February 2010

European Equities Continue Rally on Commodities, Banks

Europe Session Key Developments

•    Greece Finance Minister Says That Greece Will Not Need Bailout
•    Commodities Surge Higher on Improved Economic Outlook
•    Euro and British Pound Halt Decline Versus Greenback

Stocks in Europe advanced for the second day as corporate earnings and analyst upgrades lifted share prices for some of the region’s largest companies.  The DJ Stoxx 600 Euro Index added 1 percent to 244.38, its biggest increase in six weeks, and the Euro and British Pound halted their decline against the greenback.  Commodities surged as traders sold dollars, leading to big advances among commodity producers.  As of 15:30 GMT, the CRB Commodity Index was up 1.7 percent to a fresh two-week high.  Oil was among the strongest plays in the commodity space, being quoted 3.6 percent higher at $76.71 at that time.  Concern over Iran’s nuclear ambitions helped to elevate the price of the liquid.  Gold was also up substantially, higher by 2.6 percent to $1117 per ounce.

Despite this week’s gains, the Stoxx 600 is still down 6.1 percent since this year’s high on Jan. 19 amid concern about budget deficits in some European Union member nations.  After agreeing to provide support for Greece, the worst of the nations with budget difficulties, last week, European finance ministers today refused to provide details on what that support may entail.  Instead ministers turned up the pressure on Greece to rein in its deficit, as the Greek government said it was ahead of schedule on its budget targets.  Nonetheless, Greece was one of only two Western European nations whose benchmark equity indices were down today.

FTSE 100                         5244.06                     +76.59                     +1.48%
British stocks rallied today on continued strength in commodity prices and positive earnings results from Barclays Bank that helped push financials shares higher.  Six stocks gained for each that fell on the FTSE, which was led higher by over 5 percent gains for Barclays Bank and the Royal Bank of Scotland.  Barclays surged 6.8 percent after the company reported earnings that were more than double those of last year.  BHP Billiton, the world’s largest mining company, led basic-resource producers to the largest gain on the index after the company was raised to “buy” from “hold” by ING.  The company’s shares gained 3.1 percent.

CAC 40                             3669.04                     +59.82                     +1.66%
Trading in Paris led to the biggest gain among the major European indices today, as the CAC rallied on 3 percent gains in basic materials and technology stocks.  Overall, 38 of the 40 stocks on the index closed higher as investors pushed the CAC higher for a second straight day.  Vallourec advanced 5.7 percent for the biggest gain on the CAC after the world’s second-largest maker of steel tubes for oil and gas production was raised to “buy” from “reduce” at Natixis Securities.  L’Oreal dropped the most on the CAC as the world’s largest cosmetics company reported an 8 percent drop in profits and missed analysts’ expectations.  The company’s shares dropped 4.7 percent.

DAX                                   5592.12                        +81.02                     +1.47%
German stocks were led higher today by technology issues which gained 2.52 percent and financials which gained 1.8 percent.  Only 2 of the 30 DAX components closed lower on the day as a report by the ZEW Center showed that investor confidence fell less than expected in February.  Deutsche Bank, the country’s largest lender, led the benchmark index higher.  The company’s shares were raised by a Credit Suisse analyst.  ThyssenKrupp, Germany’s largest steelmaker climbed 2.6 percent on higher commodity prices across the board.

IBEX 35                          10393.90                     +100.30                 +0.97%
Basic Materials stocks in Spain gained almost 4 percent leaving the benchmark IBEX index with its second consecutive day closing higher.  Stocks were led by ArcelorMittal, the steel producer, as commodity prices across the board continued this week’s rally.  The company’s shares were higher by 4.16 percent for the biggest gain on the IBEX.  Financials across Europe were higher after Barclays announced its earnings today and Spain’s banks were no different.  The sector was up over 1 percent on the day.  Bankinter was 1 percent higher after the company’s shares were upgraded to “neutral” from “sell” at UBS.

FTSE MIB                     21289.20                     +166.73                   +0.79%
Italy’s FTSE MIB increased for the second day amid higher equity prices across the region.  Digital Multimedia Technologies extended gains from yesterday after the maker of television-broadcasting infrastructure was upgraded to “buy” at several European brokerage houses.  The company gained 3.9 percent after a 15 percent increase yesterday.  Another big advancer in Milan was Tenaris, the world’s largest maker of seamless pipes used to extract oil and gas.  The company’s shares rose 3.3 percent amid a higher price estimate at Credit Suisse and higher prices on energy commodities.

