Forex News

U.S. Market Update

Dow +96 S&P +12 NASDAQ +26
Better-than-expected earnings from Alcoa, encouraging Sep same-store sales figures and improving weekly jobs data are all helping equity indices rally. With earnings season now under way, commentators are waiting to see whether corporate America can follow up last quarter's earnings gains with revenue growth. Weekly initial jobless claims came in lower than expected, sinking to their smallest figure since January, while continuing claims fell very close to the 5M handle. Commentators continue to warn that the continuing jobs figures are being impacted by workers exhausting unemployment payments. Front-month crude is up nearly $2, to trade around $71.50. Treasury prices remain stubbornly firm with the long end outperforming heading into this afternoon's 30-year reopening which has sent the yield below 4%.
Alcoa managed to rack up a profit (ex items) in its Q3, crushing analysts' expectations for another loss. Executives were upbeat about the quarter, noting that they are seeing signs that Alcoa's markets are stabilizing and consumption is set to grow in the second half of the year. Nevertheless, revenue was merely in line and better earnings beat expectations due to cost and expense reductions. PepsiCo was in line with the Street in its Q3 report, and reaffirmed its 2009 guidance. Ominously, PepsiCo's CEO warned that he expects an "age of thrift" has descended on markets and will last through 2010, echoing similar comments from Wal-Mart's chairman last week. Marriott came in slightly ahead of estimates, thanks to improvements in revenue per available room (REVPAR), which the company said should improve further next quarter.
Sales data out this morning is showing a big turnaround for retailers in Septermber, fueling hopes for the holiday season. Comps from apparel names The Limited (+1% v -3%e), American Eagle (flat v -4%e) and TJX (+7% v +4%e) were much higher than expected. Teen mall chain Aeropostale held up its excellent comps for yet another month, while higher end competitor Abercrombie saw another month of dismal negative comps. Shares of AEO and ANF are up 6% or so, while LTD and TJX are around even. Costco pulled its same-store sales numbers out of negative territory for the first time since last fall, while Target and BJs saw incremental progress towards positive comps, but are still in the red. COST and TGT are around even, while BJ is down 4%. Department stores did universally better than expected, with Nordstrom and Dillards trouncing estimates. Despite this, y/y sales comps at nearly all the leading department stores remain in the red. Kohls is the big exception, with the name beating estimates by a wide margin (5.5% v 0.1%e).
In currencies, the greenback composed itself in New York trading after rising risk appetite in the Asian session and early European morning put it on the defensive. Both the BoE and ECB maintained their interest rates at current levels, in line with expectations. EUR/USD initially maintained a steady tone around the 1.4770 area after Trichet reiterated yet again his steady line that interest rates are appropriate, adding that the Euro Zone labor market might deteriorate less than originally expected. Dealers were especially keen to see whether Trichet would fine-tune his currency views from before the G7 summit last week. The market seemed disappointed with his tepid remarks, including boilerplate comments that excessive FX volatility is not wanted. Trichet also welcomed the recent strong dollar statements from US officials, calling them "extremely important," and warned that he would never comment on FX intervention, pledging to act rather than talk on the topic.
EUD/USD briefly tested 1.48 before technical exhaustion seemed to envelop the upward momentum in commodities and currencies. EUR/USD tested the 1.4730 level as the NY morning wore on but holding onto small gains established from the Asian open. Commodities retreated from their earlier highs in sympathy with the dollar's slight improvement. The 88 level in USD/JPY continues to be on dealers' radar with earlier chatter circulating that the Japanese Post Office was bidding for dollars ahead of the figure. There could be some significant USD sell stops if that level is breeched and there is no sign of Kampo.
Trade The News Staff
Trade The News, Inc.
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All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. Trading decisions are the responsibility of traders, not those providing additional information. Trade The News is not liable (financial and/or non-financial) for any losses that may arise from any information provided by TTN. Trading securities involves a high degree of risk, and financial losses can and do occur on a regular basis and are part of the risk of trading and investing.

U.S. Dollar Could Continue To Drop As Euro Finds Strength

Jean-Claude Trichet needs governments to walk through the emergency exit first if he's going to be able to keep nurturing Europe's recovery with record low interest rates and cash injections. As an economic rebound allows policy makers to mull how they will withdraw stimulus measures, the European Central Bank President is demanding that when growth takes hold, lawmakers execute 'ambitious' plans to reverse the region's largest budget deficit since the euro began trading in 1999.
Trading Tactics
Buy EUR/USD on signs of a clear uptrend.
The buying point is at 1.4773; Fibonacci 161.8% is the take profit at 1.4830;
Fibonacci 23.6% is the stop loss at 1.4715
The selling point is at 1.4690; Fibonacci 61.8% is the take profit at 1.4600; Previous resistance is the stop loss at 1.4765
Technical: Euro breaks the previous resistance and form a new high against U.S. dollar. A move back higher could set up a test of 1.4830
The following analysis is for information only; Finotec is not responsible for any decisions or misinterpretations based on the given text.

