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U.S. Equities Trim Weekly Loss On Fourth Quarter GDP Revision

U.S. Session Key Developments

•    U.S. Fourth Quarter GDP Revised Higher to 5.9 Percent, Personal Consumption Lower
•    Existing-Home Sales Drop in January, Chicago Business Gauge Better-Than-Expected
•    Commodities Trade Higher as Greenback Falls Against Major Cross Currencies

U.S. stocks posted a slight gain in the final day of trading this week, as estimates for fourth quarter economic growth were shown to be higher than previously thought.  Despite today’s gain, however, the S&P 500 closed the week down 0.4 percent to 1,104.  The market-moving GDP revision was announced one hour before the opening bell and showed that the U.S. economy expanded 5.9 percent in the fourth quarter of 2009, better than the 5.7 percent initial estimate.  The GDP data was revised higher thanks to stronger business investment in the quarter and a greater contribution from inventories.  The personal consumption aspect, however, was revised lower to 1.7 percent from a 2.0 percent initial reading.  Overall, stocks traded mostly sideways during the session as other economic data released today was mixed.  The Chicago Purchasing Managers Index unexpectedly rose from 61.5 to 62.6 in February, but the University of Michigan Confidence indicator fell in the month and existing home sales disappointed for January.  Home sales were expected to rise 0.9 percent in January but instead were shown to have fallen 7.2 percent, after declining 16.2 percent in the month prior.

Globally, stocks had a strong day as the major European indices and China’s Hang Seng Index each traded at least 1 percent higher.  Investor risk appetite made a strong return as commodities joined stocks in trading higher across the board.  Crude oil prices gained for the third time this week, adding nearly 2 percent to $79 a barrel, while gold futures posted a second consecutive gain and closed the week near the $1120 level.  As for currencies, the U.S. Dollar was generally weak, falling against most of its major counterparts, including the euro.  The U.S. Dollar Index fell for a third consecutive day, but held above the 80 level for a seventh consecutive session.

DJIA 30                     10,325.26                      +4.23                       +0.04%
The Dow Jones Industrial Average closed slightly above even on a low-volume trading day.  Volume on U.S. exchanges today was slightly under 8 billion shares, 11 percent less than the 2010 average due to a snow storm in New York City and the surrounding area.  JPMorgan Chase led the index with a 3.2 percent gain after analysts at Barclays recommended buying the bank’s shares.  The bullish commentary led to a near full percent gain among financial shares.  Other stocks that outperformed the index included General Electric and drug maker Merck, which each added 0.8 percent on the day.  The worst performer on the index was Kraft Foods, which fell over 1.3 percent on the day.

S&P 500                     1,104.49                         +1.55                         +0.14%
The broad-based S&P 500 posted a small gain in the final day of trading this week on strength in financials and basic materials shares.  Financials rose nearly 0.7 percent on bullish commentary from Barclays analysts as well as commentary from Fed Chairman Ben Bernanke in the past two days that suggested rates would remain low for the foreseeable future.  The basic materials sector added 0.3 percent today, as commodities generally traded higher during the session.  Mining company Freeport McMoRan gained over 1 percent, while Barrick Gold Corp. added 0.2 percent on higher precious metals prices.  On the downside, AIG fell 10 percent for the biggest loss  on the index after posting a fourth-quarter net loss of $8.8 billion.

NASDAQ                     2,238.26                         +4.04                         +0.18%
The tech-heavy Nasdaq was the best performer among major U.S. indices as technology stocks posted a slight gain.  Among the heaviest-weighted fifteen tech stocks on the index, smart phone competitors Research in Motion and Apple posted the largest gains.  Shares of each company rose at least 1.2 percent as shares of Palm, another smart phone competitor, sank on news that company sales may be very weak this year.  Qualcomm was the worst performer among the large Nasdaq tech stocks, dropping 1.3 percent on the session.

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

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European Stocks Generally Higher on Industrial Orders, U.S. Fed Comments

Europe Session Key Developments

•    U.S. Fed Chairman Bernanke Says Interest Rates to Remain Low For Foreseeable Future
•    Standard & Poor’s Says It May Downgrade Greece’s Credit Rating
•    Europe Industrial Orders Unexpectedly Climb, Boosted by Machinery Demand
•    Euro Rises Against Greenback, Cable Falls