Written by Gary Chalik, CFDTrading Research
Please send any comments about this report to GChalik@fxcm.com

Stocks in Asia/Pacific Advance on Improved Corporate Rating, Higher Commodity Prices

Asia Session Key Developments

• Hong Kong Shares Closed for Chinese New Year
• Australia’s Business Sentiment Rebounds Amid Rate Pause
• RBA Maintains Pledge to Hike Rates Going Forward

Stocks in Asia edged higher on Tuesday despite thin trading condition as investors await another meeting by European policy makers concerning Greece’s debt crisis, while the equities market benefitted from expectations that corporate earnings will continue to bounce back as the global economy recovers.  In Australia, business confidence rebounded in January after the central bank unexpectedly kept their benchmark interest rate at 3.75%, leading the confidence index to rise 7 points to 15, according to the National Australia Bank survey of 410 companies. Meanwhile the Reserve Bank of Australia said that the February rate decision was “finely balanced” as the board continues to assess the impact of the record rate hikes, and went onto say that borrowing costs are likely to rise further as economic conditions improve.

Nikkei 225                          10,034.25

The Japanese equity markets pared yesterday’s decline, leading the Nikkei 225 to edge up 20.95 points (0.21%) and close at 10,034.25. Eight out of the ten components rallied on the day, with oil & gas leading the way, adding 1.84%, while consumer services slipped 0.13% to taper the advance.  Shares of Nippon Oil added 2.90% on the back of higher energy prices, while All Nippon Airways rallied 3.11% after Citigroup Global Markets Japan raised its rating on the firm to “buy” from “hold.” Moreover, Sumitomo Corp slumped 4.35% after the firm offered a cash bid of 122B yen to increase its stake in Jupiter Telecommunications, while Panasonic added 1.42% after Citigroup increased its outlook for the stock to “hold” from “sell.”

Hang Seng                        20,268.69

Closed in observance of the Chinese New Year

S&P/ASX 200 Index           4,567.80

Stocks in Australia advanced on the back of higher commodity prices, with the S&P/ASX 200 tipping 22.30 points (0.49%) higher to close at 4,567.80. Three out the ten components rallied on the day, with financials gaining 1.49%, while technology slid 4.19%. Shares of Foster Group, Australia’s largest beer and winemaker slid 2.16% after the company reported its lowest first-half profit in four years, while Primary Health Care, Australia’s second-largest provider of medical diagnostic tests lost 11.89% following the release of its first-half profit report. In addition, Onesteel rallied 5.59% subsequent to the company publicizing that domestic market conditions are “continuing to recover in line with management’s expectations,” while Riversdale Mining jumped 4.98% on the back of higher energy prices.

Notable Asian Session Event Risk / Economic Releases

U.S. Equity Markets Closed for President’s Day

Today’s Session Key Developments

•    European Union Officials Pressure Greece to Take More Measures to Cut Debt
•    Precious Metals Trade Higher, Greenback Rises Against European Counterparts

U.S. equity markets were closed today for the President’s Day Holiday.  Although stock prices were unchanged, the U.S. Dollar posted gains against its European counterpart for an eighth time in the last nine days.  Today, the exchange rate fell below $1.36 per euro for the first time since May 2009.  Investors remained pessimistic regarding the debt situation in Greece and concerned that the problems may spread into other nations.  European Union economics officials told Greece leaders that more steps need to be taken to reduce the country’s budget deficit.  Despite the concerns, European equities managed to close higher thanks to rising commodity prices and better-than-expected earnings reports.  As for U.S. markets, there is no major economic data released tomorrow to drive investor sentiment, but fourth quarter earnings will be released for Abercrombie & Fitch, Qwest Communications, and Teva Pharmaceutical.

DJIA 30                      10,099.14                      –.–                             -.–%

S&P 500                       1,075.51                       –.–                            -.–%

NASDAQ                       2,183.53                       –.–                            -.–%

Written by James Russell, CFDTrading Research
Please send any comments about this report to JRussell@fxcm.com

European Equities Trade Higher on Precious Metals, Earnings

Europe Session Key Developments

•    EU Economic Officials Tell Greek Leaders to Take More Measures to Cut Budget Deficit
•    Precious Metals Prices Rise, Mining Companies Gain
•    Euro and British Pound Continue to Decline Against the U.S. Dollar

