March 2010

European Equities Generally Higher On Greece Speculation, Portugal Cuts

Europe Session Key Developments

•   Speculation of Greece Bailout Continues Following Sarkozy Comments
•   Crude Oil Trades Higher For Second Day, Precious Metals Fall
•   Euro Gains Against Greenback, Cable Lower

European stocks traded around last week’s close most of the session before closing the day slightly lower.  The Stoxx Europe 600 Index was down 0.1 percent to break a streak of six straight higher closes that included the biggest weekly jump since July.  Last week’s rally was due in part to increased speculation of an end to the Greek fiscal crisis and the possibility of a European Union bailout.  This weekend, French President Nicolas Sarkozy offered the strongest comments to date regarding the possibility of a bailout; “I want to be very clear: if it were necessary, the states of the euro zone would fulfill their commitments,” he said.  Meanwhile, in Washington today Greek Prime Minister George Papandreou called for trans-Atlantic cooperation against “unprincipled speculators” whom he blames for much of the surge in Greek financing costs.  Portugal, which faces its own budget problems, announced plans to sell 6 billion euros of assets to cut debt.  Those assets may include stakes in utility EDP-Energias de Portugal SA and oil company Galp Energia SGPS SA.  The government also said it would limit civil servants’ wage increases to below the inflation rate through 2013 as well as delaying part of a high-speed rail project and increasing taxes on those who earn more than 150,000 euros a year.  Portugal hopes that those measures will help it avoid Greece’s financial woes, particularly ahead of a planned sale of 750 million euros of 11-year bonds later this week.

FTSE 100        5,606.72        +6.96        +0.12%
Just under half of the components of the British benchmark index were up today, extending last week’s 4.6 percent gain.  Declines among health care stocks were overcome by healthy gains from the utility and energy sectors.  All four health care components were down as the group declined 0.6 percent.  AstraZeneca led the sector lower after its experimental Recentin drug failed to match Roche Holding AG’s Avastin in tests for use as a first-line treatment against colon cancer.  AstraZeneca’s stock fell 1.42 percent to 2,953 pence and erased 2.42 index points.

CAC 40          3,903.54        -6.88            -0.18%
Trading on the CAC led to the worst performance among benchmark indices for the top five European economies.  The French Business Confidence took a hit, unexpectedly dropping from 104 to 102 in February as the government phases out economic stimulus measures.  Among French equities, industrial stocks were the worst performers, dropping 0.5 percent as a group.  EAD, the maker of Airbus jets, was right in line with the group’s decline, slipping 0.5 percent after six straight days of gains.  The company said it would report a loss for 2009.

DAX            5,875.91        -1.45            -0.02%
German stocks, weighed by the basic materials sector, were marginally lower as a group.  German industrial production rose in January by 0.6 percent after falling 1 percent in December.  Economists had forecast a 1 percent gain in January.  On the equities front, basic materials shares were down 0.4 percent as the CRB Commodity Index was slightly lower.  German steelmaker Salzgitter dropped 1.4 percent after the company was cut to “neutral” from “overweight” at JPMorgan Cazenove.

IBEX 35            11,078.30        +58.50            +0.53%
Stocks on Spain’s benchmark index gained for a seventh consecutive day, pushing the IBEX to its highest close since February 2.  Basic materials and energy stocks were the strongest performers today on generally higher commodity prices.  Acerinox was the strongest among basic materials shares, gaining 2.3 percent after Kepler Capital Markets raised its recommendation on the shares on Friday.  Spanish-Argentine oil group Repsol led energy shares, gaining 1.2 percent.

FTSE MIB            22,398.21        +120.09            +0.54%
Trading on Italy’s FTSE MIB  led to the largest gain among major European indices.  Banca Generali rose for a sixth consecutive session, gaining over 4 percent after announcing that net income was significantly better than last year.  Saipem, Europe’s largest oilfield-services provider, gained nearly 2 percent on rising crude prices.

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

British Pound Testing Potentially Strong Resistance

Euro / US Dollar

A larger EURUSD rally, probably a 4^th wave, may be underway towards 13870-14030.  4^th waves are often choppy, usually flats or triangles.  An impulsive rally from 13433 and corrective decline from 13738 may be complete.  This is bullish but I am uncomfortable with long positions at this point with equities testing key resistance levels (another view is presented with the USDCHF).

British Pound / US Dollar

The GBPUSD has met resistance from former support / the 38.2% of the decline from 15825, at 15181.  Channel resistance reinforces resistance at the current level.  I am looking for a turn lower in a 5^th wave.  Price should not come close to 15533.

Australian Dollar / US Dollar

The AUDUSD is nearing 9148, which is where the rally from 8796 would sport 2 equal legs.  9170 would be additional resistance.  9050 is potential short term support.  A drop below 8974 is needed in order to suggest that the larger trend has turned back down.

