Eyes on Spanish, Italian Auctions While ECB’s Meeting Puts Sentiment to Test

Markets are cautious as investors’ appetite for risk is about to be put to test since Spain and Italy are preparing to sell as much as 17 billion in debt today, while ECB and BoE will announce their key interest rates.

The European Central Bank and Bank of England are expected to keep the monetary policy unchanged this moth awaiting for more evidence about the effects of the previous easing measures.

After the ECB’s first interest rate decision for 2012, market’s will turn their focus towards Draghi’s press conference, yet the key economic data awaited from both Europe and the US today are also adding to the caution.

In Europe the industrial production is expected to fall in Nov. from the previous month, in the US retail sales are expected to improve in Dec., while in UK the industrial production fell below expectations in Nov.

Asian stocks retreated today as confidence turned more negative after Japan’s current-account surplus narrowed in Nov. on slowing demand for exports, while in China inflation eased to the lowest level in 15 months.

Although China’s policy makers are given more room to accelerate their easing measures, it indicates that consumption is weakening. Nikkei 225 fell today 0.74%, while Hang Seng fell 0.30%.

In Europe stocks are mixed ahead of the Spanish, Italian bond auctions while sentiment will be put to test ahead of ECB’s meeting. FTSE 100 fell 0.17% while CAC 40 gained 0.22%.

If investors will be disappointed by today’s results, the euro and other high yielding assets will face more downside pressures. For now the dollar index is moving with bearish momentum around the 81.25 level.

The euro is slightly higher around the 1.2720 level, while the pound is seeing losses trading around 1.5300 as the industrial production fell in Nov. more than expected. The yen weakened trading around 76.95.

The AUD is almost unchanged around the 1.0305, while the downside pressures imposed on the USD brought some gains to gold which is trading as of this writing around the $1648.10 per ounce level.

Japan said today it might reduce its petroleum imports from Iran, which continues to threaten shutting Strait of Hormuz in response to the US and EU sanctions, imposing upside pressures on crude which trades around $101.55.

Concerns Renewed in Market Over Europe

Concerns Renewed in Market Over Europe
Concerns Renewed in Market Over Europe

Stocks turned into red as concerns returned to market since the early morning despite the data that was released from Euro Zone today, where the debt crises’ worries over Europe renewed forcing investors to avoid high yielding assets such as Euro, Sterling Pound and stocks.

Germany sold 4.06 billion euros of 10-year bonds on average yield of 1.93% compared with the 1.98% yield recorded an auction earlier, where German borrowing cost fell today by 5 basis points as investors still consider German Bunds as the safe haven in the euro-area region. However, and despite the 1.3 times bid-to-cover ratio, Germany didn’t auction the maximum target of 5 billion euros, which pressured the euro and the stocks further to the downside.

Furthermore, U.S factory orders came below expectations during the month of November, factory orders inclined by 1.8% compared with the prior revised reading of -0.2% and below expectations of 2.0%.

In Europe DAX dropped today 0.90% and FTSE 100 declined 0.5%. The euro retreated below the 1.30 level trading as of this writing around the 1.2931. The pound also dropped trading around the 1.5632.

The AUD declined today trading around the 1.0342 level although oil prices eased today trading with some downside bias around the $102.41 in a correctional move following yesterday’s sharp gains; tensions over Iran continue which kept gold prices up around the $1610.61.

Risk Appetite Improved on the First Trading Day of 2012

Risk Appetite Improved on the First Trading Day of 2012
Risk Appetite Improved on the First Trading Day of 2012
The first trading day of 2012 witnessed better than expected data from China, UK, Switzerland, Germany and USA, noting that investors’ appetite was boosted toward high yielding assets.

In China the non-manufacturing PMI unexpectedly rose to 50.3 in Dec. from 49 in Nov., while Switzerland the PMI manufacturing for Dec. rose to 50.7 from 44.8 previous, adding to evidence the global economy is strengthening.

In UK the PMI manufacturing for Dec. rose to 49.6 from 47.7 previous, while in Germany the unemployment rate unexpectedly fell in Dec. to 6.8% from the precious 6.9%.

Finally the US ISM manufacturing rose for the month of December to reach 53.9 better than forecasted 53.4, taking into consideration that the US data for November and December was better than expected till now, not to forget that holiday season strengthened economic activities in USA.

Manufacturing data came out better than expected globally, increasing demand on the higher yielding assets as well as commodities, where oil is trading around $102.25 and gold around $1606.03.

Markets will still focus today on the FOMC minutes and what would the FEDs say about the recent activities. In the meantime the USD is trading with strong bearish momentum around the 79.56 level.

Worries from Europe’s debt crisis were put aside today, yet fears may be back any moment; after EU leaders warned from a tough 2012 which will determine the euro to continue its struggle against other major currencies.

In Europe DAX rose today 1.50% and FTSE 100 rose 2.20%. The euro jumped above the 1.30 level trading as of this writing around the 1.3048. The pound also rose considerably trading around the 1.5650.

The AUD rose today trading around the 1.0359 level especially after a manufacturing index rose to 50.2 last month compared with 47.8 in Nov. in Japan the yen continues to strengthen, hurting exports, trading around 76.67.

Gains Across the Board as Risk Appetite Improves on Manufacturing

Gains Across the Board as Risk Appetite Improves on Manufacturing
Gains Across the Board as Risk Appetite Improves on Manufacturing
Today is the first trading day of 2012 for many markets, yet gains are seen across the board following the better than expected manufacturing data from China,UK and Switzerland.

