Thursday December 2, 2010 - 03:51:08 GMT
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Morning Briefing : 02-Dec-2010 -0334 GMT
Our patience paid off as both Dow (11,256) and S&P500 (1206) gained 2 percent overnight. Economic data points from EU to US were all encouraging, EU PMI came in line with estimates and Chinese and Swiss PMI topped estimates alongwith US ISM manufacturing which was also above expectation. Over the last 2 weeks we have seen Dow test its 11,000 support a number of times and with todays close above 11,220 it has set a course for November highs of 11,451.
Bulls are rejoicing in Asia, signs of Santa rally becomes stronger. Hangseng (23,500) is up 1.08%, Nikkei (10,166) is up 1.78%, Shanghai (2991) is up 1.15% and Kospi (1945) is up 0.81%. Australian trade surplus improved for the month of October and if the trend continues then we expect a better GDP number for 4th quarter as external sector would no longer be a drag like Q3. EU GDP and ECB rate decision are on the cards today. Yesterday, Nifty (5961) gained 1.67% lead by banks and metals. We expect Nifty to test resistance zone between 6030-50 and a close above that will open the door for 6150. Support is expected around 5880-90 and then around 5840-5850.
Crude (86.42) has bounced back sharply from yesterday's low of 83.63 taking Support from the positive US jobs data and China's manufacturing data. Techinically the Support at 84 is holding and retaining our bullish view for a rise towards 90-95 in the coming days/weeks. On the downside 80 is a very strong Support seen below 84.
Gold (1391.90) is continuing to trade higher. 1410-20 will be the next significant Resistance region to watch for. A test of this Resistance region is looking likely in the coming days. A strong break above 1420 might take it further up towards 1470-80.
Some welcome diversification coming into the currency markets, it seems. Dollar-Yen (84.11) saw a sharp rise to a high of 84.39 in the US session, up from 83.38. This, despite the rise in the Euro (1.3108) from 1.2971 to a US-session high near 1.3181. Obviously, the Euro-Yen Cross (110.26) has risen from a low near 108.76 to a high near 110.76. The Dollar Index (80.82) is in a consolidative mode above medium term Support at 80.14.
Traders possibly wanted to square up some of their Euro Shorts ahead of the ECB meeting today. And tomorrow is the important US Non-Farm Payroll data. It is natural therefore for the markets to become a little quieter after the large movements in November. Further, this is the last month of the year and dealing rooms will start thinning down after the 15th.
Dollar-Swiss (1.0040) consolidates just below important Resistance at 1.0070 and could be in danger of falling a bit. The Pound (1.5610) has regained some ground over the last couple of days, up from the low of 1.5484 on Tuesday. Support is now seen at 1.5600-5575. The Aussie (0.9642) has also recovered a bit since Tuesday and might be ranged between 0.9700-9550 for a while, within an overall bearish/ consolidative bias.
Among the Emerging currencies, both the Won (1151.80) and the Sing Dollar (1.3119) posted very good gains yesterday. This was also reflected in the strengthening of the Rupee to 45.37. The Asian currencies possibly gained on the small let-up in risk anxiety and on reports that investment flows into Emerging Market Equities had increased. The Brazilian Real (1.7060) has also strengthened, but could weaken again as the USDBRL is now on an important trendline Support, which could attract Buyers.
Dollar-Rupee might dip to 45.25, but is oversold in the near term. This may be kept in mind.
The 3M USD LIBOR was unchanged at 0.30%. The 2Y and 10Y yields were up 7 bps and 16 bps to quote at 0.54% and 2.96% respectively.
In India, the cost of 1-month inter-bank loan rose for the 4th month to 7.8% this November. In another move to ease the liqidity crunch, the RBI has decreased the statutory limit for banks to invest their deposits in debt (including government bonds) from 25% to 23%.
India's 3Y government notes yield 7.43%. Similar-maturity securities yield 2.77% in China, 7.01% in Russia and 12.70% in Brazil. That compares with 0.81 percent for 3Y US Treasuries.
Nov Australia Trade Balance
...Actual A$ 2.63 Bln...Previous A$ 1.81 Bln
06:45 GMT CH GDP QoQ (Q3'10)
...Expected 0.5%...Previous 0.9%
10:00 GMT EU GDP Q3 '10 First
...Expected 0.4%...PRevious 0.4%
12:45 GMT E-15 ECB Announcement
...Expected 1.00%...Previous 1.00
AU GDP QoQ (Q3)
...Actual 0.2%...Previous 1.1%
US ADP Emp
...Actual 93K...Previous 43K
Nov US Manufacturing ISM
...Actual 56.6...Previous 56.9
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