New Zealand Dollar / US Dollar

I wrote last week to “favor the downside against 7022.  A move above there would probably give way to strength above 7088 and a test of 7156.”  The NZDUSD has exceeded 7022 and short term support is 6940/80.  Action since 7088 could also be a triangle.

US Dollar / Japanese Yen

The USDJPY rally has reached the 61.8% retracement of the decline from 9217.  This level is reinforced by former support.  Given the extent and structure of the advance, it is certainly possible that an A-B-C decline is complete from 9380.  Expect consolidation / pullback.  Initial support is 90.

US Dollar / Canadian Dollar

The USDCAD has dropped below 10368 and to its lowest level since mid January.  The potential for a bottom and reversal remain, especially since the decline from 10577 is now 161.8% of the decline from 10684-10491 and the decline from 10684 is 100% of the decline from 10784.  Even if the decline from 10577 is a 3^rd wave (rather than a c wave), a 4^th wave correction would probably reach at least 10368.

US Dollar / Swiss Franc

The decline from the 10900 high February can be counted as a 3 wave setback and the rally from the low (10646) may be an impulse.  The other count is a double zigzag (a-b-c-x-a-b-c).  Confusion reigns at this point and the key levels are 10646 and 10900.  Until one of those levels gives way, the market remains in a range.

Gold

No change: “Gold has traded sideways since December and appears to be building a bullish base.  Specifically, the base could be a complex head and shoulders (the head itself is a head and shoulders).  In order to complete the pattern, gold would sell off once more towards 1075 before finding a right shoulder low.”

Light Crude

Crude remains strong and the larger trend is considered up as long as price is above 6859 (under there completes a longer term head and shoulders top).  Still, at least a setback looks likely near term as there are 5 waves up from the February low (and wave v is a diagonal).  8286-8350 is potential resistance from a gap.  Expect weakness to at least below 7705.  7613 is potential support.  It is possible that the rally from the February low completes wave C of an A-B-C flat.  An impulsive decline from near current price would confirm as much.

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 tojsaettele@dailyfx.com.

Asian Stock Markets Advance Amid Accelerating Economic Growth, France Pledges to Support Greece

Asia Session Key Developments

• Asian Stocks Rally to Six-Week High
• Bank Lending in Japan Tumbles for the Seventh Month
• Japan Trade Surplus Widens More-Than-Expected on Exports

Stocks in Asia/Pacific began the week on a strong note, rallying to a six-week high following French President Nicolas Sarkozy stating that the euro region stands ready to rescue Greece should the government struggle to fund its budget deficit. Meanwhile, the economic docket overnight showed bankruptcies in Japan tumbled for the seventh straight month as emergency government programs helped companies stay afloat, with the gauge slipping 17.3% from the previous year, while bank lending weakened 1.5% during the same period amid expectations for a 1.7% decline. Moreover, the trade surplus widened to 1712.8B yen in January as exports jumped at an annual pace of 40.6%, which exceeded forecasts for a rise to 1249.5B yen, while the Eco Watchers Outlook survey surged to the highest since July 2009, with the index increasing to 44.8 in February from 41.9 in the previous month.

Nikkei 225                          10,595.92

Stocks in Japan extended Friday’s advance, leading the Nikkei 225 to rally 216.93 points (2.09%) on Monday and close at 10,585.92. Nine out of the ten components pushed higher, with consumer goods leading the way, rising 2.56%, while utilities retreated 0.13%. Shares of Yahoo Japan added 4.69% as Tokai Tokyo Securities upgraded the company’s rating from “neutral” to “above average,” while Dentsu Inc rallied 6.04% after reporting an 8.8% rise in February revenue.” In addition, Mitsui Mining & Smelting rose 2.00% amid the Nikkei English News reporting that the company plans to start recycling metals used in batteries for hybrid and electric vehicles as early as 2014, while Nissan Motor soared 4.71% as Dow Jones publicized that the automaker expects vehicle production at its two plants in Mexico to rise by about 20% this year.

Hang Seng                        21,196.87

The Hong Kong equity market pushed higher on Monday for the second day, leading the benchmark equity index to rise 409.90 points (1.97%) and close at 21,196.87 as all nine components advanced on the day. Shares of PetroChina advanced 2.80% amid the company, along with Royal Dutch Shell made an offer worth more than A$3.3 billion to acquire Arrow Energy, while Li & Fung, the largest supplier of toys and clothing to Wal-Mart, added 4.20% as the U.S. unemployment rate unexpectedly held at 9.7% in March. Moreover, Aluminum Corporation of China climbed 4.19% on the back of higher metal prices, while China Overseas Land & Investment rose 2.17% after publicizing that property sales in February added 52%.

