Daily FX & Market Commentary: Focus turns to Friday's US jobs report

Daily FX Commentary: (Morning Report)

EUR/USD 

The pair continues to trend higher and approaches the next target at 1.3600, following break above very strong 1.3500 resistance zone. Positive technical were supported by fundamentals that gave the single currency an additional boost. Corrective easing on overbought hourly / 4h conditions faces support at 1.3520, Fib 38.2% of 1.3413/1.3587, reinforced by hourly 55 day EMA and strong one at 1.3500 zone, previous resistance. Yesterday’s close above 1.3500 and 1.3526, 200 day MA is seen supportive, with clearance of psychological 1.3600, seeing no significant barriers until 1.3700, round figure and 1.3726, Fib 76.4% of 1.4246/1.2042 descend. 

Res: 1.3547, 1.3567, 1.3600, 1.3650 
Sup: 1.3532, 1.3520, 1.3500, 1.3477 

GBP/USD 

Cable holds positive near-term sentiment, extending recovery from 1.5700 support zone. Regain of initial 1.5800 barrier and test of more significant 1.5825 breakpoint, sees scope for fresh extension higher and possible full retracement of 1.5891/1.5673 downleg, above which to open way for stronger recovery. Break above 4h 55 day EMA and 4h indicators entering positive territory, supports the notion. Previous barriers at 1.5800/ 1.5780 zone, now act as initial supports. 

Res: 1.5840, 1.5850, 1.5891, 1.5925 
Sup: 1.5800, 1.5780, 1.5764, 1.5724 

USD/JPY 

Near-term price action moves in a consolidative mode, following yesterday’s stretch to a fresh high at 91.40. While immediate support higher platform base at 90.40 zone stays intact, near-term structure will remain aligned towards the upside. Extension of broader uptrend through 91.40, to focus next barrier at 92.00. Hourly studies hold neutral tone, however, reversing 4h chart indicators do not rule out further easing that would harm immediate bulls if psychological / Fibonacci support at 90.00 contains any stronger dips. 

Res: 91.00, 91.25, 91.40, 92.00 
Sup: 90.73, 90.55, 90.31, 90.23 

USD/CHF 

The pair accelerated losses after repeated attempt lower finally broke below 0.9200 support and fresh slide dipped through 0.9100, to test very strong support and near-term base at 0.9080. Dominating negative tone on lower and larger timeframes studies, keeps bears firmly in play, however, corrective action on oversold conditions and attempt at strong support, is seen preceding fresh leg lower. Minor resistance lies at 0.9120 zone, with more significant barrier seen at 0.9165, Fib 38.2% of 0.9291/0.9086 downleg, reinforced by descending hourly 55 day EMA, while 0.9200 zone is seen capping for now. On the downside, break below 0.9080 to open psychological 0.9000, also March 2012 low, next. 

Res: 0.9125, 0.9140, 0.9165, 0.9188 
Sup: 0.9086, 0.9080, 0.9050, 0.9000 

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Daily Market Commentary: (Evening Report)

London Market Report

Stocks fall as focus turns to Friday's US jobs report

Equities were extending losses on Thursday after yesterday’s shock contraction in the States, as markets braced for another busy day on the economic calendar tomorrow.

“Traders were unwinding positions earlier on January's phenomenal rally which sees major share markets at multi-year highs,” said market strategist Ishaq Siddiqi from ETX Capital.

Market analyst Craig Erlam from Alpari said this afternoon that markets were nervous ahead of the crucial jobs report in the US due out tomorrow afternoon. He said: “The jobs report tomorrow is always one of the most keenly watched items on the economic calendar, with the potential to cause significant movements in a number of markets. The figures over the last couple of months have been pretty uninspiring, as the private sector held off on hiring due to the uncertainty surrounding the fiscal cliff.

“All of the political infighting did little to ease these concerns, but now a lot of this has been dealt with, especially in respect to taxes, I expect to see the numbers pick up in the first few months of the year. We could even see the first quarter numbers come in much higher than expected, with a backlog of new hires over the past few months being carried out at the start of 2013.”

Stocks fell yesterday after the US Commerce Department revealed that the world's largest economy shrank by 0.1% in the last three months of last year, a stark contrast to the 3.1% growth seen in the third quarter. Forecasts were for a 1.1% expansion.

Meanwhile, economic data from the US today came in mixed: initial jobless claims rose by more than expected last week; personal incomes surpassed forecasts; while the Chicago NAPM purchasing managers’ index came in well ahead of estimates.

Europe Market Report 

European Markets Declined On Mixed Economic Data & Earnings

The European markets finished in negative territory on Thursday, after some mixed earnings results and some mixed European economic reports. However, the markets pared their losses in the afternoon, following the release of some positive economic data from the United States. Thursday was the first opportunity Europe had to react to Wednesday's FOMC announcement. Investors will now turn their attention to the U.S. jobs report for January, which will be released on Friday.

The Euro Stoxx 50 index of eurozone bluechip stocks declined by 0.81 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 0.21 percent.

The DAX of Germany dropped by 0.24 percent and the CAC 40 of France fell by 0.87 percent. The FTSE 100 of the U.K. decreased by 0.55 percent, but the SMI of Switzerland gained 0.38 percent.

Euro area house prices decreased at a faster pace in the third quarter, European Union statistical office Eurostat said Thursday.

The House Price Index dropped 0.7 percent from the second quarter, when prices fell 0.1 percent, Eurostat said in its first ever publication on the evolution of house prices in the 17-nation currency bloc. In the first quarter of 2012, prices fell 0.7 percent.

Germany's unemployment fell unexpectedly in January as the labor market turned healthier in the face of rising prospects of moderate economic growth.

Unemployment declined sharply by a seasonally adjusted 16,000 in January, following December's revised decrease of 2,000, figures from the Federal Labor Agency revealed Thursday. The latest decline contrasted with an expected increase of 8,000.

Germany's retail sales decreased more than expected in December reflecting weak domestic demand. Sales declined 1.7 percent in December from a month ago, when it was up 0.6 percent, Destatis reported Thursday. Sales were forecast to fall just 0.1 percent.

Germany's inflation unexpectedly slowed in January, preliminary data from the Federal Statistical Office showed on Thursday.

The harmonized index of consumer prices (HICP), which is meant for EU comparison purposes, rose 1.9 percent annually, which was a tad slower than the 2 percent increase in December. Economists had forecast the figure to hold steady at 2 percent.

France's producer price inflation slowed unexpectedly in December, data released by the statistical office INSEE showed Thursday. Producer prices on the French market rose 1.6 percent year-on-year, following a 1.9 percent gain in November. Economists had forecast the figure to climb to 2 percent.

