News and Views: 31 July, 2008

Stocks in US continued to move upwards yesterday after 39 energy producers rose after crude oil fell further

Indices:

European markets:

Like Tuesday, yesterday markets in Europe were lifted by good results from Siemens and ArcelorMittal. Financial stocks too were not far behind, after the Federal Reserve initiated measures to make the market more liquid. Rainer Sartoris, economist at HSBC Trinkaus said:"The Fed has expanded its measures and signals very clearly that it will do everything to support the financial system. This has a positive impact on the stock markets. Investors are now hoping again for more stability." (source:  reuters.com)

Investor mood was lifted after good earnings news was received from financial sector taking insurance stocks higher in London. (source: ft.com). 

Germany’s Xetra Dax added 1 per cent to 6,460.12 and the CAC 40 in Paris gained 1.9 per cent to 4,400.55. The FTSE 100 index was up 101.5 points to 5,420.7. (source: ft.com).

US markets:

Stocks in US continued to move upwards yesterday after 39 energy producers rose after crude oil fell further. James Gaul, a money manager at Boston Advisors LLC in Boston said:"A strong up day from energy is going to move the whole index. Investors are looking for any excuse possible to push this market up. They're tired of being in a down market.'' (source: bloomberg.com).

Matthew Albrecht, an analyst with S&P Equity Research, said: “We view these moves as positives for the investment banks, as they improve industry liquidity, but balance sheet troubles and economic headwinds remain.” (source: ft.com).

Oil demand has increased due to reported shortage in supply according to the Energy Department . This could lead oil to go up, but till then investors want to make the most of the profits. (source: sharecast.com).

Across the markets, the Dow Jones leapt 186 to 11,583, the tech stacked Nasdaq Composite was up 10 at 2,329, while the broad-based S&P 500 added 21, or 1.7%, to 1,274. (source: sharecast.com).

Asian markets:

Asian stocks took cue from rise in US stocks after a good consumer confidence report lifted investor spirits. (source: ft.com).

Hong Kong shares rose after investors took Merrill Lynch's latest write down as a sign credit crisis was easing, since it was not as high as it was anticipated. (source: reuters.com).

Currencies:

The ADP or employment report showed an unexpected addition of jobs in the private sector, raising anticipation of receiving a good non-farm payrolls data on Friday. This news took dollar higher.  Matthew Strauss, senioe currency strategist at RBC Capital Markets in Toronto said: "The ADP (employment report) number is bullish for the U.S. dollar especially in an environment where we've seen in the last few weeks U.S. data surprising on the upside. One should be reminded that the ADP number is not a highly reliable indicator of what might happen to non-farm payrolls. But nonetheless it has increased the risk that non-farm payrolls could be much stronger than the minus 75,000 expected." (source: reuters.com).

The Federal Reserve's decision to inject more cash into the markets to make them more liquid also boosted the dollar. (source: sharecast.com). 

The euro was down 0.3 percent at $1.5540. The dollar was up 0.1 percent at 108.20 yen. (source:reuters.com).

Commodities:

Oil:

Oil disappointed commodity traders yet again, after it rose above $4 a barrel over US weekly inventory data lacking the much needed push to take oil below $120 a barrel. (source: ft.com).

Focus also moved towards tension in Nigeria and Middle East, where militant attacks are eminent. (source: sharecast.com).

The September futures contract settled with a $4.58 gain at $126.77 a barrel on the New York Mercantile Exchange. (source: sharecast.com).

Gold: 

Wednesday was a little weak for gold, with climbing dollar, declining oil prices and rise in US stocks. Michael Kimpinski, trader at Commerzbank said:"Gold's decline was pretty much forex related, and oil is coming down. We need to see some stronger commodities in general, and a stronger euro, to push gold higher again." (source: reuters.com).

Gold was at 918.80/920.30 by New York's last quote at 2:15 p.m. (source: reuters.com). 

Bonds:  

Yields move inversely to bond prices

US Treasuries:

Prices of US government bonds ended lower yesterday after investors moved away towards stocks reducing demand for treasuries as a safe haven. The Federal Reserve's move to provide more liquidity also harmed importance of bonds. Carl Lantz, interest rate strategist with Credit Suisse in New York said:"Treasuries have been weighed by the refunding announcement signaling increased supply. You also had the Fed extending its credit facilities which gave a boost to stocks and weighed on the Treasury market." (source: reuters.com).

The 30-year Treasury bond's price slipped 7/32, for a yield of 4.64 percent. (source: reuters.com).

European Bonds:

A high inflation rate is expected by economists in a report which is due. Analysts fear a further rise in interest rates by the European Central Bank. Wilson Chin, a fixed-income strategist at ING Bank NV in Amsterdam said:"The ECB is likely to remain hawkish and the front end could come under some pressure. The curve could flatten further.'' (source:bloomberg.com).

The yield on the 10-year bund, Europe's benchmark government security, fell 1 basis point to 4.39 percent. (source: bloomberg.com).

Economic Calendar - 31 July 2008:

12:30pm  Gross Domestic Product Annualized (2Q) - United States: 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 1%. (High volatility expected).

12:30pm Gross Domestic Purchases Price Index (2Q) - United States : The GDP Price Index released by the Bureau of Economic Analysis, Department of Commerce gauges the change in the prices of goods and services. Changes in the GDP price index are followed as an indicator of inflationary pressure that may anticipate interest rates to rise. A high reading is seen as positive, or bullish for the USD, while a low reading is seen as negative, or bearish. Previous rate was 3.6%. (High volatility expected).

12:30pm Personal Consumption Expenditure (QoQ) (2Q) - United States : The Core Personal Consumption Expenditure released by the US Bureau of Economic Analysis is an average of the amount of money the consumers spend in a month on durable goods, consumer products, and services.. It is considered as an important indicator of inflation. A high reading is bullish for the USD, while a low reading is bearish. Previous rate was 1.1%. (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.)