Stock Market Blog

Mixed trading as markets wind down for holiday period

Monday, December 26, 2011 by
Filed under: Forex, Currencies

Early dollar weakness gave way to strength after the release of better than expected employment data led to a bounce in risk appetite. Initial Jobless Claims unexpectedly dropped to 364k in the weak ending Dec 17, hitting its lowest figure since April 2008, and falling well below analysts’ expectations of a 278k print. Continuing Claims also fell below what had been forecast, reaching 3546k vs 3600k estimated and 3625k previous. In addition the 4-week MA of Initial Claims improved to 580k, which was the best result since 2008. Q3 GDP was revised down to 1.8% annualized versus 2.0% expected, and this also encouraged dollar buying as it pushed risk appetite up again. Fitch published a report in which it warned of a potential debt time-bomb ticking in the U.S called: “U.S Public Finances, An Update” which repeated the projections that underpinned the outlook behind the AAA downgrade in November. In the report it underlined the possibility that debt could exceed 90% of GDP in the U.S by the end of the decade – and this also stimulated the dollar’s rebound, again for reasons of increased risk aversion. Other data out included the important Michigan Sentiment Survey which showed an increase to 69.9 vs 68.0 and 67.7 previous.


The euro rose initially as risk appetite remained firm, however, question marks over the impact of the ECB’s cheap capital injection led to renewed selling as disappointment at the impact on the wider euro-zone sovereign debt crisis weighed. It was hoped that the banks which benefited from the 490bn injection might start to use the money to buy sovereign debt from struggling peripherals like Spain and Italy, however, it appears that banks may be reluctant to take on more exposure and may be stockpiling the money to shore up their balance sheets or even lending it back to the ECB. Either way there was a sense that the initial optimism at the news had completely unwound today as euro pairs re-touched pre-ECB lows, as it became clear this wasn’t going to stave off the sovereign crisis in the way which had been hoped. Indeed, it will probably require a deeper union in the euro-zone before the crisis eases with a superstate resulting which compares with the U.S as opposed to the old E.U which was more like a trade federation.


Sterling strengthened as risk appetite rebounded and the upward revision in GDP to 0.6% qoq in Q3 versus the 0.5% expected helped allay growth fears, however it pared its gains after risk appetite fell again on euro-zone concerns, and a much lower than anticipated Current Account print. U.K Current Account data showed a fall to -15.2bn vs the – 6.3bn expected and the -2.0bn previous. The fall was mainly due to a drop in exports with a good deficit of 27.569bn in the quarter and a 90% drop in investment. Policy-makers had been counting on Britain exporting its way to recovery but the figures put paid to that, and it is possible cable will face some downside action in the new year as QE expectations remain high and February is the target month for an increase from the BOE.


The yen traded mixed and slightly muted as low holiday volumes reduced participation. Risk factors were the main driver with risk appetite starting the day strong but then falling after renewed concerns about the euro-zone sovereign debt crisis. Apart from trade slowing all over the globe, many traders in Japan may have taken the day off as Friday is the Emperor’s birthday and a national holiday. Supermarket Sales fell by -2.3% compared to the -0.9% previous print, providing further signs of a slowdown and following on from data on Tuesday which showed falling exports. Other news from Japan showed strengthening ties with China and Japan diversifying its portfolio of assets by investing 10bn dollars in Chinese government debt. Whilst only a token amount it was a positive sign for China as Japanese are notoriously low risk in their investment style. The move was also a negative comment on western assets which it does not wish to increase and may now view as more risky.


Analysis by:

Hello world!

Welcome to WordPress. This is your first post. Edit or delete it, then start blogging!

Mixed Outlook for Gold as the Market Declines

Wednesday, December 14, 2011 by
Filed under: Gold, Precious Metals, Silver

Whatever glow there might have been from last week’s European summit turned to gloom as markets turned downwards Monday. Global investors drove down everything in sight, including gold which dropped nearly 3% to a seven-week low to trade under $1,660 an ounce. Gold got lumped with other assets considered risky (we live in interesting times, as gold was known to be the “safe asset” for millennia and now it’s a “risky asset”). European indexes were down: Germany 3.4%, France 2.6% and Italy 3.8 %.