Nov
30th
Mechan Controls PLC acquire PJO Group Ltd
By Bob ParkinsonMechan Controls PLC today announced the acquisition of PJO Ltd. a certification and calibration company
Safety Switch manufacturer Mechan Controls of Skelmersdale today announced that it had purchased Yorkshire based PJO Limited.
PJO Limited offers a broad service provision to utility companies and the deep mining industry. The main income streams are derived from offering calibration, testing and repair to the gas, electric and water industries and also the manufacture and supply of mining consumables, methane extraction equipment and mining machinery.
PJO had turnover for the year to 31 December 2010 of around £1.4 million and will add a new dimension to the Mechan portfolio which also included Nirvana Engineering, specialist suppliers to the reserve power industry.
The business will continue to be run by Managing Director, Jim O’Grady and with assistance from the experienced existing management team and input from Mechan management the company intends to develop all aspects of the business but with a particular emphasis on the Mining supplies side which has superb export potential.
The Directors of Mechan are delighted to make this second acquisition as part of their long term strategic plan to expand Mechan’s operations across the safety, security and controls sector. Wilf Boardman, group managing director commented “PJO adds to our range of products and services and our experience in overseas markets, particularly the USA gives us the opportunity to really add value to the whole group”.
Mechan was advised by the corporate finance team at Moore and Smalley Chartered Accountants while Lancashire solicitors, Marsden Rawsthorn, provided legal advice. The deal was part funded by NatWest, advised by Napthens solicitors.
For any further information contact Bob Parkinson
b.parkinson@mechancontrols.co.uk
01695 722264
07974 259922
Nov
30th
Market Wrap - 30th November
By Michael Hewson CMC Markets
Markets started off on a predominantly soft tone this morning after
the overnight downgrades of global banks by Standard and
Poor’s, but central bank intervention on a co-ordinated
scale saw the tide turn in a significantly positive fashion
starting with the Chinese central bank cutting its
bank reserve requirement ratios by 50bps to 21%, the first cut of
its type in three years.
This was swiftly followed by all the major central banks, Fed, ECB, BoE, SNB, BoJ and Bank of Canada announcing the joint lowering of swap rates by 50bps to address the tightness in global funding markets.
This version of QE on steroids has sent the bears scurrying back to their caves to lick their wounds, sending European markets to their highest levels in three weeks and near the monthly opening levels.
The biggest gainers as would be expected are the basic resource stocks of mining with Antofagasta (ANTO LN) and Xstrata (XTA LN) leading the gainers. Banks have also surged with Barclays (BARC LN), Lloyds (LLOY LN) and RBS (RBS LN), posting gains in excess of 5%.
On the downside we’ve seen the more defensive sectors underperform, while the biggest loser is Cairn Energy (CNE LN) after the company closed down its offshore Greenland drilling rigs. Utilities have slipped back with National Grid (NGG LN) near the bottom of the FTSE.
U.S. markets soared on the open today after this morning’s central bank liquidity sugar rush, while the latest November ADP numbers also boosted sentiment as they blew away expectations of a rise of 130k, coming in at 206k.
Shares in focus today are likely to be U.S. banks in the wake of last night’s ratings downgrades while Boeing could also be in the spotlight in the aftermath of yesterday’s Chapter 11 announcement by American Airlines, given that the company has a $40bn airplane order, which could well be at risk. Chicago manufacturing for November also came out much better than expected at 62.6, above consensus of 58.5. U.S. existing home sales also beat expectations, coming in at 10.4%, above expectations of 2%.
The U.S. dollar has been crushed today after the co-ordinated move by global central banks sent currencies soaring across the board. The main concern behind the timing and extent of this intervention is that the underlying situation is much worse than is generally perceived in Europe. How the Japanese authorities will feel as the U.S. dollar slips against the yen is anyone’s guess given the problems being caused by the strength of the yen. The commodity currencies have jumped sharply with the Australian, New Zealand dollar leading the way. The Euro has also rebounded strongly jumping back above 1.3500
Gold has jumped sharply on today’s liquidity injection by central banks while silver has lagged somewhat.
Crude oil prices have also jumped sharply near to two week highs on today’s U.S. dollar weakness while increased tensions in the Middle East could well continue to limit any potential downside.
Copper prices have also surged on today’s triple R cut, though there is a concern that today’s cut could well be a precursor to a poor manufacturing PMI figure tomorrow from China
This was swiftly followed by all the major central banks, Fed, ECB, BoE, SNB, BoJ and Bank of Canada announcing the joint lowering of swap rates by 50bps to address the tightness in global funding markets.
This version of QE on steroids has sent the bears scurrying back to their caves to lick their wounds, sending European markets to their highest levels in three weeks and near the monthly opening levels.
The biggest gainers as would be expected are the basic resource stocks of mining with Antofagasta (ANTO LN) and Xstrata (XTA LN) leading the gainers. Banks have also surged with Barclays (BARC LN), Lloyds (LLOY LN) and RBS (RBS LN), posting gains in excess of 5%.
On the downside we’ve seen the more defensive sectors underperform, while the biggest loser is Cairn Energy (CNE LN) after the company closed down its offshore Greenland drilling rigs. Utilities have slipped back with National Grid (NGG LN) near the bottom of the FTSE.
U.S. markets soared on the open today after this morning’s central bank liquidity sugar rush, while the latest November ADP numbers also boosted sentiment as they blew away expectations of a rise of 130k, coming in at 206k.
Shares in focus today are likely to be U.S. banks in the wake of last night’s ratings downgrades while Boeing could also be in the spotlight in the aftermath of yesterday’s Chapter 11 announcement by American Airlines, given that the company has a $40bn airplane order, which could well be at risk. Chicago manufacturing for November also came out much better than expected at 62.6, above consensus of 58.5. U.S. existing home sales also beat expectations, coming in at 10.4%, above expectations of 2%.
The U.S. dollar has been crushed today after the co-ordinated move by global central banks sent currencies soaring across the board. The main concern behind the timing and extent of this intervention is that the underlying situation is much worse than is generally perceived in Europe. How the Japanese authorities will feel as the U.S. dollar slips against the yen is anyone’s guess given the problems being caused by the strength of the yen. The commodity currencies have jumped sharply with the Australian, New Zealand dollar leading the way. The Euro has also rebounded strongly jumping back above 1.3500
Gold has jumped sharply on today’s liquidity injection by central banks while silver has lagged somewhat.
Crude oil prices have also jumped sharply near to two week highs on today’s U.S. dollar weakness while increased tensions in the Middle East could well continue to limit any potential downside.
Copper prices have also surged on today’s triple R cut, though there is a concern that today’s cut could well be a precursor to a poor manufacturing PMI figure tomorrow from China
Nov
30th
Gold Jumps after Central Banks Launch "Prudent" Liquidity Measures, S&P Downgrades "Leave Banks Facing Short-term Funding Concer
By Ben Traynor (Bullion Vault)
U.S.dollar gold bullion prices leapt 1.7% in 30
minutes Wednesday lunchtime in London – hitting $1744 an ounce –
following an announcement of coordinated action from central banks
worldwide aimed at increasing Dollar liquidity in the global
financial system.
The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank will all lower the price on existing Dollar liquidity swap arrangements by 50 basis points (0.5 percentage points), effective Monday.
As well as strengthening Dollar liquidity provision, the central banks "judge it prudent" to make arrangements to offer enhanced liquidity provision in other currencies " so that liquidity support operations could be put into place quickly should the need arise", a Bank of England statement said.
On the currency markets the Dollar fell sharply following the central banks' announcement.
Despite its rally, the price of gold bullion this lunchtime remained only marginally above where it began the month.
Spot market silver bullion prices also surged – jumping 3.5% to $32.51 per ounce in the space of 36 minutes – while stocks and commodities also rallied.
By Wednesday lunchtime in London the FTSE was up over nearly 3% on the day – while Germany's DAX was up more than 4%.
A few hours earlier, ratings agency Standard & Poor's cut its ratings on 15 of the world's largest banks late Tuesday – while at the same time raising its rating for two Chinese banks.
Bank of America, Barclays, Citigroup, Goldman Sachs, HSBC, JPMorgan Chase, Morgan Stanley, Royal Bank of Scotland and UBS all had their debt ratings cut by one notch each – reportedly as a result of changes in ratings methodology at S&P.
Despite this technical explanation, the downgrades "will likely raise concerns about their short term funding," says Andrew Fraser, investment director at Standard Life Investments, speaking before the central banks' announcement.
"They will be sidelined by money market funds who are the traditional buyers of that short-term paper."
S&P could also change its outlook on France's AAA rating from stable to negative "within a week, perhaps 10 days" reports French newspaper La Tribune, citing an anonymous diplomatic source.
European leaders meantime "are now entering the critical period of 10 days to complete and conclude the crisis response of the European Union," European economic and monetary affairs commissioner Olli Rehn said Wednesday.
