Fundamentals

Dividends Can Help Investors Navigate Volatile Markets Ahead

Fundamentals

Risk Appetite and Data Support Crudes Surge to New Highs Yet Conviction Does Not Hold

North American Commodity Update

Commodities – Energy

Risk Appetite and Data Support Crudes Surge to New Highs Yet Conviction Does Not Hold

Crude Oil (LS NYMEX) -  $81.85   //  $0.36  //  0.44%

Risk appetite, macro data and supply-and-demand statistics seemed to align for bullish crude traders. Yet despite begin given the fundamental green light (and notably still backed by impressive buying momentum over the past month), the active crude futures contract on the NYMEX was forced to retrace its morning thrust to a fresh, eight-week high just above $83. Whether using a fundamental, technical, sentiment or hedge-based trading approach, every active market participant is conscious of the $84 swing high set back on January 11th and its status as a 16-month high for the market. Surpassing this level could easily banish uncertainty and encourage sidelined investment; but truly extending a bull trend for this commodity will require a broad improvement in investor sentiment and a clear shift in production and consumption fundamentals. As for sentiment, the dollar was lower and equities were modestly higher; but it was obvious that the sparks of risk appetite are not catching. Whether a turn in the markets itself or a prominent economic catalyst is responsible for the inevitable restoration of speculative interest remains to be seen.

For actual drive, today’s fundamentals offered the better source of momentum – though this wouldn’t actually pan out as one would expect. Through the morning, the top headline was the report from China that its exports had surged 46 percent – suggesting global activity was accelerating and economies would require fuel to keep the expansion in place. During the European hours, there were two conflicting reports. Germany reported its crude reserves were 20 percent larger than initially estimated due to deposits reported in the Upper Rhine region. Counteracting this potential supply boost from Europe’s largest economy, OPEC raised its global consumption expectations for the year and upgraded its output projections by 190,000 barrels to 28.94 million barrels per day. Come the active US trading session, traders had hoped that the US Department of Energy inventory figures would be able to break the offsetting nature of the early data. Following the yesterday’s 6.5 million barrel increase from the API report, expectations were probably set higher for the DoE account than the 2.0 million rise expected. In fact, the 1.432 million barrel pickup through March 5th was smaller than expected; and there was a notable 3.181 million barrel and 2.796 million barrel contraction in gasoline and distillate inventories respectively. Furthermore, total fuel consumption rose 0.2 percent to an August high 19.7 million barrels. Nevertheless, with this weekly increase, we have see the longest period of expansion in crude holdings since May and the highest overall stockpiles at 353 million barrels since August.

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

Commodities – Metals

The Dollar Drops and Chinese Inflation Accelerates while Gold Tumbles

Spot Gold  -  $1,107.66   //  -$14.19 //  -1.26%

It seemed a dichotomy in nature. The US dollar was on the retreat and China reported remarkable levels of inflation; and yet, gold would tumble on the day. In fact, the commodity was little changed through most of the session; but there was a remarkable swing during the early trading hours of the US session that measured 2.7 percent in a mere two hours. This jump in activity notably pushed the market to lows not seen in over a week and ultimately broke a loose but untested rising channel for the past month.  For fundamental encouragement, the precious metal had a few contradictory dynamics to account for. Running astray of the commodity’s role as a dollar hedge, the decline in the US dollar through much of the day ultimately roused little impetus for price action. Furthermore, the currency’s penchant for playing safe haven seems to fit the assurances of former EU Commission President Prodi who suggested the Greece crisis had passed and other European economies would not follow in its path. However, there are two inconsistencies here. First, Prodi is no longer standing President; so he is entitled to black-and-white assessments; and gold itself has recently taken on a value of safe haven asset due to its value as an alternative to fiat currency with sovereign debt risk as inflated as it is. In the end, neither risk appetite nor credit stability were particularly strong; and long-standing concerns are still certainly engrained. Another questionable driver was China’s report of inflation. The government reported home prices grew at their fastest pace in nearly two years in recent data. This would seemingly support a demand for gold as an inflation hedge; but the implications this price growth has for an asset bubble and instability in the Chinese economy more than compensates for the bullish sentiment that can be derived from this data.

