News and Views: 28 August, 2008

Indices:

European markets:

Stocks in Europe advanced after the release of US new durable goods data showed a jump in July, boosting commodity prices and a good year ahead for energy and metal producers. Vafa Ahmadi, fund manager at CPR Asset Management in Paris, said: "This gives a bit of air to the market. It's an undeniably good number, following a good number in June. It's a small series of data moving in the right direction.'' (source: bloomberg.com).

David Jone, chief market strategist at IG Index, in London said: "The oil sector in particular, coupled with the steady recovery we have seen in the crude price over the past week, seems to be attracting interest from investors again." (source: reuters.com).

London's energy-heavy FTSE 100 rose 1.1 percent. Frankfurt's DAX fell 0.3 percent while the CAC 40 in Paris edged up 0.1 percent. (source: reuters.com).

US markets:

Markets in US rose as data released yesterday showed new durable goods orders rose surprisingly by 1.3 percent in July. Al Goldman, chief market strategist at Wachovia Securities in St. Louis, said:"Durable goods orders were up very nicely, and the market is going up because that has helped people start to look beyond the valley of all the economic and credit concerns to better times ahead. People are a little less pessimistic." (source: reuters.com).

Another analyst, Peter Jankovskis, manager at OakBrook Investments in Illinois, said: "As long as businesses are optimistic, we have a good chance of pulling out of this weak period in the economy in fairly short order. The durable goods data was a very strong report, and the market has acted appropriately.'' (source: bloomberg.com).

The Dow Jones industrial average was up 89.64 points, or 0.79 percent, at 11,502.51. The Standard & Poor's 500 Index was up 10.12 points, or 0.80 percent, at 1,281.63. The Nasdaq Composite Index was up 20.49 points, or 0.87 percent, at 2,382.46. (source:reuters.com).

Asian markets:

Asian markets were a mixed lot, with Nikkei dipping and the Hang Seng rising. Nikkei fell after real Estate developer Sohken Homes filed for bankruptcy, taking real estate stocks lower. (source: sharecast.com).

Whereas, in Hong Kong, shares were lifted by China Mobile and China Life's post-earnings rise. (source: reuters.com).

Currencies:

Euro rose against the dollar in the trading yesterday as comments from the European Central Bank rekindled hope of an interest rate hike in the euro zone to bring inflation under control. David Greenwald, chief operating officer at currency hedge fund TG Capital in California, said: "Weber's comments today were quite hawkish. The ECB may subsequently change its view and it has done that in the past. But to me, the ECB's core view is hawkish and its core predisposition is to raise interest rates. So it's very hard for me to see a straight line move in the dollar ." (source: reuters.com).

In late afternoon trading, the euro was up 0.5 percent on the day at $1.4725. The dollar was little changed against the yen, it last traded at 109.59 yen. Sterling was down 0.3 percent at $1.8345. (source: reuters.com).

Commodities:

Oil:

Traders kept a close watch on the tropical storm, Gustav yesterday amid rising concerns that the hurricane may cause havoc in the Gulf of Mexico installaions, cutting oil supply by this weekend. Joe Bastardi of AccuWeather.com in Pennsylvania, said: "The forecasts have Gustav heading for Louisiana, which is very bad news. If the storm track holds, this could shape up to be an untimely repeat of Hurricane Katrina. The damage caused by Katrina is in the collective consciousness of everyone who trades.'' (source: bloomberg.com).

Crude oil for October delivery rose 11 cents to $118.26 a barrel at 8:44 a.m. Sydney time on the New York Mercantile Exchange. (source: bloomberg.com).

Gold: 

Gold rose for the second day yesterday as oil rose higher, and dollar weakened against the euro, making gold desirable again as a hedge against inflation. Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago, said: "Gold is up on the weakness of the dollar and potential hurricanes. A dollar or two more in oil, and gold has new legs.'' (source: bloomberg.com).

Gold futures for December delivery rose $5.90, or 0.7 percent, to $834 an ounce on the Comex division of the New York Mercantile Exchange. (source: bloomberg.com).

Bonds:  

Yields move inversely to bond prices

US Treasuries:

Despite a rise in equities, US treasuries saw a rare rise, since usually bonds and equities move inversely. Strategists at Action Economics, said: "A surprise rebound in durable goods orders set the early bearish tone, but ongoing speculation about the status of the housing GSEs kept a safety bid close by on the margin." (source: reuters.com).

European Bonds:

Unlike yesterday, bonds in Europe declined after European Central Bank council member, Axel Weber said that there is no scope for interest cuts since inflation remain the bank' main concern. Marius Dahiem, a senior bond strategist at Bayerische Landesbank in Munich, said: "Weber was hawkish as ever. It does strike me how strongly the market reacted to these comments. The market has recently traded quite one-sidedly on the recession story. Weber probably wanted to counter overly optimistic expectations for rate cuts.'' (source: bloomberg.com).

The 10-year note yield climbed 5 basis points to 4.16 percent as of 4:41 p.m. in London. (source:bloomberg.com).

Economic Calendar - 28 August 2008:

03:00am  Unemployment Rate (Aug) - Germany : The Unemployment Rate released by the Bundesagentur für Arbeit shows , in a percent basis, the amount of unemployed people in Germany. A decrease in this indicator has positive implications for consumer spending which stimulates economic growth. A decrease of the figure is bullish for the EUR, while an increase is bearish. Previous rate was 7.8%. (Medium volatility expected).

12:30pm  Gross Domestic Product Annualized (2Q) - US: The Gross Domestic Product annualized released by the US Bureau of Economic Analysis shows the monetary value of all the goods, services and structures produced within a country in a given period of time. It is a gross measure of market activity because it indicates the pace at which a country's economy is growing or decreasing. A high reading or a better than expected number is seen as positive for the USD, while a low reading is negative. Previous rate was 0.9%. (Medium volatility expected).

23:01pm  Gfk Consumer Confidence (Aug) - UK: The GfK Group Consumer Confidence is a leading index that measures the level of consumer confidence in economic activity. A high level of consumer confidence stimulates economic expansion while a low level drives to economic downturn. A high reading is positive for the GBP, while a low reading is bearish. Previous rate was -39.   (Medium volatility expected).

Recent Market Action:

Sources include: Bloomberg.com , Reuters.com, Fxstreet.com and FT.com

(Any opinions expressed in these updates do not reflect the views of the company, and as such should not be taken as trading advice.)