Stocks in Europe managed to rally today despite lurking concerns over Greece and its impact on the regional currency.  Rising commodity prices led to gains among commodity producers and helped push the DJ Stoxx 600 Euro Index to its highest close since February 4.  Precious metals were the biggest gainers among commodity groups, led by a near 1 percent gain in gold that pushed the yellow metal above $1100 for the first time in eight trading days.  The higher commodity prices helped basic-resource shares post the largest gain among the major European sectors, rising over 1.3 percent on the day.  Despite the strength in European stocks, the region’s major currency fell against the U.S. dollar for an eighth time in the last nine days.  The euro has now dropped over 10 percent against the greenback since the exchange rate peaked above 1.50 in late November 2009.  The major fundamental concern for the currency remains the stability of the euro region as it attempts to ward off a sovereign debt crisis that has spread through the unfortunately-labeled “PIGS” countries- Portugal, Ireland, Greece, and Spain.  Officials in Greece, the European country with the largest budget deficit, were told today by EU Economic Commissioner Olli Rhen to take more measures to cut the deficit.  Greek Prime Minister George Papaconstantinou said his country is in a ‘terrible mess’ and he compared his task of fixing the nation’s fiscal difficulties to changing ‘the course of the Titanic.’  European finance ministers met today to review the Greece deficit plan and may be forced to take more direct action if the threat persists.  Thus far, rhetoric from EU officials regarding aid to Greece has remained vague, but European investors will remain attentive as discussions go forward.

FTSE 100                        5167.47                     +25.02                     +0.49%
Trading in London led to a near half-percent gain on the FTSE 100, as Barclays Bank gained nearly 5 percent to lead financial shares higher.  The banking giant is expected to post record annual profits tomorrow of more than 11 billion pounds, nearly double the profits achieved in 2008.  Unlike many of its competitors, Barclays has not taken taxpayer money to improve its standing, although the bank has indirectly benefited from government aid.  Furthering gains on the FTSE today was British Airways, which gained 2.6 percent on news of a tentative approval for numerous international airline giants to more closely coordinate each other’s efforts.  Also rising today were commodity producers, as precious metals prices increased and the outlook for commodity demand improved.  Rio Tinto was the top performer among mining shares as Bank of America Merrill Lynch added the company to its “Europe 1 List.”

CAC 40                            3609.22                     +10.15                     +0.28%
French equities gained for the first time since Wednesday, led by a 1.3 percent gain in basic materials shares.  Air Liquide and ArcelorMittal led the sector higher, each adding over 1.2 percent on the session.  Air Liquide rose for a fourth session after announcing better-than expected fourth quarter earnings and an improved outlook for 2010.  Furthering gains among commodity-dependent shares was Technip, which added 2 percent after the oilfield-services provider was upgraded at Oddo Securities.  In addition, Renault gained nearly 2.4 percent on news that the carmaker may attempt an exit from Volvo to raise cash.

DAX                                     5511.10                      +10.71                     +0.19%
The German index posted the smallest gain among major European indices, led by gains among industrials and utilities today.  Industrial company Deutsche Post gained 1.3 percent, salt producer K+S added 1.5 percent, and Siemen’s, the region’s largest engineering firm, gained 0.9 percent.  Utilities were led higher by E. ON, which gained nearly 1 percent after a statement from the company that energy prices must reflect the cost of backing up other power sources, as wind power remains unproven.

IBEX 35                          10293.60                     +68.70                   +0.67%
Trading in Spain led to the largest gain among major European indices, led by gains in commodity producers and consumer services.  Gamesa, a leader in sustainable energy technology, posted the largest gain on the IBEX today, gaining over 5.7 percent.  Spain’s largest maker of wind turbines announced today that it has established operations in India and launched a new plant in the country.  Iberia Airlines was the next-best performer on the index, gaining over 3 percent on news of a tentative approval for American Airlines, British Airways, Iberia, Finnair, and Royal Jordanian Airlines to more closely coordinate and market transatlantic flights.  Oil-engineer Tecnicas Reunidas also gained over 3 percent on rising optimism for commodities.

FTSE MIB                       21122.47                     +86.56                    +0.41%
Italy’s FTSE MIB posted a near-100 point gain today as stocks around the region rallied on higher commodity prices and earnings results.  One of the best performers in Milan today was Digital Multimedia Technologies, which posted its biggest gain in four months after announcing it sold a unit of DMT System.  The stock gained as much as 11 percent intraday.  Italian carmakers were less optimistic today regarding their situation, as Italy’s Foreign Car Producers said that 10,000 auto industry jobs are at risk if the government doesn’t renew incentives to buy new cars.  They stated that sales could fall in 2010 by 350,000 units.

