EUR/USD Trades Flat in Light Session

The U.S. markets are closed for Memorial Day, setting up a lackluster trading session which saw very little movement in the EUR/USD, GBP/USD, gold and crude oil. Normal trading will resume on Tuesday when traders will get the opportunity to react to U.S. confidence numbers.

The EUR/USD finished flat on Monday after posting an inside move. The main trend is down on the daily chart but the Forex pair is currently trading on the strong side of a short-term pivot price at 1.2897. This is giving the market a slight bias to the upside.

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The GBP/USD posted a strong rally early in the session, but the bulls succumbed to selling pressure, sending the market lower for the session. The main trend is down on the daily chart, but oversold conditions have made the Sterling susceptible to short-covering rallies.

Bearish traders are counting on additional stimulus from the Bank of England to drive the British Pound lower against the U.S. Dollar.

August gold traded flat in light trading. Gold is in an interesting position. Technically, the market appears to be forming a secondary higher bottom which could be signaling that the buying is greater than the selling at current price levels.

Fundamentally, the direction that gold moves over the short-run is going to be determined by the move in the equity markets. If the stock indices become unstable and volatility increases, then look for gold to rise.

July crude oil sold off sharply last week as investors shed risky assets. The supply and demand situation continues to indicate lower prices, but realistically the market has become range bound which means traders are going to drive it up and down without any real direction. The improving U.S. economy may be a bullish factor, but potential economic slowdowns in Europe and China are hurting demand. We could see a test of a retracement zone at $91.77 to $90.45 on Tuesday. This may encourage some profit-taking or fresh counter-trend buying. 

Denny’s Serves Up Grand-Slam Returns

Denny’s Serves Up Grand-Slam Returns
Denny’s Serves Up Grand-Slam Returns
We all know that McDonalds Corporation (NYSE/MCD) is the reigning king of the fast food sector and one of the top performers over the past decade, based on my stock analysis.

In fact, my stock analysis suggests that McDonalds’ rivals are trying to emulate what is working at the company rather than compete against the seller of the iconic “Big Mac.”

Burger King Worldwide, Inc. (NYSE/BKW) may be pursuing a similar strategy to McDonalds’ by diversifying its menu offering with new items and value-conscious options, based on my stock analysis.

Yet while Wall Street focuses on McDonalds and its burger-oriented rivals, my stock analysis reveals that a stock that I feel offers better valuation and potential upside is Denny’s Corporation (NASDAQ/DENN). With a market-cap of $552 million, Denny’s is dwarfed by the $102-billion market cap of McDonalds, but that doesn’t mean there isn’t a buying opportunity with Denny’s, based on my stock analysis.

In fact, Denny’s is up 50% over the past 52 weeks and has easily outperformed the S&P 500’s advance of 26.8% and McDonalds’ 11.8% gain, according to my technical analysis.

ews

Denny’s is best known for its “Grand Slam” breakfast offerings. The company has gone through a major structural reorganization in which it sold many of its stores to franchisors, thereby reducing its own operating costs and collecting fees instead. As of March 27, 2013, 1,525 of the company’s 1,689 restaurants were franchised. The end results have been stronger operating numbers and a steady rise in the company’s share price, according to my stock analysis.

About 98 restaurants are situated in Canada, Costa Rica, Mexico, Honduras, Guam, Curacao, Puerto Rico, Dominican Republic, and New Zealand.

And in an aggressive and bold move, Denny’s has been looking at expanding into the highly competitive Chinese market, where the top players are McDonalds and YUM! Brands, Inc. (NYSE/YUM)—owner of the Kentucky Fried Chicken (KFC) and Taco Bell brands. The company’s deal with Great China International Group was recently cancelled, likely due to some poor results from the top players in China, based on my stock analysis.

On the operations end, Denny’s reported adjusted earnings of $0.08 per diluted share in its first-quarter earnings season, up 48.4% year-over-year and a penny above the Thomson Financial consensus earnings-per-share (EPS) estimates. It was the third straight quarter of outperformance.

On a comparative valuation basis, Denny’s trades at 1.16X trailing sales and has a price-to-earnings-growth (PEG) ratio of 0.92, versus 3.71X sales and a PEG ratio of 2.04 for McDonalds.

Now, don’t get me wrong; I still believe McDonalds will continue to be the top player in the restaurant and fast foods sector going forward. (Read “The Secret to Success in the Fast Food Sector.”) But for some added potential, a small-cap such as Denny’s makes sense for the aggressive investor, based on my stock analysis.

By George Leong, B.Comm. for Profit Confidential

Chinese and German Manufacturing Now Both Contracting

Chinese and German Manufacturing Now Both Contracting
Chinese and German Manufacturing Now Both Contracting
A recession for the global economy is becoming an increasingly likely scenario.

The Chinese economy, the second-biggest in the world, witnessed a contraction in manufacturing in May. The HSBC Flash China Manufacturing Purchasing Managers’ Index (PMI) registered 49.6 for May, declining from 50.4 in April. (Source: Markit, May 23, 2013.) Any number below 50 represents contraction in the manufacturing sector.

 The Chinese economy exports a significant amount of what it produces to the global economy. Contraction in Chinese manufacturing shows exports are falling—the global demand for goods is falling.

Similarly, Germany’s Flash Manufacturing PMI showed continuous contraction in the manufacturing sector. The index stood at 49.0 in May. (Source: Markit, May 23, 2013.) The German economy is important to observe, because it’s the largest economy in the eurozone and an economic slowdown in the nation can send the common currency region into another downward spiral, again affecting the global economy.

Looking at other key indicators, they are pointing to an economic slowdown ahead in the global economy. Consider the copper market. Demand for copper is suggesting activity in the global economy is sluggish, even deteriorating.

Copper prices are down more than 10% since the beginning of 2013, and stockpiles of the brown metal, tracked by the London Metals Exchange (LME), are up a staggering 95% this year! (Source: Bloomberg, May 23, 2013.)

Other industrial metal prices, such as aluminum, lead, nickel, and zinc, are in decline as well.

How can the U.S. economy possibly improve when the global economy is in trouble?

The U.S. is highly affected by any shift in demand in the global economy.

After the financial crisis of 2008, U.S.-based companies were able to show growth because of robust demand in the global economy. Some say the growth in the global economy pulled the U.S. out of recession in 2008.

Now, the economic indicators clearly point to diminishing global demand. Will U.S.-based multinational companies be able to show profit growth under the scenario of global manufacturing contraction? Of course not! (Someone tell stock market investors!)

During the first-quarter earnings reporting season, some of the biggest big-cap companies in the key American stock indices displayed concerns regarding the crisis in the eurozone. I expect more companies to start blaming the economic slowdown in the global economy as they report lower second-quarter corporate earnings.

Michael’s Personal Notes:

As I have been writing in these pages, economic growth in the U.S. economy won’t happen by printing more paper money—it’s a short-term fix that creates more long-term problems.

