July 2009

Hang Seng Rises to 11-Month High, Reserve Bank of Australia Maintains Improved Outlook

Asia Session Key Developments

• People’s Bank of China to Hold ‘Moderately Loose’ Policy
• RBA to Tighten Policy Next Year

Hang Seng Rises to 11-Month High, Reserve Bank of Australia Maintains Improved Outlook

Stocks in the Asia/Pacific continued to advanced following the rise in risk appetite, with the Hang Seng ending the session at an 11-month high. At the same time, Reserve Bank of Australia Governor Glenn Stevens held an improved outlook for the $1T economy and downplayed the severity of the global recession, stating that the economic downturn is not the worst since the post-war period. Moreover, the central bank head said demands for home loans have improved significantly, with the jobless rate rising at a slower pace than initially expected, and the comments suggests the RBA may tighten policy in the first half of the following year as growth prospects improve.

NKY 225                                           10,088.66

Stocks in Tokyo were marginally lower, with the Nikkei edging down 1.40 points (0.01%) to 10,087.26, led by a 0.53% drop in industrials. At the same time, financials gained 1.38% to lead the market higher, with shares of Sumitomo Realty & Development advancing 5.88%. Meanwhile, Sumitomo Mitsui Financial Group added 3.91% after Nomura Holdings recommended to buy the stock, while shares of Mitsubishi UFJ Financial Group added 0.36%. At the same time, JFE Holdings, the second-largest steel producer in Japan, gained 7.25% after Goldman Sachs raised the firms rating to ‘buy,’ while Sapporo Holdings rose 5.45% after the firm said it expects a less-than-expected loss for the first half of the year.

HSI                                                         20,624.54

Stocks in Hong Kong were higher on Tuesday, with the Hang Seng gaining 372.92 points (1.84%) to close at an 11-month high of 20,624.54, driven by a 3.69% rally in telecommunications. China Mobile climbed another 4.04% after the firm reported mobile subscribers expanded last month, while shares of China Shenhua Energy added 3.91% after the firm signed an agreement to supply Shenzhen Energy with coal. At the same time, Industrial and Commercial Bank of China advanced 3.83% after the central bank pledged to maintain a ‘moderately loose’ policy stance going forward.

ASX 200                                            4,169.50

The ASX 200 was 29.90 points (0.72%) higher on Tuesday, ending the session at 4169.50. Consumer goods advanced 1.46% to lead the index higher,  with shares of Billabong International rising 5.51% after the central bank Governor reinforced an improved outlook for the $1T economy. At the same time, National Australia Bank gained 2.90% following the comments from the central bank head, while Equinox Minerals was trading 5.14% higher following the rise in commodity prices. Meanwhile, NAB business confidence index jumped to -4 from -24 in the first quarter as the government took unprecedented steps to stem the downside risks for growth and inflation, while the Conference Board’s Leading Index fell for the first time in 3 months as a result of the slump in global trade.

Notable Asian Session Event Risk / Economic Releases

European Stock Markets Look Flat On US, Asia Session

Europe: What to Watch For

• US, Asian Markets Appear Range Round On Mixed Reports
• French Business Survey, Italian Consumer Confidence Index On Deck

European stock exchanges look set to follow Wall Street’s and Asia’s sidestep as no significant economic data appear on the calendar.  US markets were flat as positive and negative reports came in on corporate profits and new home sales.  New home sales smashed expectations, exceeding surveyed figures by seven percent to 11.0%.  However, the good news was weighed down by weak earnings reports from the retail, insurance, and telecommunication industries.  Likewise commodity markets remained flat with oil ticking slightly lower by -0.26%.  French Business Survey Overall Demand and Italian Consumer Confidence Index are set to indicate slight improvement in Euro-Zone’s optimism for recovering conditions.

DAX 30   5251.55

Germany’s largest bank Deutsche Bank AG plans to release second quarter results.  Markets remain hopeful for strong earnings as US financial companies showed better then expected profitability in recent weeks.