Written by James Russell, CFDTrading Research
Please send any comments about this report to JRussell@fxcm.com

Stocks in Asia/Pacific Slump amid China Bolstering Steps to Curb Inflation

Asia Session Key Developments

• Japan’s GDP Rises More Than Expected
• Asian Stocks Fall for the First Time in a Week

Stocks in Asia/Pacific Slump amid China Bolstering Steps to Curb Inflation

The Asian stock market pushed lower on Monday for the first time in a week as China bolsters steps to curb inflation, while commodities tumble lower on the back of a strengthening U.S. dollar. In Japan, GDP jumped 1.1% in the fourth quarter from a downward revision of 0.0% the previous quarter, marking the largest advancement in the reading since the first quarter of 2008. Meanwhile, the Hang Seng index was closed in observance of the Chinese New Year, while the USDJPY rallied for a second straight day.

Nikkei 225                          10,013.30

Japanese equity markets halted the previous day’s advance, leading the Nikkei 225 to slip 78.89 points (0.78%) and close at 10,013.30. Nine out of the ten components traded lower on the day with health care leading the way, tumbling 1.36%, while utilities added 0.19% to taper the decline. Shares of Apamanshop Holdings rallied 2.7% following the company raising its operating profit forecast for the October-to-March period to 650 million yen, while Kawasaki Kisen Kaisha sky rocketed 4.7% after the company announced that it plans to raise as much as 34.6 billion yen in a public sale of new shares. At the same time, Nippon Meat Packers retreated 4.6% subsequent to publicizing that it’s nine-month operating profit fell 18% to 23.2 billion yen, while Senshu Holdings slumped 8.7% as the bank plans to raise as much as 65.4 billion yen by selling 240 million shares, according to a filing with the nation’s Finance Ministry.

Hang Seng                        20,268.69

Closed in observance of the Chinese New Year

S&P/ASX 200 Index           4,545.50

Stocks in Australia traded lower on the day, with the S&P/ASX 200 pushing 16.60 points lower (0.36%) to close at 4,545.50. Three out of the ten components tumbled on Monday, with industrials shedding 0.93%, while health care rose 1.27%. Shares of BHP Billiton, the world’s largest mining company tipped 0.4% lower as copper future for May delivery declined 1.6%, while Crane Group lost 5% following Australia’s largest plumbing supplies distributor reported first-half results. In addition, AWB leapt 9.1% after the company reached an agreement to settle a shareholder class action, while Bluescope steel fell 3.12% on the back of lower commodity prices.

Notable Asian Session Event Risk / Economic Releases

Written by Michael Wright, Daily Fx Research
Questions? Comments? email me at mwright@fxcm.com

U.S. Equities Fall As China Restrains Lending

U.S. Session Key Developments

•    China Raises Reserve Requirement For Nation’s Banks
•    US Retail Sales Beat Estimates While Confidence Falls

There was much to digest today as the dollar appreciated and equities and commodities gave up part of weeklong gains.  The morning’s biggest news was the surprise move by the People’s Bank of China to increase reserve requirements for Chinese banks by 50 basis points.  The central bank aims to curb lending after banks extended 1.1 trillion yuan in new credit, 19 percent of the year’s total target, in January alone.  The move sent stocks and commodities lower on concern that hawkish monetary policy in China would dampen the economic recovery.  News that the Euro Zone economy grew less than expected put additional selling pressure on markets that a positive US retail sales reading could not overcome.  At the New York open, the Dow Jones Industrial Average was lower by one percent and the greenback was higher by 0.7 percent against a basket of currencies.  The dollar pared gains during the session even as confidence among US consumers unexpectedly fell in February from a two-year high.  Leadership from the tech sector helped stocks trim losses as well.  Commodities closed the session lower on the dollar’s strength coupled with China’s plans to curb growth.  China is among the world’s largest consumers of commodities across the board.  Crude was down 1.4 percent to $74.20, trimming part of this week’s gains.  Among metals, copper was 1.6 percent lower and gold was 0.18 percent lower.  Monday is a US market holiday giving investors a chance to enjoy the winter Olympics, which open tonight.  Politics and economics will step aside as the world’s most talented winter athletes gather in Vancouver, Canada to showcase their skills.

DJIA 30                      10,099.14                    -45.05                          -0.44%
Though closing lower today, the Dow Jones Industrial Average still managed to finish the week up for the first time in five weeks.  Today’s move was led by 3M Co., which lost 1.4 percent after a Bank of America analyst cut the company’s shares from “neutral” to “underperform.”  Yesterday the company’s shares were upgraded by Bernstein.  Alcoa Inc., the world’s largest producer of aluminum, dropped 2.2 percent, the largest decline on the Dow.  Slower growth in China, a large consumer of metals, is a threat to Alcoa’s core business.