According to data compiled by Bloomberg, 2,267 non-financial constituents of the Russell 3000 index saw their cash holdings increase by 13% to $1.73 trillion in the first quarter of 2013 compared to the same period a year earlier. (Source: Bloomberg, May 23, 2013.)

As the cash hoard continues, business spending declined 21% in the first quarter compared to the last quarter of 2012. This was the biggest decline since the financial crisis of 2008.

To top this off, business executives in the U.S. economy are worried about troubles in the global economy, and they don’t have a very optimistic view on conditions here at home. A CEO Confidence Survey conducted by the Conference Board suggests only 29% of executives believe conditions in their industries have improved in the first quarter; going forward, only 32% expect the U.S. economy to improve in the next six months. (Source: Conference Board, April 25, 2013.)

Looking at all of this, how can you not question the effectiveness of quantitative easing in the U.S. economy? The problem at hand is businesses shying away from spending in the U.S. economy and hoarding cash. To my standards, quantitative easing is failing at making businesses more confident about spending as it was promised.

Dear reader, for economic growth to take place in the U.S. economy, businesses must be willing to spend and make investments; we are seeing the opposite of that. This isn’t rocket science; once businesses start to spend and make investments, we will see recovery in the jobs market and economic growth will eventually follow.

The U.S. economy is at a vulnerable stage. I am paying extra attention to business spending because troubles from outside the U.S. economy are brewing quickly, and as a result, multinational businesses may make further cutbacks on their spending.

Where the Market Stands; Where It’s Headed:

We are putting the finishing touches on “A Dire Warning for Stock Market Investors,” a forecast we will present in video format. Please see your e-mail inbox tomorrow for this presentation. It’s important you watch it to see where the stock market is really headed next.

What He Said:

“As for the stock market, it continues along its merry way oblivious to what is happening to homebuyers’ wealth. (Since 2005 I have been writing about how the real estate bust would be bigger than the boom.) In 1927, the real estate market crashed and the stock market, even back then, carried along its merry way for two more years until it eventually crashed. History has a way of repeating itself.” Michael Lombardi in Profit Confidential, November 21, 2007. This was a dire prediction that came true.

By Michael Lombardi, MBA for Profit Confidential

Can the Electric Car Save the Global Economy

Can the Electric Car Save the Global Economy
Can the Electric Car Save the Global Economy

It’s a very interesting concept: I absolutely believe that energy innovation will help the U.S. economy tremendously over the coming years.

Under that vast umbrella of energy innovation, alternative energy has the potential to become a genuine economic engine that can revolutionize personal transportation and the economic landscape.

There is excitement surrounding automaker Tesla Motors, Inc. (NASDAQ/TSLA). This company just doubled on the stock market in a little over a month.

I haven’t driven any of Tesla’s vehicles, but the company’s new four-door sedan looks fantastic, and the quality of the paint job really stands out.

I definitely see more “Chevrolet Volts” around. According to General Motors Company (NYSE/GM), it delivered 5,550 Volts in the first quarter of 2013, up 3.2% comparatively. The company is likely employing new sales incentives.

Virtually every automaker is getting in on the electric vehicle action. Even Porsche has a new electric “supercar.” The company is bringing to market the “918 Spyder,” which has a 4.6 liter V8 engine and two electric motors. The two electric motors provide an additional 218 horsepower on top of the more than 500-horsepower V8. The car can operate on its batteries alone, but I suspect the range would be extremely short.

Trucks and SUVs are bread-and-butter for domestic automakers. But the migration to electric vehicle production (a loss leader right now) is all about range and economies of scale. A $40,000 compact Chevy sedan is a misnomer.

While insider ownership with a company like Tesla is high and its valuation is extreme, the company would be an attractive takeover candidate for a successful automaker. The illusion can become real. BMW AG (XETRA/BMW) perhaps?

Range, costs, and availability of charging stations are obvious barriers for electric automakers.

But there’s been a sea of change with Tesla after so many electric vehicle and alternative energy failures. (See “Why These Old Economy Stocks Aare Absolutely Crucial.”) The company just raised another $1.0 billion from new shares and debt, and it has cashed in on the stock market’s renewed interest.

A close friend of mine who has in-depth knowledge of domestic automakers thinks the whole electric vehicle trend is a bust. Without question, the business case for it is not profitable at this time. (Tesla is even selling its California zero-emission tax credits to other automakers to boost its bottom line.)

But that doesn’t mean that innovation within the industry is not worthy of pursuit—not at all.

There is the issue regarding utility consumption. If electric vehicles become more prevalent, the demand for electricity will go up. The consumer is always on the short end of the stick.

But this build out, if it proves to be a successful business model for automakers, does have real potential to energize the industry.

Energy innovation, in all its forms, is a great opportunity.

By Mitchell Clark, B.Comm for  Profit confidential

Crude Eases Down While Natural Gas Looks To The Future

Crude Eases Down While Natural Gas Looks To The Future
Crude Eases Down While Natural Gas Looks To The Future
Crude oil closed the week at 94.10 but gave back a lot of Friday’s gains early Monday morning to trade at 93.62 down 54 cents. Crude oil should be trading with a negative bias in the coming week, with strengthening of the dollar index and likely risk aversion keeping prices under pressure, the dollar index is rising due to surge in its safe-haven demand and fall in gold prices. Discouraging economic data releases from China and Eurozone are also seen weighing on crude oil futures. China’s HSBC Manufacturing Purchasing Managers’ Index fell to a seven-month low of 49.6 in May from 50.9 in April. A reading below 50.0 indicates contraction. Eurozone manufacturing PMI in May also remained below 50.0 mark at 47.8.  Disappointing economic releases from Eurozone and China have raised fears over slowdown in oil demand. Overall environment is bearish in all commodities.

Sentiment weakened in the international market after US Federal Reserve Chairman Ben Bernanke’s testimony to Congress. Global market sentiment was hit, as Bernanke hinted that the Fed might consider scaling back its bond-buying program over the next few months.

On Friday a strong durable goods report in the US helped give a shine to the US recovery and helped crude gain as the US economy, the world’s second largest consumer of crude oil was on the mend. After the release of a report from the Commerce Department that showed a larger-than-expected rebound in durable goods orders which surged by 3.3% in April after tumbling by a revised 5.9% in March. However, amidst an impending recovery in manufacturing activity following a recent pullback, the data added to worries that the Fed will taper its stimulus in the near future.

Crude oil futures fell for the fourth consecutive session, on concerns about lackluster energy demand following weak Chinese manufacturing data contributing to a 2% price loss for the week.