The next European leaders' summit is due to take place on December 9.
Eurozone finance ministers meantime agreed Tuesday on measures aimed at boosting the Euro area's rescue fund, the European Financial Stability Facility.
One mechanism will be a "partial protection certificate" for government bond investors, worth 20-30% of the initial amount invested. These certificates, will be detachable and separately tradable, according to an official EFSF statement.
The other measure agreed involves creating "one or more Co-Investment Funds", to attract additional investment.
"Both options are designed to enlarge the capacity of the EFSF," said Klaus Regling, the rescue fund's chief executive.
"[However] it is really not possible to give one number for leveraging because it is a process...we will need money as we go along."
The EFSF's current effective lending capacity if €440 billion, backstopped by guarantees from Eurozone governments. Some of that €440 billion is already committed in loans, however, while the guarantees offered by countries like Italy and Spain have been compromised by those countries' recent fiscal difficulties.
There are widespread concerns that the EFSF is not large enough to rescue either of those two nations should they require a bailout.
"We will have to look at the IMF," Dutch finance minister Jan Kees de Jager told reporters after Tuesday's meeting.
"We have talked about leverage though private money, but it would be two or two and a half times an increase so not sufficient... I think countries in Europe and outside of Europe should be prepared to give more money to the IMF."
Tuesday's meeting also brought an agreement to release €8 billion of bailout funding to Greece.
A poll of economists by newswire Reuters meantime shows a majority expects the ECB to cut interest rates when it meets next week.
Switzerland has become the number one destination for Italian exports – primarily owing to a large jump in gold bullion shipments, Italian business daily Il Sole 24 Ore reports.
In Vietnam meantime a number of gold bullion refiners are reported to have shut down their processing operations following a central bank draft decree that some fear will hand a monopoly to a single refiner, Saigon Jewelry Co.
The State Bank of Vietnam has previously allocated gold bullion import quotas to refiners, one trader in Ho Chi Minh City says.
"Over the last few months [though] only the Saigon Jewelry Co was allocated quotas.
SBV governor Nguyen Van Binh last week announced that the central bank has "administratively acquired" SJC – the latest in a series of moves aimed at regulating Vietnam's gold market.
Ben Traynor
BullionVault
(c) BullionVault 2011
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it
The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank will all lower the price on existing Dollar liquidity swap arrangements by 50 basis points (0.5 percentage points), effective Monday.
As well as strengthening Dollar liquidity provision, the central banks "judge it prudent" to make arrangements to offer enhanced liquidity provision in other currencies " so that liquidity support operations could be put into place quickly should the need arise", a Bank of England statement said.
On the currency markets the Dollar fell sharply following the central banks' announcement.
Despite its rally, the price of gold bullion this lunchtime remained only marginally above where it began the month.
Spot market silver bullion prices also surged – jumping 3.5% to $32.51 per ounce in the space of 36 minutes – while stocks and commodities also rallied.
By Wednesday lunchtime in London the FTSE was up over nearly 3% on the day – while Germany's DAX was up more than 4%.
A few hours earlier, ratings agency Standard & Poor's cut its ratings on 15 of the world's largest banks late Tuesday – while at the same time raising its rating for two Chinese banks.
Bank of America, Barclays, Citigroup, Goldman Sachs, HSBC, JPMorgan Chase, Morgan Stanley, Royal Bank of Scotland and UBS all had their debt ratings cut by one notch each – reportedly as a result of changes in ratings methodology at S&P.
Despite this technical explanation, the downgrades "will likely raise concerns about their short term funding," says Andrew Fraser, investment director at Standard Life Investments, speaking before the central banks' announcement.
"They will be sidelined by money market funds who are the traditional buyers of that short-term paper."
S&P could also change its outlook on France's AAA rating from stable to negative "within a week, perhaps 10 days" reports French newspaper La Tribune, citing an anonymous diplomatic source.
European leaders meantime "are now entering the critical period of 10 days to complete and conclude the crisis response of the European Union," European economic and monetary affairs commissioner Olli Rehn said Wednesday.
The next European leaders' summit is due to take place on December 9.
Eurozone finance ministers meantime agreed Tuesday on measures aimed at boosting the Euro area's rescue fund, the European Financial Stability Facility.
One mechanism will be a "partial protection certificate" for government bond investors, worth 20-30% of the initial amount invested. These certificates, will be detachable and separately tradable, according to an official EFSF statement.
The other measure agreed involves creating "one or more Co-Investment Funds", to attract additional investment.
"Both options are designed to enlarge the capacity of the EFSF," said Klaus Regling, the rescue fund's chief executive.
"[However] it is really not possible to give one number for leveraging because it is a process...we will need money as we go along."
The EFSF's current effective lending capacity if €440 billion, backstopped by guarantees from Eurozone governments. Some of that €440 billion is already committed in loans, however, while the guarantees offered by countries like Italy and Spain have been compromised by those countries' recent fiscal difficulties.
There are widespread concerns that the EFSF is not large enough to rescue either of those two nations should they require a bailout.
"We will have to look at the IMF," Dutch finance minister Jan Kees de Jager told reporters after Tuesday's meeting.
"We have talked about leverage though private money, but it would be two or two and a half times an increase so not sufficient... I think countries in Europe and outside of Europe should be prepared to give more money to the IMF."
Tuesday's meeting also brought an agreement to release €8 billion of bailout funding to Greece.
A poll of economists by newswire Reuters meantime shows a majority expects the ECB to cut interest rates when it meets next week.
Switzerland has become the number one destination for Italian exports – primarily owing to a large jump in gold bullion shipments, Italian business daily Il Sole 24 Ore reports.
In Vietnam meantime a number of gold bullion refiners are reported to have shut down their processing operations following a central bank draft decree that some fear will hand a monopoly to a single refiner, Saigon Jewelry Co.
The State Bank of Vietnam has previously allocated gold bullion import quotas to refiners, one trader in Ho Chi Minh City says.
"Over the last few months [though] only the Saigon Jewelry Co was allocated quotas.
SBV governor Nguyen Van Binh last week announced that the central bank has "administratively acquired" SJC – the latest in a series of moves aimed at regulating Vietnam's gold market.
Ben Traynor
BullionVault
(c) BullionVault 2011
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it
Nov
30th
Pre Market and FX Commentary - 30th November
By Michael Hewson CMC Markets
Last nights press conference of Eurogroup ministers saw the
unveiling of the EFSF bailout fund which was
agreed with two options. One is first loss guarantees, involving
partial risk protection, while the second option is a rather
convoluted co-investment fund which brings together private and
public funding, with three tranches, with the IMF contributing to
one of the tranches, though leaders were somewhat vague on the
amounts expected from the IMF as well as how much it could be
leveraged.
Having seen some of the details clarified the suggestion is that we aren’t really that much further forward given the lack of detail with respect to who is going to invest in the fund and how much the IMF will be involved.
As such the credibility gap remains and wasn’t helped by German finance minister Schauble admitting that the fund wouldn’t be able to contain the debt crisis. The €8bn Greek aid tranche was signed off at least ticking one box, and removing one short term uncertainty, from the ever increasing list.
Later this morning a raft of economic data is due out of Europe including German unemployment data for November and retail sales data for October and Eurozone unemployment data for October and CPI for November. German unemployment is expected to slipE 5k, remaining at 7%, while retail sales are expected to rise 0.1%. Eurozone unemployment rate is expected to remain stubbornly above 10% at 10.2%, while CPI is expected to remain at 3%. Italian CPI for November is also due and expected to remain benign at 0%.
Despite the gloom from yesterdays Autumn Statement the pound has continued to hold up well, largely because we’re not part of the euro, than any confidence in the UK’s fiscal outlook, which remains pretty dire. Ratings agency Fitch’s warning on the deteriorating fiscal outlook was a shot across the bows in the event growth continued to slip back.
This morning’s Gfk consumer confidence number for November pretty much tells us everything we need to know on that score, coming in at -31, not much of an improvement on last months -32.
If investors were looking for comfort in the U.S.’s recent improving economic data then last nights downgrade by S&P of major American banks, would have shattered that complacency.
The downgrade of Goldman Sachs, Morgan Stanley, BOA and Citigroup kept the focus on debt problems and could well act as a weight on the recent improvement in sentiment across the other side of the Atlantic. The improving economic data as well as yesterday’s sharp rise in consumer confidence has raised expectations with respect to forthcoming jobs data.
As such this afternoon we have the aperitif to this week’s payrolls data with November ADP expected to continue to improve with expectations of an increase to 130k from last months 110k. November Chicago Purchasing Managers is also expected to increase slightly from 58.4 to 58.5.
EURUSD – yesterday’s pop above 1.3420 proved to be extremely short lived once again slipping lower. To delay the risk of further losses we would need to see a break and close of 1.3420 to push back towards last weeks highs at 1.3570. The objective remains for a retest of the lows in October at 1.3150 on the way to the 1.3050 level, which is the 61.8% retracement level of the 1.1880/1.4940 up move. A break here would then target this year’s low at 1.2870. Keep an eye on U.S .dollar index resistance at 79.85 and October highs as a key level. If that holds euro downside could be limited in short term.