FTSE 100   4586.13

BP Plc, Europe’s second largest oil company is scheduled to release second quarter earnings which were plagued by huge volatility in the commodity markets.  Provident Financial Plc, which has been plagued by losses on defaulting subprime loans, is expected to report earnings.

CAC 40   3372.36

French Business Survey Overall Demand is scheduled to be released; its previous reading continued to push new lows to -60.  The report is likely to show some correction as French Consumer Spending increased to 1.2% in the year end June from May’s -0.3%.  A rebound in spending is likely to put upward pressure on overall demand as consumers buy more goods and services.

European Aeronautic, Defence & Space Co, the owner of Airbus SAS reports second quarter earnings.  The report will help markets evaluate the current investment condition of airlines as many look to selloff unprofitable business segments and consolidate into larger, stronger corporations.   The French retail industry was hit hard as shopping giant Klepierre SA and Louis Vuitton Moet Hennessy SA said profits fell tremendously as consumers cut back discretionary spending.

IBEX 35   10591.70

Spanish builders Fomento de Construcciones y Contratas SA and Acciona SA are likely to report grim second quarter earnings as fellow builder Obrascon Huarte Lain SA reported that they expect very low activity of homebuilding as the number of unsold properties rise.  Banco Bilbao Vizcaya Argentaria SA, Spain’s second largest bank may report second quarter profit increased 12% on higher interest income.

FTSE / MIB   20346.10

Italian Consumer Confidence Index is expected to edge up to 105.8 in July, rising from June’s 105.4.  The incremental increase seems speculative as Italian Retail Sales dropped lower then expected in May.  The optimism may be attributed to positive news from corporate earnings worldwide, sparking hopes of a pending recovery.

STMicroelectronics NV, Europe’s biggest chipmaker will release second quarter results and help markets assess investment and production in the tech industry.

Upcoming European Session Event Risk / Economic Releases

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

Stocks Finish Green After Home Sales Data Sparks Optimism

US Session Key Developments

• New Home Sales Stronger Than Expected In June
  
• Centex Rallies 9.1% on Home Data
  

Stocks Finish Green After Home Sales Data Sparks Optimism

Stocks managed to finish the day ahead after spending most of the day in negative territory, allowing the Dow to add to it’s largest two-week rally since 2000. Positive economics data, however, helped prevent equities from slipping. Indeed New Home Sales in June rose by 11.0% after economists forecast the figure to rise by only 3.0%. The latest figures came after May’s upwardly revised sales figure increased 2.4%. Signs of a bottoming housing market could not have been clearer after today’s release – and investors reacted. Centex led homebuilders today, surging ahead 9.1% after the data release.

Dow 30              9108.51             +15.27                        +0.17%

A mixed day on the Dow saw only four of the nine sectors in the index finish in the green. The best performing one, Basic Materials, jumped 1.46% after Alcoa bulldozed ahead as options on the stock pointed toward a buying signal.

SPX 500              982.18                 +2.92                        +0.30%

The VIX (fear gauge) declined today rose substantially, by 1.19 points to 24.28. The 5.2% increase in the level of volatility implied on the S&P 500 came despite a strong performance by Financials. Indeed the sector performed the strongest, by 1.49%.

NAS 100             1967.89                +1.93                          +0.10%

NASDAQ had a mostly solid day, with only Technology and Consumer Goods finishing down. The former declined as small-cap stocks took major hits after implied volatility rose.

Japanese Stocks Hit Resistance, Australian ASX Benchmark Well Beyond Its Ceiling

Nikkei 225

The Nikkei’s reversal over these past two weeks has been fully charged by momentum. In fact, the Japanese benchmark index has seen its most aggressive advance in over two decades. Now, however, we have come upon the first significant level of resistance to be concerned with. After the gap higher, Monday’s advance was stalled at the same level as the swing high from early July. This is a psychological barrier though and is a direct conflict with the market’s underlying trend. Should the strong bias maintain its course, a forced break could essentially be catalyzed to significant follow through. However, with a long-term 50% Fib 130 points above said level, at least a temporary break seems overdue. How long can this record breaking rally last without some relief?