Natural gas futures closed slightly lower on profit-taking ahead of a 3-day holiday weekend, but the downside was limited by forecasts for warmer weather next week which should stir more demand. Natural gas is trading at 4.26 this morning. With summer coming in strong increased demand for residential use is helping buoy prices but traders continue to watch headlines, after the Department of Energy opened the door to exporting natural gas by approving two controversial projects giving hopes that the other 20 projects backlogged waiting approval will come soon. The main reason for the anticipated growth is that natural gas is abundant. And because of the U.S shale gas boom, it has become relatively cheap — especially in North America, where prices lately have been in the range of $4 per million British thermal units, compared with highs of $13 as recently as 2005. The European spot price is around $10 per million B.T.U.’s, and the Asian price around $15; contract prices, often linked to oil, may be higher. And because it burns much cleaner than either coal or oil, it will very likely stay in favor because its use can help lower the greenhouse gas emissions that are blamed for causing global warming.

Gold, Silver & Copper Go Their Separate Ways

Gold, Silver & Copper Go Their Separate Ways
Gold, Silver & Copper Go Their Separate Ways
Gold futures closed slightly lower on Friday in a quiet trading session ahead of the 3-day US holiday weekend; but prices closed higher for the week, finding support from the recent declines in global stock markets and a weaker dollar. Gold ended the week at 1387 and continue to gain this morning adding over $5 to trade at 1392 which is typical of the Asian session. Gold usually gives back the gains by the time the European session is underway. The markets should be subdued today with the UK also on holiday.

At the end of last week the dollar index, a gauge of the greenback’s movement against six other major currencies, exchanged hands at 83.628 compared with Thursday’s level of around 83.723.  The euro rose against the dollar on Friday, after a German business sentiment survey beat forecasts, suggesting Europe’s largest economy is picking up and making further euro zone monetary easing less likely. The euro remained under the 1.30 price level. The Japanese yen gained against the US dollar, extending an advance that was spurred in part by a selloff in Japanese bonds. The JPY is trading at 100.98 this morning as the Bank of Japan director tried to talk down worries over the market run in his speech on Sunday.

Last week’s market confusion was caused by US Federal Reserve Presidents and the Chairman all giving mixed signals sending the dollar climbing and falling. Between four regional Bank Presidents speaking, Mr. Bernanke testified before congress and then was questioned by congress which was followed by the release of FOMC minutes. With bearish remarks from the US Federal Reserve and weak economic data from most countries, the fate of commodities, including metals were up in the air. Though away from the lows seen in April, most commodities have already lost ground and look poised to fall more. The downturn came on the heels of US Federal Reserve Chairman Ben Bernanke’s comments late Wednesday indicating that the Fed could taper off the current $85 bln asset purchase programme if the recovery in the US economy shows signs of sustainability. Minutes of the Fed’s latest policy meeting also indicated that a number of officials were in favor of starting the exit from the easing program as early as June.

Gold holdings with SPDR Gold Trust fell 3.01 tons from the previous session to 1,020.07 tons on Wednesday, according to data on the website of the world’s largest gold exchange-traded fund. Gold holding of the trust have witnessed outflows for six straight sessions and have touched the lowest level since mid-February 2009.

The overall metals pack traded on the downside with silver trading at 22.50 and copper at 3.295. Copper and silver prices edged lower Friday as traders weighed signs of economic resilience in Europe and the U.S. against worries about lower copper demand from China. There are reports that Goldman Sachs has unwound its long position on London Metal Exchange copper futures indicating its bearish outlook for the metal. China’s HSBC Manufacturing Purchasing Managers’ Index fell to a seven-month low of 49.6 in May from 50.9 in April. A reading below 50.0 indicates contraction. The US and China are the world’s biggest buyers of crude oil and copper–almost at par with each other. The Eurozone manufacturing PMI in May was 47.8, again in contraction. So, the question begs asking that can the recovery in the US economy offset the slowdown in China and other countries.  

Markets Take A Breather On Monday

Markets Take A Breather On Monday
Markets Take A Breather On Monday
Wall Street and the FTSE are closed today for national holidays and will return to work on Tuesday. These holidays kick off the summer vacation season and beach weekends. Market turmoil along with volume usually subsides for the summer months. There is very little on the economics calendar today and even less on the news front, so commodities, equities and currencies should remain range-bound. Unlike last week. Reversing its five-weeks winning streak, US Markets ended the week in red. During the week, the key indices reached all-time or multiyear highs, but they reversed after comments from Federal Reserve Chairman Ben Bernanke signaled the central bank could start reducing its bond-buying program in the next few meetings. The Dow Jones lost 0.33 percent to close at 15303.10 and the NASDAQ and the S&P 500 lost 1 percent each to conclude trade at 3459.14 and 1649.60 respectively. Despite better-than-expected economic data, European markets closed lower for the week gone-by. The FTSE-100 lost 68.73 points or 1.02 percent to end at 6654.34; the CAC lost 44.48 points or 1.11 percent to draw curtains at 3956.79 and the Germany’s DAX 30 index dropped 92.68 points or 1.10 percent to shut shop at 8305.32. Tracking weak global cues, most Asian markets ended the week on a bearish note. Panic hit the Nikkei on Thursday falling over 7% in a single day.

Currency markets were just as erratic; with the US dollar climbing as high as 84.4 as the US central bank gave off mixed signals, even Mr. Bernanke’s testimony before congress was contradicted in his following question and answer session. The greenback is trading at 83.7 this morning. The Australian dollar was the big loser of the week falling to trade below 0.97 weighed down by lackluster Chinese data, which also pulled the NZD to trade close to the 0.80 mark.

China’s factory activity shrank for the first time in seven months in May as new orders fell. The flash HSBC Purchasing Managers’ Index for May fell to 49.6, slipping under the 50-point level demarcating expansion from contraction for the first since October. The final HSBC PMI stood at 50.4 in April. A sub-index measuring overall new orders dropped to 49.5, the lowest reading since September, suggesting China’s domestic economy is not strong enough to offset soft external demand.

The euro also gave up to the US dollar to trade at 1.2925 as stronger US data helped show that the economy was on the rebound. While positive numbers from Germany did little to help the euro. U.S. orders for long-lasting manufactured goods rebounded in April, buoyed by more demand for commercial aircraft and an increase in products that signal business investment. Orders for durable goods, items expected to last at least three years, rose 3.3 percent last month from March. Orders for Industrial machinery and electronic products increased 1.2 percent after a 0.9 percent gain in March.

German business sentiment survey beat forecasts, suggesting that the Europe’s largest economy is picking up steam. The German Ifo business-climate index climbed to 105.7 in May after two consecutive months of declines. The index came in at 104.4 in April

While the Japanese yen gained for the first time in weeks to trade at 100.98 this morning after the run on the Nikkei last week.

Friendly Durable Goods Report Reverses EUR/USD to Down

Early session volatility disappeared and liquidity dried up as investors appear to have headed to the sidelines ahead of the U.S. holiday on Monday. If you missed the early moves then don’t expect to catch up later as the current action suggests that the bigger players have packed it in for the long week-end.

