May 2010

Asia/Pacific Shares Mixed Following Fitch Downgrade of Spain

Asia Session Key Developments

•    China Expected to Raise Gas Prices 24 Percent Tomorrow
•    Australian Deficits Narrows as Trade Conditions Improve
•    Japanese Construction Orders Weaken for the Second Time This Year
•    New Zealand Business Confidence Holds Below 50 for the Third Straight Month

Asia/Pacific Shares Mixed Following Fitch Downgrade of Spain

Shares in Asia/Pacific were mixed to begin the week following Fitch’s downgrade of Spain’s long term foreign and local currency issuer ratings (IDR) to “AA+” from “AAA,” while health care and consumer shares posted higher earnings growth. Meanwhile, the economic docket showed that Australian TD Securities inflation posted the highest annualized reading since October 2008, while the regions new home sales rose for the second straight month. In Japan, labor cash earnings in April advanced to the highest since December, while construction orders weakened for the second successive month.  Nonetheless, New Zealand’s business confidence in May held below 50 for the third uninterrupted month.

Nikkei 225                  9,768.70
Japanese equity markets pushed higher for a fourth consecutive day on Monday, leading the Nikkei 225 to climb 5.72 points (0.06%) and close at 9,768.70. Six out of the ten components rallied on the day, with health care leading the way, rising some 1.49%, while telecommunications lost 1.20% to taper the advancement. Shares of Astellas Pharma, the second largest pharmaceutical company in Japan added 1.73 percent after the company said that it will hire at least 300 sales staff in China, while Kao jumped 3.75 percent subsequent to Bank of America Corp’s Merrill Lynch raising the company’s stock rating from “neutral” to “buy.” In addition, JTEKT dived 2.41% as the maker of car parts said that it plans to raise up to 19.4 billion yen from the sale of shares to the public and Toyota Motor, whilst Pac Metals added 1.01% on the back of higher metal prices.

Hang Seng                        19,765.19
The Hong Kong market pared Friday’s advance, leading the benchmark equity index to slip 1.52 points (0.01%) and close at 19,765.19. Three out of the nine components pushed lower, with consumer goods down the most, tumbling some 2.31%, and was followed by a 0.27% decline in financials. Shares of Bank of East Asia soared 1.61% as the bank stated that it plans to sell 5 billion Yuan of bonds in China, whereas Industrial & Commercial Bank of China edged 0.17% higher after the bank said that it prepared to provide financing, export credit and advisory services for a railway project in the United Arab Emirates. At the same time,   Petrochina rose 0.47% as China, the world’s second-largest energy consumer is expected to raise wholesale natural gas prices by 24.9 percent tomorrow.

S&P/ASX 200 Index    4,429.70
Shares in Australia pared Friday’s advance, leading the S&P/ASX 200 to slump 27.80 points (0.62%) and close at 4,429.70. Six out of the ten components retreated on the day, with basic materials leading the way, losing some 1.14%, while health care rallied 0.82 percent. Shares of Qantas Airways leaped 2.04% as the airline plans to boost Airbus SAS A380 flights from Melbourne to London and Los Angeles, while Healthscope rose 4.97 percent after the company received two additional takeover offers that value the hospital’s owner at A$1.84 billion. Nevertheless, Origin Energy increased 0.47% on the back of higher energy prices.

Written by Michael Wright, Currency Analyst
Questions? Email me at mwright@fxcm.com

Asian Stocks Extend Yesterday’s Rally As European Debt Concerns Ease

Asia Session Key Developments

•    New Zealand’s Building Approvals Surge to 2-Year High
•    Japan’s Unemployment Rate Rises to 5.1%

Asian Stocks Extend Yesterday’s Rally As European Debt Concerns Ease

Asian stocks rallied for a third consecutive day, subsequent to U.S. stocks posting their biggest rally in almost three weeks as concerns over Europe’s debt crisis eases off the pedal, in the short term that is. Meanwhile, New Zealand’s building approvals rose to a two year high, adding to signs that residential construction will come to aid economic activity this year. In Japan, the jobless rate rose to 5.1% in April from 5.0% the previous month, while household spending retreated 0.7% amid economics expectations of 2.5%. Thus rising unemployment will likely to weigh on household spending going forward. Nevertheless, New Zealand’s money supply contracted for the sixth straight month

