Monday January 25, 2010 - 19:47:53 GMT
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Demand for Higher Risk Helping Equity Prices
U.S. equity markets are
trading better at the mid-session, buoyed by demand for higher risk,
oversold conditions, a fresh influx of cash and news that Obama may
propose tax breaks for businesses.
Investors dumped stocks late
last week as sentiment shifted toward less risky assets. The
combination of a stronger Dollar, monetary tightening in China and a
proposal by Obama to end financial institution prop trading weighed
heavily on traders last week. While these conditions are expected to
continue to linger this week, the bulk of the focus will be on the Fed
FOMC meeting which takes place on January 27th. Traders will be looking
for clues as to when the Fed will decide to begin to raise interest
rates. News that Bernanke is expected to reappointed as Fed chairman is
also to support todayâ€™s rally.
Treasury futures are trading
lower at the mid-session as demand for lower yielding assets is
falling. Demand for safety helped to lower yields and boost the March
Treasury Bonds and Treasury Notes last week. This bodes well for the
next auction because it looks as if the Treasury will be able to offer
lower yields. Supply concerns are likely to limit gains, however.
Gold is mounting a strong comeback following last weekâ€™s sharply lower
trade. Investors dumped commodities because of the stronger U.S.
Dollar. News that China was beginning to shift toward a tighter
monetary policy means less demand for precious and industrial metals.
Furthermore, a slow down in demand will mean lower inflation which
lessens the need for gold as a hedge. Most of todayâ€™s strength can be
attributed to short-covering and profit-taking.
Oil is trading sideways-to-higher at the mid-session following last
weekâ€™s collapse. The prospect of a stronger Dollar and weaker demand
from China were the driving forces behind the weakness. New regulations
regarding position limits also led to massive liquidation. Cold weather
moving to the East may drive up demand for heating oil which could
underpin crude oil today.
The U.S. Dollar is trading mixed at the
mid-session with no clear theme at this time. Traders may be choosing
to stand on the sidelines or lighten-up positions during the two days
leading up to the Fed FOMC meeting on January 27.
Euro is holding on to its early morning gains at the mid-session. Gains
are being limited by traders taking a precautionary view on
developments regarding the Greece budget problem.
British Pound is strengthening since the New York opening. Oversold
conditions and position squaring are helping to boost the British
Pound. The U.K. economy is still the driving force behind this marketâ€™s
recent weakness. This market is likely to strengthen over the near-term
or until more bad economic news hits the wires.
Japanese Yen is trading lower following a volatile week which saw the
Greenback lose ground. News that Bernanke will be reappointed is
helping to support demand for higher risk assets. This market could
turn around quickly to the upside today if U.S. stock markets weaken
and demand for lower yielding assets rises. The Bank of Japan is
expected to leave interest rates and stimulus alone at this weekâ€™s
meeting, but could threaten to intervene if this currency rallies above
The March Swiss Franc is trading higher overnight after
continuing last weekâ€™s late session reversal. The chart pattern
suggests that this market is likely to continue to strengthen until it
reaches a key resistance zone at .9702 to .9743. Traders should also
watch the Euro. A sudden drop in the Euro versus the Swiss Franc could
lead to renewed talk of intervention by the Swiss National Bank.
conditions in gold, crude oil and equities are not supporting the March
Canadian Dollar as originally forecast this morning. Overall, this
market can best be described as rangebound.
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