Overnight, the U.S. Dollar Index futures contract turned its main trend to down on the daily chart, but the move failed to attract any major sellers. This move set up the day for choppy trading conditions. Given the two-sided trade in the dollar, many interrelated markets become range bound.

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The Euro experienced a technical bounce when it took out resistance at 1.2992, but the rally fizzled as the market approached the high for the week at 1.2997 and the major 50% level at 1.3019. Fundamentally, the early rally was launched after a German confidence index came out better-than-expected.

The size of the intraday retracement in the Euro suggests that sellers are still in control despite this week’s retracement rally. A friendly U.S. Durable Goods report also contributed to the Euro’s weakness because it probably brought the Fed closer to ending its stimulus program or at least that’s the way speculators reacted to the news.

Despite the choppy trade in the dollar index, the British Pound was able to hold on to its early session gains. This up move represented a follow-through rally, confirming Thursday’s closing price reversal bottom. Technically oversold conditions also contributed to the GBP/USD’s strength.

The bigger picture still suggests the Sterling is poised for further weakness. Two weak economic reports this week were strong indications that the Bank of England will consider implementing additional stimulus at its next monetary policy meeting.

July crude oil also traded lower on Friday as weaker equity markets weighed on risky assets. Fundamentally, high supply is expected to continue to keep a lid on rallies. Earlier in the week, the EIA reported a drop in inventories but it was not enough to attract buyers.

Technically, it looks as if crude oil is going to remain range bound for quite some time. Based on the short-term range of $86.16 to $97.38, traders should watch the pivot price at $91.77 for direction.

August gold settled into a range today after a volatile session two days ago. Turmoil and uncertainty in the equity markets this week helped trigger a massive reversal to the upside, but the lack of follow-through suggests that short-covering rather than new buying was behind the move.

Technically, gold is trying to establish a secondary higher bottom at $1336.30, but since the trend will remain down until $1487.20 is violated; sellers are likely to step in on any meaningful rallies. A surprise news event or a massive sell-off in the equity markets may be the only factors that could drive gold higher from current levels. 

Global Recovery Weighs On The Currency Markets

Global Recovery Weighs On The Currency Markets
Global Recovery Weighs On The Currency Markets

The US dollar tumbled from 84.44 just two days ago to trade at 83.75 on Friday morning as the US Fed keeps traders unsure. Yesterday, unemployment claims reported better than forecast, with first time and ongoing claims fell below forecast. Existing home sales also reported well above expectations. Signs that the US recovery was well underway, could trigger a tapering in asset purchases by the Fed. Economists don’t expect the Fed to curtail the bond purchases next month, but Paul Ashworth, chief U.S. economist for Capital Economics, said the September meeting is a real possibility.

For one thing, Bernanke told lawmakers Wednesday that the Fed might reduce the purchases within the next few meetings if the job market showed “real and sustainable progress.” Bernanke is scheduled to hold a news conference after the September meeting, so Ashworth said it would allow him to directly explain the change then.

The easing of the US dollar gave the euro a bit of momentum, which was supported by a better than expected print of eurozone PMI.  The euro rallied off its overnight lows following the release of stronger flash PMI’s for Germany, France, and the euro area aggregate. While all of the flash PMI’s remain in contractionary territory the improvement suggests that reduced financial market fragmentation may be leading to gains in economic activity. The euro was able to climb to trade at 1.2934 at the open today.

The release of a new United Nations report on growth and recovery, weighed heavily on the euro which seems to be the biggest drag on global recoveries, although the UN revised downward growth forecasts for all regions. The world economy is expanding at a subdued pace, and a moderate pickup in growth is expected for 2014, according to the mid-year World Economic Situation and Prospects report just released by the UN Department of Economic and Social Affairs.It noted that since late 2012, new policy initiatives in major developed economies have reduced systemic risks and helped stabilize consumer, business and investor confidence, but with very limited improvement on economic growth. According to the report, risks are still tilted to the downside and have the potential to derail the still feeble recovery of the world economy. Short-term risks stemming from the euro area crisis, fiscal adjustment in the United States and a further slowdown in large developing countries have diminished, but not disappeared.

The report also cited the UK growth along with recent reports from the IMF urging the government to turn from austerity to growth, is weighing heavily on the pound, which is trading at 1.5103 after falling to the 1.50 level yesterday. The UK economy is still a long way from “a strong and sustainable recovery”, the International Monetary Fund has warned. In its concluding statement on its mission to the UK, the IMF said austerity measures were acting as a drag on the economy.  The government could do more to offset the negative impact of austerity with infrastructure spending, it said. George Osborne said the UK would not “duck its economic challenges”. The IMF acknowledged that the UK’s austerity programme had earned the government international credibility.

 

 

 

Equity Markets Tumble Along With Crude Oil On Fundamentals

Equity Markets Tumble Along With Crude Oil On Fundamentals
Equity Markets Tumble Along With Crude Oil On Fundamentals
Markets around the globe responded to lackluster Chinese data on Thursday. Wall Street recovered from steep declines on Thursday to end only modestly lower as investors discounted concerns about the Federal Reserve curtailing its bond buying program. Dow Jones fell less than 0.1%. S&P 500 lost 0.3% and NASDAQ declined 0.1%. All three indexes were down nearly 1% earlier in the session.

A big sell-off in Japan dragged down Europe and put pressure on U.S. markets in early trading, but they clawed back throughout the day. European markets fell sharply, hit by worries over a possible end to US economic stimulus measures, with mining stocks among the worst performers. DAX of Germany, CAC 40 of France and FTSE 100 of U.K. decreased by 2.1% each.

Yesterday, the United Nations also released its updated growth estimates. . The United Nations has revised down its forecast for the world economy, reiterating the view it should begin a weak recovery this year. The UN World Economic Situation and Prospects report revised downward its forecast for the world economy to 2.3 per cent growth in 2013, followed by 3.1 per cent in 2014.

The UN said the economy in the European Union’s euro area would shrink by 0.4 per cent this year and make a modest recovery to 1.1 per cent growth next year. Africa was predicted to see 5.0 per cent growth this year and 5.4 per cent next year. For every country and region, the growth prediction has been shaved back because of doubts about tactics being used for recovery.

Crude oil took a tumble as traders took a long serious look at prices, future demand, growth and economic recovery. Crude prices were down as demand concerns from China after weak manufacturing growth hurt prices amid high inventories. Also, lower unemployment claims in US renewed worries about Fed’s scaling back its bond-buying program and hurt prices. Crude oil pared much of the early losses; but closed slightly lower for a second straight session, after some weak manufacturing data out of China renewed fears of demand growth concerns. Oil prices were also supported by some upbeat macroeconomic data out of the US with initial jobless claims dropping more than expected last week. Crude oil is trading at 93.97 after touching the lower end of the $93 range yesterday. The US dollar was strong most of the day on Thursday but dipped late in the day as traders moved to gold giving crude a bit of a rebound.