European Market Update

Risk appetite continues to rise ahead of European central bank meetings; Gold continues to shine at the expense of the dollar

ECONOMIC DATA

(RU) Russian Gold & Forex Reserves w/e Oct 2nd: $411.5B v $412.7B prior
(JP) Japan Sept Preliminary Machine Tool Orders Y/Y: -61.9% v -71.5% prior
(FR) Sept Bank of France Business Sentiment: 92 v 91e
(FR) French Aug Trade Balance: -€3.4B v -€2.3Be
(TU) Turkey Aug Industrial Production: -6.3% v -5.2%e
(HU) Hungary Aug Preliminary Trade Balance: €229M v €414Me
(CZ) Czech Sep Unemployment Rate: 8.6% v 8.6%e
(NV) Dutch Sept CPI M/M: 0.5% v 0.4%e; Y/Y: 0.4% v 0.3%e
(NV) Dutch Sept CPI EU Harmonized M/M: 0.5% v 0.5%e; Y/Y: 0.0% v -0.1%e
(SW) Swedish Aug Industrial Production M/M: -2.9% v 0.9%e; Y/Y: -20.9% v -18.4%e
(SW) Swedish Aug Industrial Orders M/M: -4.2% v 8.4% prior, Y/Y: -18.1% v -16.9% prior
(SW) Swedish Aug Activity Level: 102.8 v 102.6 prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
In equities news overnight: US markets having 'officially' kicked off Q3 earnings season, equity markets in Europe as in Asia traded comfortably positive. Today being the 1-year anniversary of 2008's internationally coordinated emergency Central Bank rate cut, market commentators have broadly reflected on trends since that action and those moving forward. Following Alcoa's [AA] aftermarket numbers, European miners/mineral names and heavy industrials traded sharply higher from the open. The FTSE100, heavily weighted in miners outperformed, seeing particular strength in Vedanta [VED.UK] following its Q2 production update. The financial sector has retained its premier placement in the media with further speculation that Lloyd's Banking Group [LLOY.UK] was contemplating a £15B rights offer in its continued efforts to avoid the UK APS. Further speculation regarding HSBC [HSBA.UK] acquiring RBS's [RBA.UK] former ABN Amro Asian assets continues unabated. In a session light of government or economic data, equities have trended lower from their opening highs in mixed volumes. Overall sentiment remains positive with all sectors of the EuroStoxx50 ex Consumer Services have traded in positive territory.
In individual equities: Lloyds [LLOY.UK] Considering £15B rights issue (about 58% of market cap) - FT. The capital raise would be part of Lloyds' plan to avoid entering the UK government's asset protection plan. || Vedanta [VED.UK] Provides Q2 production update; Production in Q2 was broadly in line with expectations. || EADs [EAD.FR] Airbus CEO: USD weakness is causing European exporters some problems. Expect Airbus to compete with Russian and Chinese market entries in future. || Hochschild Mining [HOC.UK] Announces results of convertible bond placement and share placement. || Ladbrokes [LAD.UK] Announces £275M 1 for 2 rights issue (about 25% of market cap), Reports Q3 Group Op Profit -58% y/y, Rev -15% y/y. || Air Berlin [AB1.GE] As part of prior agreement, Tui Travel UK to take 9.9% stake in firm (current stake approx 40%). || CGGVeritas [GA.FR] Provides Q3 vessel availability rate at 90% v 89% q/q, v 98% y/y. ||
Reminder: Mainland Chinese bourse will come off their 1-week national holiday tom (Fri, Oct 9, 2009)
Speakers: Russian Kremlin Aide: Have held no talks to drop USD as pricing currency for oil but noted that such discussions along those lines would make sense || Irish Finance Minister Lenihan: Committed to sustainable public finances, Ireland will not emerge from recession until 2011. The Irish economy remained in sharp contraction but with some tentative signs of a bottom. However, he caution that one should not be complacent about the significant challenges ahead || Colombian Fin Min Zuluago commented that Peso currency strength was a concern and was attentive to its appreciation || India Central Banker Ahluwalia commented that no evidence to suggest withdrawal of stimulus measures at this time and suggested looking for a possible exit to accommodation when GDP hits 7%. End March inflation might be 5%. Lastly he noted that market conditions were good for possible stake sales of state companies ||
