[B]Merkel boosts global markets[/B]
[I]DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments[/I]
Wall Street rose to its highest level since April after German Chancellor, Angela Merkel, seemed to support the European Central Bank’s efforts to strengthen the Euro and fight the region’s debt crisis. The high technology index, NASDAQ, outperformed the market after Cisco shares jumped nearly 10% and Apple reached a new high. This came after the US indexes had moved sidelong for the last two weeks. Yesterday’s gains seem to indicate a continued upward market trend. The positive stock developments in US were followed up in Asia where both the South Asian MSCI- and Nikkei indexes rose in morning trade.
At press conference with the Canadian Prime Minister yesterday, Angela Merkel voiced strong support for the EURO, along ECB President Mario Draghi’s statement last month to do whatever it takes to save the euro. Merkel also stressed the need for Europe’s swift fiscal policy integration. Merkel’s statement was interpreted as Germany is inching closer to take active steps for economic stimulus. Germany has so far been reluctant to give up on its strict monetary and fiscal policies.
Merkels comments gave a boost both to stock markets in Western Europe and strengthened the Euro. Euro/USD rose from 1.2275 to a high on 1.2373, trading at 1.2350 in opening in Asia, well inside the established short term corridor where the EURO for the last two weeks has floated between 2050 and 1.2450. USD/JPY is stronger than in weeks, trading at 79,32. The dollar has weakened towards other currencies on increased risk appetite. This has boosted commodities which are trading higher. Gold bounced back from low 1600 to trade at 1615. Also silver (28.15) is higher. Brent crude is back on 114 level from Wednesday’s high on 116 while NYMEX crude saw USD 95 for the first time in several weeks.
While few observers doubt that ECB will take decisive action to tackle the ongoing debt and banking crisis in the Euro zone, the outlook is less clear for the US Federal Reserve’s future policy measures. US data continue to be firm. Two top Federal Reserve officials yesterday weighed in against further monetary policy easing. A third one stated that US interest rates needed to be raised earlier than the 2014 deadline set by the Federal Reserve.
[I]Copyright: United World Capital[/I]
[B]Risk appetite still robust[/B]
[I]DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments[/I]
Japan’s Nikkei share average continued to inch higher Monday morning as risk appetite remained robust. The Nikkei index reached a three month’s high on Friday helped by a weaker Japanese yen. USD is still up against JPY trading at 79,50. The weaker Yen has given Japanese exporters a welcome support. Thailand presented much stronger than expected GDP-figures this morning while Chinese stocks reached its lowest level in 3 years.
The increased risk appetite and optimism in Asia and other markets seems to be driven by sustained hopes for progress in European leaders tackling of Euro zone debt crisis. German Chancellor Angela Merkel went last week far in backing ECB President Mario Draghi in his unconditional support for the Euro. During a state visit to Canada Ms Merkel seemed to second Draghi’s statement, in that Germany will take all means necessary to support the EURO.
The strength of the content of these statement will be tested later this week when Greek Premier Antonis Samaras on Friday meets Merkel in Berlin to ask for a revised austerity schedule. So far, neither Germany nor the EU-commissions have demonstrated any willingness for compromise, and threatened not to pay out the September bail out tranche if Greece fails to meet its austerity obligations.
EURO/USD is in early trading Monday morning at the same level as Friday 1.2331. Further short term development will depend on how ECB and EU-institutions handle Greece and higher Spanish and Italian bond prices. Rumors say that ECB is considering a ceiling for bond prices to avoid further speculation. Oil prices are higher as the US proposal to use oil strategic reserves to dampen prices, have met with skepticism. Brent is at 114,50 and NYMEX crude reached above 96. Gold (1617) and Silver (28,15) are also trading higher.
[I]Copyright: United World Capital[/I]
[B]Apple most valuable company in history[/B]
[I]DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments[/I]
Apple shares reached a new high becoming the most valuable public listed company of all time yesterday. Shares rose to USD 665 up 2,6 % from last week. The combined value of Apple shares exceed the previous record set by Microsoft. Stocks were otherwise flat in New York on Monday experiencing signs of fatigue after six-week of gains and uncertainty regarding the handling of the debt crisis in Europe. The South Pacific Asian stock index, MSCI, is as the Japanese Nikkei up in early trading in Asia.
EURO/USD is trading up, 1.2357, on expectations to the top level meetings in Europe in the second half of the week.Greek Premier Antonis Samaras is likely to ask for a two years postponement of the execution of austerity measures when he meets with German Chancellor, Angela Merkel, in Berlin on Friday. Germany seems adamant. Finance Minister Schaubel stated yesterday that he sees no point in throwing more money into a bottomless Greek hole. The Foreign Minister of Finland stated that a possible Greek exit from the Euro is on the agenda. The Minister added that the Greeks know what it takes to stay in the Euro. It is up to Greece to decide whether they are willing to undertake the necessary obligations and measures to stay as a EURO- member.
