Another week is coming to an end, with markets still trading on the negative sentiment present in the aftermath of US stimulus package agreement by the Senate! US stocks rose slightly yesterday and NIKEI followed in the same way after slight optimism that global leaders will agree on more help for struggling economies in this weekend's G7! It should also be noted that China's economy is showing signs of recovery too.
The EUR/USD has been trading lower following this morning's German GDP number shrank its most in more than 20 years! The same has happened with the French economy; therefore traders have exited any euro positions they have! The fact that the Euro zone data continues to disappoint weighs on the currency and any rallies toward 1.30 fade quickly. The next level to watch on the downside is 1.2830 ahead of 1.2780. If the latter gives way we may have further losses towards 1.27 and the euro cannot sustain its gains over 1.2950, showing how negative the sentiment currently is. However, as today is Friday we may see some profit-taking in the pair and also traders may not want to be exposed amid the G7 meeting!
The pound has trading higher since early in the European session which is mainly due to the downside trading EUR/GBP. The bad economic data out of Europe, in combination with no data out of UK, is weighing on the pair and further downside may be seen if 0.8830 gives way. The next level to watch is 0.8780 ahead of 0.8725.
Today's US economic calendar is empty apart from consumer confidence figures later on and the number is expected negative once again, however unless it gives us a big deviation from the forecast we may not see any trading action. For now traders are concentrating on the G7 where central bankers and financial ministers from the 7 richest countries in the world are gathering to discuss the current economic problems. At times like these, where the global economic future seems so dismal, investors will monitor all statements in order to assess what the next step is and we can expect statements regarding the monetary policy, so it will be interesting to see what officials will say regarding rates!
Let's see how the day will progress until New York closes and if the dollar will continue to gain against the euro, amid bad Euro zone economic conditions and also risk aversion towards the greenback. All eyes and ears will be upon the G7 leaders this weekend and therefore traders may not wish to keep open positions during the weekend pause amid fears of market gaps on Sunday's opening…
Lena Manousarides
Independent Market Analyst and Professional Trader
Email: manousarides@yahoo.com
Lena Manousarides is a professional Trader and an independent Market Analyst, who pioneers in Fx trading in Athens, Greece. After several years of professional trading in the Forex Market, Lena formerly worked with FXGreece as a Market Analyst, writing articles on a daily basis, using fundamental and technical analysis. She also writes for several major financial newspapers in Greece and is in the process of becoming professional Commodity Trading Advisor.
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Currency Technical Report
| Daily Forex Technicals | Written by FX Greece | Feb 13 09 14:24 GMT | | |
EUR/USDResistance: 1,2930/ 1,2990-95/ 1,3030/ 1,3075-80/ 1,3110/ 1,3170/ 1,3210/ 1,3260 Comment: Euro's consolidation against the dollar continues, as it moved below the first support levels at 1,2800-10, but the decline was limited below 1,2750 area. Yesterday's false break and the daily candle leave us positive, regarding a rise resumption to the upper part of the consolidation at 1,2990-00 or even 1,3070-00 area. Important support today is found at 1,2820-30 , and it should not be breached in order to see a rise resumption. The consolidation's wider ranges are set at 1,2700-10 and 1,3070-00 area. *STRATEGY: We will try buy orders at the retracements towards 1,2820-40, with stops below 1,2790 and target at 1,2920-30 or 1,2990-00 area…
DISCLAIMER
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Gassco Says Fault Halted U.K.’s Vesterled Gas Flows
By Ben Farey
Feb. 13 (Bloomberg) -- Gassco AS, Norway’s natural-gas pipeline operator, said a power blackout halted gas flows to the U.K. through the Vesterled pipeline.
“There won’t be any flows during this gas day,” Gassco spokesman Kjell Varlo Larsen said by phone from Bygnes, Norway. A so-called gas day is a 24-hour period until 6 a.m.
A power failure at StatoilHydro ASA’s Heimdal platform in the North Sea last night cut power to the nearby Heimdal Riser and halted deliveries to Britain, the spokesman said. The problem is being fixed, he added.
More of the fuel is being pumped through the Langeled pipeline into the U.K. to compensate, Gassco said.
Gas for delivery today advanced as much as 14 percent in London. It traded for 49 pence a therm at 12:49 p.m. local time, according to ICAP Plc. That’s equal to $7.12 a million British thermal units. A therm is 100,000 Btus.
Production is being increased elsewhere in Norway to make up for the outage, according to the company. Total gas production is reduced by 20 million cubic meters a day to 320 million and it is not clear when normal operations will be restored, Gassco said.
Vesterled, a 340-kilometer (210-mile) pipeline, can transport as much as 36 million cubic meters of gas a day from Norwegian North Sea deposits including StatoilHydro’s Heimdal and Oseberg fields. The link arrives in the U.K. at Total SA’s St. Fergus terminal in northeast Scotland.
StatoilHydro said it halted production of 1,000 barrels of oil equivalent a day at its Heimdal field as a result of the power failure. “There are only minor restrictions,” StatoilHydro spokesman Geir Gjervan said by phone.
The Heimdal Riser serves as a hub for gas from the Oseberg Gas Transport line, as well as from the Huldra, Heimdal and Vale fields. The riser sends gas through the Statpipe system to Germany as well as to the U.K.
To contact the reporter on this story: Ben Farey in London at bfarey@bloomberg.net.
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Snam Rete Gas Falls on Rights Offer to Fund Purchases
By Gianluca Baratti
Feb. 13 (Bloomberg) -- Snam Rete Gas SpA, Italy’s gas grid operator, fell as much as 4 percent in Milan after saying yesterday it would proceed with a rights offering of up to 3.5 billion euros ($4.5 billion) to help fund the acquisition of two businesses from Eni SpA.
Snam agreed to buy gas retailer Italgas SpA for 3.07 billion euros and Stoccaggi Gas Italia, or Stogit, for 1.65 billion euros, Rome-based Eni said yesterday. Snam will finance the deals through a rights sale in which Eni will participate, and new loans of 1.3 billion euros.
Eni is selling Italgas and Stogit to satisfy regulators who want Italy’s largest energy company to separate some of its gas operations from its oil business, Eni said. As a 50.03 percent shareholder of Snam, Eni will retain control over those units.
“The market might be initially concerned by the large rights issue,” Matija Gergolet, an analyst at London-based Goldman Sachs Group Inc., said in a note yesterday.
Gergolet said the company would need to raise the full amount of the rights offering to maintain a net debt ratio of four times earnings before interest, taxes, depreciation and amortization. He has a “cautious” rating on the stock.
Snam Rete Gas fell as much as 4 percent to 3.84 euros and traded at 3.85 euros at 12:05 p.m. in Milan.
