News and Views: 4 July, 2008

Indices:

European markets:

After Wednesday being a dry day for stocks, European markets rebounded again led by banks and insurers. This happened after the European Central Bank President Jean-Claude Trichet in a meeting signaled that policy makers would not be lifting interest rates in the near future to contain inflation. (source: bloomberg.com). This time the ECB lifted interest rates by a quarter point to 4.25% which Trichet feels will help bring inflation back below 2%. (source: sharecast.com). Rolf Biland, chief investment officer at VZ Vermoegenszentrum said: "In Europe, we probably won't see any more interest-rate increases that soon. At the moment, the market welcomes every little sign of improvement.'' (source: bloomberg.com).

Before the ECB President's statement and ahead of the US jobs data, market activity was volatile, which took oil to an al time high of $146 a barrel and dollar fell to a record low against the euro. (source: ft.com).

Henk Potts, a strategist at Barclays Stockbrokers said: "The vast majority of analysts were anticipating the European Central Bank would have raised rates today. They also anticipated a very hawkish statement to come through from that and it was certainly nowhere near as strong as many had expected." (source: reuters.com).

The German Dax closed 48 points higher at 6,353 the French CAC rose 47 points to 4,343. London's FTSE 100 was up 0.9 percent. (source: sharecast.com and reuters.com).

US markets: 

Markets in US were again low on Thursday after a report by Nvidia Corp showed reduced sales forecast, this news outweighed speculation the Federal Reserve may hold off from raising interest rates. (source: bloomberg.com). The US jobs data released yesterday also did not get much weightage, 62000 jobs were eliminated last month, in line with what analysts predicted, according to the US Department of Labor. (source: ft.com).

The major indices were mixed with Dow Jones 30 up 73 at 11,288. The S&P 500 was up 1 at 1,262 and the NASDAQ Composite ended down 6 points to 2,245. (source: sharecast.com).

Asian markets:

In US, trading in Asian stocks rose led by Japanese banks and automakers after US job losses fueled speculation that interest rates in US won't rise. (source: bloomberg.com).

The benchmark Nikkei was down 0.1 percent at 13,256.19. (source: reuters.com).

Currencies:

After much speculation by analysts, the ECB President Trichet did increase interest rates by a quarter percentage point to 4.25% and signaled no more rises in the future. This took euro lower against dollar. Akio Shimizu, chief manager of foreign exchange trading in Tokyo at Mitsubishi UFJ Trust & Banking Corp said: "The euro will face a little more selling pressure. Trichet stuck to his message that he wouldn't raise rates successively. Traders with price expectations for additional rate hikes were out of the euro.'' (source: bloomberg.com).

The dollar was stronger than most days even after a poor US jobs data. Boris Schlossberg, a senior currency strategist at DailyFX.com in New York said: "The unemployment number really didn't break the dollar's back. The market was so bearish that I thought we would see a minus-100 (thousand job-loss) print, so this is moderately good news." (source: reuters.com).

The euro was last 1.2 percent lower on the day at $1.5694. Against the yen, the dollar jumped almost 0.8 percent to trade at 106.72. (source: reuters.com).

Commodities:

Oil:

Oil did not change much yesterday amid huge demand for fuels particularly from China, which may strain supply. Tim Evans, an energy analyst for Citi Futures Perspective in New York said:"There's a kind of expectation in the market that there will be strong ongoing demand for distillate fuel. We had the Chinese earthquake, and we've got the Olympics coming up.'' (source: bloomberg.com).

Crude oil for August delivery rose 15 cents to $145.44 a barrel at 8:55 a.m. in Sydney in after-hours electronic trading on the New York Mercantile Exchange. (source: bloomberg.com).

Gold: 

Rise in Dollar took gold priced in dollar lower yesterday. Jon Nadler, a senior analyst at Kitco Minerals & Metals Inc in Montreal said in an e-mail: "Gold has now run out of negative dollar news. We are looking at the prospect that the next central bank to raise rates will indeed be the Fed.'' (source: bloomberg.com).

Gold futures for August delivery dropped $12.90, or 1.4 percent, to $933.60 an ounce on the Comex division of the New York Mercantile Exchange. (source: bloomberg.com).

Bonds:  

Yields move inversely to bond prices

US Treasuries:

Treasury notes gained yesterday after reports showed US payrolls fell and US jobs data was worse than expected, reducing speculation an interest rate rise by the Federal Reserve. Richard Schlander, a portfolio manager at Pioneer Investments in Boston said: "The Fed's painted itself into a corner. They can't ease, they can't raise rates. The economy is muddling along at best. It's a very awkward situation. We've got stagflation-lite.'' (source: bloomberg.com).

The 10-year note's yield rose 3 basis points to 3.98 percent. (source: bloomberg.com).

European Bonds:

European bonds also gained like the US treasury notes after ECB signaled that they may not raise any more interest rates in the near future. Christoph Kind, head of interest rates and currencies at Frankfurt Trust Investment GmbH said:"Trichet doesn't sound as hawkish as some have feared. The market reaction has been quite positive because there were fears the ECB could hike by 50 basis points.'' (source: bloomberg.com).

The yield on the German 10-year bund, Europe's benchmark government security, dropped 8 basis points to 4.56 percent. (source: bloomberg.com).

Prev - Next >>