While there is little room for compromise and new postponements for Greece, Germany seems to have moved closer to other Euro-countries and the European Central Bank, ECB, regarding possible purchase of bonds from struggling Euro-economies as Italy and Spain. A ceiling or threshold for the interest rate on these bonds have been discussed as a measure to avoid speculation.
As long as such solutions are aired, the Euro is probably going to inch upwards for the rest of the week till we see a more clear picture. Long term odds point against the Euro and in support of USD and precious metals. Gold prices have reached 1621 and silver is also stronger (28,85). Oil prices are stable: NYMEX at 96 and Brent 114.
[I]Copyright: United World Capital[/I]
[B]Asia slips back on Japan export[/B]
[I]DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments[/I]
Asian stocks slipped back after Japan’s export fell an annual 8,1 percent in July. Collapsing shipments to Europe and a steep fall in sales to China caused the deepest drop in export in six months. The Japanese yen strengthened against the dollar trading at 79,28. The South Asian Pacifix index, MSCI fell 0,7 percent. The US-markets rallied during the first part of the session, but fell back from record highs. Standard and Poor’s 500 index rose to a four year high before slipping back into red.
The Euro/USD jumped back to a high on 1.2488 on expectations that the European Central Bank, ECB, will act to rein in surging borrowing costs. The interest rate on both Spanish and Italian bonds fell sharply in yesterday’s trade. Crude oil prices are steady. Brent close to 115 and NYMEX above 96. Gold (1640) and silver (29,25) are bullish, and some experts claim that we are turing into a bullish commodity and precious metals market.
The Euro broke through the short term technical resistance level in its recent two week corridor where the common currency has seen movements between 1.2042 and 1.2444 on the upside. The rally we recently have seen in stocks is, however, has been built not on fundamentals, but on expectations that ECB shall convince resistant Germans to buy bonds to cap the yield of troubled euro zone sovereign states.
German Chancellor Angela Merkel voiced last week principle support for ECB’s crisis-fighting strategy. This boosted the short term both the Euro and global market sentiment. 1.2488 is the highest level seen on the Euro since early July. Euro zone top level meetings at the end of this week will give a more clear indication as to the future direction of the common currency. ECB bond buying and whether European leaders are willing to give necessary promises to keep Greece in the Euro, are on the top of the agenda.
[I]Copyright: United World Capital[/I]
[B]FED minutes lift EURO and gold[/B]
[I]DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments[/I]
Three weeks old minutes from the US Federal Reserve’s meeting August 1st have lifted global stock markets and given ERO/USD a welcomed boost over the last 12 hours. The Euro touched a seven week high at 1.2553 on Thursday as Premier Antonis Samaras started his European charm offensive to keep Greece in the Euro. The South Asian Pacific stock index, MSCI, rose one percent on expectations that the minutes indicate FED willingness for economic stimulus, and early losses in the New York were nearly trimmed off. Crude prices, gold and silver are strongly up.
FED wrote minutes reflects end of July’s rather pessimistic outlook on US economy. Since then data on better employment, retail and to a certain degree housing figures, have turned market sentiment around, and convinced that the US economy is back on the right track. The open question and decisive for eventual FED action is whether employment figures for August will confirm latest data. Market expectations are in favor of further quantitative easing and buying of treasury bills and bonds. This weakened the dollar towards most currencies yesterday.
The Euro saw its highest level since early July and burst through the upside in the short term technical corridor between 1.2040 and 1,2450 where it has moved the last weeks. If Samaras succeeds in convincing that Greece is sincere in its austerity intensions and wish to stay in the EURO, his European partners might agree to give him the t two years postponement chance he his bidding for. Such a nod to recession fighting Greece, would eventually in the short term lead to a further strengthening of the Euro as will a European central Bank decision to buy sovereignSpanish and Italian bonds.
The prospects for monetary easing and economic stimulus will weaken the dollar and give a boost to commodity driven currencies as Canadian and Australian dollar, Norwegian krones and indirectly Swedish krones, a trend clearly seen over the last days. Commodities quoted in USD will be given a further boost. Oil, copper, gold and silver rallied yesterday and reached their highest levels in weeks. Even HSBC’s report yesterday that China’s manufacturing purchasing Manager index, PMI, for August, fell to its lowest level since last November, did not spoil the commodity and precious metal party. This is probably going to be gthe case as long as investors continue to cultivate expectations that monetary easing and economic stimulus are just around the corner.