GBPUSD – the pound continues to be well supported holding above the 1.5470 area yesterday and breaking the 1.5620 level in the process. This could well see further sterling gains towards 1.5720 which was the old 50% retracement of the up move from 1.5270 to 1.6170. It also coincides with 38.2% pullback of the down move from the 1.6170 highs to the Friday lows at 1.5425. The big chart point remains at 1.5190 which is 61.8% retracement of the entire up move from the 2010 lows at 1.4230 to the highs this year at 1.6745. A significant break here would then target 1.4880.
EURGBP – the single currency remains range bound between the broader resistance at last weeks highs and resistance at the 0.8650/70 area and 55 week MA. As such while below these highs the odds continue to favour a move back towards last weeks lows and a break below the 200 week MA, on the way to further sterling gains towards 0.8450. There is also trend line support at 0.8380 from the October 2008 lows at 0.7695. A move above 0.8670 retargets a move towards 0.8730.
USDJPY – marginal new highs at 78.28 yesterday keeps the potential for further gains intact while the base around 77.45 remains intact. This keeps alive the possibility of further US dollar gains towards trend line resistance at 79.00 from the 2007 highs at 124.15. Only below 77.20/30 area would undermine this scenario, and risk a move lower that would see the next key support area around the 76.20/30 area, a break below of which opens up the lows at 75.30.
Having seen some of the details clarified the suggestion is that we aren’t really that much further forward given the lack of detail with respect to who is going to invest in the fund and how much the IMF will be involved.
As such the credibility gap remains and wasn’t helped by German finance minister Schauble admitting that the fund wouldn’t be able to contain the debt crisis. The €8bn Greek aid tranche was signed off at least ticking one box, and removing one short term uncertainty, from the ever increasing list.
Later this morning a raft of economic data is due out of Europe including German unemployment data for November and retail sales data for October and Eurozone unemployment data for October and CPI for November. German unemployment is expected to slipE 5k, remaining at 7%, while retail sales are expected to rise 0.1%. Eurozone unemployment rate is expected to remain stubbornly above 10% at 10.2%, while CPI is expected to remain at 3%. Italian CPI for November is also due and expected to remain benign at 0%.
Despite the gloom from yesterdays Autumn Statement the pound has continued to hold up well, largely because we’re not part of the euro, than any confidence in the UK’s fiscal outlook, which remains pretty dire. Ratings agency Fitch’s warning on the deteriorating fiscal outlook was a shot across the bows in the event growth continued to slip back.
This morning’s Gfk consumer confidence number for November pretty much tells us everything we need to know on that score, coming in at -31, not much of an improvement on last months -32.
If investors were looking for comfort in the U.S.’s recent improving economic data then last nights downgrade by S&P of major American banks, would have shattered that complacency.
The downgrade of Goldman Sachs, Morgan Stanley, BOA and Citigroup kept the focus on debt problems and could well act as a weight on the recent improvement in sentiment across the other side of the Atlantic. The improving economic data as well as yesterday’s sharp rise in consumer confidence has raised expectations with respect to forthcoming jobs data.
As such this afternoon we have the aperitif to this week’s payrolls data with November ADP expected to continue to improve with expectations of an increase to 130k from last months 110k. November Chicago Purchasing Managers is also expected to increase slightly from 58.4 to 58.5.
EURUSD – yesterday’s pop above 1.3420 proved to be extremely short lived once again slipping lower. To delay the risk of further losses we would need to see a break and close of 1.3420 to push back towards last weeks highs at 1.3570. The objective remains for a retest of the lows in October at 1.3150 on the way to the 1.3050 level, which is the 61.8% retracement level of the 1.1880/1.4940 up move. A break here would then target this year’s low at 1.2870. Keep an eye on U.S .dollar index resistance at 79.85 and October highs as a key level. If that holds euro downside could be limited in short term.
GBPUSD – the pound continues to be well supported holding above the 1.5470 area yesterday and breaking the 1.5620 level in the process. This could well see further sterling gains towards 1.5720 which was the old 50% retracement of the up move from 1.5270 to 1.6170. It also coincides with 38.2% pullback of the down move from the 1.6170 highs to the Friday lows at 1.5425. The big chart point remains at 1.5190 which is 61.8% retracement of the entire up move from the 2010 lows at 1.4230 to the highs this year at 1.6745. A significant break here would then target 1.4880.
EURGBP – the single currency remains range bound between the broader resistance at last weeks highs and resistance at the 0.8650/70 area and 55 week MA. As such while below these highs the odds continue to favour a move back towards last weeks lows and a break below the 200 week MA, on the way to further sterling gains towards 0.8450. There is also trend line support at 0.8380 from the October 2008 lows at 0.7695. A move above 0.8670 retargets a move towards 0.8730.
USDJPY – marginal new highs at 78.28 yesterday keeps the potential for further gains intact while the base around 77.45 remains intact. This keeps alive the possibility of further US dollar gains towards trend line resistance at 79.00 from the 2007 highs at 124.15. Only below 77.20/30 area would undermine this scenario, and risk a move lower that would see the next key support area around the 76.20/30 area, a break below of which opens up the lows at 75.30.
Nov
29th
Market Wrap - 29th November
By Michael Hewson CMC Markets
Despite concerns about the U.S. and
France’s credit rating, European markets have been
a bit of a mixed bag, trading between positive and negative
territory throughout the day with concerns about Europe tempering
upward momentum in the short term, ahead of a key meeting of
European finance ministers.
Italy managed to get away €8bn worth of bonds of varying maturities but the rates charged were at euro life time highs, with relief that the auction didn’t fail helping underpin markets.
The main gainers have been the more defensive sectors after yesterday’s strong rally with Telecoms and Healthcare sectors leading the gains. Also amongst the gainers have been companies that have seen sharp losses in the past few days. Man Group (EMG LN) has pulled back from multi year lows; while gold miner Randgold Resources (RRS LN) has pulled back some of its sharp losses from yesterday. GKN (GKN LN) has also remained underpinned on renewed bid speculation.
The biggest losers have been yesterday’s biggest gainers among the basic resource and financial sectors, with Lloyds Banking Group (LLOY LN) and Royal Bank of Scotland (RBS LN) giving back some of yesterdays gains along with miners Rio Tinto (RIO LN) and Anglo American (AAL LN).
U.S. markets opened higher this morning despite the warning from Fitch last night about the U.S. credit rating. News that American Airlines holding company AMR has filed for Chapter 11 bankruptcy hasn’t been enough to undermine markets too much.
In earnings news jewellery chain Tiffany’s reported Q3 profits up by 63%, boosted by sales in Asia. Income came in at $0.70c a share, above expectations of $0.61c, however the firm revised its Q4 outlook down, despite recent improvements in the key holiday season.
Sentiment was boosted after U.S. consumer confidence for November jumped sharply rebounding sharply to 56 after Octobers surprise plunge to 39.8.
The U.S. dollar has once again underperformed today on the back of the firmer tone in equity markets. Last night’s decision by Fitch to upgrade Australia to a triple “A” has seen the Australian dollar pop higher and is the main gainer on the day, though given the countries reliance on commodity prices, a global slowdown could suggest that the rebound is slightly overdone. The New Zealand dollar has followed in its wake.
The pound has shrugged off a rather gloomy Autumn Statement by the Chancellor, as he resisted the temptation to row back on his fiscal plan, while the high yields, (above 7%) on this morning’s Italian bond auction, helped it gain against the euro.
The Euro has struggled despite briefly popping above 1.3420, slipping back down again in the afternoon in the absence of any positive headlines coming out of Europe as well as the revelation that the ECB was unable to fully sterilise all of its bond purchases. While the amount in question was only around €10bn, it prompted some speculation about monetisation. Reports that Angela Merkel remained adamant in her opposition to Eurobonds didn’t help either.
Oil prices have jumped sharply after this afternoon’s news from Iran of the British embassy being stormed and hostages being taken, while the jump in U.S. consumer confidence also helped.
Gold prices have continued to remain underpinned as they hold above the 55 day MA with a likelihood of further gains while above the $1,680 area.
Silver prices on the other hand are struggling below their 55 day MA which currently sits at $33.35.
Copper prices have remained somewhat becalmed, although slightly higher on better than expected US consumer confidence numbers
Italy managed to get away €8bn worth of bonds of varying maturities but the rates charged were at euro life time highs, with relief that the auction didn’t fail helping underpin markets.
The main gainers have been the more defensive sectors after yesterday’s strong rally with Telecoms and Healthcare sectors leading the gains. Also amongst the gainers have been companies that have seen sharp losses in the past few days. Man Group (EMG LN) has pulled back from multi year lows; while gold miner Randgold Resources (RRS LN) has pulled back some of its sharp losses from yesterday. GKN (GKN LN) has also remained underpinned on renewed bid speculation.