Spot Silver  -  $16.98   //  -$0.28  //  -1.62%

Just as surely as the dollar would retrace its gains yesterday, the currency would recover much of its losses today. In the end, this would leave highly-sensitive silver with a mute, dominant fundamental driver. From speculative readings, equities and other key markets were slowly building in favor of growth-linked performance. Nonetheless, this precious metal would take its cues from gold and close its worst daily performance in two weeks. Looking at speculative demand, iShares (the largest ETF backed by silver) reported its holdings were unchanged at 9,351 tons following two sales of 61 tons a piece over the past 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

Fundamentals

Volume Recovers along with Bearish Convictions for a Steep Crude Loss Tuesday

North American Commodity Update

Commodities – Energy

Volume Recovers along with Bearish Convictions for a Steep Crude Loss Tuesday

Crude Oil (LS NYMEX) -  $79.08  //  -$1.23 //  -1.53%

Following Monday’s relatively restrained level of activity, crude would find conditions far more interesting today. For the market itself, the commodity would report its biggest daily decline since the February 5th tumble. This price action was further encouraged by a surge volume behind the active NYMEX futures contract (seven times greater than the recent record, non-holiday lull seen yesterday). However, despite the session’s bearish drive; bullish interests would step in to maintain the rising trend channel of the past two-and-a-half weeks. Where was the motivation for such a significant reversal? Risk appetite was no doubt the root of investor activity across the asset classes; but macro-economic data would have its own stirring qualities. Taking stock of sentiment, equities and commodities were lower across the board through the active US session. As has been the case recently, the move away from risky positions (or unwinding existing exposure) has rerouted capital away from assets like crude and to the US dollar. As the primary pricing instrument for oil, the currency’s gains offer a further weight to price action.

While the shifting tides of risk appetite can carry itself under its own momentum, a few big-ticket economic releases no doubt added fuel to the fire (and perhaps catalyzed the initial tumble).The dollar’s rally this morning began as EURUSD responded to the release of the German IFO business sentiment survey for February. Confidence in Europe’s largest economy unexpectedly fell for the first time in 11 months on a combination of harsh weather, uncertainty surrounding consumer spending and the threat that Greece troubles could turn into a Euro Zone financing matter. The sharp drop in the US Consumer Confidence report from the Conference Board amplified the dour mood among investor interests. The present conditions reading of the report marked its lowest reading in 27 years; and with it, expectations of pull-through energy demand has been depressed even further. Turning form macro interests to energy-specific fundamental considerations, inventory data will be released over the next 24 hours. After the close of the US session, the American Petroleum Institute (API) is scheduled to publish its stockpile figures for the week ending February 19th. This data is remarkable in its own right; but for market-influence, the US Department of Energy (DoE) due tomorrow holds the greater influence over price action. Bloomberg’s consensus forecast is looking for a 1.9 million barrel increase (which would account for the longest period of gains in nearly nine months) while gasoline holdings are seen rising by 600,000 barrels (though, as of last week inventories were already at their highest level since March of 2008).

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

Commodities – Metals

Gold Extends its Pullback, Breaks a Steady Trend Channel as the Dollar Rallies

Spot Gold  -  $1,103.70  //  -$10.55 //  -0.95%

Speculators would initially attempt to hold up gold’s two weeks rising trend channel; but a souring of background sentiment would eventually call the end of this notable technical pattern. Tuesday’s decline measured as much as 1.3 percent through its session low; and the loss through the NYMEX close was the biggest bear run the commodity has seen since the February 4th plunge. For drive, the tumble in equities and subsequent advance for the benchmark dollar would bear down on two of the precious metal’s primary fundamental applications: speculative asset and dollar hedge. It may seem that these two drivers are the same thing. However, a comparison of a speculative benchmark like the Dow Jones Industrial and the benchmark currency itself shows a strikingly different path. Over the past few weeks, the Dow has advanced slowly but steadily; while the dollar has held onto its trend through this same period and even established fresh 8-month highs. With interest rate speculation bolstering real market rates, the dollar is a concern all of its own. Looking ahead to tomorrow, the commodity’s other two primary roles (inflation hedge and safe haven) will be roused by testimony from two key US policy makers. Treasury Secretary Timothy Geithner will speak on government spending going into 2011 – developing sovereign credit concerns and potentially reviving the metal’s tarnished appeal as a store for funds despite its high price. Fed Chairman Ben Bernanke will also testify before a house panel on monetary policy. This will be particularly interesting for rate watchers given the central bank announced a surprise hike to the discount rate last week.

Spot Silver  -  $15.84 //  -$0.41  //  -2.50%

Just like its more expensive counterpart, silver would suffer its biggest daily decline in nearly three weeks on a marked advance for the dollar and overall slump in speculative fervor. However, unlike gold, this metal would not force is own rising trend channel. Looking at market activity, aggregate open interest among the active futures contracts is near its lowest levels since September 8th as investors lighten their portfolios of speculative positions that don’t bear tangible interest. Tomorrow, the March 2010 futures contract will expire; requiring those that trading this contract to roll over to the next month.