French household spending remained flat in December, following a 0.2 percent increase in November, the statistical office Insee showed Thursday. Economists had forecast spending to grow 0.2 percent.

Confidence among British consumers improved more than expected in January as they turned optimistic about the economy's prospects, a survey by GfK NOP revealed Thursday. Also, consumers were upbeat on making major purchases at present.

The headline consumer confidence index rose to -26 in January from -29 in December. Economists expected only a modest increase to -28.

House prices in the UK increased in January after recording no change in the past two months, as recent employment gains and easier access to bank loans, thanks to central bank's credit program, lifted housing market activity.

House prices increased 0.5 percent month-on-month in January, a report from the Nationwide Building Society showed Thursday. The rate of increase was faster than the 0.2 percent increase expected by economists.

US Market Report

Mixed Batch Of Data Leads To Choppy Trading On Wall Stree

With traders digesting a mixed batch of economic data, stocks are turning in a lackluster performance during trading on Thursday. Uncertainty ahead of tomorrow's monthly jobs report is also contributing to the lack of conviction among traders.

The major averages are currently posting modest losses, although the Nasdaq is down only 0.83 points or less than a tenth of a percent at 3,141.48. The Dow is down 31.59 points or 0.2 percent at 13,878.83 and the S&P 500 is down 3.63 points or 0.2 percent at 1,498.33.

The choppy trading on Wall Street comes as traders express uncertainty about whether the recent batch of economic data supports any further upside for the markets.

Following yesterday's disappointing fourth quarter GDP report, the Labor Department released a report before the start of trading showing a bigger than expected rebound by weekly jobless claims.

The Labor Department said initial jobless claims rose to 368,000 in the week ended January 26th, an increase of 38,000 from the previous week's unrevised figure of 330,000. Economists had been expecting jobless claims to climb to 350,000 after hitting a five-year low in the previous week.

While bigger than expected, Jennifer Lee, senior economist at BMO Capital, said the rebound was not too shocking, adding, "And it was encouraging that the bounceback did not completely erase the two weekly improvements."

Helping to offset the negative sentiment generated by the report was a separate report from the Institute for Supply Management - Chicago showing a notable improvement in business activity in the Chicago-area in the month of January.

The ISM Chicago said its Chicago business barometer climbed to 55.6 in January from a revised 50.0 in December, with a reading above 50 indicating growth.

The Commerce Department also released a report showed a substantial increase in personal income in December, although the jump was due in large part to accelerated dividend and bonus payments ahead of the year-end tax increases.

On the other hand, gold stocks have come under pressure, with a notable decrease by the price of gold weighing on the sector. With gold for April delivery sliding $21.40 to $1,660.20 an ounce, the NYSE Arca Gold Bugs Index is down by 1.3 percent.

Housing stocks have also shown a notable move to the downside, dragging the Philadelphia Housing Sector Index down by 1 percent. M/I Homes (MHO) is leading the housing sector lower after reporting its fourth quarter results.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Thursday. Japan's Nikkei 225 Index edged up by 0.2 percent, while Hong Kong's Hang SengIndex fell by 0.4 percent.

In the bond market, treasuries are seeing modest strength after coming under pressure in recent sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 1.8 basis points at 1.988 percent.

==================================================================== Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Weekly Market analysis - ECB is significantly more optimistic

Weekly Market analysis

The ECB is significantly more optimistic surrounding the financial outlook, at least in public which will help underpin Euro sentiment, with rate cuts taken off the agenda for now.  There is also a more confident tone surrounding the Chinese economy, although this optimism could fade very quickly given underlying credit conditions. In this environment, risk appetite could deteriorate quickly again. Key events for the forthcoming week Date Time (GMT) Data release/event Tuesday January 15th 13.30 US retail sales Friday January 18th 02.00 China Q4 GDP Friday January 18th 09.30 UK retail sales

Dollar: 

The most likely outcome continues to be solid US growth in the short-term even though there has been a persistent trend for mixed economic releases. Federal Reserve policy will continue to be an important short-term focus with some increased expectations over an ending of quantitative easing this year. Member comments will be watched very closely ahead of the end-January meeting. The overall tone is still likely to be broadly dovish which will lessen potential dollar support.  Risk conditions will be watched closely with tensions liable to resume over the US debt-ceiling talks and defensive dollar support may increase again.  

The US currency was unable to break significant technical levels against the Euro and dipped sharply later in the week following the ECB policy meeting with a retreat back towards 1.33.

The latest US employment report was relatively close to expectations with a non-farm payroll increase of 155,000 for December from an upwardly-revised 161,000 gain the previous month. The unemployment rate was static at 7.8% and there was a modest increase in earnings. The data will reinforce expectations of a solid US expansion, but markets were expecting a strong release which lessened the potential for further dollar buying support.

There was a stronger than expected reading for the ISM non-manufacturing index with an increase to 56.1 for December from 54.7 the previous month with a particularly strong reading for the employment report which maintained optimism surrounding the outlook and potential for US out-performance.

The decision to water-down Basel bank capital reserve requirements from 2015 should have some positive impact on risk conditions which would also curb underlying dollar demand.

The Administration formally nominated Jack Lew as the new Treasury Secretary. Any comments on the debt ceiling and fiscal situation will be watched very closely and any remarks on the dollar will also be watched very closely. 

US jobless claims were slightly higher than expected at 371,000 in the latest week from a revised 367,000 previously while there was a downward revision to the Philadelphia Fed index for December, but the overall impact was limited