Italgas, Stogit
Italgas sells gas in 1,300 Italian towns and cities and transports 6.5 billion cubic meters of the fuel a year in its 40,000 kilometers (24,860 miles) of pipes, according to the company Web site.
Stogit has eight storage areas which provide energy security during disruptions such as last month, when gas shipments were interrupted during a dispute between Russia and Ukraine. More than half of Italian electricity is generated by gas.
Snam reported yesterday that 2008 net income declined 11 percent to 530 million euros. Earnings rose 20 percent from adjusted 2007 profit, after accounting for items including changes in tax rates. The company will boost its dividend payout by 9.5 percent to 23 cents a share.
Snam said at a presentation today that cost savings and “synergies” will total 2 percent of 2008 earnings before interest, taxes, depreciation and amortization by 2012. Based on Snam’s pro forma Ebitda figure of 2.2 billion euros, it’s targeting about 40 million euros in annual cost savings and synergies by 2012.
Chief Executive Officer Carlo Malacarne said at the presentation that Snam will maintain its dividend at the “top range” of European Union utilities.
To contact the reporter on this story: Gianluca Baratti in Madrid at gbaratti@bloomberg.net
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Eni to Pump 2 Million Barrels of Oil a day in 2012
By Adam L. Freeman
Feb. 13 (Bloomberg) -- Eni SpA, Italy’s largest oil company, forecast production will rise by 3.5 percent a year to exceed 2 million barrels a day in 2012.
Spending in the 2009-2012 period will fall by 1 billion euros to 48.8 billion euros ($62.8 billion) compared with the previous period, the Rome-based company said today in a statement. About 34 billion euros will be targeted for investments in oil production.
“Exploration will be the pillar of our sustainable policy,” Claudio Descalzi, head of exploration and production at Eni, told analysts during a presentation in London today.
Chief Executive Officer Paolo Scaroni is depending on fields in the Gulf of Mexico, Congo and Turkmenistan to bolster production and counter disruptions in Nigeria caused by militant attacks and a smaller share of output from the Kashagan development in Kazakhstan.
Investment opportunities “remain attractive” even in a low oil-price environment, Scaroni said today.
Eni has “leading” lifting costs of $7.5 a barrel of oil due to its focus on low-cost projects, he said.
The company plans to maintain a “strong” capital position and credit rating while investing in profitable growth and returning “superior” yields. Scaroni sees oil this year at around $43 a barrel, though he predicts “high volatility” in the near term.
Algeria, Libya
Eni in 2008 won rights to search for oil and gas in Algeria and extended an oil and gas supply agreement with Libya for 25 years. The company also paid 2.74 billion euros for Suez SA’s 57 percent stake in Belgian gas supplier Distrigaz SA. Scaroni said that acquisition will enable Eni to sell 21 percent of western Europe’s gas.
Separately, Eni today said it lost 874 million euros in the fourth quarter, its first quarterly loss in at least seven years amid a collapse in the price of oil. Excluding inventories, profit totaled 1.94 billion euros beating analysts’ estimates of 1.83 billion euros, according to the median estimate of nine analysts surveyed by Bloomberg News.
Crude futures in New York slumped 56 percent in the quarter, the biggest drop since trading started in 1983. Oil futures for March delivery traded at $33.89 today.
To contact the reporter on this story: Adam L. Freeman in Rome at afreeman5@bloomberg.net
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Gazprom CEO Miller Meets U.S. Ambassador in Moscow
By Lucian Kim
Feb. 13 (Bloomberg) -- OAO Gazprom Chief Executive Officer Alexei Miller met with U.S. Ambassador John Beyrle in Moscow as Russia’s largest energy producer seeks to burnish its image among investors and consumers.
Miller and Beyrle discussed Russian-U.S. energy cooperation at Gazprom’s headquarters today, the state-run company said in an e-mailed statement, without elaborating.
Gazprom is on a drive to restore investor confidence after its share price collapsed 66 percent since May and the company shut off gas supplies to Europe last month during a pricing dispute with Ukraine. Top managers, including chief of exports Alexander Medvedev, made their case to investors in Moscow, London and New York this week.
Medvedev suggested during the two-week gas cutoff that former President George W. Bush’s administration may have encouraged Ukraine’s pro-western government to show intransigence during negotiations with Gazprom. Since the inauguration of Barack Obama in January, Russia has welcomed a renewal of relations with the U.S.
Beyrle, who became ambassador in July and is a fluent Russian speaker, met with Nikolai Tokarev, the head of national oil pipeline operator OAO Transneft, two weeks ago.
Miller and Medvedev led a delegation to Alaska in October to discuss possible cooperation there with companies such as ConocoPhillips. Gazprom wants to break into the U.S. market after it begins shipping liquefied natural gas from Sakhalin Island later this year. LNG, gas chilled to a liquid, can be loaded onto tankers and transported around the world.
Gazprom Marketing & Trading, a company unit, opened its Houston office in 2006.
To contact the reporter on this story: Lucian Kim in Moscow at lkim3@bloomberg.net
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OPEC Cuts Global Oil Demand Forecast as Recession Deepens
By Alexander Kwiatkowski
Feb. 13 (Bloomberg) -- The Organization of Petroleum Exporting Countries reduced its 2009 demand forecast for a sixth consecutive month as the economic slump causes a “sudden and massive” decline in consumption.
OPEC lowered its estimate for 2009 worldwide oil demand this year by 530,000 barrels a day to 85.13 million barrels a day, the producer group said in a monthly report today. That means demand will contract by 580,000 barrels a day this year, or 0.7 percent. Last month it forecast a decline of 0.2 percent.
“The deterioration in the world economy has led to a significant reduction in global oil consumption,” the report from OPEC’s Vienna-based secretariat said. “The sudden and massive erosion in demand has helped push crude oil inventories up sharply.”
OPEC agreed to a record 9 percent reduction in supply targets at its last meeting in December to try to halt the falling price of oil, which has dropped more than $100 a barrel in New York in the past six months. The group, which supplies more than 40 percent of the world’s oil, said the cuts appear to have succeeded in stemming the rout in prices “despite a steady stream of negative economic and demand data.”
The decline in global demand will be led by industrialized nations in North America, Europe and the Pacific rim, according to the report. Consumption by developed economies will decline 1.13 million barrels a day in 2009, OPEC forecasts, a drop of 2.4 percent compared with 2008.
This decrease will be partly offset by demand growth in developing economies, which OPEC forecasts to rise by 350,000 barrels a day, or 1.4 percent.
Consumption Shrinking
Consumption of OPEC’s crude in 2009 will shrink 1.71 million barrels a day to 29.22 million barrels a day, the group said, calculating that figure using its world demand and non-OPEC supply forecasts. That level of demand is about 300,000 barrels a day less than it predicted last month.