S&P 500                     1,075.51                      -2.96                            -0.27%
Two stocks advanced for every three that declined, sending the broad-based Standard and Poor’s 500 index into the red.  The decline was led by industrials, utilities, and energy stocks.  All three sectors dropped at least 0.6 percent as commodities fell on a higher dollar.  Motorola rallied the most in the S&P 500 after the company said it would split in two next year.  The company’s shares gained 7.3 percent.

NASDAQ                   2,183.53                      +6.12                           +0.28%
Leadership from the tech sector helped the broader market trim steep losses today as the tech-heavy Nasdaq Composite was the lone advancing index of the three US majors.  “Technology stocks seem attractive to some investors after they got hit real hard over the past month” explains Bruce McCain, chief investment strategist at Key Private Bank.  Blackberry maker, Research In Motion, was among the best performers in the Nasdaq after the stocks was upgraded by a RBC Capital analyst.  The stock was up 3.12 percent.

Written by Gary Chalik, CFDTrading Research
Please send any comments about this report to GChalik@fxcm.com

Oil Falls for the First Time in Five Days but Closes Friday Well of its Lows

North American Commodity Update

Commodities – Energy

Oil Falls for the First Time in Five Days but Closes Friday Well of its Lows

Crude Oil (LS NYMEX) -  $74.09  //  -$1.19 //  -1.58%

Oil’s steady, rising trend channel of the past week was brought to a close in the morning hours of Friday’s session. From Thursday’s high (set near the end of the day after the Greek bailout news filtered through the market), the active NYMEX futures contract fell as much as 4 percent before bulls stepped in pushed the market well off its lows. This aggressive move wasn’t formed in a vacuum however. The fundamental impetus for this significant drive was multi-faceted (a fact that could keep the market volatility into next week as well). For direction, traders would look at both risk appetite trends and underlying supply-and-demand factors. As for market-wide sentiment, there were still tremors surrounding the Greek bailout; but until the European Union offers details on the plan next week, this looming event will actually help to anchor trend development. However, this episode couldn’t keep the crude (nor any other speculative asset) stable in the face of another move to cool speculation in the market’s favorite place to invest – China. The People’s Bank of China announced it would lift the nation’s reserve requirement another 50 basis points starting February 25th. This is the second time in a month the policy authority raised the ratio, suggesting the group is growing increasingly desperate to cool inflation and avoid a potentially devastating asset bubble. Considering China is seen as the standout destination for growth and potential returns, their efforts to throw the breaks on the speculative trends are a moderating influence for the entire world.

From risk trends to fundamentals, there were significant indicators that would both bolster and undercut the outlook for supply-and-demand equilibrium. For oil traders, the US retail sales figures were perhaps the bright spot for an otherwise discouraging day for data. Delayed because of the snowed-in capital, the spending numbers would come out better than expected with a 0.5 percent increase through January. This would beat expectations and mark the third time in four months the series would climb – suggesting the American consumer (the world’s largest) was once again encouraging demand. However, this would prove the only tangible support fundamental traders would find on the day. Dimming the spending forecast, the University of Michigan consumer confidence survey would unexpectedly step back for its initial February reading. Far more influential though was the short-fall in the 4Q European GDP numbers. German (Europe’s largest economy) unexpectedly stalled in through the final months of the year while the broader Euro Zone expanded a tepid 0.1 percent over the three-month period. Considering Germany is largely dependent on manufacturing and exports, this is particularly discouraging for energy demand going forward. Turning from macro data to true market demand, today’s inventory and speculative positioning figures were very discouraging. The DoE reported US crude holdings jumped 2.42 million barrels last week to 331.4 million barrels to its highest level in two-months. Gasoline supplies jumped 2.32 percent to push holdings up to the highest level since March 14th of 2008. Taking a bead on speculative interest, net long positions among traders reportedly dropped 51 percent to 42,060 contracts according to today’s COT release.

Watch our weekly, live coverage of the DoE Inventory figures every Wednesday beginning at 10:15 AM EST.