European stocks were mostly higher today on surprisingly strong industrial orders data for the region and commentary from U.S. Fed Chairman Ben Bernanke that indicated low rates would remain for the foreseeable future.  Equity markets in France, Germany, Italy, and the U.K. rallied for the first time this week, while Spanish stocks fell for a third consecutive session.  Investor sentiment increased during the early hours of trading after Germany announced a rise in its GfK Consumer Confidence Survey, as the index rose from 3.0 to 3.2 in March.  The European Union’s statistics office in Luxembourg announced soon after that the region’s industrial orders unexpectedly rose 0.8 percent in December.  The surprise increase was led by a rise in demand for machinery and capital goods and boosted investor confidence regarding the strength of Europe’s recovery.  As a result, both stock and commodity prices closed slightly higher, as crude oil returned to $80 a barrel and agricultural products gained.  Gold, on the other hand, closed below the $1100 mark for the first time in seven sessions despite Dollar weakness.  The U.S. Dollar Index posted its second loss in three days, closing just above the 80 level for a sixth straight session.

In the final hour of today’s trading, investors cheered comments out of the U.S. from Fed Chairman Ben Bernanke that interest rates would remain low going forward.  The Fed Chairman stated that the country’s “nascent” recovery, as seen by low rates of resource utilization and high unemployment, would require low rates “for an extended period.”  This commentary offset lingering concerns for European investors that their region’s own economic recovery still faces serious hurdles.  Unemployment in the region remains above 10 percent, and sovereign debt issues have gone unaddressed thus far.  EU leaders may be forced into action soon, however, as Standard & Poor’s said today that it will consider downgrading Greece’s credit rating in the near future.

FTSE 100                         5342.92                     +27.83                     +0.52%
British stocks traded higher today for the first time this week on strength in the technology and financial sectors.  Leading financial shares higher was Lloyds Banking, which gained 3.4 percent as investors await the company’s earnings reports tomorrow.  HSBC Holdings followed suit, gaining 2 percent as investors await its earnings next week.  Shares of HSBC, Europe’s largest bank, have rallied for eight consecutive days.  Technology shares were the second-strongest sector today as Sage Group and Autonomy Corp. gained at least 1.4 percent each.

CAC 40                             3715.68                     +8.62                     +0.23%
French equities closed higher today despite higher-than-expected job losses in December, as technology shares gained over 1.8 percent.  STMicroelectronics posted a 2.6 percent gain to lead tech stocks, while Cap Gemini and Alcatel-Lucent gained at over 1 percent each.  Yesterday, STMicroelectronics introduced a new family of highly efficient power rectifiers to help power-suppy companies achieve energy-efficient approvals.

DAX                                  5615.51                    +11.44                     +0.20%
German stocks posted a small gain after a final reading confirmed that the country’s economy stalled in the fourth quarter of 2009.  Fresenius Medical Care posted the largest gain on the DAX, adding over 4 percent on news that the company would double its budget for acquisitions to $400 million this year.  Volkswagen was the next strongest DAX performer today, gaining 1.6 percent after setting aggressive sales goals yesterday for its growing line of products.  Volkswagen also received a ‘Canadian Car of the Year’ award.

IBEX 35                          10254.00                     -58.90                     -0.57%
Trading in Spain led to the only decline among major European indices as financials fell over 1.3 percent.  Spanish banking giants BBVA and Banco Santander both dropped over 1 percent after Barclays Capital reduced its outlook on the financial institutions.  Barclays analysts downgraded BBVA from “overweight” to “underweight” and cut Banco Santander from “equalweight” to underweight”.  Telecinco continued its volatile trading of the last few weeks, dropping over 2.2 percent today.

FTSE MIB                     21346.31                     +122.24                    +0.58%
Italy’s FTSE MIB gained for the first time this week despite disappointing retail sales in December.  Trading in Milan led to a near 3 percent gain for STMicroelectronics after BofA-Merrill Lynch kept the chipmaker as its top pick for the industry.  Banco Popolare gained 2 percent after an upgrade from Banca Akros, while investment bank Mediobanca added 2.8 percent on better-than-expected net income.

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

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US Equities Drop On Lower Commodity Prices

U.S. Session Key Developments

•    Ben Bernanke May Signal Prolonged Low Interest Rate Environment
•    Commodities Fall Led By Natural Gas and Precious Metals

US Stocks were lower today for the first time in five days.  Last week, the S&P 500 and Dow Jones Industrial Average both gained at least 3 percent, their biggest gains since November.  Initially, equity index futures were pointing to a higher open amid speculation the Federal Reserve Chairman Ben Bernanke may signal U.S. interest rates will be kept near a record low.  However, stocks spent most of the day in negative territory as lower commodity prices dragged down commodity shares.  The CRB Commodity Index was down 0.4 percent led by declines in soft commodities, precious metals, and natural gas.  The three were down 2.96 percent, 0.98 percent, and 2.85 percent respectively.  In the precious metals space, gold was down 0.8 percent and silver was down 1.2 percent.  The two metals have a high negative correlation to the dollar, which didn’t hold today as the dollar index actually gave up 0.1 percent.  However, the greenback did gain marginally against the euro, which represents the US’s largest trading partner.  In store for tomorrow are reports on US Consumer Confidence as well as US House Prices.  Both are key indicators of the continued strength of the economic recovery.

