2,508.32 +21.62; S&P 500 1,398.26 +7.42; NYSE Composite 9,371.87 +7.53
Advancing issues overwhelmed decliners for the third straight session, 3791-2414, though new lows narrowly edged new highs, 159-157.
As mentioned above, oil slipped $4.41 to $126.62. The metals were decimated, owing to new-found stability in the dollar. Gold lost $23.30, to $881.70, while silver fell 90 cents to $16.52.
Even with the good news, trading was still rather light, probably a semi-permanent feature now that warmer weather has found its way to the Northeast.
Despite the three straight days of rising prices, the Dow has only regained 166 points of the more than 500 it lost in the previous week and is dangerously close to a key resistance level at 12,700.
While the ebullience could easily spill over into tomorrow's session, it's by no means certain that this current rally has any legs whatsoever. Expect more drifting and dodging over the near term, until there is a final washout, which could occur any time between next week and the first part of July.
NYSE Volume 1,229,452,000
NASDAQ Volume 1,948,316,000
While the Energy Department explained that the drop in oil supply was due merely to delays in unloading tankers in the Gulf of Mexico, the CFTC revealed that an investigation into trading practices had been underway since December. The Commission also announced some initiatives which would make commodity trading more transparent.
All of that contributed to a better-than $4 decline in the price of light, sweet crude on the NY Merc. It was the largest one-day drop in more than a month.
Responding to the positive news, Wall Street extended its rally into a third straight day, though once again, gains were not impressive.
Dow 12,646.22 +52.19; NASDAQ 2,508.32 +21.62; S&P 500 1,398.26 +7.42; NYSE Composite 9,371.87 +7.53
Advancing issues overwhelmed decliners for the third straight session, 3791-2414, though new lows narrowly edged new highs, 159-157.
As mentioned above, oil slipped $4.41 to $126.62. The metals were decimated, owing to new-found stability in the dollar. Gold lost $23.30, to $881.70, while silver fell 90 cents to $16.52.
Even with the good news, trading was still rather light, probably a semi-permanent feature now that warmer weather has found its way to the Northeast.
Despite the three straight days of rising prices, the Dow has only regained 166 points of the more than 500 it lost in the previous week and is dangerously close to a key resistance level at 12,700.
While the ebullience could easily spill over into tomorrow's session, it's by no means certain that this current rally has any legs whatsoever. Expect more drifting and dodging over the near term, until there is a final washout, which could occur any time between next week and the first part of July.
NYSE Volume 1,229,452,000
NASDAQ Volume 1,948,316,000
Wednesday, May 28, 2008
Stocks Drift, End Higher
The trading today was akin to watching paint dry. All of the indices traded in a narrow range, hovering above and below the flat line. Volume, as it has the last three days, remained on the low side.
Dow 12,594.03 +45.68; NASDAQ 2,486.70 +5.46; S&P 500 1,390.84 +5.49; NYSE Composite 9,364.34 +50.32
The advances of the past two days are highly illusory. In the absence of any concrete economic news, traders are forced into a condition of buying despite their best instincts. It's really a herd mentality at work. Once the market is up for a while, investors get the idea that everything is OK and it's safe to buy stocks.
So, the indices will gain smallish amounts for days, but then, just like last week, there will be a sudden realization that the market stinks and the US economic ship is still sinking. Low volume tells us that the smart money is still sitting on the deck, sipping mai tais, waiting for the eventual storm to capsize the whole ship, crew and all. The correction in stocks may not be swift, but slow and deadly, but one thing is certain, it will be deep, just like the recession the government seeks to avoid/obfuscate/ignore.
On the day, advancers beat decliners, 3481-2811. New lows continue to hold sway over new highs, 196-112. The highs-lows metric continues to suggest lower days ahead, in the near term.
Oil rebounded again, gaining $2.18 to $131.03. Gold dipped, losing $7.80, to $905.00. Silver also lost ground, declining 5 cents to $17.42.
With two days past and two to go in the short week, expect a little bit of turnaround on either Thursday or Friday. Of course, whatever happens will not be extraordinary, unless some outside force is felt on Wall Street, or unless the smart money goes completely to the sidelines, which would likely result in a 3-400 point drop on the Dow.
The more probable condition is the slow-drip torture method we've witnessed over the past months. A few days up, then down. Rinse, repeat. Lose.
NYSE Volume 1,205,546,000
NASDAQ Volume 1,862,700,000
Dow 12,594.03 +45.68; NASDAQ 2,486.70 +5.46; S&P 500 1,390.84 +5.49; NYSE Composite 9,364.34 +50.32
The advances of the past two days are highly illusory. In the absence of any concrete economic news, traders are forced into a condition of buying despite their best instincts. It's really a herd mentality at work. Once the market is up for a while, investors get the idea that everything is OK and it's safe to buy stocks.
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And they're buying up anything that has been beaten down over the past 9 months, which is just about everything. Stocks are still risky, despite what any analyst or market wonk may tell you, me, their neighbors or friends. The government continues to sound the "all clear" horns, though behind the scenes, inflation, foreclosures, tight credit and the employment condition have them scared to death.Edmonton, Vancouver, Bad Credit, Divorced, Bankruptcy OK. Apply online.
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So, the indices will gain smallish amounts for days, but then, just like last week, there will be a sudden realization that the market stinks and the US economic ship is still sinking. Low volume tells us that the smart money is still sitting on the deck, sipping mai tais, waiting for the eventual storm to capsize the whole ship, crew and all. The correction in stocks may not be swift, but slow and deadly, but one thing is certain, it will be deep, just like the recession the government seeks to avoid/obfuscate/ignore.
On the day, advancers beat decliners, 3481-2811. New lows continue to hold sway over new highs, 196-112. The highs-lows metric continues to suggest lower days ahead, in the near term.
Oil rebounded again, gaining $2.18 to $131.03. Gold dipped, losing $7.80, to $905.00. Silver also lost ground, declining 5 cents to $17.42.
With two days past and two to go in the short week, expect a little bit of turnaround on either Thursday or Friday. Of course, whatever happens will not be extraordinary, unless some outside force is felt on Wall Street, or unless the smart money goes completely to the sidelines, which would likely result in a 3-400 point drop on the Dow.
The more probable condition is the slow-drip torture method we've witnessed over the past months. A few days up, then down. Rinse, repeat. Lose.
NYSE Volume 1,205,546,000
NASDAQ Volume 1,862,700,000
Tuesday, May 27, 2008
Week Begins with Low-level Markup
There was nothing startling about today's market gains. One can read absolutely nothing into the low volume rally following a three-day weekend except that it is unlikely to last through tomorrow's midday trading.
In fact, today's trade was more evidence of the PPT (Plunge Protection Team a/k/a the President's Working Group on Financial Markets) remaining active in the markets as the upward trajectory was largely the result of two separate, abrupt 50-point moves on the Dow - both between 12,500 and 12,550 - which occurred at 10:00 am and again at 2:30 pm.
The sad part of the manipulation plan for the markets is that both moves failed to create or sustain momentum.
Following the 10:00 am move, the Dow backed off 100 points by noon. The 2:30 pump resulted in the highs of the day an hour later, though by the close, the 12,550 target was not realized.
Dow 12,548.35 +68.72; NASDAQ 2,481.24 +36.57; S&P 500 1,385.35 +9.42; NYSE Composite 9,314.02 -1.76
News was largely inconsequential, as the Conference Board reported that their Consumer Confidence Index dropped to 57.2, from a revised 62.8 in April, it's lowest level since 1992.
Oil fell on the NY Mercantile Exchange, losing $3.34 on new concerns over - get this - demand - to 128.85. This is not unexpected and it would be no surprise if oil prices stabilized over the summer and subsequently fell in autumn, just in time for energy prices not to be an issue in the November elections.
Since Republicans have been so accommodating to Big Oil, a concerted trading and talking effort will coordinate to keep gas prices below $4.00 in the fall of 2008, and likely under $3.50. Republicans don't want to give Democrats an issue, and this is surely one over which they have control. It's a scandal, a sham and a shame. If a new administration is brought to bear in November, investigations should begin early in 2009.
The average price of a gallon of gas hit an all-time high of $3.93 over the just-concluded Memorial Day weekend. The price is as artificial as an office-lobby fern and should vacillate between $3.60 and $4.00 for the balance of summer, or, as oil execs and politicians on their payroll are fond of calling it, the peak driving season.
Gold lost $19.20 to $906.60. Silver finished 83 cents lower at $17.47.
Market internals were on opposite axes, as advancing issues outpaced decliners, 3976-2289, but new lows continued to dominate new highs, 182-103.
With little corporate news and a dearth of economic releases this week, expect stocks to vacillate with a slim bias to the upside. Investors are still very much in the dark as to the true strength or weakness of the economy and are desperate for gains. Anyone on the buy side over the next few weeks is likely to find eventual disappointment as the indices will retest March lows at some point in the near term.
NYSE Volume 1,129,459,000
NASDAQ Volume 1,720,927,000
In fact, today's trade was more evidence of the PPT (Plunge Protection Team a/k/a the President's Working Group on Financial Markets) remaining active in the markets as the upward trajectory was largely the result of two separate, abrupt 50-point moves on the Dow - both between 12,500 and 12,550 - which occurred at 10:00 am and again at 2:30 pm.
The sad part of the manipulation plan for the markets is that both moves failed to create or sustain momentum.
Following the 10:00 am move, the Dow backed off 100 points by noon. The 2:30 pump resulted in the highs of the day an hour later, though by the close, the 12,550 target was not realized.
Dow 12,548.35 +68.72; NASDAQ 2,481.24 +36.57; S&P 500 1,385.35 +9.42; NYSE Composite 9,314.02 -1.76
News was largely inconsequential, as the Conference Board reported that their Consumer Confidence Index dropped to 57.2, from a revised 62.8 in April, it's lowest level since 1992.
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And while new home sales increased 3.3% in April, home prices fell by 14.1% in the first quarter of 2008.The Path of Substantial Wealth and Riches: Your Parents' Influence on Your Finances
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Oil fell on the NY Mercantile Exchange, losing $3.34 on new concerns over - get this - demand - to 128.85. This is not unexpected and it would be no surprise if oil prices stabilized over the summer and subsequently fell in autumn, just in time for energy prices not to be an issue in the November elections.
Since Republicans have been so accommodating to Big Oil, a concerted trading and talking effort will coordinate to keep gas prices below $4.00 in the fall of 2008, and likely under $3.50. Republicans don't want to give Democrats an issue, and this is surely one over which they have control. It's a scandal, a sham and a shame. If a new administration is brought to bear in November, investigations should begin early in 2009.
The average price of a gallon of gas hit an all-time high of $3.93 over the just-concluded Memorial Day weekend. The price is as artificial as an office-lobby fern and should vacillate between $3.60 and $4.00 for the balance of summer, or, as oil execs and politicians on their payroll are fond of calling it, the peak driving season.
Gold lost $19.20 to $906.60. Silver finished 83 cents lower at $17.47.
Market internals were on opposite axes, as advancing issues outpaced decliners, 3976-2289, but new lows continued to dominate new highs, 182-103.
With little corporate news and a dearth of economic releases this week, expect stocks to vacillate with a slim bias to the upside. Investors are still very much in the dark as to the true strength or weakness of the economy and are desperate for gains. Anyone on the buy side over the next few weeks is likely to find eventual disappointment as the indices will retest March lows at some point in the near term.
NYSE Volume 1,129,459,000
NASDAQ Volume 1,720,927,000
Monday, May 26, 2008
Top 5 Tips For Good Home Loans
Buying a house and making it your home is a dream for almost everyone. Fortunately we have services that help buyers make their dreams come true faster: such as home loans. The world of home loans is varied, full of layers and sometimes confusing. However, many companies offer support and a set of options for new borrower. It makes easier the moment of choosing which loan best fits your situation.
Good home loans are easy to be found if you know where to search and how to negotiate. Low interest rates can make a sizeable difference in your savings, both on a long term and short term basis. It can be decisive in the moment of choosing a larger space as well. I've prepared some tips that may help you in order to get the best interest rate on your first home loans:
1. Research a good lender
It's very important that borrower do a lot of research to discover the lender best fits his needs. Even when you are opting for a home loan and you don't have a good credit history, you can look around and choose the one that is best suited to your financial situation.
2. Bad credit is not a big problem
You are not destined to take the very first opportunity that you find just because you suffer from bad credit. If you have such an attitude you may suffer for long time due high interest rate. You may end up being not able to meet the commitment and this may worsen your financial credit score.
3. Compare the interest rates
The mortgage rates tend to vary depending on the type of loan. Choosing adjustable home loan make sure you are aware such loan has possible risks associated. Don't hesitate to ask about taxes, costs, terms and other issues. Mortgage brokers are likely to serve you with the best services to beat enemies.
4. Bargain and negotiate
Now that you chose the lender it's time to get the best deal. Usually, loan officers and brokers can help you get some really good discounts on your home loan. Don't show anxiety to get deal closed, be direct and let the company officer knows you have resources. It's also important to state you are not negotiating he unique possible deal for you.
5. Be critical
Remember a loan is like a simple product, but with many terms issued. Seller wants you purchase, he usually show only the good factors. You should have critical sense to decide and bargain for better prices. Doing this you assure you got the best lender and closed the best deal.
Get more quality information and services for home loans.
Visit: Choice Home Loans
Good home loans are easy to be found if you know where to search and how to negotiate. Low interest rates can make a sizeable difference in your savings, both on a long term and short term basis. It can be decisive in the moment of choosing a larger space as well. I've prepared some tips that may help you in order to get the best interest rate on your first home loans:
1. Research a good lender
It's very important that borrower do a lot of research to discover the lender best fits his needs. Even when you are opting for a home loan and you don't have a good credit history, you can look around and choose the one that is best suited to your financial situation.
2. Bad credit is not a big problem
You are not destined to take the very first opportunity that you find just because you suffer from bad credit. If you have such an attitude you may suffer for long time due high interest rate. You may end up being not able to meet the commitment and this may worsen your financial credit score.
3. Compare the interest rates
The mortgage rates tend to vary depending on the type of loan. Choosing adjustable home loan make sure you are aware such loan has possible risks associated. Don't hesitate to ask about taxes, costs, terms and other issues. Mortgage brokers are likely to serve you with the best services to beat enemies.
4. Bargain and negotiate
Now that you chose the lender it's time to get the best deal. Usually, loan officers and brokers can help you get some really good discounts on your home loan. Don't show anxiety to get deal closed, be direct and let the company officer knows you have resources. It's also important to state you are not negotiating he unique possible deal for you.
5. Be critical
Remember a loan is like a simple product, but with many terms issued. Seller wants you purchase, he usually show only the good factors. You should have critical sense to decide and bargain for better prices. Doing this you assure you got the best lender and closed the best deal.
Get more quality information and services for home loans.
Visit: Choice Home Loans
Personal Loans: Resolve Financial Problems
We all know that the global economic system is passing through the rough and trough of credit crunch which occurred in the global financial market. Faced with this critical situation, the banks are pulling the belt tight as far as the credit give-away is concerned. Under such conditions not only the people with bad credit are suffering, but also the people with decent credit history are facing many difficulties in availing finance to resolve their problems. Still the UK financial market has the strength and capability to cross such dire straits and keep providing the necessary loans like the personal loans which the clients need so much in order to meet their personal requirements.
These unsecured personal loans are multi-functional in the sense that the borrower is at liberty to utilize the funds in any way he or she wants them to. Thus, this aspect adds to the suitability and likability of these loans in the eyes of people who are looking for more and more funds to add to their status, socio-economically. A loan seeker can go for debt consolidation, tours, asset purchasing, funding medical and educational bills or any other personal need coming in his or her way during the fluctuating aspects of life.
