July 2009

Daily Commodities Fundamentals: Commodities End the Week on a Bullish Note

North American Commodity Update, Last Updated 7/31/2009 4:30 PM EST (GMT = EDT +5:00)

Commodities – Energy

Crude Prices Finish Week Off Strong

Crude Oil (WTI)   $69.220                         +$2.280                             +3.41%
Crude Oil future prices advanced further today, marking a complete retracement of Wednesday’s near 6.5% decline. Mixed fundamental data, including the US 2Q GDP report, led to Crude’s near 3% increase up towards $69-per-barrel. At 8:30 AM EST, the Department of Commerce reported a 1.0% contraction in GDP, less than the 1.5% expectation. However, further analysis is required to fully understand the report. In the report, 1Q GDP was revised down to -6.4% from -5.5%, meaning that the recession had been even more extreme than we thought. Also, despite the bullish total GDP figure, US Personal Consumption (a component of GDP) fell by 1.2%, a steeper decline than the projected 0.5% fall. Personal consumption is a leading indicator for future economic growth, as it can indicate both consumer confidence and spending. Many believe that the 2Q GDP was inflated by another one of its components, Government Expenditures.  Regardless, commodity traders were bullish following the news, leading to Crude’s increase. It will be interesting to see if Crude can finally hold onto these gains even though demand remains extremely weak. Next week could prove to be volatile, as three major national banks (BoE, ECB, RBA) are all due for their respective key lending rate decisions.

Department of Energy Inventories

Commodities – Metals

Precious Metals End Higher After Volatile Week of Trading

Gold                   $954.100                           +$16.800                           +1.79%
As expected, Gold continued to gain during intraday trading, again breaking through the psychological $950-per-ounce level before closing around $956. Today’s 2% price increase was largely due to extreme US dollar weakness, as investors again sold the safe dollar in favor of higher yielding currencies. The Dollar Index actually broke through key support level today around 78.3 before re-establishing itself, preventing breakout losses for the greenback. All the major currencies had gained over 1% on the dollar (excluding the Canadian dollar) as of 4:00 PM EST. Recall that Gold and the greenback tend to trade inversely as speculators use the metal to hedge against dollar weakness and/or inflation.

Silver                 $13.905                             +$0.420                              +3.11%
Silver closed the week on a positive note, adding another 3% to what has become a volatile three days. Like Gold, Silver benefitted from today’s extreme dollar weakness against its major competitors. Foreign currencies rallied against the greenback as risk appetite drove dollar to the absolute edge of a breakout. The US 2Q GDP report, though not immediately influential, ended up being a significant market mover today. On Monday, the US ISM Manufacturing figure is due at 10:00 AM EST. The survey questions US industry executives about future production, inventories, employment, etc. It has potential to drive Silver prices upon its release.

-Written by Jay Steinberg, CFDTrading Research
Questions/Comments about this article? Send them to JSteinberg@fxcm.com

European Stocks Sell Off Slightly as Bourses Close Higher for Third Week

Europe Session Key Developments

•    Commodities Continue to Move Higher
•    Earnings Prove Less Favorable

European Markets posted slight declines on the session while closing higher for the third week. Commodities continued to recovery for Wednesday’s sharp fall, while earnings today from major firms proved less favorable as profits tumbled and job cuts are expected to continue to fill the margin gap. Firms reporting results included airliners British Airways and Air France, both posting losses though showing sharp contrast to expectations and giving opposing outlooks. Miner Anglo American also reported a large decline in profit while beating out expected earnings. Oil companies Total and Eni, two of Europe’s largest, posted sharp declines in profit as energy demand remained poor as economies remain weak. That murky scenario is likely to continue as more layoffs add to lower demand in the coming months. Indicator releases today proved mostly positive, helping to lift otherwise bearish sentiment. Euro-Zone unemployment grew at a smaller pace than expected to 9.4% from 9.3%, compared to a forecast for a gain to 9.7% Also, the Swiss KOF leading indicator improved at a faster rate than expected, while US GDP data showed a smaller contraction in the second quarter of just two percent. While such figures allude to the possibility of growth in the third quarter, optimism was kept in check as first quarter GDP was revised down to a 6.4% contraction, well below the previously stated decline of 5.5%. Also, consumption showed a larger decline of 1.2% in Q2, versus estimates for a dip of just 0.5%. While layoffs continue to moderate, it remains uncertain whether demand will pick up as consumers continue to ration income into savings and paying off debts accumulated in recent years. Adding to the concern, Deutsche Bank CEO Ackerman commented that loans will be the next wave of the financial crisis as the weakened economy created by the subprime collapse and lower bank lending now leads to a negative feedback loop in which rising unemployment creates losses on safer loans.