[I]Copyright: United World Capital[/I]
[B]No Samsung copy of iPhone[/B]
[I]DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments[/I]
SAMSUNG did not copy Apple’s iPhone. Even if Samsung Electronic flagship Galaxy smartphone looks very similar to Apple’s iPhone, Samsung did not violate the iPhone design, a South Korean court ruled on Friday. Simultaneously nine jurors started deliberations in California in one of many disputes between the two giants fighting for supremacy in a market the two companies control more than half the world’s smartphone sales. The companies have infringed on each other copy rights. The judge therefore ordered Samsung to immediately stop selling 10 products including Galaxy S 11 and also banned sales of four Apple products. Both the rivals were ordered to pay each other relatively small compensation damages. Samsung stocks fell 3 % prior to the court’s decision, and recovered substantially – up 2,5 % from the bottom – when the verdict was published.
Angela Merkel and French President Francois Hollande agreed that Greece have to stick to its debt obligations prior to Antonis Samaras separate meetings in Berlin and Paris today. The firm German-French stand is most likely to be regarded as part of a negotiating strategy; and as an initial reaction to the Greek premier’s bid for a two years leniency period before austerities are carried through. Compared with Spain and Italy relatively small funds are needed to keep Greece afloat. A Greek Euro exit will primarily have an important symbolic value and be regarded as a beginning of a breakup of the Euro. European leaders might, therefore, be willing to pay the price and give Greece a grace period.
EURO/USD have stabilized after strong gains earlier in the week, trading at 1.2554. The interpretation of the outcome of Samara’s meetings today would have a bearing on the short term direction on the value of the Euro. The British pound against USD has also increased substantially over the last days. Oil prices are dropping from its high levels on Thursday, Brent crude is at 114 and NYMEX back to 96. Gold prices continue to climb, and reached 1667 in early trading in Asia. Silver is at 38,50. Both precious metals are seen as a hedge in a volatile currency market.
What might be seen as overblown expectations for monetary easing in US and the Euro zone front collided with fundamentals in early Asian trading. The outlook for growth is dim in spite of all expectations. The South Asian Pacific Index, MSCI, fell 2 % after a similar reality test saw European and Asian markets falling on Thursday. The general feeling is that expectations and market fundamentals are, too, far apart and that equity markets are in for a correction.
[I]Copyright: United World Capital[/I]
[B]Tropical storm raises oil prices[/B]
[I]DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments[/I]
Brent and NYMEX crude rose more than a dollar Monday morning on supply worries as tropical storm Isaac threatens to interrupt most US offshore oil production in the Gulf of Mexico. Brent which fell below 114 on Friday, reached 115 in early Asian trading. An explosion in the biggest oil refinery in Venezuela has claimed 39 lives and cut supplies of refined oil products. War mongering over Syria likewise keep up the tension in the Middle East.
Investors’ concentration will this week be back on the US Federal Reserve and its annual meeting of central bankers and economists in Jackson Hole August 31st. Fed Chairman Ben Bernanke’s speech will probably give clues whether the FED is ready for a third round of quantitative easing. Time for FED-action is, however, running out with the Presidential elections approaching. Republicans have been highly critical to the first rounds of monetary stimulus, and a new round of easing shall be interpreted as a boost to Obama.
Whatever statement shall have an important impact on where the markets are going to move for the next weeks and on the strength of the USD. The steam seems to be running out of last week’s Euro rally which saw the common currency jump to 1.2575. Euro-USD is now trading at 1.2505 in Asia with volatile stock markets without direction.
The charm offensive of Antonis Samaras ended in Paris Saturday with the Greek Premier asking for time and not more money. Back in Greece he stressed the message that Greece belongs to Europe and wants to stay in the Euro. Angela Merkel echoed Samaras’s concern when Sunday encouraged party followers eager to see Greece leave the Euro, to watch their words The French President solely repeated that Europe is waiting for results from Greece and the last “troika” report on austerities.
After an evenhanded sentence from a South Korean court last Friday morning in the patent conflict between Samsung and Apple, A Californian court issued Friday afternoon a pro-Apple verdict which considerably block’s Samsung’s opportunities in the US-market. The court orders Samsung to pay USD 1 billion in damage compensation for infringing on Apple’s propriety rights. Samsung’s share fell 7 % in South Korean trade in the morning.
[I]Copyright: United World Capital[/I]
[B]Apple reaches all-time high[/B]
[I]DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments[/I]
Shares of Apple climbed to another record on Monday reaching 680 dollar a share the day after the iPad maker won a USD 1 billion judgment in a patent lawsuit against South Korean Samsung Electronics. Samsung shares plunged 7 % Monday, but recovered and was up two percent in Asian trading this morning. Apple has claimed a ban on 8 Samsung phones in the US. The Korean company is going to contest the verdict after a Korean court last Friday morning presented a much more even handed decision blaming companies for stealing patents from each other. Other competitors are heavily influenced by the recent verdict. NOKIA shares rose 9 % yesterday.