The unsecured personal loans can be differentiated on accounts of the total sum, the tenure, package's APR which in turn are determined by such factors as the credit past of the borrower, the credit priorities of the loan provider, the client's individual profile, the borrower's disposal income, repayment history and other loans availed by the the loan seeker.
For availing personal loans, the clients can compare different online quotes provided by numerous financial institutions working in tandem with the clients and the financiers. Therefore, before deciding upon a particular loan scheme one should compare different quotes available with different loan providers. As various borrowings deserve different interest rates, so making comparison can be the best way to arrive at the best and affordable loan deal. The best part of such loans is that these loans are provided to the unemployed people too. Thus, the loans for unemployed are also easily available in the market.
There is adequate information available online to help one in getting the affordable loan plan. The immense pool of information available can help one in garnering the amount between 500 pounds to 250000 pounds without facing much hassles and consumption of time. Simply by filling up the online application form one can have the loan to fulfill his desires. As these online service providing teams work in close cooperation with reputed lenders, these expert teams can arrange even unsecured loans without consuming more time.
These unsecured personal loans are multi-functional in the sense that the borrower is at liberty to utilize the funds in any way he or she wants them to. Thus, this aspect adds to the suitability and likability of these loans in the eyes of people who are looking for more and more funds to add to their status, socio-economically. A loan seeker can go for debt consolidation, tours, asset purchasing, funding medical and educational bills or any other personal need coming in his or her way during the fluctuating aspects of life.
The unsecured personal loans can be differentiated on accounts of the total sum, the tenure, package's APR which in turn are determined by such factors as the credit past of the borrower, the credit priorities of the loan provider, the client's individual profile, the borrower's disposal income, repayment history and other loans availed by the the loan seeker.
For availing personal loans, the clients can compare different online quotes provided by numerous financial institutions working in tandem with the clients and the financiers. Therefore, before deciding upon a particular loan scheme one should compare different quotes available with different loan providers. As various borrowings deserve different interest rates, so making comparison can be the best way to arrive at the best and affordable loan deal. The best part of such loans is that these loans are provided to the unemployed people too. Thus, the loans for unemployed are also easily available in the market.
There is adequate information available online to help one in getting the affordable loan plan. The immense pool of information available can help one in garnering the amount between 500 pounds to 250000 pounds without facing much hassles and consumption of time. Simply by filling up the online application form one can have the loan to fulfill his desires. As these online service providing teams work in close cooperation with reputed lenders, these expert teams can arrange even unsecured loans without consuming more time.
Friday, May 23, 2008
The Vulnerabilities of the US Dollar
- Euro: Headed Back to 1.60?
- Can the British Pound Hold Onto its Gains?
The Vulnerabilities of the US Dollar
The US dollar weakened significantly this past week as rising oil prices revealed the vulnerabilities of the US economy. Companies are beginning to struggle and have been forced to come up with more creative ways to deal with the energy crisis. With crude oil prices hitting $135 a barrel and gasoline in many states topping $4 a gallon, US companies are making cuts across the board. Ford Motors Co for example plans on reducing production while American Airlines will be lowering capacity by 15 percent and adding bag charges. According to the futures market, some traders even expect gas prices to hit $7 to $8 a gallon. However the US is not alone in having to deal with the oil crisis which is one of the major reasons why the dollar has weakened. Over the past few weeks, the market had been slowly pricing in a pause from the Federal Reserve. At the same time, there was a growing consensus that other central banks may need to begin or continue to cut interest rates. The surge in oil prices and hawkish comments from the European Central Bank, the Bank of England and the Reserve Bank of Australia dramatically altered the outlook for these central banks. With strict inflation targets, traders came to realize that interest rates for these 3 countries will remain unchanged for the foreseeable future and as a result, currency rates adjusted for these expectations. In the coming week, the vulnerabilities of the US economy may become even more apparent. The US markets are closed for Memorial Day on Monday, but we still have a busy week ahead of us with consumer confidence, new home sales, durable goods, first quarter GDP, personal income, personal spending and Chicago PMI due for release. We expect most of these numbers to be dollar bearish as US consumers continue to struggle under the weight of deteriorating personal finances.
Euro: Headed Back to 1.60?
The Euro staged a dramatic recovery against the US dollar this past week as hawkish comments from the European Central Bank fueled speculation that a rate hike may be around the corner. Although we think that a rate hike would be a dramatic move, the stability of recent Eurozone economic data is certainly encouraging as the market's focus shifts from fears for growth to inflation. Earlier this week, German business confidence for the month of May showed a surprising improvement. Today, the PMI numbers explain why German businesses are not worried. Service and manufacturing PMI numbers both deteriorated from the prior month, but remain in expansionary territory. Next week, it may be US rather than Eurozone economic data that help the EUR/USD inch towards 1.60. The only significant reports from the Eurozone are German employment, Retail PMI and German retail sales. We expect the labor market in Germany to continue to improve because the employment component of the manufacturing PMI report actually accelerated this month. Meanwhile it will also be a busy week for Switzerland who will be releasing their trade balance, UBS Consumption and KoF leading indicator reports. The currency has performed very well against the Japanese Yen this past week and it remains to be seen whether this strength can continue.
Can the British Pound Hold Onto its Gains?
It has been a great week for the British pound, which rallied more than 300 pips against the US dollar. Upside surprises in economic data as well as hawkish minutes from their latest monetary policy meeting confirmed that it will be months before we see another rate cut from the Bank of England. In fact, for all intents and purposes, the next move from the BoE may have to be a rate hike. Unlike the US, the Bank of England has a strict inflation target and if inflation is more than 3 percent, the central bank governor is forced to write a special letter to the Chancellor to explain why inflation has increased and to outline the time frame for bringing inflation back to target. Earlier this month, consumer prices hit 3 percent on a yearly basis, and now, the BoE must do all that they can to rein in inflation. The recent stability in economic data has helped their cause as long as the economy does not fall back into a downward spiral. With no major economic data due for release next week, the British pound stands a chance at holding onto its gains as long as there isn't surprisingly strong US data.
Great Week for the Australian, New Zealand and Canadian Dollars
Rising commodity has been the story of the week, helping to take the Australian, New Zealand and Canadian dollars higher. The Aussie rose to a 24 year high, putting itself within an arm's reach of hitting parity against the US dollar. Rising inflationary pressures and stronger economic data leaves the RBA far closer to a rate hike than any of the other major central banks. We do not believe that they are ready to raise rates, but tighter monetary policy could be a final option. The lack of meaningful economic data next week leaves the action for the Canadian and New Zealand dollars. Canada will be releasing its Current Account balance and GDP while New Zealand will be reporting its trade balance.
Fate of USDJPY Tied to Movements in the Dow
This past week, the fate of USD/JPY has been tied to the movements in the Dow but there has been vastly divergent behavior in all of the Yen crosses. EUR/JPY, AUD/JPY and CHF/JPY for example have performed well while USD/JPY has remained depressed. The sell of in US stocks continued to help the Yen, but the slew of market moving data scheduled for next week will heighten the event risks for the low yielding currency as we expected much of the data to reflect the pressure of rising oil prices. On the economic calendar are the retail sales, jobless rate, consumer prices and industrial production reports.
DailyFX
- Can the British Pound Hold Onto its Gains?
The Vulnerabilities of the US Dollar
The US dollar weakened significantly this past week as rising oil prices revealed the vulnerabilities of the US economy. Companies are beginning to struggle and have been forced to come up with more creative ways to deal with the energy crisis. With crude oil prices hitting $135 a barrel and gasoline in many states topping $4 a gallon, US companies are making cuts across the board. Ford Motors Co for example plans on reducing production while American Airlines will be lowering capacity by 15 percent and adding bag charges. According to the futures market, some traders even expect gas prices to hit $7 to $8 a gallon. However the US is not alone in having to deal with the oil crisis which is one of the major reasons why the dollar has weakened. Over the past few weeks, the market had been slowly pricing in a pause from the Federal Reserve. At the same time, there was a growing consensus that other central banks may need to begin or continue to cut interest rates. The surge in oil prices and hawkish comments from the European Central Bank, the Bank of England and the Reserve Bank of Australia dramatically altered the outlook for these central banks. With strict inflation targets, traders came to realize that interest rates for these 3 countries will remain unchanged for the foreseeable future and as a result, currency rates adjusted for these expectations. In the coming week, the vulnerabilities of the US economy may become even more apparent. The US markets are closed for Memorial Day on Monday, but we still have a busy week ahead of us with consumer confidence, new home sales, durable goods, first quarter GDP, personal income, personal spending and Chicago PMI due for release. We expect most of these numbers to be dollar bearish as US consumers continue to struggle under the weight of deteriorating personal finances.
Euro: Headed Back to 1.60?
The Euro staged a dramatic recovery against the US dollar this past week as hawkish comments from the European Central Bank fueled speculation that a rate hike may be around the corner. Although we think that a rate hike would be a dramatic move, the stability of recent Eurozone economic data is certainly encouraging as the market's focus shifts from fears for growth to inflation. Earlier this week, German business confidence for the month of May showed a surprising improvement. Today, the PMI numbers explain why German businesses are not worried. Service and manufacturing PMI numbers both deteriorated from the prior month, but remain in expansionary territory. Next week, it may be US rather than Eurozone economic data that help the EUR/USD inch towards 1.60. The only significant reports from the Eurozone are German employment, Retail PMI and German retail sales. We expect the labor market in Germany to continue to improve because the employment component of the manufacturing PMI report actually accelerated this month. Meanwhile it will also be a busy week for Switzerland who will be releasing their trade balance, UBS Consumption and KoF leading indicator reports. The currency has performed very well against the Japanese Yen this past week and it remains to be seen whether this strength can continue.
Can the British Pound Hold Onto its Gains?
It has been a great week for the British pound, which rallied more than 300 pips against the US dollar. Upside surprises in economic data as well as hawkish minutes from their latest monetary policy meeting confirmed that it will be months before we see another rate cut from the Bank of England. In fact, for all intents and purposes, the next move from the BoE may have to be a rate hike. Unlike the US, the Bank of England has a strict inflation target and if inflation is more than 3 percent, the central bank governor is forced to write a special letter to the Chancellor to explain why inflation has increased and to outline the time frame for bringing inflation back to target. Earlier this month, consumer prices hit 3 percent on a yearly basis, and now, the BoE must do all that they can to rein in inflation. The recent stability in economic data has helped their cause as long as the economy does not fall back into a downward spiral. With no major economic data due for release next week, the British pound stands a chance at holding onto its gains as long as there isn't surprisingly strong US data.
Great Week for the Australian, New Zealand and Canadian Dollars
Rising commodity has been the story of the week, helping to take the Australian, New Zealand and Canadian dollars higher. The Aussie rose to a 24 year high, putting itself within an arm's reach of hitting parity against the US dollar. Rising inflationary pressures and stronger economic data leaves the RBA far closer to a rate hike than any of the other major central banks. We do not believe that they are ready to raise rates, but tighter monetary policy could be a final option. The lack of meaningful economic data next week leaves the action for the Canadian and New Zealand dollars. Canada will be releasing its Current Account balance and GDP while New Zealand will be reporting its trade balance.
Fate of USDJPY Tied to Movements in the Dow
This past week, the fate of USD/JPY has been tied to the movements in the Dow but there has been vastly divergent behavior in all of the Yen crosses. EUR/JPY, AUD/JPY and CHF/JPY for example have performed well while USD/JPY has remained depressed. The sell of in US stocks continued to help the Yen, but the slew of market moving data scheduled for next week will heighten the event risks for the low yielding currency as we expected much of the data to reflect the pressure of rising oil prices. On the economic calendar are the retail sales, jobless rate, consumer prices and industrial production reports.
DailyFX
Dollar Slides as US Housing Recession Deepens
The lack of improvement in the housing sector continued to weigh on the US dollar, and kept traders from bidding the currency before the extended holiday weekend. Looking at price action, the low yielding Yen and Swiss franc rounded up the biggest gains against the US dollar. In turn the euro regained its footing and pushed back to yesterday highs just short of 1.58. The British Pound however held steady throughout the session as growth concerns led the currency to hold in the 1.98 range. The greenback also declined against the Australian and New Zealand dollar as commodity prices pushed higher - though the Canadian dollar didn't join the crowd as traders squared their books for the weekend.
On the economic front, the National Realtors Association's existing home sales report dampened hopes that the worst housing recession in a quarter century may be coming to an end. Sales fell 1.0 percent in April - posting its eighth consecutive decline in the past nine months. And, though this figure did have a positive side in that it was better than the 1.6 percent drop forecasted, the details of the report clearly spelled out a deteriorating market. Buyers continued to search out bargains though the median housing price dropped 8.0 percent from the same month a year ago. Interestingly enough, prices actually rose on a monthly basis for the second time, which may have in turn led inventories to rise to a new record high.
Rising commodity prices mixed with falling home prices pressed on the stock markets, and led investors to cutback on high risk-reward investments. As a result, the DJIA fell 145.99 points to 12,479.63 points, with 27 of the 30 components declining. The broader S&P500 also slipped 18.42 points to hold off at 1,375.93 points, with 172 stocks falling to a new 52 week low.
Heightened economic concerns fueled demands for US Treasuries, and led risk-adverse investors to seek the safe haven of risk-free bonds. As a result, the benchmark 10-Year yield fell to 3.852 percent from 3.911 percent, while the 2-Year yield plunged to 2.446 percent from 2.528 percent.
US capital markets will be closed through Monday due to the Memorial Day holiday; and the dollar will suffer from the low liquidity and could experience high volatility in turn. When US-based traders return to the markets, fundamentals will be there to meet them. Tuesday is packed with the S&P/Case-Shiller housing data, new home sales report and consumer confidence. Looking over the entire week's listings, there will be particular interest in the first quarter GDP revision which is expected to benefit from a boost in consumer spending and exports.
DailyFX
On the economic front, the National Realtors Association's existing home sales report dampened hopes that the worst housing recession in a quarter century may be coming to an end. Sales fell 1.0 percent in April - posting its eighth consecutive decline in the past nine months. And, though this figure did have a positive side in that it was better than the 1.6 percent drop forecasted, the details of the report clearly spelled out a deteriorating market. Buyers continued to search out bargains though the median housing price dropped 8.0 percent from the same month a year ago. Interestingly enough, prices actually rose on a monthly basis for the second time, which may have in turn led inventories to rise to a new record high.
Rising commodity prices mixed with falling home prices pressed on the stock markets, and led investors to cutback on high risk-reward investments. As a result, the DJIA fell 145.99 points to 12,479.63 points, with 27 of the 30 components declining. The broader S&P500 also slipped 18.42 points to hold off at 1,375.93 points, with 172 stocks falling to a new 52 week low.
Heightened economic concerns fueled demands for US Treasuries, and led risk-adverse investors to seek the safe haven of risk-free bonds. As a result, the benchmark 10-Year yield fell to 3.852 percent from 3.911 percent, while the 2-Year yield plunged to 2.446 percent from 2.528 percent.
US capital markets will be closed through Monday due to the Memorial Day holiday; and the dollar will suffer from the low liquidity and could experience high volatility in turn. When US-based traders return to the markets, fundamentals will be there to meet them. Tuesday is packed with the S&P/Case-Shiller housing data, new home sales report and consumer confidence. Looking over the entire week's listings, there will be particular interest in the first quarter GDP revision which is expected to benefit from a boost in consumer spending and exports.