Euro

Structural fears surrounding the Euro-zone will remain lower in the short-term. There has been a further easing of peripheral bond yields with improved investor demand for securities. The ECB is more confidence over the financing risks and appears much less willing to consider a further cut in interest rates. Confidence could, however, unravel quickly, especially with continuing GDP declines in the peripheral economies such as Spain with high levels of unemployment also increasing social tensions. Euro support is therefore liable to fade again quickly on fresh economic fears. The Euro found firm support close to 1.30 against the US currency and advanced strongly later in the week after the ECB policy meeting. There was a small improvement in Euro-area business confidence, but the unemployment rate increased to a record 11.8%. Data from peripheral economies inevitably remained the key focus with Spanish and Greek unemployment above 25% as youth unemployment remained above 50%. There were further concerns surrounding the substantial political tensions associated with extremely high unemployment levels. The German industrial data was again weaker than expected with a 2.9% annual decline despite a small monthly recovery which continued to cause some unease surrounding the Euro-zone growth outlook.  There was also uncertainty surrounding German parliamentary support for a Cyprus bailout which had some small negative Euro impact. There was a stronger than expected Spanish debt auction as the five-year bond yield declined to below 4.00% from 4.20% previously and Spain was also able to sell more than the targeted amount which increased confidence in the peripheral bond market and pushed benchmark yields down further. As expected, the ECB left interest rates on hold at 0.75%, although there had been some calls for the bank to cut rates.  In the press conference, Draghi remained generally downbeat surrounding immediate growth prospects with a warning that risks were still to the downside and that further balance sheet adjustments were needed. Inflation risks were described as broadly balanced. The rest of the briefing was significantly more optimistic as Draghi stated that financial conditions had improved to a marked extent. The ECB President stated that the decision to leave interest rates on hold had been unanimous and gave the impression that there had been no calls for rates to be cut, in contrast to the December meeting. Although he refused to rule out the possibility of further rate cuts, markets moved to price-out any reductions during 2013 and this had a strong impact in boosting Euro demand. The Euro was also boosted by Draghi’s refusal to comment on exchange rates as he pointedly stated that the ECB did not have an unemployment target. Yen:   There will be intense pressure for the Bank of Japan to engage in further aggressive policy easing with widespread expectations that the central bank will introduce a revised 2% inflation target at next week’s meeting. There will also be scope for a further monetary easing while the government will announce a further  fiscal expansion. Defensive demand for the yen will also fade if there is a sustained improvement in risk appetite and confidence in the global growth outlook.  A substantial amount of yen negative fundamentals have, however, been priced in which could trigger a sharp correction. The yen remained under heavy selling pressure during the week with correction attempts quickly attracting selling pressure on the Japanese currency. The US currency pushed to a 29-month high above 89 and the Euro also advanced very strongly during the week. There were widespread expectations that the Bank of Japan would introduce a 2% inflation target at next week’s policy meeting which would trigger a further easing of monetary policy by the central bank. The yen was also undermined by improved sentiment towards global financial conditions. The Japanese currency was subjected to further heavy selling pressure later in the New York session. Prime Minister Abe stated that the government would launch a JPY10.3trn spending package to boost the economy and there was also pressure on the Bank of Japan to target employment as well as inflation. The economic data provided no support for the yen with a JPY222bn current account deficit for November, reinforcing fears over the balance of payments position.

Sterling There will be further uncertainty surrounding the UK outlook with particular unease surrounding the consumer spending outlook as incomes remain under pressure and there will be expectations of weak 2013 growth. The balance of payments situation will also come under greater focus with unease over potential funding pressures if there is a sustained decline in defensive Sterling demand. In contrast, there will be Sterling support from the aggressive monetary policies in the US and Japan. Trends in risk appetite will still be important at times and the UK currency will tend to gain some support when confidence in is stronger, but the currency overall will find it difficult to make much headway. Sterling was able to find support close to 1.60 against the dollar with rallies back to the 1.6150 area while the UK currency was on the defensive against the Euro with a move beyond the 0.82 level. The UK goods deficit declined slightly to GBP9.2bn from GBP9.5bn the previous month with a modest gain for exports. There was still underlying unease surrounding the trade outlook with exports still unable to make much underlying headway and there were also expectations that trade would be a small negative influence on the fourth-quarter UK GDP data. There were no surprises from the Bank of England as it held interest rates steady at 0.50% and also decided against any further boost to the quantitative easing programme from GBP375bn. The UK currency gained some underlying support from the decision not to expand policy further, especially with expectations that the Federal Reserve will continue to buy bonds in the short-term. Swiss franc:  The National Bank will remain strongly committed to maintaining the 1.20 minimum Euro level in the short-term, especially with a strong determination to protect competitiveness and avert any serious deterioration in industrial conditions.  The imposition of negative rates by commercial banks will also undermine franc support. An easing of Euro-zone pressures will tend to lessen the potential for defensive capital inflows into the franc, but the currency will gain at times as an alternative to the Japanese currency. The dollar was unable to sustain a firmer tone against the franc and retreated to lows close to 0.91 later in the week. With the US currency cushioned to some extent by a weaker franc tone on the Euro cross with a move above 1.21. There were reports that the Zurich Canton Bank was setting negative interest rates on Swiss deposits, following the example of some major banks last year and this had a significant impact in weakening the Swiss currency. The ECB shift away from a potential rate cut also undermined the franc. Australian dollar The Australian dollar found support below 1.05 against the US currency and pushed to highs near 1.06 despite struggling on the crosses. There was greater optimism surrounding the Chinese economic outlook which also provided some degree of support for the Australian currency. The domestic data releases provided no support for the currency with a wider than expected trade deficit and a slight decline in retail sales for the month, although international trends tended to dominate. There will be immediate support from greater optimism surrounding the Chinese outlook, but confidence is liable to fade quickly and limit Australian dollar gains. Canadian dollar:  The US dollar was unable to push above the 0.99 level against the Canadian currency during the week before re-testing support below 0.9850 There were only limited domestic economic releases with a sharp decline in building permits offsetting the substantial gains seen the previous month while the PMI index edged back above the 50 level for December. Even with optimism surrounding the fundamentals and potential capital inflows, the Canadian dollar will find it difficult to sustain any significant gains.  ==================================================================== Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Weekly Market analysis - currency policies remain in focus following FED decision on additional QE

