News and Views: 12 August, 2008

Oil prices fell on Monday after drop in crude imports by China overshadowed rise in supply disruptions from the conflict between Russia and Georgia

Indices:

European markets:

Markets in Europe rose to touch a six week high on Monday 11 August 2008. A weak euro gave a boost to export-sensitive stocks like carmakers, apart from this energy stocks also found support when oil rose a little amidst concern on fighting between Russia and Georgia. Andrea Williams, head of European equities at Royal London Asset Management, said:"The backdrop is still very negative and the outlook for the oil price is positive. Generally, if you look at where earnings numbers have come out, we haven't had the massive downgrades that people thought, particularly on the financial side. We've still got ING and UBS to go but certainly, the worst is through for write downs, so it is more an issue of credit market deterioration." (source: reuters.com).

Britain's FTSE 100 was up 1 percent, Germany's DAX rose 0.7 percent and France's CAC gained 1 percent. (source: reuters.com).

US markets:

Investors were jubilant over oil's drop taking US stocks higher, giving boost to prospects for consumer and business spending. (source: reuters.com).

Dow Jones industrial average gained 48.03 points, or 0.41 percent, to end unofficially at 11,782.35, and the Standard & Poor's 500 Index rose 9.00 points, or 0.69 percent, to finish unofficially at 1,305.32. The Nasdaq Composite Index climbed 25.85 points, or 1.07 percent, to close unofficially at 2,439.95. (source: reuters.com).

Asian markets:

Oil prices fell on Monday after drop in crude imports by China overshadowed rise in supply disruptions from the conflict between Russia and Georgia. Hong Kong shares were flat on Monday after initial gains were lost due to high producer price inflation numbers in China. (source: reuters.com).

Whereas the Nikkei gained as a weak yen brought exporters such as Honda, Canon and Sony into the spotlight. Japanese stocks also saw a rise due to declining commodity prices, soothing inflationary concerns and boosting company earnings outlook. (source; sharecast.com).

The benchmark Nikkei 225 closed 262 points higher at 13,430. Hong Kong's Hang Seng closed down 25 points at 21,859. (source: sharecast.com).

Currencies:

Dollar rose higher again versus the euro as investors assessed how slow the US economy is and outside the US, other economies are slowing down too. Matthew Strauss, a currency strategist at RBC Capital Markets in Toronto, said: "Growth outside the US is really slowing and hawkish remarks by the ECB at this point won't have the same impact on the euro as they did one or two months ago." (source: reuters.com).

The euro fell almost to $1.49. (source: reuters.com).

Commodities:

Oil:

Crude oil continued its decline on Monday as investors weighed up demand from China with supply disruptions due to conflict between Russia and Georgia. Chinese crude imports fell 7% to 13.79million tonnes in July. (source: sharecast.com).

The September futures contract was off 75 cents at $114.45 a barrel in New York. (source: sharecast.com).

Gold: 

Gold dipped further, with declining oil and rising dollar, taking away the bullion's safe haven status. Investors are not only selling oil related stocks but also gold investments to rake in profits as gold dipped to its cheapest level. Bruce Dunn, vice president of trading at Auramet Trading in New Jersey, said: "It's clearly a technical break. It's clearly the oil and the dollar/euro. You could see some panic here in the gold market now." (source: reuters.com).

Gold ended at $819.25/820.85 by New York's last quote at 2:15 a.m. EDT. (source: reuters.com).

Bonds:  

Yields move inversely to bond prices

US Treasuries:

Oil's slip below $113 a barrel, caused bonds to decline further, as investors focus has shifted towards stocks. This reinforced the idea that consumers may be ready to spend enough to keep the economy from weakening. Michael Sheldon, chief market strategist with RDM Financial Group in Westport, Connecticut, said:"Contributing to the downside in Treasury prices today, it looks like we are seeing some allocation out of bonds and into stocks." (source: reuters.com).

The benchmark 10-year Treasury yield rose to 4.01 percent. (source:reuters.com).

European Bonds:

European bonds were lower on Monday after Klaus Liebscher, a policy member of European Central Bank said:"There is no room for complacency on the matter on inflation." Showing the bank is still concerned about inflation rise. (source: sharecast.com).

The yield on a 10-year bond rose by a basis point to 4.27%. (source: sharecast.com).

Economic Calendar - 12 August 2008:

08:30am  Retail Price Index (MoM) (Jul) - United Kingdom: The Retail Price Index released by the National Statistics is a statistical measure of a weighted average of prices of a specified set of goods and services purchased by consumers. It is widely considered as a key measure of inflation that indicates an accurate reflection of the cost of living. A high reading is seen as positive (or bullish) for the GBP, whereas a low reading is seen as negative (or bearish). Previous rate was 0.8%. (High volatility expected).

08:30am Retail Price Index (YoY)(Jul) - United States: The Retail Price Index released by the National Statistics is a statistical measure of a weighted average of prices of a specified set of goods and services purchased by consumers. It is widely considered as a key measure of inflation that indicates an accurate reflection of the cost of living. A high reading is seen as positive (or bullish) for the GBP, whereas a low reading is seen as negative (or bearish). Previous rate was 4.6%. (High volatility expected).

12:30pm Trade Balance (Jul) - United States: The Trade Balance released by the Bureau of Economic Analysis 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 USD. If a steady demand in exchange for US exports is seen, that would turn into a positive growth in the trade balance, and that should be positive for the USD. Previous rate was -$59.79B. (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.)