DailyFX
U.S. Market Update
Dow -147 S&P -20 NASDAQ -33.7
Indices opened and moved lower this morning as oil resumed its upward march, topping $133/bbl overnight. The climbing cost of crude is seen hitting various industries, as RCL-5% was cut overnight at Morgan Stanley. F-4% was still sinking after lowering its outlook yesterday; last night, Ford's CEO declined to say when or whether the company will set a revised profit target. Meanwhile, the US Department of Transportation reported this morning that vehicle miles traveled in March fell 4.3% y/y, representing the first drop in the month since 1979. GM opened lower after reporting that the American Axel strike had further impacted operations, cutting production by 230K units in Q2, with a pretax EPS impact of $1.8B. Several major retailers reported after the close yesterday, painting a broadly mixed to positive picture. FL+10.8% after beating revenue estimates, HIBB+6.8% after guiding significant SSS improvement in May and ZUMZ+5.2%. PSUN-11.7% was the exception, with the company cutting its SSS and earnings guidance. CA+6.3% came in under estimates but guided strong for FY09 (garnering a price target hike at RBC). In M&A news, BUD+8% after the Financial Times reported that the Belgian brewing giant was working on a $46B bid for the company; CNBC's Faber later reported that sources were saying BUD had no interest in answering any potential bid amicably. AGL+30% after announcing it had signed a merger agreement with LEH-4% for $22/shr.
Bond markets are benefiting from the softened equity markets and the better-than-expected headline April US existing home sales data. It is worth noting the figures did reveal April's supply rose to a 22-year high above 11 months, which may have added to the pressure in stocks. The 10-year yield has slipped back below 3.85% after testing 3.95% during yesterday's session.
The USD continued its soft tone in the session as higher commodities continued to weigh on sentiment. The dollar was unable to gain any momentum as growth in European service and manufacturing industries slowed in May. US existing home data was above expectations, but the rise in inventory remains a concern. The spread between the US-German two-year notes continues to widen at -172 bps from -150 a few days back. The JPY was broadly firmer as the BoJ expressed worries on inflation as oil prices continue to rise. In addition, Japan's top economic advisory panel urged diversification in the state-run pension fund. JGB futures were sharply lower overnight as chatter that pension monies would flow out of bonds into equities. Dealers were paying close attention to a downward sloping trendline in EUR/JPY cross that is currently place at the 164.70 approach. A break above would open upside momentum in the cross. Commodity-related currencies are slightly firmer with USD/CAD at 0.9850 and AUD/USD at 0.9615 Thin market conditions will prevail on Monday with both the US and UK on holiday.
Trade The News Staff
Trade The News, Inc.
Indices opened and moved lower this morning as oil resumed its upward march, topping $133/bbl overnight. The climbing cost of crude is seen hitting various industries, as RCL-5% was cut overnight at Morgan Stanley. F-4% was still sinking after lowering its outlook yesterday; last night, Ford's CEO declined to say when or whether the company will set a revised profit target. Meanwhile, the US Department of Transportation reported this morning that vehicle miles traveled in March fell 4.3% y/y, representing the first drop in the month since 1979. GM opened lower after reporting that the American Axel strike had further impacted operations, cutting production by 230K units in Q2, with a pretax EPS impact of $1.8B. Several major retailers reported after the close yesterday, painting a broadly mixed to positive picture. FL+10.8% after beating revenue estimates, HIBB+6.8% after guiding significant SSS improvement in May and ZUMZ+5.2%. PSUN-11.7% was the exception, with the company cutting its SSS and earnings guidance. CA+6.3% came in under estimates but guided strong for FY09 (garnering a price target hike at RBC). In M&A news, BUD+8% after the Financial Times reported that the Belgian brewing giant was working on a $46B bid for the company; CNBC's Faber later reported that sources were saying BUD had no interest in answering any potential bid amicably. AGL+30% after announcing it had signed a merger agreement with LEH-4% for $22/shr.
Bond markets are benefiting from the softened equity markets and the better-than-expected headline April US existing home sales data. It is worth noting the figures did reveal April's supply rose to a 22-year high above 11 months, which may have added to the pressure in stocks. The 10-year yield has slipped back below 3.85% after testing 3.95% during yesterday's session.
The USD continued its soft tone in the session as higher commodities continued to weigh on sentiment. The dollar was unable to gain any momentum as growth in European service and manufacturing industries slowed in May. US existing home data was above expectations, but the rise in inventory remains a concern. The spread between the US-German two-year notes continues to widen at -172 bps from -150 a few days back. The JPY was broadly firmer as the BoJ expressed worries on inflation as oil prices continue to rise. In addition, Japan's top economic advisory panel urged diversification in the state-run pension fund. JGB futures were sharply lower overnight as chatter that pension monies would flow out of bonds into equities. Dealers were paying close attention to a downward sloping trendline in EUR/JPY cross that is currently place at the 164.70 approach. A break above would open upside momentum in the cross. Commodity-related currencies are slightly firmer with USD/CAD at 0.9850 and AUD/USD at 0.9615 Thin market conditions will prevail on Monday with both the US and UK on holiday.
Trade The News Staff
Trade The News, Inc.
Housing, HOUSING!
And that concludes our week dear reader as we head off to the long weekend and the official Memorial Day kick start to the summer; we depart the week with more weakness in the Housing sector. The U.S. session revealed that sales of previously owned homes fell in April though less than expectations but they are still falling and inventories of unsold properties set yet another record high, proving that the problem is far from over in the US economy.
The single currency now is ending the week strongly bullish against the dollar, while now the euro is attempting to build a higher base to continue the new initiated upside wave 1.5690s -1.5670s is going to be the strong demand point for now. While the daily basis heavily saturated with buying orders the weekly basis is still indicating the upside potential; thought the correction might take place which might take the euro down until 1.5611 as the first level and even if it extend the wave will be valid as long as 1.5585 remains intact.
The pound is creating a new upside wave on the medium term as today's closing if manages to be above 1.9779 at least will indicate the breach of the major descending channel and the beginning of a new wave as still on the weekly basis momentum indicators are reflecting upside potential. On the daily basis the pound is heavily over bought still which on the intraday helped the pound decline after setting the high at 1.9850 which is a strong level for the pound that might take the pound down till strong support levels at 1.9770s which as mentioned above need to close above to indicate the upside reversal.
The USDJPY continued the downside headings to set the low at the strong support level of 103.20s yet on the intraday basis reversal signals have appeared as the pair is excessively oversold affected by ongoing carry trades reversals in the market. On the short though as long as the pair remains trading below 104.20s then the downside current waves is still valid.
Crown Forex
The single currency now is ending the week strongly bullish against the dollar, while now the euro is attempting to build a higher base to continue the new initiated upside wave 1.5690s -1.5670s is going to be the strong demand point for now. While the daily basis heavily saturated with buying orders the weekly basis is still indicating the upside potential; thought the correction might take place which might take the euro down until 1.5611 as the first level and even if it extend the wave will be valid as long as 1.5585 remains intact.
The pound is creating a new upside wave on the medium term as today's closing if manages to be above 1.9779 at least will indicate the breach of the major descending channel and the beginning of a new wave as still on the weekly basis momentum indicators are reflecting upside potential. On the daily basis the pound is heavily over bought still which on the intraday helped the pound decline after setting the high at 1.9850 which is a strong level for the pound that might take the pound down till strong support levels at 1.9770s which as mentioned above need to close above to indicate the upside reversal.
The USDJPY continued the downside headings to set the low at the strong support level of 103.20s yet on the intraday basis reversal signals have appeared as the pair is excessively oversold affected by ongoing carry trades reversals in the market. On the short though as long as the pair remains trading below 104.20s then the downside current waves is still valid.
Crown Forex
U.S. Existing Home Sales Drop; Inventories Soar
Existing home sales dropped by 1% in April, sending the annualized level down to 4.89 million units from March's 4.94 million level. Markets were expecting a 1.6% drop. The monthly decline reflected drops both in single-family homes (down 0.5%), while condos/co-ops sales dropped 5.2%.
The number of unsold homes on the market soared 10.5%. Measured in terms of months' supply, inventories were at 11.2 months, the highest level on record. The median price of existing homes increased 1.1% in April, although it was 8% lower on a year-over-year basis.
Existing home sales are now a full 3.3% below their September 2005 peak. They are also an annualized 5% lower than their first-quarter average, consistent with our forecast calling for another outsized decline in residential investment in the second quarter. Inventories in the sector jumped 10.5% and are now approximately 1.8 times their historical average. This implies that no near-term bottom is in sight for the housing market. Indeed, the NAHB housing market index ticked lower in May.
The elevated level of inventories also suggests that prices will have to fall further in order to assist in clearing the inventory glut. Eroding household net worth will be a weight on the consumer. However, disposable income has historically been the most important driver of consumer spending and the fiscal rebate checks should prop spending up in the second and third quarters.
RBC Financial Group
The number of unsold homes on the market soared 10.5%. Measured in terms of months' supply, inventories were at 11.2 months, the highest level on record. The median price of existing homes increased 1.1% in April, although it was 8% lower on a year-over-year basis.
Existing home sales are now a full 3.3% below their September 2005 peak. They are also an annualized 5% lower than their first-quarter average, consistent with our forecast calling for another outsized decline in residential investment in the second quarter. Inventories in the sector jumped 10.5% and are now approximately 1.8 times their historical average. This implies that no near-term bottom is in sight for the housing market. Indeed, the NAHB housing market index ticked lower in May.
The elevated level of inventories also suggests that prices will have to fall further in order to assist in clearing the inventory glut. Eroding household net worth will be a weight on the consumer. However, disposable income has historically been the most important driver of consumer spending and the fiscal rebate checks should prop spending up in the second and third quarters.
RBC Financial Group
Calm as We Await...
The greenback remains weak against major currencies as the housing slump deepens while the soaring of crude oil prices continue to negatively affect growth in the US economy while upside risks to inflation remain as result of rising food and energy prices. The markets remain calm as we await the release of existing home sales later on this afternoon as sales are projected to decline even more, and if this case happens the USD will remain deteriorating since the US still did not find a bottom to the housing sector.
The Euro Zone released its PMI manufacturing advanced reading for the month of May coming in line with projections at 50.5 but still less than the prior reading of 50.7. As for the services reading, it declined to 50.6 from 52.0 while it was forecasted at 51.7. The composite advanced reading for May also slipped to 51.1 from both the expected and previous readings of 51.5 and 51.9 respectively. Although the service and manufacturing industries grew at the slowest pace since five years due to the massive rise in crude oil prices seen lately, the euro is neutral versus the falling greenback due to banks making it harder to lend companies money. The EUR/USD is currently traded at 1.5723 while recording a high of 1.5741 and a low of 1.5696.
The UK released its first quarter GDP preliminary reading coming in line with predicted and prior readings at 0.4% respectively. As these readings were widely expected in the market it did not move the market much while sterling is neutral too as it awaits for the release of the US fundamental data concerning home sales. The GBP/USD is currently traded at 1.9792 while recording a high of 1.9808 and a low of 1.9755.
Currently in the market people are lacking confidence as investors fear the market while they sell high yielding currencies and buy low yielding currencies in which we call unwinding of carry trades. The yen is finally rebounded gaining some of its losses witnessed the past couple of days at it gains against major currencies. The USD/JPY is traded at 103.62 while recording a high of 104.26 and a low of 103.46.
Crown Forex
The Euro Zone released its PMI manufacturing advanced reading for the month of May coming in line with projections at 50.5 but still less than the prior reading of 50.7. As for the services reading, it declined to 50.6 from 52.0 while it was forecasted at 51.7. The composite advanced reading for May also slipped to 51.1 from both the expected and previous readings of 51.5 and 51.9 respectively. Although the service and manufacturing industries grew at the slowest pace since five years due to the massive rise in crude oil prices seen lately, the euro is neutral versus the falling greenback due to banks making it harder to lend companies money. The EUR/USD is currently traded at 1.5723 while recording a high of 1.5741 and a low of 1.5696.
The UK released its first quarter GDP preliminary reading coming in line with predicted and prior readings at 0.4% respectively. As these readings were widely expected in the market it did not move the market much while sterling is neutral too as it awaits for the release of the US fundamental data concerning home sales. The GBP/USD is currently traded at 1.9792 while recording a high of 1.9808 and a low of 1.9755.
Currently in the market people are lacking confidence as investors fear the market while they sell high yielding currencies and buy low yielding currencies in which we call unwinding of carry trades. The yen is finally rebounded gaining some of its losses witnessed the past couple of days at it gains against major currencies. The USD/JPY is traded at 103.62 while recording a high of 104.26 and a low of 103.46.
Crown Forex
U.K Grow Yet Outlook Is Bleak
The week is finally coming to an end, this week though was highlighted by the dollar's weakness which helped push oil prices to hit record highs, and this rise in energy prices is affecting inflation globally and threatening both consumers and businesses.
Both Germany and the Euro Zone reported the purchasing mangers index for May, the PMI manufacturing rose Germany to 53.5 after rising 53.6 back in April and higher than median estimates, while the PMI for services dropped to 53.7 from 54.9 and below the 54.0 expected estimate.
While for the 15-nation economy, PMI manufacturing slowed to 50.5 from 50.7 inline with median estimates, while the services PMI declined to 50.6 from 52.0 and below the 51.7 expected in the markets.
Rising food and energy prices are weighing down on consumers and businesses in the Euro area while the rising Euro is doing the rest, the ECB still see growth in the Euro area though moderating but the outlook remains way better than that in the United States and the United Kingdome, and the ECB accordingly are able to maintain their Hawkish stance to fight skyrocketing inflation.
The Office for National Statistics in U.K reported today that the preliminary Gross Domestic Product estimate for the first three months of this year, the U.K economy grew 0.4% over the quarter unchanged from the previous estimate and inline with the previous estimate, while over an annualized estimate the economy grew by 2.5 percent also unchanged from the previous and inline with median estimates.
Going through the details we can see that investments fell 1.6% after rising 1.8% the previous quarter, while consumer spending rose 1.3% after rising 0.1%, the BOE expected the economy to continue slowing throughout this year, yet the bank seems to have set his eyes on rising inflation…
The BOE are now stuck in a difficult position as prospects of rising inflation would limit the bank's options against downside risks to growth, many members of the MPC have set their eyes on growth even if their worst case scenario suggests the economy might go through contraction, as house prices continue to fall and access to credit is seen to continue tightening…
Global inflation is rising due to the fact that oil and food prices continue to soar, central bankers all around the globe are trying to find their balancing act among growth and inflation, with some expected to go through stagflation while others are seen to go through recession, and both hope that emerging markets alongside China, India, and Russia can weather the storm!
Crown Forex
Both Germany and the Euro Zone reported the purchasing mangers index for May, the PMI manufacturing rose Germany to 53.5 after rising 53.6 back in April and higher than median estimates, while the PMI for services dropped to 53.7 from 54.9 and below the 54.0 expected estimate.
While for the 15-nation economy, PMI manufacturing slowed to 50.5 from 50.7 inline with median estimates, while the services PMI declined to 50.6 from 52.0 and below the 51.7 expected in the markets.
Rising food and energy prices are weighing down on consumers and businesses in the Euro area while the rising Euro is doing the rest, the ECB still see growth in the Euro area though moderating but the outlook remains way better than that in the United States and the United Kingdome, and the ECB accordingly are able to maintain their Hawkish stance to fight skyrocketing inflation.
The Office for National Statistics in U.K reported today that the preliminary Gross Domestic Product estimate for the first three months of this year, the U.K economy grew 0.4% over the quarter unchanged from the previous estimate and inline with the previous estimate, while over an annualized estimate the economy grew by 2.5 percent also unchanged from the previous and inline with median estimates.