The Paris-based International Energy Agency also cut its global oil demand forecast for 2009 earlier this week, projecting consumption will decline by 1 million barrels to 84.7 million a day because of a weaker economic outlook from the International Monetary Fund.
Oil production by all 12 members of OPEC declined 959,200 barrels a day in January to 28.71 million barrels a day as the group enacted supply cuts, the report said, citing secondary- source estimates that include analysts and news agencies.
The 11 OPEC members excluding Iraq pumped 26.33 million barrels a day in January. That is still above the production quota for this year of 24.85 million barrels a day, agreed by the group in December.
Fewer Shipments
The group will cut shipments by 3.5 percent in February, the biggest monthly reduction in at least five years, according to U.K.-based tanker-tracker Oil Movements.
OPEC has completed about 60 to 70 percent of 4.2 million barrels a day of output reductions announced since September, according to the shipping consultant. OPEC has complied with about 80 percent of cuts, Secretary-General Abdalla el-Badri said this week.
Saudi output fell the most in January, dropping by 322,500 barrels a day, or 3.9 percent to 7.99 million barrels a day, according to the OPEC report. The country has a production target this year of 8.05 million barrels a day.
OPEC cut its forecast for oil supply from outside the group to 50.89 million barrels a day. That still leaves an increase of 550,000 barrels a day, or 1.1 percent, this year over 2008.
Indonesia left the producer group this year. OPEC’s 12 remaining members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela.
To contact the reporter on this story: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.net
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Dollar May Extend Gain as Haven on Bets Stimulus to Fall Short
By Yasuhiko Seki and Ron Harui
Feb. 13 (Bloomberg) -- The dollar may rise for a fourth day against the euro, the longest gain in four months, on speculation U.S. plans to end the recession will fall short, spurring demand for the greenback as haven.
The euro fell yesterday to the lowest level versus the dollar in more than a week as industrial output in the 16 countries sharing the currency dropped in December by the most on record, giving the European Central Bank more room to cut interest rates. The Group of Seven major industrial nations may discuss exchange rates during a meeting that starts today.
“Risk-aversion will not fade unless we know more concrete details of the U.S. plans,” said Seiya Nakajima, chief economist at Japanese trading house Itochu Corp. in Tokyo. “This will keep interest in safe havens alive.”
The dollar traded at $1.2866 per euro at 8:44 a.m. in Tokyo from $1.2861 late in New York yesterday, when the greenback touched $1.2722, the strongest level since Feb. 2. The yen traded at 116.67 per euro from 116.95 late in New York yesterday. The U.S. currency traded at 90.82 yen from 90.94 yen.
Traders may have bought the euro at about $1.27 to keep it from falling below that level so they can profit from an options contract that expires today, said Scott Ainsbury, a portfolio manager who helps manage about $12 billion in currencies at New York-based hedge fund FX Concepts Inc.
“The bottom side, the $1.27, is acting as a magnet,” Ainsbury said of the euro versus the dollar. “It has just been held up almost artificially.” The euro hasn’t fallen below $1.27 since Dec. 5. An option grants an investor the right, not the obligation, to buy or sell the underlying security at a pre- determined date.
Weaker Sterling
Sterling fell 1.3 percent to $1.4218 and 0.6 percent to 90.18 pence per euro yesterday as the spread between two- and 10- year government debt reached the widest since at least 1992. Bank of England Governor Mervyn King said on Feb. 11 the U.K. is in a “deep recession” that may prompt policy makers to keep cutting the main rate, now at 1 percent, and pump money into the economy.
The yen advanced 1.5 percent to 13.1741 versus the Norwegian krone and 1 percent to 129.02 versus the pound yesterday on speculation the global drop in stocks will encourage investors to sell higher-yielding assets and pay back low-cost loans in Japan. Japan’s 0.1 percent target lending rate compares with 1 percent in Great Britain and 2.5 percent in Norway.
The South African rand depreciated 3 percent to 10.1096 per dollar on speculation the country’s credit rating may be downgraded as the government plans to more than double its fiscal deficit because of slowing economic growth.
G-7 Meeting
The G-7 plans to discuss exchange-rate developments at a meeting in Rome today and tomorrow, a U.S. Treasury official on Feb. 11. told reporters in Washington on condition of anonymity, declining to discuss specific currencies.
Treasury Secretary Timothy Geithner, speaking on Feb. 11 before the Senate Budget Committee, defended his strategy of taking time to work out the details of a plan to shore up the financial industry.
“I completely understand the desire for details and commitments,” he said. “But we’re going to do this carefully.”
A U.S. economic stimulus bill was headed for passage in Congress by the end of this week after lawmakers agreed on a $789 billion plan that aims to stem the recession through a mix of government spending and tax cuts.
“All the stimulus in the world is not going to arrest the economic downturn unless we have some sort of stabilization in the banking system,” said Omer Esiner, a senior analyst in Washington at Ruesch International Inc., a currency trading company. “That’s helping safe-haven assets.”
European Output
The euro weakened yesterday as much as 1.4 percent against the dollar after the European Union’s statistics office said in Luxembourg that industrial output fell 12 percent from a year earlier. The decline was larger than the 9.5 percent drop forecast by economists in a Bloomberg survey and the biggest since the data series began in 1986.
The ECB cut its inflation outlook in 2010 to 1.6 percent from 2 percent, stoking speculation policy makers will lower its main refinancing rate to a record. The bank also reduced its 2010 growth outlook to 0.6 percent from 1.4 percent.
Investors added to bets the ECB will reduce the 2 percent rate at its March 5 meeting, with the yield on the three-month Euribor interest rate futures contract due in March falling to 1.70 percent yesterday.
To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net; Yasuhiko Seki in Tokyo at yseki5@bloomberg.net.
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Eni Has First Quarterly Loss in at Least Seven Years
By Adam L. Freeman
Feb. 13 (Bloomberg) -- Eni SpA, Italy’s largest oil company, reported its first quarterly loss in at least seven years and will cut spending after the global recession spurred a record plunge in crude prices.
The loss was 874 million euros ($1.13 billion) compared with net income of 3 billion euros a year earlier, Rome-based Eni said today in a statement. Excluding inventories, profit beat analyst estimates. Revenue declined 3 percent to 24.6 billion euros.
Chief Executive Officer Paolo Scaroni is relying on fields in the Gulf of Mexico, Congo and Turkmenistan to bolster production and counter disruptions in Nigeria caused by militant attacks. Eni will spend “slightly less” this year than the 14.56 billion euros earmarked for investment in 2008.