In China the non-manufacturing PMI unexpectedly rose to 50.3 in Dec. from 49 in Nov., while Switzerland the PMI manufacturing for Dec. rose to 50.7 from 44.8 previous, adding to evidence the global economy is strengthening.

In UK the PMI manufacturing for Dec. rose to 49.6 from 47.7 previous, while in Germany the unemployment rate unexpectedly fell in Dec. to 6.8% from the precious 6.9%.

Signs of increased manufacturing output around the world sustained risk appetite today, increasing demand on the higher yielding assets as well as the commodities, where oil is trading around $100.95 and gold around $1590.45.

Markets will focus today on the US ISM manufacturing expected to rise to 53.4 in Dec. from 52.7 previous as well as the FOMC minutes. In the meantime the USD is trading with strong bearish momentum around the 79.80 level.

In Asia stocks rose today following China’s data, yet volume continued to be thin as markets in Japan,China,New Zealand and Thailand were closed for public holidays. Hang Seng rose 2.40% while the S&P/ASX 200 Index rose 1.10%.

Worries from Europe’s debt crisis were put aside today, yet fears may be back any moment, after EU leaders warned from a tough 2012 which will determine the euro to continue its struggle against other major currencies.

In Europe DAX rose today 1.27% and FTSE 100 rose 1.09%. The euro jumped above the 1.30 level trading as of this writing around the 1.3020. The pound also rose considerably trading around the 1.5590.

The AUD rose today trading around the 1.0325 level especially after a manufacturing index rose to 50.2 last month compared with 47.8 in Nov. in Japan the yen continues to strengthen, hurting exports, trading around 76.70.

Volatility on the Last Trading Day of 2011

Volumes continue to be very low on the last trading day of 2011, therefore movements seem to be exaggerated. Although economic data will be absent today from Europe andU.S., volatility will persist within the broad markets.

Concern over Europe’s two-years debt crisis which could drag the global economy into recession still persist, yet positive data from theUSyesterday signaled the world’s largest economy is withstanding againstEurope’s debt crisis.

The Chicago PMI reached to 62.5 in Dec. from 61.0 expected while the pending home sales rose by 7.3% in Nov. from 1.5% expected, indicating that the US economy seems to be firmer than previously expected.

While markets are believed to continue be unstable today and first few weeks of 2012, mainly being affected byEurope’s debt crisis, the slowing Chinese economy and the unstable outlook for global recovery.

In Asia, stocks closed with gain the last trading day of 2011 on the upbeatUSdata andChina’s manufacturing contraction in Dec. which reinforced the need for policy makers to implement pro-growth policies.

Yet MSCI Asia Pacific Index was down 18% in 2011, the first yearly drop since 2008. All major indexes in Asia fell in 2011, with Nikkei 225 loosing 17%, S&P/ASX 200 falling 14.5% andChina’s CSI 300 Index falling 21.7%.

Risk aversion was high in 2011, mainly due to worries fromEurope’s debt crisis which could drag the global economy into recession, while demand on the safe haven USD and JPY expanded considerably.

In Europe stocks are inching higher on the last trading day of 2011, yet they are heading for their first annual drop since 2008 of almost 12% due to the spreading debt crisis which started withGreecethen reached toItalyandSpain.

The support to the European stocks was given today by the U.S. data, yet worried over the region’s outlook persist as Italy’s bond yields continued to be high even after yesterday’s bond auction.

DAX rose today 0.35% and CAC 40 rose 0.28%, yet the FTSE 100 fell 0.18%. Currencies also move in divergence, with the euro falling trading as of this writing around the 1.2940, while the pound inched higher trading around 1.5435.

The USD is moving in a tight range with some bullish momentum around the 80.35, the yen is strengthening trading around the 77.45 level, while AUD is slightly stronger trading around the 1.0165.

Commodities are stronger today where gold is trading around the $1571.60 level, while crude oil is moving in a tight range around the $100.00 level on fears from Iran’s threat to halt oil shipments.

Mixed Sentiments Dominate Markets on Europe’s Debt Crisis Fears; Inflation Trapped in the U.S

Cautious optimism prevailed the financial markets today, with improved economic reports capping a busy week for the U.S economy, as economic fundamentals proved the world’s largest economy is on the right track of recovery as 2011 nears to end, but negative vibes are still cited among traders as the EU leaders face a three-day deadline to build up funding package to battle the region’s debt crisis.

So far, the Federal Reserve prophecy is about to be fulfilled by the end of this year, as all key inflation data suggest that price pressures in the U.S are no longer a threat to the economic rebound, therefore, the Fed could have more space to consider more stimulus if the recovery falters, which is not likely to happen now as the economy seems to be adding stream at stronger pace than forecasted.

Currency trading was limited today in light of a mix of positive economic reports and fears over Europe’s debt crisis on Friday, where the U.S. dollar steadied against a basket of major currencies on Friday, where the U.S. dollar index was trading at 80.12, compared with the opening level at 80.16. The Euro was little changed against the Dollar, where the EUR/USD pair traded around $1.3040, compared with the opening level at $1.3029.

The British Pound consolidated against the Dollar as well, where the GBP/USD pair traded around $1.5521, compared with the opening level at $1.5522, and the U.S. dollar dropped faintly against the Japanese Yen, where the USD/JPY pair was trading at 77.66, compared with the opening level at 77.85.