Going through the details we can see that investments fell 1.6% after rising 1.8% the previous quarter, while consumer spending rose 1.3% after rising 0.1%, the BOE expected the economy to continue slowing throughout this year, yet the bank seems to have set his eyes on rising inflation…
The BOE are now stuck in a difficult position as prospects of rising inflation would limit the bank's options against downside risks to growth, many members of the MPC have set their eyes on growth even if their worst case scenario suggests the economy might go through contraction, as house prices continue to fall and access to credit is seen to continue tightening…
Global inflation is rising due to the fact that oil and food prices continue to soar, central bankers all around the globe are trying to find their balancing act among growth and inflation, with some expected to go through stagflation while others are seen to go through recession, and both hope that emerging markets alongside China, India, and Russia can weather the storm!
Crown Forex
Euro Economy Weakening
The generally weak Euro-zone data will make it difficult for the Euro to regain momentum in the short term.
The Euro pushed to just above the 1.58 level against the dollar in early Europe on Thursday, but was unable to sustain the gains and generally drifted weaker during the day. Energy and gold prices again had an important impact on the US currency.
Oil advanced to a new record high in Asia around US$135 per barrel before a retreat. As gold prices also weakened, there was increased pressure for a Euro correction weaker while there was also pressure for a correction after recent gains.
The latest Euro-zone industrial orders data recorded a 1.0% monthly decline for a 2.5% annual fall, maintaining the recent weak trend. Although the German evidence has been generally firm this week, data from other Euro-zone economies has been less favourable, illustrating the risk of further divergence within the Euro area.
The Euro-zone PMI index for the manufacturing sector weakened to 50.5 in May from 50.7 while the services-sector index dipped sharply to 50.6 from 52.0 and suggests that the economy has stalled given that both sector are close to the 50.0 level. There was also a further reported decline in French consumer spending.
Investica
The Euro pushed to just above the 1.58 level against the dollar in early Europe on Thursday, but was unable to sustain the gains and generally drifted weaker during the day. Energy and gold prices again had an important impact on the US currency.
Oil advanced to a new record high in Asia around US$135 per barrel before a retreat. As gold prices also weakened, there was increased pressure for a Euro correction weaker while there was also pressure for a correction after recent gains.
The latest Euro-zone industrial orders data recorded a 1.0% monthly decline for a 2.5% annual fall, maintaining the recent weak trend. Although the German evidence has been generally firm this week, data from other Euro-zone economies has been less favourable, illustrating the risk of further divergence within the Euro area.
The Euro-zone PMI index for the manufacturing sector weakened to 50.5 in May from 50.7 while the services-sector index dipped sharply to 50.6 from 52.0 and suggests that the economy has stalled given that both sector are close to the 50.0 level. There was also a further reported decline in French consumer spending.
Investica
Dollar Supported by Oil Prices Correction
After reaching fresh record highs, oil prices eased on Friday, giving the Dollar some support in the early trading; but the US currency stayed in sight for a one-month low against the Euro on worries that inflation could lead to a deeper US slowdown. The Dollar traded at 1.5725 against the Euro at 7:00am GMT. The Dollar tends to move in the opposite direction of the oil, and it registered a hit on Thursday as the oil traded above $135. Also, earlier this week, the Federal Reserve downgraded its 2008 US economic growth forecast and raised its inflation outlook.
The Dollar traded at 104.03 against the Yen at 7:00am GMT, after slipping below 103 Yen yesterday. The Yen came under pressure as rising energy prices would also hurt Japan's growth, which is showing signs of slowdown. Traders said the Dollar was supported by buying from Japanese retail investors and importers but resistance was firm around 105 Yen due to Japanese exporter selling.
The Euro was supported by solid data that came from the Euro Zone's strongest economy, Germany, which leaded to speculation that the European Central Bank was more likely to raise interest rates than to cut, after keeping them on hold at 4 percent this month. The currency was little changed against the Yen at 163.74 in the early trading and it dropped to 163.55 at 8:00am GMT.
The Pound fell against the Dollar before a government report that may show UK economic growth in the first quarter of the year matched the slowest pace in three years. The British currency also traded near the weakest level against the Euro. The Pound traded at 1.9773 against the Dollar and at 0.7949 against the Euro at 8:00am GMT. Later today will be revealed UK's revised GDP, which is expected to stay at the 0.4 percent level.
US sales, revealed later today, probably fell in April to a record low, signalling no let-up in the housing recession and pushing the Dollar down, economists believe. According to a Bloomberg News survey to 67 economists, the National Association of Realtors may report that home resales dropped 1.6 percent to a 4.85 million. “As the Dollar lacks direction, the focus will be on crude if home sales data come weak as expected”, said Tomoko Fujii, Bank of America's head of economics and strategy for Japan.
Finotec Group Inc.
The Dollar traded at 104.03 against the Yen at 7:00am GMT, after slipping below 103 Yen yesterday. The Yen came under pressure as rising energy prices would also hurt Japan's growth, which is showing signs of slowdown. Traders said the Dollar was supported by buying from Japanese retail investors and importers but resistance was firm around 105 Yen due to Japanese exporter selling.
The Euro was supported by solid data that came from the Euro Zone's strongest economy, Germany, which leaded to speculation that the European Central Bank was more likely to raise interest rates than to cut, after keeping them on hold at 4 percent this month. The currency was little changed against the Yen at 163.74 in the early trading and it dropped to 163.55 at 8:00am GMT.
The Pound fell against the Dollar before a government report that may show UK economic growth in the first quarter of the year matched the slowest pace in three years. The British currency also traded near the weakest level against the Euro. The Pound traded at 1.9773 against the Dollar and at 0.7949 against the Euro at 8:00am GMT. Later today will be revealed UK's revised GDP, which is expected to stay at the 0.4 percent level.
US sales, revealed later today, probably fell in April to a record low, signalling no let-up in the housing recession and pushing the Dollar down, economists believe. According to a Bloomberg News survey to 67 economists, the National Association of Realtors may report that home resales dropped 1.6 percent to a 4.85 million. “As the Dollar lacks direction, the focus will be on crude if home sales data come weak as expected”, said Tomoko Fujii, Bank of America's head of economics and strategy for Japan.
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More Housing For U.S
The week is about to end and our exist queue is to be the sales of previously owned properties in the United States as in April the downside trend for the sector is expected to have continued as not much Americans are convinced yet that it is the time to bargain…
With the vaporizing sentiment in the economy and especially the housing market consumers are not at the place to hunt for new homes since their finances are tight already and face the ghost of unemployment and mounting gas and food prices.
In April Existing home sales are expected to have shed another 1.6% to an annual pace of 4.85 million after 4.93 million in March. The continued degradation in the sector was the leak that spread the contagion into the rest of the economy infecting severely the financial sector as with the collapse of the credit market after subprime loans and households foreclosures mounted the rules have tightened further to mortgage qualifications which is still limiting the drive into the housing spree.
After the dicing and chopping of those mortgages was sold to investors and left no one shielded from the horrific aftermath, still markets are gradually starting to adjust as they try to compensate their losses and strengthen their financial positions. Mortgages to those with bad credit history and the famous products that were highly risky and popular is what set Americans to default on their mortgages and lose their homes, such as those known to be famous with what is called price shocks, which are the negative amortization adjustable rate mortgages, which for the first couple of years allows the borrower the opportunity to pay small monthly payments and then starts escalating at light speed to the extent they can not afford it anymore.
Still the sector's bottoming is one of the major concerns and is one of the bases that need to be achieved to help the U.S economy rise once again. The feds have reached the end of their easing cycle and now the 2.0% rate is lucrative enough to stimulate the economy. Inflation is the concern now especially with the surge in commodities and the amounts of liquidity that was added into the economy whether to the financial sector or the rebates to the public is excess money supply that will reflect the effects of it as well.
The American induced credit crunch has affected world economies as well, as UK is the first runner up to suffer severe slowdown this year. Today will be the second revision to the first quarter GDP estimate which is expected with no change at the sluggish pace seen of 0.4% on the quarter and 2.5% on the year. As for the second European economy it's the advanced PMI day as we are expecting slight softening in May in both the Union and Germany yet rest ashore that till now their fundamentals are 'sound' and they have conquered and survived compared to other nations.
Let's wait and see as the mover will be the home sales in the U.S for today as we are upon the week end squaring as well so be ware, and after the surprise pick up in housing starts you never know we might see one here, which will be taken strongly positive for the dollar, especially that the woes are once more concentrating on the credit turmoil and the need to a bottom in the housing sector. So stay tuned until the data is with us to devour…
Crown Forex
With the vaporizing sentiment in the economy and especially the housing market consumers are not at the place to hunt for new homes since their finances are tight already and face the ghost of unemployment and mounting gas and food prices.
In April Existing home sales are expected to have shed another 1.6% to an annual pace of 4.85 million after 4.93 million in March. The continued degradation in the sector was the leak that spread the contagion into the rest of the economy infecting severely the financial sector as with the collapse of the credit market after subprime loans and households foreclosures mounted the rules have tightened further to mortgage qualifications which is still limiting the drive into the housing spree.
After the dicing and chopping of those mortgages was sold to investors and left no one shielded from the horrific aftermath, still markets are gradually starting to adjust as they try to compensate their losses and strengthen their financial positions. Mortgages to those with bad credit history and the famous products that were highly risky and popular is what set Americans to default on their mortgages and lose their homes, such as those known to be famous with what is called price shocks, which are the negative amortization adjustable rate mortgages, which for the first couple of years allows the borrower the opportunity to pay small monthly payments and then starts escalating at light speed to the extent they can not afford it anymore.
Still the sector's bottoming is one of the major concerns and is one of the bases that need to be achieved to help the U.S economy rise once again. The feds have reached the end of their easing cycle and now the 2.0% rate is lucrative enough to stimulate the economy. Inflation is the concern now especially with the surge in commodities and the amounts of liquidity that was added into the economy whether to the financial sector or the rebates to the public is excess money supply that will reflect the effects of it as well.
The American induced credit crunch has affected world economies as well, as UK is the first runner up to suffer severe slowdown this year. Today will be the second revision to the first quarter GDP estimate which is expected with no change at the sluggish pace seen of 0.4% on the quarter and 2.5% on the year. As for the second European economy it's the advanced PMI day as we are expecting slight softening in May in both the Union and Germany yet rest ashore that till now their fundamentals are 'sound' and they have conquered and survived compared to other nations.
Let's wait and see as the mover will be the home sales in the U.S for today as we are upon the week end squaring as well so be ware, and after the surprise pick up in housing starts you never know we might see one here, which will be taken strongly positive for the dollar, especially that the woes are once more concentrating on the credit turmoil and the need to a bottom in the housing sector. So stay tuned until the data is with us to devour…
Crown Forex
Stocks Finish Week Badly
The only catalyst needed to send stocks into a pre-holiday funk was word that existing home sales fell for the 8th time in the last nine months. Right from the opening bell, investors were selling and getting out of town.
Market lows came early on - prior to noon - and stocks drifted in a negative range all session long. And while the housing news was widely expected, it served as just another reminder that the US economy has a long way to go towards recovery.
e Dow 12,479.63 -145.99; NASDAQ 2,444.67 -19.91; S&P 500 1,375.93 -18.42; NYSE Composite 9,315.78 -117.57
Declining issues outpaced advancers by the widest margin of the week, 4335-1742. New lows opened a huge gap over new highs, 212-65, the widest in weeks.
Many investors find that May-August are best spent on the beach or the vacation home and a rally this summer would certainly be something of a lark.
Crude oil regained $1.38 to close out the week at $132.19, while gold advanced $7.50 to $925.80 and silver edged 27 cents higher to $18.29.
All told, the Dow lost 3.5% for the week with other major indices following suit.
Remember our fallen heroes this weekend. It is because of them that we enjoy our freedoms.
NYSE Volume 1,105,550,000
NASDAQ Volume 1,727,578,000
Market lows came early on - prior to noon - and stocks drifted in a negative range all session long. And while the housing news was widely expected, it served as just another reminder that the US economy has a long way to go towards recovery.
e Dow 12,479.63 -145.99; NASDAQ 2,444.67 -19.91; S&P 500 1,375.93 -18.42; NYSE Composite 9,315.78 -117.57
Declining issues outpaced advancers by the widest margin of the week, 4335-1742. New lows opened a huge gap over new highs, 212-65, the widest in weeks.
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Even though volume was very light - typical of a pre-holiday get-away - the hangover effects of a horrible end to the week will certainly spill over into the final week of May and into June, a period normally highlighted by sluggish trade and nitpicking over corporate details.Forex Foreign Currency Exchange Trading Beginner's Resource Center.
forexforexforexforex.com
Many investors find that May-August are best spent on the beach or the vacation home and a rally this summer would certainly be something of a lark.
Crude oil regained $1.38 to close out the week at $132.19, while gold advanced $7.50 to $925.80 and silver edged 27 cents higher to $18.29.
All told, the Dow lost 3.5% for the week with other major indices following suit.
Remember our fallen heroes this weekend. It is because of them that we enjoy our freedoms.
NYSE Volume 1,105,550,000
NASDAQ Volume 1,727,578,000
Thursday, May 22, 2008
U.S. Market Update
Dow +25 S&P +4.3 NASDAQ +13.4
Soaring oil prices continued to dominate markets and headlines this morning, although unlike the previous two sessions indices have been gaining ground since the open. Traders appear to be using the heavy losses of the last two days as a buying opportunity, with confidence further bolstered by the better than expected weekly jobless claims data out before the open. Front-month oil hit a new high of $135.09 a barrel before pulling back to trade at $133.05 this morning; OPEC Secretary General Badri responded by calling the oil market "crazy." Ford opened in the red after dropping its standing goal of returning to profitability in 2009 and slashing production for 2008 "to respond to the rapidly changing business environment." Tech name BCSI is down 26% after missing earnings estimates and declining to offer specific guidance for the coming quarter besides saying that results would be "flat." Retailers were reporting a gloomy picture of the US consumer this morning: DKS-16.6% after missing revenue estimates and cutting its earnings and SSS outlook, ANN-4% after guiding SSS "slightly negative" for the year, BONT-5% after a mixed quarterly report and cuts to guidance, and GME-9.4% even after beating estimates and raising guidance. Two retailers managed to buck the trend, with LDG+9.7% after reaffirming its positive outlook and ZLC+10.3% on improving revenues and positive SSS. ESLR was a big winner, opening up more than 20% after reporting two new contracts worth approximately $1B. CPN gained nearly 9% after the company confirmed an unsolicited merger offer from NRG Energy that would create the largest power company in the US. In other M&A news BCE is sliding 14% after a Quebec court upheld an appeal by debt holders who claimed the buyout LBO offer as is it currently constituted is unfair.
Treasury markets are losing some ground, sending the 10-year yield back above 4.90% bringing it back within reach of the 2008 high. There has been some flattening in the benchmark yield curve with the spread dipping below 140 basis points helped by the two-year yield climbing back above 2.50%. The Oct fed fund future has seen the odds of a 25 basis point hike by later this year rise above 25%.
