Banks

U.S. Equities Drop as Risk Trends Dominate

U.S. Session Key Developments

•    Fitch Downgrades Portugal’s Credit Rating Citing Deteriorating Finances
•    UBS Economist Predicts Eventual Greece Default
•    New Home Sales Unexpectedly Drop in February

Risk trends were strong today sending the Dollar index to a 10-month high and U.S. equities down for the first time this week.  Concern over government deficits predicated the turnaround in risk appetite as Fitch Ratings cut Portugal’s credit rating while a UBS economist simultaneously predicted that Greece would default on its debt.  Fitch downgraded Portugal’s long-term credit ratings to “AA-“ from “AA” while leaving the outlook at “negative,” meaning that more grade cuts can be expected.  The ratings company cited Portugal’s deteriorating public finances as the reason for the cut.  Separately, Paul Donovan, UBS’s deputy head of global economics, said Greece “is going to default at some point.”  The joint-news sent the single currency tumbling to a 10-month low of 1.3315 against the dollar, down 1.4 percent since yesterday’s close.  The euro was not even the worst performing G10 currency against the dollar; that honor went to the Japanese Yen, which dropped 2.1 percent in today’s trade.  Overall, the dollar index, which measures the greenback’s performance against six major trading partners, was up 1.3 percent.  Commodities did not take the dollar move lightly as the CRB Commodity index gave up 0.8 percent.  Gold and Crude were major laggards as prices for April delivery dropped 1.5 percent and 2.0 percent respectively.

DJIA 30                     10,836.15                      -52.68                       -0.48%
The Dow Jones Industrial Average was dragged lower by Proctor and Gamble, which contributed 7 points to the index’s decline.  The world’s biggest consumer-products maker fell 1.4 percent on concern that government deficits may impede a global recovery.  Chevron was another major laggard, adding an additional 6.4 points to the decline.  The U.S.’s second largest energy company fell 1.1 percent as oil prices fell 2.0 percent.

S&P 500                       1,167.72                           -6.45                       -0.55%
The Standard & Poor’s 500 index fell for the first time in three days as just over 1-in-5 companies advanced.  The only group to advance was financials after Dick Bove, analyst at Rochdale Securities, said banks may quadruple over the next two to three years as loan defaults decrease.  The group was up 0.7 percent as 7 out of 10 bank stocks advanced.  Bank of America posted one of the strongest gains as the bank was up 2.6 percent to $17.57.

NASDAQ                     2,398.76                         -16.48                     -0.68%
The tech heavy Nasdaq Composite was the worst performing major U.S. equity index as tech stocks lost 0.6 percent as a group and all other groups were also down.  Tech giants Google and Apple were actually up on the day.  The stocks were up 1.5 percent and 0.4 percent respectively and contributed almost 2 points against the decline.

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

Banks

Investors Mixed After Cryptic Start to 4Q Earnings Season

Those investors, who entered this round of earnings season expecting good news, received it. On the other hand, those investors who were expecting abysmal indicators saw their prediction come to fruition as well. Why has this occurred? Various blue chip and financial sector earning reports released over the last week have provided anything but solid insight into what’s on the horizon for 2010. Even as companies show robust changes in their bottom lines and balance sheets, trepidation continues to linger and has proven to weigh on investor sentiment since last Monday. On the surface, much-improved earnings-per-share data suggests that equity markets are ready to continue their bull run from last March. Upon a second review, however, excitement building over a so-called “end” to the recession appears to be a bit premature.

