Traders Own

Equity markets have had another awful day today, despite calls from the EU suggesting that they could "envisage" direct recapitalisations of European banks, which did prompt a sharp rebound midway through the trading day. Once markets had digested this and realised that this wasn't anything that hadn't been suggested before and was opposed by Germany, markets once again slipped back.

A poor Italian bond auction and worse than expected European economic business confidence data continues to weigh on sentiment as Spanish and Italian bond yields continue to rise, with Spanish 10 year yields almost touching their 2011 levels above 6.7%.

A new opinion poll in Greece putting Syriza well ahead of New Democracy has also weighed on investor sentiment as the initial pop from the weekend poll

German bund yields on the other hand continue to hit record lows, along with U.S. treasury yields and UK gilt yields as investor pile into assets, which are considered safer harbours, from the debt storm unfolding in Europe.

Comments from outgoing Bank of Spain Ordonez that he doesn't know how much the Bankia bailout will end up costing has also weighed on sentiment, as uncertainty continues about the eventual size of any final bailout bill.

The selloff has been broadly based across all sectors with the biggest fallers in the basic resource sector as fears rise about the ability or willingness of the Chinese government to deliver the amount of stimulus markets are hoping for. On the plus side defensive utility Severn Trent (SVT LN) is the outperformer up 2%, after announcing a special dividend.

U.S. markets opened significantly lower this morning reversing yesterday's gains as fears about the crisis in Europe continue to send investors into the so called safe havens of U.S. treasuries, as 10 year yields hit all-time lows.

Stocks in focus include Blackberry owner Research in Motion on expectations it will report a loss for the latest quarter. The company announced it was holding a strategic review. LinkedIn is also in focus after being on the receiving end of a broker upgrade.

Economic data failed to offer much in the way of relief as pending home sales slid sharply in April, declining 5.5%, well below expectations of no change.

The biggest mover today has been the Japanese yen as it pushes beyond the 79.00 level to its highest level since early February. It would appear that the Bank of Japan is completely oblivious to the problems of Japanese exporters as the currency continues to rise.

The U.S. dollar is not too far behind as being the main gainer today as investors flock to the relative safe haven of the greenback and US treasury yields fall to record lows on the 10 year.

The biggest decliner has been the Australian dollar after disappointing April retail sales numbers overnight showed a decline of 0.2%, well below expectations of a 0.2% rise, as concerns about a slowdown in China weighed on spending. With commodities also remaining weak the Canadian and New Zealand dollar have also fallen sharply.

Cyclical commodities have tanked today with crude oil prices falling sharply on both the Brent and WTI measures.

U.S. oil prices have fallen to their lowest levels since mid-October last year at $88 after pending home sales for April slid sharply, while inventory data is expected to show further rises in data due out tomorrow.

Brent prices have also slumped back after economic business confidence data in Europe slumped to a two and a half year low. With the US dollar also attracting capital inflows this is also weighing on the oil price.

Copper prices have slid after Chinese officials played down the prospect of further large scale stimulus measures in the near term falling to their lowest levels this year.

Gold prices are back retesting the lows seen earlier this month, and it is becoming increasingly apparent that if the $1,520 level were to give way we could well see a sharp drop towards $1,450.

Equity markets have continued their positive bias today on the back of buoyant financials after it was suggested that France and Germany were pushing for a relaxation of capital rules under Basel 3, to help boost growth. Even though this was denied by German finance minister Schaeuble, falling yields on Italian and Spanish bonds and optimism that a Greek PSI deal was imminent, kept markets with a predominantly bid bias, sending the FTSE to its highest level since July last year.

The positive sentiment also translated across to more cyclical sectors with the oil and gas sector getting a boost from more positive broker comment and a firmer oil price. Indian based Essar Energy (ESSR LN) has continued its recent volatile trading, up near the top of the FTSE100 as sentiment fluctuates on the outcome of its tax dispute in Gujarat. British Airways owner IAG (IAG LN) is higher as it looks to identify new takeover targets while announcing the launch of a new budget airline Iberia Express on 25th March. On the downside engineering groups Weir Group (WEIR LN) and IMI (IMI LN) have slid sharply after being hit with broker downgrades.

U.S. markets opened pretty much unchanged from Friday’s closing levels on the back of the slightly firmer tone in European markets, but have continued to push up ahead of this week’s FOMC and U.S. GDP numbers, due on Friday. The recent improvement in U.S. economic data has seen optimism rise that this week’s U.S. Q4 GDP numbers will see a revision upwards, while the slightly more dovish makeup of the new FOMC committee has raised expectations of a much easier monetary policy outlook in 2012.

Companies in focus today include Halliburton after the energy Services Company reported a rise on Q4 profits, with EPS coming in pretty much on expectations of $0.99c a share. Blackberry owner Research in Motion is also in focus after the company announced that its co-chief executives were both resigning.

The U.S. dollar has taken a bit of a beating today as investors have shed some of the recent shackles of caution sending commodity currencies pushing higher. The biggest gainers have been the New Zealand and Australian dollar outperform today ahead of a key week for U.S. economic data. Some of the recent U.S. dollar gains are being given back ahead of this week’s two day FOMC meeting. Given the change in make-up with respect to this year’s FOMC, which has a distinctly more dovish look than last year’s there is an expectation that policymakers could adopt a much more dovish tone than has been the case of late.

The Pound has underperformed relative to its peers ahead of the release of this week’s latest Q4 GDP numbers, which some commentators fear could well post a negative quarter, and the pound has suffered some profit taking as a result.

The weakness in the U.S. dollar amidst speculation about this week’s FOMC has seen gold prices push to their highest levels since the 12th December. We need to see a close above the $1,675 level to target a move towards $1,700. Support remains around the 200 day MA at $1,643.

Oil prices have remained underpinned by the firmer tone in equity markets as well as reaction to the EU’s announcement of economic sanctions against Iran, from July was met with a predictably hostile response by the Islamist Republic, as it once again threatened to close the Straits of Hormuz. It remains to be seen how the ban would be implemented given that Greece, Italy and Spain are Europe’s biggest importers and have little scope to withstand any oil price shocks.

Orange juice futures continued their recent gains making brand new highs over fears of citrus greening disease and an important ban.

After a strong down day on Friday copper prices have rebounded strongly but have yet to get above their 200 day MA, and the risk remains for lower prices while below this key chart level.