Nikkei 225                  9,762.98
Japanese equity markets pushed higher for a third successive day on Friday, leading the Nikkei 225 to rally 123.26 points (1.28%) and close at 9,762.98. Nine out of the ten components advanced on the day, with oil & gas leading the way, rising 3.22%, while utilities lost 0.85% to taper the advance. Shares of Toyota Motor increased 0.76% as the carmaker raised its global vehicle production in April amid rising demand in Asia and the U.S., while CSK Holdings jumped 4.71% as the computer services company had its 12-month share price estimate raised to 350 yen from 200 yen at Deutsche Bank AG. At the same time, Showa Shell Sekiyu K.K. added 3.38% as the company delayed the restart of a crude distillation unit by a week due o a problem with a secondary unit.

Hang Seng                        19,766.71
The Hong Kong market rallied for a third straight day on Friday, leading the benchmark equity index to soar 335.34 points (1.73%) and close at 19,766.71. Seven out of the nine components pushed higher on the day, with oil & gas leading the way, adding some 2.93%, while technology slid 0.45%. Shares of Industrial & Commercial Bank of China Asia rose 1.23% as the bank sold HK$2.5 billion of floating-rate notes due in June 2011, while Bank of Communications jumped 3.77% after it was publicized that the lender received regulatory approval to raise as much as 42 billion yuan from a rights offer. Moreover, CNOOC increased 2.66% on the back of higher commodity prices.

S&P/ASX 200 Index    4,457.50
Shares in Australia extended yesterday’s northern journey, leading the S&P/ASX 200 to climb 78.30 points (1.79%) and close at 4,457.50 as all ten components rallied on the day. Shares of BHP Billiton edged 0.31% higher as copper futures for July delivery increased 2.5%, while Stockland sky rocketed 6.34% as the company had its rating raised from “hold” to “buy” at Citigroup. Nevertheless, Wesfarmers jumped 4.29% as the company said it is moving to the second stage of its five-year Coles retail turnaround program.

Written by Michael Wright, Currency Analyst
Questions? Email me at mwright@fxcm.com

U.S. Equities Reverse Sharply in Last Hour of Trading

U.S. Session Key Developments

•    Reports Surface that Chinese Officials are Reviewing Euro-Zone Debt Holdings
•    Durable Goods Orders and New Home Sales Beat April Expectations
•    Euro Approaches Four-Year Low Versus Greenback

Entering the final hour of trading, U.S. stocks appeared set to advance following a strong durable goods report and better-than-expected home sales in April.  A concerning report out of China, however, quickly reversed investor sentiment, causing the Dow Jones Industrial Average to plunge 100 points in the final forty-five minutes of trading.  It was the third consecutive decline for the index which fell to 9974, its lowest close since a 100-point dip on February 8 sent the index to 9908.  Initially, equities showed strength as strong economic data in April gave investors hope that the U.S. economy may avoid the difficulties that currently plague Europe.  Purchases of new homes beat expectations and rose to a two-year high in April, while durable goods rose 2.9 percent in the month, the best reading since January.  The economic readings, coupled with equities strength in Europe and Asia, helped boost U.S. stocks for much of the day and sent commodity prices higher across the board.  Crude oil futures rose nearly 3 percent to close above the $70 level and gold futures jumped over 1 percent to $1212.  Around 3:15 PM in New York, however, U.S. equities took a turn for the worst following a Financial Times report on China’s holdings of European debt.  The report stated that Chinese officials have been meeting with foreign bankers in recent days to review the country’s holdings of European sovereign debt in light of the region’s fiscal difficulties.  The report derailed investor confidence in the Euro-zone economy, causing a sharp reversal in U.S. equities and pushing the euro near a four-year low against the U.S. dollar.  The Dollar Index closed higher as a result, settling at a 14-month high of 87.30.