Two trends are dominating the analysis of earnings thus far: the equity market response and the bond market response. Better-than-expected earnings-per-share data from banks have offered equity securities investors hope that profitability is resuming and earnings growth will become a positive trend going forward; yet, at the same time, the loan losses disclosed by other institutions indicates that consumers are still struggling. JPMorgan Chase & Co. exhibited both sides in their most recent earnings: while revenues surged to over $3.3 billion dollars on strong investment banking results, and thus pushing fourth quarter EPS to $0.40 (against $0.30 expected), it suffered tremendous losses on mortgage and credit card loans. Even as non-financial sector companies begin to show steady revenue growth and solid earnings data – Intel Corp and IBM come to mind first, as both outperformed analysts’ expectations – the bank data offers the most telling insight into the future of the market. Sizeable losses at banks indicates that consumer credit isn’t mending as quick as desired or forecasted, and, going forward, could remained depressed should unemployment continue to hover around ten percent for some time. If consumers and business struggle to find footing in a market about to have stimulus withdrawn from it as an asset bubble begins to build, it’s not evidently clear who will seek loans in order to trigger profit growth for banks down the line.

Written by Christopher Vecchio, CFDTrading Research
Please send any comments about this report to Cvecchio@fxcm.com

Banks

European Stocks Validate Bearish Bias, Break Past Key Support

Weekly Strategy

FTSE 100

Long-Term Technical Outlook

There are 2 levels that most likely produce a top.  The first level, 4751, has been reached and is where the rally from 4096 is equal to 61.8% of the 3461-4521 rally.  The next level is 5156, which is where the 2 bull legs would be equal.

Short-Term Technical Outlook

The FTSE has broken out of the Rising Wedge that we identified earlier this week, with prices now positioned to test the 38.2% Fibonacci retracement level at 4816.64. A break beyond that will target the 50% Fib at 4777.25.

DAX

Long-Term Technical Outlook

There are 2 levels that most likely produce a top.  The first level, 5506, has nearly been reached and is where the rally from 4524 is equal to 61.8% of the 3589-5176 rally.  The next level is 6113, which is where the 2 bull legs would be equal.

Short-Term Technical Outlook

The German benchmark index has sold off as expected and is now positioned above the 61.8% Fibonacci retracement level at 53198. A break lower targets the 76.4% level at 52587.

CAC 40

Long-Term Technical Outlook

There are 2 levels that most likely produce a top.  The first level, 3535, has been reached and is where the rally from 2958 is equal to 61.8% of the 2466-3400 rally.  The next level is 3892, which is where the 2 bull legs would be equal.

Short-Term Technical Outlook

Our bearish forecast for the French equities has been validated: prices fell through the bottom of a rising wedge formation and taken out the 38.2% Fibonacci retracement level at 3599.14. From here, the bears will look to take the index to the 50% Fib at 3560.47.

IBEX 35

Long-Term Technical Outlook

There are 2 levels that most likely produce a top.  The first level, 1124, has nearly been reached and is where the rally from 925 is equal to 61.8% of the 670-993 rally.  The next level is 1247, which is where the 2 bull legs would be equal.

Short-Term Technical Outlook

As with most other European exchanges, Spanish shares sold off to break beyond the Rising Wedge we identified at the beginning of the week. Prices now target the 38.2% Fibonacci retracement level at 1113.66.

FTSE MIB

Long-Term Technical Outlook

There are 2 levels that most likely produce a top and neither has been reached.  The first level, 22798, is where the rally from 17626 is equal to 61.8% of the 12332-20702 rally.  The next level is 25996, which is where the 2 bull legs would be equal.

Short-Term Technical Outlook

The FTSE/MIB looks essentially the same as other European benchmark indexes: prices validated our bearish scenario, breaking below Rising Wedge support to challenge resistance-turned-support at 21981.13. A move lower from here would target the 21947.83 – 21762.62 congestion region.

Banks

U.S. Stocks Lose Most in Six Weeks on Fed, Treasury Report

US Session Key Developments

• Federal Reserve and Treasury Says Credit Conditions Worsened
  
• TALF Program to Be Extended Three Months
• Foreign Cash Flows to U.S. Collapsed in June
  