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

Fundamentals

Iran Sanctions Move to the Forefront for Crude Traders as Sentiment Trends Cool

North American Commodity Update

Commodities – Energy

Iran Sanctions Move to the Forefront for Crude Traders as Sentiment Trends Cool

Crude Oil (LS NYMEX) -  $80.00  //  -$0.06 //  -0.07%

Looking across the various markets Monday, it was clear that speculative interests were relatively subdued. This alludes to the presence of big-ticket fundamental concerns (the potential Greece default and steady withdrawal of government stimulus) that are both preventing another build up in speculative positions and found investors seeking out further developments in these matters that could define the future trading environment. For crude, the lack of underlying risk appetite would dry up momentum behind the commodity’s impressive advance of the past two weeks. On the day, oil prices were relatively unchanged; but there was notable discrepancy between the intraday price action of the March and April futures contracts on the NYMEX as the market rolled over for the former’s expiration. Taking a broader view of speculative interest, the CFTC’s Commitment of Traders numbers revealed net speculative long positions for the benchmark crude contract jumped 63 percent in the week through the 16th; though the total only represented 5.3 percent of total open interest.

From speculative interests to supply-and-demand considerations; the docket for scheduled and unscheduled event risk was relatively light. For macro economic data, the US Chicago Federal Reserve National Activity Index reported only the second ‘above trend’ growth reading in nearly three years. The outlook for the world’s largest economy is brightening; but the struggles for employment and business investment are notable hurdles to a true recovery in activity and thereby energy demand. What’s more, with emerging markets seeing export demand drying up and some nations (China) forcibly slowing the economies; the forecast for global crude consumption is discouraging. This very assessment was formed by the Centre for Global Energy Studies – headed by a former Saudi Arabian oil minister – when they projected that oil prices will struggle to hold above $80 this year. Among the other headlines that oil traders are keeping track of are the French strikes and political spat between Iran and the rest of the world. A refinery strike at Total in France is entering its sixth day. A large union is calling for additional strikes at other major firms. In the Middle East, Iran is coming under pressure from the US for its plans to build two new uranium enrichment plants. Both of these issues are still developing; but their scale for influence on true supply and demand is relatively constrained. Looking ahead to the forthcoming inventory reports, Bloomberg’s survey has tallied a forecast for a 1.95 million barrel increase in stockpiles. If this increase is released, it would be the longest period of gains in nearly nine months.

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

Commodities – Metals

Little Movement in the Dollar and Risk Appetite Leads to the Same for Gold

Spot Gold  -  $1,114.00  //  -$5.20 //  -0.46%

With neither risk trends nor the US dollar developing significant headway Monday, gold would find no fundamental leverage to resolve the technical congestion that has developed over the past week. Spot gold has carved a steady bullish channel since the February 5th reversal; but restrained momentum has prevent the market from moving beyond $1,225. Like currency or equity traders, those in the gold market are looking for the larger fundamental trends to develop headway. The European Union’s management of Greece’s financial troubles has been woefully disappointing; yet cautious investors are hesitant to label this the next financial crisis. The same is true about the steady and widespread withdrawal of government stimulus – a vital element to the global financial market recovery last year. While neither threat has produced any positive or negative developments; the market’s mere appreciation of these dangers reflects a state of uncertainty. In other news, the World Gold Council opined that China wasn’t a “realistic candidate” to buy the remaining portion of the IMF’s gold inventory that it plans to sell (approximately 191 tons). This contradicts the assessment of other notable analysts who say China’s efforts to diversify away from the US dollar will lead to large purchases. Currently, the world’s second largest economy is struggling to prevent the popping of a significant asset bubble. A move into risk-sensitive gold seems an unattractive move at the metal’s already high prices; but a concentrated exposure to US policy and markets is a problem in its own right.

Spot Silver  -  $16.23 //  -$0.09 //  -0.55%

Silver would advance intraday to its highest level in nearly three weeks Monday morning; but the metal would struggle to hold onto its gains as the US dollar and Dow maintained tight ranges for the day. Looking at market tangibles, volume on the active contract extended its steady decline over the past week – a trend that roughly extends back to the beginning of the current bull trend. Furthermore, open interest has tumbled to its lowest level since November 12th – though it is difficult to establish how much of this is due to the proximity of the February futures’ expiration (then again March is the far-more active contract).

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

Fundamentals

European Equities Cap Biggest Weekly Gain Since July

Europe Session Key Developments

•    French Data Generally Disappoints, Euro-Zone and German Data Show Improvement in Manufacturing
•    Commodities Trade Sideways After Fed Raises Discount Rate
•    Euro Gains Versus Greenback For Second Time This Week, Pound Falls To Nine-Month Low