DJIA 30                      10,383.38                   -18.97                          -0.18%
The Dow Jones Industrial Average was down for the first time in five days.  Chevron, which produces and transports natural gas, contributed the most to the Dow’s decline as natural gas prices fell 2.85 percent.  The company’s shares were down 1.47 percent.  JP Morgan and Bank of America both gained over 2 percent as the companies would benefit tremendously from a prolonged low interest rate environment.

S&P 500                       1,108.01                         -1.16                            -0.10%
Only two of the ten industry sectors were up today as the broad-base Standard and Poor’s 500 Index was down 0.1 percent.  Financial and industrial stocks were the only sectors to advance with Financials up over 1 percent.  The sector gained as investors expect Bernanke to signal that U.S. interest rates will be kept near record lows when he testifies in front of Congress on Wednesday and Thursday.  A prolonged low interest rate environment would benefit banks tremendously.

NASDAQ                     2,242.03                       -1.84                           -0.08%
The tech heavy Nasdaq Composite posted the smallest lost of the three biggest U.S. benchmark indices as tech stocks lost only 0.1 percent.  Just under half of all tech stocks listed on the index were up today.  Oracle contributed the most to the sector’s advance as the company’s shares gained 2 percent.  This weekend, CEO Larry Ellison said he has high expectations for Sun Microsystems, the unprofitable hardware maker that Oracle bought last month for $7.5 billion.  Ellison was questioned about the acquisition in a press conference following his return to San Francisco after the billionaire successfully recaptured the America’s Cup trophy for the United States.

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

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European Equities Rally Fourth Straight Day, Euro Drops

Europe Session Key Developments

•    UK Reports Surprising Budget Deficit
•    Spain and France Issue New Government Debt
•    Euro Breaches Nine Month Low Against the Dollar

European equities advanced for the fourth straight day while government bonds fell amid more sovereign debt issuances.  The Dow Jones Stoxx 600 Index, the gauge for European stocks, gained 0.6 percent—its eight advance in nine days.  National benchmark equity indices rose in 17 of the 18 western European markets with Iceland as the lone exception.  Bond yields also rose—and bond prices fell—as France and Spain issued 11 billion euros ($15 billion) of new sovereign debt.  Additional pressure was put on bonds as Britain posted an unexpected deficit and Greece’s budget woes lingered.  The U.K. government reported that spending exceeded revenue by 4.3 billion pounds ($6.7 billion) last month after tax receipts tumbled.  Following the news, yields on Greek 10-year bonds increased as much as 19 basis points to 6.57 percent, the highest since February 9^th.

Equities trimmed gains after the US labor department reported that last week’s initial jobless claims surprisingly increased by 31,000 to 473,000.  However, the biggest stateside news came after US markets closed when the Fed surprised everyone with a hawkish move to raise the discount rate by 25 basis points.  The single currency, which had been lower for most of the day against the dollar, shot to as low as 1.3502 before finding support at the even level.  Today’s close marks a new nine-month low for the single currency.

FTSE 100                         5325.09                     +48.45                     +0.92%
British stocks rallied today on the heels of higher commodity prices.  The benchmark FTSE 100 index was led higher by producers of basic resources.  The sector was up 1.83 percent as all 12 names advanced.  BHP Billiton, the world’s largest mining company, gained 1.92 percent to add 3.28 index points—the most in the sector.  Most metals were up today despite a stronger dollar.  British Petroleum was up 0.79 percent for another 3.31 index points as crude prices advanced to 79.06 for a gain of 2.24 percent.  BT Group, the UK’s largest fixed-line company, dropped 1.2 percent after Standard and Poor’s lowered the company’s long term credit rating to the lowest level of investment grade.

CAC 40                            3747.83                     +22.62                     +0.61%
Four of five issues gained as the CAC advanced for the fourth straight day.  Tech stocks led today’s advance as the sector gained almost 3 percent.  Cap Gemini, Europe’s largest computer services company, rose 6.2 percent to lead the sector higher.  The company posted a 60 percent drop in full year net income but expects revenue to resume growth in the second half of the year.  Financials were down 0.66 percent, the lone sector to decline today.  Societe Generale, France’s second largest bank, fell 7.2 percent, its largest drop in 9 months.  The bank cut its dividend to 25 cents a share after writedowns linked to risky assets weighed on fourth-quarter profits.