The biggest losers have been yesterday’s biggest gainers among the basic resource and financial sectors, with Lloyds Banking Group (LLOY LN) and Royal Bank of Scotland (RBS LN) giving back some of yesterdays gains along with miners Rio Tinto (RIO LN) and Anglo American (AAL LN).
U.S. markets opened higher this morning despite the warning from Fitch last night about the U.S. credit rating. News that American Airlines holding company AMR has filed for Chapter 11 bankruptcy hasn’t been enough to undermine markets too much.
In earnings news jewellery chain Tiffany’s reported Q3 profits up by 63%, boosted by sales in Asia. Income came in at $0.70c a share, above expectations of $0.61c, however the firm revised its Q4 outlook down, despite recent improvements in the key holiday season.
Sentiment was boosted after U.S. consumer confidence for November jumped sharply rebounding sharply to 56 after Octobers surprise plunge to 39.8.
The U.S. dollar has once again underperformed today on the back of the firmer tone in equity markets. Last night’s decision by Fitch to upgrade Australia to a triple “A” has seen the Australian dollar pop higher and is the main gainer on the day, though given the countries reliance on commodity prices, a global slowdown could suggest that the rebound is slightly overdone. The New Zealand dollar has followed in its wake.
The pound has shrugged off a rather gloomy Autumn Statement by the Chancellor, as he resisted the temptation to row back on his fiscal plan, while the high yields, (above 7%) on this morning’s Italian bond auction, helped it gain against the euro.
The Euro has struggled despite briefly popping above 1.3420, slipping back down again in the afternoon in the absence of any positive headlines coming out of Europe as well as the revelation that the ECB was unable to fully sterilise all of its bond purchases. While the amount in question was only around €10bn, it prompted some speculation about monetisation. Reports that Angela Merkel remained adamant in her opposition to Eurobonds didn’t help either.
Oil prices have jumped sharply after this afternoon’s news from Iran of the British embassy being stormed and hostages being taken, while the jump in U.S. consumer confidence also helped.
Gold prices have continued to remain underpinned as they hold above the 55 day MA with a likelihood of further gains while above the $1,680 area.
Silver prices on the other hand are struggling below their 55 day MA which currently sits at $33.35.
Copper prices have remained somewhat becalmed, although slightly higher on better than expected US consumer confidence numbers
Nov
29th
Gold Could Gain from "Aggressive Monetary Policy", UK Confirms 'Credit Easing', Italy "No Longer Controls Own Fate"
By Ben Traynor (Bullion Vault)
The wholesale market gold price hovered in a 0.5%
range around $1711 an ounce Tuesday morning in London, where
Britain's chancellor today gave his autumn budget statement to
parliament.
Elsewhere in Europe, Italy's borrowing costs hit new highs at an auction of government bonds, while Eurozone finance ministers are meeting to discuss boosting the single currency rescue fund.
By Tuesday lunchtime, the spot market gold price was showing a gain of 1.7% on last week's close.
"In the short term [however], we fear gold could go a bit lower," warns Daniel Briesemann, analyst at Commerzbank in Frankfurt.
"But this would be exclusively driven by weaker equity markets and weaker commodity markets, because of the increasing risk aversion."
"We remain bullish on gold," says Societe Generale commodities strategist Jeremy Friesen in Hong Kong, adding that "aggressive monetary policy" aimed at countering ongoing crises "will be positive" for the gold price in 2012.
The silver price meantime hovered around $31.80 per ounce – 1.7% up for the week so far – while stocks, commodities and US Treasury bonds were also broadly flat by Tuesday lunchtime.
Britain's government is facing bigger budget deficits than previously forecast, after the Office for Budget Responsibility revised down its growth projections.
"Two more years of weak productivity growth would increase the structural deficit by close to £30 billion," the Financial Times reports, citing its own analysis of Britain's public finances.
The OBR now forecasts that growth for this year will be 0.9%, with 2012 seeing growth of 0.7%. The forecasts mean it looks unlikely the government will hit its target of eliminating the deficit by 2015.
In his Autumn budget statement today, Britain's chancellor George Osborne told confirmed so-called 'credit easing' plans to provide £40 billion to underwrite loans to small and medium sized business. Osborne also restated the government's opposition to a proposed European financial transaction tax. Public sector workers – many of whom plan to strike tomorrow over pensions – will have salary increases capped at 1%.
UK money supply meantime increased by £8.5 billion in October, according to the Bank of England's preferred money supply measure M4 excluding intermediate and other financial corporations – a year-on-year rise of 2.8%.
M4 Sterling lending meantime – the total amount of money lent out to households, private non-financial firms etc. – rose by £5.6 billion, with UK mortgage approvals hitting their highest level since December 2009. The Bank announced on October 6 that it was increasing the size of its quantitative easing program from £200 billion to £275 billion.
The Sterling gold price fell throughout Tuesday morning, losing 0.8% by lunchtime to hit £1095 per ounce – just above where it began the week – as the Pound gained strongly against the Euro.
Despite yesterday's promotion of 'Buy a Bond' day by the Italian Banking Association, Italy's borrowing costs rose to fresh Euro-era highs this morning when it auctioned 3-Year and 10-Year government bonds. The average yield on €2.5 billion of 10-Year bonds sold was 7.56% – while the 3-Year average yield was higher at 7.89%.
Greece, Ireland and Portugal were all facing lower borrowing costs when they were forced to ask for bailouts.
"Italy has lost control of its fate and its future now lies with the European Central Bank, International Monetary Fund, France and Germany," says Jeffrey Sica, president and chief investment officer at SICA Wealth Management, which manages over $1 billion in client assets.
In Brussels meantime, Eurozone finance ministers are meeting today to discuss options for leveraging the European Financial Stability Facility, while in Karlsruhe, the German Constitutional Court is reviewing whether or not Germany's entire parliament will need to vote on any EFSF proposals.
"It's not just Germany that has a parliament," Jean-Claude Juncker, Luxembourg prime minister and chairman of the Eurogroup of single currency ministers, commented last month.
"They also exist elsewhere...we are dealing with 17 governments, 17 states and 17 parliaments."
Ratings agency Moody's announced Tuesday that has placed 87 banks in 15 European countries on review for possible downgrade. The majority of ratings to be reviewed are those of banks in Spain, Italy, Austria and France.
Over in New York, the number of bullish minus bearish contracts held by noncommercial gold futures and options traders on the Comex exchange – the so-called speculative net long – fell in the week ended 22 November, according to data published Monday by the Commodity Futures Trading Commission.
Speculative net long positions fell 12.3%, and by the equivalent of around 78 tonnes of gold bullion.
"The substantial decline in speculative longs is disquieting," says Standard Bank commodities strategist Marc Ground.
"However, we are comforted that this decline in longs has not been accompanied by a marked increase in short positions, a signal that the market has not turned bearish."
"In the week under review," adds precious metals consultancy VM Group, "bets appear to be forming against the gold price. That said, news flow remains the single biggest driver and sentiment can change rapidly. Moreover, much of the fall in the net long position was due to option expiry for December month."
Ben Traynor
BullionVault
(c) BullionVault 2011
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it
Elsewhere in Europe, Italy's borrowing costs hit new highs at an auction of government bonds, while Eurozone finance ministers are meeting to discuss boosting the single currency rescue fund.
By Tuesday lunchtime, the spot market gold price was showing a gain of 1.7% on last week's close.
"In the short term [however], we fear gold could go a bit lower," warns Daniel Briesemann, analyst at Commerzbank in Frankfurt.
"But this would be exclusively driven by weaker equity markets and weaker commodity markets, because of the increasing risk aversion."
"We remain bullish on gold," says Societe Generale commodities strategist Jeremy Friesen in Hong Kong, adding that "aggressive monetary policy" aimed at countering ongoing crises "will be positive" for the gold price in 2012.
The silver price meantime hovered around $31.80 per ounce – 1.7% up for the week so far – while stocks, commodities and US Treasury bonds were also broadly flat by Tuesday lunchtime.
Britain's government is facing bigger budget deficits than previously forecast, after the Office for Budget Responsibility revised down its growth projections.
"Two more years of weak productivity growth would increase the structural deficit by close to £30 billion," the Financial Times reports, citing its own analysis of Britain's public finances.
The OBR now forecasts that growth for this year will be 0.9%, with 2012 seeing growth of 0.7%. The forecasts mean it looks unlikely the government will hit its target of eliminating the deficit by 2015.
In his Autumn budget statement today, Britain's chancellor George Osborne told confirmed so-called 'credit easing' plans to provide £40 billion to underwrite loans to small and medium sized business. Osborne also restated the government's opposition to a proposed European financial transaction tax. Public sector workers – many of whom plan to strike tomorrow over pensions – will have salary increases capped at 1%.