Stocks in Europe extended their largest weekly gain since July as manufacturing data for Germany and the general euro zone beat expectations.  The Dow Jones Stoxx 600 Index, a broad measure of European equities, rose 0.5 percent to increase its weekly gain to 3.9 percent.  After initially trading lower on yesterday’s unexpected news of Fed tightening, European shares rallied collectively on strong economic data from Germany, Italy, and the general euro zone.  Germany announced that the country’s PMI manufacturing index unexpectedly rose from 53.7 to 57.1 in February, while industrial orders in Italy trumped expectations by rising 10.1 percent in 2009.  Furthering bullish sentiment was a report that the euro area’s PMI manufacturing index and PMI composite index beat expectations for December.  As for commodities, crude oil ticked slightly higher as it approached $80 a barrel, while metals surprisingly held at yesterday’s closing levels despite the unexpected hawkish maneuver of the Federal Reserve.  During after-hours yesterday, the Fed increased the discount rate for the first time in three years, but markets managed to shake off the tightening as Chairman Bernanke’s commentary maintained that the Federal Funds Rate would remain at historic lows for the time-being.  Yesterday, the greenback immediately spiked higher against its European counterparts after the Fed decision, but during today’s session the Euro managed to rally against the Dollar for only the second time this week, rising to $1.3613 at the time of this writing.  The sterling, however, continued its slide against the American currency, falling to a nine-month low on the session.  Overall, the U.S. Dollar Index rallied intraday above 81.30, and closed near a seven-month high.

FTSE 100                         5358.17                     +33.08                     +0.62%
British stocks posted their ninth gain in the last ten days, led by consumer goods which gained 1.7 percent.  At least two stocks gained for each that fell on the FTSE today, as better-than-expected retail sales over the twelve months ended in January boosted investor sentiment.  Unilever was the biggest gainer among consumer goods companies, adding 2.6 percent on the session, while tobacco firms British American and Imperial added over 2 percent each.  British American received a boost from analysts at Nomura, yesterday, who raised their price target on the company’s shares.  The only sector to close lower today was basic materials, hurt by a 1.8 percent decline for Anglo American after the mining company posted a 53 percent decline in net annual profit.

CAC 40                             3769.54                     +21.71                     +0.58%
French equities gained over 0.5 percent today, despite weak economic data for the country.  Investors managed to shrug off a drop in business confidence for February as well as worse-than-expected PMI numbers for the month.  The leading sectors today were technology, financials, and utilities, which each added at least 0.8 percent.  Vallourec, a tubular technology firm, posted the biggest gain on the CAC, adding over 2 percent on the day.  Following closely behind were Lagardere, Credit Agricole, and Vivendi, which each gained at least 2 percent on the session.  Overall, twenty-nine of the forty CAC stocks closed higher in the week’s final day of trading.

DAX                                   5722.05                        +41.64                     +0.73%
The German index extended its longest winning streak this year as strong manufacturing data increased risk appetite and lead stocks higher.  Consumer goods led the way with a 2 percent gain, while technology and consumer services shares added at least 1.3 percent each.  Automobile producers were the strongest group among the consumer goods sector as BMW gained 3.4 percent and Daimler added 2.5 percent.  Technology shares were led by a 1 percent gain for Infineon and SAP.

IBEX 35                          10676.70                     +102.50                 +0.97%
Shares in Spain added nearly a full percent today, led by a 3 percent gain in health care shares and a 2.4 percent rise in consumer services.  Bolsas Y Mercado was the strongest performer on the index, adding 3.8 percent, while Grifols closed right behind, up 3 percent.  Thirty-three of the thirty-five index stocks closed higher in the week’s final day of trading, with Gamesa and Acerinox being the only two exceptions.  Gamesa shares fell despite a decision to rehire 79 laid-off employees.

FTSE MIB                     21722.33                     +86.21                   +0.40%
Italy’s FTSE MIB posted the smallest gain among major European indicies, despite a strong industrial orders report.  The report showed that industrial orders unexpectedly rose 4.7 percent in December and 10.1 percent for the year.  Trading in Milan led to a strong showing for EEMS Italia, which gained 6 percent after Intermonte Sim reiterated a “buy” rating on the company.  Italian carmaker Fiat also posted a strong gain of 2.3 percent, after Cheuvreux said that Fiat’s profit targets are not out of reach despite weakness in the automobile sector.

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

Fundamentals

U.S. Equities Rally For Third Day, Fed Tightens After Hours

U.S. Session Key Developments

•    Fed Unexpectedly Raises Discount Rate By 0.25 Percent After Hours
•    Commodities Advance During Market Hours, Fall After Hours on Fed Hiked
•    Philadelphia Fed Index Higher For Sixth Month, Leading Indicators Rise Slightly

