September 2009

Asian Stocks Slump as Nomura Holdings Sells Record Shares, Commodities Falters

Asia Session Key Developments

• Nomura Holdings Sells Record Shares to Expand North American Business
• BoJ Sees Ongoing Turmoil in Domestic Economy

Stocks in Asia/Pacific were mostly lower on Friday, with the Nikkei leading the decline after Nomura Holdings sold JPY 511.3billion shares to fund its oversea expansion. At the same time, the Bank of Japan meeting minutes said “funding conditions of large firms was significant” after raising its assessment of the economy last week, but went onto say that lending to “small firms and firms with low credit ratings remained limited” as the financial system remains weak. In addition, policy makers noted “jobs and incomes continue to deteriorate and both business investment and consumption remain weak’ following the slump in global trade. Meanwhile, policy makers clarified that any decision made by the central bank to allow the emergency programs to expire will not be indicative of future rates, and have maintained the deadline for December 31.

Nikkei 225                          10,265.98

Stocks in Japan tumbled on Friday, with the Nikkei slipping 278.24 points (2.64%) to close at 10,265.98 as all 10componets declined on the day. Financials pushed 5.06% lower to lead the decline, with oil & gas and telecommunications shedding 3.82% and 3.63% respectively. Shares of Nomura Holdings, Japan’s biggest brokerage, slipped 15.86%, its largest decline in more than three decades subsequent to announcing a record JPY 511.3billion share sale to fund its expansion overseas, while Japan Airlines plunged 7.64% as the firm failed to obtain its fourth bailout from the government. At the same time, Tokyu Land Corp fell 6.78% as JPMorgan Asset Management (Japan) decreased its ownership in the company from 7.35% to 6.01%, while Sumitomo Realty & Development slipped 5.62% after Daiwa Securities downgraded the firms rating to “outperform” from “buy.”

Hang Seng                        21,024.40

The Hang Seng ended the week lower, with the index falling 26.33 points (0.13%) to end at 21,024.40. The index had its worst week of the month as energy and commodity prices pulled back, while financials remained weighed as investors remained weary of the rise in risky loans. Seven of the nine components tipped lower on the day, driven by a 0.85% decline in technology, while basic materials and utilities advanced 0.70% and 0.08% respectively. Shares of PetroChina slid 0.99% on the back of lower crude prices, while Aluminum Corp of China dropped 0.92% following the slump in global commodities. At the same time, China Mobile slipped 0.70% as the company plans to lower roaming fees for subscribers, while the Industrial & Commercial Bank of China rose 0.51% after a newspaper said bank lending may rise to 500B Yuan from 410.4B Yuan in August.

S&P/ASX 200 Index           4,713.30

Stocks in Australia gained on Friday, with the ASX rising 12.10 points (0.26%) to end at 4,713, led by a 1.15% rise in financials. At the same time, shares of Minara Resources tumbled 5.94% as copper prices slipped to a one-month low during the US trade, with Newcrest Mining shedding 0.57% as gold prices fell back below $1000/oz. Moreover, Emeco Holdings, an Australian earthmoving company, plunged 10.64% after a financial investment firm withdrew its offer for the firm, while Babcock & Brown Infrastructure rose 7.84% after receiving an offer from a group of hedge funds to refinance its debt holdings.

Notable Asian Session Event Risk / Economic Releases

Crude Oil Forecast Bearish as Contract Breaks Key Support

Crude oil has fallen sharply on the day, breaking resoundingly below trendline and moving average support. Next targets include the commodity’s 200-day Simple Moving Average at 62.31, with previous spike lows near said mark reinforcing its significance. The breakdown bodes poorly for near-term price action, and previous congestion near 68 provides nearest resistance.

Gold prices have thus far held important psychologically significant support at the 1000 mark, but price has been unable to break above substantial highs. Continued failure at said level would keep the commodity price in its long-term ascending triangle formation—leaving a return to trendline support near 950 as the more likely outcome. Closer price floors can be found at the psychologically significant 1000 mark.

