Wednesday December 1, 2010 - 03:54:38 GMT
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Morning Briefing : 01-Dec-2010 -0334 GMT
November turned out to be a down month for most equity markets globally and US is no exception. Overnight Dow (11,006) closed in the red with 0.42% losses and S&P500 registered a decline of 0.61% to close at 1181. Going into the last month of the year, markets await the decision from Congress on whether the tax cuts are going to beextended or not.ISM manufacturing and construction spending data would be released from US and a number of PMI data points would also be hitting headlines from EU later in the day.Monthly charts of Dow and S&P 500 exhibit signs of stress but having said that we believe key level for Dow remains the 10,900-11,000 level, which has successfully contained any bear raids till date. However, if the gates fall then the path of least resistance will be down.
Asian markets are in red with Hangseng (22,952) quoting a 0.24% loss, Nikkei (9937) trading flat, Shangahi (2948) unchanged and Kospi (1916) up by 0.44%. Australian GDP came in lower than estimate with a 0.2% Q-o-Q growth and a 2.7% y-o-y growth but Chinese PMI topped estimates with 55.2 reading. Yesterday Nifty gained 0.56% to clsoe at 5863. Nifty faces strong resistance between 5930-50 and then around 6010-30 and support is expected around 5830-40and then around 5770-80.
Crude (84.10) fell sharply from yesterday's high of 85.90. The stronger dollar and front month contract expiry pulled down the price. It is now trading near the Support at 84.00. Although Crude has failed to sustain the break above the Resistance at 85.00, with strong Support at 80.00, the broader outlook is bullish for a rise towards 90.
Gold (1384.50) has risen above 1380 yesterday. The increasing concerns on the Euro zone debt crisis supported the price rise yesterday thereby easing the threat of a Head and Shoulder pattern formation which we had been mentioning for some time. While above 1380, there are chances of further rise towards 1400-10 in the coming days.
Continued weakness in the Euro (1.2997) which simply failed to hold up yesterday despite its proximity to the 200-day Moving Average (1.3121). The European debt problems seem to be just too big. The Dollar Index (81.26) has continued to rise as a result, a far cry from the low of 75.63 seen on 4th November.
Dollar-Yen (83.60) has come off sharply from yesterday's high 84.27, with the Yen's strength against the Euro rubbing off against the Dollar as well. Dollar-Swiss (1.0020) on the other hand, has not fallen much, although it still trades below a crucial Resistance at 1.0070. A corrective dip may be expected. The Pound (1.5577) has risen from yesterday's low of 1.5484, largely profiting at the expense of the Euro. Note that the EUR-GBP cross has fallen 2% over the last couple of days, from 0.8515 to 0.8336. The Aussie (0.9565) has continued to lose alongwith the Euro, despite the rise in Gold overnight and the rise in Copper day before. A further fall towards 0.9441 might be seen.
Overall, the Dollar has recovered brilliantly over the last one month and the chances of protracted Dollar weakness are now severly reduced. However, some correction/ consolidation is possible in the near term.
Among the Emerging currencies, the Won (1161.20) remains weak overall and may weaken further towards 1172 in the medium term. The Sing Dollar (1.3190) also remains weak and the USD-SGD is trading in a strong uptrend. The pair may be bought on dips. The USD-BRL (1.7145) is nearing Support at 1.7120-7080. It may see a strong rise from there.
Dollar-Rupee fell to 45.89 yesterday and might dip further towards 45.75-65 over this week, on strong GDP numbers and strong inflows into Emerging Market Equities.
The 3M USD LIBOR was unchanged at 0.30%. The 2Y yields were down 5 bps to quote at 0.47% and the 10Y yields were unchanged at 2.80%.
The USD LIBOR has started moving up slowly after being flat for the past 3 months. Additionally, the US Treasury yields have also started rising in the past few weeks after seeing their all time lows. It may be the beginning of an era of increase in interest rates. To see charts, please follow the links below:
LIBOR charts: http://www.kshitij.com/graphgallery/usdlib.shtml#usd
US Treasury yield: http://www.kshitij.com/graphgallery/usdsin00.shtml#sin00
00:30 GMT AU GDP QoQ (Q3)
...Expected 0.5%...Previous 1.2%
13:15 GMT US ADP Emp
...Expected 69K...Previous 43K
15:00 GMT Nov US Manufacturing ISM
...Expected 56.3...Previous 56.9
...Actual 5.1%...Previous 5.0%
IN GDP Q4FY10
...Actual 8.9%...Previous 8.8%
...Actual 10.1%...Previous 10.0%
...Actual -0.1%...Previous 0.3%
US Case Schiller
...Actual 0.6%...Previous 1.7%
US Cons Conf
...Actual 54.1...Previous 49.9
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