Thursday November 18, 2010 - 03:46:21 GMT
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Morning Briefing : 18-Nov-2010 -0340 GMT
US stocks closed the session flat with Dow at 11,008 (down 0.14%) and S&P500 at 1179 (up 0.02%). The market has already baked in good news about earnings and Fed policy, and now, investors need more clarity about Europe, China and the direction Washington will take with Republicans in control of the House, before moving higher. Now with EU and IMF officials meeting with Irish political brass, we could see a bailout packaged for Ireland getting announced soon. This would sooth the nerves of the market and trigger a recovery in asset prices. Dow has very strong support between 10850-900 and we attach a high probability of that holding. At the same time we would like to point out, 10,700 is a line on the sand for the bulls because if Dow falls below that then the bullish structure is impaired and an eventual target for July'10 lows of 9600 opens up.
We pointed out in our yesterday's Morning Briefing that most Asian indicies are sitting on key support levels and hence probability of a recovery is higher. We would be watching carefully to see whether those supports hold or not. Going into trade this morning, Asian indicies are mostly higher with Nikkei at 9872 (up 0.61%), Hangseng at 23,431 ( up 0.93%), Shanghai at 2978 ( up 0.15%) and Kospi AT 1911 ( UP 0.70%). Nifty has very strong band of support between 5930-50 and we expect the support to hold on a closing basis. Resistance is expected between 6040-60 and then at 6100-6110.
Crude (81.06) dropped further and tested the Support at 80.00 as expected. Although EIA's data release showed an unexpected decrease in the US Crude inventories, China's monetary tightening concerns is retaining the downside pressure. However, the Support at 80 is holding as of now and we will have to be little cautious as a break below 80 might increase the chances of further dip towards 77-75.
Gold (1347.70) is trading flat in between 1330-50 since Tuesday's sharp fall. As mentioned yesterday, we might see some sideways consolidation between 1320-50 for some time within the broader uptrend.
As anticipated yesterday, there has been a small pullback in the Dollar Index (78.92) and in the Euro (1.3562) compared to yesterday's low of 1.3460 in the latter. There is Resistance at the current level for the Euro. A break will be needed in order to take the Euro higher. The market may be mixed/ consolidative over today-tomorrow, needing fresh triggers, but possibly not finding any as data releases are light.
Dollar-Swiss (0.9913) may be ranged between 0.9880-1.0000. Dollar-Yen (83.38) may resume its climb towards 83.85 after its dip to 83.13-03 yesterday. The Pound (1.5891) held promise yesterday of a rise towards 1.60, but has come off from its rise to 1.5948 yesterday. The Aussie (0.9811) has bounced well from yesterday's low near 0.9725, a key Support, and might attempt a further rise towards 0.99.
As suggested, the picture appears mixed/ consolidative. Small moves might be more likely than large moves
Its a mixed picture in Asia as well. While the Sing Dollar (1.3004) has appreciated a bit from yesterday's level of 1.3072, the Korean Won (1142.40) has weakened further. Dollar-Rupee (45.31) was closed yesterday on account of Id. Prospects are mixed for today. On the one hand, the weaker Won could pull Dollar-Rupee up towards 45.50. On the other hand, in case the stock market goes up on the Axis-Enam deal, there could be chances of Dollar-Rupee dipping towards 45.10-00. Let us see.
The 3M USD LIBOR was unchanged at 0.28%. The 2Y yields were down 1 bps to quote at 0.49% while the 10Y yields were up 5 bps to quote at 2.89%.
The longer term Treasuries fell for the second day before the anticipated auction of another round of treasuries by the government, next week. The Treasuries saw a continuous rise for about 5-7 days post the Fed meeting early this month.
Credit Default-Swaps for the State Bank of India fell 35 basis points in past 6 months, more than the similar BRIC nation benchmarks. The Bank is planning to start its Euro Debt sales next week.
14:30 GMT Sep US Philifed Index
...Expected 5.1...Previous 1.0
UK BOE Minutes
...Actual 1-0-8...Previous 1-0-8
...Actual 7.7%...Previous 7.7%
US Oct Core CPI (MoM)
...Actual 0.0%...Previous 0.0%
US Oct Housing Starts
...Actual 0.52 Mln...Previous 0.59 Mln
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