FTSE 100                      4,608.36                   -23.25               -0.50%
The UK Index posted lower by half of one percent as weakness ensued in half of the sectors as Oil & Gas fell more than two percent. The sector saw considerable weakness with BG Group down 4.49% and Royal Dutch Shell lower by 2.51%. Traders sold into oil related firms as earnings from Total and Eni exposed weaker profits amid low demand and production. Others seeing declines today included insurer Standard Life, down more than four percent along with a 3.03% drop in Old Mutual. Despite the weakness today, several firms saw considerable gains including a rebound of 6.03% in Bayer and gains of several percentage points in miners Xstrata and Kazakhmys.

CAC 40                     3,426.27                   -9.22                 -0.27%
French stocks closed slightly off as traders took profit ahead of the weekend in five of ten sectors. Oil & Gas saw the largest drop at 2.70% as Total reported a sharp decline in profit and expected to continue job cuts and low production in a difficult environment for the firm. Also dropping considerable was Air France, down 4.08% after reporting a larger than expected loss in the second quarter while remaining pessimistic on the future. Despite the downside, several firms closed noticeably higher including a 10.05% rise in good maker PPR on news that first-half earnings came in ahead of estimates. Steelmaker Vallourec also moved sharply higher by 8.84% as Cheuvreux and Societe Generale raised their ratings on the stock following earnings. Meanwhile, improvements in the automotive market led tiremaker Michelin to report a smaller loss than expected which helped boost its stock by 6.64%

DAX                         5,332.14                    -28.52             -0.53%
Trading in the German market led to a loss of more than half of one percent as five of nine sectors fell and all those in decline fell more than one percent. Fertilizer maker K & S fell the most at 3.83% as Equinet lowered its rating on the firm. Also falling considerably was Deutsche Bank, following a statement by CEO Ackerman that bad loans will be the next wave resulting from the financial crisis. His comments came amid a recent decision by the bank to set aside one billion euros in the second quarter for loan loss provisions. Morgan Stanley responded by cutting its rating on the stock to “equal-weight” from “overweight.” Financial concern may rise further if other banks take action similar to those of National Australia Bank and Deutsche Bank.

IBEX 35                     10,855.10                   -19.30                 -0.18%
The Spanish index fell the least of the five majors while unemployment in the nation climbed to 18.1%, remaining the highest in the Euro-Zone. Health Care and Financials gained more than one percent while Telecommunications and Basic Materials fell more than two percent each. Toll operator Cintra rose the most on the session at more than 13% on a reverse share deal with Ferrovial. TV station operator Gestevision Telecinco continued to move higher by 5.82% to eight euros from six euros just in the prior month. Banks in Spain resisted pressure following Deutsche Bank’s comments as Banco Bilbao rose 1.77% while Banco Santander climbed 1.50%.

S&P/MIB                        20,575.52                    -243.08                  -1.17%
Stocks in Italy fell the most of the five majors as large firms included oil company Eni and insurers Fondiaria and Assicurazioni were seen declining. Eni fell nearly eight percent as the firm reported a sharp drop in earnings to 830 million euros from 3.44 billion in the year ago period. Profit missed estimates on an adjusted basis by 103 milliosn as the figure fell 60% to 900 million euros. Also, the firm cut its dividend to protect the credit rating and capital.