S&P/ASX 200

Though the Japanese market is the focus among the bullish crowd with its strongest rally in decades, the Australian ASX could arguably be considered a more bullish-centric. Advancing 9 of the past ten active sessions, the advance is steady – if yet still slowing. Resistance at this point is more a condition of momentum rather than solid levels. The chop that preceded the October/November financial seizure offers a wide net to hold technical traders back; but a long-term 38.2% Fib at 4,185 may offer something more tangible to work with.

Hang Seng

The Hang Seng’s most recent, bullish leg has not been as clear as some of its Asian region counterparts; but the general direction and momentum are hard to argue with. Once again riddled with gaps, we have seen this surge push through its range of highs through 18,850/19,000. Looking for potential resistance on this run, there is an immediate level to be concerned with in the 61.8% Fib pulled from the May to October 2008 bear wave at 20,385. Perhaps more prominent is the support this region (20,500/350 offered going back to 2007. However, it should be noted that technical levels on the Hang Seng are rarely held to be exact turning points. Therefore, we will watch momentum rather than hard levels to gauge the potential for corrections.

Written by: John Kicklighter and Jamie Saettele, Strategists for CFDTrading.com
Questions? Comments? You can email them to John at jkicklighter@cfdtrading.com.

Treasuries’ Pullback Struggling for Momentum

Treasury Note (10-Year)

Treasury yields have picked up over the past two weeks; but the bearish pull in 10-year Treasury Note futures has been relatively constrained when compared to the performance of the US dollar or Dow. A higher time frame chart shows there is a bullish underlying trend still in place starting with the trendline that began in late June of 2008 and has since notched confirmation in October and June of this year. However, this is a relatively loose level. Therefore, if there is a break below the 115-27 range low that has stood as support for the entire month (and offers a minor potential head-and-shoulders formation), there could be a short-term break and run to the next level of support at 114. A rebound on the other hand would initially target 118.

UK Gilt (10-Year)

Gilts have finally overrun range support at 116.50/00 that has stood as a floor for the UK debt market since November. This move confirms the tenacity and consistency of the bearish trend channel that has maintained the market’s pace since the March reversal. From a technical perspective, this past week’s bearish break was significant and could be considered the breaking of a neckline on an extended head-and-shoulders formation. However, the follow through on this technical shift (at least initially) has been relatively restrained. There is a notable 50% Fib of the last major bull wave around 115.00/25; but this lacking breakout has more to do with momentum. Should there be a successful test and rebuff of resistance founded in the former range support (which coincides with the top of the bearish trend channel over the past four months), it would suggest a steady downtrend.

German Bund (10-Year)

The Bund’s bullish break above 121.50 lasted for a little more than a week before the floor once again dropped out from underneath bulls. A look to the daily chart shows a clear and deliberately formed reversal; but the progression on the decline has been choppy. Now, a familiar level of support comes into view in the 120 pivot that acted as resistance between May 25th to June 19th – which also happens to be the mid-point of the June rally and 38.2% retracement of the larger July 2008 to March 2009 advance. A weekly view of this market shows a lack of regard to even clear levels like these; but should broader market activity remain constrained, this floor may hold up.

Japanese Government Bond (10-Year)

Rarely does the benchmark 10-year JGB bond futures contract respect a technical a distinct technical level. Oftentimes, a clear level of support or resistance is warped and bent before momentum takes off in the opposite direction. However, the low-hanging support at 139 (there was a more absolute high in the range from 139.30/50) proved itself to be a clear barrier to price action. The subsequent retracement from these highs is much more restrained that the June rally – suggesting it could be ultimately be a correction in a more progressive advance. Short-term support is seen around 138; but the next significant floor is not noted seen until 137.25 (a notable pivot and short-term 50% Fib retracement.