U.S. stocks declined by the largest amount since July 2 after a new Federal Reserve report showed that bank lending contracted in the second quarter. Indeed many had not been prepared for this announcement as surging equities may have led many to perceive that pain-staking conditions in the credit markets had been alleviating. Indeed, the Fed added that it would be extending its emergency TALF program by three months. TALF loans collaterlized with newly issued Asset-Backed Securities (ABS) and older Collaterlized Mortgage-Backed Securities (CMBS) will continue to be issued through the end of March 2010 while those backed by newly issued CMBS will be extended through the end of June 2010. Investors quickly sold shares once it was made clearer by the Fed that further stimulative action would be required of them. If that wasn’t enough to inspire the selling spree, the level of investment driven to the U.S. from abroad collapsed in June. Total Net Treasury International Capital (TIC) shrank $31.2 billion in June, wildly undershooting the consensus estimate of a rise in such flows of $23.0 billion. The unsettling may lead many to believe that the world’s trust in the American bond market may bay dwindling.

DOW 30   9135.34               -186.06                   -2.00%

Dow stocks took a beating today, with the worst of its sectors, Basic Materials, plummeting 4.73%. Alcoa, one of the two sector’s members, led the free-fall when it shed 6.48% on an indication from the Fed that the economy might not be performing as well as many had anticipated.

SPX 500   979.73              -24.36                   -2.43%

Financials were the second-hardest hit sector in the S&P 500 with Wells  Fargo and Bank of America declining 5.16% and 4.77%, respectively. Word that credit tightness in the second quarter had actually grown worse shook investors’ confidence in the banking sector. Implied volatility on the benchmark, as shown by the VIX index, rose to it’s highest level in five weeks. In percentage terms, the VIX, rose by the largest amound since April 20.

NAS 100   1930.84              -54.68                   -2.75%

NASDAQ stocks performed the worst of the three U.S. benchmark equity indices, with Technology shedding 2.81%. Apple, one of the day’s biggest losers, declining 4.26%, lost out after Dell announced it would be devloping a smart phone for China Mobile Ltd.

Written by Luis Gil, CFDTrading Analyst

For questions and comments email lgil@fxcm.com

Banks

Daily Commodities Fundamentals: Commodities Close Lower Entering the Weekend

North American Commodity Update, Last Updated 8/14/2009 3:51 PM EST (GMT = EDT +5:00)

Commodities – Energy

Crude Sold Following a Disappointing Consumer Confidence Report

Crude Oil (WTI)   $67.530                         -$2.990                             -4.24%
Crude Oil future prices plummeted today, ending the week with a 3.5% decline back below the psychological $70-per-barrel level. After a week’s worth of important fundamental data releases including the FOMC rate decision and Bank of England Quarterly Inflation Report, the University of Michigan’s Consumer Confidence report turned out to be the main market mover. While this may seem strange, it is not that surprising when put into context; recent data releases have encouraged investors to re-enter higher yielding assets in hopes of a global economic recovery. Equity markets have rallied, which has translated to a bid up of Crude future prices as speculators predict a short-to-medium term hike in demand. Many believed that the United States would be one of the first countries to successfully escape the prolonged global recession; however, today’s consumer confidence figure revealed that Americans are not willing to take the lead. Consumer confidence was expected to increase from 66.0 to 69.0, but upon release, the report showed that the figure had actually dropped to 63.2. As a result, Crude future prices faced a severe sell-off as investors return towards safer assets and wait for an economic turnaround. Looking towards next week, crude could potentially retest the $70-per-barrel level before giving in to the true, market-moving fundamentals.

Department of Energy Inventories

Commodities – Metals

Stronger Dollar and Bearish Outlook Drive Precious Metals Lower

Gold                   $949.000                      -$7.500                           -0.78%
Gold future prices finished lower to close out the week, again losing as the US dollar strengthened. After a worse-than-expected US Confidence Report, the greenback gained across the board as investors flocked towards the relatively safe dollar and fled from higher-yielding assets (equity markets fell significantly). Recall that Gold and the greenback tend to trade inversely as investors use the metal to hedge against dollar weakness/inflation. Simultaneous to the dollar’s advance, today’s Euro-Zone and US CPI reports revealed that inflation is not likely to be of concern in the near-term. This fact was already suggested in numerous global bank statements during the last two weeks. Though Gold’s correlation with the dollar index is not remarkably high, dollar strength should continue to be an indication for Gold price action. Therefore, any encouraging fundamental releases that heighten risk appetite will likely translate into future price increases as well.