Both US and Asian stock exchanges saw the lowest trading volume of the year kept alive only by the increased trading in mobile smart phones. Investors are sitting on the fence looking ahead to a key speech by Federal Reserve Chairman Ben Bernanke on Friday. The markets are also waiting news on whether the European Central Bank, ECB, shall start to buy sovereign bonds of the most pressured Euro-states, Italy and Spain. Merkel seems to have given up her former strong opposition to ECB bond intervention. The German Central Bank is, however, staying the course and likened bond buying to a drug injection in the markets.
The Euro/USD dips to 1.2488 is coming under renewed pressure after last week’s short term high on 1.2575. USD/JPY is down 0,2 % at 78,515 with Japanese export trading figures weaker as result of the European debt crisis and the Chinese slowdown combined with a strong yen. The Euro is pressed by continued uncertainty as to which measures to take to handle the debt crisis. The German business sentiment index fell for a four month in row to its lowest level since March 2010.
Oil prices tumbled yesterday after the Isaac storm forecast proved less serious than firstly reported. Brent crude fell from 115 to 112. NYMEX, New York, crude trades below USD 96 a barrel. Also copper and precious metals fell. Gold trades at 1661 with Silver at 30,65. Markets are expected to be volatile during this week waiting for the Federal Reserve and top economists meeting in Jackson Hole over the weekend. Ben Bernanke is giving his speech on Friday followed by ECBs Mario Draghi on Saturday.
[I]Copyright: United World Capital[/I]
[B]ECB-optimism boosts EURO[/B]
[I]DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments[/I]
EURO/USD jumped 100 points to 1.2570 yesterday on optimism that European leaders will take positive steps to tackle the debt crisis. The Euro is at 1.2557 in early Asian morning trade, close to a seven week high towards the dollar. Rumors that the European Central Bank, ECB, is on the verge of starting to buy bonds from Italy and Spain, gained strength when ECB president Mario Draghi unexpectedly cancelled his visit to Jackson Hole during the weekend where FED Chairman Ben Bernancke on Friday is going to address world central bankers.
Global investors have for the last weeks had their eyes locked on Jackson Hole and, Wyoming, and an upcoming ECB meeting next week; for any signs of monetary easing from Europe and the United States. Bernanke’s speech precedes the Federal Reserve’s September 12 – 13 policy meeting. Bernanke has for the last two years used this meeting with central bankers to signal FEDs policy intentions. Better US housing and employment data pointing to a modest recovery have, however, dampened the optimism for economic stimulus.
Equity markets in the United States were flat yesterday on very low volumes. Asian markets are mixed. Latest economic news from China tell that the stock markets are under pressure. Chinese stocks have fallen dramatically and their companies are in contradiction to their US counterparts delivering weak quarterly results. Some analysts state that China is in for a hard landing and that the growth in GDP which was 7,6 % in the second quarter, shall be far lower In the two remaining quarters of 2012.
Except for the jump in the Euro, there are small changes in the currencies and commodities. USD/JPY is 78,575. The dollar gains somewhat versus the more commodity driven currencies. Oil prices are unchanged. Brent crude at 112 and NYMEX trades at 96 with hurricane Isaac having a major impact. Gold is steady at 1665, at a 4 month high, on expectations that Bernancke would give hints of further stimulus measures. Gold reached 1676 on Monday. Silver, which often tracks gold, trades at 30,86 close to Monday’s three months high. Gold and silver are likely to stay at these levels till Bernancke makes his speech on Friday.
[I]Copyright: United World Capital[/I]
[B]Asian shares hit one-month low[/B]
[I]DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments[/I]
Asian stocks hit a one-month low this morning after Chinese growth concerns and weaker export and retail figures from Japan. The Euro stays steady as global markets waited for hints on further US economic stimulus in Federal Reserve Chairman Ben Bernanke’s address at Jackson Hole tomorrow. Wall Street edged higher on an increase I home sales in July. The daily volume was again very weak reflecting market reluctance to make bet prior to Bernanke’s speech.
Volume traded at the New York exchanges was 4,1 billion shares compared with the previous low on Monday of 4,6 billion shares. The daily traded average a year is 6,6 billion shares. The Dow Jones industrial average inched up 4,6 points and reached 13 107. The S&P is trading at four-year high compared the Shanghai Composite Index which hit its lowest close since February 2009.The share indexes reflect investors strong expectations for a turnaround in US economy helped by FED monetary easing. Investors are simultaneously bearish on China, in spite of, the fact that China’s relatively low 7,6 % increase in GDP in second quarter of 2012, far outpaced any other country in the world.