Written by Roman Kadinsky, CFDTrading Research
Please send any comments about this report to Rkadinsky@fxcm.com

Stocks in Asia/Pacific End the Week Higher Following the Rebound in Global Commodities

Asia Session Key Developments

• Japanese Jobless Rate Surges to 6-Year High
• Risk Appetite Support by Higher Commodity Prices

Stocks in Asia/Pacific End the Week Higher Following the Rebound in Global Commodities

The Asian equities market continued to rally into the end of the week, with the Nikkei posting a 1.89% gain on positive earnings and higher commodities prices. The MSCI Asia Pacific Index is now at its highest since September 26, with the markets continuing to turn a blind eye to the negative data out of Japan. A report by the Japanese government showed household spending rose less than expected in June, while price growth remained subdued in June and July, and the rise in the unemployment rate continues to reinforce a dour outlook for the domestic economy as households face tightening credit conditions paired with a weakening labor market.

NKY 225                                           10,356.83

The Nikkei 225 was 191.62 points (1.89%) higher as commodities continue to rally, with the index ending the week at 10,356.83, led by a 3.77% gain in financials. Shares of Mizuho Securities jumped 14.0% after the firm said net-income surged to JPY 129.5B from EUR 2.7B in the previous year, while Sumitomo Trust & Banking Co added 3.6% as the firm agreed to buy Citigroup’s asset management unit in Japan for JPY 120B. At the same time, Sony soared 6.8% after cost-cutting measures led to a smaller-than-expected loss for the second quarter, while Terumo Corp. jumped 6.42% on upgrades from Merrill Lynch and Nikko Citigroup. Tokyo Electron led the technology subsector higher, gaining 4.20% as it posted better than expected earnings and raised its sales forecasts.

HSI                                                         20,234.08

The Hang Seng added 339.25 points (1.68%) to end the trade at 20,234.08, driven by a 2.23% rise in financials. HSBC Holdings jumped 4.61% and Sun Hung Kai Properties rose 3.60% after Morgan Stanley recommended going long on developers. At the same time, shares of China Petroleum and Chemical Corp. were supported by higher crude prices, gaining 3.26% on the day, while China Shenhua Energy Corp. slumped 3.06% to weigh on the overall market.

ASX 200                                            4,244.00

Stocks in Australia pushed higher on Friday, following the rebound in global commodities. The ASX rose 53.60 points (1.28%) to close at 4,2440.00, led by a 2.13% rally in oil & gas. At the same time, financials gained 1.94%, with shares of Australia and New Zealand Banking Group gaining 4.45% after the firm announced that they are coming close to acquiring RBS’s Taiwan Assets. Meanwhile, telecommunications slumped 2.40% to weigh on the overall market, driven by a 2.49% decline in Telstra Corp after Credit Suisse lowered its rating for the firm to ‘underperform’ from ‘neutral.’

Notable Asian Session Event Risk / Economic Releases

European Stock Markets To Move On Region’s CPI & Unemployment Reports

Europe: What to Watch For

• Wall Street Rises To Highest Levels Since Last Fall
• Euro-Zone Consumer Price Index Show Onset Of Deflation
• Euro-Zone Labor Markets Deteriorating

US Markets rose to their highest levels since the fall of 2008 after strong waves of corporate earnings renewed investor confidence in equities.  Wall Street jumped on economic data showing the amount of people receiving unemployment benefits decreased, hinting at improving economic conditions.  Markets will be able to evaluate the US economy more accurately on GDP reports scheduled to be released at 12:30 GMT.  Euro-Zone Consumer Price Index is expected to fall -0.4% in the year end July, down from June’s reading of -0.1%.  The onset of deflation in the decrepit region could threaten to throw the economy into stagnation as businesses and consumers perpetually hold off spending to wait for the best possible prices.  Further corroborating evidence of a weak European economy, Unemployment Rates are set to rise to 9.7% in June from May’s 9.5%.  The deteriorating labor markets will weigh on recovery as consumers cut back on spending.