DJIA 30                        9,974.45                          -69.30                       -0.69%
The Dow Jones Industrial Average posted the largest decline among major U.S. indices as 22 of the 30 bluechip stocks closed in the red.  Leading the decline were McDonald’s and American Express which dropped 2 percent each, followed by Verizon and Chevron stock which fell at least 1.4 percent on the day.  On the upside, Disney rallied 2.3 percent and Merck gained 1.1 percent.

S&P 500                       1,067.95                            -6.08                        -0.57%
The broad-based S&P 500 slumped for a second time this week, led by declines in telecommunications shares and consumer goods.  Sprint Nextel led the decline in telecom stocks, dropping over 7 percent, while Verizon and Leucadia shares fell over 1 percent.  Weakness in consumer goods was heavily influenced by a 2.6 percent drop in PepsiCo shares, as well as a 1 percent decline for Coca-Cola and Procter & Gamble.

NASDAQ                      2,195.88                           -15.07                       -0.68%
Shares on the tech-heavy Nasdaq fell for the third consecutive day as technology shares dropped over 1 percent.  Microsoft, the most heavily-weighted company in the tech sector, fell over 4 percent and was replaced by Apple as the world’s most valuable technology company by total market cap.  Microsoft closed the day with a market cap of $219.2 billion, trailing Apple’s $222.1 billion.

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

Asian Stocks Pare Yesterday’s Losses as Wall Street Bounces

Asia Session Key Developments

•    Japanese Corporate Service Prices Falls for the 19th Straight Month
•    Risk Appetite Sends Higher Yielding Currencies North
•    Japan’s Small Business Confidence Pulls back from Three Year High

Asian Stocks Pare Yesterday’s Losses as Wall Street Bounces

Asian shares pared yesterday’s losses amid speculation that this month’s slump may have been overdone. Meanwhile, Australia’s Westpac leading index in March marked its fastest pace of growth since the second quarter of 2009. In Japan, small business confidence in May pulled back from the three year high, while corporate service prices tumbled 1.1%, falling for the 19th straight month.

Nikkei 225                  9,522.66
Japanese equity markets pared yesterday’s decline, leading the Nikkei 225 to rally 62.77 points (0.66%) and close at 9,522.66. Seven out of the ten components pushed higher on the day, with telecommunications leading the way, adding 2.68%, while oil & gas lost 1.63% to taper the advance. Shares of NGK Insulators dropped 2.92% as the company had its rating slashed at Takai Tokyo Securities from “above average” to “neutral,” while Mitsui OSK Lines soared 5.00% as the Baltic Dry Index, a measure of shipping rates for commodities rose to the highest level since November 25th. In addition, Pac Metals added 1.39% on the back of higher metal prices.

Hang Seng                        19,196.45
The Hong Kong equity market halted yesterday’s retracement, leading the benchmark equity index to rally 210.95 points (1.11%) and close at 19,196.45. Six out of the nine components pushed higher on the day, with basic materials leading the way, rising 4.79%, while consumer services lost 1.74%. Shares of Cosco Pacific jumped 5.07% as container shipping from Asia to Europe is now at “pre-crisis” levels as trade rebounds, whist New World Development lost 0.83% as the total occupation permits issued in April fell to 9 from 15 the previous month. Moreover, PetroChina added 1.13% as the commodity prices rallied on the prospect of increased demand from the world’s third-largest economy.

S&P/ASX 200 Index    4,307.20
Shares in Australia pared yesterday’s decline, leading the S&P/ASX 200 to soar 41.90 points (0.98%) and close at 4,307.20. Seven out of the ten components increased on the day, with basic materials leading the way, adding 2.88%, while health care lost 1.02%. Shares of BHP Billiton rallied 2.70% as the group and 11 other coal miners in Australia bided A$4.85 billion for the nation’s largest coal railroad o head off the state government’s planned initial public offering, whereas Foster’s Group rose 7.38% as Fitch affirmed Foster’s at “BBB” on potential structural separation.  Additionally, Sims Metal Management surged 3.68% on the back of higher metal prices.

