December 2009

European Markets End Year with Strong Gains

Europe Session Key Developments

•    Indicators Restrain Selling Pressure
•    Commodities Higher on Dollar Weakness

European stocks closed higher today with only the British and French indices open for trading. Volume remained low on December seasonality, while indicators came in better including higher house prices in the UK for an eighth month, while US data showed lower jobless claims and improving conditions. Ultimately equities have performed well since March, and have gained more than 22% since the start of 2009. Performance has been even greater in Spain, which benefited from emerging market recovery in Latin America with speculation lifting the IBEX35 by 30%. As we move into 2010, traders will consider two opposing forces weighing on sentiment. On the one hand, central banks are beginning to flush excess liquidity from the market, and interest rates will be increased in the coming year. At the same time, strong economic growth promises to increase top line profit for companies. This would bode well for companies that have been cost-cutting to preserve profits.

FTSE 100                      5,412.88            +15.02             +0.28%
Trading in the British index led to a higher close as more than three fourths of stocks advanced along with six of ten sectors. Ultimately Financials carried the day with a gain of 0.78% including a greater than 4% move in Land Securities, the nation’s largest reinsurance trust. This came on the heels of a report showing house prices increased for an eighth month. Ultimately, improvement in the sector is vital towards retaining consumer confidence and the health of bank’s balance sheets. Looking ahead however, housing prices may start to fall as supply catches up with demand, perhaps a cautionary sign that could bode poorly for some sectors of the FTSE.

CAC 40                     3,936.33                  +0.83                 +0.02%
French equities ended the day slightly higher as nearly half of stocks fell while six of ten sectors closed lower. Losses proved limited as no major news dragged down stocks, and no single stock fell a percent or more. On the leading side, plane maker EADS climbed 2.81% to lead following recent announcements that China Eastern will purchase 16 aircraft. Ultimately, the French index remains near recent highs and will continue to move higher should global trade continue to improve.

DAX                         5,957.42

IBEX 35                   11,940.00

FTSE MIB                 23,248.39

This is the final article from Roman Kadinsky, CFDTrading Research
Please send any comments about this report to Rkadinsky@fxcm.com

Oil Advancing Toward $80, Gold and Silver Find Support

Commodities – Energy

Oil Continues to Grind Higher, $80 Close Ahead

Crude Oil (WTI)       $79.58       +$0.30       +0.38%
Oil prices continued higher after taking out resistance at $79.04 and are now on pace to move in for a test of the psychologically significant barrier at the $80 level. Weekly US jobless claims figures top the economic calendar, with an expected increase this time around offering the possibility of a corrective pullback ahead of the New Year holiday.

Commodities – Metals

Gold, Silver May Extend Rebound on US Jobless Claims Data

Gold       $1098.03       +$5.13       +0.47%
Gold prices are little changed heading into the final day of trade of trade before the New Year holiday, with prices recovering a bit to position for a re-test of the psychologically significant $1100 handle. The metal retains a strong inverse correlation with the outlook for US monetary policy (as expressed by the spread between Dec’2010 and Mar’2010 fed funds futures), which has recently forced losses on steadily improving US data. This relationship may start to offer prices a bit of support as weekly US jobless claims data shows a narrow increase.

Silver       $16.93       +$0.12       +0.71%
Prices found a bit of support at the bottom of a falling channel established earlier this month and have moved up towards a re-rest of the $17.00 handle on the upside. As with gold, a significant inverse correlation with the 2010 fed funds futures spread will mean that US jobless claims figures are the top fundamental catalyst to watch into the week-end.

