News and Views: 11 August, 2008

Dollar has been enjoying its rise thoroughly this past month, and it had no problems reaching a seven month high  against the yen and a five month high against the euro on Friday

Indices:

European markets:

European stocks gained despite having a volatile trading day on Friday after crude oil price dropped sharply. Earlier in the day investors were disappointed on the poor performance of Fannie Mae, but eventually losses turned into gains due to oil drop. European Central Bank's decision on Thursday not to raise interest rates and concentrate on economic recession also helped sectorial rise of autos, luxury goods and defensive stocks. (source: reuters.com).

Andreas Huerkamp at Commerzbank in Frankfurt, a strategist said:"The economic data for the euro zone is in free fall. We have looked at it historically and it usually indicated that earnings expectations are between 40 and 60 percent too high for the coming year and must come down by around 20 percent." (source: reuters.com).

The German Dax closed 18 higher at 6,56, the French CAC rose 34 to 4,491. (source: sharecast.com).

US markets:

Investors were having a field day betting the sharp drop in crude oil may reduce companies' input costs and lift profits. This gave boost to the US stocks shrugging off loss from Fannie Mae. (source: sharecast.com).

Across the markets, the Dow Jones rose 302 points to 11,734, the tech loaded Nasdaq Composite climbed 58 to 2,414, while the broad-based S&P 500 has added 30 to 1,296. (source: sharecast.com).

Asian markets:

On Friday, the start of Olympics in Beijing did not do much for the Chinese markets. The markets fell after US stocks declined overnight, but later losses were marginalised by rise in car makers and technology stocks. Japan however rose slightly, after a stronger yen. (source: ft.com).

The Hang Seng index closed 1 per cent lower at 21,885.21. The Nikkei 225 average closed 0.3 per cent higher at 13,168.41. (source: ft.com). 

Currencies:

Dollar has been enjoying its rise thoroughly this past month, and it had no problems reaching a seven month high  against the yen and a five month high against the euro on Friday, caused by steep decline in crude oil price.  (source: reuters.com). Dollar shot up in demand due to poor economic reports in the euro zone and the ECB's decision to hold interest rates, in turn depreciating euro's price. (source: sharecast.com).

The dollar climbed as high as 110.09 yen. (source: reuters.com).

Commodities:

Oil:

Crude oil was at a three month low on Friday as dollar continued to dominate the currency market along with the stock markets. Supplies in Turkey were rerouted, easing concern of oil shortage after Kurdish militants bombed a pipeline. Dollar's rise and oil's decline is prompting investors to slowly shift their investments out of oil. (source: sharecast.com).

Crude for September delivery fell $4.82 to settle at $115.20 a barrel on the New York Mercantile Exchange. (source: sharecast.com).

Gold: 

Gold continued to slip after oil had a steep fall and dollar became a strong contingent for investor investment compared to oil. Investors were looking to liquidate their commodity investments, meaning they were keen on selling off their commodities to take in as much profit they could take before oil and gold prices along with other commodities fall further. Tom Hartmann, a trader at Altavest Worldwide Trading said:"The main driver at this point is the strength of the dollar, without a doubt." (source: reuters.com).

Among precious metals gold for December delivery fell $13.10 to $864.80 an ounce. (source: sharecast.com).

Bonds:  

Yields move inversely to bond prices

US Treasuries:

Gains in stocks has shifted investor attention from bonds lately, and on Friday it was no different. Matthew Moore, economic strategist at Banc of America Securities, said:"There were some geopolitical concerns along with spike in stocks so that limited the sell-off in Treasuries." (source: reuters.com).

Ten-year note yields were up just one basis points at 3.94 percent. (source: reuters.com).

European Bonds:

Bonds in Europe fell amidst gains in European stocks. Jean-Claude Trichet's comments on Thursday, caused a further fall in bonds, he said the concern should be possible recession in the economy and not inflation. (source: sharecast.com).

The yield on Germany’s benchmark 10-year bund rose by a basis point to 3.94%. (source: sharecast.com).

Economic Calendar - 11 August 2008:

08:30am  Goods Trade Balance (Jun) - United Kingdom: The trade balance released by the National Statistics is a balance between exports and imports of goods A positive value shows trade surplus, while a negative value shows trade deficit. It is an event that generates some volatility for the GBP. If a steady demand in exchange for UK exports is seen, that would turn into a positive growth in the trade balance, and that should be positive for the GBP. Previous rate was -£7.4B. (High volatility expected).

08:30am Total Trade Balance (Jun) : The trade balance released by the National Statistics is a balance between exports and imports of total goods and services. A positive value shows trade surplus, while a negative value shows trade deficit. It is an event that generates some volatility for the GBP. If a steady demand in exchange for UK exports is seen, that would turn into a positive growth in the trade balance, and that should be positive for the GBP. Previous rate was -4.1B. (High 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.)