Written by Michael Wright, Currency Analyst
Questions? Email me at mwright@fxcm.com

An Intraday Reversal in Risk Appetite Salvages Crude from Steep Morning Losses

North American Commodity Update

Commodities – Energy

An Intraday Reversal in Risk Appetite Salvages Crude from Steep Morning Losses

Crude Oil (LS NYMEX) -  $69.94   //  -$0.27   //  -0.38%

Beginning in the early Asian session and continuing through to the pre-US open trading hours, crude would pitch into a selling trend that would build in intensity as European liquidity slowly filtered into the market. In fact from Monday’s US session close, the active WTI futures contract would topple an impressive 4.36 percent by the time the New York exchange would come on line. This momentous decline (and the subsequent recovery) was heavily influenced by the temp that risk aversion would set for the broader speculative markets. For contrast, the Japanese Nikkei 225 and UK FTSE 100 would both tumble more than three percent through their respective sessions; government bonds for the stalwart industrialized economies met significant demand; and safe havens like the US dollar and gold would swell with the influx of wealth that was fleeing the risk implied in fundamentally unstable capital markets. What was driving this particularly flight to safety?  Media would assign the blame to tensions in North Korea and new developments in the European Union’s financial crisis. However, sentiment had already established its bias long before. In reality, these new issues are simply new sparks to activate a preconceived desire to unwind risky positions. This better explains the intraday reversal in sentiment and crude that carried the benchmark to a nearly unchanged status for the day. Without real fundamental fodder to genuinely raise the threat level of a large or even global financial crisis, there is a lack of conviction in taking the next step towards longer-term bearish trends.

Turning from the whiles of sentiment to more objective market influences, the discrepancies between contracts and crude types has notably diminished. Looking at the NYMEX contango (the condition where the deferred futures contract is more expensive than the active nearby), the difference between the contracts for July and August expiration has narrowed to $1.35 (from a 15-month high of $4.59 set just two weeks ago). More importantly for potential arbitrageurs who believed the benchmark US WTI grade was artificially deflated by an inventory build up in Cushing, Oklahoma; the premium that the Brent contract has held for two months now stands at a much more bearable $0.80 (from nearly $7 just a few weeks ago). What does this mean for traders? Market functioning is improving for the crude market. Yet, that does not negate the influence of larger fundamental concerns. The demand/supply balance was altered by a few prominent economic indicators released through the day. The second reading of the UK’s 1Q GDP report was in line for its headline figures; but the component figures suggested growth (and thereby energy demand) was better positioned than previously thought.  Investment would unexpectedly grow 1.5 percent through the period while personal consumption was. In the US, the Conference Board’s consumer sentiment survey for May advanced to a near two year high as Americans responded to economic stability and a tentative improvement in labor conditions. These are still very early signs of economic strength (and certainly not what is needed to put pressure on supplies); but they are necessary first steps. Speaking of supplies, the API inventory report for the period ending May 21st would report a modest increase in holdings of 616,000 barrels. This is in line with tomorrow’s DoE forecasts.

Commodities – Metals

Best Back to Back Rally for Gold in Months as Sentiment and North Korea Tension Send Capital to Safe Haven

Spot Gold -  $1,204.25  //  $12.60  //  1.06%

For most speculative assets (regardless of their position on the risk spectrum), the intraday shift in sentiment would lead to a wide range and comparatively modest daily change. Not so for gold. Avoiding much of the volatility that drove more reactive assets on dramatic swings, the precious metal carved a steady advance that would lead it to a close near the day’s high through the end of the US session. The rebound in investor sentiment through the US session was wide spread; and the initial tumble in speculative interests through the morning was encouraged by a range of tangible concerns. So, then would this particular asset not conform? The unique performance from gold can be traced back to its appeal amongst international investors. More than just an easy safety play for the highly leveraged, this commodity is being treated as a long-term alternative to global currencies, government debt and hedge for the early threat of inflation. As such, investors are concerned about the steady deterioration in Euro-are markets by Germany’s proposal for broad naked short sales and the geopolitical uncertainties brought on by the growing hostilities between North Korea and much of the rest of the world. Alternatively, long-term convictions do not guarantee security with a buy-and-hold strategy for gold. The CBOE Gold Volatility Index suggests the metal could see a 25.7 percent move over the coming months, compared to the 34.6 percent reading on the S&P 500’s VIX volatility index and 15.1 percent outlook from the DailyFX currency volatility measure.