S&P/ASX 200 Index           4,807.90

Shares in Australia advanced for a seventh straight session on Monday, leading the S&P/ASX 200 to increase 40.70 points (0.85%) and close at 4,807.90 as all ten components pushed higher on day. Shares of BHP Billiton climbed 2.38% as copper futures rose 1.2%, while Woodside Petroleum surged 1.64% as oil surged to nearly an eight-week high on Friday. At the same time, Linc Energy leapt 3.58% amid CEO Peter Bond stating that investor confidence in the coal market has “come back over the last few weeks and months,” while Arrow Energy jumped 46.84% after Royal Dutch Shell and PetroChina made a bid for the firm.

Notable Asian Session Event Risk / Economic Releases

U.S. Stocks Rise on Better-Than-Expected Non-Farm Payrolls

U.S. Session Key Developments

Labor Department Reports Payrolls Dropped By 36,000 in February

Consumer Credit Unexpectedly Rises in January

Investors Sell Off US Dollar, Crude Gains 2 Percent

U.S. Equities are on track to test January highs after a better-than-expected non-farm payrolls report sent stocks higher.  The Labor Department reported that payrolls dropped by 36,000 in February, compared with a decrease of 68,000 estimated in a Bloomberg survey.  Economists had expected that the severe weather had kept job hunters at home and kept businesses from hiring.  The report showed that 1 million Americans said bad weather prevented them from getting to work during the survey week.  Nonetheless, the unemployment rate held at 9.7 percent in the face of all the snow, suggesting that March could see the first significant rise in payrolls.  On the other hand, the underemployment rate – which includes part-time workers who’d prefer a full-time position and people who want work but have given up looking – rose to 16.8 percent from 16.5 percent.  Gains in employment are pivotal to a sustainable economic recovery.  The greenback faltered despite the employment surprise due to its “safe-haven” status.  The dollar index finished the session at 80.44, 0.2 percent lower from yesterday’s close.  The dollar was lower against all G7 currencies except the Japanese Yen, which fell 1.4 percent to 90.29 against the dollar.  Commodities gained on the dollar’s weakness and the newfound confidence in the strength of the economic recovery.  The CRB Commodity Index was up 0.8 percent at the end of the session.  Crude oil provided major strength, gaining 2.0 percent to $82.09.

DJIA 30                  10,566.20                    +122.06                       +1.17%
The Dow Jones Industrial Average closed the first week of March back in the black for 2010 and on the verge of testing its January 19 high of 10725.  Overall, only two components of the index declined in today’s session as shares of Boeing and American Express paced all advancing issues.  Both companies advanced at least 3.4 percent and contributed a combined 28 points to the Dow’s advance.  Alcoa was the third best performer as metal prices gained 0.7 percent in today’s commodity rally.  Alcoa closed up 3.1 percent.

S&P 500                     1,138.70                      +15.73                         +1.40%
The Standard and Poor’s 500 Index gained for the sixth consecutive trading day.  All industry groups were in the black as 19 out of 20 components advanced overall.  All 82 Financial issues were higher today as the group gained 2.0 percent to lead all sectors.  Bank lending to consumers unexpectedly increased in January for the first time in a year.  Consumer credit rose by $5.0 billion compared to the $4.5 billion drop anticipated by economists surveyed by Bloomberg.  American International Group was the best performer among financial companies.  The bailed-out insurer rose 5.1 percent after it announced it would sell its remaining stake in Transatlantic Holdings, valued at close to $500 million.

NASDAQ                   2,326.35                      +34.04                         +1.48%
The tech heavy Nasdaq Composite was the best performer among the three main U.S. equity indices.  Basic materials stocks led all industry groups higher, gaining 2.65 percent amid major gains in commodity prices.  Technology shares, which hold the most weight by far, gained 1.3 percent.  Apple contributed the most to the sector’s advance.  The maker of iPods gained 3.9 percent to close at $218.99.  The company climbed to a record intraday price of $219.70 after they announced they would start selling the iPad in the U.S. on April 3 and will take preorders next week.