Silver                 $14.675                    -$0.312                           -2.08%
Silver futures could not hold on to yesterday’s gains during a volatile day of trading; the metal lost nearly 2% as investors turned bearish following the University of Michigan’s Consumer Confidence report. Though Silver is considered a precious metal like Gold, it has seen far more drastic price action due to its other application. Because Silver doubles as an industrial input, it is particulary sensitive to any changes in global economic outlook. Despite a better-than-expected US Industrial Production figure (0.5% actual vs. 0.4% expected), investors’ recent bullish forecast was not carried into the weekend. As for next week, expect Silver to follow investor sentiment; only time will tell which direction that will be.

-Written by Jay Steinberg, CFDTrading Research
Questions/Comments about this article? Send them to JSteinberg@fxcm.com

Banks

Daily Commodities Fundamentals: Crude Loses, Precious Metals Trade Sideways

North American Commodity Update, Last Updated 8/11/2009 2:52 PM EST (GMT = EDT +5:00)

Commodities – Energy

Crude Falls Near 2% During Intraday Trading

Crude Oil (WTI)          $69.360                         -$1.240                             -1.76%
Crude Oil future prices fell below the psychological $70-per-barrel level after losing nearly 2% during intraday trading. In order to avoid significant event risk surrounding tomorrow’s FOMC Interest Rate Decision, speculators are selling off their Crude positions, taking profits and waiting for a clearer signal regarding a potential  global economic recovery. Today’s sell-off did not face much resistance, as fundamental data supporting Crude’s recent surge has been hard to come by. demand for the commodity remains extremely low; just last week, the Department of Energy’s Crude stockpile report revealed a larger-than-expected in Crude inventory, pushing down future prices. The US Wholesale Inventories report revealed that inventories had plummeted by 1.7%, signaling that demand for Crude may remain weak as companies face diminished demand for their products. Tomorrow’s new DOE report will show any changes in Crude demand; this report combined with the FOMC Interest Rate Decision at 2:15 PM EST should yield significant price action tomorrow. Though no change of the key lending rate is expected, the commentary surrounding the event has potential to be market moving.

Department of Energy Inventories

Commodities – Metals

Precious Metals Waver, End Near Even

Gold                   $947.700                      +$0.800                           +0.08%
Gold future prices closed near even today, consolidating around the psychological $950-per-ounce level as speculators await tomorrow’s FOMC Rate Decision. US dollar activity has been a useful contrarian indicator for Gold price movement, as the two tend to trade inversely. Investors often use the metal to hedge against a weaker greenback or inflation. The commentary following tomorrow’s FOMC decision should provide better insight regarding near-term inflationary concern. If the Fed chooses to maintain the key lending rate (which it will) but continue to purchase treasuries as an economic stimulus, speculators may buy Gold to avoid a weaker greenback resulting from uncontrolled inflation. However, if the Fed hints that a rate hike may be in the near future, the US dollar would strengthen, potentially applying downward pressure on Gold. At 5:30 AM EST tomorrow, the Bank of England will release its Quarterly Inflation Report, which could also be market-moving for commodities.

Silver                 $14.325                    -$0.030                          -0.21%
Silver future prices traded sideways during today’s session, failing to rebound from yesterday’s small decline. As was the case for Gold, speculators seem to be waiting for tomorrow’s abundance of fundamental news reports that could all be potentially market moving. In addition to the FOMC Interest Rate Decision, we mentioned the Bank of England’s Quarterly Inflation Report. Historically speaking, this news release has been used as an opportunity for the Bank to make implications regarding its future monetary policy. The report is a broad assessment of various economic indicators in the UK, but the fact that the Bank’s Rate Decision was just last week may prevent significant market movement following the release. UK Unemployment is also expected to come across the wires; any changes in the UK job market could scare investors into relatively safer currencies such as the US dollar. Because Silver serves as both a precious metal and as an industrial input, it is particularly sensitive to the aforementioned fundamental reports. With that in mind, tomorrow has potential to be an eventful day for Silver future prices.