Spot Silver  -  $17.95   //  $0.04  //  0.22%

As gold sees its daily momentum ebb, silver’s correlation will similarly wane. The cheaper precious metal cut a bearish recovery similar to that of the Dow through Tuesday’s session. At the same time, the intensity of the move was certainly ratcheted down from that of equities or oil. Perhaps the dollar’s temperate retracement helped keep the market under control or the stability of gold would dissuade rampant speculation. Nonetheless, both open interest and volume for the continuous contract declined through last week’s close (the exchange releases delayed activity data) as commodity approached a range low of $17.40/00.

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

Asian Stocks Nosedive amid European Debt Concerns and Political Tensions in Korea

Asia Session Key Developments

•    Asian Stocks Drop to the Lowest Since July
•    New Zealand’s 2 Year Inflation Expectations Rises to 2.8 Percent
•    Miners Extend Gains Amid Speculation that China Will Ease Tightening Measures

Asian Stocks Nosedive amid European Debt Concerns and Political Tensions in Korea

Asian stocks Tumbled lower on Tuesday, falling to its lowest level as Spain’s banking crisis and tensions between North and South Korea stirred concern for global economic growth. In New Zealand, 2 year inflation expectations in the second quarter rose 2.8 percent after rising 2.7 percent. In addition, the MSCI Asia Pacific Index pushed to its lowest level in ten months after a report stated that North Korea’s military had been ordered to prepare for combat.

Nikkei 225                  9,459.89
Japanese equity markets extended yesterday’s decline, leading the Nikkei 225 to free fall 298.51 points (3.06%) and close at 9,459.89. Nine out of the ten components pushed lower on the day, with basic materials leading the way, tumbling 3.80%, while utilities jump 1.24% to taper the retracement. Shares of NGK Insulators plunged 3.94% as the company was downgraded from “above average” to “neutral” at Tokai Tokyo Securities, while Sumitomo Metal Mining lost 3.52% as copper and aluminum pushed lower amid signs that Europe’s debt crisis may spread. At the same time, Dainippon Sumitomo Pharmaceuticals jumped 5.15% after Credit Suisse Group AG raised its investment in the drug maker from “neutral” to “outer perform.”

Hang Seng                        18,985.50
The Hong Kong equity market pared yesterday advance, leading the benchmark equity index to retreat 682.26 points (3.47%) and close at 18,985.50 as all nine components pushed lower on the day. Shares of Cheung Kong dropped 3.73%  as the Hong Kong developer along with two other of the country’s largest developers stated that they bid to build a HK$333 billion project above a station run by the government owned operator, whilst Aluminum Corporation of China plunged 6.44% on the back of lower commodity prices. Moreover, Cathay Pacific Airways decreased 3.46% as the airline along side Swire Pacific agreed to sell their stakes in Hong Kong Air Cargo Terminals.

S&P/ASX 200 Index    4,305.40
Shares in Australia pared yesterday’s advance, leading the S&P/ASX 200 to plunge 130.10 points (2.96%) and close at 4,265.30 as all ten components retreated on the day. Shares of National Australia Bank dropped 3.26% as the Australian dollar to fell to its lowest level since July, whereas, Gunns dove 24.29% amid speculation that some institutional shareholders are liquidating their position in the company. In addition, Sonic Healthcare lost 1.17% as Australian medical centres operator expects lower earnings this financial year amid a fall in demand for pathology services.