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

European Equities Climb For Sixth Day on Greece Speculation, U.S. Payrolls

Europe Session Key Developments

•   European Union Working to Develop Rescue Plan For Greece
•   German Factory Orders Increase, U.S. Nonfarm Payrolls Better Than Expected
•   Commodities Trade Higher On Dollar Weakness and Better Economic Outlook

European stocks rallied for a sixth consecutive day on speculation for an EU rescue of Greece and better-than-expected jobs data from the U.S.  The Dow Jones Stoxx 600, a broad collection of European equities, closed the trading week at its highest level since January.  Investors continued to applaud actions taken by Greece to reign in the euro-area’s largest budget deficit.  Prime Minister George Papandreou has taken the task of slashing government spending and raising taxes, amid public outcry and protests from his home citizens.  Today, speculation abound that EU nations are working on a rescue plan to aid the Prime Minister in his efforts.  Luxembourg’s Jean-Claude Juncker, who heads the euro-area finance ministers, said that “we’re not abandoning Greece” and praised the country’s efforts thus far.  EU lawmakers plan to hold hearings on the Greece situation in the coming weeks, and investors seem confident that the necessary steps will be taken to maintain stability in the euro zone.  Furthering bullish sentiment was the nonfarm payrolls report out of the U.S., which showed that payrolls fell by 36,000 in February, less than the 68,000 anticipated.  The news helped to rally both equities and commodities, which were led by a near 2 percent gain in the price of crude oil to nearly $82 a barrel.  Precious metals also traded higher, as gold futures rose to $1139 per troy ounce on the COMEX and silver futures rallied above the $17.40 level.  Despite the better-than-expected payrolls data, investors sold off the U.S. dollar due to its “safe-haven” status.  The euro rallied against the greenback to $1.36 at the time of this writing, and cable rose above $1.51.

FTSE 100                    5599.70                      +72.54                       +1.31%
British shares rebounded from yesterday’s losses as basic materials and financials posted strong gains on the day.  Basic materials shares were led by a 5 percent gain for Xstrata and a 4 percent gain for Fresnillo as commodity prices rallied across the board.  Xstrata, a mining firm, agreed to sell the Prodeco coal operations in Colombia to Swiss commodities firm Glencore.  Financial shares rallied over 2 percent today led by fund manager Schroders.  The firm followed up its strong gains from yesterday’s sessions after reporting that assets under management increased 35 percent last year.

CAC 40                            3908.12                     +79.71                      +2.08%
French stocks rallied over 2 percent today as all ten of the CAC components closed higher on the session.  Nearly every stock in the index closed higher as Societe Generale gained nearly 5 percent to push financial shares up over 3 percent on the day.  Technology shares also performed well as Alcatel-Lucent rose 3.5 percent as it expands its relationship with Kenya Data Networks.  Water company Veolia Environnement was the lone laggard on the index, falling 4 percent after reporting full-year net income that missed analysts’ estimates.

DAX                                 5878.57                       +83.25                    +1.44%
German stocks posted gains today as factory orders increased for the month of January.  Consumer goods and basic materials added at least 1.8 percent each to push the overall index to its highest close since January.  Automobiles were the best performing sub-sector of consumer goods, as Daimler gained over 3 percent after announcing its February global sales were 8.9 percent higher than a year earlier.  The report showed that global demand is improving and helped push shares of competitors BMW and Volkswagen up 2.5 percent and 3.2 percent, respectively.

IBEX 35                          11010.20                     +264.90                   +2.47%
Trading in Spain led to the biggest gain among major European indices, as stocks on the IBEX had their best day since July.  ArcelorMittal and Acinerox each gained at least 2.8 percent as commodity prices continued their surge higher.  The financial sector gained over 3 percent on the day, as Banco Santander and BBVA rallied over 3.4 percent each.  Banco Santander raised $2.2 billion today from a sale of bonds backed by U.K. residential mortgages.  The banks were also pushed higher by speculation that they may be in the bidding for Turkish lender Garanti Bank.

FTSE MIB                      22278.12                     +433.56                    +1.98%
Italy’s FTSE MIB advanced for a sixth consecutive session, closing the trading day up over 4 percent on the week.  Among the most actively traded stocks in Milan were Italcementi, Italy’s largest cement maker which gained nearly 2 percent, as well as Banca Italease, whose shares rose 4 percent.  It was the largest increase since 2009 for Banca Italease, after a price was set for an offer by Banco Popolare.  Shares of UniCredit and Intesa Sanpaolo advanced over 1.5 percent each, after analysts at BofA Merrill Lynch initiated a “buy” recommendation to both firms.

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

Asian Stock Markets Rally as Global Growth Prospects Improve

Asia Session Key Developments

• Australian Foreign Reserves Narrows in February
• Construction in Australia Grows at Slower Pace
• Japan Reserve Assets Tip Lower for Second Month

Stocks in Asia/Pacific ended the week on a higher note subsequent to the drop in U.S. jobless claims, while the Japanese yen weakened amid speculation that the Bank of Japan will expand easing measures in order to support the domestic economy. Meanwhile, the economic docket overnight showed official reserve assets in the world’s second largest economy narrowed for the second time in the past seven months, with the figure slipping to $1051.1B in February from $1053.1B in the previous month. Meanwhile, construction in Australia grew at a slower pace in February as the AiG’s Performance of Construction Index pulled back to 52.8 from 57.7 in the previous month, while the nation’s foreign reserves weakened to A$44.3B during the same period from A$46.6B in January.