“They performed well in a difficult and challenging environment,” Jason Kenney, an Edinburgh-based analyst at ING Wholesale Banking, said in a telephone interview. “You have got to be prudent in this kind of market.”
Eni proposed to keep its final dividend unchanged at 1.30 euros a share. Scaroni will brief analysts and investors over the company’s strategy at a presentation in London starting at noon.
Profit excluding changes in the value of inventories was 1.94 billion euros. Eni was expected to report earnings on this basis of 1.83 billion euros, according to the median estimate of nine analysts surveyed by Bloomberg News.
Eni rose 40 cents, or 2.4 percent, to 17.22 euros at 9:54 a.m. in Milan. The stock has lost 22 percent during the past 12 months, giving the company a market value of 69 billion euros.
Shell, BP
Eni is the last of Europe’s four biggest oil companies to report fourth-quarter earnings. Royal Dutch Shell Plc, Europe’s largest oil company, recorded its first quarterly loss in a decade of $2.8 billion. BP Plc had its first loss in seven years of $3.3 billion. France’s Total SA had a quarterly loss of 794 million euros.
Crude futures in New York slumped 56 percent in the quarter, the biggest drop since trading started in 1983. Oil futures for March delivery traded at $34.63 today.
Snam Rete Gas SpA, owner of the Italian natural gas grid, yesterday agreed to buy Eni’s gas retail and storage businesses for 4.72 billion euros.
Snam will buy gas retailer Italgas SpA for 3.07 billion euros and Stoccaggi Gas Italia, or Stogit, for 1.65 billion euros. As a 50.03 percent shareholder of Snam, Eni will still maintain control over those units.
Output Gains
Eni’s oil and natural-gas output rose 2.1 percent to 1.85 million barrels a day in the quarter. Production gained 3.5 percent in 2008 and will continue to rise this year. The company also forecast a rise in global gas sales from 2008’s 104 billion cubic meters due to the purchase of Belgian gas supplier Distrigaz SA..
An Eni-led group in October agreed to cede more royalties and oversight to the Kazakh government for the Kashagan development, which is due to start production at the end of 2012 when the Italian company relinquishes its role as sole operator.
Eni’s Kashagan partners are Exxon Mobil Corp., Total SA and Shell. The largest oil discovery in 35 years is expected to produce around 370,000 barrels a day a year after the start of output before peaking at 1.5 million barrels a day.
Eni last year won rights to search for oil and gas in Algeria and extended an oil and gas supply agreement with Libya for 25 years. The company also paid 2.74 billion euros for Suez SA’s 57 percent stake in Distrigaz. Scaroni said the acquisition would enable Eni to sell 21 percent of western Europe’s gas.
Eni’s share-price forecast was raised to 25 euros yesterday from 20 euros by analysts at Sanford C. Bernstein & Co.
Out of 37 analysts who follow the company, 29 rate it “buy,” seven have “hold” recommendations and one advises clients to sell the stock.
To contact the reporter on this story: Adam L. Freeman in Rome at afreeman5@bloomberg.net
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Crude Oil Rises From a Seven-Week Low After Equities Recover
By Grant Smith and Christian Schmollinger
Feb. 13 (Bloomberg) -- Crude oil rose in New York, paring the worst weekly decline since December, after equities gained on speculation governments will widen efforts to help consumers weather a deepening global recession.
Oil climbed as much as 2.8 percent as stocks in Europe and Asia advanced, sending the MSCI World Index higher for the first time in four days. U.S. index futures climbed. China’s economy may expand 6.6 percent in the second quarter after slowing to 6.3 percent in the three months to March 31, according to a Bloomberg survey.
“Equities are lending some support to oil,” said Carsten Fritsch, an analyst with Commerzbank AG in Frankfurt. “It may be there’s some optimism coming back into the market from the stimulus package, and a feeling that markets came down too far.”
Crude for March delivery rose as much as 96 cents to $34.94 a barrel on the New York Mercantile Exchange. It was at $34.77 a barrel at 1:15 p.m. London time. Yesterday, futures fell $1.96, or 5.5 percent, to $33.98, the lowest settlement since Dec. 19.
The contract is heading for a 14 percent decline this week, the steepest since the week ended Dec. 19.
The MSCI World Index added 0.8 percent to 843.98 at 11:51 a.m. in London. The gauge of 23 developed markets has lost 2.9 percent this week.
Cushing Inventories
The discount of the March West Texas Intermediate contract, the grade that’s traded in New York, to London’s Brent futures contract nearest expiry widened to a record $11.48 a barrel today after supplies rose at Cushing, Oklahoma.
Supplies at Cushing, where WTI is stored, climbed 1.7 percent to 34.9 million barrels last week, the highest since at least April 2004, when the department began keeping records for the location.
Brent crude for April settlement was at $45.41 a barrel, 62 cents or 1.4 percent lower, on the ICE Futures Europe exchange at 1:19 p.m. London time.
OPEC lowered its estimate for 2009 worldwide oil demand this year by 530,000 barrels a day to 85.13 million barrels a day, the producer group said in a monthly report today. That means demand will contract by 580,000 barrels a day this year, or 0.7 percent. Last month it forecast a decline of 0.2 percent.
“The deterioration in the world economy has led to a significant reduction in global oil consumption,” the report from OPEC’s Vienna-based secretariat said. “The sudden and massive erosion in demand has helped push crude oil inventories up sharply.”
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net
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Daily Technical Strategist
| Daily Forex Technicals | Written by FXTechstrategy | Feb 13 09 11:30 GMT | | |||||||||||||||||||||||||||||||||||||
| Today's Focus: GBPUSD & EURUSD
GBPUSDDespite the pair's intra day bounce off the 1.4137 level on Thursday and a higher upmove seen in early morning trading today,GBP's declines off the 1.4986 high printed on Feb 09'09 has some more downside to go. In such a case, its Jan'2002 low at 1.4045 will be targeted at first ahead of the 1.3682 level, its Jun'2001 low and then its YTD low at 1.3504.Our view is for the latter level to be taken out triggering the resumption of its medium to longer term declines. The daily stochastics remains pointed to the downside supporting this view. On the other hand, having declined for three days in a row, its early morning gains today could activate further upside if sustained with the nearby resistance located at the 1.4352 level, its Dec 31'08 low being the next target and then the 1.4578 level, its Feb 04'09 high. Above these key levels are required to signal a move towards the 1.4981 level, its Jan 16'09 high where a break will resume GBP's recovery started at the 1.3504 level towards the 1.5374 level, its Jan 08'09 high and later the 1.5484 level, representing its .382 Ret (1.8669 to 1.3504 decline).All in all, the pair remains entrenched in a corrective price activity with overall outlook still continuing to point to the downside in the medium to longer term.