-Written by Jay Steinberg, CFDTrading Research
Questions/Comments about this article? Send them to JSteinberg@fxcm.com

Banks

Daily Commodities Fundamentals: The Week Opened Quietly, But Don’t Expect It to Last

North American Commodity Update, Last Updated 8/10/2009 4:06 PM EST (GMT = EDT +5:00)

Commodities – Energy

Crude Pares Losses to Close Near Even

Crude Oil (WTI)   $70.960                         +$0.030                             +0.04%
Crude Oil future prices traded sideways today during a quiet US trading session. A lack of market-moving fundamental data release forced Crude to track equity markets and retreat amid US dollar strength for the majority of the day. All three major US equity indices closed lower today as investors engaged in some profit-taking following last week’s impressive performance. Crude tends to follow equity markets because of its function as an input price; global economic expansion would likely increase demand for Crude, which has been extremely weak this summer. Week after week, the US Department of Energy’s inventory figures have showed an oversaturated market with not enough demand for the commodity. This week, Crude stockpiles are expected to increase by another one million barrels. Crude prices have also reflected a stronger US dollar, which continued its gains from Friday following a better-than-expected NFP report. Tomorrow, the FOMC will begin its two day Monetary Policy Meeting; speculators believe that the key lending rate will remain at 0.25%, but the committee may hint towards a hike in rates as early as next year. Such a decision would lead to growing confidence in the global economy, potentially contributing to future Crude price increases.

Department of Energy Inventories

Commodities – Metals

Gold Trades Sideways, Silver Loses

Gold                   $948.100                           -$11.400                           -1.19%
Gold future prices fell the most in two weeks during intraday trading as prices tested and broke through the psychological $950-per-ounce level to close down 1.3% at $946. The move was a significant setback to any hopes of a near-term test of $1000, as the break below $950 could spark technical selling until $920-per-ounce. Gold’s decline was largely due to the stronger US dollar as it continues to gain against its major competitors following Friday’s NFP report. Job losses for July were approximately 80K less than expected and the unemployment rate dropped by 0.1% for the first time since April 2008. The U.S. dollar index was up 0.3% as of 3:00 PM EST but investors traded cautiously preceding tomorrow’s FOMC Monetary Policy meeting. The commentary surrounding tomorrow’s meeting will likely be the main market mover, as no tangible changes are expected just yet. Gold could see significant upside if the committee is concerned about future inflation as a result of the economic stimulus plan; Gold is often used as a hedge against dollar weakness and/or inflation.

Silver                 $14.365                           -$0.303                          -2.07%
Silver future prices lost nearly 2% as the US dollar continued to strengthen and investors pull back from their bullish sentiment that closed last week’s trading. Due to a shortage of market-moving fundamental data, mere speculation may be responsible for Silver’s noteworthy decline. An extension from Friday’s dollar strength contributed to the metal’s decline today, especially in anticipation of this week’s upcoming reports. In addition to the FOMC meeting, an array of potentially impactful releases is expected, including Euro-Zone CPI, the UK Unemployment Rate, and the UK’s Quarterly Inflation Report. After this week, we should have a clearer idea of the future direction of commodity prices and the global economy as a whole.

-Written by Jay Steinberg, CFDTrading Research
Questions/Comments about this article? Send them to JSteinberg@fxcm.com

Banks

Daily Commodities Fundamentals: Commodities Close Lower to End Week

North American Commodity Update, Last Updated 8/7/2009 5:19 PM EST (GMT = EDT +5:00)