Weekly Market analysis

Monetary and currency policies will remain a very important focus following the Federal Reserve decision to sanction additional quantitative easing during 2013 and further action by the Bank of Japan.  There will be further unease over the implications of currency gains and resistance is liable to increase which will risk fuelling a more aggressive phase of currency wars as central banks look to resist currency appreciation. Key events for the forthcoming week Date Time (GMT) Data release/event Thursday December 27th 15.00 US jobless claims Thursday December 27th 15.00 US consumer confidence Dollar: Fiscal policy will remain important in the short-term as fiscal talks continue and there is likely to be a deterioration in risk appetite which would support the dollar if there is no progress. The Federal Reserve stance will remain an important focus throughout the next few months and the dovish policies will have a negative impact on the US currency as the Fed continues its policies of bond purchases. There will still be expectations that the US economy will out-perform the Euro-zone which should provide some degree of dollar support. There has also been a retreat in precious metals prices which suggests that underlying dollar selling is likely to be contained. The dollar remained on the defensive for much of the week, but did find some respite as risk appetite faded again as the Euro retreated from the 1.33 area. Regional Fed Presidents Lacker and Fisher continued to voice opposition to the recent additional quantitative easing. There were, however, strong expectations that the dovish view would prevail, especially with the doves maintaining a strong position on the 2013 FOMC which will keep policy loose. The US current account deficit narrowed to US$107.5bn from a revised US$118.1bn the previous quarter. As a percentage of GDP the deficit was below 3.0% compared with a peak above 6% of GDP in 2005. There is the potential for a medium-term decline in the deficit as the energy deficit narrows and the US currency will be slightly less vulnerable to underlying selling. The US jobless claims data was slightly weaker than expected with an increase to 361,000 in the latest week from a revised 344,000 figure the previous week. The other releases were stronger than expected with the third-quarter GDP estimate revised up to 3.1% from 2.7%. In addition, there was a stronger than expected reading for existing home sales at 5.04mn from 4.76mn the previous month while the Philadelphia Fed index increased to 8.1 from -10.7 the previous month. US budget negotiations remained an important focus as the House of Representatives debated the so called ‘plan B’. Speaker Boehner insisted that the House had the votes to pass the bill while President Obama stated that it would be vetoed.  As the vote deadline approached, Boehner admitted that he did not have enough support and the vote was cancelled as some Republicans refused to back any tax increases. Further votes are not scheduled until at least December 27th which triggered a sharp deterioration in risk appetite on fears that the year-end deadline would be missed. Markets still expect that a compromise deal will be reached eventually which helped cushion the impact, but sentiment could deteriorate sharply if deadlock persists   Euro There will be further relief that the acute Euro-zone crisis phase has eased with the Greece debt buyback completed while there has been a further decline in peripheral bond yields.  There is a very heavy schedule of peripheral debt issuance during the first quarter of 2013 which will make it difficult for Spain to resist a bailout. The underlying growth outlook remains extremely weak which will maintain pressure for a more aggressive ECB policies. Political tensions will also intensify with Italian elections likely in February and the Euro will find it very difficult to make any sustained headway given the net economic risks.  The Euro advanced to 7-month highs against the dollar on an easing of Euro-zone fears and improved risk appetite and peaked at 1.33 before edging lower. ECB President Draghi was also cautiously optimistic surrounding the 2013 outlook as Euro-zone officials continued their attempts to play-up the economic prospects. Draghi expressed confidence that competitiveness in Spain was starting to improve and was optimistic over the benefits of a single bank supervisor. There was a further increase in bad debts within Spanish banking sector as the ratio rose to a fresh historic high of 11.2% in November from 10.7% previously which will maintain fears over the Spanish outlook.  For now, however, wider fears surrounding the Euro-zone have eased which has encouraged a further drop in speculative short positions against the currency and the Greek credit rating was revised to B- from selective default with a stable outlook. The German IFO index was slightly stronger than expected with a second successive monthly increase to 102.4 from 101.4. Although there was a lower than expected reading for current conditions, the data maintained a more favourable tone. There was a further decline in peripheral bond yields which helped underpin sentiment as Italian benchmark yields declined to a two-year low.  ECB member Asmussen stated that he would be very reluctant to cut the deposit rate to below zero which cast some doubt over the prospects for an ECB rate cut. Yen: The LDP won a huge victory in the recent lower-house elections and the strength of their majority should mean that they can over-ride any veto attempt from the Upper House. The government will push ahead with aggressive policies to combat deflation. There will also be intense pressure on the Bank of Japan to take an even more aggressive stance on monetary policy and the bank will consider an increased inflation target early in 2013.  These pressures will exert downward pressure on the yen, but the currency could still gain at times when there is a deterioration in global risk appetite. The Japanese election result recorded a major LDP victory as they won 294 of the 400 seats in the lower house with their partner winning a further 30. The results give the coalition a two-thirds majority and this is extremely important as the government can over-rule opposition from the Upper House The latest trade data recorded a headline deficit of JPY953bn from a revised JPY549bn previously as exports recorded a 4.1% annual decline. The data reinforced fears surrounding the export outlook and reinforced negative yen sentiment. The Bank of Japan announced a further JPY10trn in quantitative easing which was in line with market expectations. There is still a high degree of pressure on the central bank to take additional steps to boost the economy and sanction additional policy measures. Incoming Prime Minister Abe stated that the central bank was carrying out policy steps sought by the government one at a time in a clear reference to the government expecting further action. The administration is planning an emergency economic package in January and the yen remained under heavy selling pressure. The yen found support towards the 84.50 area against the dollar and recovered ground as risk appetite deteriorated sharply following the collapse in US fiscal cliff talks. The US currency moved back to the 84 area as the Euro retreated to below 111. Sterling There will be further unease surrounding the UK economic outlook with expectations of a weak fourth-quarter.  There will be major uncertainties surrounding Bank of England policies and there will certainly be pressure for the central bank to maintain an aggressive stimulus policy to underpin demand.  There will be speculation over a shift towards nominal GDP targeting when Carney takes over as Governor later next year.  The UK currency will continue to gain some protection from the aggressive policies pursued by other global central banks, but Sterling is unlikely to make significant headway. Sterling was resilient during the week and challenged 3-month highs around 1.63 against the dollar before consolidating slightly lower. There were further concerns surrounding the AAA credit-rating following the Standard & Poor’s decision to downgrade the outlook to negative and there was further speculation that the rating would be lost during 2013.  With the Federal Reserve increasing its bond purchases and the Bank of Japan expand policy further this week, there will be some initial Sterling support on relative grounds with expectations that the Bank of England will hold policy steady in the short-term.. The latest inflation data recorded an unchanged annual rate of 2.7% for November compared with expectations of a marginal decline. Although the RPI rate dipped to 3.0% from 3.2%, there were some expectations that the stickiness in inflation would curb any further quantitative easing by the Bank of England. The Bank of England minutes were broadly in line with expectations as the MPC voted 9-0 for unchanged interest rates while there was a 8-1 vote in favour of leaving quantitative easing on hold as Miles again voted for a further £25bn expansion in bond purchases. The bank was generally pessimistic over the growth outlook and warned over the stickiness of inflation. There were also further calls for a weaker exchange rate with Sterling’s gains described as unhelpful and a headwind for recovery and this is likely to be an important issue during 2013. The headline retail sales report was weaker than expected with sales unchanged for November following a revised 0.7% decline for October. There was also a sharp decline in the latest GfK consumer confidence reading from -22 to -29. Swiss franc: The National Bank will remain strongly committed to maintaining the 1.20 minimum Euro level in the short-term, especially with a strong determination to resist franc appreciation to protect competitiveness. Aggressive policy relaxation elsewhere will maintain the risk that upward pressure on the franc will intensify again as investors look for a safe-haven, especially if the Japanese yen is subjected to further selling pressure. The dollar remained firmly on the defensive against the franc and dipped to fresh 7-month lows just below 0.91 before staging a weak corrective recovery. The Euro consolidated around the 1.2080 area with narrow ranges prevailing. With liquidity declining into the Christmas period there is likely to be an increased reluctance to take on the National Bank and the 1.20 minimum level and a potential for a further round of short Euro covering. There were wider concerns surrounding the risk of renewed tensions during 2013 and the franc also gained support from a lack of attractive safe-havens, especially with the yen under serious selling pressure. Australian dollar The Australian dollar continued to probe resistance above 1.05 against the dollar during the week, but it was unable to sustain the gains and retreated back to below the 1.05 level. The currency was unsettled to some extent by a decline in gold prices and dipped again when there was a deterioration in risk appetite. The monetary policy minutes suggested that the bank could be cautious over further interest rate cuts, but Reserve Bank Governor Stevens also continued to suggest that the currency was over-valued and that it should be weaker. There is likely to be resistance to currency gains with the Reserve Bank under pressure to push the currency weaker, especially if growth fears intensify. Canadian dollar: The Canadian dollar was unable to make further headway during the week and edged back to the 0.99 area as narrow ranges generally prevailed. The latest retail sales data was stronger than expected which provided some relief and oil prices were generally firm, but a decline in gold prices had some negative impact. Even with near-term resilience and optimism surrounding the fundamentals, the Canadian dollar will find it difficult to advance from current levels.