EURUSDThe 1.2766 level, its Jan 23'09 low and 1.2706 level, its Feb 02'09 low as well as Thursday low at 1.2722 are now seen as the price levels that are limiting EUR's attempts at retesting and possibly breaking its 2008 swing low at 1.2330.This is the third time the pair is failing at that area and if that continues to be seen especially now that it has broken out of declining ST channel, we could see upside momentum building up for a potential upmove. Despite this temporary base forming price activities, EUR still retains its medium term bearishness and should eventually retarget the 1.2330 level. Beyond the 1.2706/66 area, additional supports are located at the 1.2551 level, its Dec 04'08 low with a breach of there setting the stage for a recapture of its 2008 swing low standing at 1.2330 while resistance is initially situated at the 1.3000/1.2993 level, its psycho level/Feb 06'09 high followed by its Feb 04'09/Nov 25'08 high at 1.3071/81 and next its Jan 27/28'09 highs at 1.3327/30.This zone is expected to turn the pair back down but if it gives way, we could see higher gains towards the 1.3478 level, which represents its .382 Ret(1.4719-1.2706 decline) with a penetration of there bringing further upside gains towards its .50 Ret at 1.3716.On the whole, while our broader view remains to the downside, our concern is the inability of the pair to push below the 1.2706/66 support zone.
Mohammed Isah This report is prepared solely for information and data purposes. Opinions, estimates and projections contained herein are the author's own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed to be reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness and neither the information nor the forecast shall be taken as a representation for which the author incur any responsibility. The does not accept any liability whatsoever for any loss arising from any use of this report or its contents. This report is not construed as an offer to sell or solicitation of any offer to buy any of the currencies referred to in this report | |||||||||||||||||||||||||||||||||||||
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Forex Market Issues and Risks
| Daily Forex Fundamentals | Written by AC-Markets | Feb 13 09 11:51 GMT | | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| G7 Friday - Summit Expected to Scrutinize Exchange Rates News and Events:The dollar weakened throughout the night as continued speculation the U.S Stimulus package wouldn’t be sustainable marred sentiment. The EURUSD traded a 1.2879 - 1.2949 range with a slight bias to the upside. However, we continue to believe any move on the part of the pair is dollar driven. Euro zone GDP figures are expected at 10:00 GMT today (-1.2% vs. -0.2%). A key event today and tomorrow is the G7 summit in Rome. 7 of the largest economies will discuss monetary policy and interest rates - with a focus on the dollar and the Yen. Some may remember the concerted intervention in 1985 and 1987 on the dollar - however we don’t see this meeting being a major currency mover, except if some sort of landmark agreement spawns from this meeting. Markets will continue to trade with risk aversion as the main impetus. It is interesting to note that with global interest rates so low the YEN isn’t necessarily that strong against other currencies - however with a local economy so dependant on exports, the relatively strong Yen continues to hurt the economy. The inverse can be said of the Sterling, which has been greatly oversold - on worsening economic data. News in brief: Australia votes and accepts the previously rejected $27.3m stimulus plan. Europe set to confirm deep recession with GDP numbers today. US initial jobless claims falls short of consensus at -623K (vs. prev. -626K). Improvement in Retail sales shouldn’t be taken as a real sign of recovery - heavy discounts and a strong Christmas season are to blame. News is light today.
Today Key Issues:
The Risk Today:EurUsd Convergence towards the 1.2900 pivot continues, breakout failed to materialize - Euro moves continue to be unsustainable. Downward channel slows, initial focus for a support level points to 1.2902, 1.2877 - solid support at 1.2814. Resistance on the upside sits at 1.2934, breakout of 1.2900 - 1.2940 range would retest 1.3000 levels. GbpUsd The cable rebounding nicely, testing 38.20% retracement of 1.4986 - 1.4140 move at time of writing. We see initial support at 1.4339 (Feb 11th support, 23.6% retracement) then aim for 1.4140 (Feb 12th lows) - further down 1.4052 (Feb 2 low). On the upside 1.4535 stands as a soft resistance (23.60% retracement on 1.4988 - 1.4395 move). UsdJpy Renewed risk aversion and continued haven status of both currencies sees the Yen give way to the dollar. Upward channel on the 1week chart shows we are in a 1 day upward channel. Strong resistance at 91.78, from there we go to 92.42. UsdChf Clear upward trend persists on the monthly chart. We tested the lower trend line several times these past days. 1.1567 and 1.1502 support on the lower side. Not much points to the pair breaking out anytime soon - despite consumer confidence improving in Switzerland.
Disclaimer: This report has been prepared by AC Markets (thereof ACM) and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Salesperson or Traders of ACM at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Euro Gains Capped By Lowest GDP Since 1995, Pound Soars Ahead of G-7
| Daily Forex Fundamentals | Written by DailyFX | Feb 13 09 11:36 GMT | | |
| Talking Points
Euro Gains Capped By Lowest GDP Since 1995, Pound Soars Ahead of G-7 The Euro would reach as high as 1.2940 on the back of increased risk appetite and short covering ahead of the G-7 meeting and the prospect of more initiates from the U.S. government. However, the German GDP reading of a -2.1% ended bullish momentum as it increase the chances of more rate cuts from the ECB. The largest contraction in 22 years for the regions largest economy would drag the economic unions growth number down to -1.5%. Euro-zone GDP contracted for the third straight quarter and the most since 1995. The dour growth numbers has increased the chances that the central bank will cut rates by at least 50 bps at their March meeting. Indeed, ECB executive board members Lucas Papademos, Juergen Stark and Jose Manuel Gonzalez Paramo as well as Spanish central bank Governor Angel Fernandez Ordonez and Belgium Governor Guy Quaden said this week that the bank may cut rates next month. The lower interest rate expectations will continue to be a weighing factor for the Euro, but increasing risk appetite has keep the single currency supported which may keep in stuck in its recent range of 1.2700 - 1.3100 over the near-term. Then pound soared over 250 bps to as high as 1.4600 on the back of the increasing risk appetite as it erased the majority of the losses it suffered following the BoE's quarterly inflation report. Indeed, the central bank signaling further rate cuts and the possibility of quantitative easing had sunk Sterling to as low as 1.4150. The 50-Day SMA continues to provide formidable resistance at 1.4650 and may limit anymore upside potential for the pound. The potential of more coordinated efforts to revive the global economy coming from the G-7 meeting has fueled the bullish Sterling sentiment. However, if the current every man for themselves mentality continues post summit then we could see recent gains reversed. The prospect of a new plan to help stem foreclosures helped reverse market sentiment at the end of the U.S. session and the increase in risk appetite has continued through overnight trading. The mortgage plan and the stimulus plan finally getting passed may be the catalyst to send equity markets higher which could lead to dollar weakness. However, with a three-day weekend ahead traders may be reluctant to become too bullish especially with the G7 meeting scheduled. The gathering of the leaders of the developed nations isn't expected to focus on currencies but it still provides potential event risk. The U of Michigan consumer confidence report is expected to show that consumers have become les optimistic, which could negatively impact consumer spending going forward. The mounting job losses have led Americans to retrench and their conservative spending habits will remain a weighing factor of domestic growth.