The USD rebounded from its earlier lows against the majors aided by better weekly jobless claims data and cautious comments from European officials on the 2008 growth outlook. The EUR/USD was retesting the 1.57 level after hitting 1.5814 in early European trading. The Italian Business Group noted that a strong euro was harming exports, adding that the ECB must not underestimate the slowdown in GDP. The EU's Juncker stated that he did not expect the euro to develop "extremely favorably" over the coming months, noting that there will not be a recession in Euro Zone while lowing estimates for 2008 GDP to 1.4% "at best" vs the 1.7% EU forecast provided back on April 28. The dollar was also aided by oil retracing from its latest all-time high. The JPY was broadly softer following the downgrading of the Japanese export and housing sector in a report issued by the government. EUR/JPY up 90 pips at 163.50, USD/JPY above 104 and GBP/JPY firmer by 300 pips at 206. The GBP rose to a three-week high of 1.9768 on the back of the smaller-than-expected 0.2% decline in UK April retail sales and an upward revision to UK March retail sales. EUR/GBP was lower by 75 pips to 0.7930 level.
June Bud -28 ticks at 112.69 and June Gilts -75 ticks at 106.18. European equities recovered from earlier losses to move into positive territory ahead of the close. Euro Stoxx 50 flat at 3,795, FTSE unch at 6,200, CAC 40 +0.1% at 5,030 and DAX +0.3% at 7,061
Trade The News Staff
Trade The News, Inc.
Soaring oil prices continued to dominate markets and headlines this morning, although unlike the previous two sessions indices have been gaining ground since the open. Traders appear to be using the heavy losses of the last two days as a buying opportunity, with confidence further bolstered by the better than expected weekly jobless claims data out before the open. Front-month oil hit a new high of $135.09 a barrel before pulling back to trade at $133.05 this morning; OPEC Secretary General Badri responded by calling the oil market "crazy." Ford opened in the red after dropping its standing goal of returning to profitability in 2009 and slashing production for 2008 "to respond to the rapidly changing business environment." Tech name BCSI is down 26% after missing earnings estimates and declining to offer specific guidance for the coming quarter besides saying that results would be "flat." Retailers were reporting a gloomy picture of the US consumer this morning: DKS-16.6% after missing revenue estimates and cutting its earnings and SSS outlook, ANN-4% after guiding SSS "slightly negative" for the year, BONT-5% after a mixed quarterly report and cuts to guidance, and GME-9.4% even after beating estimates and raising guidance. Two retailers managed to buck the trend, with LDG+9.7% after reaffirming its positive outlook and ZLC+10.3% on improving revenues and positive SSS. ESLR was a big winner, opening up more than 20% after reporting two new contracts worth approximately $1B. CPN gained nearly 9% after the company confirmed an unsolicited merger offer from NRG Energy that would create the largest power company in the US. In other M&A news BCE is sliding 14% after a Quebec court upheld an appeal by debt holders who claimed the buyout LBO offer as is it currently constituted is unfair.
Treasury markets are losing some ground, sending the 10-year yield back above 4.90% bringing it back within reach of the 2008 high. There has been some flattening in the benchmark yield curve with the spread dipping below 140 basis points helped by the two-year yield climbing back above 2.50%. The Oct fed fund future has seen the odds of a 25 basis point hike by later this year rise above 25%.
The USD rebounded from its earlier lows against the majors aided by better weekly jobless claims data and cautious comments from European officials on the 2008 growth outlook. The EUR/USD was retesting the 1.57 level after hitting 1.5814 in early European trading. The Italian Business Group noted that a strong euro was harming exports, adding that the ECB must not underestimate the slowdown in GDP. The EU's Juncker stated that he did not expect the euro to develop "extremely favorably" over the coming months, noting that there will not be a recession in Euro Zone while lowing estimates for 2008 GDP to 1.4% "at best" vs the 1.7% EU forecast provided back on April 28. The dollar was also aided by oil retracing from its latest all-time high. The JPY was broadly softer following the downgrading of the Japanese export and housing sector in a report issued by the government. EUR/JPY up 90 pips at 163.50, USD/JPY above 104 and GBP/JPY firmer by 300 pips at 206. The GBP rose to a three-week high of 1.9768 on the back of the smaller-than-expected 0.2% decline in UK April retail sales and an upward revision to UK March retail sales. EUR/GBP was lower by 75 pips to 0.7930 level.
June Bud -28 ticks at 112.69 and June Gilts -75 ticks at 106.18. European equities recovered from earlier losses to move into positive territory ahead of the close. Euro Stoxx 50 flat at 3,795, FTSE unch at 6,200, CAC 40 +0.1% at 5,030 and DAX +0.3% at 7,061
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USD to the Fall...
The dollar is continuing its fall on anticipations that the soaring oil prices will continue to pressure inflation while slowing growth in the US economy. The greenback is still negatively affected by the housing sector as today a report from Office of Federal Housing Enterprise Oversight will show housing prices are still plunging and this time fell 1.3% percent in the first quarter. As we all know that the housing crisis was behind the fall out of America due to subprime mortgages crisis as this will continue to downgrade the US dollar until they find a bottom to the housing sector.
The EU released its industrial new orders for the month of March coming in at -1.0% worse than both the expected reading of -0.5% and revised previous reading of 0.2% from 0.6%, but this had no affect on the single currency as it did not move the market. The euro is still strong versus the deteriorating greenback due to the ECB remaining hawkish and not expecting a rate cut anytime soon due to the rallying crude prices, and of course this is the best support the euro is witnessing so far. The EUR/USD is currently traded at 1.5764 while trading a high of 1.5814 and a low of 1.5743.
As for the UK it released its retail sales for the month of April showing that sales came in better at -0.2% from the previous reading of -0.4% while the predicted was -0.5%. The better than expected reading showed that consumers are not much affected by the high prices of food and energy as this helped the GBP gain grounds against the weak greenback as the pair tries to break the resistance of 1.9800 as it is currently traded at 1.9767 while recording a high of 1.9782 and a low of 1.9683.
The yen is stable against the dollar due to the greenback weakness but it is falling versus both the euro and the sterling in which we call carry trades. The USD/JPY is currently trading at 103.26 while recording a high of 103.47 and a low of 102.73.
Crown Forex
The EU released its industrial new orders for the month of March coming in at -1.0% worse than both the expected reading of -0.5% and revised previous reading of 0.2% from 0.6%, but this had no affect on the single currency as it did not move the market. The euro is still strong versus the deteriorating greenback due to the ECB remaining hawkish and not expecting a rate cut anytime soon due to the rallying crude prices, and of course this is the best support the euro is witnessing so far. The EUR/USD is currently traded at 1.5764 while trading a high of 1.5814 and a low of 1.5743.
As for the UK it released its retail sales for the month of April showing that sales came in better at -0.2% from the previous reading of -0.4% while the predicted was -0.5%. The better than expected reading showed that consumers are not much affected by the high prices of food and energy as this helped the GBP gain grounds against the weak greenback as the pair tries to break the resistance of 1.9800 as it is currently traded at 1.9767 while recording a high of 1.9782 and a low of 1.9683.
The yen is stable against the dollar due to the greenback weakness but it is falling versus both the euro and the sterling in which we call carry trades. The USD/JPY is currently trading at 103.26 while recording a high of 103.47 and a low of 102.73.
Crown Forex
Jobless and Dollar!
The dollar in the US session was able to proclaim some strength as the weekly claims fell more than expected, as woes are still surrounding the labor market in the US as the Feds said that further rise in unemployment is to be seen in the US which was enclosed within the yesterday released FOMC minutes.
The Euro continued its downside wave as it needed the correction, and the drop in industrial orders helped the euro to give up more gains. In the US session the euro hit its intraday low at 1.5726 and now momentum indicators are starting to provide reversal signals as the euro is within oversold areas. On a daily basis the euro set the high early at 1.5814 and though the euro is in an overbought area still no clear signs of reversals are seen confirming the intraday basis which now the euro that trades at 1.5750s might attempt to 1.5770s before declining once again to the downside.
The Pound though was hammered with negative growth data yet the positive momentum was confirmed from rising inflationary pressures confirming the steady rates for the BoE. The upside wave that was seen since the morning in the US session let the pound consolidate at its intraday highs set at 1.9849 as the pound attempted to breach above 1.9850s yet has failed intraday momentum is weakening and shows the pound might drop and on a daily basis sterling is in an overbought area the pair targets 1.9870s while now 1.9770s is a critical level for the pound and if it manages to continue to trade above it and closes higher especially on a weekly basis and new upside wave will be confirmed validating the breach of the upside band for the descending channel.
The USDJPY is still within the upside wave since the morning trading now at its highs near the peak set at 103.76 though on an hourly basis the pair is excessively overbought which might take it down slightly until 103.40s before the upside continuation as now the daily basis is confirming upside headings from an oversold areas which targets 104 levels.
Crown Forex
The Euro continued its downside wave as it needed the correction, and the drop in industrial orders helped the euro to give up more gains. In the US session the euro hit its intraday low at 1.5726 and now momentum indicators are starting to provide reversal signals as the euro is within oversold areas. On a daily basis the euro set the high early at 1.5814 and though the euro is in an overbought area still no clear signs of reversals are seen confirming the intraday basis which now the euro that trades at 1.5750s might attempt to 1.5770s before declining once again to the downside.
The Pound though was hammered with negative growth data yet the positive momentum was confirmed from rising inflationary pressures confirming the steady rates for the BoE. The upside wave that was seen since the morning in the US session let the pound consolidate at its intraday highs set at 1.9849 as the pound attempted to breach above 1.9850s yet has failed intraday momentum is weakening and shows the pound might drop and on a daily basis sterling is in an overbought area the pair targets 1.9870s while now 1.9770s is a critical level for the pound and if it manages to continue to trade above it and closes higher especially on a weekly basis and new upside wave will be confirmed validating the breach of the upside band for the descending channel.
The USDJPY is still within the upside wave since the morning trading now at its highs near the peak set at 103.76 though on an hourly basis the pair is excessively overbought which might take it down slightly until 103.40s before the upside continuation as now the daily basis is confirming upside headings from an oversold areas which targets 104 levels.
Crown Forex
Dollar Continuing Its Slide As Oil Prices Rises
The greenback traded near a one-month low against the euro and may weaken to $1.59 per euro and 101 yen in one month on speculation a surge in oil prices to record highs will increase inflation while slowing economic growth in the U.S., which is the world's biggest oil importer. The currency also traded near the lowest level in almost two weeks versus the yen before a government report that will probably show falling U.S. house prices. 'The U.S. economy is vulnerable to surging oil prices,' said Toru Umemoto, chief currency strategist in Tokyo at Barclays Capital, Britain's third-biggest lender. 'Stagflation risks in the U.S. are rising, buffeting the dollar.' The dollar is currently traded at $1.5766 per euro as of 8:00 a.m. GMT, after falling to $1.5816, the lowest level since April the 24th. The greenback is also trading at 103.14 yen after falling to as low as 102.74 yen, the weakest level since May the 12th. The euro is currently trading at 162.70 yen from 162.76 yen.
Sterling edged higher on Thursday, but stayed near a one-month low against the euro before UK retail sales data that may suggest more sluggishness in consumer spending as the economy continues to weaken. Additional signs of weakness would complicate matters for the Bank of England as it tries to balance an economic downturn with rising inflation risks. Minutes released on Wednesday from the BoE's Monetary Policy Committee meeting earlier this month showed that only policy dove Daid Blanchflower voted for a 25 basis point rate cut from 5 percent, further dampening expectations for a cut next month.
Finotec Group Inc.
Sterling edged higher on Thursday, but stayed near a one-month low against the euro before UK retail sales data that may suggest more sluggishness in consumer spending as the economy continues to weaken. Additional signs of weakness would complicate matters for the Bank of England as it tries to balance an economic downturn with rising inflation risks. Minutes released on Wednesday from the BoE's Monetary Policy Committee meeting earlier this month showed that only policy dove Daid Blanchflower voted for a 25 basis point rate cut from 5 percent, further dampening expectations for a cut next month.
Finotec Group Inc.
Replay The 1970s!!!
Well, well, well aren't we in an enigma! Doesn't this just sound peculiarly familiar what we are seeing in the US and the global economy, sure it does, reminds us of the era merely behind the terminology STAGFLATION in the 1970s, combining sluggish growth and surging INFLATION!
The FOMC minutes of the last meeting where the feds took rates down to 2.0% indicated clearly that the feds are insecure about inflationary levels and are in no place to lower rates further. They downgraded growth and upgraded their inflation projections, and that surprisingly added to the woes of the US dollar and did not at all support it like what was seen after the decision as market participants predicted the bottoming of the easing cycle.
Growth is to pick up in the second half of this year. That is still the testimony the Feds are holding on to, yet markets already know that and with $135 barrel of oil they see dues to be paid by the American economy as they are to enter the Stagflation Era with no redeemer; and according to the American history of monetary rule they will result to quick reversal to those rate cuts to take the economy into RECESSION before rising up once again and now that scenario is which once was thought the savior for the dollar it is instead its undertaker!
Inflation in the 1970s ear of OPEC rule was approached by the US administration with what is known by the Economic Stabilization Act of 1970 when the president became the Commander in Chief of PRICES, well surely the administration has assumed to take control is the same domineer but by actual military invasion of oil rich nations to secure their supply instead of going through the dilemma once again, yet the messers have become the messees, and now Bernanke is the one in the line of fire.
How is the economy to rise of its predicament, the stimulus if actually convinces consumers to spend that is more inflation, and when the economy adjusts to rising domestic demand still inflation will surge more disposable income at that point will be torn apart and wage increases will be prohibited to not fuel further price pressures, and there comes the more important pickle which is the HOUSING MARKET prices then if they bottom are supposed to rise but with that affordability problem and tight house hold finances are not going to spur them into properties buying mood!
So basically here is the conclusion. Inflation is the ruling power in nowadays economic balance. In the Euro Zone it's the one in charge surely in the United Kingdom it's threatening the stagflation phase as well and today we have data from both economies to weigh the effect. Britons are expected to have trimmed further their shopping sprees as sales are projected to have deepened the fall in April. As for the industrial direction in the Kingdom still at records low and expected with slight improvements on the back of abroad and not domestic demand. As for the single currency nation the industrialized nation is expected to have seen much more softening in that sector in March, as today Europe is taking the lead to add to the woes the surging crude has bestowed upon financial balance in markets and economies.
All are waiting for the knight in shining armor, and all people of the world are looking up to their central bankers and governments for redemption yet are they capable of handling the challenge? Bernanke is now out of ideas for the US and the world needs them to stabilize for no other reason but to secure financial markets stability and restoring of liquidity which has prompted their economies to their nightmares, while the feds now are using the old trick in the book the WAIT AND SEE approach so let's see what good that is going to bring us as we ponder upon the weekly unemployment claims for last week and suffer with the rest of the American public!!!
Crown Forex
The FOMC minutes of the last meeting where the feds took rates down to 2.0% indicated clearly that the feds are insecure about inflationary levels and are in no place to lower rates further. They downgraded growth and upgraded their inflation projections, and that surprisingly added to the woes of the US dollar and did not at all support it like what was seen after the decision as market participants predicted the bottoming of the easing cycle.
Growth is to pick up in the second half of this year. That is still the testimony the Feds are holding on to, yet markets already know that and with $135 barrel of oil they see dues to be paid by the American economy as they are to enter the Stagflation Era with no redeemer; and according to the American history of monetary rule they will result to quick reversal to those rate cuts to take the economy into RECESSION before rising up once again and now that scenario is which once was thought the savior for the dollar it is instead its undertaker!
Inflation in the 1970s ear of OPEC rule was approached by the US administration with what is known by the Economic Stabilization Act of 1970 when the president became the Commander in Chief of PRICES, well surely the administration has assumed to take control is the same domineer but by actual military invasion of oil rich nations to secure their supply instead of going through the dilemma once again, yet the messers have become the messees, and now Bernanke is the one in the line of fire.