Commodities – Energy

Crude Prices Fall on U.S. Dollar Strength

Crude Oil (WTI)   $70.420                         -$1.500                             -2.09%
Crude traded lower after a choppy day of trading, losing roughly 2% by the session’s close. Today’s main market mover was the US Non-Farm Payrolls report, which led to a swing towards risk appetite but also a strengthening of the US dollar. The NFP revealed a loss of 247K jobs last month, a dramatic improvement when compared to the 328K analysts expected. The US unemployment rate actually fell from 9.5% to 9.4%; it was the first decline since April of 2008. The positive release out of the United States led to an impressive dollar rally. When the dollar gets stronger, dollar-denominated commodities like Crude lose. However, the better-than-expected NFP report heightened investor confidence, leading many to believe that the recession is over. If this is truly the case, demand for Crude would likely increase as the global economy begins to expand. Note that just Wednesday, the Department of Energy inventory figures showed a significant year-over-year decline in Crude demand, a threat to any sustainable economic recovery. It will be interesting to see what direction, if any, Crude prices take next week.

Department of Energy Inventories

Commodities – Metals

Precious Metals Retrace Slightly to End Week

Gold                   $956.900                           -$6.000                           -0.62%
Gold finished slightly lower today, leaving it nearly even over the past week at approximately $957-per-ounce. The reason for Gold’s decline today was certainly US dollar strength; the greenback closed higher against all of its major competitors (excluding the New Zealand dollar), specifically gaining over 2% on the Japanese Yen. As was the case with Crude, the US NFP report was the fundamental driving factor. Investors continue to regain confidence in the global economy, many of whom believing that the US will lead the world out of the recession. Gold losses were subdued today despite the dollar’s impressive performance because when speculators prepare for an economic recovery, inflationary fear sets in, helping to support Gold future prices. Recall that Gold and the greenback tend to trade inversely as investors use the metal to hedge against dollar weakness/inflation. Expect Gold prices to increase next week due to heightened risk appetite and inflationary concern.

Silver                 $14.600                          -$0.045                          -0.31%
For the first time all week, Silver’s price move was less extreme than Gold’s. Silver future prices lost only 0.3% due to conflicting fundamental data that applied pressure on opposite sides of the metal. Usually, dollar weakness and risk appetite go hand-in-hand, leading to volatile swings in prices. In addition to serving as a precious metal, Silver also has an industrial application, which makes it particularly sensitive to a changing global economic outlook. Today’s better-than-expected US NFP report bid up the US dollar while still encouraging investors to re-enter higher yielding assets. Next week, the Bank of Japan and the FOMC are due for their interest rate decisions. Though they are both expected to maintain their respective key lending rates, the commentary that follows may provide some direction in the global marketplace, leading to changes in commodities.

-Written by Jay Steinberg, CFDTrading Research
Questions/Comments about this article? Send them to JSteinberg@fxcm.com

Banks

Daily Commodities Fundamentals: Crude and Gold Trade Sideways, Silver Falls

North American Commodity Update, Last Updated 8/6/2009 3:50 PM EST (GMT = EDT +5:00)

Commodities – Energy

Crude Pares Early Losses, Ends Near Even

Crude Oil (WTI)   $71.920                         -$0.050                             -0.07%
Crude Oil future prices closed nearly even today after paring more significant losses that had tested the psychological $70-per-barrel level. Prices began their initial descent right before the US trading session began, when both the Bank of England and European Central Bank released their Interest Rate decisions. Though neither bank decided to adjust its key lending rate, the meetings did have very differing results. Jean-Claude Trichet of the ECB expressed a sentiment of guarded optimism, hinting that a recovery is on the horizon. The Bank of England, however, decided to extend its Asset Purchase Program by an additional £50B, which indicated that the UK remains in a period of financial turmoil. The fear of a prolonged economic recession drove down Crude future prices by nearly $2. Also putting pressure on Crude was a weaker equity market in anticipation of tomorrow’s US Non-Farm Payrolls report. Risk aversion took control as investors await a clearer signal regarding the health of the global economy. Expect tomorrow to be a volatile day in the Crude market leading into the weekend.