Nikkei 225                          10,368.96

Stocks in Japan pared yesterday’s decline, leading the Nikkei 225 to rally 223.24 points (2.20%) on Friday and close at 10,368.96. Eight out of the ten components pushed higher on the day, with consumer services rising 2.96%, which was followed by 2.58% advancement in technology. Shares of Mitsui Chemicals soared 4.92% as the company announced it will take additional measures to cut costs, while JFE Holdings added 2.99% as the Nikkei English News said the company plans to purchase a 24% state in China’s Pancheng Yihong Pipe Co. for approximately 1 billion yen. In addition, Kawasaki Kisen Kaisha climbed 4.89% as Mitsubishi UFJ Financial Group lifted the company’s stock rating from “market perform” to “outer perform,” while Sony added 3.39% following a Wall Street Journal report that said the firm will release new hand-held products which will compete against Apple.

Hang Seng                        20,787.96

The Hong Kong equity market pared yesterday’s decline, leading the benchmark equity index to gain 212.19 points (1.03%) and close at 20,787.97as all nine components advanced on the day. Shares of Cosco Pacific surged 3.64% as the shipping company expects annual profit on trade and rates, while Li & Fung, the biggest supplier of toys and clothing to Wal-Mart, added 2.21% amid the drop in U.S. jobless claims. Moreover, PetroChina gained 1.82% as crude pushed higher on Friday due to speculation that a recovery would boost demand for oil, while Aluminum Corporation of China advanced 2.08% on the back of higher metal prices.

S&P/ASX 200 Index           4,767.20

Shares in Australia rallied for the sixth successive session on Friday, leading the S&P/ASX 200 to increase 16.70 points (0.35%) and close at 4,767.20. Nine out of the ten components pushed higher on the day, with technology rising 1.72%, while telecommunications shed 0.36% to taper the advance. Shares of Australian Worldwide Exploration leapt 4.71% amid the company publicizing that it will begin drilling off New Zealand’s coast, which could potentially contain 250 million barrels of oil, while Tower Australia added 1.59% after the Australian Prudential Regulation Authority and Foreign Investment Review Board approved Dai-ichi Mutual Life Insurance’s bid to increase their stake in the insurance firm. At the same time, AWB slumped 2.27% as Commonwealth Bank of Australia expects a drop in grain harvest, while OZ Minerals added 2.27% on the back of higher metal prices.

Notable Asian Session Event Risk / Economic Releases

Crude Traders Unable to Exploit Technical Break as Risk Ways the Market Down

North American Commodity Update

Commodities – Energy

Crude Traders Unable to Exploit Technical Break as Risk Ways the Market Down

Crude Oil (LS NYMEX) –  $80.39  //  -$0.48 //  -0.59%

Without momentum to step in to support yesterday’s push above $80.50, the active light sweet crude futures contract on the NYMEX would ultimately be led to a corrective move. Therefore, while the commodity technically marked its highest close since January 11^th Wednesday, the market is still anchored to the congestion that has stalled progress for going on two weeks now. Undermining speculative efforts to carry crude to a new 16-month high are the dampening effects that stalled risk appetite has had across the capital markets. The same hesitation at the threshold of a new trend was seen in equities and EURUSD. The curb on sentiment is still a culmination of many different factors (including the struggles of an economic recovery, a withdrawal of government stimulus and uncertainty in sovereign debt risk); but risk aversion was leveraged today through a few notable events. The European Central Bank and Bank of England’s respective monetary policy decisions would offer little guidance on the difficult balance between growth and debt reduction. Both groups would maintain their benchmark rates and the BoE maintained its 200 pound bond purchasing program. However, the ECB would take another, measured move towards tightening with the announcement that it was switching to a variable rate on its three-month cash offers. Exacting a greater effect on sentiment, Greece finally decided to go forward with its necessary 5 billion euro bond sale after its spreads dropped following yesterday’s additional austerity cuts. With a bid of nearly three times what was offered, the market seemed confident in Greece’s ability to finance its debts. Nonetheless, calls for the EU to announce details on any aid package should the member economy need it from Finance Minister Papaconstantinou reflects the fine line this region is walking.