How is the economy to rise of its predicament, the stimulus if actually convinces consumers to spend that is more inflation, and when the economy adjusts to rising domestic demand still inflation will surge more disposable income at that point will be torn apart and wage increases will be prohibited to not fuel further price pressures, and there comes the more important pickle which is the HOUSING MARKET prices then if they bottom are supposed to rise but with that affordability problem and tight house hold finances are not going to spur them into properties buying mood!
So basically here is the conclusion. Inflation is the ruling power in nowadays economic balance. In the Euro Zone it's the one in charge surely in the United Kingdom it's threatening the stagflation phase as well and today we have data from both economies to weigh the effect. Britons are expected to have trimmed further their shopping sprees as sales are projected to have deepened the fall in April. As for the industrial direction in the Kingdom still at records low and expected with slight improvements on the back of abroad and not domestic demand. As for the single currency nation the industrialized nation is expected to have seen much more softening in that sector in March, as today Europe is taking the lead to add to the woes the surging crude has bestowed upon financial balance in markets and economies.
All are waiting for the knight in shining armor, and all people of the world are looking up to their central bankers and governments for redemption yet are they capable of handling the challenge? Bernanke is now out of ideas for the US and the world needs them to stabilize for no other reason but to secure financial markets stability and restoring of liquidity which has prompted their economies to their nightmares, while the feds now are using the old trick in the book the WAIT AND SEE approach so let's see what good that is going to bring us as we ponder upon the weekly unemployment claims for last week and suffer with the rest of the American public!!!
Crown Forex
Inflation Concerns Pressure USD
The dollar fell versus most key currencies Wednesday as oil prices surged to a new all-time high increasing inflation concerns. Minutes from the April 29-30 Federal Open Market Committee meeting showed most FOMC members were concerned about inflation as they 'viewed the decision to reduce interest rates at this meeting as a close call.' However, the minutes did not boost the greenback. Inflation concerns are the key driver of the FX market. The oil-price surge is an indication of the Fed's too easy monetary policy as well as a major driver of the dollar's decline. Although the Fed's easy monetary stance increases not only the US inflation rate but also the worldwide inflation rate, investors prefer currencies where inflation targeting has been used, like the euro and dollar block currencies, as they are less prone to inflation. The AUD/USD rose on surging commodity prices and international interests in Australia's commodity companies. The USD/CAD fell to the lowest in more than two months on record oil prices and speculation the Bank of Canada will be less likely to cut rates after a report showed Canadian inflation accelerated in April. The GBP/USD was little changed ahead of tomorrow's UK retail sales data. The risk-sensitive yen and Swiss franc rose as US equities sold off.
The EUR/USD had its biggest two-day gain since March on an unexpected rise in German business confidence, reducing bets the European Central Bank will cut rates anytime soon. The pair is also highly correlated with crude oil that rose above $133/barrel. The EUR/USD looks poised to test the 1.59 resistance or even the all-time high at 1.60. First support is now at 1.57 and second at 1.54.
Financial and Economic News and Comments
US & Canada
- The Federal Reserve signaled no more interest-rate cuts and raised its expectations for unemployment and inflation this year. The minutes from the April 29-30 Federal Open Market Committee meeting showed 'several members noted that it was unlikely to be appropriate to ease policy in response to information suggesting that the economy was slowing further or even contracting slightly in the near term.' The Fed also released updated quarterly economic forecasts with the minutes. The Fed forecast the US GDP to rise between 0.3% and 1.2% this year, down from the last forecast of growth between 1.3% and 2%.
- Canada's consumer-price inflation rose to 1.7% y/y and 0.8% m/m in April, Statistics Canada reported. The rise in the annual inflation rate to 1.7% y/y from March's 1.4% y/y is the first inflation-rate increase since November 2007 driven by an 11.6% y/y rise in gasoline prices. The Bank of Canada's core CPI, which the BOC uses to monitor the inflation target, increased 0.3% m/m, and rose 1.5% y/y in April from March's 1.3% y/y
- Canada's leading economic index rose 0.1% m/m in April, the first increase since January. Six of the index's 10 components rose, led by the stock market and sales of durable goods, Statistics Canada said.
Europe
- German business confidence unexpectedly rose to 103.5 in May from 102.4 in April, the Ifo institute said. The business conditions index rose to 110.1 in May from 108.4 in April, and the business expectations index climbed to 97.3 from 96.7. Although unexpectedly rising, the indicators are mostly below 2007's readings indicating economic momentum is gradually losing speed.
- The Bank of England voted 8-1 to keep its benchmark interest rate unchanged at 5.0%. The majority of BOE policy makers argued that a rate cut risked letting inflation get out of control
Asia-Pacific
- The Australian consumer sentiment index rose to 89.8 in May, the first increase this year, from 87.4 in April, Westpac Banking Corp. and Melbourne Institute reported. The sentiment index recorded its fourth straight reading below 100, indicating pessimists outnumber optimists
FX Strategy Update
Hans Nilsson
Capital Market Services, L.L.C.
The EUR/USD had its biggest two-day gain since March on an unexpected rise in German business confidence, reducing bets the European Central Bank will cut rates anytime soon. The pair is also highly correlated with crude oil that rose above $133/barrel. The EUR/USD looks poised to test the 1.59 resistance or even the all-time high at 1.60. First support is now at 1.57 and second at 1.54.
Financial and Economic News and Comments
US & Canada
- The Federal Reserve signaled no more interest-rate cuts and raised its expectations for unemployment and inflation this year. The minutes from the April 29-30 Federal Open Market Committee meeting showed 'several members noted that it was unlikely to be appropriate to ease policy in response to information suggesting that the economy was slowing further or even contracting slightly in the near term.' The Fed also released updated quarterly economic forecasts with the minutes. The Fed forecast the US GDP to rise between 0.3% and 1.2% this year, down from the last forecast of growth between 1.3% and 2%.
- Canada's consumer-price inflation rose to 1.7% y/y and 0.8% m/m in April, Statistics Canada reported. The rise in the annual inflation rate to 1.7% y/y from March's 1.4% y/y is the first inflation-rate increase since November 2007 driven by an 11.6% y/y rise in gasoline prices. The Bank of Canada's core CPI, which the BOC uses to monitor the inflation target, increased 0.3% m/m, and rose 1.5% y/y in April from March's 1.3% y/y
Europe
- German business confidence unexpectedly rose to 103.5 in May from 102.4 in April, the Ifo institute said. The business conditions index rose to 110.1 in May from 108.4 in April, and the business expectations index climbed to 97.3 from 96.7. Although unexpectedly rising, the indicators are mostly below 2007's readings indicating economic momentum is gradually losing speed.
Asia-Pacific
- The Australian consumer sentiment index rose to 89.8 in May, the first increase this year, from 87.4 in April, Westpac Banking Corp. and Melbourne Institute reported. The sentiment index recorded its fourth straight reading below 100, indicating pessimists outnumber optimists
FX Strategy Update
| EUR/USD | USD/JPY | GBP/USD | USD/CHF | USD/CAD | AUD/USD | EUR/JPY | |
| Primary Trend | Positive | Negative | Negative | Negative | Neutral | Positive | Neutral |
| Secondary Trend | Neutral | Neutral | Negative | Positive | Neutral | Positive | Neutral |
| Outlook | Neutral | Neutral | Negative | Neutral | Neutral | Negative | Neutral |
| Action | Sell | Sell | Sell | None | None | Stopped Out | None |
| Current | 1.5787 | 103.01 | 1.9691 | 1.0260 | 0.9847 | 0.9635 | 162.57 |
| Start Position | 1.5661 | N/A | 1.9865 | N/A | N/A | 0.9495 | N/A |
| Objective | 1.5100 | N/A | 1.9380 | N/A | N/A | 0.9035 | N/A |
| Stop | 1.6055 | 104.65 | 2.0085 | N/A | N/A | 0.9635 | N/A |
| Support | 1.5700 | 102.80 | 1.9400 | 1.0200 | 0.9700 | 0.9500 | 161.00 |
| 1.5400 | 100.00 | 1.9200 | 1.0000 | 0.9500 | 0.9300 | 159.00 | |
| Resistance | 1.5900 | 106.00 | 1.9800 | 1.0600 | 1.0000 | 0.9700 | 165.00 |
| 1.6000 | 107.50 | 2.0000 | 1.0800 | 1.0300 | 1.0000 | 167.00 |
Hans Nilsson
Capital Market Services, L.L.C.
Most Fed Officials Viewed April Rate Cut as 'Close Call'
Signals no more rate cuts even if economy contracts; says the substantial easing of monetary policy since Sept., the Fed's liquidity efforts [TAF, TSLF], and the fiscal stimulus package should help to support economic activity. "Moreover, although downside risks to growth remained, members were also concerned about the upside risks to the inflation outlook, given the continued increases in oil and commodity prices and the fact that some indicators suggested that inflation expectations had risen in recent months. Nonetheless, most members agreed that a further modest easing in the stance of policy was appropriate to balance better the risks to achiving the Committee's dual objectives."
Notes odds that economy may be 'severely disrupted', financial conditions better, but still fragile, concened about upside inflation risks, signs inflation expectations had risen. Saw rising restraint on consumer spending.
Food, energy pries to keep boosting overall inflation.
Raises 2008 jobless forecast to 5.5-5.7%% from 5.2-5.3% previous
Adjusts 2008 GDP growth forecast to 0.3% -1.2% from 1.3%-2%previous, and 2009 to 2%-3% from 2.1%-2.7% previous
Raises 2008 core inflation forecast to 2.2-2.4% from 2%-2.2% previous, Total Inflation forecast to 3.1%-3.4%% from 2.1%-2.4%
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Notes odds that economy may be 'severely disrupted', financial conditions better, but still fragile, concened about upside inflation risks, signs inflation expectations had risen. Saw rising restraint on consumer spending.
Food, energy pries to keep boosting overall inflation.
Raises 2008 jobless forecast to 5.5-5.7%% from 5.2-5.3% previous
Adjusts 2008 GDP growth forecast to 0.3% -1.2% from 1.3%-2%previous, and 2009 to 2%-3% from 2.1%-2.7% previous
Raises 2008 core inflation forecast to 2.2-2.4% from 2%-2.2% previous, Total Inflation forecast to 3.1%-3.4%% from 2.1%-2.4%
Trade The News Staff
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Wall St.: Going Nowhere, Slowly
The markets traded in a tight, positive range on Thursday, on extremely low volume characterized by choppiness all session long.
Little more can be said about one of the most lackluster sessions in recent memory.
There was no shocking news on the housing front (wait until tomorrow for that, when Existing Home Sales data is released), few analyst advisories of note, no big Fed speeches or astounding earnings figures.
It was a relief, of sorts, after two consecutive days of deep declines. Investors have to weigh the relative merits of buying into new positions or taking profits as we head into a long and very uncertain summer.
Dow 12,625.62 +24.43; NASDAQ 2,464.58 +16.31; S&P 500 1,394.35 +3.64; NYSE Composite 9,433.35 +36.32
The price of oil on the futures market actually took a breather for a change, dropping $2.36, to $130.81. It's almost as though the schemers in the futures pits realize that the entire world's attention is now focused on them and it was time to take a little froth off the top.
As I've mentioned here previously, oil and energy prices hold the potential for worldwide economic maladies, forcing all manner of inequities in prices for food, especially, and just about any other aspect of human life. Speculation in oil futures has been largely overblown, and, like any orderly market, some kind of correction should be on the horizon.
The oil markets, however, are obviously not orderly. In fact, they are one among the most misunderstood and unregulated of any commodities. There simply are too many sources of data and conflicting readings for anyone to actually have a handle on the true value of a barrel of crude.
Thus, the futures take the path of least resistance, and possibly that of outright manipulation, heading up. Bringing down prices will almost certainly take something approaching an act of God, since there is no hard-and-fast pricing mechanism. Only one thing is certain. We all pay more for heating homes and driving autos.
Advancing issues took a slight edge over decliners, 3476-2548, though new lows once again trumped new highs, 180-91. The recent see-sawing between the new highs-lows and advance-decline metrics continues to suggest more sideways trading with a bearish bent.
It is worth noting that today's spread between the new lows-highs (89) is among the largest in recent vintages.
Gold lost $10.80 to $918.30, while silver dropped just 3 cents to close at $18.03.
With tomorrow the final session before a three-day weekend, another 100+ point loss on the Dow would not be surprising in the least, though another day just like today is probably more likely.
NYSE Volume 1,187,776,000
NASDAQ Volume 1,964,569,000
Little more can be said about one of the most lackluster sessions in recent memory.
There was no shocking news on the housing front (wait until tomorrow for that, when Existing Home Sales data is released), few analyst advisories of note, no big Fed speeches or astounding earnings figures.
It was a relief, of sorts, after two consecutive days of deep declines. Investors have to weigh the relative merits of buying into new positions or taking profits as we head into a long and very uncertain summer.
Dow 12,625.62 +24.43; NASDAQ 2,464.58 +16.31; S&P 500 1,394.35 +3.64; NYSE Composite 9,433.35 +36.32
The price of oil on the futures market actually took a breather for a change, dropping $2.36, to $130.81. It's almost as though the schemers in the futures pits realize that the entire world's attention is now focused on them and it was time to take a little froth off the top.
As I've mentioned here previously, oil and energy prices hold the potential for worldwide economic maladies, forcing all manner of inequities in prices for food, especially, and just about any other aspect of human life. Speculation in oil futures has been largely overblown, and, like any orderly market, some kind of correction should be on the horizon.
The oil markets, however, are obviously not orderly. In fact, they are one among the most misunderstood and unregulated of any commodities. There simply are too many sources of data and conflicting readings for anyone to actually have a handle on the true value of a barrel of crude.
Thus, the futures take the path of least resistance, and possibly that of outright manipulation, heading up. Bringing down prices will almost certainly take something approaching an act of God, since there is no hard-and-fast pricing mechanism. Only one thing is certain. We all pay more for heating homes and driving autos.
Advancing issues took a slight edge over decliners, 3476-2548, though new lows once again trumped new highs, 180-91. The recent see-sawing between the new highs-lows and advance-decline metrics continues to suggest more sideways trading with a bearish bent.
It is worth noting that today's spread between the new lows-highs (89) is among the largest in recent vintages.
Gold lost $10.80 to $918.30, while silver dropped just 3 cents to close at $18.03.
With tomorrow the final session before a three-day weekend, another 100+ point loss on the Dow would not be surprising in the least, though another day just like today is probably more likely.
NYSE Volume 1,187,776,000
NASDAQ Volume 1,964,569,000
Wednesday, May 21, 2008
Markets Mashed Again
Taking its cue from yesterday's day-long sell-a-thon, investors took some time Wednesday morning determining the direction of the market. The major indices hugged the flatline or traded slightly negative all morning, but, by 2 PM, the selling had accelerated into another rout of the bulls.
Dow 12,601.19 -227.49; NASDAQ 2,448.27 -43.99; S&P 500 1,390.71 -22.69 NYSE Composite 9,397.03 -138.98
The precipitous drop in stocks coincided with the release of minutes from the Fed's April meeting. The Fed governors apparently were very close to not cutting rates at all (they cut federal funds .25%) and indicated that the economy was very weak, with stresses from the high price of oil, gas and food; credit issues; and continued weakness in the housing market were paramount concerns.
Normally, Fed minutes and oil inventory figures would not prompt such a strong reaction, but, given the market's jittery current composition, sentiment sent stocks to shocking new lows.
Speaking of new lows, there were 216 of them, compared to 204 new highs, somewhat of a surprise considering the breadth and depth of the sell-off. With trading characterized best as "one-sided," decliners outnumbered advancing issues, 4201-1820. These internal figures are still rather modest. More concerted selling and borderline panic would show the gap between new lows and highs much more pronounced, while the decline-advance ratio would be more like 4-1 or 5-1, rather than today's 2-1 ratio.