DAX 30   5360.66

Continental AG’s CEO resigned during his outspoken resistance to capitalize the auto parts giant under pressure from lenders.  The news comes after the company posted a second quarter loss of €190 million as an already ailing auto demand worsens.  With no events on the economic calendar, the German index is likely to reflect trends seen in comparable European markets.

FTSE 100   4631.61

Anglo American Plc, the largest investor in South Africa’s mining industry is scheduled to report earnings while commodity prices advance on increasing risk appetite in markets.  British Airways Plc will release results as volatile oil markets and cutbacks in travel spending drag on revenue.  Liberty International Plc, the largest owner of UK shopping centers may report better then expected earnings on retail sales rebounding in the year through June to 2.9%.

CAC 40   3435.49

Europe’s largest airline, Air France-KLM Group posted a first quarter loss of €431 million as passenger and cargo volumes were adversely affected by the global slump.  L’Oreal SA, the world’s largest cosmetics maker displayed their prowess of global diversification by reporting increased revenues of 2.6% attributed to strengthening demand in Asia and South America.

IBEX 35   10874.40

Spain’s largest lender Banco Santander SA and its rival Banco Bilbao Vizcaya Argentaria SA got its credit rating cut by Moody’s Investors Service as exposure to defaulting subprime mortgages and Spain’s deteriorating economy weakened the banks’ ability to payback creditors.

FTSE / MIB   20818.60

Italian Consumer Price Index is expected to rise 0.4% in the year end July, ebbing slightly from June’s reading of 0.6%.  The metric indicates some stability in prices as other European nations like Germany are threatened by deflation.  However, Producer Prices are surveyed at -7.5% in the year through June, showing future downward pressure on headline inflation reports.  Enel SpA, Italy’s largest utility reports first half results amid huge volatility in energy markets.

Upcoming European Session Event Risk / Economic Releases

Written by Kevin Yip, CFDTrading Analyst         For questions and comments email kyip@fxcm.com

Daily Commodities Fundamentals: Commodities Bounce Back After Yesterday’s Steep Declines

North American Commodity Update, Last Updated 7/30/2009 2:01 PM EST (GMT = EDT +5:00)

Commodities – Energy

Crude Prices Bounce Back 5% After Yesterday’s Steep Decline

Crude Oil (WTI)   $66.560                         +$3.210                             +5.07%
Volatility has been the story in the market for Crude Oil futures as yesterday’s 6.5% freefall was followed by a 5% price increase  to spike above $67-per-barrel during intraday trading. Yesterday’s Department of Energy stockpile report, which revealed a 5.15 million barrel increase in Crude Oil inventory as opposed to an expected 1.50 million barrel contraction, trimmed nearly one third of the commodity’s gains since mid-July. Demand for Crude has been historically weak this summer as companies limit their consumption. However, Thursday’s encouraging fundamental data releases and better-than-expected corporate earnings reports returned Crude to its winning ways of late. In early morning trading, the Housing Industry of Australia’s New Home Sales MoM figure for June was 0.5%, up from -5.6% in May. An increase in home sales signals a growing housing market, an essential component of a global economic recovery. In Germany, the Euro-Zone’s largest economy based on Nominal GDP, the unemployment rate was held constant since last month. The Euro-Zone’s Economic Confidence Indicator beat expectations, coming in at 76.0 (75.0 expected).  The positive fundamental news from the global economy heightened investor demand for risk appetite, leading to an increase in Crude future prices despite yesterday’s demand concerns. However, perhaps the most market-moving factor in Crude trading on Thursday was the barrage of optimistic corporate earnings releases that hinted towards an end to the global economic recession. This quarter in particular, projected EPS figures have been reduced so significantly that companies have managed to exceed expectations by simply cost cutting. As a result, nearly 80% of the S&P 500 companies that have reported their 2Q earnings beat expectations. And while the trend continued today, numerous companies not only posted good earnings but also improved their economic outlook for the remainder of 2009.  As we approach the end of a volatile week for Crude, the psychological $65-per-barrel level remains in the rearview mirror. The CFTC hearings have come to a close, but Chairman Gensler seems determined to regulate commodity speculation, saying that “inaction is just not acceptable.” Lingering concern of government regulation will continue to impact the broader commodity market.