European Markets Fall for First Time in Over a Week

Europe Session Key Developments

•    Credit Growth Remains Weak
•    Optimism Gives Way to Profit taking
•    Commodities Weak on Dollar Strength

European stocks closed at the lows of the day as optimism gave way to profit taking ahead of the close of 2009. Data affecting the trade today included poor money supply growth in the Euro-Zone, including the annualized M3 contracting. Other indicators included Switzerland and US Chicago PMI showing improvement. Elsewhere, dollar strength ruled the day, leading to a fall in metals while crude oil managed to hang onto gains amid Department of Energy figures that showed stockpiles diminished in the previous week. Overall, profit taking today is not unexpected given the sharp appreciation in valuations since March, as well as the run up seen in recent weeks. Ultimately stocks appear poised for growth in the year ahead as investors weigh two conflicting forces. On the one hand, central banks will flush excess liquidity from the market place by removing special programs and beginning to raise interest rates. At the same time, companies are expecting top line growth as sales rebound. This may have a high effect on profit as cost-cutting efforts this year have made firms far more productive and nimble. Despite the new highs recently set, stocks are not far from a recent consolidating top and a return to such levels may occur.

FTSE 100                      5,397.86            -39.75             -0.73%
Trading in the British index led to the first loss in six sessions as nearly all sectors fell along with losers outnumbering winners nearly 3:1. Oil & Gas fell the most at 1.01% while Basic Materials suffered a decline of nearly one percent as commodities faced weakness on dollar strength. Should the greenback continue to appreciate in value, pressure on hard asset prices would bode poorly for many UK raw material producers and the index could underperform. At the same time, rising demand in 2010 could lead to outperformance if inflation and prices escalate.

CAC 40                     3,935.50                  -24.48                 -0.62%
French equities ended the day lower by nearly two-thirds of a percent as most stocks fell while low volume led to minimal moves with no single stock rising or falling two percent or more. Ultimately, the French index looks poised to close the year stronger by more than 20% with similar moves as the British and German indices.

DAX                         5,957.42                    -54.12                 -0.90%
The German index fell the most of the five majors as losses were noted in all but Technology while five sectors fell more than 1% each. Financials weighed negatively on the index today with Deutsche Bank falling the most, down 2.43%. Overall the index has rallied impressively since early December, up more than 6% and a decline today may simple be profit taking ahead of the 2009 close.

IBEX 35                   11,940.00                -95.10                -0.79%
Trading in Spain led to a lower close of more than three-quarters of a percent as over 70% of stocks traded down. Three sectors managed to close higher while all three of Spain’s largest companies posted minor declines. Overall the IBEX remains the best performer on the year with a gain of nearly 30%, well ahead of other European indices

FTSE MIB                 23,248.39                  -127.85               -0.55%
The Italian index fell the least of the five majors as stocks ended the final day of trading lower. Action today included second-largest bank Intesa SanPaolo falling for the first time in six days, down 1.4%, while largest-bank UniCredit dropped less than one percent. Losers outnumbered winners 2:1.

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

Asian Stocks Halt Advance as Gold and Oil Stumble, Moody’s Maintain “Negative” Outlook for Hong Kong Banks

Asia Session Key Developments

• Gold Falls for Second Day
• Copper Climbs for a Fourth Day To the Highest in Nearly 16 Months
• Moody’s Announce Hong Kong Banking Sector Will Remain “Negative”

Stocks in Asia/Pacific tumbled on Wednesday following the drop in gold and oil prices, while Moody’s Investors Services held a cautious outlook for Hong Kong’s banking sector and said that the outlook for the city’s indsutry will remain “negative.” In Australia, copper prices advanced for a fourth day to a 16-month high as workers at the world’s second-biggest copper mine voted to go on strike. Meanwhile, China’s leading index climbed to 106.29 in November from a revised 105.82 the month prior, rising for a 12^th consecutive month, while Japan’s Nomura/JMMA Manufacturing Purchasing Manager Index for December rose to 53.8 from 52.3 the previous month.

Nikkei 225                          10,546.44

The Japanese equity markets halted the two-day advance, leading the Nikkei 225 to shed 91.62 points (0.86%) and close at 10,546.44. All ten sectors traded lower on the day, with oil& gas slumping 1.93% to lead the decline, and was followed by a 1.75% drop in utilities.  Shares of Japan Airlines slumped 23.86%, posting the largest drop since it began trading in 2002 amid the carrier’s lenders rejecting a bankruptcy proposal by the state turnaround agency, while Tokyu Corp, which owns 2.9% of JAL, slumped 2.37% following the report. At the same time, Showa Denko K.K. rallied 3.93% as Mitsubishi UFJ Financial Group upgraded the stock to “strong outperform,” while Hitachi advanced 3.65% as the firm pledged to do whatever it can to return to profit in the next fiscal year.