The Commerce Department said yesterday that US gross domestic product expanded at a 1,7 percent annual rate helped by stronger export growth. The pace of growth remained nevertheless, too, slow to shut the door for further monetary easing from the Federal Reserve. At the Republican Convention, Paul Ryan, the vice Presidential running mate to Mitt Romney, directed a blistering attack on President Obama’s economic policies Ryan promised to make the tough choices needed for a US economic turnaround that would generate jobs, cut government spending and revitalize small businesses.
Euro/USD is steady at 1.2543 and there is small changes in other currency pairs. Hurricane Isaac has had little impact on oil prices over the last 24 hours. Brent crude is staying above 112 with NYMEX dropping to 95 USD a barrel. Gold is trapped in a tight trading range between 1655 and Monday’s 4-month high on 1676. If Bernanke’s address misses to give clear signals for a new round of quantitative easing, both gold and silver would come under sell pressure.
[I]Copyright: United World Capital[/I]
[B]Close call on FED easing[/B]
[I]DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments[/I]
The US Federal Reserve’ decision on whether to take economic stimulus to boost a stagnating economy, is “too close to call”, a top FED official stated yesterday on the eve of Ben Bernanke’s annual speech in Jackson Hole today. Quantitative easing shall have a positive effect on a stagnating job market, but could risk creating inflationary pressure. In his speech to the convention, last night, Republican contender. Mitt Romne, signaled job creation as the major issue, promising to create 12 million new jobs during an eventual Romney term.
Asian shares fell to a four-week low Friday morning on cooled expectations for stimulus. The meeting of world central bankers precedes the decisive Federal Reserve meeting on September 12th and 13th. US and European stocks also fell. Dow Jones gave up 0,81 % while the technology index, Nasdaq, dropped 1.03 %. In Japan Nikkei slipped 1,1 % to a two-week low after Japan’s industrial output unexpectedly fell in July. Japanese manufacturing activity has so far in August contracted to its lowest level in 16 months as a clear token that the European debt crisis is biting Japan painfully.
Currencies and commodities are in the waiting mood prior to signals from the federal Reserve. The Euro/USD is steady above 1.25 level, but has lost some ground towards the USD trading at 1.2515. Japanese yen has gained against USD at 78,42. The Norwegian krone (NOK) is stronger both against Euro and USD after the Norwegian Bank yesterday decided to keep the interest rate at 1,50 %. NOK is under strong upward pressure and a representative for the Norwegian bank indicated possible intervention if NOK gets even stronger. As an oil producing country Norway has strong reserves, a 600 Billion sovereign oil fund, a balanced budget and trade balances surplus. That makes Norway’s finances, a non EU and Euro-member, outstanding in an European context.
Brent crude keeps steady above USD 112 a barrel ahead of today’s speech, set for the second monthly gain. Gold continues to move in the tight corridor between 1655 and 1675 with silver dropping one percent to 30,40. Copper is up after four losing sessions.
[I]Copyright: United World Capital[/I]
[B]Bernanke keeps stimulus hopes alive[/B]
[I]DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments[/I]
Stressing that US Federal Reserve if necessary is prepared to take further steps to strengthen the economy, Chairman, Ben Bernanke, kept market optimism for monetary easing alive in his speech in Jackson Hole Friday. US equity markets rose. The trend continued in Asia this morning where the South Asian Pacific Index, MSCI, is up, in spite of, a steep decline in China’s industrial production in August. Chinese manufacturing is at its lowest level since 2009.
Bernanke’s speech gave commodity and precious metals price a strong lift. Gold jumped USD 40 an ounce and trades at 1690 in Asia. Silver also rose 3 % trading at 31.80 Oil prices are strong. Brent crude is at 114 and NYMEX trades above 96. Soft commodities continue to raise. EURO/USD which got a strong lift on Friday when it reached 1,2685 is still trading at the highest levels seen in weeks. If the European Central Bank, ECB, which meets on Thursday, decides to start buying sovereign bonds from the most exposed Euro-countries, the Euro shall probably in the short term perspective, be lifted further up. Japanese yen is strengthened since last week and trades at 78,315 against USD.
The most awaited Bernanke’s statement dashed some hopes for a quick FED action. Bernanke’s comments, however, bolstered bets that the US central bank will provide more stimulus for an economy that is close to stalling. US Labor market numbers for August is going to be published later this week, and shall give a new indication on whether more active measures are needed.
This week markets are going to be concentrated on the ECB meeting where it seems that the German government very reluctantly, is giving up their resistance against ECB intervention in the bond markets. A EU Commission for tighter central control with the banks inside the Euro zone is also on the table.
[I]Copyright: United World Capital[/I]
[B]Brent climbs to 116 on war rhetoric[/B]
[I]DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments[/I]
Global markets taking monetary easing as a done deal continues to climb. Both oil and precious metal prices climbed to level not seen for the last months. Brent crude rose to 116, and gold flirting with 1700. Silver reached 32.20. EURO/USD is trading at 1.2617 making it likely that the EURO, in spite of a Moody down writing the Euro zone to negative, shall see 1,27 before the European Central Bank on Thursday will decide on whether to buy Spanish and Italian bonds aggressively.