UK money supply meantime increased by £8.5 billion in October, according to the Bank of England's preferred money supply measure M4 excluding intermediate and other financial corporations – a year-on-year rise of 2.8%.
M4 Sterling lending meantime – the total amount of money lent out to households, private non-financial firms etc. – rose by £5.6 billion, with UK mortgage approvals hitting their highest level since December 2009. The Bank announced on October 6 that it was increasing the size of its quantitative easing program from £200 billion to £275 billion.
The Sterling gold price fell throughout Tuesday morning, losing 0.8% by lunchtime to hit £1095 per ounce – just above where it began the week – as the Pound gained strongly against the Euro.
Despite yesterday's promotion of 'Buy a Bond' day by the Italian Banking Association, Italy's borrowing costs rose to fresh Euro-era highs this morning when it auctioned 3-Year and 10-Year government bonds. The average yield on €2.5 billion of 10-Year bonds sold was 7.56% – while the 3-Year average yield was higher at 7.89%.
Greece, Ireland and Portugal were all facing lower borrowing costs when they were forced to ask for bailouts.
"Italy has lost control of its fate and its future now lies with the European Central Bank, International Monetary Fund, France and Germany," says Jeffrey Sica, president and chief investment officer at SICA Wealth Management, which manages over $1 billion in client assets.
In Brussels meantime, Eurozone finance ministers are meeting today to discuss options for leveraging the European Financial Stability Facility, while in Karlsruhe, the German Constitutional Court is reviewing whether or not Germany's entire parliament will need to vote on any EFSF proposals.
"It's not just Germany that has a parliament," Jean-Claude Juncker, Luxembourg prime minister and chairman of the Eurogroup of single currency ministers, commented last month.
"They also exist elsewhere...we are dealing with 17 governments, 17 states and 17 parliaments."
Ratings agency Moody's announced Tuesday that has placed 87 banks in 15 European countries on review for possible downgrade. The majority of ratings to be reviewed are those of banks in Spain, Italy, Austria and France.
Over in New York, the number of bullish minus bearish contracts held by noncommercial gold futures and options traders on the Comex exchange – the so-called speculative net long – fell in the week ended 22 November, according to data published Monday by the Commodity Futures Trading Commission.
Speculative net long positions fell 12.3%, and by the equivalent of around 78 tonnes of gold bullion.
"The substantial decline in speculative longs is disquieting," says Standard Bank commodities strategist Marc Ground.
"However, we are comforted that this decline in longs has not been accompanied by a marked increase in short positions, a signal that the market has not turned bearish."
"In the week under review," adds precious metals consultancy VM Group, "bets appear to be forming against the gold price. That said, news flow remains the single biggest driver and sentiment can change rapidly. Moreover, much of the fall in the net long position was due to option expiry for December month."
Ben Traynor
BullionVault
(c) BullionVault 2011
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it
Nov
29th
Pre Market and FX Commentary - 29th November
By Michael Hewson CMC Markets
Sovereign debt credit risk remains at the forefront today after
ratings agency Fitch put the U.S.
on notice of losing its triple “A” rating last
night, by putting them on a negative outlook with a view to a
downgrade by 2013, after last weeks faliure to agree budget cuts by
the congressional super committee. On the plus side Fitch upgraded
Australia to triple “A”.
A report from La Tribune last night suggested that Paris could also be within 10 days of being put on notice of a downgrade of its outlook, this one by S&P; suggesting that the future for European triple “A” sovereigns is not looking too rosy right now.
The focus remains on European bond markets this morning in the wake of Moody’s warning on the vulnerability of sovereign ratings. Italy’s pain looks set to continue as they look to raise another €8bn in three separate auctions of 2014, 2020 and 2022 bonds, with yields stuck stubbornly above 7%; this could be another expensive auction. Belgium is also expected to auction some T-Bills.
A final decision is also expected on the next Greek aid tranche of €8bn at today’s Eurozone finance ministers meeting, assuming Greek politicians have agreed to all the preconditions of the troika. Discussions are also expected to continue with respect to leveraging the EFSF, while a French downgrade would pretty much kill it stone dead, even though its pretty much comatose now.
Focus is also likely to shift to the UK today as the Chancellor gets up to give his Autumn Statement and it is unlikely to be full of joy and hope, after the OECD growth downgrades yesterday. The OECD suggested that the UK was already in recession and could well remain so into Q1, before recovering. Yesterday’s CBI retail sales data for November reinforced the weakness in the economy, coming in much worse than expected, and falling to the lowest levels since March 2009 at -19.
While the UK downgrades weren’t as severe of those of Europe, it is likely to be of little comfort given that the EU is the UK’s biggest export market. These growth downgrades are likely to be followed by similar downgrades by the independent (OBR) Office for Budget Responsibility. This is likely to give the Chancellor a potential £30-50bn headache over the next five years as the growth path and future income stream of the UK economy gets downgraded, in the wake of the problems in Europe. It will give the Chancellor very little room for manoeuvre today as he tries to stimulate some form of growth and investment in a moribund economy.
In the wake of Black Friday and Cyber Monday, U.S. consumer confidence for November is expected to improve from October’s 39.8, jumping to 44.
EURUSD – yesterday’s rebound in the single currency fizzled out just short of the old support at 1.3410/20. To delay the risk of further losses we would need to see a break of 1.3420 to push back towards last weeks highs at 1.3570. The objective remains for a retest of the lows in October at 1.3150 on the way to the 1.3050 level, which is the 61.8% retracement level of the 1.1880/1.4940 up move. A break here would then target this year’s low at 1.2870. Keep an eye on U.S. dollar index resistance at 79.85 and October highs as a key level. If that holds euro downside could be limited in short term.
GBPUSD – yesterday’s break above the 1.5520 area saw the cable spill over towards 1.5600. If the pound holds above 1.5470 we could well see another test higher towards the 1.5620 level and trend line resistance from the 14th November highs at 1.6085. While below here though the risk remains for a retest towards the 1.5270 October lows. The big chart point remains at 1.5190 which is 61.8% retracement of the entire up move from the 2010 lows at 1.4230 to the highs this year at 1.6745. A significant break here would then target 1.4880.
EURGBP – the single currency remains range bound between the broader resistance at last weeks highs and resistance at the 0.8650/70 area and 55 week MA. As such while below these highs the odds continue to favour a move back towards last weeks lows and a break below the 200 week MA, on the way to further sterling gains towards 0.8450. There is also trend line support at 0.8380 from the October 2008 lows at 0.7695. A move above 0.8670 retargets a move towards 0.8730.
USDJPY – yesterday saw further US dollar gains to 78.25 after finding a base around 77.45. This keeps alive the possibility of further US dollar gains towards trend line resistance at 79.00 from the 2007 highs at 124.15. Only below 77.20/30 area would undermine this scenario, and risk a move lower that would see the next key support area around the 76.20/30 area, a break below of which opens up the lows at 75.30.
A report from La Tribune last night suggested that Paris could also be within 10 days of being put on notice of a downgrade of its outlook, this one by S&P; suggesting that the future for European triple “A” sovereigns is not looking too rosy right now.
The focus remains on European bond markets this morning in the wake of Moody’s warning on the vulnerability of sovereign ratings. Italy’s pain looks set to continue as they look to raise another €8bn in three separate auctions of 2014, 2020 and 2022 bonds, with yields stuck stubbornly above 7%; this could be another expensive auction. Belgium is also expected to auction some T-Bills.
A final decision is also expected on the next Greek aid tranche of €8bn at today’s Eurozone finance ministers meeting, assuming Greek politicians have agreed to all the preconditions of the troika. Discussions are also expected to continue with respect to leveraging the EFSF, while a French downgrade would pretty much kill it stone dead, even though its pretty much comatose now.
Focus is also likely to shift to the UK today as the Chancellor gets up to give his Autumn Statement and it is unlikely to be full of joy and hope, after the OECD growth downgrades yesterday. The OECD suggested that the UK was already in recession and could well remain so into Q1, before recovering. Yesterday’s CBI retail sales data for November reinforced the weakness in the economy, coming in much worse than expected, and falling to the lowest levels since March 2009 at -19.
While the UK downgrades weren’t as severe of those of Europe, it is likely to be of little comfort given that the EU is the UK’s biggest export market. These growth downgrades are likely to be followed by similar downgrades by the independent (OBR) Office for Budget Responsibility. This is likely to give the Chancellor a potential £30-50bn headache over the next five years as the growth path and future income stream of the UK economy gets downgraded, in the wake of the problems in Europe. It will give the Chancellor very little room for manoeuvre today as he tries to stimulate some form of growth and investment in a moribund economy.
In the wake of Black Friday and Cyber Monday, U.S. consumer confidence for November is expected to improve from October’s 39.8, jumping to 44.