Stocks in the United States were up at early trading on Friday, paring a weekly for the Standard & Poor’s 500 Index, as the Dow Jones Industrial Average was higher by nearly 0.5% to trade around 11,9332, while the S&P 500 index was higher by nearly 0.9 percent to trade around 1,226. European stock indexes were mixed before closing on Friday, where FTSE 100 was up by 0.15% to trade at nearly 5,408 and the DAX was lower by nearly 0.30% to trade around 5,571.

The yellow shiny metal gained to trade around $1,593.07 an ounce after gold prices opened at $1,575.34 levels while crude oil prices rose to trade around $93.83 a barrel since the opening price of $93.72 levels.

Improved Economic Momentum Boost Gains in Markets

A wave of optimism was spread throughout the financial markets on Thursday, following upbeat economic reports from Europe and the United States, indicating that the economic recovery is adding stream regardless of the escalating debt woes that have been spreading fears around the markets

In a busy session for the U.S economy, data from the U.S Department of Commerce showed that jobless claims dropped to 366 thousand from 385 thousand, the lowest level in three years, while manufacturing data came much better than forecasted in December.

A gauge of manufacturing activity in the New-York region accelerated more than estimates to 9.53 following an anemic expansion worth 0.6, while the factory growth in the Philadelphia Federal District advanced to 10.3 from 3.6.

Positive vibes dominated the market on Thursday though some of economic reports missed median estimates such as the U.S industrial production report which showed the U.S factory production dropped 0.2 percent after increasing 0.7 percent, while the U.S Department of Treasury reported its net long-run TIC flows eased significantly to $4.8 billion from $68.6 billion.

The U.S producer Prices Index was released as well to show that price pressures continue to be subdued  as been said by the U.S Federal Reserve Bank, and won’t be threatening and will actually support the U.S economy to maintain a stronger economic recovery.

Moreover, economic fundamentals from the euro area came better than forecasts as PMI manufacturing advanced reading came in at 46.9 from the prior reading of 46.4, while the services contraction eased to 48.3 from 47.5 in November.

After a three-day gain, the U.S dollar where little changed major currencies on Thursday, where the US dollar Index opened at 80.52 levels and traded around 80.36, the Euro versus the dollar rebound a little where the EUR/USD pair trades around 1.3022, compared with the opening level at 1.2985.

The British Pound rose faintly against the dollar, where the GBP/USD pair trades around 1.5498, compared with the opening level at 1.5472. The dollar fell before the Japanese Yen, since the USD/JPY opened at 78.12 levels to currently trade around 77.88.

Stocks in the United States were higher after opening on Wednesday, as the Dow Jones Industrial Average traded around 11888 with a 0.55 percent gain, while the S&P 500 index was up 0.53% to trade around 1218. European stock indexes extended gain before closing on Wednesday, where FTSE 100 Index was down by nearly 2.25% to trade at 5395 and the DAX Index was up by 0.83% to trade around 5726.

After rebounding from a two-month low, gold prices steadied since opening at $1574.42 levels to currently trade around $1574.33 an ounce, while crude oil prices steadied low after opening at $94.91, where crude oil trades around $96.00 a barrel, following its big drop after the OPEC decided to increase the production ceiling.

Unstable Markets as Sentiment is Fragile and Data Disappoint

Markets remain under pressures although some correction was seen this morning following the sharp losses suffered yesterday. Concerns over the outlook of the European debt crisis will persist today after Fitch downgraded five major European banks.

Yesterday yields on Italian 2-year bonds rose to a record high of 6.47%, the highest since 1997, while German yields fell to 0.29% highlighting that traders are heavily targeting safer investments as the global economic growth is being further damaged by the European debt crisis.

Investors may continue to avoid riskier assets and head towards the safe haven USD and treasuries, whereSpainsold today 6 billion euros of bonds far surpassing a target of 3.5 billion euros as demand proved to be very solid. The bonds were sold at a lower average yields than the previous auction.

Fitch downgraded yesterday five major European banks including Banque Federative du Credit Mutuel, Credit Agricole, Danske Bank, OP Pohjola Group and Rabobank Group, and warned of a “broader phenomenon of stronger headwinds facing the banking industry as a whole”.

AsEurope’s economy is likely to slip back into a recession while downgrade risks by major rating agencies remain high, sentiment continues to be fragile. Thereby Asian stocks dropped further today with the MSCI Asian pacific Index falling 1.8% at 16:20 inTokyo.

In Europe stocks opened higher, where FTSE 100 gained 0.62% while DAX rose 1.11% mainly as a technical correction, after the sharp losses seen since Monday. Yet this rally is likely to be short-lived since European leaders failed to adopt a last solution to the debt crisis.

Economic data confirms the slowdown seen in global growth; in Japan the Tankan index of sentiment among large manufacturers fell more than expected; in China the foreign direct investment dropped for the first time since 2009 and the preliminary PMI manufacturing showed the sector may contract a 2nd month.

In Europe and Germany the services and manufacturing PMI improved slightly in Dec., yet employment fell during Q3 inEuropeby -0.1%. InU.K.retail sales dropped considerably in Nov. from the previous month. Switzerland held the interest rate steady at 0.0%, while the industrial production fell by -1.4%.

Markets are eyeing today important economic data from theU.S., including the weekly jobless claims, the industrial production, the Net TIC flows, the current account, the PPI, NY empire manufacturing, as well asPhiladelphiafed index and finally the EIA natural gas storage change.

The euro is trading with some bullish momentum around the 1.3005 after Dec.’s manufacturing and services PMI rose in Germany and Europe. The pound also found some upside support, and is trading now around the 1.5520 level after the USDIX fell today towards the 80.30 level.