U.S. stocks rallied for a third day, capping the biggest three-day rally since November for the Dow Jones Industrial Average and S&P 500.  The news of today’s trading was quickly overshadowed thirty minutes after close, however, when the Federal Reserve unexpectedly raised the discount rate by a quarter point to 0.75 percent.  During trading hours, the market moved steadily higher as investors were encouraged by further strength in commodity producing firms and generally positive economic data.  The economic docket provided an upbeat outlook for market participants as the  Philadelphia Fed beat expectations and rose for a sixth consecutive month to 17.6, while leading indicators gained for a tenth straight month.  Stocks and commodities rallied in tandem, as crude oil traded above $79 a barrel and gold held above $1120 during the session.  Commodities moved sharply lower after hours, however, as the Fed unexpectedly announced a quarter point rise in the discount rate- the rate charged to banks for direct loans from the central bank.  The rate had previously been held at 0.50 percent since 2008 as Fed policy makers maintained a dovish stance amidst the worst financial crisis since the Great Depression.  In their statement today, the central bank said that “these changes are intended as a further normalization of the Federal Reserve’s lending facilities.”  The policy statement went on further to state that the modification does not signal a change in the outlook for the economy or monetary policy, although some market participants appear to disagree.  The dollar rose nearly a full percent to $1.3510 per euro following the announcement, and gold futures sold off from their $1118-$1125 intraday range back to the $1100 level.

DJIA 30                     10,392.90                      +83.66                       +0.81%
The Dow Jones Industrial Average posted the largest gain among major U.S. equity indices, led by a 1 percent gain in financial and industrial shares.  Insurance company Travelers was the best performer on the index, adding 1.9 percent, followed by Boeing, whose shares rose 1.7 percent.  Furthering gains among financial shares were Bank of America and JPMorgan Chase, whose shares gained 1 percent each.  Procter and Gamble also traded higher, adding nearly 1 percent, after company executives reiterated its strong earnings expectations for 2010.  Walmart was the biggest laggard of the 30 Dow stocks, dropping over 1 percent after sales by U.S. stores fell 1.6 percent, worse than the company’s projection of 2 percent.  The company’s fourth quarter profit actually beat estimates, although revenues fell short of analyst expectations.

S&P 500                     1,106.75                         +7.24                         +0.66%
The broad-based S&P posted its third consecutive gain led by basic materials and industrials.  Precious metals continued their climb during the regular trading hours, pushing Newmont Mining and Freeport McMoRan higher by at least 2 percent each.  Priceline.com rose the most on the index, gaining nearly 10 percent after announcing that forecast first-quarter profit is significantly higher than analyst estimates.  Hewlett-Packard, the world’s largest personal-computer maker, rallied over 1 percent after the company posted a 25% profit jump from one year ago.

NASDAQ                     2,241.71                         +15.42                         +0.69%
The tech-heavy Nasdaq rallied for a fifth consecutive session as technology stocks gained over 0.8 percent on the day.  The fifteen largest technology companies on the Nasdaq closed higher today, with the exception of Teva Pharmaceutical.  The top performing large tech company was DirecTV, whose shares gained over 4 percent on the session.  DirecTV added customers in the fourth quarter last year despite a rise in monthly bills for customers.

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

Fundamentals

U.S. Equities Surge On Rising Commodities, Manufacturing Data

U.S. Session Key Developments

•    Crude Oil Posts Biggest Advance in Four Months, Gold Posts Largest Gain in Three Months
•    Empire Manufacturing Grows At Fastest Pace in Four Months
•    U.S. Dollar Falls For Third Consecutive Day Against Major Currencies

U.S. stocks rallied in the week’s first day of trading as strong manufacturing data and a revival in risk appetite boosted commodity and equity markets.  The positive shift in sentiment helped push the S&P 500 to its largest gain since November 5.  Initially, markets moved higher on the open after a release from the Federal Reserve Bank of New York showed that manufacturing in the tri-state area surpassed expectations in February.  The manufacturing index grew at the fastest pace in four months, rising from 15.92 to 24.91, as sales increased and unemployment subsided.  Furthering today’s stocks rally were rising commodity prices, led by crude oil which posted a 4 percent gain to close above $77 a barrel.  Gold and silver rallied 2.7 percent and 4.6 percent respectively, as the U.S. Dollar Index fell for a third consecutive session.  The euro posted its first gain against the greenback in a week as Greek Finance Minister George Papaconstantinou said that his country had “no actual need for” a bailout and was ahead of its deficit-reduction targets.  Overall, U.S. equities remain in the red this year, but valuations have become more reasonable and there may be opportunity for growth going forward.  According to Bloomberg, the S&P 500 is currently valued at 18.8 times the reported earnings of its companies, a significant drop-off from its 24.5 P/E valuation in December.

DJIA 30                     10,268.81                      +169.67                       +1.68%
The Dow Jones Industrial Average posted its largest gain since November as commodity and financial shares gained over 2 percent each.  Twenty-eight of the Dow’s thirty stocks closed higher on the session.  Bank of America was the top performer on the index today, rising nearly 5 percent as financial shares around the globe rallied on better-than-expected earnings from Barclays Bank.  American Express and JPMorgan Chase followed suit, gaining at least 2.8 percent each on the session.  As for commodity shares, Alcoa posted a 3.4 percent gain on rising costs for aluminum, while energy giants Chevron and Exxon Mobil each added over 2 percent.  Pfizer and Kraft were the only shares to trade lower today, dropping 0.4 percent each.