Written by: John Kicklighter and Jamie Saettele, Strategists for CFDTrading.com
Questions? Comments? You can send them to jkicklighter@cfdtrading.com

European Stocks Continue to Rise on Confidence and Financial Optimism

Europe Session Key Developments

•    Crude Moves Closer to $69 Per Barrel
•    Optimism in Financials Continues on Commerzbank

European Markets continued to move higher, extending two weeks of gains, as German optimism and higher commodities helped to lift stocks at the start of the trading week. Also, a large increase in US home sales helped to boost confidence that the worst of the recession and housing difficulties may be in the past. Indicator releases today included the Hometrack housing survey in the UK, which came in paltry with no increase in price for the second straight month, while the annualized decline narrowed. Other news included the GfK confidence survey, which was expected to post no growth but instead came in noticeably higher at 3.5. Financial stocks continued to move higher as the LIBOR rate fell below 0.50% for the first time while the spread between Libor and overnight indexed swaps remains high at 31 basis points. Also, Commerzbank reached an agreement with LGT Group to sell its Dresdner Bank unit. Meanwhile, in automarkets, Volkswagen concluded its acquisition talks with Porsche and may sell stock to protect the firm’s credit rating after acquiring Porsche debt.

FTSE 100                      4,586.13                   +9.52               +0.21%
Stocks in the British index closed higher by more than two-tenths of a percent as four sectors advanced with greater than one percent gains seen in Oil & Gas and Basic Materials. Higher commodity prices helped the two sectors lead the index into a gain while Financials, the bellwether of growth in equities in recent weeks, closed lower by 0.38%. Overall six of ten sectors declined while just over half of the 102 stocks closed higher. Leading gains was education company Pearson with a 12.05% rise as the firm intends to expand investment and raised guidance for the second half. Also up noticeably was Lloyds, higher by 6.85% as the bank named a new chairman and comments by Chancellor of the Exchequer Darling alluded to improvements in the sector. On the other end, packaging materials firm Rexam fell the most by 12.12% as Goldman Sachs removed the firm from its conviction buy list and news spread of an equity raising plan.

CAC 40                     3,372.36                   +5.91                 +0.18%
Trading in France led to the smallest gain of the five majors as seven of ten sectors advanced along with half of the 40 stocks. Utilities climbed the most at 0.71% while Consumer Goods fell the most at 1.21%. Moves in the market proved minimal however with the highest move in two stocks up just over two percent while automaker Peugeot fell the most at 3.54%

DAX                         5,251.55                    +22.19             +0.42%
German stocks closed higher by nearly half of one percent as three sectors gained more than one percent while Consumer Goods fell 1.61%. Movements lower were minimal with automakers showing the most weakness as Daimler fell 2.44% while Volkswagen and BMW saw moves in excess of one percent to the downside. On the leading edge, Commerzbank rose the most at 5.84% as it agreed to sell its Dresdner Bank unit, while steelmakers ThyssenKrupp and Salzgitter gained more than two percent each on higher commodities.

IBEX 35                     10,591.70                   +153.10                 +1.47%
The Spanish index gained the most of the five majors as the Financial sector climbed 2.57% while Technology and Healthcare fell more than one percent. More than two-thirds of stocks closed higher with the largest move seen in construction company Obrascon Huarte Lain. The firm saw its shares rise 5.38% as speculation of a housing recovery fueled optimism along with Cheuvreux raising its rating on the stock to “outperform” from “underperform” Also continuing to gain, TV station operator Gestevision Telecinco advanced 4.63% while the heavily weighted Banco Santander posted a 3.4% gain as Citigroup raised its price estimate on the stock.

S&P/MIB                        20,346.10                    +20,346.10                  +0.92%
Italian equities climbed nearly one percent as banking stocks advanced. Banco Popolare rose two percent while the nation’s largest bank, UniCredit, gained 2.5%. Utility Enel saw a gain of 1.3% as Societe Generale recommended the stock with a “buy” rating. Also seeing a considerable move were shares of oil company Eni, up 2.4% as crude traded higher before the close of European markets.