Natural gas continued to boom, trading this morning at 4.282 up by 26 pips after inventory reports supported prices along with weather forecasts for warmer summer temperatures, increasing residential demand. Natural gas futures rose, after a smaller-than forecasted gain on US gas stockpiles. The Energy Information Administration said inventories of natural gas rose 89bn cubic feet in the week ended May 17 to 2.053 trillion cubic feet.

 

Chinese Data Sends The Metal Markets Crazy

Chinese Data Sends The Metal Markets Crazy
Chinese Data Sends The Metal Markets Crazy

Gold prices were up after weak economic data from China raised fears of stagnant growth in the world’s second largest economy and boosted gold’s safe haven appeal. Chinese data since the beginning of the month has been on the lackluster side, missing high expectations as Chinese official’s projected much higher growth rate after its recovery. Officials had great expectations after the economy had turned around. Gold is trading at 1392.75 this morning remaining on a positive note as the US dollar eased to trade at 83.75 after topping 84.40 range on Thursday. The performance of China’s manufacturing sector, measured by HSBC’s purchasing managers index, was shown to be worse than expected at 49.6 rather than forecasts of 50.4. China’s factory activity shrank for the first time in seven months in May as new orders fell, a preliminary survey of purchasing managers showed, adding to concerns that a recovery in the world’s second-largest economy is sputtering.

The flash HSBC Purchasing Managers’ Index for May fell to 49.6, slipping under the 50-point level demarcating expansion from contraction for the first since October. The final HSBC PMI stood at 50.4 in April.

Gold rose sharply towards $1,400 per ounce, as investors sought its safe-haven status after the dollar and equity markets were hit by a slew of weak manufacturing data that indicated stagnant global economic growth.

Gold holdings of SPDR gold trust, the largest ETF backed by the precious metal, declined to 1,018.57 tons, as on May 23. ETF investors remain sidelined, and without their support it will be difficult for gold to hold on to the gains. Earlier in the week gold tumbled to test the 1321 resistance level and was unable to break through giving investors some support as they pushed gold to trade over 1400.

Silver holdings of ishares silver trust, the largest ETF backed by the metal, declined to 10,022.95 tons, as on May 22. Silver is trading at 22.513 and remains in the green this morning as investor take advantage of low prices and the weaker US dollar to grab up the commodity.  The US dollar slumped and the yen soared on Thursday, as expectations that the Federal Reserve could soon reduce its bond purchases sparked cascading sell-offs in Japanese markets, resulting in a fierce short squeeze in the yen.

The US dollar index, a gauge of the greenback’s movement against six other major currencies, dropped to 83.723 from 84.251.

Copper futures fell the most in 3-weeks on COMEX, after manufacturing shrank for the first time in 7-months in China, the world’s biggest user of the metal. Copper futures for July delivery closed down by 2.3% at $3.304 on the COMEX division of the NYMEX. Copper prices were down after weak Chinese manufacturing activity adding to fears that recovery in the top metals consumer was weakening which could hurt demand for industrial metals. Manufacturing activity in the United States grew at its slowest pace since October, which further put pressure on prices. Base Metals are expected to move in a range due to continued supply concerns from mines which can cape the prices from falling further.

Falling Equity Markets Fuel Crude Oil Weakness

Falling stock prices and weak economic data drove July Crude Oil prices lower on Thursday. Yesterday, comments from Fed Chairman Ben Bernanke regarding the curtailing of the Fed’s aggressive bond-buying program drove equity markets sharply lower, dragging down crude oil prices due to a soaring U.S. Dollar.

This weakness continued today after China’s manufacturing sector showed further signs of developing weakness in May. The drop in factory activity signaled to investors that a slowdown in the world’s second largest economy could curtail demand for crude oil.

Technically, downside momentum has put the market in a position to challenge the May 15 bottom at $92.40. Although a move through this level will turn the main trend to down on the daily chart, the market could quickly rebound if buyers step up following a test of the 50% level at $91.77.

Gold Bars

The weaker U.S. Dollar helped to boost June Gold prices on Thursday. Gold was feeling pressure early but the U.S. Dollar reversed course overnight when a break in Japanese equity markets triggered an aggressive move into the Yen. The subsequent rally in gold reinforces the new higher bottom at $1336.30. This could help fuel a rally into the retracement zone at $1455.80.

Before getting too bullish gold, keep in mind that the U.S. Dollar could turn back up quickly if the break in the equity markets subsides. The Fed tapering its bond purchases is supportive to the dollar and could drive gold back down to the recent bottoms at $1336.30 and $1321.50.

The EUR/USD survived a test of the recent bottom at $1.2796. The market has been under tremendous selling pressure since early Wednesday when it sold off due to Bernanke’s bearish comments. Today’s rally is related to the heavy selling pressure in the Japanese equity markets due to the weaker-than-expected Chinese manufacturing data. Additionally, the market was underpinned after the preliminary composite purchasing managers’ indexes for the euro zone rose to a three-month high, although still signaling a sharp downturn in the region.

The GBP/USD traded mixed early in the session before turning higher on the day. Early selling pressure was fueled by bearish fundamentals and calls for additional stimulus after the release of two weak economic reports this week. Oversold technical indicators and the weakness in the dollar contributed greatly to today’s upside reversal. Since the main trend is down, expect the short-covering rally to be short-lived. 

US, European and Japanese Stocks Slump on Fed minutes and poor PMI survey from China

On late Wednesday and early Thursday the combined effect of Fed Chairman Bernanke’s testimony and a poor manufacturing activity survey from China took its toll on all major European, Japanese and US indices and they registered steep losses.

The US trading session yesterday closed on the red side of the charts, after Ben Bernanke said the central bank could reduce the monetary stimulus programme during one of its next meetings if the economic situation and the labour market allow such a step to be taken.

The news caused concerns among investors, sparking speculations about a recent cut in the asset-buying programme, which immediately reflected on the market performance. 

The S&P500 fell by 13.81 points, or 0.8%, and closed at 1655.35 points, with all ten industries in the index ending the session in red. Utility and energy companies registered the biggest decline during the trading hours with shares of First Solar Inc. dropping by an impressive 6%. The S&P500’s best performer was Bristol-Myers Squibb Co. which reported an increase by 5.3%.

Meanwhile, the Dow reported a decrease by 80.41 points, or 0.5%, to 15,307.17 points. Cisco Systems Inc. was the company that reported the biggest fall, sliding by 2.8%. The world’s largest drug maker, Pfizer, along with the biggest household chain in the US, Home Depot Inc., were among the few companies that reported an increase yesterday. 

On the other hand, the technological Nasdaq Composite slid by 38.82 points and ended the session at 3463.30 points.