DAX                                 5680.41                       +32.07                    +0.57%
German stocks were led higher today by health care stocks, which gained 1.69 percent.  Overall, 28 out of the 30 issues advanced.  Health care stocks were led higher by Fresenius, which rose 2.6 percent to 50.07 euros.  The only stock to perform better was K+S, the world’s biggest salt producer, which gained 3.4 percent to 45.78 euros.  Meanwhile, Daimler slumped 4.7 percent, its biggest decline since October and the biggest move on the DAX today.  The company reported a fourth-quarter loss, missing an analyst estimate of a profit of 254.6 million euros.

IBEX 35                        10574.20                     +75.60                    +0.72%
Spanish equities gained today as the government successfully issued 5 billion euros of new benchmark bonds.  The bond issue may have quieted some investor concerns as the government plans to cut spending to reel in its budget deficit.  Basic materials stocks led Spanish equities higher.  The sector gained over 2 percent as commodities continued this week’s rally.  Obrascon Huarte and ArcelorMittal both gained 2.27 percent for the best performances on the benchmark IBEX 35.

FTSE MIB                      21686.12                    +35.31                    +0.16%
Italy’s FTSE MIB increased for the fourth day despite debt concerns in the European Monetary Union’s third largest economy.  Italy’s Audit Court issued a warning late Wednesday that derivative contracts used by Italian municipalities could magnify debt and imbalances over time.  The FTSE MIB, Italy’s benchmark equity index, posted the smallest increase of benchmark indices in the five largest European Union economies.  Shares in Telecom Italia and Bulgari both posted notable gains; both rose 2.3 percent.  The former gained for a third straight session after Bernstein upgraded the company’s shares to “outperform” from “market perform.”

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

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European Equities Drop Most Since Early December

Europe Session Key Developments

•    U.K. Jobless Claims Fall the Most Since 2007, Unemployment Rebounds
•    Euro Continues Stumble After China Tightens Lending, Greece Debt Outlook Deteriorates
•    U.S. Earnings Continue to Disappoint

European markets were hammered on Wednesday despite positive economic data from the fourth quarter coming from Britain. U.K. Jobless Claims for December fell by over fifteen thousand, and the Unemployment Rate for November was revealed to have rebounded to 7.8 percent from 8.0 percent. Despite this, speculation of a slowdown of stimulus policies, led by a Chinese move to raise interest rates today, fueled a global sell-off of equity securities. In particular, commodities, and accordingly, Basic Materials companies, posted the largest losses across the major European markets as investors feared demand would weaken throughout the year. Financials also moved lower across Europe after Bank of America released earnings halfway through the European session, which indicated that it continued to lose money in the fourth quarter, in spite of improving credit conditions.

Looking forward, a moderate supply of economic data due on Thursday could help move the markets positive once again. German and the broader Euro-zone Purchasing Manager Indices are set to be released, all expected to show slight increases from the previous period. A bevy of British financial data is due, among them the M4 Money Supply for December, which points to a 8.90 percent increase from the year previous.

FTSE 100                      5420.80                   -92.34               -1.67%
British stocks fell for the first time this week despite data showing a rebound in employment. Even as the Unemployment Rate gained to 7.8 percent in November, positive sentiment among investors was offset by news earlier in the day from Asia suggesting that China will continue to draw down on its stimulus measures. Basic Materials were hit the hardest, falling 4.67 percent on risk aversion. Overall, all ten sectors dropped, with Consumer Goods, Oil & Gas, and Financials posting the next three largest losses, down 1.10 percent, 1.50 percent, and 2.12 percent each. Xstrata and Rio Tinto, both mining companies, posted losses of 6.2 percent and 4.3 percent, respectively. Other movers on the day included Johnson Matthey, which dropped 3.5 percent after Credit Suisse downgraded its shares to “underperform,” and William Hill, which gained 3.4 percent on better-than-expected fourth-quarter revenue.

CAC 40                     3928.95                   -80.72                 -2.01%
Trading in Paris today resulted in the largest drop for the French index in more than two months, declining just over two percent to 3928.95. With global recovery sentiment weakening after news that China is likely to wind down its stimulus policies, the Basic Materials sector dropped 3.43 percent amid speculation that demand for commodities is likely to diminish. Nine of ten sectors lost on the day, with five sectors losing more than two percent each. Technology posted the only positive day, gaining 0.31 percent on Wednesday. Alstom dropped 4.2 percent after Morgan Stanley cut is recommendation to “equal-weight,” while Renault fell 3.9 percent as its stock was cut to “sell” at UBS. Among the winners on the day was Groupe SEB, surging 8.3 percent for its biggest gain since June.