EURUSD – yesterday’s rebound in the single currency fizzled out just short of the old support at 1.3410/20. To delay the risk of further losses we would need to see a break of 1.3420 to push back towards last weeks highs at 1.3570. The objective remains for a retest of the lows in October at 1.3150 on the way to the 1.3050 level, which is the 61.8% retracement level of the 1.1880/1.4940 up move. A break here would then target this year’s low at 1.2870. Keep an eye on U.S. dollar index resistance at 79.85 and October highs as a key level. If that holds euro downside could be limited in short term.
GBPUSD – yesterday’s break above the 1.5520 area saw the cable spill over towards 1.5600. If the pound holds above 1.5470 we could well see another test higher towards the 1.5620 level and trend line resistance from the 14th November highs at 1.6085. While below here though the risk remains for a retest towards the 1.5270 October lows. The big chart point remains at 1.5190 which is 61.8% retracement of the entire up move from the 2010 lows at 1.4230 to the highs this year at 1.6745. A significant break here would then target 1.4880.
EURGBP – the single currency remains range bound between the broader resistance at last weeks highs and resistance at the 0.8650/70 area and 55 week MA. As such while below these highs the odds continue to favour a move back towards last weeks lows and a break below the 200 week MA, on the way to further sterling gains towards 0.8450. There is also trend line support at 0.8380 from the October 2008 lows at 0.7695. A move above 0.8670 retargets a move towards 0.8730.
USDJPY – yesterday saw further US dollar gains to 78.25 after finding a base around 77.45. This keeps alive the possibility of further US dollar gains towards trend line resistance at 79.00 from the 2007 highs at 124.15. Only below 77.20/30 area would undermine this scenario, and risk a move lower that would see the next key support area around the 76.20/30 area, a break below of which opens up the lows at 75.30.
Nov
28th
Market Wrap - 28th November
By Michael Hewson CMC Markets
European markets have started the week on the front foot boosted by
speculation that EU leaders are in the process of preparing to take
more drastic action to try and deal with the deteriorating
situation in Europe.
This morning’s speculation of an €600bn IMF bailout of Italy was quickly squashed, as expected given the lack of IMF funds.
Given that we have been down this route a number of times before, with respect to action from EU leaders, you could argue that there is an element of naivety in this rebound, and as such the potential for disappointment remains quite high.
The problems facing EU leaders were highlighted this morning after the OECD downgraded its growth forecasts for 2011 and 2012 for not only Europe but the UK as well; however this has barely made a dent in the current rebound.
The main gainers so far have been the financial stocks after the losses in recent days, with Barclays (BARC LN), RBS (RBS LN) and Lloyds (LLOY LN) leading the gainers. Industrial stocks are also higher with Weir Group (WEIR LN) up on the back of a broker upgrade from Barclays.
Basic resource stocks have also rebounded after some upbeat comment from a number of brokers suggested that the recent sell-off has been somewhat overblown with Vedanta (VED LN) and Antofagasta (ANTO LN) leading the risers in this sector. The only dark spot is gold miner Randgold Resources (RRS LN), down over 7% on the back of strike and weather problems with its Ivory Coast operation, which has lowered production and hit profits.
U.S. markets have followed Europe’s lead today in the wake of a much more positive Black Friday, relative to 2010, with sales up 6.6%. Today we have Cyber Monday which usually marks the biggest on-line trading day of the year as the pre-Christmas shopping season gets under way. With financials in Europe leading the way the U.S. financials have led the rally higher with JP Morgan and Bank of America leading the way.
Other stocks in focus include Amazon which saw Kindle sales quadruple over the long weekend. Blackberry owner Research in Motion is also in the spotlight after being downgraded by broker Sterne. U.S. new home sales for October rose 1.3%, above expectations of flat growth, but below the rise in September 3.4%.
In stark contrast to Friday the U.S. dollar is the amongst the worst performers today along with the Japanese yen, with the commodity currencies bouncing back sharply, with the Australian, New Zealand and Canadian dollar leading the gainers.
The Euro has also bounced back despite both this morning’s Italian and Belgian bond auctions getting away with much higher yields. German 10 year bond yields have started to edge higher and are now trading either side of the equivalent UK yields, as investors mull the possibility that Germany could be forced to consider the possibility of Eurobonds after the OECD joined the chorus of voices arguing for them as well as greater ECB participation to help governments. The OECD also downgraded its growth forecasts for 2011 and 2012 for the UK and Europe, predicting a mild recession in both, and was also notable that the downgrade to Europe’s growth was greater than the UK’s. The organisation also urged both central banks to boost their balance sheets sharply to head-off the effects of a sharp recession.
The pound has underperformed relative to its peers after CBI retail sales data for November reinforced the weakness in the retail sector this morning, coming in much worse than expected and falling to the lowest levels since March 2009 at -19. It wasn’t helped by OECD comments that suggested that QE could jump as high as £400bn, while dovish comments from MPC policymakers kept alive the likelihood of further easing as early as Q1 next year.
The Japanese yen has been the weakest on the day against the U.S. dollar as the greenback touched its highest levels since 7th November, on optimism about the US recovery.
Gold prices have unsurprisingly pushed sharply higher in the wake of today’s US dollar weakness and this morning’s comments about further QE by the OECD.
Copper prices have risen sharply on the back of the bounce back in the mining sector and the rebound in risk appetite today.
Crude oil prices have also rebounded sharply, despite the growth downgrades from the OECD, rising on the back of the better U.S. retail sales figures over the long weekend, with Brent prices jumping sharply but struggling just shy of $110. U.S. crude prices also struggled to get much above $100, after finding support around the 200 day MA last week at $95.80.
This morning’s speculation of an €600bn IMF bailout of Italy was quickly squashed, as expected given the lack of IMF funds.
Given that we have been down this route a number of times before, with respect to action from EU leaders, you could argue that there is an element of naivety in this rebound, and as such the potential for disappointment remains quite high.
The problems facing EU leaders were highlighted this morning after the OECD downgraded its growth forecasts for 2011 and 2012 for not only Europe but the UK as well; however this has barely made a dent in the current rebound.
The main gainers so far have been the financial stocks after the losses in recent days, with Barclays (BARC LN), RBS (RBS LN) and Lloyds (LLOY LN) leading the gainers. Industrial stocks are also higher with Weir Group (WEIR LN) up on the back of a broker upgrade from Barclays.
Basic resource stocks have also rebounded after some upbeat comment from a number of brokers suggested that the recent sell-off has been somewhat overblown with Vedanta (VED LN) and Antofagasta (ANTO LN) leading the risers in this sector. The only dark spot is gold miner Randgold Resources (RRS LN), down over 7% on the back of strike and weather problems with its Ivory Coast operation, which has lowered production and hit profits.
U.S. markets have followed Europe’s lead today in the wake of a much more positive Black Friday, relative to 2010, with sales up 6.6%. Today we have Cyber Monday which usually marks the biggest on-line trading day of the year as the pre-Christmas shopping season gets under way. With financials in Europe leading the way the U.S. financials have led the rally higher with JP Morgan and Bank of America leading the way.
Other stocks in focus include Amazon which saw Kindle sales quadruple over the long weekend. Blackberry owner Research in Motion is also in the spotlight after being downgraded by broker Sterne. U.S. new home sales for October rose 1.3%, above expectations of flat growth, but below the rise in September 3.4%.
In stark contrast to Friday the U.S. dollar is the amongst the worst performers today along with the Japanese yen, with the commodity currencies bouncing back sharply, with the Australian, New Zealand and Canadian dollar leading the gainers.
The Euro has also bounced back despite both this morning’s Italian and Belgian bond auctions getting away with much higher yields. German 10 year bond yields have started to edge higher and are now trading either side of the equivalent UK yields, as investors mull the possibility that Germany could be forced to consider the possibility of Eurobonds after the OECD joined the chorus of voices arguing for them as well as greater ECB participation to help governments. The OECD also downgraded its growth forecasts for 2011 and 2012 for the UK and Europe, predicting a mild recession in both, and was also notable that the downgrade to Europe’s growth was greater than the UK’s. The organisation also urged both central banks to boost their balance sheets sharply to head-off the effects of a sharp recession.
The pound has underperformed relative to its peers after CBI retail sales data for November reinforced the weakness in the retail sector this morning, coming in much worse than expected and falling to the lowest levels since March 2009 at -19. It wasn’t helped by OECD comments that suggested that QE could jump as high as £400bn, while dovish comments from MPC policymakers kept alive the likelihood of further easing as early as Q1 next year.
The Japanese yen has been the weakest on the day against the U.S. dollar as the greenback touched its highest levels since 7th November, on optimism about the US recovery.
Gold prices have unsurprisingly pushed sharply higher in the wake of today’s US dollar weakness and this morning’s comments about further QE by the OECD.
Copper prices have risen sharply on the back of the bounce back in the mining sector and the rebound in risk appetite today.
