Monday December 6, 2010 - 05:03:33 GMT
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Morning Briefing : 06-Dec-2010 -0343 GMT
Year end seasonality is playing itself out with a Bang. Though the job numbers dissapointed on most counts, meagre 39K rise against a 150-160K expected and the unemployment rate notched up from 9.6% to 9.8%, but the markets cheered it as an indication that Helicopter Ben has just got its License to Fill renewed. Fed chief hinted at more easing as he believes that US labour market is still on Life Support. Not doing enough risks a deflationary spiral and hence Fed will be more than Happy to remain the Fat Santa for Bulls well into next year. US has been adding 62K jobs on average since September against a minimum 100K required to match population growth and 150-160K required to casue a serious dent in the unemployment rate. On friday Dow closed at 11382 (up 0.17%) and S&P 500 closed at 1225 (up 0.26%).Dow remains well supported around 11,200 and resistance is expected around 11,500.
Stepping into trade this morning we find Asian indicies are mostly in the green barring an cut in Nikkei. Hangseng at 23,551 (up 1%), Shanghai at2981 (up 0.12%), Kospi at 1957 (unchanged) and Nikkei at 10,147 (down 0.30%). Nifty (5992) is expected to open above 6000 and it faces trong resistance arounde 6030 and 6050. A close above 6050 will be postive and open a target of 6150. Support is around 5950-70. A break below 5950 will flip the bias to bearish and open a target for 5870-5880.
Crude (89.34) has risen above 89. The weaker dollar and cold weather is supporting the price rise. Our overall bullish view is intact for a rise towards 93-95 in the coming days.
Gold (1413) has risen above 1400. The bad US NFP data release on Friday triggered the price rise. A strong break above 1420 will now open doors for further rise towards 1470-80. Support is seen at 1380.
Bernanke's comment on possible QE3 after the dismal jobs data on Friday sent the Dollar hurltling. With this, the market focus shifts from the European debt situation to the US growth problem. The Dollar Index (79.35) has come off sharply through last week, but has an important Support at 79.17 today.
The Euro (1.3345) has dipped a bit from its Friday's high of 1.3438. The Pound (1.5743) is also trading slightly lower than its Friday's high of 1.5788. Dollar Swiss (0.9768) had seen a sharp fall to 0.9725 on Friday. Remember it had met stubborn Resistance at 1.0060-70 all through last week. Dollar-Yen (82.85) also saw a sharp fall on Friday to a low of 82.52. The Aussie (0.9885) had climbed to a high of 0.9939 and is trading slightly lower from there.
For one, the picture is now likely to be well and truly muddled, with the market unable to decide whether it wants to sell the Euro or the Dollar. Secondly, people will be more keen to start closing their books than to take fresh positions going into the final weeks of the year. This would mean that December might not see the creation of lasting trends. Yes, big moves are possible in the next couple of weeks, but these might get reversed.
Within this, the Dollar could see some more selling over this week and the next, if the immediate Support of today gives way. Something to watch carefully for.
Among the Emerging currencies today, the Won is trading near 1137.90, compared with a low of 1131.80 on Friday. Some more loss towards 1120 might be possible. Dollar-Sing (1.3028) had come off strongly to 1.3000 on Friday and could dip further towards 1.2950-30 unless a close above 1.3050 is seen today. Dollar-Real (1.6839) has also broken an important support (now Resistance) at 1.7000 on Friday. Dollar-Rupee had closed at 45.10 on Friday, but may well open lower near 44.90 today.
The 3M USD LIBOR was unchanged at 0.30%. The 2Y and 10Y yields were down 7 bps and 1 bps to quote at 0.53% and 2.97% respectively. The 10Y US treasuries touched a high of 3.01% last Friday before falling off early in the Asian trade today.
German bunds are seeing a rapid increase in yields over the un-ending concern of the European debt crises. Difference between the yield of 10Y German bunds and 10Y US treasuries fell to 7 bps last week, the lowest since Jun-09.
No major data release today
EU Retail Sales
...Actual 0.5%...Previous -0.1%
Nov US NFP
...Actual 39K...Previous 172K
Oct CA Labour Force
...Actual 15.2K...Previous 3.0K
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