Written By Michael Wright, Currency Analyst
Questions? Email me at mwright@fxcm.com

As Sentiment Trends Cool, Crude Traders Look for Guidance from Growth Prospects

North American Commodity Update

Commodities – Energy

As Sentiment Trends Cool, Crude Traders Look for Guidance from Growth Prospects

Crude Oil (LS NYMEX) -  $70.38   //  $0.34   //  0.49%

While the NYMEX-based crude contract would technically eke out a modest advance for the opening day of the week, the market has essentially passed the day unmoved. In fact, this benchmark energy product has been confined to congestion for the past week; the only difference between today and last week is that the level of volatility is dissipating. On the other hand, the investing masses are seemingly skeptical of this recent slump in activity as can be seen in the CBOE’s Crude Oil volatility index. Having retested an eight-month high of 47.0 percent, traders are still paying high premiums on options to protect against another dramatic change in the commodity’s price. Until this volatility is realized however, the masses will keep a constant vigilance on the speculative interests that underlie the capital markets. Feeding the risk appetite / aversion theme that has leveraged so much activity from the capital markets over the past month, the European Union’s questionable future was delivered a small jolt this morning when the Bank of Spain seized savings bank CajaSur as the firm moved closer to failure. While this would suggest a financial vulnerability for one of the EU’s larger member economies; the immediate threat would ultimately seem minimal as the local market benchmarks would weather the news with a relatively muted response.

Contrasting with the norm as of late, growth considerations would hold greater sway over crude Monday than the ever-volatile speculative cajoling that the threat of a financial crisis can encourage. Feeding demand forecasts early in the Asian session, investors were looking to the world’s second largest energy consumer (China) and its hesitancy in implementing growth and market cooling policy in the wake of the European Union’s troubles. For Japan, the outlook for economic activity was less optimistic according to the Cabinet Office’s economic outlook. The government maintained its assessment that the economy was “picking up steadily” from the previous month; but Finance Minister Kan would also remark that he would hold off on boosting his forecasts until after seeing the revisions for the first quarter GDP numbers to better assess whether stimulus and exports are putting in an unsustainable plug for the recovery. Rounding out consumption probabilities for the top three energy importers, crude traders would further enjoy an upgraded outlook for the United States. While the existing home sales data was questionable given the inventory glut; the Chicago Fed’s National Activity Index would point North with the best reading for the economy since December 2006. Furthermore, the National Association of Business Economics would release a survey that upgraded its forecast for growth this year to 3.2 percent from a 3.1 percent outlook just this past February. Is this round of news enough to substantially tip the scales of supply and demand going forward? Not likely.

Commodities – Metals

In the Absence of Speculative Volatility, Gold Falls Back on Structural and Sovereign Concerns

Spot Gold -  $1,94.95  //  $17.85  //  1.52%

The tempering of Gold’s two-month run to record highs seems to have found a point of equilibrium today. Having slipped over six-and-a-half percent from its record high through Friday, the precious metal put in for its first advance in four days. While this advance wasn’t particularly remarkable compared to recent volatility; it was notable given the relative lack of activity in other capital markets. Before the end-of-the-day sell off in the US session, equities were quiet and relatively unchanged. The same general conditions were notable in the broader commodity market and fixed income. However, gold would establish a clear bias and consistent tend. This was no doubt encouraged by lasting fundamental concerns over the structural and lasting troubles the global financial market face. Speculators may swing from risk adverse to insistent through minute changes in data; but the concern over sovereign fiscal health is a matter that shifts very little (sans major market changes like introduction of the EU’s rescue program) and will therefore maintain support for a larger trend. Speaking of the European situation, the Bank of Spain’s decision to take over CajaSur reminds the investment community and policy makers that the mere promise of assistance is not enough to return the region to health. In fact, savings banks in Spain have fallen on such hard times that the government has established a fund for the group that could total as much as 99 billion euros – the majority of which has not yet been funded.

Spot Silver  -  $17.95   //  $0.29  //  1.64%

Despite the late-session drop in equities and the strong performance from the US dollar through the New York session, silver would nevertheless advance for a second consecutive day. Normally, the precious metal – lacking the independent value of gold – will follow short-term speculative trends and maintain a positive correlation to equities and negative association to the US dollar (one of the preferred safe havens). However, Monday’s appreciation is not particularly incredible. On the whole, the capital markets were relatively stable through the most liquid part of the day; and this stability allowed the commodity to retrace some of the steep losses suffered through the second half of last week.