Crude oil prices have also rebounded sharply, despite the growth downgrades from the OECD, rising on the back of the better U.S. retail sales figures over the long weekend, with Brent prices jumping sharply but struggling just shy of $110. U.S. crude prices also struggled to get much above $100, after finding support around the 200 day MA last week at $95.80.
Nov
28th
Gold Back above $1700, Investors Pricing In "Euro Endgame", Savers in Italy "Are Government Bond Buyers of Last Resort"
By Ben Traynor (Bullion Vault)
The spot market gold price climbed to $1718 an
ounce Monday morning London time – a 2.1% gain on Friday's close –
while stock and commodity markets also rallied following news that
leaders may be close to an agreement on the Eurozone rescue
fund.
"News out of the US is also contributing to the more upbeat mood on markets, with preliminary reports from retailers suggesting that it was a good Black Friday weekend," says Marc Ground, commodities strategist at Standard Bank, referring to reports that Americans spent over $52 billion in the days following Thanksgiving on Thursday.
"With a slew of US data flow out this week [however] this optimism over the outlook for US economy is sure to be tested in the coming days."
Despite this morning's rally, the gold price remains nearly 5% off its November high.
The silver price also gained this morning, climbing to $32.22 per ounce – 2.8% up from the end of last week.
Eurozone finance ministers are due to meet tomorrow amid reports that they will finalize a plan to leverage the European Financial Stability Facility. European leaders agreed last month that the EFSF could offer part-guarantees to private sector buyers of distressed Eurozone government bonds at auction.
Germany meantime is continuing to push for changes to European treaties, according to press reports on Monday. A number of potential treaties and agreements are reported to be under discussion, all aimed at creating more robust incentives for national governments to exercise fiscal discipline.
"The Germans have made up their minds... they are doing everything they can to push for [treaty change] as rapidly as possible," a senior European Union official told news agency Reuters.
European nations that argue for a larger European Central Bank role, or for jointly-issued 'Eurobonds', are "those countries that have to sort out their budget problems and [have chosen] to misunderstand that they have to make more efforts," German finance minister Wolfgang Schaeuble said in an interview on Sunday.
"The goal," Schaeuble added, "is for the member states of the common currency to create their own Stability Union and to concentrate on that."
The Organisation for Economic Cooperation and Development 's latest 'Economic Outlook', published today, calls for "a substantial relaxation of monetary conditions" in the Eurozone. The OECD has cut its global growth forecast and predicts recession for the Eurozone and the UK – adding that fiscal tightening could also "tip the US economy into recession".
Eurozone contagion is "rising and hitting probably Germany as well," Pier Carlo Padoan, OECD chief economist, said Monday.
"So the first thing, the absolute priority, is to stop that and in the immediate [term] the only actor that can do that is the ECB."
An auction of German government bonds 'failed' last week when only €3.9 billion of 10-Year bunds were sold – versus a maximum target of €6 billion.
"Markets continue to move faster than politicians," says Mansoor Mohi-uddin, head of foreign exchange strategy at UBS in Singapore – adding that investors have begun to "price in the endgame" for the single currency.
"Failure to come up with a comprehensive solution on December 9 [the next European leaders' summit] is certainly possible," adds Joachim Fels, chief economist at Morgan Stanley.
"We believe that it would open up a much darker scenario that, eventually, could entail a breakup of the Euro."
Ratings agency Moody's meantime says that its "central scenario remains that the Euro area will be preserved without further widespread defaults" but warns that "even this 'positive' scenario carries very negative rating implications in the interim period."
Elsewhere in Europe, the International Monetary Fund has denied a report in Italian newspaper La Stampa claiming that it was preparing to lend Italy €600 billion at interest rates of 4-5% – enough to cover Italy's financing needs for around a year-and-a-half.
The Italian Banking Association meantime is today promoting 'Buy a Bond' day, encouraging ordinary Italians to lend their savings to the government. The initiative is supported by the country's professional soccer players.
"Italian savers may be bondholders of last resort as banks and institutional investors are reducing holdings of government bonds," says Wolfram Mrowetz of Milanese investment firm Alisei SIM.
Here in the UK, chancellor George Osborne is expected to announce so-called 'credit easing' measures – designed to boost lending to small businesses by offering guarantees – in Tuesday's autumn budget report to parliament.
"We are making available £20 billion for the National Loan Guarantee Scheme," Osborne told a BBC interviewer on Sunday.
"However it sits within an envelope that could be as large as £40 billion."
The British Chamber of Commerce meantime has today predicted the Bank of England will increase the size of its quantitative easing program – through which the Bank buys assets (mainly government bonds) from institutions such as banks and pension funds – from the current £275 billion to £325 billion.
Over in Australia, gold mining output fell to around 66 tonnes in the third quarter of the year – down 2.4% from Q2 – according to an industry survey published Sunday.
Melbourne based mining consultants Surbiton Associates, which carried out the survey, explain the drop was party caused by some producers choosing to process lower ore grades – while preserving high grade ore in case of a fall in the gold price.
Ben Traynor
BullionVault
(c) BullionVault 2011
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it
"News out of the US is also contributing to the more upbeat mood on markets, with preliminary reports from retailers suggesting that it was a good Black Friday weekend," says Marc Ground, commodities strategist at Standard Bank, referring to reports that Americans spent over $52 billion in the days following Thanksgiving on Thursday.
"With a slew of US data flow out this week [however] this optimism over the outlook for US economy is sure to be tested in the coming days."
Despite this morning's rally, the gold price remains nearly 5% off its November high.
The silver price also gained this morning, climbing to $32.22 per ounce – 2.8% up from the end of last week.
Eurozone finance ministers are due to meet tomorrow amid reports that they will finalize a plan to leverage the European Financial Stability Facility. European leaders agreed last month that the EFSF could offer part-guarantees to private sector buyers of distressed Eurozone government bonds at auction.
Germany meantime is continuing to push for changes to European treaties, according to press reports on Monday. A number of potential treaties and agreements are reported to be under discussion, all aimed at creating more robust incentives for national governments to exercise fiscal discipline.
"The Germans have made up their minds... they are doing everything they can to push for [treaty change] as rapidly as possible," a senior European Union official told news agency Reuters.
European nations that argue for a larger European Central Bank role, or for jointly-issued 'Eurobonds', are "those countries that have to sort out their budget problems and [have chosen] to misunderstand that they have to make more efforts," German finance minister Wolfgang Schaeuble said in an interview on Sunday.
"The goal," Schaeuble added, "is for the member states of the common currency to create their own Stability Union and to concentrate on that."
The Organisation for Economic Cooperation and Development 's latest 'Economic Outlook', published today, calls for "a substantial relaxation of monetary conditions" in the Eurozone. The OECD has cut its global growth forecast and predicts recession for the Eurozone and the UK – adding that fiscal tightening could also "tip the US economy into recession".
Eurozone contagion is "rising and hitting probably Germany as well," Pier Carlo Padoan, OECD chief economist, said Monday.
"So the first thing, the absolute priority, is to stop that and in the immediate [term] the only actor that can do that is the ECB."
An auction of German government bonds 'failed' last week when only €3.9 billion of 10-Year bunds were sold – versus a maximum target of €6 billion.
"Markets continue to move faster than politicians," says Mansoor Mohi-uddin, head of foreign exchange strategy at UBS in Singapore – adding that investors have begun to "price in the endgame" for the single currency.
"Failure to come up with a comprehensive solution on December 9 [the next European leaders' summit] is certainly possible," adds Joachim Fels, chief economist at Morgan Stanley.
"We believe that it would open up a much darker scenario that, eventually, could entail a breakup of the Euro."
Ratings agency Moody's meantime says that its "central scenario remains that the Euro area will be preserved without further widespread defaults" but warns that "even this 'positive' scenario carries very negative rating implications in the interim period."
Elsewhere in Europe, the International Monetary Fund has denied a report in Italian newspaper La Stampa claiming that it was preparing to lend Italy €600 billion at interest rates of 4-5% – enough to cover Italy's financing needs for around a year-and-a-half.
The Italian Banking Association meantime is today promoting 'Buy a Bond' day, encouraging ordinary Italians to lend their savings to the government. The initiative is supported by the country's professional soccer players.
"Italian savers may be bondholders of last resort as banks and institutional investors are reducing holdings of government bonds," says Wolfram Mrowetz of Milanese investment firm Alisei SIM.
Here in the UK, chancellor George Osborne is expected to announce so-called 'credit easing' measures – designed to boost lending to small businesses by offering guarantees – in Tuesday's autumn budget report to parliament.
"We are making available £20 billion for the National Loan Guarantee Scheme," Osborne told a BBC interviewer on Sunday.
"However it sits within an envelope that could be as large as £40 billion."
The British Chamber of Commerce meantime has today predicted the Bank of England will increase the size of its quantitative easing program – through which the Bank buys assets (mainly government bonds) from institutions such as banks and pension funds – from the current £275 billion to £325 billion.
Over in Australia, gold mining output fell to around 66 tonnes in the third quarter of the year – down 2.4% from Q2 – according to an industry survey published Sunday.