Going forward, it is very unlikely that oil will be able to decouple from its role as a speculative instrument. With global investors wary of adding to risky positions for fear of an unforeseen crisis, going long energy when global growth is still tame would be a risky step – especially at the market’s current highs. As for the ongoing adjustments to demand forecasts (through growth readings), the economic docket was light meaningful releases. Topping the list was the revision to the Euro Zone’s fourth quarter GDP figures. Whereas the headline figures for growth were unchanged at a 0.1 percent increase over the three-month period, household spending was notably upgraded to an unchanged figure. In other news, US factory orders rose by 1.7 percent in January and consumer spending – measured through the ICSC Chain Store Sales report – rose 2.7 percent. Tomorrow, the US non-farm payrolls could give the most meaningful adjustment to growth forecasts for the world’s largest economy that the market has seen in some time. Expectations are already set low with a forecast for 65,000 jobs lost and an uptick in the unemployment rate to 9.8 percent; but this speaks more to the slow recovery the economy has ahead of it rather than ushering in renewed fear of a secondary recession. From the supply side, the US Department of Energy inventory report for the week ending February 26^th yesterday recorded a 4.03 million barrel increase – extending the longest series of weekly increases since May and which pushed total inventories to its highest level since August. Alternatively, refineries increase their utilization rates to 81.9 percent – the highest level since October.

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

Commodities – Metals

Tempered Risk Appetite Draws Gold’s Controlled Rally to a Close

Spot Gold  -  $1,131.80  //  -$8.10  //  -0.71%

Spot gold fell for the first time in six days, ending the longest stretch of gains since early October. However, this pullback would ultimately come at the same pace the initial upswing was running. Quantifying the lack of momentum behind the metal’s recent bull trend, the CBOE’s Gold Volatility Index fell to a seven-week low of 20.06 percent. Notably, this activity levels just above the January and October lows that preceded forceful bearish and bullish waves respectively. This trend towards moderation comes from the soothed sense of financial uncertainty that peaked with the perceived Greek crisis. However, this is not to mean that risk trends have vanished for good while inflation and growth concerns step back in. Greece’s ability to fund its deficit is still questionable and a revival in market-wide fear could expose doubts about this region. Yet, even if this hot spot for investor anxiety were to fade, there is still a matter of ballooned global deficits and warnings surrounding sovereign credit ratings for even the largest economies. This raises the value of the metal as a safe haven when investors are looking for an alternative to devalued fiat currency. In the meantime, Friday’s US employment report could resuscitate gold bug’s focus on risk trends as this data weighs on investors’ confidence about the global recovery and further exacts its influence on the US dollar.

Spot Silver  -  $17.12   //  -$0.08  //  -0.44%

Like its more expensive counterpart, silver would end the day in the red. However, the pullback the metal would put in for was notably more controlled than the series of daily advances that preceded it. Lacking the clear function as a store of value that gold so blatantly exploits, this commodity is more sensitive to the whims of risk appetite and the actions of the US dollar. This could lend itself to leveraged volatility following the release of the often-unpredictable US NFPs.

Discuss gold and oil trading with other traders in the DailyFX Forum

Written by John Kicklighter, Strategist
Questions or Comments about this article? Send them to jkicklighter@dailyfx.com

European Stocks Rise for Fifth Day, Central Banks Keep Rates Steady

Europe Session Key Developments

BoE and ECB Hold Rates Steady, ECB

Sterling Continues to Slide Ahead of BoE Interest Rate Decision on Thursday

Commodities are Generally Higher Amid Dollar Weakness and Economic Optimism

European stocks were mostly higher for the fifth straight trading day.  The Stoxx Europe 600 Index gained 0.2 percent as national benchmark indices increased in 9 of 18 western European markets today.  Stocks trended higher through most European event risk before paring their advance after a report showed pending U.S. home sales unexpectedly fell in January.  Economists had forecast a 1 percent gain, while the index of purchase agreements for existing homes sank 7.6 percent.  Stocks were relatively unaffected by the BoE and ECB interest rate decisions announced at 12:00 GMT and 12:45 GMT respectively.  Both central banks left benchmark interest rates unchanged at 0.50 percent and 1.00 percent respectively.  The BoE also decided to keep its bond-purchase program unchanged for the second month while the ECB tightened the terms of its regular three-month market operations and returned to offering such funds at a variable rate.  The greenback appreciated against sterling and the euro after the respective central banks announced their rate decisions.  Positive U.S. economic data also facilitated the dollar’s advance.  A report from the Labor Department showed claims for U.S. jobless benefits dropped from a three-month high last week.  Overall, the dollar gained 0.7 percent against its major trading partners.  The CRB Commodity Index dropped 1 percent on the dollar’s advance.  Natural gas was a major laggard as contracts for May delivery dropped 3.6 percent to 4.65 USD/MMBtu.  Tomorrow the infamous U.S. change in non-farm payrolls should provide direction for all markets going into the weekend.  Economists are currently predicting that payrolls fell 63,000 in February and that the unemployment rate will rise to 9.8 percent according to Bloomberg surveys.

