Friday, May 18 update – markets closed third week of drop in a row:
S&P 500 at 1,295 (-0.74%)
Dow at 12,369 (-0.59%)
Nasdaq at 2,779 (-1.24%)
Facebook shares closed the first trading day
at $38.23 – very near to its initial offering price ($38).
19 May 2012
09 May 2012
Financial markets find it difficult
to recover from the prevailing political storm in Europe, and the disappointing
employment figures released last Friday, indicating that the U.S. economy will
need an extra boost to keep the positive momentum. In Europe there is serious
concern about the nature of the relationship between the German chancellor and
the president-elect in France – Francois Hollande. Many believe that the new
president, who previously objected to fiscal consolidation, that were decided
by Merkel and Sarkozy a few months ago, will continue to take a tough stance on
the issue, which can delay the recovery in the Euro zone.
Greece – it is unclear what will
happen to the debt-ridden state. The first attempt to form a new government last
night failed, which shows the complex situation of Greece. The investors’ fear
that even after the new government will be established, it is not certain
whether it would respect the decisions made by the previous administration,
regarding the necessary cuts that are mandatory for getting the financial aid from
the European Union. Discarding of the previous agreements could eventually lead
for Greece to depart from the Euro zone.
In summary of the first and volatile
trading day of the week, leading indices closed in mixed signals.
What awaits us today?
In the absence of significant
macroeconomic data, investors will continue to monitor developments in Europe
and especially in Greece, which is unable to form a new government. Although
the indicators recovered last night much of the falls from last Friday, we
still believe that there is still room for further declines in the markets.
FOREX Arena – the Dollar and Yen have lost some
value, after closing a week very well, due to the recovery relief to the
markets, which returned the investors, who love risk, to the scene of Commerce.
Even here we still Bearish on the Dollar and Yen as negative sentiment in the
markets may continue some time. one of the few things that might change things
is the FED’s statement, regarding the possibility of launching a third
acquisition program, which will push the markets up and lead to significant decline
in the value of the US Dollar.
07 May 2012
Tension in the markets ahead of the elections in France and Greece
Wall Street’s leading indexes closed
one of the worst weeks of the year due to disappointing employment data,
indicating that the U.S. economy needs another boost to prevent a situation
where it can join the many states that sunk in recession. Employment sector
returns to be the weak link of the American economy. According to employment
data released last Friday, the U.S. economy produced only about 115 thousand
jobs in April, well below expectations, was the addition of more than – 170
thousand jobs. March figure was revised upwards by 34 thousand jobs, to 154
thousand jobs. The unemployment rate actually fell by 0.1% to 8.1%. Update In
the month of March and the surprising decline in the unemployment rate could
moderate the fall opening of the trading day. Disappointing in sequence to the
negative macroeconomic data published recently in the U.S., indicating that
Bernanke and his colleagues will have to pull another rabbit out of a hat, to
restore the U.S. economy on track for sustainable growth. The last trading day
of the week closed when leading indices fell by more than – 1%. NASDAQ 100
index plunged more than – 2%.
Forex - U.S. dollar closed the week with
the upper hand against most currencies traded him. Australian dollar crashed
this week about – 280 pips and closed the worst week of the year, the interest
rate by surprise, at a rate of 0.5%, and pessimistic forecasts of the
Australian central bank, which adjusted the year 2012 downwards. New Zealand
dollar plunged even more than – 250 pips against the U.S. dollar against the
disappointing employment data published in New Zealand. European banknote
traded steadily throughout the week, but the sharp falls in markets drove the
traders to the dollar, and the pair declined below 1.31 dollars to Euro.
The Japanese Yen strengthened,
particularly in currencies with high interest rates. Strengthening of the Yen
may continue for a week, due to the negative sentiment prevailing in the
markets.
Commodity sector – oil registered the sharpest daily
decline of the year (a drop of 4%) and locked the week below $100 in the 98.5
dollars per barrel. Gold dropped lower against the dollar, but still manages to
maintain price levels over 1,600 dollars per ounce, indicating that buyers are
not willing to give up easily.
This week – Financial markets will try to
recover from one of the worst weeks of the year, but there is a lot of event
that could worsen the situation even more. In the opening of the trading week we’ll
have the election results in France and Greece. Many believe that the change of
government in both countries may overshadow the financial markets. The new government
in Greece tries to cope with these difficult reforms Greece needed to get the
EU rescue funds and the International Monetary Fund. There is concern that the
new government in Greece would prefer to leave the EU rather than dealing with
the harsh offered steps. Investors are more afraid of what will happen if Sarkozy
would give way, since he, together with the German chancellor, navigated the
crisis in the Euro zone and were involved in every decision. Changes in the
composition that may inhibit several moves on the agenda for the crisis in
Europe, which most needed at such a crucial – where most of the member
countries are in recession and need a strong and experienced leadership to get
out from under.
02 May 2012
The sellers had the upper hand after
leading U.S. indicators closed the best first quarter in the last decade, the
first month of the second quarter, closing the negative territory with a lot of
question marks about the future of the global economy. In the monthly summary,
the Dow Jones closed around opening levels of monthly index – S&P500 fell
by 0.8% and the Nasdaq fell by 1.45%. The indices closed the last trading day
of the month in a fall in prices, in light of disappointing macroeconomic data
released in the U.S., indicating that the U.S. economy continues to slow down
and in light of disappointing news that continue to flow from Spain almost
every day. The Chicago PMI fell below 60 points, after staying above this level
for 5 consecutive months. The index registered a reading of 56.2 points,
compared to 62.2 points, recorded a month earlier. The figure was worse than
the forecasts, which were about 60.9 points.