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European Market Update
| Daily Forex Fundamentals | Written by Trade The News | Feb 13 09 11:16 GMT | | |
| European GDP data register multi-decade declines; yet Risk appetite returns on hope US, Chinese stimulus plans will stop the bleeding; G7 meets with protectionism as main topic ECONOMIC DATA(GE) German Q4 GDP Q/Q:-2.1% v -1.8%e; Y/Y wda: -1.7% v -1.4%e; Y/Y nsa: -1.6% v -1.3%e; Y/Y decline the largest since Mar 1993 (FR) French Q4 Non-farm Payrolls Q/Q: -0.6% v -0.5%e; Wages Q/Q: 0.3% v 0.4%e (SP) Spain Jan CPI: -1.2% v -1.3%e; Y/Y: 0.8% v 0.8%e (CZ) Czech Q4 Preliminary GDP Y/Y: 1.0% v 0.5%e (HU) Hungary Q4 Preliminary GDP Y/Y: -2.0% v -1.5%e (SZ) Swiss Producer & Import Prices M/M: -0.8% v 0.0%e; Y/Y: -0.9% v -0.1%e (NE) Netherlands Dec Trade balance: €2.5B v €2.6B prior (SW) Sweden Q4 Industry Capacity: 83.9% v 89.4% prior (IT) Italian Q4 Prelim GDP Q/Q: -1.8% v -1.3%e; Y/Y; -2.6% v -1.7%e; Y/Y reading is the lowest since at least 1980 when the series began (EU) Euro-zone Q4 Adv GDP Q/Q: -1.5% v -1.3%e; Y/Y; -1.2% v -1.1%e; Q/Q decline was largest since series started back in 1995 (UK) UK Jan House Prices M/M: -1.4%; Y/Y: -12.2% - FT House price Index; 11th straight monthly decline German Bundestag (Lower House) approved German second €50B stimulus package SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUMEquities: Air France [AF.FR] Reported Q3 Net loss of €505M worse than the loss of €285.5M expected. It operating loss was €194M slightly better than consensus of a loss of €209M. The revenues came in at €5.97B above the €5.78B expected. The company noted a larger than expected loss on fuel hedging book and added that it had fuel hedge position of 43% for 2009. It would reduce itst capex spending by €600M in 2009 || Pernod-Richard: [RI.FR] Reported H1 Net €625M below the €657.0M estimates. The H1 revenues were €4.21 slightly below the €4.25B consensus estimates. Currency movements had a negative impact on sales but positive impact on profitability || Eni [ENI.IT] Reported Q4 Adj Net Profit (ex items) of €1.94B compared to €1.83B estimates. The company would hold a €1.5B bond offer. It set its FY08 final dividend at €1.3/share. Expected refining margins to drop in FY09 compared to FY08 || Saab [SAABB.SW] Reported Q4 Net loss of SEK724M below profit of SEK584.7M expected. Revenues were SEK8.19B above consensus of SEK7.78B. For its full year, revenues came in at SEK23.8B slightly above SEK23.42B estimates. It proposed to cut its dividend to SEK1.75/shr from 4.75 prior. It saw its FY09 sales as "flat"and noted that the development of the Swedish defense budget as "a challenge". Redundancies might not be avoidable as margins fall. || Michelin [ML.FR] Reported FY08 Net income €360M below the €480M estimates as rising raw material prices and energy and transportation costs had a negative impact Its revenues were €16.4B in-line with €16.5B estimates. ; cutting dividend.. It FY operating margin came in at 5.6% below its previous guidance of a range of between 7% and 7.5%. and compared to 9.8% y/y || Galapagos [GLPG.BE] Revealed key drug target for Alzheimer's disease || Solarworld [SWV.GE] Reported FY08 Net income €250M. Its EBIT came in at €260M below €272.5M estimates while revenues were €900M slightly below the €910M consensus. It noted that its January sales were higher than levels seen a year-ago. || Beazley [BEZ.UK] Reported FY08 pretax £87.2M below estimates of £103.6M. It announced a £150M rights issue. Lastly the company stated it would acquire First State Management for $35M in cash || Speakers: German Fin Min Steinbrueck commented that he more protectionism on international front and would bring up the issue at official meeting. He reiterated that he was opposed to the Centralized "bad bank" concept . Reiterated that must halt vicious spiral in bank balance sheets || Czech Central Bank Minutes: Weaker currency rate for CZK reduces scope for lower policy rates. Latest production and trade data suggested deeper then expected economic decline but possible government spending to fight economic crisis could pose upside risk to inflation in long run. Some central bank members express concern that inflation would converge towards target rate at slower pace than forecast. || BoE provided details on Commercial Paper purchases under Asset Purchase Facility || EU's Junker noted European Commission must examine Italian and French auto and economic stimulus packages. Commented that protectionism can not be the vehicle used to get out of economic crisis. Sees a lack of coordination between national programs designed to stimulate economy || German Bundestag (Lower House) approved German second stimulus package of €50B In Currencies: Risk appetite returned in the session with the latest U.S. mortgage plans cited as the catalyst for the price action today. Dealers also noted some evidence position squaring ahead of the G7 summit in Rome which softened the USD and JPY pairs. Overall, no surprises are expected from G7 communiqué on currencies. Typically, G7 states that excessive moves are undesirable but market forces should determine appropriate rates. The GBP was firmer by 300+pips to regain the 1.46 handle for a brief moment ahead of the NY morning. EUR/GBP cross lower by 170 pips at 0.8845. The EUR/USD was in the upper end of its recent range after failing to break 1.2700 option barrier on Thursday. The slew of negative European GDP readings did eventually par some of the Euro's gains against the USD. Fixed income: Risk appetite and supply from Italy have sent government bond prices lower in European trade this morning in relatively thin volumes ahead of the G7 meeting in Rome. Italy tapped €7.2B in 4, 12, 15 and 20y BTPS, with results in the mid-range of expectations. Gilts have under performed Bunds and UST's but yields are still sharply lower in the UK on a weekly basis. 2y Gilt is 10bps higher today at 1.31% but still around 35bps lower on the week. The 10y Gilt is about 6ps higher today 3.54%, but still about 40bps lower than last Friday's close. In Energy: WSJ reported that US Energy Sec Steven Chu noted that the DoE must accelerate its process for approving funds. Chu wants his staff members to be prepared to approve projects within 4 weeks. The department may be given the responsibility of allocating $40B in government funds. ||Total [FP.FR] CEO commented that actions and production cuts made by OPEC have been more reactive than usual. He added that current oil prices not good enough for the long term || India's Dec diesel sales rose by 1.5% y/y vs. 10.7% in Dec of 2007 || Reportedly, China is establishing a fuel price fund which would be used to stabilize prices and support local refiners. || NOTES Optimism returns prompting renewed round of risk appetite. Some speculating is building that China's economy is showing signs that a CNY4T stimulus package is taking effect. This euphoria was being complemented with U.S. plan to bring relief to cash-strapped consumers, businesses and states and aiding a job- creating program. The European GDP data was below expectations for the most part with multi-decade and all-time readings being registered. This Friday 13th has the G7 ministers meeting in Rome to discuss implementing measure to avoid the growing sense of protectionism. No surprise is expected from the meeting, but one never knows…. Looking Ahead:
Trade The News Staff Legal disclaimer and risk disclosure All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. Trading decisions are the responsibility of traders, not those providing additional information. Trade The News is not liable (financial and/or non-financial) for any losses that may arise from any information provided by TTN. Trading securities involves a high degree of risk, and financial losses can and do occur on a regular basis and are part of the risk of trading and investing. | |
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Stocks in Europe, Asia Retreat; MSCI World Drops for Third Day
By Adria Cimino
Feb. 12 (Bloomberg) -- Stocks in Europe and Asia slipped and U.S. index futures fell as companies from Electricite de France SA to Diageo Plc posted disappointing results and investors speculated U.S. measures won’t revive the global economy.