S&P 500                     1,094.87                         +19.36                         +1.80%
The broad-based S&P was the biggest gainer among major U.S. indices as all ten sectors on the index closed higher on the day.  Commodity stocks were the strongest performer, gaining over 2.6 percent, while financial and industrial shares also gained over 2 percent on the day.  Range Resources led the energy industry today, gaining over 6.6 percent, and was followed closely by First Solar, which added 5.4 percent.  First Solar will report its fourth quarter earnings later this week.  Industrial shares were pushed higher by a 3.1 percent gain for General Electric after the better than expected Empire Manufacturing Index reading for February.  Boeing and UPS also gained at least 2 percent each on the day.

NASDAQ                     2,214.19                         +30.66                         +1.40%
The tech-heavy Nasdaq rallied for a third consecutive session as technology stocks gained over 1.4 percent on the day.  The thirty largest technology companies on the Nasdaq closed higher today, with the exception of Blackberry maker Research in Motion.  The top performing large tech company was Seagate Technology, which added over 5 percent on the session, followed by a 4 percent gain for Autodesk.  PricewaterhouseCoopers said today that acquisition activity within the technology sector will return to “robust” levels this year after the value of such deals fell by more than 50 percent in 2009.

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

Fundamentals

European Equities Mixed Today as Plans For Greece Bailout Remain Unclear

Europe Session Key Developments

•    European Union Officials Discuss Budget Concerns in Brussels Today
•    Switzerland Consumer Prices Rise More Than Expected in January
•    Euro Resumes Decline Against Dollar as Greece Plans Remain Unclear

European stocks were mixed today as rhetoric from the European Union meeting in Brussels was unclear regarding its agreement to solve the Greek debt situation.  EU leaders have asked for a descriptive plan from Greece on how the country intends to reduce its debt-to-GDP ratio, but no concrete bailout plan has been announced.  The general consensus from analysts is that a bailout will happen in the near-future, to protect the Euro region and maintain the stability of its currency.  ECB President Jean-Claude Trichet said today that he welcomes the commitment of EU leaders to take the necessary actions to protect financial stability in the region.  President Trichet, along with German Chancellor Angela Merkel and Greek Prime Minister George Papandreou, has called for a close watch of the Greek economy and promised “determined” action to heed off the worst crisis for the euro currency in its eleven-year history.  Despite the commentary, investors showed a great deal of skepticism over today’s Greece agreement, sending four of the five major European equity indices lower on the trading day.  In addition, the euro currency continued its decline against the U.S. dollar, falling against the greenback for a sixth time in the last seven trading days.  The sixteen-nation common currency has dropped over 5 percent against the Dollar this year.  As for the economic docket, German wholesale prices rose 1.3 percent in January and Swiss CPI was slightly higher for the month, but neither had much impact on equities.  Looking ahead to tomorrow, however, economic data should have a major impact on market sentiment as fourth quarter GDP data is released for Germany, France, Italy, and the general Euro-Zone.

FTSE 100                        5161.48                     +29.49                     +0.57%
The FTSE 100 posted the only gain among the major European indices, led by gains in commodities and industrials.  Commodity producers gained on rising energy costs, as crude oil has increased to $75 a barrel this week.  Rio Tinto, one of the world’s largest mining companies, gained 2 percent on rising oil prices and a reinstatement of the firm’s dividend.  Rolls-Royce led industrials higher, gaining over 6 percent after reporting annual profit that beat analyst estimates and an announced payout to investors after winning more defense contracts.  Also pushing the index higher was Sports Direct International, the largest U.K. sporting-goods retailer, which gained nearly 8 percent on positive sales reports.

CAC 40                            3616.75                     -18.86                     -0.52%
Trading in Paris led to a slight decline on the trading day as technology stocks fell over 4.2 percent.  Overall, over two stocks fell for each that gained on the CAC.  Alcatel-Lucent was the worst performing stock on the index, falling 11 percent after posting its third successive full-year loss.  The global telecommunications company also cut its profit-margin target for 2010.  Renault posted the second-biggest decline on the index, dropping over 5 percent, after the French car maker announced that it posted a net loss of $4.2 billion in 2009.

DAX                                 5503.93                     -32.44                     -0.59%
The German index posted its first decline this week as eight of the ten DAX sectors closed lower on the day.  Financial shares posted a 1 percent decline on the day as the country’s largest bank, Deutsche Bank, dropped over 2 percent and Deutsche Postbank fell over 1 percent.  German banks have significant exposure to Greece, Spain, and Portugal, and investors remain skeptical that the regional debt problems have a viable solution.  Furthering the decline in German stocks was the automobiles sector, led by a 2 percent decline for Daimler and Volkswagen.

