Wednesday November 17, 2010 - 05:57:01 GMT
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Morning Briefing : 17-Nov-2010 -0549 GMT
US market got knocked by the Asian flu and PIIGs scare. Dow shaved-off 1.6% to close at 11,024 and S&P 500 declined 1.62% to close at 1,178. Dow is now sitting right above its key support zone around 10,950 and resistance will be found around 11,150.
Asian fever is still running this morning with Hangseng at 23,588 down 0.5%, Shanghaiat 3008, down 0.8%,Nikkei in the red at 9746, down 0.5% and Kospi trading flat. With most Asian indicies on support we would like to cover shorts and looks for opportunties to establish longs. Yesterday Nifty closed in the red with a 2.2% cut at 5988, lead by sell-off in realty and resources stocks. Nifty has very important support cluster around 5930-40 and we need to see that hold on a weekly closing basis for the uptrend to be intact.
Crude (82.30) fell sharply breaking below the Support at 84 yesterday. The stronger dollar, Euro zone debt concerns and fears that China might increase interest rates pulled down the price. Next significant Support is seen at 80.00, a test of which is looking likely in the coming days.
Gold (1336.40) has dropped further towards the 1330-20 Support region as expected. We expect this Support region to hold and the overall uptrend to continue. We might expect some sideways consolidation between 1320-50 for sometime before the overall uptrend resumes.
Suddenly it seems a long time ago that the Euro (currently 1.3500) was at 1.4282 on 04-Nov, just after the FOMC. What ephemeral strength? A low of 1.3447 was seen in the US session, as the markets continue to be troubled by concerns over Ireland and Greece besides fear of rate hikes in China. The Dollar Index (79.23) has seen a high of 79.46, and is trading above 79.08, which was a crucial resistance.
We see good chances of further Dollar strength in the long term. In the shorter term, the move might be a little overdone and there may be technical Supports coming up for the non-Dollar currencies over today-tomorrow.
Dollar-Yen (83.35) is bullish overall and may continue to be bought on dips. Dollar-Swiss (0.9965) has seen a steady rise over the last several days and may well test Parity today. Beyond that, Resistance is seen at 1.0065. The Pound (1.5885) succumbed to overall Dollar strength yesterday, but is now trading at an important trend Support. Might be worth buying. The Aussie (0.9777) had dropped to 0.9725 yesterday and has bounced a bit from there. A snap-back rally towards 0.99 is possible if and while the market remains above 0.97.
Among Emerging currencies, the Won weakened to 1140 yesterday, but has gained slightly to 1130.50 today. It may gain further towards 1120-10 over the next few days. USD-SGD (1.3025) has come up well from the low of 1.2814 a couple of weeks ago, but may need to dip a bit in order to allow new Longs to be built. Dollar-Rupee is closed today on account of Eid. The Brazilian Real (1.7360) is also weak overall, but could see a bit of strength in the next few days, bringing it towards 1.72.
The 3M USD LIBOR was unchanged at 0.28%. The 2Y yields and 10Y yields were down 3 bps and 10 bps to quote at 0.50% and 2.84% respectively.
The EU companies are seeing a fall in their USD bond sales amid deep concerns that the sovereign debt crisis in Europe may worsen beyond control. The share of US bond sales dipped to 2.1% of all investment-grade issuance in Oct-10, the smallest since at least 1998.
China is said to be in the process of formulating measures to contain its rapid price increases.
The Japanese yield differential between the 20Y and 10Y bonds (86 bps) was near the highest since March 2008 before tomorrowâ€™s 1.1 trillion-yen (USD 13.2 billion) auction of 20Y bonds.
08:30 GMT UK BOE Minutes
...Expected 1-0-8...Previous 1-0-8
08:30 GMT UK Unemp
...Expected 7.7%...Previous 7.7%
13:30 GMT US Oct Core CPI (MoM)
...Expected 0.1%...Previous 0.0%
13:30 GMT US Oct Housing Starts
...Expected 0.59 Mln...Previous 0.61 Mln
Oct UK CPI Y/Y
...Actual 3.2%...Previous 3.1%
EU Oct CPI (YoY)
...Actual 1.1%...Previous 1.0%
US Oct Core PPI (MoM)
...Actual -0.6%...Previous 0.1%
US Sep TICS (Net foreign purch of long-term Sec)
...Actual $ 81.0 Bln...Previous $ 128.7 Bln
US Oct Industrial Production
...Actual 0.4%...Previous -0.2%
14:15 GMT US Oct Capacity Utilization
...Expected 74.9%...Previous 74.7
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