The US markets were closed for Labor Day yesterday. The Asian markets were mixed going in and out of red territory. Oil prices were underpinned by expectations that weak data from China, the world’s second biggest oil consumer, would prompt Chinese authorities to ease credit policies further. Beijing has already taken decisive steps to encourage domestic consumption and lower interest rates. Israel’s stepped up war rhetoric against Iran, has increased tensions in the Middle East. This is impacting oil futures.
Gold and silver which are seen as hedges against unexpected moves in the currency market, are continuing to move upwards as are copper and soft commodities. Paring back of bearish bets against the Euro has probably helped bolster the single currency over the last days. There is also talk in the market that Asian players have been buying Euro against the Yen. The Japanese currency is stable against Dollar on 78,365. ECB President, Mario Draghi, stated yesterday that ECB purchases of sovereign bonds with up to three years maturity did not constitute state aid.
The Euro reached a two month high against the Australian dollar and rose 0,4 % against the yen. Investors continue to give the Australian dollar a cold shoulder on weaker growth in China and disappointing weak domestic retail sales.
[I]Copyright: United World Capital[/I]
[B]Euro-USD slips ahead of ECB[/B]
DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments
The Euro-USD slipped from its yesterday high, 1.2629, to 1.2537in Asian trading Wednesday morning. The Euro, nevertheless, demonstrated strength prior to the EC meeting tomorrow. The Euro bears who predicted a collapse in the single currency are not any longer the driving force in the markets. Whether the ECB will be able to live up to the expectations created over the last weeks, is a more complicated question. The best markets in this round can hope for is probably a strong signal of ECB readiness to intervene in the sovereign bond markets, and start buying Italian and Spanish short term bonds and not a detailed debt-buying plan.
The President of ECB, Mario Draghi, indicated that this might be in the cards when he told on Monday to European lawmakers that purchases of short term sovereign bonds to help burdened countries Spain and Italy, did not constitute a breach of European union rules. It represented an effort to stabilize the monetary situation and should not be interpreted as a state intervention in free markets. This has led critics to claim that Draghi is, too, much influenced by French Socialist President, Francoise Hollande, and Italy’s premier, Mario Monti. A final decision on ECB bond buying would most likely not be taken before the German constitutional court in the middle of the month decides on whether German participation in such bond buying is in accordance with the German constitution.
The US markets were weak after the opening after Labor Day. Manufacturing data fall for the third month in row painted a picture of a mixed, slow growing American economy stressing the need for quantitative easing measures. Stocks in Asia continue to be under pressure. Oil prices are down from yesterday’s peak. Brent crude is trading at 114 with NYMEX again tipping below 96. Gold is stabile at 1695 and silver at 32,20 demonstrates continued strength.
[I]Copyright: United World Capital[/I]
[B]Euro, oil and metals pin hopes on ECB[/B]
[I]DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments[/I]
The Euro rallied one percent to a high of USD 1.2621 yesterday, close the two month high reached on 1.2638 on August 31st. The Euro is trading nearly five percent up from its low on USD 1.2042 on July 24th. Stock markets in US were flat while Asia trades up after four losing sessions on renewed hopes that the European Central Bank (ECB) may present new tactics to counter the region’s debt crisis. All eyes are on Maro Draghi and the statement the President of ECB is going to deliver later today hopefully outlining details on the bank’s much announced bond buying program.
The strength of the Euro came after a string of leaks from euro zone officials underpinning expectations that Mario Draghi will live up to its earlier statement. Draghi stated in early August that ECB would take whatever steps necessary to boost and save the Euro. The ongoing rally in the Euro has seen the dollar index plunge to its lowest level in three and half months. The Australian dollar, which has been under constant pressure over the last couple of months, bounced back after presentation of a surprise fall in Australian jobless rate.
The ECB meeting is seen as crucial for both the bank and Mr. Draghi’s personal prestige. Draghi has pinned his authority on a bond buying scheme. Buying of Spanish and Italian bonds will ease the pressure especially on these countries interest rates and their striving economies. A renewed ECB intervention in the euro zone’s bond market would give the Euro governments some spelling relief and give them time to come up with a longer term response to the bloc’s debt crisis.
Oil prices have been falling over the last two days. The development in the oil prices also very much depend on the outcome of the ECB meeting. Brent crude trades at 113,50. The future development of Precious metal prices are also dependent on whether ECB is able to deliver according to market expectations. So the situation for precious metals is likewise. Gold prices trading at 1695, shall be given a boost upwards with a detailed ECB plan for buying of bonds. The same is the situation for silver which yesterday saw its highest level in weeks reaching 32.60.
