Tuesday December 7, 2010 - 03:46:24 GMT
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Morning Briefing : 07-Dec-2010 -0343 GMT
US is one step closer towards extending the Bush era tax cuts as Democrats are going to debate over the issue tonight. US stocks markets have had a quiet day yesterday as Dow ( 11,362 down 0.18%)) and S&P 500 (1223, down 0.13%) closed marginally in the red. Dow remains well supported above 11,200 and resistance is expected around 11500.
Asian indicies are trading mixed with volumes becoming thinner as we get close to the Holiday season. Hangseng (23,238) is flat, Nikkei (10,102) is down 0.65%, Shanghai (2956) is down 1.19% and Kospi (1957) up 0.20%). Australian Central Bank is going to announce its interest rate decision in just under 30 minutes, expectation for no change. In the afternoon we have economic releases from Europe ( UK, EU and Swiss) with Industral Production, factory orders and unemployment report. Yesterday Nifty closed at 5992, unchanged for the day. Nifty having failed to close above the key resistance around 6050 is now vulnerable to a correction towards 5920-30.
Crude (88.93) has come off slightly from yesterday's high of 89.76. Important to note is that 89.99 is the 50% retracement level of the fall from 147.27 (Jul-08) to 32.70 (Jan-09). If this Resistance holds we might see a dip towards 87-85 in the coming days. However, a fall to 85 is not looking likely as of now as the cold weather is expected to retain the strength in Crude price. The Support at 87 might be tested. The overall outlook is bullish for a rise towards 93-95.
Gold (1419.30) is continuing to trade strong and is retaining the bullish view for a rise towards 1470-80 in the coming days. Support is seen in 1400-1380 region.
Silver, spot (30.17) is trading strong. Fed chairman Bernanke's talk about possible QE3 is retaining the upside momentum in the Silver price. A rise towards 32 is looking likely in the coming days/weeks. Support is seen in 29.50-30 region.
The Euro (1.3330) is seeing yo-yo type movement since yesterday. Importantly, the Dollar Index (79.68) has managed to hold above Support at 79.04. This despite further strength in the Yen (82.35) over yesterday and today. Expect Dollar-Yen to fall further towards 82.10, maybe even 81.50, where there is stronger Support.
Overall, the markets may soon start becoming quiet, with a bit a negative-Dollar bias. The bigger question as to whether to sell the Euro or the Dollar for the longer term might be left to the new year to be answered.
Dollar-Swiss (0.9803) has seen a decent recovery from yesterday's low near 0.9725. The Pound (1.5738) has, contrarily, risen as well in the late US session, mirroring the Euro's fall in the European session and its recovery later on. The rise in Dollar-Swiss, accompanied by the rise in Euro and Pound suggests that cross-play is happening. Note also that the Aussie (0.9915) is managing to hold up well despite the fall in Dollar-Yen. This is normally not the case. All this together suggests some amount of diversification could be coming into the markets.
The Emerging currencies continue to strengthen/ retain their recent strength. Dollar-Won (1130.60) has dipped a little more. USD-SGD (1.3041) seems to be stabilising for the time being. The Real (1.6813) has gained a little more, compared to yesteday's 1.6839. Dollar-Rupee closed at 44.9450 yesterday, after finding Support above 44.80.
The 3M USD LIBOR was unchanged at 0.30%. The 2Y and 10Y US Treasury yields were down 9 bps and 2 bps to quote at 0.44% and 2.95% respectively. The economists estimate that the interest rates for 10Y yields are expected to touch 3.23% by the end of 2011. About 10% higher than currrent levels.
China will issue $450 mln of 2Y bonds at a coupon of 1.60% to individual investors in Hong Kong starting today. This move comes a week after it sold 3Y bonds to institutional investors at a coupon of 1%. The HSBC offers a rate of 0.71% for its 1Y deposits of less than 500,000 yuan in Hong Kong, as comapred to 2.5% in mainland China. Economists estimate that Hong Kong has about 55 billion yuan worth of outstanding yuan debt which comprises a quarter of the cityâ€™s deposits.
04:30 GMT AUD RBA Interest Rate
13:00 GMT BoC Meeting
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