Department of Energy Inventories

Commodities – Metals

Precious Metals Push Forward, Accelerate at US Session Open

Gold                   $936.000                           +$6.300                           +0.68%
During yesterday’s trading session, Gold future prices managed to avoid heavy losses by only losing 1%. Risk aversion had bid the US dollar against its major competitors as investors fled from higher yielding currencies towards the “safe-haven currency.” Recall that Gold and the greenback tend to trade inversely as investors use the metal to hedge against dollar weakness and/or inflation. Today’s rise in equities (the S&P hit its highest level in 9 months while the NASDAQ broke through 2,000 during intraday trading) and encouraging fundamental data reports renewed investment in  riskier assets, particularly the commodity-correlated Australian dollar, which outperformed all of its major competitors. The prospect of a global economic recovery carries with it inflationary fear, which may be confirmed by this evening’s Japanese Consumer Price Index report. Gold future prices saw nearly a full percentage point gain as a result, perhaps signaling a short-term re-test of the psychological $950-per-ounce price level.

Silver                 $13.460                          +$0.202                          +1.52%
Silver successfully bounced back from yesterday’s 3.5% decline, paring losses to close near the $13.500-per-ounce level. As was the case with Gold, dollar strength drove Silver prices downward yesterday. However, in addition to functioning as a precious metal, Silver holds its own industrial applications that make its future price particularly susceptible to fundamental data reports concerning global production. Yesterday’s disappointing US Durable Goods Orders figure (-2.5% actual vs. -0.6% expected) contributed to the metal’s steep decline; because Durable Goods last over three years by nature, they can be used as an indication of economic optimism regarding near-term growth.  During today’s trading session, fundamentals seemed to point in the opposite direction. Japanese industrial production increased for the 4th straight month, which got the market moving. In the US session, the advancement of equities kept Silver strong throughout the day. The US 2Q GDP report will be the main market mover tomorrow; GDP is expected to contract an additional 1.5%, indicating a reduced pace of recession after the 1Q 5.5% contraction. If GDP manages to beat expectations, Silver could see significant upside.

-Written by Jay Steinberg, CFDTrading Research
Questions/Comments about this article? Send them to JSteinberg@fxcm.com

European Stocks Commence Rally Following Recent Pause as Earnings Raise Optimism

Europe Session Key Developments

•    Commodities Stage Sharp Recovery
•    Earnings Reports Raise Optimism

European Markets resumed their rally with significant upside today on the hell on strong earnings from major corporations and commodities rebounding with crude oil up more than five perfect on the session. Indicator releases also added optimism to the fray as German unemployment fears were dismissed as the figure posted a loss of just six thousand jobs on a change to adjustments. Non-adjusted data shows 52,000 people added to the unemployment list, while the Federal Labor Agency estimated that approximately 30,000 rose on unemployment. Meanwhile, Euro-Zone figures came in better than expected on confidence readings. Major reports today included better than expected results from British Telecom, automaker Volkswagen, oil giant Royal Dutch Shell, engineering firm Siemens and Electricite de France. Also, Alcatel-Lucent reported its first profit in eleven quarters while French car maker Renault posted a larger than expected loss. Despite this, its shares were up and optimism exuded as the company raised its expectation for global car sales, narrowing the contraction forecast to 12% from 2008 compared to an earlier estimate for a 15% drop. While earnings provided helped to dismiss concerns that stocks are overvalued, there were some glimmers of weakness. Siemens’ report included lower new orders, its first decline since 2005, while Royal Dutch Shell plans to lay off workers amid its better than expected results. With stocks at fresh multi-month highs, it is unclear if the near-term is expected to see further upside as the rally now continues for the third week. Volatility index in the US declined only slightly from its roughly two-week high. The US dollar index, which tracks the currency against major crosses, fell today as risk appetite improved, but the index remains noticeably above support at 78.3 with potential upside still a real possibility should stocks retreat.