[I]Copyright: United World Capital[/I]
[B]ECB offers short term fix[/B]
[I]DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments[/I]
The European Central Bank (ECB) delivered according to expectations yesterday and gave rise to a global stock market rally. This after the ECB outlined a bond-buying scheme to help calm the euro zone’s debt crisis. Simultaneously firm US data fed speculation of a strong jobs report to be presented in the US later to-day.
The rally was broad both in Europe and US where three out of four listed stocks ended higher giving the Dow Jones its biggest daily gain in two months. Nasdaq rose to its highest level since 2000 ending at 3 135 with DOW at 13 292. Banks and high tech companies like Cisco, General Electric, Microsoft and Intel were the big winners. The positive trend continued in Asia where the South Asian Pacific Index, MSCI, climbed 1,3 percent. Reports that Chinese regulators had approved big infrastructure projects added to the positive market sentiment. The Shanghai index was up 2,3 and Hong Kong advanced 1,9 percent.
The ECB decision might be seen as a short term fix. It does not, however, solve the fundamental crisis problems Europe is confronted with. But markets have been given a relief brake. The ECB decision implies launching of a new and potentially unlimited bond-buying program. The program is focused on buying of bonds with a maximum 3 years maturity. Countries which have undertaken to implement approved fiscal austerity matters are eligible for the bond-buying program. ECB has thereby demonstrated willingness to confront the high interest rate levels on especially Spain and Italy’s bonds. The high bond interest rates have worsened and made the debt crisis for these countries even more unbearable. Increased risk appetite among investors shall probably be one of the important medium term results of the ECB measures.
The Euro which rose on hopes for ECB action prior to yesterday’s decision continues to marginally strengthen both in relation to USD and other currencies in early Asian trading. At present Euro/USD is at 1.2638. Greater risk appetite has weakened the Japanese Yen. USD/JPY is at 78,925. Oil prices have fallen back after skyrocketing prior to the ECB-decision. Brent crude is trading close to 114 with NYMEX in the interval between 95 and 96. Gold and silver prices are also falling back after yesterday’s high on 1705 and 32, 90 at present trading at respectively 1693 and 32,20.
[I]Copyright: United World Capital[/I]
[B]Asia eyes FED action[/B]
[I]DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments[/I]
Asian shares were up on Monday on rising expectations that the Federal Reserve would announce fresh stimulus after last week’s disappointing US jobs data. Global markets reacted Friday positively to the European Central Bank’s (ECB) announcement of a bond-buying scheme to help struggling Euro zone countries. Expectations for FED action overshadowed soft Chinese data this morning. Oil and precious metals continue to rally, and ERUO/USD which reached 1.28.15 after ECB’s announcement, is trading at 1.2784.
Trade data released Monday showed China’s exports in August grew slightly less than expected. Imports surprisingly slumped indicating weaker domestic demand. The Chinese trade balance was, however, up from July. The trade figures had little impact on stock prices. The MSCI index for the South ASIAN Pacific region rose 0,2 %. Shanghai was also up. During the APEC meeting in Vladivostok the Chinese government stated its willingness to contribute to global economic growth and announced start of important infrastructure projects.
The multibillion infrastructure drive made copper prices jump to a four month high. Gold climbs to 1737 and Silver is at its highest level in months trading at 33.89. Oil prices are also helped by the prospects on new stimulus in the US. Brent crude is above 114 and NYMEX at 96. There are strong indications that precious metals in the short term shall continue upwards.
The Euro eased back from its high on 1.2815 on Friday and stands at 1.2784. The further development of the Euro will depend on September 12th ruling by the German constitutional court on the new euro zone bailout fund. Financial markets expect the court to back the fund. If the FED decides on a third round of quantitative monetary easing, this might probably strengthen the Euro further.
[I]Copyright: United World Capital[/I]
[B]FED expectations keep EURO strong[/B]
[I]DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments[/I]
The Euro/USD has stabilized close to a four –month high on 1.2815 reached last Friday, ahead of key events in Europe and the US. The Euro traded on 1.2775 on expectations that the Federal Reserve after last week’s poor job data, would launch a new program of monetary easing when it meets September 13th. It is also awaited that the German constitutional court will give a green light to the ECB’s bond buying plan.
Neither of these expectations shall be taken for granted. The Euro also remains vulnerable to developments in Spain and Greece. Spanish Prime Minister Mariano Rajoy said yesterday that he expected the European Union to set reasonable conditions if Spain finally decided to ask for a bailout. This decision shall firstly be taken when EU finance ministers meet 14th and 15th September.
