Weekly Quick Review Preview Stocks, Bonds, Commodities, Forex: Nov. 29th To Dec.... |
posted 10:18 11/30/10
Likely Market Movers To Watch This Week
- Speculation About A Bigger Bailout Fund To Cover Spain: Many EU officials want it in order to kill off speculative attack on to-big-to-bail Spain, but Germany is thus far resisting the idea and thus helping keep anxiety high about spreading contagion to Portugal and Spain.
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One Or More Wildcards
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EU sovereign debt/banking crisis: In addition to possible settling of an Ireland bailout deal and expanded bailout fund, watch for:
- Portuguese and Spanish bond auctions
- ECB press conference expected to announce a continuation of asset purchases, tossing aside any remaining hope EUR bulls had for an exit
- US banking/housing crisis: Housing data is expected to be poor, new revelations on the insider trading probe?
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EU sovereign debt/banking crisis: In addition to possible settling of an Ireland bailout deal and expanded bailout fund, watch for:
- News on ‘Black Friday’ US and EU retail spending as an initial gauge of the critical US holiday consumer spending season – a make or break season for US retailers, in which many generate 25%-50% of annual sales. Expectations are modest for the US, glowing for Germany. See here for details
- China tightening
- US Insider Trading Investigation
- Korea Tension: US/Korea military exercises begin this week despite Korea warnings of military response
Prior Week Market Movers
- EU Sovereign Debt/Banking Crisis: Ireland bailout negotiations, EU bond yields spike, Portugal misses deficit targets, suffers 1 day national strike to protest budget cuts, Spain bond auction fails with poor demand, much higher rates
- Korean Military Escalation: North shells South
- US Insider Trading Investigation Expands
STOCKS
As noted in the below table, major US indices were mixed/lower.
Briefing.com 12 nov 29 09 o
However Chinese stocks were overall lower on both the Shanghai and Hang Seng on concerns about further shrinkage in the money supply and thus growth rate, while the Nikkei was higher due to a lower Yen helping exports. EU bourses were mostly lower on concerns about both the Ireland bailout and spreading contagion to Portuguese and Spanish bonds after Spain’s failed bond auction.
Note the below daily chart for the bellwether S&P 500.
S&P 500 DAILY CHART: 14nov29 10 o
Key Points:
- Has formed 2 sets of lower-highs and lower-lows, the beginning of a downtrend
- It is in the lower quartile of its Bollinger Bands, the ‘sell zone’.
- Nearest support at its 50 day SMA around 1180, next support at around 1175, its 23.8% Fibonacci retracement from its April high
- Note how the 1220 zone has held as resistance throughout this year, suggesting stocks may have a hard time gaining further upside until global fundamentals improve
BONDS
US, EU bonds lower. Both Spain and Portugal will hold bond auctions this week despite spiking yields.
COMMODITIES
Prices generally firmed this past week after the severe selloff of the prior 2 weeks. The gain is all the more impressive because it occurred in tandem with
- A rise in the USD, which usually moves in the opposite direction of commodities.
- Ongoing concern about slowing in the Chinese economy, the biggest commodity consumer
- Increased margin and daily price limits on commodity futures traded on the Shanghai exchange
The Reuters/CRB commodity index and GSCI Index climbed +0.75% and +1.54% respectively even as the US dollar index rose above 80 for the first time since September 23. We caution that price movements will be volatile in the near-term amid lingering concerns over sovereign crisis in the European periphery, acceleration in Chinese tightening and geopolitical tensions on the Korean peninsula.
As noted in www.oilngold.com’s weekly summary:
After the market closes on November 29, margins on copper, aluminum, steel wire, gold and fuel oil will rise to 10%, steel-reinforcing bars and zinc to 12% and rubber to 13%. Daily price limits for all products will widen to 6% from November 30. The National Development and Reform Commission (NDRC) described the government's move as measures to 'clamp down strictly on market manipulation and other illegal activity, and curb excessive speculation'. This has sent the public a signal that the government is committed to curb speculations and cool inflation. While Chinese tightening may dampen market sentiment and spur worries about demand for commodities, the actual impact may not as big as feared.
Energy was the big gainer this week, spurred by higher electricity costs in China that will force many big energy users to shift to diesel powered generators. The International Energy Agency raised its outlook for diesel consumption for the coming year.
www.oilngold.com 13nov 29 10
CURRENCIES
Weekly Currency Performance Ranking
Here’s the weekly performance summary of the major currencies, based mostly on James Chen’s very useful listing from www.fxpath.com, with my own addition of the NZD, which for some reason he chooses to omit. He notes:
For the third week in a row, USD is among the top 2 strongest currencies this past week as per average percentage price change against the other major currencies. The two worst performers were the, GBP and EUR. Not surprisingly, the EUR was the WEAKEST single currency this past week given the travails in the EU.
Strongest
1) USD (U.S. dollar) – same place as prior week
2) CAD (Canadian dollar) – up 2 places from prior week
3) JPY (Japanese yen) – up 3 places from prior week
4) CHF (Swiss franc) – up 3 places from prior week
5) AUD (Australian dollar) – down 3 places from prior week
6) GBP (British pound) – down 1 place from prior week
7) NZD (New Zealand dollar) – down 6 places from prior week
EUR (euro) – down 4 places from prior week
Weakest
Big themes in Forex for the coming week include:
Ongoing pressure on the EURUSD this week: Barring a lifting of uncertainty about not just Ireland, but ongoing rising bond yields threatening the future solvency of Spain and Portugal. There have been reports that EU officials want to increase their bailout fund to cover even Spain and thus calm markets and lower EU sovereign bond rates, however Germany is thus far firmly opposed to the idea. If Germany holds firm, so will anxiety on the EU, aided by continuing signs of deterioration in Greece, Portugal, Spain, and Ireland.
Concerns about the EU, Korean military tensions, and China tightening suggest the overall bias will be to the safe-haven USD, JPY, and CHF. This bias is also fueled by the RBA’s recent dovish tone.
The GBP is likely to face continued pressure due to UK bank exposure to Ireland. The UK’s banks hold more Irish bonds than any other nation, and the UK has volunteered aid to Ireland.
About the author: Ava FX Analysts Department
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At Ava FX, there are a team of analysts and writers providing information to FXinsights readers daily and weekly features plus special reports from the world of trading.
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