EDF, the biggest operator of nuclear reactors, and Diageo, the largest liquor maker, sank more than 7 percent. Mitsubishi UFJ Financial Group Ltd. lost 3.5 percent as U.S. Treasury Secretary Timothy Geithner said he needs time to work out details of a bank-rescue plan. Wells Fargo & Co. helped lead declines in the U.S. after American jobless claims climbed to a record. Treasuries rose for a fourth day, while gold traded near a six- month high in London as investors sought a haven as the economy deteriorates.
The MSCI World Index dropped for a third day, losing 0.7 percent at 1:58 p.m. in London. The gauge of 23 developed countries had rallied 5.8 percent in the previous five days on optimism that global stimulus packages, a financial-rescue plan from Barack Obama’s administration and interest-rate cuts would help lift the U.S., Europe and Japan out of recessions.
“There isn’t a miracle solution,” Sebastien Korchia, a fund manager at Meeschaert Asset Management in Paris, which oversees about $2.6 billion, said in a Bloomberg Television interview. “It will take time. The market is worried.”
European stocks and U.S. futures maintained losses after government data showed the total number of Americans collecting unemployment benefits reached 4.81 million. Sales at U.S. retailers rose in January for the first time in seven months.
The MSCI Emerging Markets Index of 23 developing nations sank 1.5 percent. India’s Bombay Stock Exchange Sensitive Index slipped 1.6 percent, while China’s Shanghai Composite Index fell 0.6 percent. Russia’s Micex Index decreased 0.2 percent.
BRICs Outperform
Even with today’s drops, China and Russia, along with Brazil, are the only major stock markets recording gains of more than 8 percent this year. India, the fourth member of the so- called BRICs, is down 1.9 percent.
U.S. stocks gained yesterday as lawmakers debated a $789 billion plan to revive the economy. U.S. House and Senate lawmakers agreed on a compromise late yesterday, a smaller bill than originally approved by both groups.
Governments worldwide are attempting to stabilize a global economy battered by more than $1 trillion in writedowns and losses at financial companies with stimulus programs and bank support packages. Australia’s Senate today rejected a A$42 billion ($28 billion) stimulus package aimed at preventing the country’s first recession in 18 years after an independent lawmaker demanded increased spending for his constituency.
Europe’s Dow Jones Stoxx 600 Index slid 1.2 percent as all 19 industry groups except healthcare declined. The MSCI Asia Pacific Index lost 1.8 percent as Daikin Industries Ltd. cut its profit forecast.
Futures, Obama
Futures on the Standard & Poor’s 500 Index lost 1 percent.
Treasury 10-year notes rose on speculation the government’s stimulus plan may not be enough to turn the economy around. The yield on the 10-year note fell 0.03 percentage point to 2.77 percent, according to BGCantor Market Data. Bullion for immediate delivery gained as much as 0.8 percent to $946.38 an ounce.
Obama’s stimulus plan will be insufficient to avert the biggest U.S. economic decline since 1946 as consumer spending posts its longest slide on record, according to a monthly Bloomberg News survey. The world’s largest economy will contract 2 percent this year, half a percentage point more than last month’s forecast, according to the survey.
‘Very Cautious’
Profits have declined 65 percent for 469 companies in western Europe that have released earnings since Jan. 12, according to Bloomberg data.
“Few companies have visibility on profit or sales,” Jean- Christophe Liard, an analyst at KBL Richelieu Gestion, which oversees $5.2 billion, said in a Bloomberg Television interview from Paris. “Reports are showing either a drop in margins or slowing sales. These reports are a reflection of what’s going on in the economy. We’re very cautious.”
EDF slid 7.4 percent to 32.93 euros after saying 2008 net income fell to 3.4 billion euros ($4.39 billion) because of costs associated with regulated power rates and lower industrial demand amid the economic slowdown.
Diageo slipped 4.5 percent to 867 pence. The company said full-year operating profit will rise 4 percent to 6 percent, less than a previous forecast for as much as 9 percent growth.
Mitsubishi UFJ fell 3.5 percent to 468 yen in Tokyo. Toyota Motor Corp., which makes 37 percent of its sales in North America, dropped 2.9 percent to 3,050 yen. Wells Fargo, the second-biggest U.S. home lender, slid 3.7 percent to $16.86.
Daikin, Rexel
Daikin, the biggest Japanese maker of air conditioners, fell 5.6 percent to 2,105 yen after cutting its profit forecast by 59 percent for the year ending March 31 as the slumping global economy hurt sales.
Rexel SA lost 8.4 percent to 4.70 euros. The world’s largest distributor of electrical equipment posted a 63 million-euro net loss for the fourth quarter, hurt by falling volume sales and a drop in the price of copper.
Rexel said it expects a “significant” drop in volume sales and prices in 2009, suspended its dividend and said it will cut operating investments by 25 percent.
Nexans SA sank 13 percent to 40.17 euros. The world’s biggest maker of cables and wires said 2008 profit fell to 82 million euros from 189 million euros the year before.