US, European and Japanese Stocks Slump on Fed minutes and poor PMI survey from China
US, European and Japanese Stocks Slump on Fed minutes and poor PMI survey from China

Major European and Japanese indices also got caught by the red wave being further intensified by a worse-than-expected manufacturing PMI survey from China. During the Asian session on Thursday, the Nikkei initially climbed by 2%, but then, following the news, made a deep dive and closed at its worst single-day loss in two years – 14,483.98 points. 

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European stocks took the plunge as well, causing the UK’s FTSE 100 index to wipe 1.6% off its value to 6733.81, Germany’s DAX 30 – 2.67% to 8303.32, and France’s CAC 40 – 1.8% to 3976.83.

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Looking further in the day, high market volatility is expected to come from ECB President Mario Draghi’s speech which will address the current recession and economic conditions in the Eurozone.

 

 Source: dfmarkets.co.uk

 

Disclaimer: The Content of these charts and analyses does not constitute any form of advice or recommendation by Delta Financial Markets to buy, sell (or refraining from making) any trade or investment. You may wish to seek independent advice before entering into transactions.

Delta Financial Markets shall not be held liable by you or any others for any decision made or action taken by you or others based upon reliance on or use of information or materials obtained or accessed through use of these technical analyses and charts. DF Markets assumes no responsibility for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person’s reliance upon the information on this page. DF Markets shall not be liable for any special, indirect, incidental, or consequential damages.

The Nikkei Takes A 7% Tumble As The Government Tries To Cover Markets

The Nikkei Takes A 7% Tumble As The Government Tries To Cover Markets
The Nikkei Takes A 7% Tumble As The Government Tries To Cover Markets

Asian markets today took a drastic fall. The Nikkei had climbed to record highs on the aggressive stimulus plan introduced in early April by the Bank of Japan. The Tokyo based Nikkei 225 index closed 7.32% down at 14,484 points.  Trading was volatile with volume at a record 7.66 billion shares among first section issues, against 6.38 billion yesterday.

The Bank of Japan has unleashed a torrent of liquidity to quell government bond yields amid concern that higher long-term interest rates could squeeze mortgage payers and crimp spending. The central bank on Thursday announced a ¥2 trillion fund-supplying operation after the yield on the benchmark 10-year Japanese government bond hit 1.0 per cent, its highest level in over a year. The plunge came after HSBC said manufacturing activity in China contracted in May for the first time in seven months in another sign of the weakness of recovery in the world’s second-largest economy.

The Bank of Japan had just completed its two day meeting, where it held rates and policy painting a rosy picture of the economy. The government had indicated that it wanted to extend the monetary base over the next two years. The Bank of Japan pledged to adjust its unprecedented stimulus program as needed after a jump in bond yields that highlighted risks linked to policymakers’ campaign to revive the world’s third-largest economy. BOJ Kuroda told reporters in Tokyo that the central bank will conduct its debt purchases in a flexible manner, and that the recent volatility in government securities isn’t yet affecting the economy. He spoke after the BOJ board affirmed its plan to double the monetary base in two years as it seeks to end 15 years of entrenched deflation.The biggest surge in government debt yields in five years threatens to undermine the BOJ’s stimulus, with companies including steelmaker JFE Holdings Inc. pulling bond sales amid the tumult. 

The Policy Board agreed that the BOJ will increase the monetary base at an annual pace of around ¥60 trillion to ¥70 trillion, in line with measures announced in April. The policy measures announced April 4 to achieve a 2 percent inflation target in about two years also include additional purchases of government bonds and riskier financial assets, such as exchange-traded funds. The JPY continues to gain trading at 101.80 as the BoJ will be forced to re-evaluate currency policies. Investors had been worried that the government and bank plans were too aggressive and would have ramifications that the Bank could not control due to the extent of the easing.

The release of Chinese data this morning took markets by surprise as the Chinese recovery has been on course, except a bit less than anticipated but no one foresaw manufacturing slipping back into contraction.  The performance of China’s manufacturing sector, measured by HSBC’s purchasing managers index, was shown to be worse than expected at 49.6 rather than forecasts of 50.4. China’s factory activity shrank for the first time in seven months in May as new orders fell, a preliminary survey of purchasing managers showed, adding to concerns that a recovery in the world’s second-largest economy is sputtering. The flash HSBC Purchasing Managers’ Index for May fell to 49.6, slipping under the 50-point level demarcating expansion from contraction for the first since October. The final HSBC PMI stood at 50.4 in April.

Hong Kong’s Hang Seng fell over 2.5% in afternoon trading, while Australia’s S&P lost 2% and Taiwan’s Taiex fell 1.9%. Singapore’s Straits Times gave up 2%, even though the local economy unexpectedly expanded 1.8% on an annualized basis in the first quarter from the preceding three months.

Eurozone PMI data is also due to be released today, which could further weigh on the weakness in the equities markets.

 

 

 

 

 

A Strong Dollar And Weak Chinese PMI Weighs On Crude Oil Prices

A Strong Dollar And Weak Chinese PMI Weighs On Crude Oil Prices
A Strong Dollar And Weak Chinese PMI Weighs On Crude Oil Prices

Crude prices were down pressured by lower than expected crude inventory withdrawal and high gasoline stocks. Crude dipped from the $96 to trade this morning at $93.64. A stronger dollar over concerns that the U.S. Federal Reserve may curtail its bond-buying stimulus later this year also weighed on crude prices.

Crude oil prices slumped on Wednesday, after data showed an unexpected jump in US gasoline stockpiles in the world’s top oil consumer and after the Federal Reserve chief warned of the risks of holding down US rates for too long. Crude oil stocks fell 338,000 barrels, gasoline inventories rose by 3mn barrels and distillate stockpiles rose by 459,000 barrels, as per EIA.

Lackluster Chinese manufacturing PMI printing at 49.6 has raised concerns over demand in the world’s second largest oil consumer. Traders can expect crude oil prices to go down as markets are well supplied and demand concerns from China can continue to push prices down. China’s manufacturing is contracting in May for the first time in seven months, adding to signs that economic growth is losing steam for a second quarter. An economist this morning mentioned that there has been a significant shift to Japanese products in the recent 90 days due to the huge decline in the value of the yen, making Japanese products a lot more attractive. The Chinese might retaliate as there is an imbalance in the currency markets harming its economy and there is no sign that the Japanese will slow or stop their current policy. Even though the IMF, the G7 and the G20 have supported the Japanese central banks actions, there are consequences to its neighboring economies. Recently Thailand and Korea have seen a shift in exports to Japan.

The strong US dollar continues to weigh on the commodities markets having a strong effect on crude oil. The euro continued its downtrend from yesterday, trading at 1.2842. The dollar significantly extended its gains from last night, trading at 84.372. Federal Reserve chairman Ben Bernanke supported the QE-3 in his testimony which supported the market sentiment. However, during the Q&A session, Bernanke said that the FOMC may be scaled back after signs of economic recovery become apparent; this created pessimism in the market and supported the dollar.