Daily FX & Market Commentary - Traders Keep Close Eye On Washington

Daily FX Commentary: (Morning Report)

EUR/USD

The single currency is taking a pause in recent strong rally, as psychological 1.3300 level proves to be tough barrier. Subsequent quick pullback and slide below 1.3200 handle, sidelines near-term bulls, as hourly indicators moved in the negative territory and notion being supported by Gravestone Doji that signals loss of upward momentum and stronger reversal. With initial strong support at 1.3200/1.3186 being dented, where 20 day EMA contained dips for now. However, further reversal cannot be ruled out, with next support at 1.3140 zone, Fib 38.2% of 1.2876/1.3307 and 17 Dec low, required to hold and prevent the pair form deeper slide. On the upside, lift above 1.3250 would signal higher low and shift focus towards 1.3300 barrier. Strong bullish stance on a daily chart, still keeps the upside favored, with 1.3360, weekly 90 day MA and 1.3380, April highs, seen as near-term targets.

Res: 1.3227, 1.3253, 1.3307, 1.3360
Sup: 1.3200, 1.3186, 1.3142, 1.3100 

GBP/USD

Near-term bulls are losing traction, after Cable briefly tested very strong 1.6300 barrier but failure to sustain gains, resulted reversal to initial support zone at 1.6240, where 55 day EMA so far contained losses. Negative structure on hourly chart, with price holding below descending 20 day EMA and 4h indicators reversing from overbought zone, see potential for further retracement, with 1.6200, round figure / near 38.2% of 1.6000/1.6305, seen as next downside target, with break here to confirm near-term top and open way towards 1.6100.

Res: 1.6260, 1.6268, 1.6300, 1.6308
Sup: 1.6236, 1.6200, 1.6190, 1.6175


USD/JPY

The pair dips below psychological 84.00 support, as gains stalled at 84.61 and reversal retraced nearly 61.8% of 83.30/84.61 upleg at 83.84. near-term structure is now negatively aligned, with immediate risk seen towards 83.60/30 support. Losing the latter will also fill last Monday’s gap and risk stronger correction of the recent rally. Reversing 4h and overbought daily studies are supporting such scenario, with close below 84.00, required to confirm. Conversely, regain of previous top at 84.32, would avert immediate downside risk.

Res: 84.00, 84.32, 84.46, 84.61
Sup: 83.80, 83.60, 83.30, 83.00 


USD/CHF

The pair enters corrective phase after fresh losses through psychological 0.9100 support, found temporary ground at 0.9085, 20 day lower Bollinger Band. Subsequent bounce so far tested initial barrier and previous low at 0.9150, where 20 day EMA limited recovery for now. Improved conditions on hourly chart, see potential for possible further extension higher and test of psychological 0.9200 barrier, break of which is required to confirm recovery. From the other side, firmly bearish daily structure, sees the current move as corrective and preceding fresh weakness that would focus 0.9040/00, next downside targets.

Res: 0.9153, 0.9200, 0.9240, 0.9268
Sup: 0.9126, 0.9100, 0.9085, 0.9040

====================================================================


Daily Market Commentary: (Evening Report)

London Market Report

Stocks finish flat on US budget uncertainty

    Market Movers
    techMARK 2,131.98 +0.12%
    FTSE 100 5,958.34 -0.05%
    FTSE 250 12,422.77 +0.16%

The FTSE 100 index finished broadly flat on Thursday afternoon, taking a pause of two days of decent gains, with the focus remaining on the US 'fiscal cliff' ahead of the Christmas holiday.

Even a positive surprise in US gross domestic product (GDP) failed to give markets a boost. The American economy expanded at an adjusted annual rate of 3.1% in the third quarter, well ahead of the previously estimated 2.7% growth forecast.

"European markets have struggled to retest yesterday’s highs despite gaining momentum in the first few hours of trading," said sales trader Toby Morris from CMC Markets.

"Investors saw the early recovery from yesterday’s late sell off halted with traders unable to find any real distractions to the politics in the US to push markets to new levels," he said.

Stocks finished slightly higher on Wednesday after Standard & Poor's upgraded Greece's credit rating to 'B-minus' and the IFO German business climate index beat expectations. However, gains were pared by the close after the White House Communications Director Dan Pfeiffer said that President Barack Obama would veto any ‘plan B’ for the 'fiscal cliff' from House Speaker John Boehner.

Europe Market Report 

European Markets Finished Mixed On Fiscal Cliff Concerns

The European markets ended Thursday's trading session with mixed results. The stalemate in the U.S. fiscal cliff negotiations has investors concerned, as the end of the year draws ever closer. The strong upward revision in U.S. GDP for the third quarter initially sparked gains in Europe, which then quickly eroded.

The White House Wednesday threatened to veto a plan put forward by leading House Republicans aimed at delaying the onset of the 'fiscal cliff.' The plan, called 'Plan B,' was presented by House Speaker John Boehner.

According to a White House, Boehner's proposal would only raise roughly a third of the $1 trillion in tax increases from high-income households that had previously been proposed by the Speaker.

The White House Communications Director Dan Pfeiffer said President Barack Obama is still seeking "a significant, balanced deal that is good for American families, the economy and for our nation's future" and has put forward a proposal that offers to meet Boehner halfway on taxes and spending.