FTSE 100                      4,631.61                   +84.08               +1.85%
The FTSE climbed nearly two percent as the Basic Materials sector gained 5.81% following pressure in the previous session as commodities temporarily traded lower. Also seeing considerable gains was the Telecommunications sector, up 3.63%, and a 2.98% gain in Financials. British Telecom rose the most at 12.60% following better-than-expected earnings of £214 million versus estimates for nearly half that amount at £118.2 million. Also rising sharply was building materials firm Wolseley, up 10.17% on a report from Nationwide that supply of homes may be in a shortage as prices climb for the third month in July. Other firms leading the index include raw material producers Lonmin and Eurasian Natural, both up more than eight percent.

CAC 40                     3,435.49                   +69.87                 +2.08%
French equities rallied more than two percent as Technology rose 6.21% while Basic Materials and Telecommunications gained more than three percent. Alcatel-Lucent advanced more than nine percent as the telecom equipment maker reported its first profitable quarter in more than two years. Software and management services firm Cap Gemini also rallied more than eight percent following in-line profit while seeing expected only a small decline in full-year revenue of three to four percent. ArcelorMittal also saw its stock on the list of winners as commodities recovered and news circulated that the firm’s South Africa unit will raise some galvanized steel prices while most products will be unchanged.

DAX                         5,360.66                    +90.34             +1.71%
The German market closed higher with the smallest gain of the five majors as all sectors advanced and approximately 3.5% gains were noted in Technology and Telecommunications. Volkswagen shares gained the most at 5.69% on earnings of €283M that beat out estimates for the second quarter by nearly twenty percent. Steelmaker ThyssenKrupp also saw considerable upside of 5.66% as commodities moved sharply higher following the sell-off on Wednesday. Firm-specific news impacted as well as Goldman Sachs raised its estimate on the stock by 14% to €24, well above the close today at 21.46. Weakness proved minimal today with plastics maker BASF down 1.75% along with a 0.98% dip in Deutsche Bank.

IBEX 35                     10,874.40                   +212.80                 +2.00%
Stocks in Spain rose two percent as the index climbed on a 5.58% gain in Basic Materials and greater than two percent moves in four other sectors. 33 of 35 stocks traded higher into the close. Windturbine maker Gamesa rose the most at 8.12% following a sharp drop yesterday. ArcelorMittal also recouped losses with a gain of 7.25% while TV station operator Gestevision Telecinco continued to gain to the highest level for the stock since May with a move of 6.11%.

S&P/MIB                        20,818.60                    +536.63                  +2.65%
Italian stocks gained the most of the five majors as most stocks rose with several seeing considerable gains on upgrades. Tiremaker Pirelli rose 6.9% as four firms upgraded their recommendation for the stock. Also, steel tube maker Tenaris climbed 3.4% as UBS reiterated a buy rating on improving outlook. Italy’s second largest bank, Intesa SanPaolo also climbed sharply by more than five percent while utility Enel gained 2.1%.

Written by Roman Kadinsky, CFDTrading Research
Please send any comments about this report to Rkadinsky@fxcm.com

Dow Potential To 9,500 With Break Above Fibo Resistance

The rally above 8878 indicates that the corrective rally that began at the March low remains underway.  Corrections can take many different forms but the rally from 8087 is probably the final leg of the rally, which is maturing quickly (RSI is above 70 on the daily).  Near term weakness looks likely but the earliest level to expect a top would be 9834 (61.8% extension of 6470-8878 / 8087).  10516-11097 is another topping zone.

The Dow continues to be held in check by resistance at 9,123 -the 50.0% Fibo extension of 11,790-6,470 which could lead to a retrace. However, a break above there could see the blue chip index reach as high as 9,500.

The S&P is in the same position.  While a short term decline in order to correct the advance from 869 looks likely, the bear market rally is expected to extend to at least 1048 (61.8% extension of 667-956 / 869).

The S&P is in the same position.  While a short term decline in order to correct the advance from 869 looks likely, the bear market rally is expected to extend to at least 1048 (61.8% extension of 667-956 / 869).