This may lead to continued weakness due to China’s lower PMI manufacturing data.  In the afternoon, Europe and Germany will release their PMI numbers which are expected to improve and could support a recovery in the euro, pressurizing the dollar and supporting crude prices. Economic data from the US is likely to show improvement and support the dollar’s gains

U.S. natural gas futures closed lower on Wednesday as prices pulled back ahead of Thursday’s inventory report and in the face of cooler weather heading into a holiday weekend that should slow demand.

Natural gas futures declined on NYMEX, for the first time in 4-days on forecasts of moderating weather that would limit demand for the power plant fuel. Natural gas stockpiles are expected to increase by 87-90bn cubic feet, actual data will be released by EIA later in the day. Natural gas also tumbled when it broke the 4.20 price level triggering automatic sell orders, but has recovered this morning to trade at 4.207

 

Fed Superstar Bernanke Sends Gold Crashing

Fed Superstar Bernanke Sends Gold Crashing
Fed Superstar Bernanke Sends Gold Crashing
Gold prices began declining yesterday after Fed Chairman Ben Bernanke said that decision to scale back or taper bond buying can come in one of Fed’s next few meetings if the economy looked set to maintain the pace and labor market looks improving. Gold had been trading close to the 1405 price but ended the day at 1367 giving back the day’s gains to end the day in the red. This sentiment has edged into this morning’s session with gold down another 1.65.

This week, has had very little data but a lot of Fed Presidents were scheduled to speak and they all made the headlines, putting the greenback and gold on a roller coaster. Late in the day, the FOMC minutes were released from the May 1st meeting. The minutes showed that the members were leaning towards a tapering of the monthly stimulus as it will be a very long project for the Fed to unwind their purchases and their monthly commitment. Mr. Bernanke sent the US dollar climbing. The dollar had been around 83.95 mid-day yesterday but was able to climb to trade at 84.44.

Gold futures fell sharply, following US Federal Reserve Chairman Ben Bernanke’s testimony before Congress as investors considered the likelihood that the central bank will soon begin to tighten monetary policy. Gold prices added to gains as Bernanke’s comments implied that premature tightening of Fed policy could end growth, then prices fell after he indicated that the central bank could slow asset purchases in the next few meetings.

Gold holdings of SPDR gold trust, the largest ETF backed by the precious metal, declined to 1,020.07 tons, as on May 22. Silver holdings of ishares silver trust, the largest ETF backed by the metal, declined to 10,022.95 tons, as on May 22.

US Federal Reserve Chairman Ben Bernanke at testimony to Congress on Wednesday said that the Fed’s massive bond-buying program would remain in place for now. But a decision to scale back the $85 billion in bonds the Fed buys each month could be taken at one of the central bank’s “next few meetings” if the economy looked set to maintain momentum, he added. Talk about Fed speak, what Mr. Bernanke said was a bunch of would haves, could haves, might and might not’s, but he did clearly indicate that there would be no change at the June meeting.

Silver followed cues from gold as there was very little data to help give any guidance to the metals pack that is until this morning when HSBC released its monthly Chinese manufacturing PMI report, this much followed report turned markets upside down. Not only did the report miss expectations, it showed a contraction rather than an expansion in the manufacturing sector. Markets are just now reacting to the data with silver falling over 37 cents this morning to trade at 22.108 and copper is following close on its heels at 3.319 after hitting a 6 week high yesterday. Metal traders will closely watch eurozone PMI data due later, which is expected to miss expectations and might send metals further down.

Dovish Bernanke Testimony Should Pressure Greenback

The markets were mixed overnight as investors applied various strategies ahead of Federal Reserve Chairman Ben Bernanke’s testimony before Congress. The EUR/USD and gold traded higher while the GBP/USD and crude oil posted lower prices.

Based on early stock market activity, it looks as if investors expect Bernanke to maintain a dovish tone if asked about ending the Fed’s aggressive stimulus program. His criteria for ending the program are expected to be the same – economic growth and a drop in the unemployment rate.

USD 5

If Bernanke is pressed by Congress, he may reveal the Fed’s plan to end the stimulus. Since May 1, there has been speculation that the Fed has been mapping out an exit strategy. This has helped drive the U.S. Dollar to a new high for the year while pressuring the Euro and gold markets.

The EUR/USD rallied for a third straight day on Wednesday, sending the market into a key downtrending Gann angle from the 1.3242 top. This angle at 1.2942 was penetrated, but investors couldn’t sustain the move. If Bernanke comes out dovish, then look for investors to mount another breakout attempt. The daily chart pattern suggests that 1.3019 is a potential upside target.

The GBP/USD broke sharply today after a government report showed U.K. retail sales unexpectedly declined last month. The weak report opens the door for additional stimulus from the Bank of England. This action tends to weaken a currency because it keeps pressure on interest rates.

Technically, the market broke through the Fibonacci level at 1.5127 with conviction before finding intra-day support on a slow-moving uptrending Gann angle at 1.5032. A break through this level could trigger an acceleration to the downside.

June gold traded higher as investors resumed the move created on Monday when the market reversed to the upside after reaching a low at $1336.30. If investors can sustain the developing rally then look for a near-term test of $1411.75 over the near-term.

Fundamentally, dovish comments from Bernanke could weaken the U.S. Dollar, triggering greater demand for gold and the start of a possible short-covering rally.

A weaker dollar could also trigger a rally in July crude oil. Earlier in the week, sellers stepped in as the market neared the May high at $97.38. If Bernanke convinces investors that the stimulus will continue, then look for a break in the dollar to trigger a quick rally in crude oil.

Technically, a breakout over $97.38 could fuel an acceleration to the upside with $98.22 a potential target. On the downside, the nearest support target is $94.88. 

Wall Street Continues Record-Breaking Rally Amid Indications that Fed’s Stimulus Will Remain

The uncertainty surrounding the Fed’s decision on whether to continue with the asset-purchase program has been one of the main US market’s drivers recently.  

During Tuesday’s session, all major U.S. indices closed at new historical highs. The main reason for Wall Street’s renewed growth came from officials’ speech which suggested that the Fed’s stimulus program will continue. The Fed’s meeting minutes, which are expected to shed some light on the matter, will be published today.

However, markets were calmed yesterday, after the Fed’s St. Louis President, James Bullad, said that the quantitative easing should continue because financial markets indicate they are in a process of recovery. 

The Central bank’s chairman Ben Bernanke is due to make a statement today, reflecting the outlook before the US economy. Some officials have already expressed willingness for reducing the QE over the next few months.

During yesterday’s session, the S&P500 gained 2.87points, or 0.2%, and closed at a new record level – 1669.16 points, reaching an intraday high of 1674.93 points, with five of its ten industries reporting an increase.