Spain joined the countries which slid
into recession – Spain entered recession officially yesterday, after
publication of GDP data for the first quarter of this year, which indicated
that the fourth-largest economy in the Euro zone shrank by 0.3%.
FOREX – Dollar strengthened yesterday,
particularly against the Australian dollar, which fell on Friday morning, after
the central bank made a reduction of 0.5% interest rate, to 3.75%, contrary to
predictions, predicted a reduction of only 0.25%. The Australian dollar has
lost over 60 pips within minutes against the USD and about 100 pips against the
New Zealand Dollar, since the interest rate gap between the two countries is
shrinking.
Euro fails to maintain power over
1.32, but has difficulty to continue to the next hurdle standing in 1.33. Swiss
Franc is approaching the 0.90 zone against the Dollar. Pound continues to
establish himself above 1.60, with his colleague, the U.S. dollar.
What awaits us today? – U.S. investors will bear their
eyes towards the publication of the PMI manufacturing sector, is expected to
vote on more moderate expansion, from the previous month. Expectation is the
reading of 53 points, compared to 53.4 points, recorded a month earlier.
Analysts estimate that despite everything, financial markets will continue to
gallop toward new record highs. Some are traded around the critical levels, and
breaking them may lead to a further rally. Dow tries to overcome the difficult area
level of 13,220 points, and the S&P500 will try to break the record area,
set around 1,420 points. The foreign exchange scene is expected to continue to
weaken, as long as the indices continue to rise. Commodity arena should follow
the gold, which moves up, and if it will overcome the 200 moving average – passing
in the 1,700 dollars per ounce.
30 Apr 2012
The story of the last week belongs to
Britain, which officially slid into a “double recession” during the first
quarter of this year. According to the initial GDP update of the quarter, which
refers to the first quarter of this year, the British economy shrank by 0.2%,
contrary to forecasts, according to which the British economy was supposed to
grow, albeit anemic pace of 0.1% only and thus was able to escape recession. The
Royal coin was not affected too much from this disappointing figure, because
apparently, investors took in account the kingdom recession. The Pound set last
week in an annual peak in 1.6280, but we estimate that the tide will be
limited, because decision makers in the Bank of England will not remain
indifferent over time, and increase their efforts in a campaign to encourage
economic growth. The measures are expected – further quantitative easing, a
further 25 billion pounds at least in the upcoming interest meeting, to be held
on May 10. U.S. GDP data disappointed, but Raleigh did not mind the financial
markets. Figure revealed that the world’s largest economy grew at only 2.2%
during the first quarter of this year, compared to the expectation, which stood
at 2.6% growth. Another figure that was published is the U.S. interest rate
decision, and that the rate had remained unchanged, between 0% -0.25%, once
again. FED chairman, noted in his speech that the interest rate can remain
there until the end of 2014. Bernanke hinted that further steps will be taken,
if and when the U.S. economy shows signs of real distress.
Debt crisis in Europe – The S & P International rating
agency is not excited over the successful bond offerings of Spain, and lowers
its credit rating two levels – to the level of BBB+. The downgrade was due to
macroeconomic data due to the disappointing releases in Spain recently,
including the unemployment rate which jumped to 24.4%, a record level, not seen
since the years of the 90th. At the end of 2011, the unemployment rate stood at
22.9%.
The economic crisis causes political
upheaval in many countries, as governments are forced to introduce severe
austerity programs to meet their budget targets. Last week, the Romanian
government fell in a vote of no-confidence, because of severe austerity
programs dealt with the Prime Minister.
France held the first round of
elections this week. Nicolas Sarkozy seems give way to Francois Hollande.
Elections are held in Greece in early May.
In Summary: it was a volatile week,
Wall Street indices closed the prices in increases that were moderated toward
the end of the trade-day. European indices closed in a fair price increases,
when the CAC closed with a leap of 1.14%. Asian indices closed with slight
declines. In a weekly summary, the Dow rose by 1.5%, the S & P 500 index
climbed by 1.8% and the NASDAQ stood out with a jump of 2.3%.
This week the center - Interesting week ahead, traders
will set their sight to the U.S. employment report for April, which is expected
to report some improvement from the previous month, which formed about 120
thousand jobs only. According to preliminary estimates, the U.S. economy
managed to produce in April about 176 thousand jobs, and unemployment is
expected to remain unchanged at 8.2%. According to data published on a weekly
basis (number of new jobseekers), it seems that there will be no improvement in
the sector employment, but on the contrary. Disappointing data may lead to
descent of the dollar, as investors will wait for another acquisition program.
Another statistic that will interest
is the interest rate decision this week in Europe, which is expected to remain
unchanged at a rate of 1%. Investors will follow closely following the words of
Chairman of the European Central Bank – Mario Durge – expected to address the
economic situation of Europe which is increasingly deteriorating. Investors
will try to capture clues about future monetary policy of the central bank.
Australia interest rate decision will be published this week. Estimations are
that the central bank will lower interest rates in 0.25%, due to the ongoing
slowdown in China and moderation in inflation that occurred during the first
quarter of this year. Australian dollar will be ready for the worst ahead of
the publication of the discussions.
Technically, the leading U.S. indices
closed the week very close to record highs set two weeks ago. Now we shall see
whether investors will be determined enough to lead to a real breakthrough
toward new highs.
In the FOREX arena it will be
interesting to see whether the Dollar would weaken this week. Overall, it all
depends on market sentiment. If sentiment continues to be positive, the U.S.
dollar will continue to lose altitude against most currencies trading him.
Employment data, will be published next Friday, may have a decisive influence
on the USD. The real test of the dollar against the Euro is a significant
resistance level, which stands in 1.3290. Breaking this level may propel the
duo into the moving 200 average area in 1.3470. The Pound will struggle to
rally after the publication of GDP data.