Hang Seng                        21,496.62

Hong Kong shares pushed lower on Wednesday subsequent to Moody’s Investors Service stating that the outlook for the region’s banking industry will remain “negative,” leading the benchmark equity index to slip 2.82 points (0.01%) and close at 21,496.62 as five of the nine components pushed lower on the day. Shares of Industrial and Commercial Bank of China lost 0.94% as the Standard newspaper said President and Vice Chairman Yang Kaisheng will retire, while China Mobile, the world’s largest phone operator by market value advanced1.01% as the company reaffirmed it will push forward with its plan to sell shares in China’s market. Moreover, the Bank of Communications shed 0.90% as the company, which is part-owned by HSBC, named Niu Ximing as President of the bank and Vice Chairman of the board, while PetroChina slumped 1.07% on the back of falling oil prices.

S&P/ASX 200 Index           4,833.30

Stocks in Australia traded to the downside on Wednesday after hitting a two-month high during the day, leading the S&P/ASX 200 to push 11.80 points lower (0.24%) and close at 4,833.30. Nine out of the ten components tipped over on the day, with health care leading the decline, falling 0.75%, while technology added 1.46% to taper the decline. Shares of Graincorp pushed 3.16% higher as CBH Group stated that West Australia’s harvest will likely reach about 11 million metric tons of all grains, while Eldorado Gold lost 2.11% on the back of lower gold prices. At the same time, JB Hi-FI rallied 2.85% as Chief Executive Richard Uechtritz said second quarter sales volumes were “definitely” better than the previous year, while Kagara Ltd added 0.97% after reaching an agreement to purchase a base metal project from Liontown Resources for A$4.5M.

Notable Asian Session Event Risk / Economic Releases

Oil May Stumble as Gold Finds Support on US PMI Data

Commodities – Energy

Oil Prices May Stumble on Chicago PMI, Inventory Data

Crude Oil (WTI)       $78.96       +$0.09       +0.11%
Oil prices look to have taken out resistance at $79.04, though the break is rather shallow and the grind higher to test the psychologically significant barrier at $80 may be a slow one. Expectations of a decline in December’s Chicago PMI may also complicate the push higher, forcing a pullback (albeit a shallow one) in the recent surge of upbeat sentiment about the US economic recovery. A relatively small decline in the Department of Energy’s weekly crude inventory gauge may also prove to be a hurdle.

Commodities – Metals

Gold, Silver May Find Support in Disappointing US Data

Gold       $1092.25       -$4.59       -0.42%
Gold has continued to inch lower after testing resistance at the top of a falling channel that has guided spot rates lower for most of the current month. Continued bearish momentum targets support at $1082.48. The metal retains a strong inverse correlation with the outlook for US monetary policy (as expressed by the spread between Dec’2010 and Mar’2010 fed funds futures), forcing losses on steadily improving US data. This relationship may start to offer prices a bit of support with Chicago PMI set to decline for the first in three months in December.

Silver       $17.00       -$0.09        -0.56%
Prices have moved aggressively lower and are set to test the bottom of a falling channel established earlier this month (now at $16.85). As with gold, a significant inverse correlation with the 2010 fed funds futures spread hints that a bit of support may be seen at this juncture in the near term as Chicago PMI figures cross the wires.

US Stocks Close Lower on Light Volume

U.S. Session Key Developments

•    Indicators Support Sentiment
•    Dow Fall for First time in Seven Sessions

The Dow closed lower for the first time in seven sessions, giving up a small gain in the final thirty minutes of trading. Investors remained largely optimistic as indicators today remained light while supporting growth.  The Case-Shiller housing price index showed annual contraction in house prices continues to narrow, while consumer confidence rose for a second month. Elsewhere, the greenback strengthened across most crosses, while commodities took a breather following recent gains. Ultimately, the Dow and S&P have climbed more than 20% this year, while the NASDAQ clings to a gain of more than 45%. Despite the lower close today, traders remain highly optimistic for the year ahead. Performance next year promises to play on two significant trends. Weighing on both sides will be economic growth versus the Federal Reserve’s eventual need to raise rates. This scenario may not be a serious issue in the next two months, but it’s the fear of hiring rates may increase quickly If growth proves rapid.