The European Commission on Thursday approved restructuring plans of four Spanish banks, allowing those banks to receive aid from the Eurozone bailout fund. The commission concluded that the restructuring plans of four Spanish banks, namely Liberbank, Caja3, Banco Mare Nostrum (BMN) and Banco CEISS, are in line with EU state aid rules.

The Italian Senate has approved Prime Minister Mario Monti's budget bill for 2013. Monti had previously announced that he will resign as Prime Minister once the budget receives final approval. His resignation will lead to a general election.

The Euro Stoxx 50 index of eurozone bluechip stocks increased by 0.21 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, declined by 0.05 percent.

The DAX of Germany climbed by 0.05 percent and the CAC 40 of France gained 0.50 percent. The FTSE 100 of the U.K. fell by 0.05 percent and the SMI of Switzerland decreased by 0.48 percent.

US Market Report

Stocks Nearly Flat As Traders Keep Close Eye On Washington

Stocks continue to turn in a lackluster performance in mid-day trading on Thursday amid renewed uncertainty about the looming fiscal cliff. The focus on developments in Washington has overshadowed a batch of largely upbeat economic data.

Currently, the major averages are nearly flat on the day. While the S&P 500 has edged up 1.62 points or 0.1 percent to 1,437.43, the Dow is down 1.80 points or less than a tenth of a percent at 13,250.17 and the Nasdaq is down 1.64 points or 0.1 percent at 3,042.72.

The choppy trading on Wall Street comes as traders continue to keep a close eye on Washington, as uncertainty about the fiscal cliff has crept back into the markets following recent comments by President Barack Obama and House Speaker John Boehner.

Boehner has indicated that he will bring his "Plan B" legislation to the floor of the House for a vote despite a veto threat from the White House.

The "Plan B" legislation would extend the Bush-era tax cuts for people making up to $1 million, but Democrats claim it would raise taxes on millions of working families.

Boehner has argued that the president would be responsible for the largest tax increase in American history if he can't persuade Senate Democrats to approve the legislation.

As a result of the focus on the budget negotiations, traders have largely shrugged off the latest batch of U.S. economic data, including reports showing stronger than expected existing home sales growth and a rebound in Philadelphia-area manufacturing activity.

The National Association of Realtors said existing home sales rose 5.9 percent to an annual rate of 5.04 million in November from a downwardly revised 4.76 million in October. Economists had expected existing home sales to climb to 4.90 million.

With the bigger than expected increase, existing home sales rose to their highest level since spiking to 5.44 million in November of 2009.

Separately, the Philadelphia Federal Reserve said its diffusion index of current activity climbed to a positive 8.1 in December from a negative 10.7 in November, with a positive reading indicating an increase in regional manufacturing activity. Economists had expected the index to remain negative.

The Commerce Department also released a report showing a bigger than expected upward revision to the pace of GDP growth in the third quarter, while the Labor Department reported a modest rebound in weekly jobless claims.

Other Markets


In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Thursday. While Japan's Nikkei 225 fell by 1.2 percent following recent strength, Hong Kong's Hang Seng Index inched up by 0.2 percent.

In the bond market, treasuries are pulling back near the unchanged line after moving higher earlier in the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by less than a basis point at 1.793 percent after hitting a low of 1.77 percent.

==================================================================== Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Daily FX & Market Commentary - 'fiscal cliff' optimism

Daily FX Commentary: (Morning Report)

EUR/USD

The Euro moves in a sideways consolidative mode, holding within 30-pips range, following yesterday’s failure on approach to 1.3200 barrier and Doji candle. As the latter proves to be tough barrier and the pair lacks momentum for push higher, stronger correction cannot be ruled out. The notion is supported by descending hourly and 4h studies emerging from overbought territory. Range lows at 1.3140 zone, reinforced by hourly Ichimoku cloud, offer initial support, ahead of more significant 1.3100, 13 Dec previous highs, loss of which to possibly expose psychological / Fibonacci 61.8% support at 1.3000.

Res: 1.3178, 1.3186, 1.3200, 1.3250
Sup: 1.3142, 1.3115, 1.3100, 1.3065


GBP/USD

The pair holds steady around 1.6200 handle, following yesterday’s break and close above the latter. Overall bulls remain intact for fresh extension higher that would focus key 1.6300 resistance zone. However, corrective easing may precede rally, as hourly indicators are reversing. Initial support lies at 1.6180/70 zone, previous tops and Fib 38.2% of 1.6084/1.6218 ascend, ahead of 1.6150, 50% retracement, where dips should be contained, otherwise, further delay and downside extension towards 1.6100/1.6085, would be likely.

Res: 1.6218, 1.6250, 1.6271, 1.6300
Sup: 1.6190, 1.6175, 1.6150, 1.6135 


USD/JPY

Near-term bears are running out of steam, after yesterday’s surge to fresh 1/ ½ year high, as the price slides below psychological 84.00 support, following repeated attempt at 84.32, yesterday’s high. With 4h studies starting to point lower, initial signal for corrective action is given, however, confirmation requires filling yesterday’s gap that will be seen on a dip to 83.50 and possible test of strong support at 83.30/20 zone, 13/14 Dec lows , Fib 61.8% of 82.09/84.32 ascend. Conversely, lift above 84.32, to open 84.50 and 85.00, weekly 200 day MA.

Res: 84.07, 84.15, 84.32, 84.50
Sup: 83.82, 83.50, 83.30, 83.20


USD/CHF

The pair consolidates recent losses, moving within narrow range above yesterday’s fresh low at 0.9151, with upside being capped under initial 0.9200 barrier for now. Overall bearish tone keeps the downside favored, with corrective bounce signaled by oversold 4h conditions. However, upside action requires clearance of strong 0.9200/40 resistance zone, previous lows and 20/55 day EMA’s, to avert immediate downside risk and allow for stronger retracement. Otherwise, risk of lower top under 0.9240 and fresh leg lower, would be the likely near-term scenario.

Res: 0.9192, 0.9210, 0.9213, 0.9240
Sup: 0.9165, 0.9151, 0.9100, 0.9080 

====================================================================


Daily Market Commentary: (Evening Report)

London Market Report


London close: FTSE 100 finishes strongly on 'fiscal cliff' optimism
Market Movers

• techMARK 2,120.84 +0.62%
• FTSE 100 5,935.90 +0.40%
• FTSE 250 12,293.25 +0.61%

- US budget negotiations lift hopes
- G4S up on renewed confidence
- FTSE 250 at all-time high

UK markets finished with strong gains on Tuesday afternoon as 'fiscal cliff' hopes spurred investors' appetites for riskier assets, such as mining stocks.