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

Asian Stocks Continue Southern Journey to Nine Month Low

Asia Session Key Developments

•    Japan’s Leading Index Breaks Above 100 for the First Time since January 2007
•    New Zealand’s Household Sentiment Rises for the Third Successive Month
•    Bank of Japan Keeps Rates Unchanged as Widely Expected

Asian Stocks Continue Southern Journey to Nine Month Low

Asian stocks fell to a nine month low amid lingering European debt concern, while recent data showed that U.S. initial jobless claims rose to 471K for the week ending May 15th from 446K the week prior.  Meanwhile, New Zealand’s visitor arrivals for April weakened for the third month, while household sentiment pushed higher in May, marking the third consecutive advancement. In Japan, the Bank of Japan kept their key overnight interest rate at 0.10% and said that they will continue to monitor the developments of European fiscal situations.

Nikkei 225                  9,784.54
Japanese equity markets pushed lower for a third consecutive day, leading the Nikkei 225 to plunge 245.77 points (2.45%) and close at 9,784.54 as all ten components declined on the day. Shares of Toyota dropped 1.90% as the president considers record recalls “good lesion,” while Sumitomo Electric Industries tumbled 1.99% as the company was fined a total of 16.1 billion yen for price fixing. At the same time, Sony edged 0.63% higher as the company formed a strategic alliance with Google to deliver compelling new cloud – based products and services with the android platform.

Hang Seng                        19,545.83
Closed in observance of Buddha’s Birthday

S&P/ASX 200 Index    4,305.40
Shares in Australia continued yesterday’s southern decent, leading the S&P/ASX 200 to retreat 11.10 points (0.26%) and close at 4,305.40. Eight out of the ten components pushed lower on the day, with health care leading the way, tumbling 4.58%, while technology added 0.85% to taper the decline. Shares of Sonic Healthcare dived 20.21%, falling the most in 17 years as the provider of medical tests said full-year profit will be as much as a fifth less than forecast, whilst Aquarius Platinum dropped 3.53% on the back of lower commodity prices. In addition, Primary Health retreated 4.26% after the company said that profit excluding certain items will probably fall as much as 7 percent this year on the back of falling demand for medical tests, while Billabong International lost 2.40% as stocks fall on Japan deflation.

Written by Michael Wright, Currency Analyst
Questions? Email me at mwright@fxcm.com

Global Equities Plunge Lower, Furthering Weekly Losses

U.S. Session Key Developments

•    Risk Sell-off Continues on Europe Concerns
•    VIX Volatility Index Rises to Highest Level Since March 2009
•    10-Year U.S. Treasury Yield Falls to Lowest of Year

Stocks around the globe extended their weekly decline as skittish investors continued to sell risky assets in favor of U.S. dollars and government bonds.  The Stoxx Europe 600 Index dropped 2.2 percent during European trading hours, while the S&P 500 index fell nearly 4 percent during U.S. trading.  Investors also sold off commodities across the board, driving oil prices below $66 a barrel intraday and gold below $1200 an ounce at day’s end.  The risk sell-off led to major inflows for “safer” government debt, driving down the yields of U.S., German, French, and U.K. bonds.  Ten-year U.S. Treasury yields fell 16 basis points to 3.213 percent, the lowest of the year.  As for currencies, the sell-off of “commodity currencies” continued as the Australian Dollar and New Zealand Dollar each fell over 2 percent against the greenback.  The aussie has been especially weak in recent trading, tumbling nearly 7 percent against the U.S. dollar since Monday.  Overall, market participants remained fearful and uncertain, concerned that Greece’s economic woes may spread to other European nations, ravaging the region’s economy in the process.  The VIX volatility index was a clear indicator of market uncertainty, rising over 10 percent today to its highest level since March 2009.

DJIA 30                     10,068.01                        -376.36                       -3.60%
The Dow Jones Industrial Average fell over 3 percent as all thirty index stocks closed in the red.  Bank of America and Alcoa were the biggest laggards, plummeting over 6 percent each, while shares of General Electric fell over 5.7 percent.  Overall, the index has shed 3.45 percent for the year.