DAX                         5851.53                    -124.95             -2.09%
German equities fell for the first time in three days as the DAX dropped the most since November amid stimulus concerns. Investors heeded to further contraction fiscal stimulus policies as the government announced it would cut spending on renewable energy projects by at least fifteen percent. Overall, eight of nine sectors dropped on Wednesday, good for a 2.09 percent retreat. Phoenix Solar, a company that builds and operates solar plants, fell 6.0 percent following the government decision. Deutsche Bank and Commerzbank each lost more than 2.0 percent following worse-than-expected Bank of America earnings, which emerged late in the session. Other losers included ThyssenKrupp, Germany’s biggest steelmaker, as it dropped 3.0 percent following a report showing that it won’t reach full production at its North American production facilities due to soft North American demand.

IBEX 35                     11709.00                   -313.60                 -2.61%
Wednesday proved to be the worst day in five months for the Spanish index, which dropped 2.61 percent, the largest fall among the five major European equity markets. Retreats from eight of ten sectors on the IBEX contributed to the index’s most precipitous fall since August, with five sectors falling two and one-half percent or more. Basic Materials fell over three and one-half percent as commodities struggled following news of the Chinese plan to curb lending. Banco Santander dropped 3.4 percent, its biggest decline in more than one month. Banco Bilboa Vizcaya Argentaria skidded  2.7 percent to its lowest closing price in over a month after the Spanish lender announced it was considering taking a write down on its American subsidiaries.

S&P/MIB                        23126.02                     -579.65                 -2.45%

Notable Europe Event Risk / Economic Releases

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

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Dollar Turnaround; Beginning of Reversal or Pullback?

Euro / US Dollar

I wrote Friday that “the recent break was from a triangle and triangles preceded terminal moves.  The rally from 1.4500 appears to be unfolding as a diagonal and may be complete.  Even so, one more high would probably complete the rally.  Watch 1.4850.”  The degree of weakness from 1.4772 brings forth the possibility that a larger bear move is underway.  Aggressive traders may wish to go short but should keep risk to 1.4750.  1.4675 is potential resistance.  It often does take several attempts when catching a turn though.  More risk averse should wait for additional pattern development before entering into commitments.

British Pound / US Dollar

The short side has worked well and the GBPUSD is now testing neckline support from the multi month head and shoulders top.  Short term traders should take profits if the pair fails to close below neckline today. A reaction would probably encounter resistance in the 1.6285-1.6320 area.  Risk on open shorts should be kept to 1.6450 (price should remain below 1.6400 in the event that a larger drop is underway).

Australian Dollar / US Dollar

“The AUDUSD continues to work higher towards the 78.6% of the decline from .9856-.6007, which is .9032.  This level intersects with a potential resistance line on September 24.”  I wrote Friday that “it is possible that the rally from .7700 is an ending diagonal and that wave iv of that diagonal is underway towards .8476.”  The pattern is playing out thus far.  There may be some support at .8539.  .8650/85 is short term resistance.

New Zealand Dollar / US Dollar

Short term structure is not clear but as I wrote Friday, “Kiwi is top heavy”.  The bearish implications from the AUDUSD pattern extend to the NZDUSD as well.  .7070 is potential short term resistance and .6900 is support.  “A push to a new high would expose .7250.  This is where the rally from .6193 would be equal to 61.8% of the .4890-.6601 rally.  The level also rests in between 2 prominent former pivots (.7222 and .7384).”

US Dollar / Japanese Yen

Keep the long term outlook in perspective – “a 4th triangle ended in 2007 above 124.00 therefore the decline from that level is viewed as a 5th wave that will not be considered complete until price drops to an all-time low (below the 1995 low near 80).”  The USDJPY has soared through trendline resistance and is focus is now on 93.41.  91.90 and 91.70 are now supports.

US Dollar / Canadian Dollar

Barring a break above the resistance line, the USDCAD is vulnerable to a drop towards 1.0330 – which has been both support and resistance over the last several years.  This level is also the 61.8% extension of the 1.3068-1.0782 decline (from 1.1730).  Thus far, the 61.8% retracement of the rally from .9055 has held.  The circled area could be a triangle, in which event the immediate move is higher towards 1.1100.