Silver has hit extremely overbought territory on its run to fresh 12-month highs, and continued rejection of 17.000 would make further short-term corrections likely. Said level represents congestion from 2008 and has thus far provided a formidable price ceiling. Given daily RSI well-above overbought levels, corrections are likely. Near-term support is at recent congestion of 16.50, while the psychologically significant 16.00 mark could likewise provide a price floor.

Daily Commodities Fundamentals: Commodities Extend Yesterday’s Losses Into Today

North American Commodity Update, Last Updated 9/23/2009 5:45 PM EST (GMT = EDT +5:00)

Commodities – Energy

Crude Prices Fall Sharply Again

Crude Oil (WTI)   $65.89                               -$3.08        -4.47%
Crude oil fell hard for the second consecutive day as the dollar continued to show strength and sales of existing U.S. homes unexpectedly slumped in the month of August.  Existing home sales, expected to rise 2.1 percent on the month, in fact fell 2.7 percent to a 5.1 million annual rate.  Investors became concerned over the strength and speed of the economic recovery and fled risky assets for the safety of U.S. dollars and Treasury debt.  The downward pressure on oil the past two days has also been fundamentally driven, as inventories are outpacing demand.  The DOE report yesterday showed a significant increase in crude, gasoline, and distillate inventories.  On the demand side, oil consumption will drop 1.9 million barrels a day this year and demand for gasoline has fallen to its lowest amount since January.  Today’s move in oil was a significant one from a technical perspective as oil had been trading between $68 and $75 per barrel since early August.  Going forward, fundamentals should help drive oil prices in addition to the U.S. dollar.

Commodities – Metals

Precious Metals Continue to Struggle on Dollar Strength

Gold                   $997.60                           -$15.50                              -1.53%
Gold closed below $1,000 an ounce for the first time in two weeks on U.S. dollar strength as well as the expiration of futures options which created additional selling pressure.  The U.S. Dollar Index rose 1.1% to 76.88, its highest close in two weeks, reducing the appeal of gold as an alternative investment.  The decline in the December gold contract, was the biggest decline for a most- active gold contract since July 8.  Going forward, gold will be closely linked to the dollar and will be greatly impacted by the Federal Reserve’s exit strategy from the current levels of economic stimulus.  If the Fed can withdraw economic stimulus without stoking inflation fears, that would hurt the gold price as the commodity is often used as a hedge against inflation.  However, here remain bullish fundamentals for the price of gold as the Fed’s decision to maintain low rates could continue to put downward pressure the dollar going forward.

Silver                 $16.273                   -$0.61                               -3.64%
Silver prices closed significantly lower today on dollar strength as well as falling equities.  The S&P 500 declined 10 points (0.95 percent) to 1050 as weak housing data concerned investors over the strength of the economic recovery.  It is likely that silver reached overbought levels and was due for a correction after it rallied by more than four dollars per ounce in the past month.  In the long-term, however, silver may move further to the upside as the world’s economic outlook improves.

Written by James Russell, CFDTrading Research
Questions/Comments about this article? Send them to JRussell@fxcm.com

Stocks in Asian/Pacific Weighed Down by Falling Commodity Prices, Nikkei Bucks Trend

Asia Session Key Developments

• Hong Kong’s Trade Deficit Widens
• Japan’s Trade Surplus Narrows as Exports Falter

Asian stocks were mostly lower on Wednesday on the back of falling commodity price, while the Japanese equities market surged higher following the three-day holiday. The Nikkei opened for the first time this week after the Equinox holiday and bucked the downtrend in the global markets as investors remained optimistic for the upcoming earnings season. Meanwhile, Japan’s trade surplus narrowed to JPY 185.7B in August from a revised reading of JPY 377.9B in the previous month as exports slipped at an annual pace of 36.0% from the previous year, while imports plunged 41.3%. At the same time, the trade deficit in Hong Kong widened to 21.8B from 21.7B in July as foreign demands slipped at an annual rate of 13.9%, while imports slumped 9.8% from the previous year. The data foreshadows a weakening outlook for global growth as trade conditions remain weak, and the policy makers may take further steps to stimulate growth and inflation as households face a weakening labor market paired with tightening credit conditions