Department of Energy Inventories

Commodities – Metals

Gold Trades Sideways, Silver Loses

Gold                   $965.600                      -$0.700                         -0.07%
Gold future prices also traded flat by the day’s close despite a volatile US session. Gold prices had peaked above $974-per-ounce before completely retracing and falling all the way down to near $958. The US dollar was stronger across the board, making it difficult for Gold to sustain any gains. Recall that Gold and the greenback tend to trade inversely as investors use the metal to hedge against dollar inflation and/or weakness. During tomorrow’s trading, Switzerland, Canada, and the United States all release their respective unemployment rates. These figures will likely guide the market, determining whether or not investors will return to risk aversion remain generally bullish on the global economy forecast.

Silver                 $14.575                        -$0.185                            -1.25%
As has been the case for weeks, Silver futures have proved to be much more volatile than Gold futures. Whereas Gold remained even on the day, Silver lost over a full percentage point as risk aversion dominated the marketplace. Silver’s industrial application, in addition to its function as a precious metal, makes the commodity particularly sensitive to any news regarding the global economic outlook. The commentary surrounding the two interest rate decisions likely contributed to Silver’s decline, as investors remain wary about the prospect of a near-term economic turnaround. Traders flocked en masse to the relatively safe US dollar in anticipation of tomorrow’s fundamental data releases.

-Written by Jay Steinberg, CFDTrading Research
Questions/Comments about this article? Send them to JSteinberg@fxcm.com

Banks

Daily Commodities Fundamentals: Commodities See a Choppy Day of Trading

North American Commodity Update, Last Updated 8/5/2009 4:45 PM EST (GMT = EDT +5:00)

Commodities – Energy

Crude Prices Retrace Manage Slight Gains

Crude Oil (WTI)   $71.830                         +$0.570                             +0.57%
Crude Oil future prices managed to close higher after a choppy day of trading. Crude opened the day on a high note as the Asian markets internalized the encouraging fundamental US data from the day before. Soon thereafter, the United Kingdom released its own Industrial Production report that pointed towards economic expansion, a good sign for Crude bulls. However, Crude fell nearly two dollars following the release of the Department of Energy stockpile figures. Crude Oil inventory were expected to climb by 600K barrels, when in reality, it climbed by 1670K barrels. Gasoline inventory fell by less than expected; Distillate inventory fell despite an anticipated increase (see below). The report showed that despite the recent bid up of future prices, demand for the commodity still remains weak. OPEC has hinted towards a decrease in output for the month of September as a result. Though it was predicted that a disappointing report like this one would lead to a reversal of Crude’s recent upswing, prices pushed even higher. Investors seem to be confident that the global economic recession is coming to a close and as a result, consider today’s Crude cheap.

Department of Energy Inventories

Commodities – Metals

Precious Metals Near Flat, Waiting for Direction

Gold                   $967.300                           -$2.400                           -0.25%
Gold future prices remained mostly flat during today’s trading session, failing to establish a new direction for the remainder of the week. Though nothing too extreme, the dollar was mixed against the major currencies today, beating the Australian and New Zealand dollars but losing most to the British Pound, the outperformer on the day due to their encouraging Industrial Production report. The majors continue to float around YTD highs against the dollar; a catalyst could determine whether or not the dollar breakout from Monday is sustained or retraced. Expect the Bank of England and European Central Bank’s Interest Rate Decisions to indirectly impact risk sentiment and the US dollar, which will in turn, swing Gold future prices.

Silver                 $14.750                    +$0.055                          +0.37%
Silver future prices remained mostly flat also on the session but ended higher on the day. The UK Industrial Production report had pushed Silver higher during early trading, but poor fundamental data from the world’s largest economy pared any gains. In the US, Factory Orders fell by more than expected (not completely surprising after last week’s Durable Goods Orders figure). The ADP Employment Change also came in worse than expected; this report is often considered a precursor for Friday’s NFP report, which will be a market mover for commodities.  Volatility may arise in the Silver market before Friday however, as tomorrow’s interest rate reports may provide future direction for prices.

-Written by Jay Steinberg, CFDTrading Research
Questions/Comments about this article? Send them to JSteinberg@fxcm.com

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