IBEX 35                          10281.70                    -173.30                   -1.66%
Trading in Spain led to the largest decline among the major European indices, as financials plunged over 2.2 percent on concerns over the country’s debt problems and lacking economic recovery.  The National Institute of Statistics announced today 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.  Construction firms were hit especially hard today on spending concerns, as FCC and Ferrovial each fell over 2 percent.

FTSE MIB                       21076.45                   -165.18                   -0.78%
Italy’s FTSE MIB posted the second-largest decline among major European indices, declining nearly a full percent on the day.  The most actively traded stocks to the upside included the country’s largest oil company, Eni, which added nearly 1 percent on rising oil prices, and Saipem, which gained 3 percent after analysts upgraded their recommendations on the stock.  On the losing end of trading today was Parmalat, as the dairy company fell over 2 percent after being cut at BNP Paribas from “neutral” to “underperform.”  Analysts at the bank said to avoid the stock before its February 25^th earnings release.  Also declining today was Intesa Sanpaolo, falling 3 percent after announcing plans to shut down its investment-banking unit in Athens.

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

Fundamentals

U.S. Equities Dip Slightly on Bernanke Plan, Greece Concern

U.S. Session Key Developments

•    Fed Chairman Bernanke Discusses Central Bank Exit Strategy
•    U.S. Trade Deficit Surprisingly Widens in the Month of December
•    Dollar Gains Against European Counterparts on Greece Concerns

U.S. stocks traded lower for the second time this week on concerns over Greek sovereign debt and commentary from the Federal Reserve regarding an exit strategy from the central bank’s unprecedented stimulus measures.  The Dow Jones Industrial Average fell over 70 points in the first hour of trading, but managed to gain back most of the early losses and close above 10,000.  Initially, stocks faltered in the early going after Chairman Ben Bernanke stated that the Federal Reserve may raise the discount rate “before long” as part of the “normalization” of Fed lending functions.  The markets perceived this commentary as a further example of policy tightening, along with the proposed termination of asset purchasing programs at the end of March.  The Fed Chairman, however, maintained his stance that low rates are warranted “for an extended period” and that a modest rise in the discount rate should not be viewed as a change in the outlook for monetary policy.  Although this commentary put downward pressure on stocks, the U.S. equity markets quickly rallied back on bullish sentiment out of Europe thanks to further discussions regarding a Greece bailout.  French and German officials stated that the countries were ready to come to the aid of Greece and hoped that other EU nations would step up and do the same.  Tomorrow, European Union leaders will meet in Brussels to discuss regional issues and will likely press Greece to provide a detailed overview of spending cuts going forward.  In other news, the U.S. announced that its trade deficit surprisingly widened in the month of December to $40.2 billion.  The reading was actually a positive signal for economic growth, as imports rose 4.8 percent and exports increased 3.3 percent to the highest level since 2008.

DJIA 30                     10,038.38                      -20.26                       -0.20%
The Dow Jones Industrial Average fell for the second time this week as twenty of the thirty index stocks closed in the red.  DuPont was the worst performing stock on the index, dropping over 1.5 percent despite saying that agricultural sales and margins would be higher in 2010.  Aluminum maker Alcoa, as well as energy producers Chevron and Exxon, dropped just under 1 percent each on concerns over global demand for commodities going forward.

S&P 500                       1,068.13                          -2.39                         -0.22%
The S&P dropped slightly today as every index sector closed lower with the exception of financial stocks.  Basic materials was the worst performing sector today, led by 3 percent losses for US Steel Corp and Allegheny on falling metal prices.  Coal producer Massey Energy fell nearly 3 percent after the stock was downgraded from “overweight” to “neutral” by analysts at JPMorgan Chase.  Financials was the lone sector that gained today as Bank of America, Wells Fargo, and JPMorgan Chase rallied over 1 percent.

NASDAQ                      2,147.87                         -3.00                         -0.14%
The tech-heavy Nasdaq posted a small decline today as technology stocks fell over 0.1 percent today.  Oracle and Yahoo! were the worst performing major technology stocks, declining just under 2 percent each.  Dell was one of the few tech stocks to close higher, adding 1.9 percent, after being raised to “buy” from “neutral” by analysts at Bank of America.