The second-tier FTSE 250 index was trading at a record high today, while Frankfurt's DAX was close to its best levels since 2008. However, as financial sales trader Toby Morris from CMC Markets pointed out this afternoon, "the FTSE 100 has once again underperformed finding progress above its recent highs somewhat problematic".

Eyes were kept firmly on budget negotiations Stateside today after President Barack Obama last night proposed raising taxes for those that earn over $400,000, a higher threshold than the $250,000 annual salary he had previously targeted.

Meanwhile, House Speaker John Boehner said that he is working on a "plan B" to "protect as many American taxpayers as we can". Under his new plan, tax increases will only be imposed on those earning over $1m a year.

"Markets feel that after days of slow progress, we are finally seeing a step-up in the pace of budget negotiations," said market strategist Ishaq Siddiqi from ETX Capital.

"Much work remains for US lawmakers however, who will have to endorse proposals but the last two days provides the market with a degree of confidence that we are seeing some constructive dialogue in Washington."

Economic news elsewhere was thin on the ground today, with Spanish and Greek bond auctions going smoothly and UK consumer price inflation staying unchanged at 2.7% in November. 

Europe Market Report 


Europe midday: Stocks steady ahead of US data
-Stock rose as US fiscal cliff fears diminished
-Core country bond yields increased slightly as haven demand receded
-Spanish banks´ bad loan ratio rose to 11.23 per cent for October
-Riksbank lowered benchmark policy rate
-Greek and Spanish bill auctions went off without a hitch

FTSE-100: 0.39%
Dax-30: 0.40%
Cac-40: -0.05%
FTSE Mibtel 30: 0.34%
Ibex 35: 0.82%
Stoxx 600: 0.3o%

The largest European equity benchmarks were still registering small gains by the midday mark following news overnight of concessions by US President Barack Obama on the fiscal front.

Worth noting – perhaps – there was some market chatter regarding pressure on core European bond yields, while on the periphery long-term interest rates were down a tad. The former seemed to be a result of diminished haven bids.

Acting as a backdrop, Sweden´s central bank opted on Tuesday to lower its benchmark policy rate by 25 basis points, to 1%, as expected.

Not to be missed, Spanish banks´ bad loan ratio rose to 11.23% in October, after a reading of 10.71% for the previous month.

Both the Greek and Spanish bill auctions went off without a hitch.

News that Chinese officials had again set a 7.5% target for their economy´s rate of expansion (in 2013), at their annual central economic work conference, buoyed mining and basic resource stocks.

Ireland´s economy grew more or less as was expected

Irish third quarter gross domestic product (GDP) expanded at a 0.2% quarter-on-quarter pace (Consensus: 0.7%). That disparity, however, was made up by an upwards revision to the prior month´s reading.

Italy´s current account deficit improved to €245m in October after a reading of €2.6bn for the previous month.

Moderate rise in crude futures

The euro/dollar was edging higher by 0.20% to the 1.3186 dollar mark.

Front month Brent crude futures were rising by 0.536 dollars, to the 108.26 dollar per barrel mark on the ICE.

US Market Report

US open: Homebuilder confidence back at levels from 2006
-Home builder confidence at 2006 levels
-Several M and A transactions in the news
-Single currency moving higher

Dow Jones Industrials: 0.42%
Nasdaq Comp.: 0.84%
S&P 500: 0.60%

The main US equity benchmarks are now registering moderate gains. That following yesterday´s late surge higher and as investors wait for Republicans´ reaction to Obama´s concessions yesterday. 

 

Home builder confidence back at April 2006 levels

The NAHB home builders´ confidence index for the month of December increased to 47 points after a reading of 45 points in the month before (down from a preliminary reading of 46).

The US third quarter current account deficit decreased to 107.5bn dollars, after a reading of 118.1bn dollars for the previous quarter (Consensus: 103bn dollars).

Same store weekly retail chain sales grew by 4.3% according to the latest ICSC survey data.

Month to date same-store retail sales have fallen by 0.2% according to Redbook.

Moderate rise in crude futures

Front month West Texas crude futures rose by 0.60% to the 87.70 dollar per barrel on the NYMEX.

10 year US Treasury yields are now rising by 2 basis points, at 1.78%.

==================================================================== Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Daily FX & Market Commentary - Fed likely to introduce further monetary stimulus

Daily FX Commentary: (Morning Report)

EUR/USD

The Euro steadies above 1.2900 support, with overnight’s brief break above initial 1.2950 resistance, lacking momentum for test of more significant 1.2970, Fib 38.2% and 1.3000, round figure / 50% retracement of 1.3125/1.2876. Hourly studies are losing traction, while 4h 20 day EMA capping and indicators in the negative territory, with Stochastic reversing, seeing the downside still vulnerable. Failure to regain 1.3000 handle that would open way for stronger recovery, sees risk of retesting 1.2900/1.2876, to possibly trigger further retracement of larger 1.2660/1.3125 ascend.

Res: 1.2961, 1.2971, 1.3000, 1.3030
Sup: 1.2927, 1.2900, 1.2885, 1.2876


GBP/USD

Cable holds near-term positive tone, established on a strong bounce from 1.6000 support zone, despite yesterday’s rejection on approach to psychological 1.6100 barrier. While the near-term consolidation holds above 1.6060, previous resistance, scope exists for fresh attempt higher, with clearance of 1.6100 and more important 1.6129 double-top, required to confirm bullish stance. Otherwise, loss of 1.6060, also 55 day EMA, would see increased risk of re-visiting 1.6000 area. Hourly studies are losing momentum, while 4h indicators are about to break above the midlines, with regain of 1.6100, required to confirm.

Res: 1.6086, 1.6095, 1.6100, 1.6127
Sup: 1.6060, 1.6042, 1.6012, 1.6000 


USD/JPY

The pair holds in the middle of near-term 81.70/82.83 range, following unsuccessful attempt at upper boundary and dips being contained above psychological 82.00 support. Near-term studies remain neutral, with break of either side of the range, required to establish fresh direction.

Res: 82.43, 82.63, 82.74, 82.83
Sup: 82.29, 82.10. 82.00, 81.68


USD/CHF

The pair holds near-term positive tone, as reversal from last Friday’s fresh high at 0.9381, finds ground at initial support at 0.9320, reinforced by 20 day EMA. Positive 4h chart structure keeps the upside in focus, with hourly studies starting to point higher and gaining bullish momentum. Regain of important 0.9400 barrier is seen as initial signal of bullish resumption, with break above 200 day MA at 0.9420 and previous peaks at 0.9430 zone, required to confirm. Conversely, loss of 0.9320/00 would revive bears and re-expose 0.9239 and key support at 0.9213.