The Nasdaq is in the same position as the other US equity indexes.  Additional strength should see a test of at least 2107 (61.8% extension of 1266-1880 / 1727).  2252-2341 is also a potential topping zone.

The NASDAQ is continuing its march toward 2,000 where we could see a significant retracement. However, an ultimate test of 2,059-the 61.8% Fibo remains a possibility.

Asian Stock Markets Push Higher Despite the Slump in Commodities, PBoC Pledges to Support Economic Activity

Asia Session Key Developments

• Japanese Industrial Outputs Rise 2.4% in June
• People’s Bank of China to Maintain ‘Moderately Loose’ Policy

The Asian equities market pushed higher on Thursday despite the slump in global commodities, with the ASX advancing 1.15% after Citigroup raised its outlook for the four-largest banks in Australia. At the same time, a report by the Bureau of Statistics showed building approvals jumped 9.3% in June to mark the biggest rise in four-years, and the rebound in the housing market is likely to encourage an improved outlook for the $1T economy as policymakers anticipate an economic recovery later this year. Meanwhile, report by the Japanese government showed industrial outputs fell at an annual pace of  14.3% in June, while vehicle production slumped 34.0% from the previous year, and  the slump in global trade may continue to weigh on the economy as businesses continue to face fading demands from home and abroad.

NKY 225                                           10,165.21

The Japanese benchmark equity index tipped higher for the second day, gaining 51.97 points (0.51%) to end at 10,165.21 in Tokyo. The rally was led by a 2.48% rise in consumer goods, with shares of Nissan and Honda Motors advancing 9.98% and 8.66%, respectively, after both firms announced better-than-expected earnings, while Mitsubishi Electric Corp jumped 14.70% after posting a less-than-expected loss for the quarter. In addition, Konami Corp added 6.54% as Credit Suisse raised the firms rating to ‘outperform,’ while Fujitsu Ltd. advanced 3.13% after Morgan Stanly increased its rating to ‘overweight.’ At the same time, Fanuc shed 2.18% after the firm announced a 85% drop in net income, while Sumitomo Metal Industries slumped 3.56% as the firm expects a slower recovery in global trade.

HSI                                                         20,234.08

The Hang Seng pared declines from the early trade and gained 98.58 points (0.49%) to close at 20,234.08 in Hong Kong, driven by a 3.15% rally in basic materials. Shares of China Shenhua advanced 3.82% after the central bank announced it will maintain a ‘moderately loose’ monetary policy to stimulate a sustainable recovery, with shares of Citic Pacific jumping 4.85%. At the same time, Hang Lung Properties added 2.29% after Goldman Sachs raised the firms rating to ‘buy,’ while Cnooc Ltd slumps 1.54% on the back of lower oil prices.

ASX 200                                            4,190.40

Stocks in Australia rallied on Thursday, with the ASX gaining 47.60 points (1.15%) to end the session at 4,190.40, led by a 2.46% gain in financials. Commonwealth Bank Australia advanced 4.31%, with shares of Westpac Banking Corp rising 2.69% after Citigroup raised its stock rating on the four-largest banks in the isle-nation. Meanwhile, oil & gas weighted on the market as the sector slipped 0.30% on the back of falling crude prices, with basic materials falling 0.21% following the slump in global commodities. At the same time, shares of Equinox Minerals declined 4.84% after its rating was cut to ‘neutral’ by UBS AG, while AGL Energy Ltd gained 2.73% after the firm secured a A$3.5B contract with Victoria state.

Notable Asian Session Event Risk / Economic Releases

European Stock Markets Look To Condition Of Europe’s Economy

Europe: What to Watch For

• Wall Street Ebbs On Falling Chinese Equities and Commodities
• Euro-Zone Confidence and Sentiment Indicators Hint Improvement
• Retail Purchasing Manager Index To Show Consumer Spending

US stocks declined for the second day as Chinese equities fell and commodities plummeted.  Equities have been pulling back from the recent earnings-fueled rally on indicators showing that the economy has not been performing in par with businesses.  Euro-Zone Economic Confidence is set to increase to 75.0 in July, up from June’s 73.3 reading.  Likewise, Business Climate Indicator, Consumer, Industrial, and Services Confidence are expected to beat out previous readings as firms’ outlook hint positive sentiment for economy.  Bloomberg’s retail purchasing manager index will help markets assess conditions in Europe’s retail industry as recent slumps in consumer spending has stifled growth and weighed heavily on industry earnings.