The yen is trading around the 77.85 level while the CHF is trading around the 0.9435 since demand on safe havens is still strong. The AUD is moving in a tight range around the 0.9915 as investors are still worries over the outlook of the European debt crisis.

Commodity markets were severely hit by the pessimism spread among traders this week. Oil fell below the $95.00 per barrel level after OPEC decided yesterday to increase daily production to 30 million barrels in order to avoid shortage of supplies and stabilize prices. Crude is now trading around $95.80 level.

Gold broke the $1600.00 level as inflation risks are easing while investors head for the safe haven USD. Yet commodities recovered some of the losses where gold is trading around the $1590.00 level, yet pressures may continue to be bearish as concerns over the outlook of the global economy persist.

Pessimism Return To Dominate Markets Amid Ongoing Debt Woes

Jitters returned once again to rattle up traders and a wave of pessimism cracked the financial markets on Wednesday, after a surge in costs of insuring against default on Europe’s debt crisis and German opposition of using the euro bonds as a shield to battle the region’s debt crisis, together highlighted debt crisis fears and the ongoing battle to halt the regions debt turmoil.

Debt crisis pessimism triggered a selloff wave around financial markets today, while risk appetite was barely witnessed as traders backed off from risky trading and were mostly satisfied with lower-yielding assets. Stocks and commodities fell on Wednesday, the euro dropped heavily to trade below the $1.30 level while the dollar extended it rally.

This morning, the Italian treasury sold 3 billion euros of five-year bonds in an auction that missed that the maximum target with a demand of 1.42 times compared with 1.47 last month, while the yield edged up to 6.47 from 6.29 percent from the prior auction.

Weak demand on the bonds slapped the cost for European banks to borrow in dollar up to a record by 6 bp to 147 bp from 141 bp offered by the euro interbank, the highest in two weeks, adding to signs that the European banks is struggling to contain the debt crisis.

In addition, German Chancellor Angela Merkel opposed once again the usage of European bonds as a tool to stem the Europe’s debt crisis, signaling that there is are “no simple and fast solutions” to sustain fiscal consolidation and the European Stability Mechanism “ will suffer setback”, but reassured that Europe will emerge stronger from the crisis that it entered.

The U.S economy was basically out of the equation today, lacking key fundamentals enough to lure cautious traders, but just with figures from the U.S Department of Labor showed that U.S Import Prices rose 0.7 percent, up from 0.5 percent shed in October and slightly below median estimates 0.1 percent, while November exports prices gained a slender 0.1 percent after a 2.1 percent drop, adding to signs the Federal Reserve confined inflation in November.

The U.S. dollar gained for the third consecutive versus a basket of currencies on Wednesday, since the US dollar Index opened at 80.25 levels to trade around 80.62. The Euro versus the dollar rebound a little from its lowest since January, where the EUR/USD pair trades around 1.3002, compared with the opening level at 1.3018.

The British Pound was nearly changed against the Dollar, where the GBP/USD pair trades around 1.5469, compared with the opening level at 1.5477. The dollar also gained slightly versus the Japanese Yen, where the USD/JPY opened at 77.97 levels and currently trades around 78.03.

Stocks in the United States were lower after opening on Wednesday, as the Dow Jones Industrial Average traded below the 12,000 level with a 1.61 percent drop to about 11589, while the S&P 500 index was down 0.83% to trade around 1215.

European stock indexes closed with sharp losses on Wednesday, where FTSE 100 Index was down by nearly 2.25% to trade settle at 533.6690 and the DAX Index was down by 1.72% to close and settled at 5675.14 5795, while the CAC 40 Index shed 2.25 percent to settle at 2976.17.

After the dollar gained strongly on Wednesday, gold prices dropped heavily to currently trade around $1589 after opening at almost $1629 an ounce, while crude oil prices fell after opening at $99.88 as the OPEC oil producers sealed their first new accord in three years over to increase the its production ceiling Meanwhile, crude oil trades around $96.00 a barrel.

Pessimism Spreads through Markets on Reports Merkel Rejected Increasing EU Bailout Fund

Earlier optimism in markets diminished soon after the opening of the U.S. session, where equity indexes in the United States rallied at the start of Tuesday’s session, as financial shares recovered Monday’s losses and supported demand for higher yielding assets, as investors’ risk appetite improved, especially after the reported strong demand for the Spanish bond sale, which eased concerns over the outlook of the European debt crisis.

Nonetheless, pessimism dominated markets once again after reports suggested that German Chancellor Angela Merkel rejected increasing the bailout fund for European sovereign debt. Moreover, the worse than expected U.S. retail sales put more negative pressure on confidence, as retail sales rose in November but well below median estimates, retail sales increased by 0.2% in November, worse than median estimates of 0.5%.

Meanwhile, investors are now eyeing the FOMC meeting, where the Federal Open Market Committee is expected to leave the current monetary policy unchanged, as the FOMC is expected to confirm its pledge to keep interest rates at a record low until mid 2013, while reports suggest that the FOMC will be putting the final touches on its new communication policy, although the FOMC is not expected to change its communication policy at this meeting.

The U.S. dollar erased earlier losses and rallied against a basket of major currencies on Tuesday, where the U.S. dollar index was trading at 79.72, compared with the opening level at 79.54. The Euro fell for a second day against the Dollar, where the EUR/USD pair traded at $1.3075, compared with the opening level at $1.3164, the British Pound also fell against the Dollar, where the GBP/USD pair traded around $1.5521, compared with the opening level at $1.5575, and the U.S. dollar was little changed against the Japanese Yen, where the USD/JPY pair was trading around 77.93, compared with the opening level at 77.95.