Nikkei 225                          10,544.22

Stocks in Japan advanced on Thursday after being closed for the three-day holiday, with the Nikkei gaining 173.68 points (1.67%) to close at 10,544.22 as all 10 components pushed higher on the day. Consumer services rose 2.94% to lead the rally, with technology and basic materials rising 2.22% and 2.08% respectively. Shares of Japan Airlines Corp plunged 15.79%, following a report that the airline carrier will request a government bailout, while Sanyo Electric slumped 3.7% as the firm plans to recall 189,402 washer-dyers that would cost the business roughly JPY 10B. Moreover, Fast Retailing Co advanced 5.29% after having its rating raised from “neutral,” to “buy” from Goldman Sachs, with Kyocera Corp rallying 4.46% as JPMorgan raised its outlook for the firm to “overweight,” from “neutral.” At the same time, Suzuki Motor Corp rose 4.32% as Volkswagen is in talks with the automaker to purchase a stake of the company, while Tokyo Electron advanced 5.7% after Mizuho Securities raised its rating on the firm to “strong buy” from “buy.”

Hang Seng                        21,050.73

The Hong Kong stock market plummeted today, with the Hang Seng tumbling 544.79 points (2.52%) to close at 21,050.73. The decline was led by lower commodity prices, while Metallurgial Corp of China Ltd. fell below its IPO price after declining 12 percent on its first day of trading. All nine components on the index tipped lower, with oil & gas shedding 3.00% to lead the decline, while financials slumped 2.69 %. Shares of PetroChina Co., the nation’s biggest oil producer fell 2.98%as crude oil prices tumbled lower following the rise in US stockpiles, while Aluminum Corp of China slipped 3.44% on the back of lower metal prices. Moreover, Cosco Pacific declined 2.71% following the drop in the Baltic Dry Index, which gauges the foreign cost for commodities, while HSBC Holdings fell 2.31% as investors remained wary of the rise in risky loans.

S&P/ASX 200 Index           4,701.20

Stocks in Australia weakened on Thursday, with the ASX declining 32.90 points (0.69%) to end at 4,701.20 as 7 of the 10 components tipped lower the day. Oil & gas slumped 2.01% to lead the decline, followed by a 1.44% drop in basic materials, while consumer goods advanced 0.43% to taper the decline. Shares of Woodside Petroleum slipped 2.64% on the back of lower oil prices, while BHP Billiton and Rio Tinto shed 1.64% and 1.33% respectively following the weakness in global commodities. In addition, Karoon Gas Australia plunged 18.72% after reporting negative drilling results from an exploration venture in the Browse Basin, while Brickworks jumped 12.82% to temper the slump in the overall market after announcing a rise in full-year earnings.

Notable Asian Session Event Risk / Economic Releases

Daily Commodities Fundamentals: Commodities Fall on Dollar Strength and Inventory Data

North American Commodity Update, Last Updated 9/23/2009 2:48 PM EST (GMT = EDT +5:00)

Commodities – Energy

Crude Trades Lower as Inventories Post Sharp Rise

Crude Oil (WTI)   $68.29                               -$3.47        -4.84%
Following a considerable gain yesterday to nearly $72 per barrel, crude fell sharply to below $69 per barrel as dollar strength, coupled with a surprise jump in crude inventories, led to selling by investors. Also reported was a rise for the second week in gasoline, at a significant increase of 5.4 million barrel. Distillate fuel stockpiles continue to increase as well to record levels. The failure of oil to hold at prices above the $70 should be viewed as weakness that may lead to a further slide towards the $65 level. There has been support in the past as oil traded in a tight range between $68 and $75 per barrel since early August. A break in either direction is bound to occur in the near-future, and due to production capacity, and the possibility of dollar rebounding off recent 2009 lows, sentiment appears to be weighing negatively.