DJIA 30                      10,545.41                   -1.67               -0.02%
The Dow closed lower, giving up gains in the last 30 minutes of trading as five of nine sectors declined along with half of the thirty stocks tracked. Major moves were not seen, with no firm advancing or falling two percent or more. Ultimately, the Dow remains poised to close the year with a strong gain of more than 20%.

S&P 500                     1,126.20                   -1.58                 -0.14%
The broader S&P500 index fell the most of the five majors as all but three sectors declined with Oil & Gas down 0.65% while Financials fell 0.35%. Trading saw just over 40% of stocks trading higher. Reflecting the low volatility today, Apple was the only top-ten largest firm to deviate more than one percent. Ultimately the S&P500 appears to be breaking out of its mid-November range, while caution should be noted as end-of-year volatility remains low.

NASDAQ                    2,288.40                    -2.68             -0.12%
The tech-heavy NASDAQ fell more than a tenth of one percent as nearly all sectors declined including a 0.9% fall in telecom. Overall the index remains the best performer of the three majors with a gain of more than 45%. Big index movers today included Microsoft, up just 0.67%, while Apple led to the biggest point loss, down 1.19%. Lack of liquidity as the year closes out has led to minor volatility and is likely to continue to do so as the week continues.

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

European Market Advance Continues Undeterred

Europe Session Key Developments

•    FTSE Reopens to Outperform
•    Light Data Supports Sentiment
•    Commodities Lower on Dollar

Trading continued to lead markets high as liquidity remains low amid seasonal holiday volume. Indicator releases today caused no concern as most posted inline or within estimated ranges. Finalized French GDP came in unchanged at growth of 0.3% from the second quarter, while Italian business confidence rose to a 17-month high. Despite sentiment reflecting optimism for the coming year, moves in the past few days have been minor at best. As firms largely remained profitable in 2009 through cost cutting measures and production halts, a pickup in hirings and inventory restocking, along with pent up demand, may lead to rapid growth. Higher top line growth, along with improved margins, will help stocks higher, while re-inclusion of dividends is likely to boost interest in equities. While this remains the likely scenario, the picture is not crystal clear as central bankers begin to flush out liquidity brought about by programs and dovish monetary policy. This could have a negative effect as the year continues, and may keep traders feeling uneasy about sharp improvements to economic indicators. Despite the new highs being made, equities are not far off their recent resistance and renewed volatility could pose a risk as January rolls on.

FTSE 100                      5,437.61            +35.20            +0.65%
The British index outperformed today following a closed session on Monday. Major movers included Basic Materials, up 1.75%, along with gains of more than one percent in three other sectors. Volatility remained low with only two stocks losing more than 1% while shopping mall owner Liberty Intentional gained the most at 4.93%. Miners Antofagasta and Lonmin followed, up more than three percent each.

CAC 40                     3,959.98                  +12.83                 +0.33%
The French market closed higher for the sixth consecutive session as eight of ten sectors advanced while moves of just over two percent were noted in several stocks. Cement maker LaFarge climbed the most with a 2.02% gain followed by a 1.58% rise in ArcelorMittal. Ultimately, the new high has put the index at its best level since October 2008.

DAX                         6011.55                         +8.63                 +0.14%
The German index rose slightly to mark another high as the index increases its year-to-date performance to 25%. Low volatility has led to limited moves with the biggest gainer up 1.89% while no loss of more than one percent was noted. Overall, just half of stocks traded saw gains, as traders may be trimming positions on the recent run up.

IBEX 35                   12,035.10                +11.90                +0.10%
Trading in Spain led to the lowest gain of the five majors while the index remains the best performer on the year-to-date period with a 30.88% rise. More than two-thirds of stocks advanced while losses of less than one percent were noted in the financial sector. Ultimately the IBEX is nearly at its mid-November high, but has yet to overtake it.