FTSE 100                         5527.16                      -6.05                       -0.11%
Commodity shares dragged British stocks lower as the CRB Commodity Index dropped 1 percent.  Basic Material stocks were the worst performers as the group dropped 1.1 percent in the session.  Shares of Rio Tinto and BHP Billiton both fell 1 percent.  Technology stocks were on the other end of the spectrum; the group gained 1.1 percent in the session.  The best performing issue of the session was Schroders which climbed 6 percent as the money manager reported record inflows for 2009.

CAC 40                            3828.41                     -14.11                      -0.37%
Seven out of ten components declined to drag the CAC 40 down for the first time in five days.  The index was paced by Vinci, the world’s biggest builder, which saw its shares climb 2.6 percent to 41.22 euros.  The company reported 2009 income of 1.6 billion euros that beat analysts’ estimates.  However, the positive earnings were overshadowed by GDF Suez, which contributed the most to today’s decline as its shares fell 2.7 percent.  The operator of Europe’s largest natural gas network said that profit was little changed in 2009 on lower fuel prices and a slump in industrial demand.

DAX                                 5795.32                       -22.56                    -0.39%
The DAX was the worst performer among the benchmark equity indices of the five largest European economies despite more than half the components advancing.  Basic Material stocks were the major laggards as the group fell 1.1 percent in today’s session.  Individually, Siemens AG and BASF SE led declines in the German benchmark index.  Shares in the two companies declined 1.1 and 1.2 percent respectively.  Deutsche Bank, Germany’s biggest bank, was among the best performers, rising 1.4 percent, despite its credit rating being cut by Moody’s based on the company’s dependence on the securities unit.

IBEX 35                          10745.30                     +80.80                   +0.76%
Three components advanced for every one that declined as the IBEX was one of the better performing indices in western Europe.  Health care stocks performed the best as a group, gaining 1.6 percent.  Financial stocks also fared very well with Banco Santander and BBVA contributing the most to the advance of the IBEX.  Shares in the two companies advanced 1.1 and 1.4 percent respectively.  In addition, Banco Popular posted the biggest gain on the IBEX.  The stock rose 4.0 percent.

FTSE MIB                     21844.56                     +99.50                    +0.46%
Italy’s FTSE MIB advanced for the fifth straight day paced by shares of Prysmian and Safilo Group.  Shares of Safilo, the world’s second-largest maker of eyewear, climbed 13 percent after Bank of America Merrill Lynch initiated coverage of the company with a “buy” rating.  Shares in Prysmian, the world’s second-biggest cable maker, rose 1.5 percent after the company said 2009 net income rose 4.6 percent from 2008.  Additionally, Goldman Sachs announced it would be selling a 16.8 percent stake in Prysmian.

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

U.S. Stocks Rally as Dow Returns to Positive Territory

U.S. Session Key Developments

•    Dow Jones Industrial Average Returns to Positive Territory For 2010
•    Jobless Claims Slightly Better Than Expected, Home Sales Plunge
•    Commodities Decline as Greenback Gains Against European Counterparts

U.S. stocks were generally higher for a fifth consecutive day as initial jobless claims and continuing claims were shown to be slightly lower than expected in their most recent readings.  Investors managed to shake off a 7.2 percent plunge in January home sales and pushed the Dow Jones Industrial Average back into positive territory for the 2010 year.  The employment data released by the Labor Department this morning showed that initial jobless claims fell by 29,000 to 469,000 in the week ended February 27, while continuing claims decreased to 4.5 million in the week ended February 20.  This data, coupled with a 6.9 percent improvement in nonfarm productivity in the fourth quarter, helped boost market sentiment and extend the winning streak for equities.  Commodities, on the other hand, did not fair as well due to weakness in Asia overnight and a rising U.S. dollar.  Crude oil fell nearly 1 percent today and fell below $80 a barrel intraday before closing at $80.21.  Precious metals were also weak, as gold prices fell to $1131 and silver futures fell towards the $17 level.  Silver has had a strong run as of late, gaining over 17 percent in the last month.  The U.S. Dollar Index posted its second gain of the week today, returning to the 80.5 level.  The greenback snapped its two-day losing streak against the euro, as the EURUSD fell to $1.3581 at the time of this writing.  Overall, there was very little price action after the initial morning gains as investors looked ahead to the nonfarm payrolls release tomorrow.  Economists expect the report to show that payrolls fell by 68,000 in February after declining 20,000 in the month prior.

DJIA 30                     10,444.14                      +47.38                       +0.46%
The Dow Jones Industrial Average gained back yesterday’s slight loss and some, rallying nearly 50 points on strong performances for financials and basic materials shares.  Disney was the top performer on the index, adding nearly 3 percent after analysts at Bank of America Merrill Lynch raised their rating on the stock to “buy” from “neutral.”  Shares in Bank of America rallied 1.7 percent after the U.S. Treasury sold its warrants on the company’s shares for $1.57 billion.  Other strong performers included Coca-Cola and Boeing, which each gained over 1 percent on upgrades from analysts at UBS.  Overall, shares on the index have rallied over 6 percent in the last month and have returned to the black for 2010 to date.