Commodities – Metals

Gold Recovers Much of its Early Losses Thanks to an Anchored Dollar

Spot Gold  -  $1,090.80  //  -$4.60 //  -0.40%

Two of gold’s primary fundamental roles were in play Friday; and each would have a meaningful impact on price evolution. In the early trading hours of the Asian and European sessions, the commodity would tumble on news that China would take another definitive step towards cooling its markets. Raising the reserve ratio of the nation’s banks aimed at cooling the explosive loan growth in the nation; but it will also the effect of tempering growth and speculative turnover. Naturally, this move curbed an already fragile bounce in risk appetite that had developed after the EU confirmed it would rescue Greece yesterday. As a risky security, gold would shoulder this discouraging news and pullback from a notable, descending trend of lower highs that has developed since the market hit a record high in November. This aggressive run could have held through the end of the day; but another of the precious metal’s functions would step in and push it back towards its opening level. As a dollar hedge, the commodity is seeing another indirect connection to risk trends (as the greenback is one of the market’s favored safe haven currencies); but there are fundamental aspects for this benchmark that move beyond the realm of carry interest. After briefly testing a new seven-month high in the morning, the dollar would quickly retreat into the close of the day. Looking ahead to next week, the immediate concern for this commodity is the details to the Greek bailout. If it falls short, risk aversion can easily pick back up. It will be interesting to see though when/if gold can once again find its appeal as a safe haven asset. In the meantime, the COT report showed that speculative net long positions dropped 14 percent to 181,519 contracts in the week through February 9th.

Spot Silver  -  $15.49 //  -$0.17 //  -1.09%

A sharp turn in risk appetite would have a prominent effect on silver’s price action Friday. Through the morning, the transition from Greece bailout to China reserve ratio hike would send the speculation-sensitive commodity tumbling. However, a notable retracement in from the safe haven dollar through the active US trading hours would ensure no trend would develop before the week closes. Taking a look at price action over the entire week, this pair has carved a very clear and consistent rising trend channel. However, the gradient on the price action is gradual and has developed after a dramatic selloff over the preceding three weeks. From the CFTC’s positioning data, net speculative long interest dropped 24 percent to 23,365-contracts through this past Tuesday.

For real time news and analysis, please visit http://forexstream.dailyfx.com

Written by John Kicklighter, Strategist

Questions or Comments about this article? Send them to jkicklighter@dailyfx.com

European Equities Close Lower on Weak GDP Data, Tightening in China

Europe Session Key Developments

•    China Unexpectedly Increases Bank Reserve Requirements
•    Fourth Quarter Growth Disappoints in Germany, Italy, Euro-Zone
•    Euro Falls Against U.S. Dollar For Third Day, Cable Drops

European stocks closed lower today after China unexpectedly increased bank reserve requirements and Euro-Zone growth fell short of expectations in the fourth quarter.  The announcement by the Chinese government forced banks to set aside more deposits as reserves for a second time in the last month.  The announcement came directly after the Hang Seng Index stopped trading and therefore did not impact Chinese stocks, which fell slightly on the trading day.  After the news of China pushed European equities lower during early trading, weak growth reports from the Euro region intensified the downward pressure.  Germany announced that growth stalled in the fourth quarter, as the country’s GDP failed to rise amid expectations for a 0.2 percent increase.  Later, Italy announced that its economy actually contracted 0.2 percent in the fourth quarter, while the European Union’s statistics office in Luxembourg announced that the Euro region economy rose a modest 0.1 percent as a whole.  The bearish news, coupled with investor concerns over fiscal problems in Greece, put pressure on the Euro currency for a third consecutive day.  The sixteen-nation currency fell for a seventh time in the last eight days against the Dollar and has now declined over 5 percent against the American currency.  The greenback’s strength was a clear indicator of continued bearish sentiment in the market today, and led to a sell-off in all risky asset classes.  Crude oil fell over 2 percent by the close of European markets, while gold and silver futures sold off nearly 1 percent each.

FTSE 100                        5142.45                     -19.03                     -0.37%
British stocks fell in the week’s final day of trading as industrials and financials dropped at least 1.2 percent each.  Nearly four stocks fell for each that gained on the FTSE as investors showed concern that the economic recovery may be stalling out after weak growth data from the euro region.  Lloyds fell 3.2 percent to lead financial shares lower, while Xstrata and Vendata Resources led the decline in commodity based stocks.  Mining stocks were hurt by falling commodity prices after China, the world’s largest copper consumer and second-largest oil user, moved to further curb lending.  Copper fell as far as 3.2 percent on the London Metal Exchange.

CAC 40                            3599.07                     -17.68                     -0.49%
Trading in Paris led to a near one-half percent decline as weakness in the broader Euro economy overshadowed better-than-expected French GDP growth in the fourth quarter.  Bank shares were led lower by at least a 2 percent drop in BNP Paribas, Societe Generale, and Credit Agricole.  Shares of BNP Paribas fell for a second day after the bank was downgraded by analysts at Deutsche Bank, while bank shares in general were hurt by tightening in China and concerns over stability in the euro zone.