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

Fundamentals

European Equities Rebound From Worst Week Since March

Europe Session Key Developments

•    Spain, Greece Leaders Say Debt Concerns Are Overdone
•    Commodities Higher Across The Board
•    Euro Gains Against U.S. Dollar, Cable Lower

European stocks rallied today, off their worst week of the year, on an apparent return of risk appetite.  Investors drove commodities and stocks higher during the European session, and sold off U.S. Dollars in favor of the Euro.  Investors may be viewing the Euro as oversold after the past week, as the 14-day Relative Strength Index fell below 30 over the past few sessions.  On the commodities front, crude oil gained nearly 1 percent to $72, while gold and silver added nearly 2 percent each.  Over the past few days, European leaders have attempted to ease the minds of investors by showing support for the efforts of Greece, Spain, and Portugal as they fight their large budget deficits.  French Finance Minister Christine Lagarde told reporters over the weekend that European member of the G-7 will make sure the sovereign debts are managed.  ECB President Jean-Claude Trichet stated his belief that Greek debt will be reduced to a manageable 3 percent of GDP by 2012, while Greek Prime Minister George Papandreou reiterated his stance that Greece can handle its own deficit and that foreign aid would only serve as a poor signal to the market.  Papandreou is currently waging a battle against organized labor unions in his attempt to freeze wages and implement spending cuts.  His efforts have helped to a point, as credit-default swaps on Greek sovereign debt fell from last week’s record 428 basis points.  However, swaps on the country rose today by 12.5 basis points to 420 as over 600,000 public workers plan to strike for 24 hours on February 10.  In addition, despite chatter from the Spanish Finance Minister to quell investor fears, credit-default swaps on the sovereign debt of Spain and Portugal again rose to record highs today.  Swaps on Spain gained 4.5 basis points to 171, and swaps on Portugal increased 15 basis points to 242.

FTSE 100                      5092.33                    +31.41                     +0.62%
British stocks rose today from three-month lows, led by near 2 percent gains in basic materials and consumer goods.  Basic materials shares traded higher on rising metals costs and better-than-expected earnings from Randgold Resources.  The mining company added over 6 percent today after announcing that its four-quarter profit was significantly higher than estimates.  Copper producer Xstrata also posted better-than-expected earnings and gained over 3.6 percent on the session.  Xstrata also announced that it would resume paying a dividend to shareholders for the first time since 2008.  Consumer goods were led higher today by the world’s second-largest brewer, SABMiller, and chocolate-maker Nestle.  SABMiller gained 3 percent today, while Nestle added more than 2 percent.

CAC 40                           3607.27                   +43.51                    +1.22%
Trading in Paris led to the biggest gain among all the major European indices today after the Bank of France business sentiment reading rose to 104 in January from 102 the month prior.  Each CAC sector gained today with the exception of technology shares, and twenty-seven of the index’s forty stocks closed higher.  The top performer was Dexia, which gained over 4.5 percent following four consecutive days of losses.  The bank’s shares were bid higher after an announcement that Dexia will not need to sell any specific units to gain approval for a taxpayer bailout.

DAX                                 5484.85                     +50.51                  +0.93%
The DAX gained nearly a full percent during trading today as twenty-three of the thirty index stocks rose on the session.  Daimler was the best performer on the index, gaining over 3 percent after Wolfgang Bernhard was appointed to the head production position at Mercedes-Benz.  Deutsche Telekom also helped to lift the index, adding 1.8 percent after its shares were upgraded by WestLB.  The telecom firm is considering new possibilities for its T-Mobile unit, including an initial public offering in the U.S.  Other positive gains came from Germany’s largest two utilities, E. ON and RWE, which rose in tandem for the first time in four days.  SAP was the worst performer on the index, dropping over 2 percent after CEO Leo Apotheker resigned.

IBEX 35                           10206.30                   +103.00                 +1.02%
Spanish stocks rebounded after a terrible week, gaining over 1 percent as telecom and bank shares rallied.  Banco Santander gained nearly 2 percent, while BBVA added 0.5 percent after Spain’s Deputy Finance Minister Jose Manuel Campa talked down the country’s budget deficit.  Campa said that the government will take the necessary steps to cut the budget deficit with a targeted deficit of 3 percent of GDP in 2013.  The Finance Minister also stated his projection for 3.1 percent growth in 2013.  Telefonica gained over 2 percent today on news that the telecom operator is considering levying a fee on internet search engines such as Google and Yahoo for use of the network.

FTSE MIB                        20938.24                   +122.36                 +0.59%
Trading in Milan today led to the first gain for the FTSE MIB in four days, albeit the smallest among major European indices.  Gewiss gained over 3 percent on news that the electrical product manufacturer expects sales to improve next year to levels not seen since 2008.  Drugmaker Recordati gained over 1 percent, after two losing sessions, on news that the firm is looking at new acquisitions in eastern Europe and will report that 2009 earnings exceeded those of the prior year.  Defense contractor Finmeccanica fell over 4 percent after Goldman Sachs cut its price estimate on the firm and maintained its “sell” recommendation.

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

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