US Dollar / Swiss Franc

“The print below 1.0367 (December 2008 low) satisfies the minimum requirement for wave v of C.  Divergence with momentum on nearly all time frames warns of a sharp turn against the Franc.”  The pair has turned up, at least for now.  It would take a rally through 1.0526/channel resistance in order to proclaim with confidence that a low is in place.

Jamie Saettele publishes Daily Technicals every weekday morning (930 am EST), COT analysis (published Monday mornings), technical analysis of currency crosses on Monday, Wednesday, and Friday (Euro and Yen crosses), and intraday trading strategy as market action dictates.  He is the author of Sentiment in the Forex Market.  Follow his intraday market commentary at DailyFX Forex Stream.

Contact Jamie at jsaettele@dailyfx.com if you would like to receive his reports via email.

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European Stocks Retreat Most in Over a Month

Europe Session Key Developments

•    Chinese Export Data Saps Recovery Confidence
•    UK House Prices Continue Freefall
•    German Inflation Under Control, Are Deflationary Pressures Mounting?

European markets fell gain to start the week as disappointing economic data globally suggests the economic slowdown is not over. Bank of Japan Governor said that a recovery is unlikely, but in the case that one occurs, he doesn’t “think its strength will be impressive.” Additionally out of Asia came Chinese exports data, which indicated that global trade remains low as credit conditions are still soft. In Europe, the German Wholesale Price and Consumer Price Indices dropped from the previous year, down 10.6 percent and 0.5 percent, respectively. An unchanged Consumer Price Index from the previous month, following a 0.1 percent decline, suggest that deflationary pressures remain relevant as the European Central Bank maintained its benchmark overnight interest rate last week. Surprisingly, French Central Government Balance gained to minus 86.6 billion Euros, from minus 88.7 billion Euros in May. British Total Trade Balance remained negative in June, at minus 2.176 billion pounds. The English housing market remains under pressure, as the DCLG House prices index noted a 10.7 percent decline in June.

Looking ahead, there are some notable releases which could have a significant effect on the markets. Various French Consumer Price Indices will be released tomorrow, with levels forecast to decrease as deflationary pressures linger following the aforementioned European Central Bank rate decision. Same is expected for the Italian Consumer Price Indices. The French Current Account deficit could widen as exports have struggled over the past year. The British Jobless Claims Change and ILO Unemployment Rate reports will be released, showing that the labor market’s problems continue as the country heads towards a jobless recovery. UK Average Earnings also will be released, showing that deflationary pressures onset by low-rates and expanded Quantitative Easing measures have contributed to downward pressure. Euro-zone Industrial Production could rebound, as trade out of Europe begins to flow once more. In the United States, the FOMC’s rate decision is unexpected to change, maintained at 0.25 percent.

FTSE 100                      4671.34                   -50.86               -1.08%
Trading in the English market led to over a one percent slide, down 50.86 points to 4671.34. The biggest decline in two weeks was headed by a retreat in the Basic Materials and Financials sectors, dropping 2.44 percent and 2.96 percent, respectively. Lloyds Banking Group tumbled 7.1 percent amid speculation that the lender may face government resistance to raising cash. Resolution dropped 7.6 percent after agreeing to buy insurer Friend Provident Group. Other losers in the Financials sector include Royal Bank of Scotland Group, which lost 5.5 percent, and Barclays, which lost 3.4 percent. Mining company BHP Billiton fell 1.5 percent as metals gained during European trading hours. Overall, eight out of ten sectors dropped, except for the Utilities and Consumer Goods sectors, gaining 1.05 percent and 0.69 percent, respectively. Utilities company International Power added 7.3 percent after announcing its net-income grew to 402 million pounds, outpacing the 212 million pound estimate.

CAC 40                     3456.18                   -48.36                 -1.38%
French stocks dropped for a second straight day, down 1.38 percent during trading hours. After reaching a yearly high of 3521.14 on Friday, the French index has investors concerned that its growth outpaced the current financial and overall economic rebound. All ten sectors dropped, with the Technology and Basic Materials sectors leading the plunge, down 3.84 percent and 3.41 percent, respectively. Bank Natixis dropped 17.0 percent, despite news that there were no current plans for it to be delisted after much speculation that it would be removed from the stock market. Remy Cointreau fell 3.9 percent as Deutsche Bank lowered its raing to “sell” from “hold.”