Res: 0.9368, 0.9381, 0.9400, 0.9430
Sup: 0.9320, 0.9300, 0.9263, 0.9254 

====================================================================


Daily Market Commentary: (Evening Report)

London Market Report

London close: 'Fiscal cliff' hopes lift markets
Market Movers

• techMARK 2,128.24 +0.11%
• FTSE 100 5,924.97 +0.06%
• FTSE 250 12,190.58 +0.10%

- Fiscal cliff optimism increases ahead of FOMC
- German ZEW smashes expectations
- Tullow drops 8.4 per cent

After a weak start, the FTSE 100 finished Tuesday's session with slight gains on the back of increasing optimism about the 'fiscal cliff', as well as a better-than-expected reading of German sentiment.

"The improved sentiment in the markets today has been largely come from the US," said market analyst Craig Erlam from Alpari.

"It appears that negotiations over how to avoid the fiscal cliff at the end of the year are actually starting to go somewhere. Details of the discussions between Obama and Boehner haven't been released but it now appears to be a case of deciding which entitlements to cut back on."

Meanwhile, the Federal Open Market Committee (FOMC) meeting will conclude tomorrow with analysts expecting the Fed to announce a new long-term bond purchase programme valued at $45bn per month as "Operation Twist" comes to an end.

Stock markets across Europe pushed into the blue this morning after the German ZEW Institute's economic sentiment index shot up to 6.9 points in December from -15.7 the month before. The consensus estimate was for a slight improvement to -11.5.

Analyst Thomas Harjes from Barclays Research said that the results "bode well for our forecast of a rebound in economic activity early next year even if further improvements in investor expectations turn out to be more modest in coming months."

Also helping the mood this morning was a Spanish debt auction which sold €3.89bn of 12- and 18-month bills, ahead of the €3.5bn targeted. They were sold at lower yields than the previous auction.

Europe Market Report 

Europe midday: Stocks rise on German economic confidence

-Confindustria lowers Italian 2013 GDP view
-RWI cuts German growth view
-Mixed newsflow out of the Eurozone periphery
-10 year Spanish bond yields down by 8 basis points to 5.49 per cent

FTSE-100: 0.13%
Dax-30: 0.71%
Cac-40: 0.76%
FTSE-Mibtel 30: 0.83%
Ibex 35: 0.18%
Stoxx 600: 0.22%

The main European equity benchmarks were standing moderately higher by the midday point of the session, buoyed by a surprisingly large rise in German economic sentiment - as measured by the well-known ZEW institute - and the relatively respectable results seen at the latest Spanish Treasury bill auctions this morning.

That following the slight gains on Wall Street last night and despite the somewhat weaker than expected money supply and bank lending figures out in China overnight.

The news-flow out of the Eurozone's periphery this morning was also somewhat mixed.

Thus, there were reports that Greece is very close to meeting its debt buy-back targets, but the Spanish region of Catalonia has informed the central government in Madrid that it will not meet this year's fiscal targets.

Acting as a backdrop, the two day meetings of both the US Federal Reserve and OPEC were slated to start on Tuesday. 

From a sector stand-point the best performance on the DJ Stoxx 600 is now to be seen in the following groups of shares: Automobiles (1.11%), Utilities (1.09%), and Construction (1.03%). 

German 2013 GDP forecasts lowered

The Germany's ZEW institute's economic sentiment index for the month of December improved to 6.9 points after a reading of -15.7 in the month before (Consensus: -11.5).

Some market commentary is calling attention to the fact that according to the survey results just over 75% of respondents were saying that they expected no change in the European Central Bank's (ECB) main policy rate during the next six months.

Italian business lobby Confindustria has lowered its forecast for the country's economic growth rate in 2013 to -1.1% from -0.6% before.

Single currency back at the 1.30 area

The euro/dollar is now rising again, by 0.34%, to the 1.2985 dollar mark.

Front month Brent crude futures are now rising by 0,813 dollars to the 108.20 dollar mark on the ICE.

US Market Report

Stocks Rally On Upbeat German Data, Optimism On Fiscal Cliff
Stocks have moved sharply higher over the course of the trading day on Tuesday, adding to the modest gains posted in the previous session. The markets have benefited from some upbeat German economic data as well as optimism about the looming fiscal cliff.

The major averages have moved roughly sideways in recent trading, hovering near their best levels of the day. The Dow is up 120.59 points or 0.9 percent at 13,290.47, the Nasdaq is up 41.96 points or 1.4 percent at 3,028.92 and the S&P 500 is up 14.13 points or 1 percent at 1,432.68.

The rally on Wall Street is partly due to the release of a report from the Center for European Economic Research showing a bigger than expected improvement in German investor confidence.
The report showed that the expectations index climbed to a positive 6.9 in December from a negative 15.7 in November, turning positive for the first time since May. The current conditions index edged up to 5.7 from 5.4.

Positive sentiment has also been generated by a report from the Wall Street Journal indicating that negotiations between the White House and Republican House Speaker John Boehner have progressed steadily in recent days.

Citing people familiar with the matter, the Journal said the talks have taken a marked shift recently, becoming more "serious."

The reported progress on talks between Obama and Boehner comes as a number of Republicans have indicated they would be willing to accept higher tax rates on wealthy Americans in exchange for significant spending cuts and reform to entitlement programs.

The strength on Wall Street also comes as traders look ahead to the Federal Reserve's monetary policy announcement on Wednesday.

Many analysts expect the Fed to announce a new round of Treasury securities purchases to replace its "Operation Twist" program, which expires at the end of the year.

Meanwhile, traders are also digesting a report from the Commerce Department showing that the U.S. trade deficit came in narrower than expected in the month of October.

The Commerce Department said the U.S. trade deficit widened to $42.2 billion in October from a revised $40.3 billion in September. Despite the increase by the size of the deficit, it still came in narrower than the $42.8 billion deficit forecast by economists.

A separate Commerce Department report said wholesale inventories increased by more than expected in October, although wholesale sales showed a notable decrease.

Other Markets In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Tuesday. Hong Kong'sHang Seng Index and Australia's All Ordinaries Index rose by 0.2 percent and 0.4 percent, respectively. However, Japan's Nikkei 225 Index bucked the uptrend and edged down by 0.1 percent. The major European markets also moved to the upside on the day. The U.K.'s FTSE 100 Index inched up by 0.1 percent, while the German DAX Index and the French CAC 40 Index advanced by 0.8 percent and 0.9 percent, respectively. In the bond market, treasuries have come under pressure, more than offsetting the modest gains posted in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 3.6 basis points at 1.652 percent. ==================================================================== Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.