FTSE MIB                 23,376.24                  +73.68               +0.32%
The Italian index climbed nearly a third of one percent to gain for the fifth consecutive session as the index breaks out of a range and towards its mid-November highs. Movers today included no stock rising more than 2% while shoemaker Geox fell more than 1% following its outperformance on Monday. Ultimately, the financial heavy index remains an underperformer as the Italian economy appears to be weaker in recovery than its peers.

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

Asian Stock Markets Benefit From Higher Commodity Prices; PBoC’s Fan Gang Raises Economic Outlook for China

Asia Session Key Developments

• Platinum Prices Rise to a Three-Week High
• Hong Kong Retail Sales Rise by Most in 18 Months
• Copper Rises to Highest Price in More Than 15 Months

Stocks in Asia/Pacific extended the rally on Tuesday following the rise in oil and metal prices, while People’s Bank of China adviser Fan Gang expects economic activity in the region to expand at an annual pace of 8%-9% in 2010 and sees little risk for the Yuan to depreciate in the long-term. In Australia, copper prices rose to the highest price in more than fifteen months amid speculation that demand for the commodity will strengthen and drain stockpiles. Meanwhile, retail sales in Hong Kong rose by the most in 18 months amid improving employment along with encouraged consumer spending as the region recovers from recession, with sales growing 11.7% in November from the year prior, while volume pushed 9.8% higher from previous year.

Nikkei 225                          10,378.03

The Japanese equity markets advanced on Tuesday for a second consecutive day, leading the Nikkei 225 to gain 3.83 points (0.04%) and close at 10,638.06. Three of the ten components pushed higher on the day, with consumer services rallying 1.20%, while technology pushed 0.65% lower. Shares of Fast Retailing rose 1.67%, marking its highest level since April 1997 after the Nikkei newspaper reported a rise in sales, while Pioneer slumped 4.62% as the company announced it will not sell new shares to Honda Motor, who planned to take a 2.5 billion yen stake in the firm. At the same time, Japan Airlines, Asia’s largest carrier by sales tumbled 8.33%, marking the biggest decline in five weeks, subsequent to reports announcing that a state-affiliated agency may seek bankruptcy for the unprofitable company, while Nissan Motor added 1.63% as the automaker expects vehicle sales in South Korea to more than double next year.

Hang Seng                        21,499.44

Hong Kong shares pushed higher on Tuesday, leading the benchmark equity index to gain 19.22 points (0.09%) and close at 21,499.44 as four of the nine components advanced on the day. Shares of Industrial and Commercial Bank of China inched 0.31%higher as Vice President Niu Ximing is scheduled to replace Li Jun as the President of Bank of Communications, while China Life Insurance, the nation’s largest insurer, tipped 0.26% higher as the company agreed to purchase 934 million new shares of Sino-Ocean Land Holdings at a price of HK$2.23 a share. At the same time, Bank of China weakened 1.21% as Chairman Xiao Gang said regulators in China should draft “reasonable” guidelines to manage excess liquidity, while China Construction Bank slipped 0.61% as the bank agreed to buy a 50% stake in Pacific Antai Life Insurance from ING Groep NV.

S&P/ASX 200 Index           4,845.10

Stocks in Australia traded to the upside on Tuesday after being closed yesterday in observance of Christmas/Boxing day, leading the S&P/ASX 200 to gain 54.20 points (1.13%) and close at 4,845.10.  All ten components traded higher on the day, with telecommunications climbing 1.48% to lead the rally, which was followed by a 1.42% gain in consumer services, while utilities advanced 1.24%. Shares of BHP Billiton,  the world’s largest mining company, pushed 1.06% higher on the back of higher copper prices, while Aquarius Platinum rallied 4.29% as platinum prices leapt to a three-week high. At the same time, Nufarm Ltd gained 2.84% as Sumitomo Chemical Co agreed to take a 20% in the firm, while Energy World Corp surged 15.07% as the firm expects to benefit from Indonesia’s plan to increase its electricity supply throughout the region.