In Currencies: The USD continued its soft tone against the European and commodity related pairs but did manage to maintain a steady footing against the JPY during the European morning. Dollar weakness continues to stem from its inverse relationship with commodities. Spot gold continued to hit fresh all-time highs above the $1,055.00 level for its third straight session of record highs in the spot market. Risk appetite was back in sync following the better Australian unemployment data and earnings from Alcoa after the NY close on Wednesday. The market appears not to be fearful of any surprises from the BOE or ECB interest rate decision later today. There was a think tank report on Wednesday suggesting ECB's Trichet and other EU officials might talk the euro currency down in a manner similar to recent BOE's Mervyn King style. There was some corporate verbal intervention from France's Airbus CEO who noted that USD weakness was causing European exporters some problems. In regards to the central bank meeting dealers note that there are two items that would be watched closely. First being about strategy for an eventual movement away from quantitative easing and second, any currency-related comments. GBP/USD triggered buy stops above 1.6030 to promptly test above 1.6070 area. In USD/JPY, dealers continue to speculate whether Japan's Kampo had been on the bid Wednesday at 88.00 level in yesterday's session (implying unofficial smoothing operation by the Fin Min and BOJ). Again, large USD sell stops building below the 88 handle in the event the suspected bids are pulled or fail to materialize.
In Fixed Income: UK and German yield curves are a touch flatter this morning, suggesting the unwinding of curve steepener trades in position squaring ahead of the ECB and BoE rate decisions. Treasuries, meanwhile continue to ignore rising equities and a falling greenback, with gold testing all time highs. Ahead of its $12B reopening the yield on the 30-year Long Bond remains steady below 4%. European corporate issuance seems to have dried up this week with the only offering of note in the session a €300M 7-year from Campari. Three month Euribor fixed unchanged at 0.74%.
In Energy: London Times reported that according to a report from the UK Energy Research Center (UKERC), global oil production could peak within 10 years || Royal Dutch Shell [RDS.A] Reportedly 2009 exploration budget is estimated at $31B and $28B for 2010 || Tullow Oil [TLW.UK] CFO commented that Exxon buying into Ghana Jubilee Field was seen as a positive for the project
In commodities: Spot gold continued to hit fresh all-time highs above the $1,058.50 level for its third straight session of record highs in the spot market. || South African Aug Gold Output -2.9% y/y, total Mining Output -11.5% y/y
NOTES
Risk appetite on the rise following Alcoa earnings and Australia's unemployment reports
Gold continues to shine at the expense of the dollar
Key European central bank meetings later this morning with BOE and ECB expected to hold the line. Question if the currency topic would be raised at the press conference
Widely followed think tank: European policymakers are losing trust in the Obama administration's commitment to a "strong dollar" policy and are considering policy responses
Chinese equity markets to re-open on Friday following its weeklong holiday
Looking Ahead
7:00 (SA) South Africa Aug Manufacturing Production M/M: 1.3% expected versus 3.3% prior; Y/Y: -11.5% expected versus -13.7% prior
7:00 (UK) BoE Rate Decision: No change to 0.50% Bank rate or £175B APF expected
7:45 (EU) ECB Rate Decision: No change to 1% refi rate expected
8:00 (BR) Brazil Sept IBGE Inflation M/M: 0.2% expected versus 0.2% prior; Y/Y: 4.3% expected versus 4.4% prior
8:15 (CA) Canadian Sep Housing Starts: 148.0Ke v 150.5K prior
8:30 (US) Initial Jobless Claims: 540Ke v 551K prior, Continuing Claims: 6.15Me v 6.09M prior
8:30 (EU) ECB's Trichet holds press conference following rate decision
9:50 (CA) BoC's Jenkins
10:00 (US) Aug Wholesale Inventories: -1.05e v -1.4% prior
10:00 (MX) Mexico Sept Consumer prices M/M: 0.6% expected versus 0.2% prior; Y/Y: 5.0% expected versus 5.1% prior; Core CPI M/M: 0.4% expected versus 0.2% prior
11:00 (US) ICSC Chain Store Sales Y/Y: -1.5%e v -2.0% prior
13:00 (US) Treasury to sell $12B in reopening of 30y Bonds
15:00 (BR) Brazil to sell notes and bonds
China's Shanghai Composite to re-open for Friday trading following its one-week holiday break
Trade The News Staff
Trade The News, Inc.
Legal disclaimer and risk disclosure
All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. Trading decisions are the responsibility of traders, not those providing additional information. Trade The News is not liable (financial and/or non-financial) for any losses that may arise from any information provided by TTN. Trading securities involves a high degree of risk, and financial losses can and do occur on a regular basis and are part of the risk of trading and investing.