DAX                         5285.81                    -132.31             -2.44%
German stocks declined for the second consecutive day as inflation indicators suggested the recession is not abating as thought earlier. All ten sectors declined, sending the index down 2.44 percent, the steepest decline of any of the five European major equities. ThyssenKrupp dropped 4.6 percent, as the steelmaker was rated “reduce” at Equinet, amid speculation of a “substantial recovery” expected for the stock, though “disappointment” likely looms. Two other steelmakers, Salzgitter and Kloeckner, dropped 4.4 percent and 6.7 percent, respectively. All three companies are expected to release earnings statements later this week. Deutsche Bank dropped 4.7 percent as it announced it raised 300 million in equity capital. Carmakers continued to slide, as Volkswagen, BMW, and Daimler fell 3.7 percent, 2.7 percent, and 2.3 percent, respectively.

IBEX 35                     10831.90                   -91.10                 -0.83%
Trading in the Spanish market resulted in the lowest drop of any of the five major European equities, down 0.83 percent to 10831.90. Seven out of nine sectors declined, with the Technology sector gaining 0.52 percent and Telecommunications remaining unchanged on the day. Basic Materials lost the most, down 2.95 percent. Oil & Gas dropped 1.33 percent amid falling Crude Oil prices during trading hours. Banco Bilbao dropped 1.0 percent as other European financials faced government obstacles to raising capital.

S&P/MIB                        21268.51                    -308.06                 -1.43%
Italian stocks retreated after consecutive days of gains, falling 1.43 percent during Tuesday’s trading hours. Economic data from Germany suggested that the recession may not be over just yet, and with an eye towards similar inflation reports expected for Italy, investors are beginning to fear that the European Central Bank’s low-rate, expansionary measures are weighing in inflationary pressures.

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

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European Stock Markets Eager On Transparency Of US Fed

Europe: What to Watch For

• Wall Street Rises on Bernanke Testimony, Asia Follows
• Euro-Zone Industrial New Orders Still Falling
• German IFO Hints Improvement, Long Way To Go

European Stock Markets Eager On Transparency of US Fed

European stock exchanges look to parallel similar trends seen in US and Asian markets.  US benchmark indexes rose on Federal Reserve Chairman Ben Bernanke’s testimony to Congress regarding the bank’s exit strategy out of loose monetary policy.  Bernanke noted that recent economic indicators showed some signs of improvement and that he would leave interest rates at current levels for some time.  Euro-Zone Industrial New Orders is expected to fall -27.9% in the year through May indicating that weak global demand continues to weigh on European industries.

DAX 30   5093.97

The German IFO – Expectations Survey is set to measure at 90.1 in June, up from May’s 89.5, marking the seventh consecutive month increase.  Though the metric indicates improving sentiment among German firms, the surveyed figure still falls well short of the 100 centerline between positive and negative outlooks.

FTSE 100   4481.17

Bank of England’s Monetary Policy Committee Minutes are set to be released and may help markets gain more perspective on the BOE’s economic outlook and future policy agenda.

GlaxoSmithKline Plc, the UK’s largest drug maker is scheduled to release second quarter earnings.

CAC 40   3302.89

French Consumer Spending is expected to fall -0.3% in the year end June, bettering its previous reading of  -1.6%.  The report shows that French consumption is declining, albeit at a slower rate, while helping markets evaluate future sentiment of the retail industry and the economy as a whole.  Indication of increased spending may help uplift economic expectations as household expenditures make up 58% of total GDP.

Unibail-Rodamco SA, Europe’s biggest real estate company reports second quarter earnings after the market close.  After the financial crisis impelled the real estate industry to all time lows, improving earnings of the company my help renew confidence in the housing market.

IBEX 35   10122.20

Iberdrola Renovables SA, the world’s largest operator of wind energy farms said that first half earnings dropped -24% as larger expenses cut into gross margins.

FTSE / MIB   19830.29

Fiat SpA, Italy’s largest auto maker is scheduled to release second quarter earnings.  With no events on the economic calendar, the Italian index is likely to parallel trends seen in comparable European markets.

Upcoming European Session Event Risk / Economic Releases

Written by Kevin Yip, CFDTrading Analyst

For questions and comments email kyip@fxcm.com

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Daily Commodities Fundamentals: Commodities Continue to Push Higher, Test Key Psychological Barriers

North American Commodity Update, Last Updated 7/20/2009 4:05 PM EST (GMT = EDT +5:00)