Wall Street Continues Record-Breaking Rally Amid Indications that Fed’s Stimulus Will Remain
Wall Street Continues Record-Breaking Rally Amid Indications that Fed’s Stimulus Will Remain

The other record-earning performer was the Dow, which added 52.30 points, or 0.3%, to its value, touching a fresh historical peak at 15,387.58 points, with an intraday high of 15434.50 points. 

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The Nasdaq100 also did not leave behind as it increased by 5.48 points or 0.2%, reaching a new 52-week record at 3026.45 points. 

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One of the best performers among companies was Home Depot Inc., which added 2.5% to its value and ended the session at $78.71 per share. The biggest household chain in the US reported better earnings for the first quarter, compared to analysts’ expectations. JPMorgan also rode the green wave, increasing by 1.4% and reaching $53.02 per share.

Apple, on the other hand, lost 0.7% to $439.99 per share on accusations that it has been avoiding  taxes by creating numerous offshore companies. Apple is the latest big corporation accused of tax avoidance – along with Google, Amazon and Starbucks.  Carnival Corp., too, erased 4.3% of its value, closing at $33.81 per share.

Looking further in the day, US market volatility is expected to come from the report on Existing Home Sales, along with the highly anticipated Bernanke speech and FOMC minutes. Outside the economic calendar, among other major companies that are due to announce their quarterly earnings, are Hewlett-Packard Co. and Synopsys Inc.

Source: dfmarkets.co.uk

Disclaimer: The Content of these charts and analyses does not constitute any form of advice or recommendation by Delta Financial Markets to buy, sell (or refraining from making) any trade or investment. You may wish to seek independent advice before entering into transactions.

Delta Financial Markets shall not be held liable by you or any others for any decision made or action taken by you or others based upon reliance on or use of information or materials obtained or accessed through use of these technical analyses and charts. DF Markets assumes no responsibility for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person’s reliance upon the information on this page. DF Markets shall not be liable for any special, indirect, incidental, or consequential damages.

Currencies Decline While Equities Soar

Currencies Decline While Equities Soar
Currencies Decline While Equities Soar
Market players pushed stocks higher into record territory yesterday after comments from a Federal Reserve official raised hopes the central bank will continue to pump money into the financial system. Dow Jones and S&P 500 both closed at record highs Tuesday, gaining 0.3% and 0.2% for the day. The NASDAQ added 0.2% to end at its highest level since 2000.

Investors have been paying close attention to comments from various Fed officials recently as they attempt to gauge when the central bank will begin to taper off its stimulus programs. Fed chairman Ben Bernanke will discuss his outlook for the economy Wednesday before Congress.

European stocks inched higher on Tuesday, with investors cautious about making any major moves before clarification on the U.S. Federal Reserve’s potential exit from easing measures. DAX 30 index gained 0.2% to 8,472.20 while France’s CAC closed 0.3% higher at 4,036.18. U.K.’s FTSE 100 index added 0.7% to 6,803.87, the highest closing level since December 1999.

There has been very little on the economic calendar and very little news flow, leaving traders eager for some direction and reasons to trade, giving Fed comments a bit too much attention.

As the equity markets soared the US dollar fell from its 5 year high on Friday to trade at 83.86 down from 84.3. The weakness in the US dollar helped sentiment shift to the euro. The euro was able to gain a few pips but remained locked in its range below the 1.30 level. The euro is trading this morning at 1.2921.

Disappointing inflation data in the UK and a lack of support from the Bank of England left the pound unsupported, as it tumbled by over 100 points this week to trade at 1.5155. The majority of the decline has occurred following the release of lower than expected inflation data, where y/y CPI has fallen to 2.4% with core CPI falling to 2.0% y/y. The BoE’s inflation target is 2.0%, and last week’s inflation report included downward revisions to the outlook for CPI that maintained a 50% probability of inflation remaining above target as far out as Q2 2016.

The Aussie and the kiwi remain weak against a strong US dollar as disappointing economic data and worries about China’s trade balance weigh on the currencies. It was reported over the weekend that 10% of the Chinese trade balance numbers were from erroneous or fictitious orders. Business sentiment in Australia took a tumble reporting on a negative note, after the release of the new budget which calls for major cuts. The AUD is trading at 0.9788 while the NZD is at 0.8156.

The Japanese yen is trading at 102.49 after the Bank of Japan held rates and policy as expected today, but gave a strong assessment of the economy and the results of the stimulus programs, but the bank noted that domestic prices remained in deflation. Prime Minister Abe’s is about to launch some major internal program to help the domestic economy rebound.

OECD Report Shows Spotty Growth For Developed Nations

OECD Report Shows Spotty Growth For Developed Nations
OECD Report Shows Spotty Growth For Developed Nations
Lately the International Monetary Fund and the World Bank have moved from bankers and lenders and supporters of developing economies to enforcers of economic policy, as seen in the recent eurozone bailouts and the troika. As bailouts seem to over for the present and the disbanding of the troika, these bankers seem to be moving to not only economic enforcers but also lobbyists. Recently the IMF urged the Bank of England to move from austerity to growth and tried to push the Bank of England into action. The IMF and the World Bank have changed their stance and program of economic reform and  are now pushing global economies to adopt the US and Japanese growth scenario. With the failure of austerity measures and Portugal, Spain, and Greece deep in recession with record high unemployment their GDP continues to contract making it impossible for these countries to reach budget levels demanded for continued economic support. The UK which voluntarily adopted a program of austerity continues on their own accord. Ireland is the only one of the bailout nations that seems to be recovering. Cyprus has just received their financial support and already find they will need more assistance.

The OECD released their most recent global outlook, which now shows the developed nations economies returning to growth in the first quarter of 2013 though the euro zone continued to lag behind the U.S. and Japan, according to figures released by the Organization for Economic Cooperation and Development.

The OECD said the combined gross domestic product of its 34 developed-country members grew 0.4% from the final three months of 2012, when output was flat. The OECD said there were “diverging patterns” across its membership, but that largely involved a contrast between contractions in France, Italy and the euro zone as a whole, and a pickup in growth in Japan, the U.S. and the U.K.

With growth so unbalanced and business and consumer confidence weak in the face of uncertainties surrounding the euro zone’s fiscal crisis and fiscal difficulties in the U.S., economists don’t expect a strong pickup in global growth in the near term.

The German economy is likely to grow at a stronger rate in the current quarter than in the first three months of the year, but the euro-zone crisis remains a significant risk, Germany’s central bank said yesterday. An expected recovery in construction after weather delays in the winter and encouraging signs from the industrial sector support the improved outlook, the Bundesbank said. Data released last week showed that Germany was the only major euro-zone economy to grow in the first quarter, eking out an expansion of 0.1% from the previous quarter. The 17-nation currency bloc’s economic output declined by 0.2%, marking its sixth straight quarter of contraction. Germany is expected to be the locomotive to pull the eurozone out of its crisis, but with the drop of the Japanese yen and exports shifting to Japan, exports from the eurozone continue to decline.