Commodities – Metals

Metals Fall on Dollar Strength Following Recent Rally

Gold                   $1009.50                           -$6.00                              -0.59%
Gold fell for a second session with while remaining considerably over the $1000 level. Strength in the US dollar affected the move, while inflation concerns remains largely muted. The Federal Reserve’s FOMC rate decision today caused considerably volatility while ultimately settling in the same downtrend that was established earlier in the morning. Ultimately, the recent moves have largely been a reflection of currency activity, and the dollar remains the key force to watch to determine where gold heads.

Silver                 $16.875                   -$0.24                               -1.40%
Silver prices closed lower by nearly two percent following an earlier dip that had the commodity down to nearly $16.70. Dollar strength has largely played into the weakness seen, while concerns in equities have led the metal to post a sharper fall than gold trading. As further deterioration appears likely, Silver could see support at $16.25 while the long-term trend appears favorable as industrial demand for the commodity rises as economies recover. The metal remains close to overbought levels and has rallied by more than four dollars per ounce in the past month; a healthy correction appears to be underway following the magnitude of the recent move.

-Written by Roman Kadinsky, CFDTrading Research
Questions/Comments about this article? Send them to Rkadinsky@fxcm.com

European Stocks Pared Gains Following Afternoon Decline in Commodities

Europe Session Key Developments

•    Crude Falls on Inventory Increase
•    Indicator Releases Support Uncertainty

European Markets pared gains as commodities declined into the close. Overall, sentiment appeared to be tilting against further upside as indices, including the FTSE and DAX, have failed to hold new highs in the past few trading sessions. Initial weakness in the US dollar faded in the afternoon, couped with a sell off in oil following a surprise increase in crude inventories while gasoline and distrillate stockpiles rose sharply. Investors remain concerned that demand may not be sustainable, and further declines in the price of energy commodities could bode poorly for refiners and producers. Similarly, metals also moved lower with COMEX copper down more than two percent while spot prices for silver and palladium also fell. Trade in the raw materials is in fact declining, bolstering bearish sentiment, as the Baltic Dry Index, a common measure of shipping prices for commodities, fell yesterday to the lowest level since early May. Also adding to selling pressure were indicator releases, which came in mostly higher while failing to meet excessive expectations set by economists. Euro-Zone composite PMI showed expansion for the second month, while industrial new orders increased by 2.6%. Meanwhile, a slight decline in the number of new loans for housing in the U.K. was overlooked as the Bank of England released optimistic Minutes from the previous rate decision. Ultimately, equity holders may continue to trim positions ahead of Q3 earnings following the large rally since mid-July.

FTSE 100                      5,139.37                   -3.23               -0.06%
Stocks in the U.K. closed slightly lower despite most sectors closing higher while nearly half of stocks advanced. Technology saw the largest gain at 1.18% while Oil & Gas fell 1.22% and Basic Materials dipped 0.48% on commodity weakness. Stocks falling the most included property firms such as Liberty International, down 10.11% and British Land falling 4.48%. The large decline was mostly attributed to a share offering announcement by Liberty, while a lack of increase in loans for house purchasing, as recorded by the BBA, swayed sentiment against housing stocks. Several financial firms help keep the index loss at a minimum as Standard Chartered advanced 4.32% while insurer Prudential rose 3.9% as Cazenove upgraded its rating on the firm to “outperform” on fundamental strength.

CAC 40                     3,821.79                   -1.73                 -0.05%
French equities pared an initial gain of more than one percent as six of ten sectors fell along with half of stocks. Consumer Services and Financials increased more than 1% each, while Oil & Gas and Utilities led to the bulk of the index point declines. Stability in major firms included a 2.55% rise in bank Credit Agricole along with a 1.2% rise in BNP Paribas and a similar move in insurer Axa. Downside meanwhile was equally limited with several firms down just over two percent.

DAX                         5,702.05                    -7.33             -0.13%
The German market closed down the most of the five majors as weakness extended to more than half of stocks along with six of nine sectors. Financials saw stability as the sector led gains at 0.91% while Health Care fell 1.53% and Basic Materials dipped 0.78% on commodity pressure. Automakers saw considerable weakness with BMW and Volkswagon down more than two percent each as auto sales in September likely fell.

