Overall, the market had some wild swings around the London open. The major currencies advanced against the dollar in the Asian session, but the London open saw them shed most of the gains made earlier. Large institutional traders, realigning ahead of the ECB's press conference tomorrow, influenced these moves. In addition, the rise in the oil market might have some dollar bulls switching camp for a while.
The Euro (Eur/Usd) rose to TheLFB R1 (1.3320) during the Asian session. However, soon after the London open, the pair plunged 100 pips lower to test the previous intra-day trend-line. The euro is now sitting directly on top of the 50-day moving average.
Industrial production fell in November in the Euro-area by 1.6%, less than the market had expected. Compared with one year ago, industrial production is down by 7.7%, from -5.7% in October. Monthly data shows that energy production fell by 1.5%; intermediate goods decreased 2.8%; non-durable consumer goods grew 0.1%, while durable consumer goods tumbled 2.4%.
The Pound (Gbp/Usd) followed the euro closely in the overnight market. The pair rose a strong number of pips in the Asian and into the early European session, about 200 pips, but then tumbled 100 pips, shedding half of the gains seen in the overnight market. The pound continues to trade near a 6-year low, below all the important moving averages.
The Aussie (Aud/Usd) bounced off the 50-day moving average in the Asian market, and rose 150 pips, to TheLFB R1 (0.6795). The aussie topped at this level, and is currently higher by 80 pips. The aussie rose tonight helped by the commodity markets.
Home loans in Australia grew by 1.3 percent in November which was slightly above forecasts of a 1.0 percent increase. In trend terms, the number of commitments for owner occupied housing finance remained unchanged while the number of commitments for owner occupied housing finance excluding refinancing rose 0.5%. In original terms, the number of first home buyer commitments as a percentage of total owner occupied housing finance commitments increased from 19.5% in October 2008 to 23.6% in November 2008, the highest proportion since January 2002.
The Cad (Usd/Cad) continues to trade in an area jam-packed with resistance and support levels. The pair traded, in the overnight session, between the 20 and the 50-day moving averages, testing both areas in the Asian and European trading hours. Furthermore, the cad trades just below the 1.2250 resistance level, which has held the pair down for about one month.
The Swissy (Usd/Chf) fell 70 pips in the Asian session, to TheLFB S1 (1.1130). However, during the European session, the pair started to move, a little erratically, between TheLFB S1 and the neutral pivot point (1.1195). The pair is currently trading just below the 1.1150 resistance level.
The Yen (Usd/Yen) tried to take out TheLFB R1 (89.90) in the late Asian session. This is the same area; the high of the previous day of trading is located. Tonight was the first time in the last few days when the yen moved higher, however, the pair still trades below all the important moving averages.
Equity Markets Calm Ahead Of The Retail Sales Report
Current Futures: Dow +21.00, S&P +1.80, NASDAQ +1.75
European Trade: European markets opened mixed on Wednesday, as the major indexes have headed lower for six consecutive days. Also tonight, Asian market closed slightly above the breakeven line for the first time in the last few days, helped by gains in the commodity markets.
The U.S. futures traded somewhat higher in the overnight markets, ahead of a release that is expected to show retail sales have dropped 1.2% in December. If the expected number holds true, then December would be the sixth consecutive month with a negative read, the longest streak since 1992, when the record first began. In addition, this report holds an important feature. It will confirm that the 2008 Holiday Sales were the worst in the last few decades, as the wealth effect is evaporating due to a very rapid rise in unemployment and strong declines in the prices paid for houses. A number of retail stores entered into bankruptcy last year, while others trimmed the number of stores.
Another factor that might have contributed to the fading of the wealth effect is the losses that the pensions funds have taken in the last year. According to the Center for Retirement Research, pension funds lost a little more than $850 billion last year, or 37% of their value. Usually, pension funds invest in assets deemed safe, but it looks like the government-controlled funds' performance was worse than the S&P's. Not too many can praise themselves with such a performance, when the goal is to beat inflation using safe assets.
Tonight, the Nikkei rose 24.54 points (0.29%) to 8,438.45. The Australian S&P/Asx gained 32.40 points (0.89%) to 3,687.00. In Europe, the U.K. Ftse fell 7.20 points (0.16%) to 4,391.95. The German Dax gained 22.43 points (0.48%) to 4,659.37
Crude oil rose for the first time in the last few days, bouncing from the $36 area. Crude oil for February delivery gained $0.40 to $39.10.
Gold moved very little in the overnight market. Bullion for immediate delivery rose $4.50 to $827.00.
Previous Asian trade: Asian markets rose tonight for the first time in the last five days, helped by crude's gains. The market was pulled higher by commodity stocks, which until now sent the market lower. In addition, tech companies had some unusual swings, after a series of analysts said that the companies' outlook improved after a series of restructures in order to cut cost.
Yesterday, the Chairman of the Federal Reserve, Ben Bernanke, said in speech that the remainder of the $700 bailout plan should be used for its initial purpose, buying bad assets from banks, or at least insuring them. This money would help banks re-build their balance sheets, and allow some parts of the financial markets to unfreeze. In the meantime, the Fed will maintain the pace it expends its balance sheets, especially its liability side, for the bank to access cheap loans and liquidity. The U.S. economy is not expected to show any signs of growth until Q3 or even Q4 of 2009.