DAX                                 5500.39                      -3.54                     -0.06%
The German index posted the smallest decline among the major European indices, as industrials, financials, automobiles, and technology shares fell over 1 percent each.  German economic growth stalled in the fourth quarter, disappointing investors who expected a 0.2 percent rise for the quarter.  The Dow Jones Stoxx 600 Automobiles & Parts Index was the worst performing among all 19 industry groups, falling over 2 percent on the session.  Daimler and BMW, the largest luxury carmakers in the world, fell over 1 percent each.

IBEX 35                          10224.90                     -56.80                   -0.55%
Trading in Spain led to the largest decline among the major European indices, as industrials and financials shares fell over 1 percent each on concerns over the country’s debt problems and slow economic recovery.  The National Institute of Statistics announced yesterday that the country’s GDP fell 3.1 percent in the fourth quarter on an annual basis and slowed 0.1 percent on a quarterly basis.  Employment also remains concerning as the Spanish jobless rate nears 20 percent.  Obrascon Huarte, the Spanish building and infrastructure firm, was the worst performer on the index as weakness in construction firms carried over from yesterday’s session.

FTSE MIB                       21035.91                    -40.54                   -0.19%
Italy’s FTSE MIB posted a slight decline today after the country announced that its economy unexpectedly contracted 0.2 percent in the fourth quarter.  The most actively traded stocks in Milan included banks Banco Popolare and UniCredit, which fell at least 1.6 percent each after China’s decision to curb the lending activities of its banks.  Cement-maker Buzzi Unicem fell 2.8 percent after being downgraded by Gruppo Banca Leonardo, while appliance-maker Indesit furthered declines after being downgraded at Equity Sim.

Written by James Russell, CFDTrading Research
Please send any comments about this report to JRussell@fxcm.com

Euro to New Lows; Use Channel as Reference Point

Euro / US Dollar

The EURUSD decline below 13584 gives credence to my argument that the pair is in “a 3^rd of a 3^rd wave…an objective is 13081 (161.8% extension).”  Keep risk at 13842 and 13700 should provide resistance if needed.  Use the unorthodox channel as a point of reference.  Price is now below the midpoint of the channel, which is bearish.

British Pound / US Dollar

The GBPUSD broke its diamond top last week and the trend is down against 16076.  The rarity and reliability of the diamond pattern makes the break especially bearish.  Given the 3^rd of a 3^rd count from 16464, the first Fibonacci confluence is not until 14714/62.  The reversal occurring at the 38.2% / Elliott channel resistance strongly favors the idea that the rally is a 4^th wave.  15338 is where wave v (if it is a v) would equal wave i.  Favor the downside.

Australian Dollar / US Dollar

After breaking below the December low, the AUDUSD has found strong support from the confluence of the 200 day SMA / channel support.  A break of this area is required to inspire confidence in the bearish bias (against 8935).  If the decline from 9055 is a 3^rd wave, then the decline should extend to at least 8400, which is the 161.8% extension of wave 1.

New Zealand Dollar / US Dollar

The NZDUSD has found resistance at the confluence of the 61.8% retracement / short term trendline.  The rally from 6804 is in 3 waves (corrective…looks like a double 3), which leaves the NZDUSD vulnerable.  The next major support for the NZDUSD is not until 6600.  A Fibonacci confluence at 6365-6465 serves as a bearish objective.

US Dollar / Japanese Yen

The USDJPY rally (from 8481) is corrective, which leaves the pair vulnerable to weakness below that level.  Still, a larger correction may underway since the decline from 9380 is not impulsive either.  8832 and 8736 are potential supports.  A rally above 9130 is required in order to turn bullish.  Cautiously favor the downside against that level at this point.

US Dollar / Canadian Dollar

The USDCAD is toying with me.  Having been convinced that an expanded flat was complete, I was proved wrong when the pair dropped below 10540.  However, I maintain a longer term bullish bias against 10223.  Support should be strong at 10415, which is former resistance and the 61.8% retracement.  It is also possible that the USDCAD will not make it to that level as the pair has found support at the former 4^th wave zone.  Long term traders can establish longs against the January low but short term traders should await clarification of the near term picture.

US Dollar / Swiss Franc

The USDCHF has held trendline support.  The line is unorthodox in that it connects 2^nd waves at multiple degrees of trend.  11026-11091 is a target area.  Favor the upside against 10607.