IBEX 35                     11,853.30                   +36.60                +0.31%
Spain’s IBEX managed to close higher by more than three-tenths of a percent as the heavily weighted financial sector helped to lift stocks with a move of nearly one percent while most sectors posted gains. Ultimately, while Spain’s main index has not fallen as much as other European counterparts during retracements, financial weakness could lead to a steep decline. Cracks appear evident as several firms have announced intents to raise capital ratios, while lending remains subdued and loan losses continue on rising unemployment.

FTSE MIB                        23,239.05                    +172.15                  +0.75%
Italy’s benchmark index closed higher by the most of the five majors, while remaining approximately two percent from a new year-to-date high. Most stocks posted gains on the day, led by Jeweler Bulgari, up 3.88%. Other large movers included the financial sector, with Intesa Sanpaolo up 2.2% along with a 1.44% rise in UBI. Lagging on the session were firms including UniCredit, Italy’s largest bank, down 1.26% as more news circulated on a proposed equity offered, while Banco Popolare SC fell the most at 1.39%.

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

Euro 2 Month Channel Resistance Something to Watch

Euro / US Dollar

1.4850, which is the 100% extension of the 1.2327- 1.4723 rally, has been one of the levels that we’ve been focusing on as a possible turning point.  Not only did the high last night come within 10 pips of that level but the top of a 2+ month channel (green) provides resistance as well.   A bar reversal pattern today from these levels would give us reason to try the short side.  Stay tuned.

British Pound / US Dollar

Focus remains on the larger head and shoulders pattern that has been unfolding since early June.  The neckline held Monday and Cable has now rallied to trendline resistance.  A larger bearish bias is valid against 1.6575 but confidence in a large downside move is low until a daily close below neckline support.

Australian Dollar / US Dollar

“The AUDUSD continues to work higher towards the 78.6% of the decline from .9856-.6007, which is .9032.  This level intersects with a potential resistance line on September 25.”  That would be Friday.  Resistance has entered the picture from a short term channel midline.  .8680 is potential short term support.  Coming under .8586 would turn conditions bearish.

New Zealand Dollar / US Dollar

Kiwi has gone vertical in what may be a blow-off top.  I wrote yesterday that “the pair is at its highest level since August 2008 and levels to keep an eye on are .7250 (Fibonacci extension which is discussed in FX Technical Weekly), .7382 (January 2008 low) and .7444 (June 2008 low).”  I neglected to mention a channel mid line, which has held as resistance thus far (near .7300).  The NZDUSD is in the same boat as the EURUSD (waiting for proved weakness off of resistance).

US Dollar / Japanese Yen

Keep the long term outlook in perspective – “a 4th triangle ended in 2007 above 124.00 therefore the decline from that level is viewed as a 5th wave that will not be considered complete until price drops to an all-time low (below the 1995 low near 80).”  After breaking above trendline resistance and trading to 92.50, the USDJPY retraced a significant portion of its recent rally and the top side of that former resistance line has held as support.  Conditions are of the range variety for now.

US Dollar / Canadian Dollar

Barring a break above the resistance line, the USDCAD is vulnerable to a drop towards 1.0330 – which has been both support and resistance over the last several years.  This level is also the 61.8% extension of the 1.3068-1.0782 decline (from 1.1730).  Thus far, the 61.8% retracement of the rally from .9055 has held.  The circled area could be a triangle, in which event the immediate move is higher towards 1.1100.

US Dollar / Swiss Franc

“The print below 1.0367 (December 2008 low) satisfies the minimum requirement for wave v of C.  Divergence with momentum on nearly all time frames warns of a sharp turn against the Franc.”  It would take a rally through 1.0526/channel resistance in order to proclaim with confidence that a low is in place.  Until then, focus is on 1.0037.