Stocks in the United States were mixed by opening on Tuesday, as the Dow Jones Industrial Average was up by nearly 0.20% to trade around 12,046, while the S&P 500 index was up by nearly 0.10% to trade around 1238. European stock indexes were also mixed before closing on Tuesday, where FTSE 100 was up by nearly 1.20% to trade at 5493 and the DAX was down by nearly 0.25% to close around 5771.

Gold prices fell to trade now around $1657 an ounce, but crude oil prices gained to trade around $100 a barrel.

Optimism Fades Over EU Summit Draft after Moody’s Reignite Debt Crisis Concerns

Following optimism over the EU Debt accord on Friday, markets awaked early Monday on new fears that Europe’s debt-trapped nations could be actually downgraded in the next quarter by one of the world’s biggest credit rating agencies. Traders went jittered, stocks slumped sharply, euro dropped and the dollar gained.

Earlier Monday, Moody’s Investors Service said in a statement that it will review the rating of European Union nations in the first quarter of 2012, after last week’s summit failed to craft a credible measure to halt the debt crisis, leaving the euro zone vulnerable to further possible shocks.

More failure to produce effective measures to break the debt impasse in the euro zone fueled fears the European outlook is yet to worsen. Traders went skeptical and began to weigh last week’s summit, with more disappointments after the EU Leaders “mostly” agreed-on new government treaty failed to quell market jitters.

And though Italian and French debt auctions went well with a slight drop in yields at the auction and good demand, yet still was offset by prevailing pressure and rising yields on the benchmark 10-year bonds in the region, especially for Spain that rose again above 6.0, pointing that last week’s optimism was barley seen today.

The U.S. dollar build up momentum against its peers on Monday, after the US dollar Index opened at 78.75 levels and picked up to trade around 79.37. The Euro fell the most in two weeks against the Dollar, where the EUR/USD pair trades 1.3184, compared with the opening level at 1.3370, the British Pound fell slightly against the Dollar.

The GBP/USD pair trades around 1.5592, compared with the opening level at 1.5653. Japanese Yen strengthened on Monday but little changed versus the dollar, after the USD/JPY opened at 77.61 level and currently trades around 77.87.

Stocks in the United States were lower after opening on Monday, as the Dow Jones Industrial Average traded below the 12,000 level with a 1.61 percent drop, while the S&P 500 index was down 1.85% to trade around 1232.

European stock indexes were also lower before closing on Monday, where FTSE 100 was down by nearly 1.62% to trade around 5438 and the DAX was down by nearly 3.2% to close around 5795.

After the dollar rebounded strongly on Monday, gold prices dropped heavily to currently trade around $1663 after opening at almost $1711 an ounce, while crude oil prices fell as well after opening at $99.49 to trade around $98.21 a barrel.

Risk Aversion as Euphoria Over Europe’s Rescue Deal Fades

Concerns about the euro zone’s safety persist as the euphoria over Europe’s rescue deal is fading since investors consider the measures to be insufficient to prevent the spread of the debt crisis, while inChinaexports rose by the weakest pace since 2009.

In Asia this morning, confidence and risk appetite were sustained by the improvement in the US consumer confidence which rose to a 6 months high last Friday, while European leaders revealed last week a blueprint for a fiscal deal aimed to save the euro union.

However, as the excitement over Europe’s rescue deal started to fade, worries overEurope’s growth were reignited, especially since the deepening debt crisis is starting to disturb global trading and limit demand on exports, pushing the Chinese exports to the weakest in more than two years.

As the Chinese economy seams to be slowing down, and inflations proved to be softening, Chinese policy makers are expected to start loosen their monetary policy to sustain growth. Thereby Nikkei 225 rose today by 1.37% and Australia’s S&P/ASX 200 Index rose 1.18%.

In Europe however stocks are dropping as investors are uncertain about the rescue deal. FTSE 100 fell 0.53% while DAX fell 1.27% asItalyis preparing to sell 7 billion euros of one year bills today, while France is preparing to sell 6.5 billion euros of short-term debt in an auction.

While Europe will lack the economic data today, and the US will only release the monthly budget statement for Nov., investors are seeking the safe haven USD which is trading with strong bullish momentum around the 79.20 level, pushing the higher yielding assets sharply to the downside.

The euro is trading with strong bearish momentum around the 1.3260 from the opening at 1.3378 while the pound is trading around the 1.5544 level from the opening at 1.5651. The yen also weakened trading around the 77.81 level, while the AUD is trading around 1.0110 from the opening at 1.0208.

The dollar’s bullish momentum is imposing downside pressures on commodities, while oil is trading around the $98.00 per barrel level from the opening at $99.54, while gold is trading around the $1678.50 per ounce level from the opening at $1712.60 per ounce level.

EU Summit Decisions Lift Up Debt-Crisis Optimism Once Again

Financial markets were dominated with fresh sentiments and new hopes on Friday, after European leaders agreed to toughen budget rules, lend the IMF bilateral loans up to 200 billion euros to help debt-laden nations and boost the capacity of the ESM to 500 billion euros.

The measures were considered credible though EU leaders failed to get approval of all 27-euro members to a change treaty, anyhow, the newly-born intergovernmental treaty, which will include the 17 euro-area nations besides to any EU country that would like to join, is now the key vaccine to cure debt crisis.