Gold

The next major support for gold is not until 1005 (former breakout level).  Even then, I expect that level to be taken out without much of a fight as the deflationary environment has returned with a vengeance.  Gold has reached resistance from Fibonacci (and former support), which extends to 1094.  The retracement is satisfactory; favor the downside.

Light Crude

Crude is in a 3^rd of a 3^rd wave decline from 7804.  Although the rally from the low extended, the final leg of the advance is in 3 waves; which favors a complex corrective labeling.  Medium term targets (several weeks) are 6600 (100% extension) and 6426 (July low).

Jamie Saettele publishes Daily Technicals every weekday morning, COT analysis (published Friday evenings), technical analysis of currency crosses on Monday, Wednesday, and Friday (Euro and Yen crosses), and intraday trading strategy as market action dictates at the DailyFX Forum.  He is the author of Sentiment in the Forex Market.  Follow his intraday market commentary and trades at DailyFX Forex Stream.   Send requests to receive his reports via email to jsaettele@dailyfx.com.

Stocks in Asia/Pacific Rally on Growth Optimism, Hang Seng Bucks Trend

Asia Session Key Developments

• PBoC Hikes Reserve Requirements
• Japan Household Confidence Improves

The Asian stock markets pushed higher on Friday as firms throughout the region raised their outlook for future earnings, while the Hang Seng ended the session lower on speculation China’s government will take additional steps to temper the marked expansion in the region. The People’s Bank of China announced it will raise the reserve requirement by 50bp, which will go into effect on February 25, as the central bank aims to normalize policy from the “crisis mode.” Meanwhile, household confidence in Japan improved in January, with the index rising to 39.0 from 37.6 in December, and conditions are likely to pick up over the coming months as the expansion in monetary and fiscal policy continues to feed through the real economy.

Nikkei 225                          10,092.19

The Nikkei 225 advanced on Friday after being closed for the holiday, with the index advancing 128.20 points (1.29%) to close at 10,092.19. All of the 10 sectors rallied on the day, led by a 2.47% rise in consumer services, which was followed by a 1.68% gain in telecommunications. Shares of GS Yuasa Corp surged 9.72% after the company increased its full-year forecast by 40%, while Mitsubishi Corp pushed 3.25% higher after making a bid for a 25% stake in Cia. Minera del Pacifico. At the same time, Pacific Metals Co rallied 7.30% as the firm increased its full-year forecast by 24% and raised its yearend dividend to 8 yen from 5 yen, while Asahi Glass jumped 6.89% as the firm expects to see a 13% rise in sales.

Hang Seng                        20,268.69

The Hong Kong equity market slumped on Friday even before the People’s Bank of China announced additional measures to temper the economic expansion, leading the Hang Seng to shed 22.00 points (0.11%) and close at 20.268.69. Five of the nine components weakened on the day, with telecommunications declining 0.73% to lead the downturn, while consumer goods advanced 2.46% to limit the decline. Shares of Industrial & Commercial Bank of China slipped 0.36% after rising as much as 1.1% during the session on speculation the Chinese central bank will increase reserve ratios to curb lending, while Henderson Land Development advanced 2.64% after the Wen Wei Po announced the firm will offer 3,200 new homes following the Lunar New Year holiday. In addition, Citic Pacific rallied 2.68% as its international phone call unit aims to buy a 20% stake in Companhia de Telecomunicações de Macau S.A.R.L. from its parent company, while Cathay Pacific Airways added 2.47% after saying passengers volumes tipped higher in January from the previous year.

S&P/ASX 200 Index           4,562.10

Stocks in Australia strengthened for the third-day, with the S&P/ASX 200 tipping 7.80 points (0.17%) higher to close at 4562.10, and marked the first weekly advance in five-weeks. Six of the ten sectors rallied on Friday, led by a 1.22% rally in consumer services, which was followed by a 1.20% gain in basic materials. Shares of Emeco Holdings jumped 8.21% after the company announced it will update its full-year forecast as it looks to leave the European market and cut its operations in the U.S., while shares of BHP Billiton added 1.16% on the back of rising commodity prices. At the same time, James Hardie Industries slumped 3.57% as UBS lowered its rating on the stock to “neutral” from “buy,” while National Australia Bank shed 1.13% after the Australian Financial Review said the firm may make a bid for some of the U.K. branches that is being sold by the Royal Bank of Scotland Group.

Notable Asian Session Event Risk / Economic Releases

« Previous Page — Next Page »