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Forex Blog - U.S. Market Update
Dow -7 S&P -2.7 NASDAQ -7
- Markets were in a volatile mood this morning, opening well above yesterday's
close on an upbeat durable goods report and declining oil prices, but erased
much of the day's gains by mid- morning. The Commerce Department reported that
orders for durable goods (ex transport) rose 2.5% in April, surprising analysts
who had forecasted a 0. 5% decline, providing ammunition for a less pessimistic
outlook on the US economy. With cars and aircraft in the
mix, durable order fell by 0.5%, an entire percentage point less than expected.
Meanwhile, oil briefly ticked below $126 this morning, before rising back
towards $130 in late morning trade. Airline stocks tracked the fall and rise of
crude prices, with AMR+7. 4% UAUA+5.7% and CAL+6% at one point in early
trading, but these names were well off their best levels by mid morning.
Retailers AEO+8%, RL+12%, CHS+5% and DLTR+3% were prospering after earnings
reports this morning; each managed to beat EPS estimates. KEY-11% after raising
its 2008 outlook for loan charge-offs has led to lingering weakness in many of
the financials. Citigroup also noted AIG is likely to have to raise more
capital. AIG -4. 4% XLF -1% CSCO was under pressure despite the CEO stating
that he was âextremely comfortableâ with the company's long-term growth target,
while CCE -4% is also giving back ground after reaffirming guidance. AKNS was
gaining after Kaufman initiated the name with a buy rating. In other news, Dow
Chemical announced it would hike prices by 20% on all products in June, while
UPS said it was negotiating with DHL Express to provide air transport for the
shipper. The better Durable goods data has pushed Treasury yields back towards
some key levels. The 10-year yield is testing the 200 day EMA after pushing
back above the Feb intra-day high. The yield is re- approaching 4%, levels not
seen since the first few sessions of 2008.
- The EUR/USD remains locked in its recent consolidation range of 1.
5630-1.5830 but continues to probe both sides of the range in a session marked
by a dearth of headlines on which to pin the dollar's price movements. Some
dealers attributed the USD strength to M&A flows (citing a potential
InBev-Bud merger). Others attributed strength to lower commodity prices, rather
than the usual interest rate US-German two-year differentials. The Durable
Goods data did finally provide an impetus for USD strength as the April reading
beat expectations. However the better US data helped to push NYMEX crude off
session lows of 125.96 to move back towards 129.50 level as the European close
approached. For the most part, the euro was unable to capitalize from continued
hawkish comments out of European officials regarding action to avoid secondary
effects of inflation. An ECB source reiterated that the central bank remains
poised to tighten interest rates if inflation remains at elevated levels.
German May preliminary CPI m/m came in at 0.6% v 0.4%e and 3.0% v 2.08% y/y.
- Yen related pairs experienced encounters with some critical chart points and
option barriers. EUR/JPY tested its one-year resistance line pegged at the
164.50/70 level, while USD/JPY failed to knock out an option barrier at the
105.50. Overall, the dollar followed commodity price swings in the session.
Both crude and gold exhibited a wild session in terms of price action as early
European weakness commodities evaporated in early US trading.
- June Bunds -30 ticks at 112.40 after testing its lowest level since Oct 2007;
June Gilts -18 ticks at 106.25. Euro Stroxx 50 +1.1% at 3,753; FTSE 100 Index
+0.3% at 6,076; CAC 40 Index +1.7% at 4,987 and DAX +1.3% at 7,045
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