Notable Asian Session Event Risk / Economic Releases

Oil, Metals to Continue to Diverge on US Economic Data

Commodities – Energy

Oil May Push to $80 as US Economic Data Continues to Improve

Crude Oil (WTI)       $78.96       +$0.19       +0.24%
Oil is testing the $79 level after breaking out of a rising channel that had guided prices higher from the swing bottom below $70 set earlier this month. Continued bullish momentum will target the psychologically significant $80 level. The bulls may once again find their catalysts in improving US economic data, with tomorrow’s calendar set to bring the sixth consecutive monthly increase in the S&P/Case-Shiller Home Price Index as well as a three-month high in Consumer Confidence. Both releases stand to support continued gains, boosting the outlook for economic recovery of the world’s largest crude consumer.

Commodities – Metals

Gold, Silver May Extend Losses on US Rates Outlook

Gold       $1104.38       -$2.93       -0.26%
Gold has drifted lower after testing resistance at the top of a falling channel that has guided spot rates lower for most of the current month as US data has boosted Fed rate hike expectations. Indeed, the metal retains a strong inverse correlation with the outlook for US monetary policy (as expressed by the spread between Dec’2010 and Mar’2010 fed funds futures), with that link now at a formidable 93%. This threatens further weakness as data showing improvements in house prices and consumer confidence prepares to cross the wires in US trading hours.

Silver       $17.45       -$0.07       -0.40%
Positioning is strikingly similar to gold, with prices bouncing lower from resistance at the top of a falling channel established from early December. Also in line with its more expensive counterpart, a significant inverse correlation with the 2010 fed funds futures spread hints that further weakness is ahead if US data retains an upbeat tone as expected.

US Stocks Close Higher Following Low Volume Session

U.S. Session Key Developments

•    Commodities Rise on Dollar Weakness
•    Dallas Fed Shows Growth Increasing
•    Terror Threat Limits Gains

US Markets extended highs following a temporary dip in the afternoon on news that Al-Qaeda claimed responsibility for an attempted bomb plot on a US bound airliner. Ultimately moving indices were further indicators of economic growth, as the Dallas Fed manufacturing activity index posted better than expected, while a MasterCard SpendingPulse report signaled a holiday sales rise of potentially 3.6% from the previous year. Commodities helped to boost some stocks, as a weaker dollar led to higher oil and metal prices. Elsewhere, commentary from major players including fund manager Barton Biggs, and Barclays chief economist Maki, expressed optimism for the year ahead. As new highs continue to be set, investors are clearly looking forward with enthusiasm. Overall, equities have performed strongly this year with gains of more than 45% in the NASDAQ. Performance next year promises to play on two significant trends. Weighing on both sides will be economic growth versus the Federal Reserve’s eventual need to raise rates. This scenario may not be a serious issue in the next two months, but it’s the fear of hiring rates may increase quickly If growth proves rapid.

DJIA 30                      10,547.08                   +26.98               +0.26%
The Dow closed with a quarter of a percentage point gain with seven of nine sectors up while financials fell 0.57%. Overall, most stocks ended higher while low volatility and volume led to minor movements of less than two percent in either direction. While having set a new 52-week high, the Dow appears to be lingering in a consolidation channel despite gains in the past six sessions.

S&P 500                     1,127.78                   +1.30                 +0.12%
The broader S&P500 index climbed just over a tenth of one percent as eight of ten sectors posted gains of less than one percent. More stocks fell than those advancing, although the ratio was nearly 1:1. Of the ten largest firms, only Apple and IBM posted gains of more than one percent, while JPMorgan and consumer product maker P&G fell slightly. Ultimately the S&P500 appears to be breaking out of its mid-November range, while caution should be noted as end-of-year volatility remains low.

NASDAQ                    2,291.08                    +5.39             +0.24%
The tech-heavy NASDAQ gained nearly as much as the Dow30, accelerating its year-over-year growth to over 45%. Seven of ten sectors climbed along with just under half of the 2752 stocks tracked. Big movers for the index included Apple, up 1.23%, and Microsoft with a paltry gain of 0.52%. Lack of liquidity as the year closes out has led to minor volatility and is likely to continue to do so as the week continues.

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

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