The decisions made by European leaders in addition to the ECB cut to interest rate by another 25 basis points to 1.00 percent, and the adopt of non-standard measures to give access to liquidity to banks improved the sentiment so far and enhanced risk appetite before weekend.

While jumping to the world’s largest economy, gains were triggered following the European debt accord and quite cheerful economic reports as well, as both consumer confidence and the U.S trade balance beat median estimates, adding to hopes the economic momentum will support the overall global economic recovery.

U.S consumer confidence exceeded forecasts as reported this morning, rising to 67.7 in its preliminary reading for December from 65.8 in November, according to University of Michigan survey, while also the U.S Department of Commerce U.S reported earlier the U.S trade deficit narrowed 1.6 percent to $43.5 billion from $44.2 billion is September.

The U.S. dollar fell slightly after rebounding to the upside against a basket of major currencies on Friday, where the U.S. dollar index was trading at 78.77, compared with the opening level at 78.85. The Euro rose faintly following a two-day low against the Dollar, where the EUR/USD pair traded at $1.3376, compared with the opening level at $1.3345.

Moreover, the British Pound edged up a little bit against the Dollar, where the GBP/USD pair traded around $1.5651, compared with the opening level at $1.5635, and the U.S. dollar was little changed against the Japanese Yen, where the USD/JPY pair was trading near 77.54, compared with the opening level at 77.68.

Stocks in the United States were higher by opening on Friday, as the Dow Jones Industrial Average was up by nearly 1.3% to trade around 12,158, while the S&P 500 index added nearly 1.4% to trade around 1,251. European stock indexes were also higher before closing on Friday, where FTSE 100 was up by nearly 0.8% to trade at 5528 and the DAX was rose nearly 1.9% to close around 5986.

Gold prices inclined today to trade now around $1715 after opening at level of $1709 an ounce and crude oil prices were merely changed after opening at $98.19 level to steady up around $98.45 a barrel.

Pessimism Spreads in Markets despite ECB Easing Policy and Falling Jobless Claims, as EU Summit Doubts Mount

Pessimism dominated markets ahead of the EU summit on Friday, where the U.S. dollar strengthened despite the ECB’s announcement of more monetary easing, as the European Central Bank cut the benchmark interest rates by 25 basis points to 1.00% in line with forecasts and announced more nonstandard measures to ease tensions surrounding the European debt crisis. Nonetheless, the ECB stopped short from signaling quantitative easing, which weighed down on confidence ahead of the EU summit on Friday.

Also, the Bank of England decided to keep its monetary policy unchanged on Thursday, where the BOE left the benchmark interest rates at 0.50%, while also keeping the Asset Purchase Program unchanged at 275 billion pounds, which was in line with median estimates.

Moreover, Canada released the housing starts for November, where housing starts fell to 181.1 thousand, worse than median estimates of 200.0 thousand.

Meanwhile, U.S. jobless claims failed to restore confidence despite falling to the lowest level in 9 months, where jobless claims fell to 381 thousand last week, well below median estimates of 395 thousand and the prior revised estimate of 404 thousand.

Pessimism started to spread through markets ahead of the EU summit, where investors are starting to doubt the ability of EU leaders to come up with a resolution to the debt crisis. Accordingly, investors targeted lower yielding assets including the U.S. dollar, which put higher yielding assets under pressure.

The U.S. dollar gained sharply against a basket of major currencies on Thursday, where the U.S. dollar index was trading at 78.82, compared with the opening level at 78.43. The Euro fell against the Dollar, where the EUR/USD pair traded at $1.3307, compared with the opening level at $1.3399, the British Pound also fell against the Dollar, where the GBP/USD pair traded around $1.5620, compared with the opening level at $1.5699, and the U.S. dollar fell against the Japanese Yen, where the USD/JPY pair was trading around 77.54, compared with the opening level at 77.68.

Stocks in the United States were lower by opening on Thursday, as the Dow Jones Industrial Average was down by nearly 0.45% to trade around 12,140, while the S&P 500 index was down by nearly 0.75% to trade around 1251. European stock indexes were also lower before closing on Thursday, where FTSE 100 was down by nearly 0.60% to trade at 5512 and the DAX was down by nearly 1.80% to close around 5886.

Gold prices fell to trade now around $1715 an ounce and crude oil prices fell as well to trade around $98 a barrel.

Caution Ahead of ECB’s and BoE’s Meetings

Markets are cautious and volatile ahead of ECB’s and BoE’s monetary policy meeting later today, as well as Friday’s EU summit, since some traders doubt the European leaders’ ability to come up with a clear plan that would solve the two-years-old debt crisis.

Investors are locking in their profits ahead of ECB’s and BoE’s last monetary policy meetings for this year, where European policy makers are believed to cut rates to record low at 1.00%, while BoE may hold rates steady awaiting for more measures from Europe.

Global conditions continue to be unstable, and the confirmation came this morning from the Australian unemployment rate which unexpectedly rose to 5.3% in Nov. from 5.2% previous, while Japan’s machinery orders unexpectedly fell in Oct. to -6.9% on strong yen and slower global demand.

Meanwhile South Korea held rates steady at 3.25% today,New Zealand held rates steady at record low of 2.5%, while Indonesia maintained rates steady at 6%, all in an attempt to sustain growth as the downside risks imposed by Europe’s debt crisis are widening and weakening demand on exports.