Melbourne based mining consultants Surbiton Associates, which carried out the survey, explain the drop was party caused by some producers choosing to process lower ore grades – while preserving high grade ore in case of a fall in the gold price.
Ben Traynor
BullionVault
(c) BullionVault 2011
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it
Nov
28th
Pre Market and FX Commentary - 28th November
By Michael Hewson CMC Markets
As if the problems surrounding Italy weren’t bad enough, in the
wake of Friday’s disastrous bond auction, the downgrade of
Belgium late on Friday by S&P
merely added to the concerns many investors fear about the ongoing
saga that is the Eurozone debt crisis.
Ratings agency Moody’s this morning warned on all European sovereign ratings including Germany’s in the absence of any policy measures to stabilise sentiment.
Weekend reports that Germany and France were seeking to cobble together an agreement to speed up fiscal integration, either inside or outside of the confines of the current EU treaties, by December 9th has leant some support to the single currency in Asia, as has a story about an €600bn IMF loan to bailout Italy.
Given that IMF chief Lagarde recently said that the fund only had €285bn in emergency funds this story seems rather implausible, however their does appear to be talk of some form of plan in the works, however it is not immediately clear how the IMF would be able to raise the money needed.
With German 10 year yields rising sharply last week by nearly 25 basis points after the failed 10 year auction, some have speculated that rising yields on German bonds could well precipitate a wavering in German opposition to Eurobonds.
This seems a somewhat bizarre interpretation, given that nothing could be more guaranteed to see German bond yields rise sharply than to agree to Eurobonds. It would trigger a flight out of German government debt from all those investors who have bought it as a safe haven over the past few months.
In any event Merkel has repeatedly rejected the idea out of hand, limiting her room for manoeuvre in the process, and it would be surprising if she were to change her mind in the near future, irrespective of what German bund yields do in the short term, even if a break above 2.30% does trigger a sharp rise higher towards 2.6%.
With yields under pressure at this time the last thing Belgium, Italy and France needed was to have to raise money on the bond markets this morning, but Belgium is looking to raise €2bn, Italy €1bn and France €8.5bn of between 3 month and 1 year bills.
German CPI data for November due out today is expected to show a slowing in inflationary pressures from 2.9% to 2.7%, with monthly prices expected to slip back 0.7%, raising the possibility of a much larger rate cut than 0.25% at the next ECB rate meeting.
In the UK the focus today will be on this afternoon’s Treasury Committee where Bank of England governor Mervyn King will talk about the latest Quarterly Inflation Report and, inevitably, the Chancellor’s Autumn Statement tomorrow. The committee is also attempting to set up further sessions on the statement later in the week. It is likely that the Office for Budget Responsibility will once again downgrade its growth forecasts for 2011 and 2012 thus further limiting the Chancellor’s room for manoeuvre tomorrow.
EURUSD – the single currency continues to get punished, breaking below trend line support at 1.3285 from the 2010 lows at 1.1880. This break brings the lows in October at 1.3150 into view on the way to the 1.3050 level, which is the 61.8% retracement level of the 1.1880/1.4940 up move. Keep an eye on U.S. dollar index resistance at 79.85 and October highs as a key level. If that holds euro downside could be limited in short term. A break here would then target this year’s low at 1.2870. Initial pullbacks should find selling interest around the old base at 1.3410/20 and that should cap in the short term. To stabilise the single currency needs to get above 1.3420 to push back towards trend line resistance at 1.3460 from the October highs at 1.4220 and last weeks highs at 1.3570.
GBPUSD – Friday’s break below 1.5480 brings the post QE2 and October lows at 1.5270 into view. To diminish the downside pressure in the medium term we need to see the pound get back above 1.5520 to push on back towards the 1.5720 area. The big chart point remains at 1.5190 which is 61.8% retracement of the entire up move from the 2010 lows at 1.4230 to the highs this year at 1.6745. A significant break here would then target 1.4880.
EURGBP – the single currency continues to hold above the 200 week MA on a closing basis. The key level on the top side remains at last weeks highs and resistance at the 0.8650/70 area and 55 week MA. As such while below these highs the odds continue to favour a move back towards last weeks lows and a break below the 200 week MA, on the way to further sterling gains towards 0.8450. There is also trend line support at 0.8380 from the October 2008 lows at 0.7695. A move above 0.8670 retargets a move towards 0.8730.
USDJPY – Fridays late rally and close above the 77.50/70 area shifts the focus towards further US dollar gains. To be totally comfortable with this scenario it would be preferable to see a move above the September highs at 77.85 in order to push on towards trend line resistance at 79.00 from the 2007 highs at 124.15. We could well see a dip back towards the 77.20/30 area in the short term, while a break below that would see the next key support area around the 76.20/30 area, a break below of which opens up the lows at 75.30.
Ratings agency Moody’s this morning warned on all European sovereign ratings including Germany’s in the absence of any policy measures to stabilise sentiment.
Weekend reports that Germany and France were seeking to cobble together an agreement to speed up fiscal integration, either inside or outside of the confines of the current EU treaties, by December 9th has leant some support to the single currency in Asia, as has a story about an €600bn IMF loan to bailout Italy.
Given that IMF chief Lagarde recently said that the fund only had €285bn in emergency funds this story seems rather implausible, however their does appear to be talk of some form of plan in the works, however it is not immediately clear how the IMF would be able to raise the money needed.
With German 10 year yields rising sharply last week by nearly 25 basis points after the failed 10 year auction, some have speculated that rising yields on German bonds could well precipitate a wavering in German opposition to Eurobonds.
This seems a somewhat bizarre interpretation, given that nothing could be more guaranteed to see German bond yields rise sharply than to agree to Eurobonds. It would trigger a flight out of German government debt from all those investors who have bought it as a safe haven over the past few months.
In any event Merkel has repeatedly rejected the idea out of hand, limiting her room for manoeuvre in the process, and it would be surprising if she were to change her mind in the near future, irrespective of what German bund yields do in the short term, even if a break above 2.30% does trigger a sharp rise higher towards 2.6%.
With yields under pressure at this time the last thing Belgium, Italy and France needed was to have to raise money on the bond markets this morning, but Belgium is looking to raise €2bn, Italy €1bn and France €8.5bn of between 3 month and 1 year bills.
German CPI data for November due out today is expected to show a slowing in inflationary pressures from 2.9% to 2.7%, with monthly prices expected to slip back 0.7%, raising the possibility of a much larger rate cut than 0.25% at the next ECB rate meeting.
In the UK the focus today will be on this afternoon’s Treasury Committee where Bank of England governor Mervyn King will talk about the latest Quarterly Inflation Report and, inevitably, the Chancellor’s Autumn Statement tomorrow. The committee is also attempting to set up further sessions on the statement later in the week. It is likely that the Office for Budget Responsibility will once again downgrade its growth forecasts for 2011 and 2012 thus further limiting the Chancellor’s room for manoeuvre tomorrow.
EURUSD – the single currency continues to get punished, breaking below trend line support at 1.3285 from the 2010 lows at 1.1880. This break brings the lows in October at 1.3150 into view on the way to the 1.3050 level, which is the 61.8% retracement level of the 1.1880/1.4940 up move. Keep an eye on U.S. dollar index resistance at 79.85 and October highs as a key level. If that holds euro downside could be limited in short term. A break here would then target this year’s low at 1.2870. Initial pullbacks should find selling interest around the old base at 1.3410/20 and that should cap in the short term. To stabilise the single currency needs to get above 1.3420 to push back towards trend line resistance at 1.3460 from the October highs at 1.4220 and last weeks highs at 1.3570.
GBPUSD – Friday’s break below 1.5480 brings the post QE2 and October lows at 1.5270 into view. To diminish the downside pressure in the medium term we need to see the pound get back above 1.5520 to push on back towards the 1.5720 area. The big chart point remains at 1.5190 which is 61.8% retracement of the entire up move from the 2010 lows at 1.4230 to the highs this year at 1.6745. A significant break here would then target 1.4880.
EURGBP – the single currency continues to hold above the 200 week MA on a closing basis. The key level on the top side remains at last weeks highs and resistance at the 0.8650/70 area and 55 week MA. As such while below these highs the odds continue to favour a move back towards last weeks lows and a break below the 200 week MA, on the way to further sterling gains towards 0.8450. There is also trend line support at 0.8380 from the October 2008 lows at 0.7695. A move above 0.8670 retargets a move towards 0.8730.
USDJPY – Fridays late rally and close above the 77.50/70 area shifts the focus towards further US dollar gains. To be totally comfortable with this scenario it would be preferable to see a move above the September highs at 77.85 in order to push on towards trend line resistance at 79.00 from the 2007 highs at 124.15. We could well see a dip back towards the 77.20/30 area in the short term, while a break below that would see the next key support area around the 76.20/30 area, a break below of which opens up the lows at 75.30.
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