S&P 500                       1,122.97                           +4.18                       +0.37%
The broad-based S&P 500 rallied for a fifth day as consumer services and financials gained nearly 1 percent each.  Financials were generally higher on news of the U.S. Treasury’s sale of BofA warrants, as well as easing concern over the Volcker Rule’s potential impact on bank profits.  Goldman Sachs had a strong day, posting a 3.7 percent gain on high volume trading.  Consumer services shares were led by gains in Abercrombie & Fitch, Zumiez, and Aeropostale as year-over-year comparisons showed improvements in the retail sector.  The worst performing sector on the S&P today was energy due to falling oil prices.

NASDAQ                     2,292.31                         +11.63                     +0.51%
The tech-heavy Nasdaq was the best performer among major U.S. indices as technology stocks rose nearly 0.6 percent on the day.  Of the largest-weighted fifteen tech stocks on the index, search engine giants Yahoo!, Google, and Baidu posted the strongest gains, each adding over 1 percent.  Research in Motion was the worst performer among the largest Nasdaq tech stocks, dropping 1.2 percent.

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

Asian Stock Markets Mixed on Speculation China Will Tighten Policy

Asia Session Key Developments

• Gold Climbs to Six-Week High
• Copper Prices Rally for a Fourth Straight Day
• Hong Kong Retail Sales Rise Less-Than-Expected

Stocks in Asia/Pacific were mixed on Thursday for the third consecutive day amid concern policy makers in China will tighten policy over the coming months, which could further weigh on bank lending going forward. Nevertheless, the economic docket for Hong Kong showed retail spending increased at an annual pace of 3.2% in January, which fell short of expectations for a 6.7% rise, while the value of sales increased 6.6% amid forecasts for a 10.1% expansion. Moreover, capital spending in Japan slumped 17.3% during the fourth quarter, which missed projections for an 18.4% decline, while Australia’s trade deficit narrowed to 1176M in January from a revised 2174M shortfall in the previous month.

Nikkei 225                          10,145.72

Stocks in Japan pared yesterday’s advance, leading the Nikkei 225 to shed 107.42 points (1.05%) on Thursday, and close at 10,145.72 as all ten components traded lower on the day. Shares of Mitsubishi Chemicals added 3.10% subsequent to Credit Suisse Group AG raising the company’s stock rating from “neutral” to “outer perform”, while TDK slumped 2.91% as Barclay Capital lowered its outlook for the firm to “underweight” from “overweight.” In addition, Mitsubishi Motors tumbled 10.61% as the company, along with PSA Peugeot Citroen stated that they would not form a capital alliance, while Sumitomo Metal Mining added 0.76% on the back of higher commodity prices.

Hang Seng                        20,575.78

The Hong Kong equity market extended yesterday’s decline, leading the benchmark equity index to dive 301.01 points (1.44%) and close at 20,575.78 on Thursday. Seven out of the nine components tipped lower on the day, with technology leading the way, falling 3.39% and was followed by a 2.09% decrease in telecommunications. Shares of China Mobile shed 2.41% following Daiwa Securities Capital Markets downgrading the company from “outer perform” to “underperform,” along with concerns that the company will deviate from its main business as it looks to invest in Shanghai Pudong Development Bank, while Aluminum Corporation of China tumbled 2.28% on the back of lower metal prices. Moreover, Henderson Land Development shed 0.47% as home completions last year were the lowest since at least 1999, while the Bank of China, the nation’s second-largest lender by market value retreated 3.47% as the bank plans to sell 24.93 billion yuan ($3.7 billion) of subordinated bonds next week to replenish its capital.

S&P/ASX 200 Index           4,750.50

Shares in Australia rallied for the fifth session on Thursday, leading the S&P/ASX 200 to advance 14.80 points (0.31%) and close at 4,750.50. Four out of the ten components pushed higher on the day, with basic materials climbing 1.03%, while utilities tumbled 1.81% to taper the advance. Shares of BHP Billiton, the world’s largest mining company added 1.46% as copper prices rose for the fourth straight day, while Newcrest Mining, Australia’s largest gold producer gained 1.67% as gold prices climb to a six week high. At the same time, Henderson Group rose 0.96% as Goldman Sachs JBWere raised its rating on the firm to “buy” from “hold,” while Ramsay Health Care fell 1.77% as Morgan Stanley cut the company’s stock rating from “overweight” to “equal weight.”

Notable Asian Session Event Risk / Economic Releases

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