Commodities – Energy

Economic Optimism Drives Crude Prices Higher

Crude Oil (WTI)   $64.350                         +$0.790                             +1.24%
Crude Oil future prices picked up right where they left off last week, adding nearly another 1% during today’s trading session. Last week, Crude was driven by encouraging corporate earnings releases, better-than-expected employment figures and various other economic indicators all pointing to an economic turnaround. There were numerous reasons for Crude’s gain today, beginning with the US Leading Indicator, which increased by 0.7%, surpassing the 0.5% expectation. The indicator improved for the 3rd straight month, the first time we have seen such a streak since 2004. Increased economic optimism led to a speculation that demand for the commodity will soon increase, driving future prices higher. In related equity news, CIT Group announced a private-sector bailout today after the US Government refused to grant the struggling lender any more funding. The government’s refusal to issue more bailout funds revealed its newfound faith in the stability of the economy, contributing to additional commodity gains. European Equity Indices all closed higher during today’s trading, propping up the price of Crude near the $65-per-barrel level. Slight resistance exists just above $65, so Crude may struggle before eventually breaking this important price barrier.

Upcoming Department of Energy Inventories

Commodities – Metals

Precious Metals Achieve Gains on Weaker Greenback

Gold                   $949.700                           +$12.200                           +1.30%
Gold prices tapped a 5-week high at just under $955-per-ounce during today’s trading before falling back slightly to the psychological $950 level. Gold’s dramatic increase of late can be easily explained; the US dollar fell across the board today against its major competitors, falling to a 6-week low. Gold and the greenback often trade inversely as investors use the metal to hedge against dollar weakness/inflation. As investors prepare for an economic recovery, inflationary concerns set in and, in turn, bid up Gold future prices. Inflationary fears were so overwhelming that even an alarming German PPI report signaling deflation could not mute the metal’s gains today. Gold prices have struggled to remain above $950-per-barrel today, which may signal that investors are not ready to break the resistance quite yet. Expect prices to oscillate around this level in the short-run, though a breakthrough may be on the horizon.

Silver                 $13.635                    +$0.232                          +1.73%
Silver future prices continued to increase during today’s trading, bouncing off a recent low near $12.50 just two weeks ago. As was the case with Gold futures, Silver benefitted from dollar weakness as investors bought the metal to defend against inflation. The prospect of an economic recovery also drove Silver prices higher; the market continues to price in last week’s encouraging corporate earnings reports and positive leading indicators. The Bank of Canad’s Interest Rate Decision and various price index reports will be released; these announcements will move the commodity market as we learn more about global economic confidence and inflation.

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

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European Stocks Extend Rebound, Trend Remains Bearish

Weekly Strategy

FTSE 100

Long-Term Technical Outlook

The FTSE rally from 3461 most likely completed wave 4 within a 5 wave decline from the 2007 high.  Expectations are for wave 5 to drawn the index to a new low (below 3461).

Short-Term Technical Outlook

The FTSE has rebounded from significant support at the intersection of the 100-day moving average and the 38.2% Fibonacci retracement level. Near-term resistance is seen at 4269.99, a falling channel top.

DAX

Long-Term Technical Outlook

The DAX pattern is the same as that of the FTSE 100.  The rally from the March low counts well as wave 4 within the 5 wave decline from the 2007 high.  Moreover, the decline from 5178 (on short term charts) unfolded as an impulse (5 waves).

Short-Term Technical Outlook

German shares have rebounded from near-term support at the intersection of the 38.2% Fibonacci retracement level and the lower boundary of a falling channel. Initial resistance is seen at 48380, the channel top.

CAC 40

Long-Term Technical Outlook

I’ve made a change to the labeling for the CAC 40. The change brings the count in line with that of the DAX and FTSE counts.  The rally from 2465 was wave 4 of (3).  Wave 5 of (3) is considered underway towards a new low as long as 3400 remains intact.

Short-Term Technical Outlook

The French benchmark index has rebounded from the lower boundary of a falling channel and has now surpassed support-turned-resistance at the 38.2% Fibonacci retracement level. The index now aims to challenge the channel top at 31274.04.

IBEX 35

Long-Term Technical Outlook

The IBEX 35 appears to have already completed 5 waves down from its 2007 high.  However, the decline could extend (like the CAC 40 appears to be doing).  The continued divergence with RSI at the recent high also favors weakness going forward.

Short-Term Technical Outlook

Spanish shares are positioned above support at the 23.6% Fibonacci retracement level (91848), with negative divergence on the RSI oscillator hinting at a bearish bias. Near-term resistance is seen at 99294, the 07/01 high.

FTSE MIB

Long-Term Technical Outlook

The rally from the March low in the FTSE / MIB index was a 4th wave.  In line with other European indexes, the Milan index is expected to drop to a new low (below 12343).

Short-Term Technical Outlook

Italian shares have found support at the 100-daysimple moving average. Initial resistance is seen in the 18459.31 – 18752.00 congestion region, an area that previously served as support.

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