Jamie Saettele publishes Daily Technicals every weekday morning, COT analysis (published Monday mornings), technical analysis of currency crosses on Monday, Wednesday, and Friday (Euro and Yen crosses), and intraday trading strategy as market action dictates.  He is the author of Sentiment in the Forex Market.  Follow his intraday market commentary at DailyFX Forex Stream.

Contact Jamie at jsaettele@dailyfx.com if you would like to receive his reports via email.

ASX Advances on Higher Commodity Prices, Hang Seng Falters as Banks Look to Curb Discount Lending

Asia Session Key Developments

• Standard Charted to Halt Discount Lending
• New Zealand Emerges From Recession

Stocks in Asia/Pacific were mixed on Wednesday and were weighed down by the slump in China’s equity market, while investors remained hopeful that the Group of 20 nations will maintain the expansion in monetary and fiscal policy to foster a global recovery. Chinese stocks dropped for a second day to a three week low on concerns that falling steel prices and transportation costs are indicative of a slower recovery, while a newspaper report hampered the outlook for a marked recover as the article said Standard Charted will no longer offer 2% rates on mortgage lending after China’s Banking Regulatory Commission saw an increase in risky loans. Nevertheless, as Fed Chairman Ben Bernanke sees the world’s largest economy emerging from the worst recession since the post-war period, encouraging comments following the policy meeting is likely to support the rise in market sentiment, and investors may hold an improved outlook for the global economy as policy makers take unprecedented steps to stem the downside risks for growth and inflation.

Nikkei 225

Will be closed until Thursday in observance of the Autumn Equinox holiday.

Hang Seng                        21,595.52

Hong Kong stocks ended the day lower following reports that Standard Charted Plc stopped offering discounts on mortgage lending. The index closed 105.62 points (0.49%) lower on the day at 21,595.52, led by a 1.03% drop in financials. At the same time, consumer goods rallied 3.89% on hopes that the G20 nations will maintain the expansion in monetary and fiscal policy to encourage a global recovery. Shares of BOC Hong Kong Holding Ltd., the city’s second largest publicly traded bank dropped 2.9% following the report, while the Industrial & Commercial Bank of China Ltd. slipped 1.2 percent as the firm attempts to renegotiate its bond repayment with Huarong Asset Management Co. At the same time, Aluminum Corp of China advanced 0.45% following the rise in commodities, while Li & Fung, the largest supplier of toys and clothing to Wal-Mart, jumped 3.89% following the comments from President Bruce Rockowitz that the firm may announce an acquisition by the end of the year.

S&P/ASX 200 Index           4,734.10

Stocks in Australia strengthen on Wednesday, with the ASX climbing 70.40 points (1.51%) to end at 4,734.10 as 8 of the 10 components rose on the day. Oil & gas surged 2.69% to lead the rise, followed by a 1.98% increase in utilities, while telecommunications and technology slipped 0.13% and 0.58% respectively to taper the rally. Shares of Woodside Petroleum jumped 5.09% as crude prices pushed back to $71 a barrel, while Minara Resources surged 5.61% following the rise in global commodity prices. In addition, Aristocrat Leisure rallied 8.98% as demand of gaming machines improved internationally, while QBE Insurance Group added 1.19% after the firm successfully sold $902M in bonds that will be due in 2015.

Notable Asian Session Event Risk / Economic Releases

Dow Wedge Formation May Signal Potential Breakout

The Dow has seen momentum slowed after testing the 50.0% Fibo of 14,402-6,667, where a possibility of a retrace exists. Yet, the blue chip index is developing a wedge formation which may be signaling a potential breakout today and a likely test of 10,000. Watch for FOMC decision at 18:15 GMT.

The S&P broke above resistance at 1,052- the 50.0% Fibo of 14,402-6,667 leaving upside potential to 1,144-50.0% Fibo of 1,079-812.However we have started to see the broader index give back some of its gains which could signal that the level isn’t completely cleared leaving the possibility of a retrace to 1,000.

The NASDAQ after clearing resistance at 2,009 the 31.8% Fibo extension of 2,861- 1,265, has only psychological resistance at 2,200 left before a test of 2,250-61.8% Fibo.

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