However some hopes that EU leaders will announce strong measures to ease the euro zone debt crisis are seen across the broad markers today, providing some markets with bullish momentum. As a result European stocks managed to rise today at opening where FTSE 100 gained 0.27% while DAX rose 0.69%.

In Asia however stocks dropped today with Nikkei 225 loosing 0.66% while Hang Seng lost 0.69% as investors were seeking safer positions ahead of the crucial summit of European Union leaders and Japan’s GDP report set for early tomorrow morning with speculations of a downside revision for growth during Q3.

Europe will lack the economic data today, however the US will release the weekly jobless claims and the wholesales inventories. Yet the attention will focus on Europe’s rate decision and Mario Draghi’s press conference during which he might announce more aggressive measures to protect Europe from the debt crisis.

Currency markets are moving in tight ranges today awaiting the ECB’s and BoE’s monetary policy meetings, where the USD is almost unchanged around the 78.40 level while the euro is moving in a tight range around the 1.3400 level. The pound is trading around 1.5720 level and the AUD is trading around 1.0285 level.

The yen strengthened today as demand on safe haven widened in Asia today, while the limited movement seen by the USD is keeping commodities in tight ranges, where oil is trading around $100.90 per barrel while gold is trading around the $1740.50 per ounce level.

Cautious Trading Dominates Markets ahead of Thursday’s ECB Rate Decision and Friday’s EU Summit

Cautious trading dominated European and U.S. markets on Wednesday ahead of the European Central Bank meeting on Thursday, where the ECB is expected to cut the benchmark interest rates by 25 basis points to 1.00%, while investors are also eyeing the EU summit at the end of this week on hopes EU leaders will be able to reach an agreement on a plan to ease the European debt crisis.

Accordingly, investors targeted lower yielding assets, as the level of anxiety continues to build in markets amid some doubts that EU leaders will once again fail to reach a resolution to ease the euro zone debt crisis, and we should expect volatility to continue to dominate markets throughout this week until investors have a better idea of how EU leaders intend to tackle the debt crisis.

The U.S. dollar rebounded to the upside against a basket of major currencies on Wednesday, where the U.S. dollar index was trading at 78.60, compared with the opening level at 78.45. The Euro fell against the Dollar, where the EUR/USD pair traded at $1.3387, compared with the opening level at $1.3409, the British Pound rallied against the Dollar, where the GBP/USD pair traded around $1.5677, compared with the opening level at $1.5602, and the U.S. dollar was little changed against the Japanese Yen, where the USD/JPY pair was trading around 77.73, compared with the opening level at 77.75.

Stocks in the United States were lower by opening on Wednesday, as the Dow Jones Industrial Average was down by nearly 0.55% to trade around 12,081, while the S&P 500 index was down by nearly 0.90% to trade around 1246. European stock indexes were also lower before closing on Wednesday, where FTSE 100 was down by nearly 1.20% to trade at 5501 and the DAX was down by nearly 1.50% to close around 5939.

Gold prices were little changed to trade now around $1728 an ounce and crude oil prices fell after the EUA report showed crude oil stockpiles increased above expectations to trade around $99 a barrel.

Improved Sentiment on Believes EU Leaders will Boost Efforts to Solve the Debt Crisis

Optimism was seen spreading through the Asian and European markets today on hopes Europe will boost efforts to cure the debt crisis during Friday’s EU summit, after S&P warned it might downgrade 15 European nations and the EFSF.

Investors are hoping that officials might come up with a convincing plan for solving the debt crisis as pressures are mounting, which is sustaining optimism and increasing demand on higher yielding assets.

Sentiment found additional support from the parliamentary approval to Greek Prime Minister’s 2012 budget, while Australia’s economy grew on a yearly basis more than expected by 2.5% from 1.4% a year earlier.

Yet since investors are anxiously waiting for the European summit, the ECB’s rate decision tomorrow and some key economic data from China later this week, caution will be seen among traders, which could keep trading limited.

Optimism over the outlook of the EU debt crisis brought gains not only in Europe today but in Asia as well, where Nikkei 225 ended 1.71% higher while Hang Seng was up 1.58%. In Europe FTSE 100 rose 0.50% while DAX rose 0.74%.

If EU leaders will be able to find a final solution to the debt crisis then this wave of optimism might continue, increasing demand for riskier higher yielding assets, however if the summit will disappoint, it will weigh down on confidence and demand on safe haven will be reignited.

Markets will be eyeing today Germany’s industrial production expected to weaken in Oct., while in UK the manufacturing production fell more than expected to -0.7% in Oct. The US will be releasing its consumer credit and the EIA crude oil inventories.

The euro is enjoying today some bullish momentum, trading as of this writing around the 1.3410 level, while the pound is trading to the upside around the 1.5615 level. The USD is weakening trading around the 78.47 level. The yen is almost unchanged around the 77.68 level.

As the US dollar weakened amid rising optimism in markets that EU leaders will take strong actions to ease the European debt crisis, commodities managed to find some support, where oil is trading around $101.60 while gold is trading around $1730.10.

Mixed Sentiments Dominate, as S&P Warns Europe of Possible Debt Downgrade in Cautious Trading

Mixed feelings dominated financial markets on Tuesday amid the lack of economic data from the United States, as fears continued to dominate global financial markets over the outlook of the European debt crisis after rating agency Standard & Poor’s announced it could downgrade the credit rating of 15 euro zone countries including Germany and France. Standard & Poor’s also signaled it could downgrade the credit rating of the European Financial Stability Facility EFSF.