S&P 500                       1,071.59                            -43.46                        -3.90%
The broad-based S&P 500 slumped for a fourth time in five sessions as financials and basic materials shares fell over 4.5 percent each.  The major U.S. investment banks all fell in value, as shares of Morgan Stanley, Wells Fargo, and Citigroup dropped at least 4 percent each.  As for basic materials, Freeport-McMoRan and Peabody Energy each fell 6 percent.

NASDAQ                      2,204.01                           -94.36                       -4.11%
Shares on the tech-heavy Nasdaq posted the biggest loss among major U.S. indices as tech stocks declined nearly 4 percent on the day.  Research in Motion was the biggest loser of the ten most heavily-weighted tech stocks on the index, dropping over 5 percent, while shares of Apple, Dell, and Yahoo! declined over 4 percent each.

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

Asian Stocks Free Fall to an Eight-Month Low

Asia Session Key Developments

•    Japan’s Economic Activity Expands Less-Than-Forecast
•    Australia’s Average Weekly Wages Moderates as Interest Rates Rise

Asian Stocks Free Fall to an Eight-Month Low

Meanwhile, the economic docket showed that Japan’s economic activity expanded less-than-forecasted, which could lead the central bank to expand policy further, while the region’s convenience store sales in April fell for the fourteen straight month. In Australia, consumer inflation expectation rose 3.6%, falling back from the highest since February 2009, whereas RBA foreign exchange transaction posted the slowest pace of growth since January at 350M.

Nikkei 225                  10,0030.31
Japanese equity markets pushed lower for a second straight day on Thursday, leading the Nikkei 225 to slump 156.53 points (1.54%) and close at 10,030.31. Nine out of the ten components retreated on the day, with technology leading the way falling 2.23%, while utilities added 0.16% to taper the decline. Shares of Fanuc lost 2.85% as Fuji Electric Holdings announced that it will book a first quarter gain of 30.2 billion yen from selling shares of Fanuc, while NKSJ rose 2.74% after the company announced that it profited in the last fiscal year ended March partially due to smaller losses from securities investments. Moreover, Takashimaya tumbled 1.51% as Japan’s April department store sales decreased 3.7%, whilst T&D Holding jumped 2.65% subsequent to the life insurer saying that it expects a 36 percent gain in net income to 33 billion yen this fiscal year.

Hang Seng                        19,545.83
The Hong Kong equity market declined for a second consecutive day, leading the benchmark equity index to lose 33.15 points (0.17%) and close at 19,545.83. Six out of the nine components tumbled on the day, with consumer goods leading the decline, falling 2.41%, and was followed by a 1.56% sell off in technology. Shares of PetroChina, Asia’s biggest company by market value, slid 0.96% after the company announced that they plan to buy assets from its state-controlled parent to expand its overseas oil and gas reserves, while China Construction Bank decreased 0.32% subsequent to Reuters reporting that the bank reduced its loan growth target to 15 percent this year from its earlier goal of 17 percent. At the same time, China Resources Power Holdings jumped 2.88% as the company hired Mizuho Financial Group to help it borrow HK$1 billion, whereas, Cosco Pacific retreated 0.65% on the back of lower energy prices.

S&P/ASX 200 Index    4,316.50
Shares in Australia continued yesterday’s southern decent, leading the S&P/ASX 200 to drop 70.60 points (1.61%) and closed at 4,316.50. Eight out the ten components traded lower on the day as oil & gas lead the way, down some 2.48%, while health care jumped 0.96% to taper the decline. Shares of BHP Billiton decreased 0.60% on the back of lower commodity prices, whereas Healthscope soared 2.90% as the company’s private suitors increased their buyout offer by 4.5 percent in order to win support from the directors of Australia’s second-largest hospital owner. In addition, Foster’s Group added 0.19% as JP Morgan raised the company’s stock rating from “underweight” to “neutral.”

Written by Michael Wright, Currency Analyst
Questions? Email me at mwright@fxcm.com

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