DAX 30   5270.32

German Unemployment Rate is expected to fall to 8.4% in July, dropping slightly lower from June’s 8.3%.  The continuing deterioration of German labor markets is set to weigh on the country’s income accounts as consumers cut back spending amid job losses.  The hit to the Euro-Zone’s largest economy is likely following a broader regional trend as ailing corporations lay off workers to cut back expenses.  The DAX 30 looks susceptible to heavy volatility as Siemens AG, BASF SE, and Volkswagen are scheduled to release results.

FTSE 100   4547.53

BT Group Plc, UK’s largest phone company is scheduled to report first quarter earnings.  Rolls Royce Group Plc, the world’s second largest aircraft engine manufacturer will report results behind General Electric, the biggest manufacturer, stating that sales of aircraft engines rebounded.  European oil giant, Royal Dutch Shell Plc is set to report earnings amid huge volatility in energy markets.

CAC 40   3365.62

Theolia, the French wind power producer who sat on the brink of bankruptcy in April, reported first half revenue rose 85% on the sale of lagging assets.  Auto part supplier Valeo SA suffered losses of €213 million as carmakers slashed production to manage with slumps in demand for automobiles.

IBEX 35   10661.60

Gamesa Corporacion Tecnologica SA, Spain’s biggest maker of wind turbines benefitted off markets’ shift toward renewable energy and increased earnings by 1.9% in the first half of the year.  Spain’s largest oil company, Repsol YPF SA, may report lower earnings for the second quarter as the company failed to successfully navigate the volatility seen in crude oil prices.

FTSE / MIB   20281.97

Italian Hourly Wages are expected to increase 2.8% in the year through June, highlighting some positive direction for labor markets.  Further increase in wages may help catalyze spending as consumers gain more purchasing power.

Upcoming European Session Event Risk / Economic Releases

Written by Kevin Yip, CFDTrading Analyst           For questions and comments email kyip@fxcm.com

Stocks Decline For Second Day After Plummeting Durable Goods Data

US Session Key Developments

• Durable Goods Orders Decline 2.5% in June
  
• Colorado and Six Neighboring States Stabilizing, Says Fed “Beige Book”

Stocks Decline For Second Day After Plummeting Durable Goods Data

U.S. stocks declined for a second straight day after Durable Goods Orders in June plummeted 2.5% – much worse than the anticipated contraction of 0.6%. To make matters worse, the previous month’s release was revised downward by o.5 percentage points to 1.3%. Basic Materials as a sector plummeted the most in the S&P 500, by 2.36% on the news. Alcoa and DuPont slipped 2.22% and 1.86%, respectively. The Federal Reserve released its “Beige Book” survey of the region surrounding and including Colorado. In it, the central bank’s research team found that economic conditions had “showed further signs of stabilization in June.”

Dow 30              9070.72             -26.00                        -0.29%

A mixed day on the Dow saw six of its nine sectors decline with the broader market. Oil & Gas was the second-worst performing sector with Chevron losing 1.79% on speculation the crude supplies had increased.

SPX 500              975.15                 -4.47                        -0.46%

Today’s decline saw implied volatility on the S&P 500 rise by 0.6 percentage points to 25.61%. The rise in the VIX index implies that market “fear” is at a two and a half week high. The down day ultimately forced 66% of the stocks in the 500-stock index to finish in the red.

NAS 100             1967.76                -7.75                          -0.39%

Only the Health Care sector managed to finish with its head above water with only 49% of its stocks ending the day ahead. Technology stocks were hit brutely after Yahoo plummeted 12.08% on speculation that regulators would not approve of its search engine deal with Microsoft.

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