Now that the markets have broken out of their tight 4-week trading range (see yesterday's posting), the stage is set for a retest of the March lows. This could occur rapidly, as sentiment has turned decidedly negative of late, but a gradual drift back to 12,000 seems to be in the cards over the coming two weeks.
The metals continued their sustained rally, with gold advancing $8.40 to $928.60 and silver gaining 33 cents to $18.05.
NYSE Volume 1,389,451,000
NASDAQ Volume 2,192,166,000
Dow 12,601.19 -227.49; NASDAQ 2,448.27 -43.99; S&P 500 1,390.71 -22.69 NYSE Composite 9,397.03 -138.98
The precipitous drop in stocks coincided with the release of minutes from the Fed's April meeting. The Fed governors apparently were very close to not cutting rates at all (they cut federal funds .25%) and indicated that the economy was very weak, with stresses from the high price of oil, gas and food; credit issues; and continued weakness in the housing market were paramount concerns.
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Once again, oil exploded to another record high price, settling at $133.17, up a dramatic $4.19 in just one day. This also contributed to the selling of stocks, with oil markets reacting to a large, unexpected drop in US crude inventories. Stocks go up, stocks go down. Make money in both directions with monthly options advisor newsletter.
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Normally, Fed minutes and oil inventory figures would not prompt such a strong reaction, but, given the market's jittery current composition, sentiment sent stocks to shocking new lows.
Speaking of new lows, there were 216 of them, compared to 204 new highs, somewhat of a surprise considering the breadth and depth of the sell-off. With trading characterized best as "one-sided," decliners outnumbered advancing issues, 4201-1820. These internal figures are still rather modest. More concerted selling and borderline panic would show the gap between new lows and highs much more pronounced, while the decline-advance ratio would be more like 4-1 or 5-1, rather than today's 2-1 ratio.
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With only two sessions remaining before a three-day holiday weekend, it's difficult to see investors staking out significant positions in stocks on Thursday and Friday. More likely, the markets will mark time, squaring up solid positions while dumping weak sisters.Edmonton, Vancouver, Bad Credit, Divorced, Bankruptcy OK. Apply online.
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Now that the markets have broken out of their tight 4-week trading range (see yesterday's posting), the stage is set for a retest of the March lows. This could occur rapidly, as sentiment has turned decidedly negative of late, but a gradual drift back to 12,000 seems to be in the cards over the coming two weeks.
The metals continued their sustained rally, with gold advancing $8.40 to $928.60 and silver gaining 33 cents to $18.05.
NYSE Volume 1,389,451,000
NASDAQ Volume 2,192,166,000
U.S. Market Update
Dow -66 S&P -1.7 NASDAQ -3.8
Markets were trading in the red for a second day in a row this morning as oil continues its long march north, passing the $130/bbl mark before the New York open and hitting $132/bbl in mid-morning trading following weekly inventory data. Airline names are feeling the pain of soaring fuel costs and fresh analyst downgrades, while AMR took the opportunity this morning to say it would make significant capacity reductions in its 2008 domestic schedule and speed up retiring planes. CAL -10% DAL -7.5% UAUA -12.6% LCC -12% JBLU -4.25%. IMH-17% was another big looser after announcing a FY07 net loss of $2B and disclosing an SEC inquiry into its operations. In more positive news, ADLR+6% after the FDA approved its Enterg drug candidate after the close yesterday; GlaxoSmithKline has signed a co-development deal with Adolor for the drug. BGP+14% was surging after the Wall Street Journal reported that Barnes & Noble has assembled a team of executives and advisers to study a bid for Borders, although it remains unclear what sort of antitrust barriers a merger of the US's top two book retailers would face. SOLF+8.3% after crushing the Street in its Q1 earnings report before the open this morning; the Chinese solar manufacturer noted that higher selling prices offset higher raw-material costs and boosted its guidance for full-year production to a maximum of 180MW. Treasury prices are marginally lower sending the 10-year yield back above 3.80%.
The USD was broadly weaker on Wednesday as higher commodity prices and better German economic data weighed upon its sentiment. The EUR/USD probed the 1.5780 area to embark on a potential retest of the 1.60+ all-time high in the pair. Chatter circulated that Asian central banks continued to diversifying dollar reserves into euros throughout the week, before today's German data release. In addition, comments from various members of the IFO noted there was no urgency for a potential ECB rate cut. IFO members also said that the euro's appreciation was a concern, but noted that Euro-Zone exports levels remain positive. German Econ Min Glos stated that the IFO data showed economy on solid footing, hence the robustness that ECB members have pointed out throughout the spring.
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Markets were trading in the red for a second day in a row this morning as oil continues its long march north, passing the $130/bbl mark before the New York open and hitting $132/bbl in mid-morning trading following weekly inventory data. Airline names are feeling the pain of soaring fuel costs and fresh analyst downgrades, while AMR took the opportunity this morning to say it would make significant capacity reductions in its 2008 domestic schedule and speed up retiring planes. CAL -10% DAL -7.5% UAUA -12.6% LCC -12% JBLU -4.25%. IMH-17% was another big looser after announcing a FY07 net loss of $2B and disclosing an SEC inquiry into its operations. In more positive news, ADLR+6% after the FDA approved its Enterg drug candidate after the close yesterday; GlaxoSmithKline has signed a co-development deal with Adolor for the drug. BGP+14% was surging after the Wall Street Journal reported that Barnes & Noble has assembled a team of executives and advisers to study a bid for Borders, although it remains unclear what sort of antitrust barriers a merger of the US's top two book retailers would face. SOLF+8.3% after crushing the Street in its Q1 earnings report before the open this morning; the Chinese solar manufacturer noted that higher selling prices offset higher raw-material costs and boosted its guidance for full-year production to a maximum of 180MW. Treasury prices are marginally lower sending the 10-year yield back above 3.80%.
The USD was broadly weaker on Wednesday as higher commodity prices and better German economic data weighed upon its sentiment. The EUR/USD probed the 1.5780 area to embark on a potential retest of the 1.60+ all-time high in the pair. Chatter circulated that Asian central banks continued to diversifying dollar reserves into euros throughout the week, before today's German data release. In addition, comments from various members of the IFO noted there was no urgency for a potential ECB rate cut. IFO members also said that the euro's appreciation was a concern, but noted that Euro-Zone exports levels remain positive. German Econ Min Glos stated that the IFO data showed economy on solid footing, hence the robustness that ECB members have pointed out throughout the spring.
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Canadian Inflation Unexpectedly Rises
Canadian annual inflation unexpectedly rose 1.7% in April from 1.4% the month prior, for the first time in six months. Consumers shelled out more money for gas, transportation and food. The core index, which is the focus of the BoC, to 1.5% from 1.3% in March, Record fuel costs may be helping the Canadian economy, but they are diminishing the purchasing power of consumers, as the energy component rose 4.9% from 2.7% the month prior. The MPC will now have to contend with inflation concerns and slow growth as its counterparts are across the globe. Growth in the region has remained resilient on the back of the commodity boom, which has spurred hiring. Therefore, the central bank may look to pause its easing policy as it assesses the risks of rising prices.
DailyFX
DailyFX
The Dollar May No Longer Be King
Constantly rising oil prices may cause an energy crisis that will eventually lead to a new world financial system based on multiple currencies instead of the U.S. dollar, according to a Rice University study. The dollar can no longer buy what it used to, most economists believe that in the very near future most countries if not all will start to diversify the currencies that they buy oil with, Iran and Kuwait have already started the process of excepting Euros and Yens, all in all this would be a huge step forward in fair trade and ending the U.S petrodollar monopoly.
Rising inflation fed largely by oil-producing countries will force Western governments to tighten monetary policies, undermining export-driven economies in China and India, according to a study released by the Houston-based University’s Institute for Public Policy. That would undercut energy demand, ending cheap credit worldwide that is fueled by so-called petrodollars and further undermining the global economy. "We think that energy markets may play an important role in bringing about a financial crisis that may transform the global financial system," the study's authors wrote. The U.S. dollar's status "would likely come to an end."
German business confidence rose in May despite record oil prices and the U.S. slowdown affecting some parts of Europe's economy. German Ifo Business Climate Index came in at 103.5 from an expected 102.1, 8:00 am GMT. EUR/USD currently trading at $1.5728 as of 8:30 am, GMT and expected to rise. Moving on to Britain, billionaire investment guru George Soros said that Britain has yet to suffer the worst fallout from the credit crunch. The acute phase of the global crisis may have passed but the real economy is only just starting to feel the impact. Mr. Soros added the world was set for a period of greater instability with British house prices likely to fall, and no one knows how bad it’s going to get. Delivering his gloomy assessment on BBC Radio, he insisted: “The degree of uncertainty is also uncertain”. GBP/USD currently trading at $1.9666 as of 8:30 am, GMT.
Finotec Group Inc.
Rising inflation fed largely by oil-producing countries will force Western governments to tighten monetary policies, undermining export-driven economies in China and India, according to a study released by the Houston-based University’s Institute for Public Policy. That would undercut energy demand, ending cheap credit worldwide that is fueled by so-called petrodollars and further undermining the global economy. "We think that energy markets may play an important role in bringing about a financial crisis that may transform the global financial system," the study's authors wrote. The U.S. dollar's status "would likely come to an end."
German business confidence rose in May despite record oil prices and the U.S. slowdown affecting some parts of Europe's economy. German Ifo Business Climate Index came in at 103.5 from an expected 102.1, 8:00 am GMT. EUR/USD currently trading at $1.5728 as of 8:30 am, GMT and expected to rise. Moving on to Britain, billionaire investment guru George Soros said that Britain has yet to suffer the worst fallout from the credit crunch. The acute phase of the global crisis may have passed but the real economy is only just starting to feel the impact. Mr. Soros added the world was set for a period of greater instability with British house prices likely to fall, and no one knows how bad it’s going to get. Delivering his gloomy assessment on BBC Radio, he insisted: “The degree of uncertainty is also uncertain”. GBP/USD currently trading at $1.9666 as of 8:30 am, GMT.
Finotec Group Inc.
German Business Confidence Surprisingly Rises
German business confidence in May surprised for the fourth straight month, printing at 103.5 against expectations of 102.0. The survey of 7,000 executives improved from 102.4 in April, when it unexpectedly declined. The manufacturing and trade sectors saw the biggest jump in confidence increasing from 13.3 to 15.0 and from 4.0 to 6.2 respectively.The German economy has proven to be resilient as companies increased efficiency and reduced labor costs to remain competitive. The first quarter saw an increase of 1.5% in growth as demand from emerging markets remains strong, with increased automobile sales to China. The survey also showed that executives have grown more confident about the future outlook with the expectations component rising to 97.3 from 96.7 in April. The strong fundamental data will justifies the ECB staunch hawkish stance and focus on price stability, with speculation increasing that a future rate hike is now a possibility.
DailyFX
DailyFX
Tuesday, May 20, 2008
Subprime Not Gone, Inflationary Oil to Stay
High inflation and soaring oil prices are once again dictating the action in currencies after hitting a new all time high of $129.50 per barrel. A tumbling dollar has been the order of the day, shadowing all other activity in FX markets. The higher than expected US PPI figures are also a negative for risk appetite and equities as they serve an obstacle to further Fed easing at a time when employment, manufacturing, housing and construction have been on persistent deterioration. The intensifying losses in Wall Street (Dow -200 pts, S&P -15 pts) are speeding up the yen's gains on reduced risk appetite. The latest oil rise started yesterday after OPEC's acting president Khelil indicated the world has enough oil and that the cartel will not have a meeting before its scheduled September meeting. Khelil's comments countered the effect of Saudi Arabia 's earlier agreement to the US demands to raise output by 300K barrels per day. The oil rally was intensified by oil magnate Boon Pickens' prediction for $150 oil.
Euro hits a 3-week high at $1.5680 on the dollar's woes. Germany 's ZEW current conditions index rose to a stronger than expected 38.6 from April's 33.2, while the ZEW economic expectations index fell to an unexpectedly weak -41.4 in May from 40.7 in April. The current conditions index is more closely correlated with ECB interest rates than the expectations index. The euro was also boosted by remarks from ZEW Chief Economist Franz who said he expected the ECB to raise interest rates in the near-term.
But the story may be different from Germany upon tomorrow's release of the more influential IFO survey (4 am EST). Markets consider the IFO survey to be a better indicator of Germany 's economy because it is the survey of business sentiment rather than investor sentiment, which may be skewed by the equity market. The IFO has a strong track record in triggering notable moves in the euro. Major moves in the index have served as catalysts in triggering the euro past big figures ($1.30, $1.40 and $1.50). After having posted an unexpected string of three consecutive monthly increases between January and March, the IFO's climate index finally retreated in April to 102.4 from 104.8, the largest point drop since September 2001 -- was instrumental in dragging the currency from its $1.60 high to $1.5650 in a matter of days. With the euro having consolidated mostly between $1.5650 and $1.5350 over the past 4 weeks, the currency requires fresh direction from the Eurozone for the latest signals in sentiment and growth expectations.
What to Make of Euro's Dollar-Driven Gains? EURUSD firms on a combination of soaring oil prices and the stronger than expected current conditions index of the ZEW survey. We pointed out yesterday the remarks from OPEC's acting president Khelil indicating the world has enough oil and that the cartel will not call an early meeting prior to its scheduled September meeting. Having breached the $1.5650s, EURUSD faces key resistance at $1.5700.
With oil prices surging incessantly and the Eurozone business indicators sending mixed signs, traders may give the benefit of the doubt to the single currency and potentially lifting it past the $1.5720. But another sharp decline in the IFO will is likely lead to losses past 1.56 and 1.5520s.
Aussie Extends to 24-Year High
The Aussie hit fresh 24-yr high against the USD, breaking above 96 cents following a hawkish minutes from release from the Reserve Bank of Australia's interest rate decision earlier this month. The minutes raised the risk of a near-term interest rate hike as they showed the policy board "actively considering" rates from 7.25% to fresh 12-year highs in order to combat accelerating inflation. Although the minutes did acknowledge substantial slowing in financial market conditions, the market still expects a rate hike to be the next policy change by the inflation-targeting central bank. The challenging part about predicting RBA rate decisions based on inflation is that CPI is released on a quarterly basis rather than monthly, which involves substantial time for price pressures to rebound on the back of rising commodities despite a slowdown in the real economy. We expect the RBA to raise rates to 7.50% before the end of the current quarter.
The Aussie has also been boosted by the recent rebound in gold, which emerged on the heels of soaring oil prices and fresh dollar weakness. We have persistently called for our preference for the Aussie to be one of the year's strongest FX performers, and called long AUDGBP as our preferred trade of 2008. The pair is now above 9%.
Technically, the chart below shows the Aussie to have broken above a key trend line resistance prevailing since November, and is now ripe to call up 98 cent as the next key target. The chart also shows the pair is inside a larger upward channel, whose upper bound lies just above the 1.00 level. That means, barring any sharp reductions in global risk appetite (AUD negative) and macroweakness in Australia , traders have all the reasons to probe the parity level. Support climbs to 0.9570, backed by 0.9530. On the longer term, key foundation is firmly cemented at 0.9270.
