Stocks Set to Open Better as Goldman Tensions Ease
equity markets are called better as tensions have eased regarding Goldman
Sachsâ€™ legal problems. Stock traders are also a little more optimistic because
of the opening of some air routes in Europe. Technically,
all three indices are currently retracing a little more than 50% of the recent
decline. This is a key area as the markets are in positions to post secondary
lower tops. Currently the main trend is up with no sign of a let up until the
current rally fails and a major swing bottom on the daily chart is violated.
June Treasury Notes and Treasury Bonds are trading mixed.
Traders donâ€™t seem to know which direction to play. Worries about Greece and
Goldman Sachs are sending mixed signals so traders have nothing to revert to
other than the abundance of supply in the markets. Look for a choppy two-sided
June Gold is trading better because of the weaker Dollar.
Like stocks, this market may be making a retracement of its recent down swing.
The main trend is up, but it may take the formation of a secondary lower top to
trigger strong selling pressure.
Oversold conditions and a pick-up in demand for higher
yielding assets are helping to boost June Crude Oil. Renewed air activity in Europe is increasing demand for jet fuel which is also
supportive news. The current chart pattern suggests a rally back to 85.50 is
likely over the near-term.
Speculation that Greece may require additional
rescue aid to finance its economy could weigh on the Euro the rest of this
week. At this time, the June Euro is trading better; this could change
following the New York
opening. Additional factors that could hurt the Euroâ€™s performance are ongoing
travel disruptions in Europe because of the
volcanic eruption and the widening Greek government/German Bund spreads.
The spread of volcanic ash over Europe
could develop into a major economic problem for the Euro Zone economy if the
eruption turns into a long-term issue. This natural disaster could wreak havoc
on the economies in the Zone leading to delayed interest rate hikes and
expected fiscal tightening. While the rest of the world will be hiking interest
rates, the European Central Bank may be forced to wait until the economy shows
a sustained improvement.
Although it was reported that German investor confidence
improved more than forecast this month, the lingering Greece issues could trigger a shift
in investor sentiment especially if it is combined with a slowdown in the Euro
Zone recovery. Greek borrowing costs have more than doubled at the sale of
13-week bills. This prompted Bundesbank President Axel Weber to say that Greece
may need more assistance. At this time, investors seem to be looking for a
short-term fix to a long-term problem. Another call for financial aid from the
European Union could begin to erode confidence in the Euroâ€™s ability to
survive. All of this news indicates that traders should continue to look to
sell rallies while maintaining a bearish bias for the Euro.
A better-than-than expected surge in U.K. Consumer Prices
raised questions about the recent assessment by the Bank of England that a
deflationary trend was going to emerge because of the weak economy. The BoE
recently commented that the short-term rise in inflation over the past two
months amounted to an aberration and that deflation was the real threat.
The June British Pound rallied into a major .618 retracement
level following the news that British inflation rose in March to 3.4% from 3.0%
in February. This unexpected hike in consumer prices makes it unlikely that the
BoE will increase the amount of quantitative aid at its next meeting on May
6th. Gains could be limited today because of lingering concerns over the
possibility of a hung parliament after the May 6th election.
Higher crude oil and gold are helping to give the Canadian
Dollar a boost. In addition, traders expect Bank of Canada Governor Mark Carney to
signal that the central bank is poised to raise interest rates in the near
future. Although the BoC is expected to leave interest rates unchanged at 0.25%
at todayâ€™s meeting, it is expected to present a more hawkish policy statement.
Financial market traders are pricing in a rate hike on June 1 rather than the
previous guess of July 1. Traders cite the strong economy and the prospect of
further rate hikes as the main reasons why the June Canadian Dollar should
continue to appreciate.
The easing of tensions over the SEC/Goldman Sachs fraud
lawsuit is encouraging demand for higher yielding assets which is helping to
pressure the June Japanese Yen. Traders are also pressuring the Yen because of
increased optimism that the global economic recovery remains on track. Since
late last week, the Dollar appreciated against most majors as traders began to
factor in the possibility of a prolonged economic drawdown because of the
disruption from the volcano, the possibility of a revaluation of the Yuan and
the threat of tougher financial regulations.
central bank raised interest rates for the second consecutive month to 5.25%. It
also ordered banks to set aside more cash in reserves. India is seeking to slow the
highest inflation rate among the Group of 20 nations. This move by India brought attention to the Pacific Rim area
because it may mean than China
may be next in line to raise interest rates.
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Mon 18 Dec
10:00 EZ- final HICP Tue 19 Dec
09:00 DE- IFO Survey
13:30 US- Housing Starts/Permits
13:30 US- Current Account Wed 20 Dec
15:00 US- Existing Homes Sales
15:30 US- EIA Crude Thu 21 Dec
03:00 JP- BOJ Decision
13:30 CA- CPI & Retail Sales
13:30 US Weely Jobless
13:30 US- GDP Fri 22 Dec
09:30 US- GB- GDP
13:30 US- core PCE Deflator & Presonal Income
15:00 US- New Homes Sales
15:00 US- final University of Michigan
17:00 US- early Closes Mon 25 Dec
00:00 Christmas Holidays
Potential Trading Opportunities
POTENTIAL PRICE RISK: Medium Mon--10:00 GMT-- EZ- final November HICP. flash data are rarely changed.
POTENTIAL PRICE RISK: HIGH- Medium Tue --09:00 GMT-- DE- IFO Survey. Key report but usually not a market-mover
POTENTIAL PRICE RISK: HIGH- Medium- Tue --13:30 GMT-- US- Housing Starts and Permits. Leading indicators of activity
POTENTIAL PRICE RISK: HIGH-Medium- Wed --15:00-- US- Existing Homes Sales. Top Housing statistic
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