Encouraging news from Europe boosted global markets on Friday as Gross domestic product for Euro-Zone returned to growth for the first time in a year and a half. Euro-zone GDP rose 0.4 per cent in the third quarter, however still short of the 0.6 percent rise expected which represents a fall of 4.1 percent on year. Currencies extended gains against the Greenback as investor's found confidence in the latest European data, despite speculation growth may retract as government stimulus measures are withdrawn.
In contrast the latest economic data from the states threatened to slow the momentum with US Import Prices failing to meeting expectation, rising 0.7% for the month of October falling short of the 1.1 percent expected. The US trade deficit also widened to $36.5B for the month of September against a deficit of $30.8B for August. The Reuters/Michigan Consumer Sentiment Index for November showed a surprise decline to 66 against a predicted increase of 71.2, representing the weakest reading in three months.
Despite the less than convincing economic releases, equity markets remained buoyant on the back of positive earnings namely Walt Disney Co and retailer Abercrombie & Fitch. Meanwhile the greenback extended losses against major counterparts, as a result boosting the appeal of metals namely gold which resumed momentum to finish above US$1,115.00 an ounce. The Aussie returned above 93 US-Cents after earlier in the session falling to a low US$.9223 - At the time of writing the Aussie is buying US$.9340 and we expect a reasonably subdued session, however an upset in the Japanese Gross domestic Product being released this morning could induce some volatility, which is expected to rise to 0.7 percent in the third quarter.
Expect the depreciation of the Chinese Yuan to remain in the headlines this week as President Obama lands in China to meet with officials. With the Yuan pegged to the falling US Dollar, by default provides a competitive edge to Chinese exports, thus a negative influence on other economies with 'free floating' currencies. Until action is taken, currency markets remain in disarray as central banks stock up on dollar reserves to stem the negative effect of the weak greenback on respective economies.