Sterling Upside Still Untenable
Sterling pushes up to a 2-week high of $1.9724 on a combination of general USD weakness and overall strengthening in the EUR and AUD. The current gains are a reflection of oil-driven dollar weakness than improved fundamentals in the UK , thus paving fertile ground for sterling bears to function in this week on the Bank of England minutes (Wed), retail sales (Thur), CBI survey (Thur) and Q1 GDP (Fri). UK data have shown a remarkable consistency of undershooting forecast, leading to rapid and broad selling in the currency. The chart below shows a possible extension of the gains to reach $1.9755 before renewed selling prevails en route $1.95. Whether $1.9750s emerges first remains questionable, but the eventual path is more likely to end below $1.9550 and en route to 1.9500.
Yen Rallies on Whitney and Dollar Woes
Comments from Oppenheimer's high profile banking analyst Meredith Whitney shedding further pessimism on the banking sector into 2009 are further assaulting risk appetite to the benefit of the Japanese currency. The higher than expected US PPI figures are also a negative for risk appetite and equities as they serve as an obstacle to further Fed easing at a time when employment, manufacturing, housing and construction have been on persistent deterioration.
Anticipating a sharply negative open in Asia , we expect yen gains to reaccelerate and rag USDJPY towards 103.40, followed by 103.00. We expect 102.70 to emerge by end of week. Upside capped at 104.50.
If you wish to read this report in its entirety, please submit the required information in the link here.
Ashraf Laidi
CMC Markets Plc
Euro hits a 3-week high at $1.5680 on the dollar's woes. Germany 's ZEW current conditions index rose to a stronger than expected 38.6 from April's 33.2, while the ZEW economic expectations index fell to an unexpectedly weak -41.4 in May from 40.7 in April. The current conditions index is more closely correlated with ECB interest rates than the expectations index. The euro was also boosted by remarks from ZEW Chief Economist Franz who said he expected the ECB to raise interest rates in the near-term.
But the story may be different from Germany upon tomorrow's release of the more influential IFO survey (4 am EST). Markets consider the IFO survey to be a better indicator of Germany 's economy because it is the survey of business sentiment rather than investor sentiment, which may be skewed by the equity market. The IFO has a strong track record in triggering notable moves in the euro. Major moves in the index have served as catalysts in triggering the euro past big figures ($1.30, $1.40 and $1.50). After having posted an unexpected string of three consecutive monthly increases between January and March, the IFO's climate index finally retreated in April to 102.4 from 104.8, the largest point drop since September 2001 -- was instrumental in dragging the currency from its $1.60 high to $1.5650 in a matter of days. With the euro having consolidated mostly between $1.5650 and $1.5350 over the past 4 weeks, the currency requires fresh direction from the Eurozone for the latest signals in sentiment and growth expectations.
What to Make of Euro's Dollar-Driven Gains? EURUSD firms on a combination of soaring oil prices and the stronger than expected current conditions index of the ZEW survey. We pointed out yesterday the remarks from OPEC's acting president Khelil indicating the world has enough oil and that the cartel will not call an early meeting prior to its scheduled September meeting. Having breached the $1.5650s, EURUSD faces key resistance at $1.5700.
With oil prices surging incessantly and the Eurozone business indicators sending mixed signs, traders may give the benefit of the doubt to the single currency and potentially lifting it past the $1.5720. But another sharp decline in the IFO will is likely lead to losses past 1.56 and 1.5520s.
Aussie Extends to 24-Year High
The Aussie hit fresh 24-yr high against the USD, breaking above 96 cents following a hawkish minutes from release from the Reserve Bank of Australia's interest rate decision earlier this month. The minutes raised the risk of a near-term interest rate hike as they showed the policy board "actively considering" rates from 7.25% to fresh 12-year highs in order to combat accelerating inflation. Although the minutes did acknowledge substantial slowing in financial market conditions, the market still expects a rate hike to be the next policy change by the inflation-targeting central bank. The challenging part about predicting RBA rate decisions based on inflation is that CPI is released on a quarterly basis rather than monthly, which involves substantial time for price pressures to rebound on the back of rising commodities despite a slowdown in the real economy. We expect the RBA to raise rates to 7.50% before the end of the current quarter.
The Aussie has also been boosted by the recent rebound in gold, which emerged on the heels of soaring oil prices and fresh dollar weakness. We have persistently called for our preference for the Aussie to be one of the year's strongest FX performers, and called long AUDGBP as our preferred trade of 2008. The pair is now above 9%.
Technically, the chart below shows the Aussie to have broken above a key trend line resistance prevailing since November, and is now ripe to call up 98 cent as the next key target. The chart also shows the pair is inside a larger upward channel, whose upper bound lies just above the 1.00 level. That means, barring any sharp reductions in global risk appetite (AUD negative) and macroweakness in Australia , traders have all the reasons to probe the parity level. Support climbs to 0.9570, backed by 0.9530. On the longer term, key foundation is firmly cemented at 0.9270.
Sterling Upside Still Untenable
Sterling pushes up to a 2-week high of $1.9724 on a combination of general USD weakness and overall strengthening in the EUR and AUD. The current gains are a reflection of oil-driven dollar weakness than improved fundamentals in the UK , thus paving fertile ground for sterling bears to function in this week on the Bank of England minutes (Wed), retail sales (Thur), CBI survey (Thur) and Q1 GDP (Fri). UK data have shown a remarkable consistency of undershooting forecast, leading to rapid and broad selling in the currency. The chart below shows a possible extension of the gains to reach $1.9755 before renewed selling prevails en route $1.95. Whether $1.9750s emerges first remains questionable, but the eventual path is more likely to end below $1.9550 and en route to 1.9500.
Yen Rallies on Whitney and Dollar Woes
Comments from Oppenheimer's high profile banking analyst Meredith Whitney shedding further pessimism on the banking sector into 2009 are further assaulting risk appetite to the benefit of the Japanese currency. The higher than expected US PPI figures are also a negative for risk appetite and equities as they serve as an obstacle to further Fed easing at a time when employment, manufacturing, housing and construction have been on persistent deterioration.
Anticipating a sharply negative open in Asia , we expect yen gains to reaccelerate and rag USDJPY towards 103.40, followed by 103.00. We expect 102.70 to emerge by end of week. Upside capped at 104.50.
If you wish to read this report in its entirety, please submit the required information in the link here.
Ashraf Laidi
CMC Markets Plc
Wholesale Inflation Continues to Climb in April
In a reversal of what was expected, headline wholesale finished goods prices increased a more modest 0.2 percent while core PPI prices rose a stronger-than-expected 0.4 percent in April. After a large increase in March, food prices remained flat in April while energy prices, on net, slipped 0.2 percent. Inflation in the pipeline continues to build.
Core Rises More Than Expected
* Yr/Yr core PPI has risen to a 16 year high of 3.0 percent.
* Elevated commodity prices have encouraged more investment into the sector. This increased demand for equipment showed up in the April report as solid gains were reported in metal forming machine tools, mining & machinery equipment and oil field & gas machinery equipment.
Wachovia Corporation
Core Rises More Than Expected
* Yr/Yr core PPI has risen to a 16 year high of 3.0 percent.
* Elevated commodity prices have encouraged more investment into the sector. This increased demand for equipment showed up in the April report as solid gains were reported in metal forming machine tools, mining & machinery equipment and oil field & gas machinery equipment.
Profit Margins Remain Under Pressure
- Like last week's CPI report, energy prices slipped as increases in wholesale gasoline did not rise as much as was anticipated by the seasonal adjustment process.
- Wholesalers' profit margins remain under pressure in this inflationary environment. Weak domestic demand is making it difficult to pass along the price increases to retailers.
- Like last week's CPI report, energy prices slipped as increases in wholesale gasoline did not rise as much as was anticipated by the seasonal adjustment process.
- Wholesalers' profit margins remain under pressure in this inflationary environment. Weak domestic demand is making it difficult to pass along the price increases to retailers.
Wachovia Corporation
U.S. Market Update
Dow -205 S&P -14 NASDAQ -33
Markets opened broadly lower, selling off in the wake of gloomy PPI data and yet another leg higher in commodity prices. Core prices were seen climbing at twice the expected rate in April, while up 3% on a y/y basis, which was the biggest gain since the early 1990s. Retailers HD-4% and SKS-5.5% were off after reporting earnings this morning. HD came in above estimates but still saw profits for the quarter down 66% y/y and SSS -6.5%. The CFO noted that "all departments had negative sales growth," and that HD sees "softness in construction." Saks missed on earnings but saw improving SSS numbers and guidance for the quarter. Shares of Target were holding up initially following results, but have slipped since management noted they expected to see sluggish top lines sales trends to continue into near term. Organic food distributor UNFI has gained 7% on rising profits and positive guidance. Several Chinese telecom names were taking big hits this morning after recent quarterly reports: handset maker CNTF-16% after narrowly missing on earnings, wireless manufacturer GRRF-15% after just beating estimates. SMOD-19.75% was deep in the red after slashing its next-quarter EPS and revenue guidance due to a "difficult pricing environment" and delays at a supplier. A number of airline stocks were falling this morning, led by UAUA-8% and AMR-5.8%. Traders continue to discount surging fuel costs for the group and the general inability of the multitude of consolidation talk to find its way to fruition. One bright spot in morning trading was PEIX+20%, which was surging for a second day in a row on yesterday's very positive earnings report.
With US stock indices at session lows Treasury prices are testing session highs. The gains have been tempered somewhat by the elevated core PPI data, yields are at session lows with noticeable steepening in the benchmark curve. The 10-year yield is back below 3.80% while the two-year nearing 2.30% again. Piggybacking on this morning's PPI data was another surge higher in commodity prices. The energy complex is again the leader with Boone Pickens latest bullish comments sending oil towards the $130 mark. Pickens noted he sees oil likely to reach $150 a barrel this year. June gold is making fresh one-month highs above $920 along with silver. July corn, wheat and soybeans are trading up 1.5-2% in Chicago helping the CRB add 1% to 427.
In currencies the debate had centered in recent sessions on hawkish inflationary concerns among central bankers and the impact of slowing economic momentum on currencies, a point that the German Bundesbank highlighted in its monthly comments on Monday. The EUR/USD price action had reflected the ongoing debate as it probed the 1.54 to 1.56 range during the latter portion of last week. However, the commodity-related instruments have helped the dollar maintain a softer tone throughout the US morning. Comments from T. Boone Pickens pushed oil above the 129 level; Pickens noted in an CNBC interview that oil prices could rise to $150/bbl in 2008. European currencies were also aided by stronger-than-expected price data earlier in the session in both Germany and Switzerland. The weak German ZEW economic sentiment data was brushed aside for the time being as the weak USD-high commodity price theme resurfaced. The hawkish ECB comments on inflation seem to be having an effect on ZEW President Franz, who said that he personally believes the ECB will raise interest rates in near future. EUR/USD tested the 1.5675 level where chatter circulated of "quasi-government" offers building, capping the pair for the US morning. In addition, the Fed's Kohn noted this morning that the current Fed policy stance was appropriate and added that he saw the economy improving in the second half of 2008 into 2009. Kohn also noted that the USD's decline was helping exports but accentuating inflation concerns.
USD weakness was broad-based as the dollar lost over 100 pips against the majors in the session. USD/CHF probed below the 1.04 level, down 130 pips, while GBP/USD tested above its 100 week average of 1.9677 (up 200 pips in the session). USD/JPY was off 70 pips at 103.70. The AUD/USD hit fresh 24-year highs as it tested 0.9617 and USD/CAD dipped to two-month lows of 0.9875. Risk aversion was mixed in currencies as CHF firmed, while JPY was mixed. ITraxx crossover Index widened to 404 bps from 390 levels seen in early Europe. Weakness in equities helped bolster all sectors of the yield curve in the session. Over all, the curve steepened on safe-have buying. June Bunds +34 ticks at 113.59; June Gilts +23 ticks at 107.45.
Trade The News Staff
Trade The News, Inc.
Markets opened broadly lower, selling off in the wake of gloomy PPI data and yet another leg higher in commodity prices. Core prices were seen climbing at twice the expected rate in April, while up 3% on a y/y basis, which was the biggest gain since the early 1990s. Retailers HD-4% and SKS-5.5% were off after reporting earnings this morning. HD came in above estimates but still saw profits for the quarter down 66% y/y and SSS -6.5%. The CFO noted that "all departments had negative sales growth," and that HD sees "softness in construction." Saks missed on earnings but saw improving SSS numbers and guidance for the quarter. Shares of Target were holding up initially following results, but have slipped since management noted they expected to see sluggish top lines sales trends to continue into near term. Organic food distributor UNFI has gained 7% on rising profits and positive guidance. Several Chinese telecom names were taking big hits this morning after recent quarterly reports: handset maker CNTF-16% after narrowly missing on earnings, wireless manufacturer GRRF-15% after just beating estimates. SMOD-19.75% was deep in the red after slashing its next-quarter EPS and revenue guidance due to a "difficult pricing environment" and delays at a supplier. A number of airline stocks were falling this morning, led by UAUA-8% and AMR-5.8%. Traders continue to discount surging fuel costs for the group and the general inability of the multitude of consolidation talk to find its way to fruition. One bright spot in morning trading was PEIX+20%, which was surging for a second day in a row on yesterday's very positive earnings report.
With US stock indices at session lows Treasury prices are testing session highs. The gains have been tempered somewhat by the elevated core PPI data, yields are at session lows with noticeable steepening in the benchmark curve. The 10-year yield is back below 3.80% while the two-year nearing 2.30% again. Piggybacking on this morning's PPI data was another surge higher in commodity prices. The energy complex is again the leader with Boone Pickens latest bullish comments sending oil towards the $130 mark. Pickens noted he sees oil likely to reach $150 a barrel this year. June gold is making fresh one-month highs above $920 along with silver. July corn, wheat and soybeans are trading up 1.5-2% in Chicago helping the CRB add 1% to 427.
In currencies the debate had centered in recent sessions on hawkish inflationary concerns among central bankers and the impact of slowing economic momentum on currencies, a point that the German Bundesbank highlighted in its monthly comments on Monday. The EUR/USD price action had reflected the ongoing debate as it probed the 1.54 to 1.56 range during the latter portion of last week. However, the commodity-related instruments have helped the dollar maintain a softer tone throughout the US morning. Comments from T. Boone Pickens pushed oil above the 129 level; Pickens noted in an CNBC interview that oil prices could rise to $150/bbl in 2008. European currencies were also aided by stronger-than-expected price data earlier in the session in both Germany and Switzerland. The weak German ZEW economic sentiment data was brushed aside for the time being as the weak USD-high commodity price theme resurfaced. The hawkish ECB comments on inflation seem to be having an effect on ZEW President Franz, who said that he personally believes the ECB will raise interest rates in near future. EUR/USD tested the 1.5675 level where chatter circulated of "quasi-government" offers building, capping the pair for the US morning. In addition, the Fed's Kohn noted this morning that the current Fed policy stance was appropriate and added that he saw the economy improving in the second half of 2008 into 2009. Kohn also noted that the USD's decline was helping exports but accentuating inflation concerns.
USD weakness was broad-based as the dollar lost over 100 pips against the majors in the session. USD/CHF probed below the 1.04 level, down 130 pips, while GBP/USD tested above its 100 week average of 1.9677 (up 200 pips in the session). USD/JPY was off 70 pips at 103.70. The AUD/USD hit fresh 24-year highs as it tested 0.9617 and USD/CAD dipped to two-month lows of 0.9875. Risk aversion was mixed in currencies as CHF firmed, while JPY was mixed. ITraxx crossover Index widened to 404 bps from 390 levels seen in early Europe. Weakness in equities helped bolster all sectors of the yield curve in the session. Over all, the curve steepened on safe-have buying. June Bunds +34 ticks at 113.59; June Gilts +23 ticks at 107.45.
Trade The News Staff
Trade The News, Inc.
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