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

Daily Commodities Fundamentals: Risk Appetite Drives Crude, Metals Higher

North American Commodity Update, Last Updated 7/27/2009 3:40 PM EST (GMT = EDT +5:00)

Commodities – Energy

Crude Prices End Slightly Higher, Testing $69 During Intraday

Crude Oil (WTI)   $68.300                         +$0.250                             +0.37%
Crude Oil future prices edged higher during today’s trading session, managing to close with slight gains after testing levels all the way up to $69-per-barrel. Early this morning, Crude soared on an extremely upbeat US Home Sales report, which showed an 11% increase compared to an expected 3%. Inventories were also the lowest they have been in over a decade. However, around the same time, disappointing earnings reports emerged from both Verizon and Aetna, causing Crude to pare its previous gains. As has been the case for weeks, investors seem to be ignoring the fundamental lack of demand for Crude when pricing the commodity; despite the extremely low demand, speculation continues to drive future prices higher. Further gains are certainly not out of the question, as any upbeat fundamental data will drive Crude higher.

Upcoming Department of Energy Inventories

Commodities – Metals

Silver Outperforms Gold on Good Day for Metals

Gold                   $957.500                           +$1.600                           +0.17%
Gold future prices spiked to nearly $962-per-ounce during the Asian trading session before falling back near opening levels near $956. Gold saw initial gains due to falling risk aversion; the US dollar was down across the board today (excluding the Japanese Yen) as investors flock to higher yielding currencies. The prospect of a global economic recovery led to a bid up of the Australian dollar in particular during today’s session. Gold and the greenback often trade inversely as investors use the metal to hedge against dollar weakness/inflation. It seems as if Gold futures are attempting to break away from the psychological $950 level, but the absence of a significant catalyst has muted any real gains.

Silver                 $14.025                               +$0.150                          +1.08%
For the first time this month, Silver future prices broke above the $14-per-ounce level before retracing slightly. Silver is currently trading above the $14 level, a result of heightened economic optimism. Positive fundamental data doubly affects the metal, which functions as both a hedge against dollar weakness and an input in industrial production. An encouraging US Home Sales report coupled with a better-than-expected German GfK figure calmed investors nerves resulting from poor corporate earnings today. Silver may fall back below $14 as investors take the opportunity to sell, but bullish fundamental data could serve as a support.

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

Nasdaq Looking To Test 2,000, Will Retrace Follow?

The Dow set a new yearly close at 9,093 and is looking to test resistance at 9,123 -the 50.0% Fibo extension of 11,790-6,470. A break above there could see the blue chip index reach as high as 9,500.

The S&P 500 has risen to its highest level since last November setting a new yearly high of 979. A break above Fibo resistance leaves 1,000 and the November 4th high of 1,075 as the next barriers.

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.

Nikkei Marks Longest Winning Streak Since 1988, Hang Seng Closes Above 20,000

Asia Session Key Developments

• Nikkei Reaches Longest Winning Streak in 21 Years
• Sichuan Expressway Co. IPO in Shanghai Nearly Triples In Price

Nikkei Marks Longest Winning Streak Since 1988, Hang Seng Closes Above 20,000

Stocks in the Asia/Pacific extended gains for the 10th day, marking the longest rally since 2004, while the Nikkei posted its longest win streak since February of 1988 following the rebound in risk appetite. However, firms in the the MSCI Asia Pacific Index remains overvalued at an average of 24.5 times their estimated net income, which reinforces expectations for a pullback in global equities over the near term. At the same time, as the U.S. earnings seasons continues to beat market expectations, positive outcomes this week may continue to support the rally in the global equities market.

NKY 225                                           10,088.66

The Nikkei advanced for the ninth-day to marking the longest winning streak since 1988, adding 144.11 points (1.45%) to close at 10,088.66, led by a 2.43% rally in technology. Nomura Holdings and Daiwa Securities Group advanced 3.14% and 4.49%, respectively after the Nikkei newspaper said both firms may book profits for the quarter ending June 30^th, while Nidec Corp added 3.5% after the firm raised its earnings forecast. At the same time, Nippon Yusen shed 4.55% to lead the market lower, with shares of Kawasaki Kisen Kaisha slumping 3.98% after they lowered the annual forecast.