A Spanish bail-out package will contain tight fiscal policies and structural reforms which as in Greece would cause social unrest. Greece acknowledged on Monday big problems in persuading foreign lenders and government partners to accept a 12 Billion Euro package to avoid bankruptcy. Investors are pinning hopes for continued market optimism on FEDs willingness to embark on a new series of quantitative easing in the form of buying of government and other debts. A poll among economists shows that 60 % find that likely.
Such economic stimulus shall strengthen the EURO and weaken the USD. As a result the of these speculations dollar stood on a four-month low against a basket of currencies. USD/JPY is at 78,20. Stock markets both in US and Asia are falling on profit taking and a weak technology sector after steep falls in the shares of chipmaker Intel. Oil is still trading high on expectations on FED action. Brent stands close to 115 and NYMEX at 96.50. Gold has recovered from yesterday’s correction, trading at 1730. Gold has rallied 7 % over the last month with an even stronger increase in silver.
[I]Copyright: United World Capital[/I]
[B]Crucial decisions await markets[/B]
[I]DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments[/I]
Global securities markets rallied in expectation of positive outcome of this week’s crucial events; the German constitutional court’s ruling on the legality of the EU bailout fund, elections in Euro-skeptic Netherlands, details in ECB bail-out package and whether FED will initiate further monetary easing. Dow Jones climbed to its highest level since 2007, and Asian shares followed suit. Asian stocks rose to three-week highs on stimulus expectations supported by a statement from the Chinese Premier Wen Jiabao that China is on track to meet this year’s target for economic growth.
The USD came under new pressure after the international rating agency, Moody’s, threatened to downgrade US if the world’s biggest economy do not produce policies to cut its debt. The dollar index, DXY, towards several other currencies reached a four-month low. Euro/USD jumped to 1.2872 on hopes that the constitutional court will rule in favor of Germany automatically participating in the European Stability Mechanism (ESM) and other bail-out arrangements. The Australian dollar which is highly sensitive to development in China, climbed to a three week high of 1.0474.
Commodities and oil prices are also living high on stimulus expectations. A weaker dollar continued to underpin most dollar-based commodities. Brent crude rose to USD 115,43 and NYMEX, traded above 97. Gold has fully recovered from the drop on Monday and is back on 1735. During trading on Friday Gold reached 1741 which is the highest level since February. Silver is at 33,60. Copper is up the fourth day in row.
The new records in the equity markets have been reached on the basis of much smaller than usual volumes. Among investors there is therefore a growing feeling that markets might have run, too, quickly based on monetary expectations without roots in economic fundamentals. Regardless of the outcome of this week’s crucial events we might therefore be in for a rather strong technical correction. The forthcoming US elections which traditionally give a boost to stock markets are also an uncertain factor. In the currency market the sentiment seems for the moment clearly in favor of the Euro. Japanese yen reappears as a safe haven, and precious metals still seem to be a safe bet.
[I]Copyright: United World Capital[/I]
[B]Markets expect FED stimulus[/B]
[I]DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments[/I]
The US Federal Reserve, FED, seems set for a third round of monetary stimulus. It is further expected that FED will continue its low interest rates policies at least to 2015. If FED’s statement today clearly signals stimulus, the dollar will come under new pressure. The Euro which received a boost from the German constitutional court and by the outcome of the Dutch elections yesterday, will in short term be further strengthened. Euro/USD continues up in the opening hours in Asia and trades at 1.2926. Asian shares steady amid caution before FED’s decision.
US and European stock exchanges reacted reluctantly to the German Constitutional Court decision which opens the door for buying of sovereign bonds from exposed Euro countries. The markets had already priced in a positive constitutional outcome and consolidated earlier gains. Neither a new introduction of Apple created the great enthusiasm on Wall street nor worldwide. There is also a sober attitude towards possible FED measures. There are also strong doubts about the efficacy of further quantitative easing.
FED Chairman Ben Bernanke has on the other hand clearly stated that the central bank will not sit idly by while unemployment remains far above levels consistent with a healthy economic recovery. A strong “growth” statement will therefore be taken positively by markets, but not cause the big enthusiasm. Further easing will have a negative impact on the dollar, strengthen commodities and the risk appetite. It is, however, a clear understanding that there is limited magic in FED’s tool box. Further market growth from here depends primarily on economic fundamentals.
The careful, defensive attitude which we see during this week, is reflected in the new strength of the Japanese Yen which trades at 77,721 against the USD. Yen is seen as a safe haven when there is volatility and uncertainty regarding the market direction. Oil prices got a new boost following the tragic killing of the US ambassador in the oil rich Libya. Brent jumped above 116 a barrel, and New York crude is steady above 97. Gold is consolidating around 1730 – 1735. Silver experienced big volatility. After reaching USD 34 it fall 3 %. It is now trading at 33,25. The positive upward trend in gold and silver is expected to continue with a positive FED decision.
[I]Copyright: United World Capital[/I]