News and Views: 25 June, 2008

Oil moved higher after supply disruptions from Nigeria continued

Indices:

European markets:

Markets in Europe showed a dismal pictures on Tuesday when they ended lower over US economy worries. The consumer confidence monthly report by The Conference Board showed a decline of consumer's mood to 50.4 from a revised 58.1 in May. (source: reuters.com).

Jean-Clause Petit, head of equities at Barclays Wealth Managers in France said: "Worries over a slowdown have spread from financial market professionals to people in the real economy, and it confirms what the market has been fearing for a while. The real danger is to face a clear economic downturn and earnings erosion, without having room for interest rate cuts because of high inflation." (source: reuters.com).

Financial shares like UBS, Commerzbank and BNP Paribas however lifted the markets marginally, but markets still closed lower. (source: sharecast.com).

Germany's DAX index ended down 0.8 percent, the UK's FTSE 100 index down 0.6 percent and France's CAC 40 down 0.8 percent. (source: reuters.com).

US markets: 

US markets were very volatile yesterday, taking stocks lower. Housing shares initially went down after the Standard & Poor's/Case Shiller national home price index showed its biggest monthly decline. But later housing giants like DR Horton, Lennar and Pulte Homes were the biggest risers. (source: sharecast.com).

The Dow Jones industrial average shed 34 at 11,807. The S&P 500 lost 3 at 1,314 and Nasdaq retreated 17 to 2,368. (source; sharecast.com).

Asian markets:

Nikkei was flat and Hang Seng closed lower on Tuesday's trading. A weakening demand for motors in US took Toyota down. Banks were a mixed lot, with Sumitomo Mitsui Financial went down, whereas Mizuho Financial and Mitsubishi UFJ Financial both went up. Fall in property stocks also took markets down ahead of a US interest rate meeting. (source: sharecast.com and reuters.com).

The Nikkei 225 index closed 7 points lower to end at 13,849. Hong Kong's Hang Seng closed down 258 points at 22,456. (source: sharecast.com).

Currencies:

After Monday's rise, dollar declined against most major currencies on Tuesday after data showed weak US consumer confidence. Traders are pessimistic about the Federal Reserve's ability to raise interest rates and concerned about the health of US economy. (souce: reuters.com).

The euro rose to $1.5609 , a session high, from around $1.5575 before the report. The dollar fell to 107.55 yen from around 107.80 yen. (source: reuters.com).

Commodities:

Oil:

Oil moved higher after supply disruptions from Nigeria continued. Apart from this, oil rose after traders were disappointed over Saudi Arabia's output increase which was not sufficient. Weaker dollar also pushed oil prices up. (source: sharecast.com).

  Crude for August delivery closed up 26 cents at $137 a barrel on the New York Mercantile Exchange. (source: sharecast.com).

Gold: 

Gold moved up on Tuesday over a weak dollar. But investors were particularly careful about buying large portions ahead of the interest rate decision by the US Federal Reserve on Wednesday. It is however expected that the Fed may leave the rate unchanged at 2%. Peter Tse, a dealer at Scotia Mocatta in Hong Kong, said: "There's some early Japanese buying. I guess most people remain on the sidelines until the Fed meeting and in particular the announcement to see how hawkish it would be." Tse added that he expects gold to trade in a range of $875 to $890 and does not think that traders would risk buying huge amounts before the Fed meeting. (source: reuters.com).

Gold for August tracked rising oil prices, settling up $4.40 at $891.60 an ounce on the New York Mercantile Exchange. (source: sharecast.com).

Bonds:  

Yields move inversely to bond prices. 

US Treasuries:

European Bonds:

Bonds in Europe performed well after investors moved away from equities due to a weak economic data from the euro zone. The purchasing manager's index fell to a provisional 49.5 points in June from 51.1 in May. (source: sharecast.com).

German ten-year bund yield fell 2 basis points to 4.6%. (source: sharecast.com).

Economic Calendar - 25 June 2008:

N/A   Consumer Price Index (MoM) (Jun) – Germany:  The Germany consumer price index released by the Statistiches Bundesamt Deutschland measures the average price change for all goods and services purchased by households for consumption purposes. CPI is the main indicator to measure inflation and changes in purchasing trends. A high reading is positive (or Bullish) for the EUR, while a low reading is negative (or bearish). Previous rate was 0.6%. (Medium volatility expected). 

12:30pm Durable Goods Orders (May) – United States:  The Durable Goods Orders, released by the US Census Bureau, measures the cost of orders received by manufacturers for durable goods, which means goods planned to last for three years or more, such as motor vehicles and appliances. As those durable products often involve large investments they are sensitive to the US economic situation. The final figure shows the state of US production activity. A high reading is bullish for the USD. Previous rate was -0.5% . (Medium volatility expected).

12:30pm Durable Goods Orders ex Transportation (May) – United States:  The Durable Goods Orders measures, released by the US Census Bureau, the cost of orders received by manufacturers for durable goods, which means goods planned to last for three years or more, excluding the transport sector. As those durable products often involve large investments they are sensitive to the US economic situation. A high reading is bullish for the USD, while a low reading is seen as Bearish. Previous rate was -0.5% . (Medium volatility expected).

18:15pm Fed Interest Rate Decision - United States: The Board of Governors of the Federal Reserve announces an interest rate. This interest rate affects the whole range of interest rates set by commercial banks, building societies and other institutions for their own savers and borrowers. It also tends to affect the exchange rate. If the Fed is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the USD. Previous rate was 2% . (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.)