HSI                                                         20,251.62

Stocks in Hong Kong were higher on Monday, with the Hang Seng Index advancing 268.83 points (1.35%) to close above 20,000 for the first time since the collapse of Lehman Brothers. China Mobile jumped 4.22% after a newspaper report said the firm may be one of the first Hong-Kong listed firm to sell stock in mainland China, while China Shenhua Energy rose 3.90% on the back of higher commodity prices. Meanwhile, Sun Hung Kai Properties gained 3.39% after reports were released saying Hong Kong home prices may increase 32% by the end of 2010.

ASX 200                                            4,139.60

The ASX 200 was up 49.80 points (1.22%) on Monday to end the session at 4,139.60, led by a 2.98% rally in telecommunications. At the same time, basic materials added 1.44% on the back of higher commodity prices, with oil & gas advancing 0.94%. Meanwhile, Macquarie Group pared losses from the previous week despite speculation surrounding the news that Macquarie Airports might become its own entity. At the same time, Goodman Group advanced 3.37% after announced plans to raise A$1.5B from the capital markets, while shares of Leighton Holdings rose 2.23% after the firm was awarded two contracts totaling $735M.

Notable Asian Session Event Risk / Economic Releases

European Stock Markets To Move On German Cfk Survey

Europe: What to Watch For

• Asia Shares Advance After Bernanke Reiterates Confidence In US Economy
• German Cfk Survey To Show Stalled Consumer Confidence

European stock exchanges look set to follow gains seen in the Asia session on better then expected corporate earnings.  Ben Bernanke stated in a publicity event that he has “tremendous confidence” in the US economy.  The statements sat well with Asian markets as recovery hopes of the world’s largest importer strengthened.  The German Cfk Consumer Confidence Survey will help markets evaluate the consumer sentiment in the Euro-Zone’s largest economy.

DAX 30   5229.36

German Cfk Consumer Confidence Survey is set to remain flat for August as lagging consumer sentiment stalls the reading after rising two consecutive months in June and July.  Expectations indicate that rising unemployment is weighing on confidence in Germany’s economic performance.  Qatar’s sovereign wealth fund may buy 10% of Volkswagen AG, less than planned.

FTSE 100   4576.61

Barclays Plc, one of Great Britain’s largest banks is expected to report second quarter earnings that are in line with results from the first quarter.  EasyJet Plc, Europe’s second biggest discount airline is scheduled to announce expansion plans in hopes to gain market share as cash-strapped travelers scan the internet and agencies for the best deals.  Oil giant Royal Dutch Shell Plc will announce plans to slash as many as 600 senior management jobs in an effort during their cost cutting restructuring program.  Europe’s biggest discount airline Ryanair Holdings Plc, will release earnings amid a weak travel industry hit hard by curtailed spending from consumers and businesses.

CAC 40   3366.45

Liqueur producer, Remy Cointreau SA’s CEO expects that the bottom of the recession will linger through the third quarter as unemployment in the Euro-Zone continues to rise and business investment halts.  Societe Television Francaise, the owner of France’s most popular TV channel reported that income slid 61% as companies cut advertising spending.

IBEX 35   10438.60

Banco Popular Espanol SA, Spain’s third biggest bank may report that earnings fell 45% according to analyst estimates.  The Spanish builder Obrascon Huarte Lain SA expect very low activity from Spain’s homebuilders for the next few years as unsold properties rise.

FTSE / MIB   20161.18

The Bank of Italy stated that banks which issued the government convertible bonds will be able to classify the issuance as equity.  The move can have a significant effect on corporate balance sheets that are required to have a certain amount of capital to maintain low leverage ratios.

Upcoming European Session Event Risk / Economic Releases

Written by Kevin Yip, CFDTrading Analyst

For questions and comments email kyip@fxcm.com

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