Markets opened lower this morning by around half of one percent amid indicators adding to already weak sentiment on current conditions. Commodities continued to fall, following a day of volatility, with crude trading below $59 earlier in the session, a correction of nearly 20% from its June 11 high. Meanwhile, the Baltic Dry Index, which measures shipping costs for commodities, fell Thursday to 3018.0, the lowest level in nearly two months. This return of risk aversion has led to a sharp appreciation in yen across all majors with some analysts citing potential for yen to head below 90.0 per dollar.
[B]Major Currency Performance Compared to Japanese Yen in Past Month
Data this morning included a narrower [B]trade balance[/B] deficit in the US, amid rising exports and lower imports as domestic demand slumped in the face of rising oil. The average price of imported crude increased to $51.21 which resulted in lower demand of 8.448 million barrels per day from a much larger 9.75 million in April. Adding more concern for demand, [B]consumer confidence[/B] fell in July at a larger pace than was expected. The indicator posted at 64.6 in July compared to 70.8 in May. Economists polled by Bloomberg had forecast a marginal decline to 70.0 on the reading. Also, the economic outlook indicator of the release came in lower at 60.9 from 69.2, its lowest level in the past four months. Inflation expectations for the year ahead fluctuated lower by one-tenths of a percent to three percent.
[B]University of Michigan Consumer Confidence
Second quarter earnings have kicked off in the U.S. with Aluminum producer Alcoa having released its results Wednesday afternoon. The company reported a loss but traders bought the firm’s stock in afterhours following positive comments resulting from stimulus packages in China and the US. While the stock opened higher Thursday by more than five percent, it ended the day lower in a grim sign of investor unease. Next week will prove to be equally interesting as major global firms report earnings including Intel, JPMorgan Chase, IBM, Bank of America, Goldman Sachs, General Electric and others. Weak results, despite likely follow-through of optimism on 2010, may keep stocks from recovering for some time while yen and dollar continue to appreciate.