Nonetheless, better than expected factory orders from Germany provided some hope for investors, where factory orders increased by 5.2% in October, better than median estimates of 1.0%, while compared with a year earlier, factory orders increased by 5.4%, also better than median estimates of 1.9%. Moreover, GDP data from the euro zone for the third quarter came in line with median estimates.

Meanwhile, the Bank of Canada left the benchmark interest rates unchanged at 1.00% in line with median estimates, where the BOC signaled that the European debt crisis could weigh down on global economic growth. Nonetheless, the BOC signaled that rising economic activities in the United States represent a good sign for the outlook, since the United States is indeed Canada’s largest trading partner. Canada also released the Ivey PMI for November, which rose to 59.9, better than median estimates of 55.5.

The U.S. dollar fell slightly against a basket of major currencies on Tuesday, where the U.S. dollar index was trading at 78.62, compared with the opening level at 78.71. The Euro was little changed against the Dollar, where the EUR/USD pair traded at $1.3383, compared with the opening level at $1.3386, the British Pound also fell against the Dollar, where the GBP/USD pair traded around $1.5601, compared with the opening level at $1.5642, and the U.S. dollar fell slightly against the Japanese Yen, where the USD/JPY pair was trading around 77.75, compared with the opening level at 77.80.

Stocks in the United States were mixed by opening on Tuesday, as the Dow Jones Industrial Average was up by nearly 0.25% to trade around 12,129, while the S&P 500 index was down by nearly 0.05% to trade around 1256. European stock indexes were also mixed before closing on Tuesday, where FTSE 100 was higher by nearly 0.20% to trade at 5579 and the DAX was down by nearly 1% to close around 6043.

Gold prices remained under pressure and dropped to trade now around $1709 an ounce and crude oil prices were little changed to trade around $100 a barrel.

Risk Aversion on S&P’s Downgrade Warnings to Europe

Pessimism was seen across the broad markets today after Standard & Poor’s warned it might downgrade 15 European nations including Germany and France, spreading concerns in markets and boosting demand for lower yielding assets.

If European leaders will fail to decide on a credible plan during Friday’s summit that would solve the region’s debt crisis, six nations might lose their AAA credit ratings, spreading pessimism over the outlook of the European economy.

This ended the rally seen since last week in the global equity markets, as risk aversion increased demand on safe haven. Investors must be cautious over the coming period ahead of the ECB meeting and the EU summit later this week.

As uncertainty continues to surround the outlook of the European debt crisis the Australian central bank cut its interest rate by 25 basis points to 4.25% to sustain growth, signaling that Europe’s efforts to end the debt crisis are still not enough.

We expect markets to remain under pressure since more pessimism might be spread among traders ahead of the ECB’s meeting and EU’s summit. US lack the economic data today. While in Europe the GDP was unrevised at 0.2% in Q3.

In Asia stocks fell as the regions is facing “much greater downside risks”, and Nikkei 225 ended lower 1.39%, while Hang Seng closed 1.24% down. InEurope, FTSE 100 fell 0.23% while DAX fell 1.09%.

The euro is trading with some bearish momentum around the 1.3390 level, while the pound is hovering around the 1.5650 as of this writing. The USD is almost unchanged around the 78.55 level. The yen is rising trading around 77.65.

Oil is almost unchanged trading around $100.88 on the euro zone downgrade risks, while gold is trading around $1719.50. The AUD fell today trading around 1.0225 after the RBA lowered rates to 4.25%.

EU Optimism Boosts Demand for Higher Yielding Assets, as USD Falls against Major Currencies

A wave of optimism dominated global financial markets on Monday, where traders were already encouraged by the unexpected drop in U.S. unemployment reported last Friday, while optimism that EU leaders could be able to reach a resolution to the debt crisis in Europe, boosted confidence in markets and supported demand for higher yielding assets, as the U.S. dollar fell against major currencies, while equities, commodities, and major currencies rallied.

Investors are optimistic that EU leaders could reach a plan to ease the euro zone debt crisis at this week’s EU summit, while the ECB is expected to loosen its monetary policy as well in order to help in easing the deepening debt crisis. Moreover, reports signaled that Germany and France have reached an agreement on reforms to solve the debt crisis and prevent another situation in the future, which also supported confidence in markets.

Nonetheless, the U.S. ISM services index signaled that activities in the services sector eased in November below projections, where the ISM services index eased to 52.0, compared with the prior estimate of 52.9 and below median estimates of 53.9. Nevertheless, investors were focused on the developments in Europe, which overshadowed the worse than expected ISM services index.

The U.S. dollar fell sharply against a basket of major currencies on Monday, where the U.S. dollar index was trading at 78.23, compared with the opening level at 78.61. The Euro gained against the Dollar, where the EUR/USD pair traded at $1.3459, compared with the opening level at $1.3416, the British Pound gained strongly against the Dollar, where the GBP/USD pair traded around $1.5699 compared with the opening level at $1.5605, and the U.S. dollar fell against the Japanese Yen, where the USD/JPY pair was trading around 77.82, compared with the opening level at 78.09.

Stocks in the United States rallied by opening on Monday, as the Dow Jones Industrial Average was up by nearly 1.20% to trade around 12,165, while the S&P 500 index was up by nearly 1.60% to trade around 1264. European stock indexes were also higher before closing on Monday, where FTSE 100 was higher by nearly 0.45% to trade at 5577 and the DAX was up by nearly 0.60% to close around 6116.

Gold prices fell to trade now around $1740 an ounce and crude oil prices gained to trade around $101-$102 a barrel.