Swiss Reinsurance Co. surged 4.7 percent to 19.83 francs. The world’s second-biggest reinsurer said Jacques Aigrain resigned as chief executive officer after record losses forced the company to seek capital from investors including Warren Buffett.
Cap Gemini
Cap Gemini SA lost 6.8 percent to 26.36 euros. Europe’s largest computer-services company said 2008 profit rose 2.5 percent to 451 million euros, missing analysts’ estimates, and predicted first-half sales will drop.
Renault SA advanced 2.9 percent to 16.71 euros. France’s second-largest carmaker reported a wider-than-expected second- half loss on Europe’s biggest auto market slump in 15 years and pledged to deepen cost cuts as the situation worsens in 2009.
“The most striking feature of Renault’s release is its aim for positive cash flow in 2009,” said London-based Credit Suisse analyst Stuart Pearson, who has an “underperform” rating on the shares. “This statement alone will significantly support the stock.”
Smith & Nephew Plc rose 4.8 percent to 537.5 pence after Europe’s largest maker of shoulder and knee implants said fourth- quarter operating profit increased and that long-term demand was “favorable.”
Fortis, Commerzbank
Fortis dropped 15 percent to 1.12 euros after shareholders yesterday rejected the state-organized breakup of what was once Belgium’s largest financial-services company.
Commerzbank AG slid 4.5 percent to 3.51 euros. The stock was cut to “underweight” from “equal weight” by analysts at Morgan Stanley. A “lack of visibility on financials, including Dresdner and the operating environment” were cited by Morgan Stanley as reasons for the downgrade in a note to investors.
Viacom Inc., owner of MTV, Comedy Central and Nickelodeon, said fourth-quarter profit excluding some items was 76 cents a share. Analysts surveyed by Bloomberg estimated 79 cents. The stock didn’t trade in Europe.
Earnings at the 349 companies in the S&P 500 that have reported fourth-quarter results fell 36 percent on average as firms from Microsoft Corp. to Procter & Gamble Co. disappointed investors and the economy shrank at the fastest pace in 26 years. The period is projected to be the sixth straight quarter of decreasing profits, the longest streak on record.
To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.
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Yen Falls on Speculation Stock Gains Will Revive Risk Appetite
By Yasuhiko Seki
Feb. 13 (Bloomberg) -- The yen dropped against the euro and the U.S. dollar on speculation gains in Asian stocks may revive investors’ appetite for riskier assets, reducing demand for the Japanese currency as a haven.
The yen also weakened against the Australian and New Zealand dollars after Australia’s Senate approved a A$42 billion ($28 billion) stimulus package aimed at ensuring the economy doesn’t enter its first recession in 18 years.
“The recent moves of such indicators as VIX and the rise in stocks seem to suggest that risk aversion is gradually easing,” said Akio Yoshino, chief economist at Societe Generale Asset Management Ltd. “This should give investors less reason to buy the yen.”
The yen fell to 91.22 against the dollar at 12:10 p.m. in Tokyo from 90.94 late in New York yesterday. It slid to 117.89 per euro from 116.95 yesterday.
The Nikkei 225 Stock Average climbed 2.2 percent and the MSCI Asia-Pacific Index of regional shares rose 1.4 percent today. The VIX volatility index, a Chicago Board Options Exchange gauge reflecting expectations for stock-market price changes that is used as a measure of risk aversion, fell 7.4 per cent to 41.25 yesterday.
To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net; Yasuhiko Seki in Tokyo at yseki5@bloomberg.net
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US Dollar Stronger, Japanese Yen Mixed Ahead of Final Fiscal Stimulus Vote, G7 Meeting Feb 13-14
Thursday, 12 February 2009 20:54:17 GMT
Written by Terri Belkas, Currency Strategist- Euro to See Increased Volatility on Friday as Euro-zone Q4 GDP May Fall by Most on Record
- British Pound Remains Under Pressure as Markets Bet on BOE Rate Cuts
The US dollar surged across the majors, while the Japanese yen ended the day mixed as equities plunged throughout the day but staged a last minute rebound on reports that the US government would assist homeowners struggling with mortgages. The only thing clear right now is that there is serious indecision amongst market participants, and perhaps the biggest question mark in regards to investor sentiment is what will happens with the US fiscal stimulus bill, as the House and Senate could bring a final vote before the end of the week, which has potential to provide a big boost to risky assets and subsequently weigh on the US dollar and Japanese yen.
Data-wise, the picture looked mixed for the US on Thursday. Advance Retail Sales unexpectedly rose for the first time in seven months during January at a rate of 1.0 percent, and excluding autos, rose 0.9 percent. A breakdown shows increased spending on vehicles, electronics, food and beverages, gasoline stations, clothing stores, and internet retailers. The data suggests that aggressive discounting by retailers has helped to boost consumption, but it's also worth noting that retail sales remain down 9.0 percent from a year earlier as consumers cut back on their use of credit and the labor markets contract by the most since 1971. On the flip side, initial jobless claims for the week ending February 7 fell slightly to 623,000 from 631,000, but this is still near the highest since 1982. Likewise, continuing jobless claims for the week ending January 31 hit a fresh record high of 4,810,000 from 4,799,000, and on the housing front, the National Association of Realtors (NAR) said that median home prices fell a record 12 percent in Q4 from a year earlier.
Looking ahead, the University of Michigan’s consumer confidence survey for the month of February is forecasted to reflect the worst sentiment since 1980, as the index could dip to 60.2 from 61.2 in January. However, based on the latest release of US retail sales, there is potential for a bit of an improvement. If this is the case, the rise in the index could boost risk appetite, at least temporarily. Nevertheless, the greater risk for the forex markets rests in the hands of the status of the US fiscal stimulus. Another event to watch is the G7 meeting, which starts on Friday and goes on through Saturday, as they will reportedly discuss currencies. Hawkish comments about the Japanese yen could help drive the currency lower on speculation that the government will physically intervene, but it is worth noting that previous G7 meetings have yielded little in the way of market-moving news.
Euro to See Increased Volatility on Friday as Euro-zone Q4 GDP May Fall by Most on Record
The euro saw very choppy price action on Thursday, ending the day down against the US dollar but up against the rest of the majors, including the Japanese yen and British pound. Things could take a more broadly bearish turn for the currency on Friday though, as Euro-zone GDP will be released. In 2008, the release of Euro-zone CPI drew significant attention and sparked major volatility for the euro. However, indicators of growth have now become more important, as the European Central Bank has shifted its focus away from inflation and on to the global and regional economic slowdown. The advanced reading of Q4 GDP is forecasted to slump 1.3 percent from the previous quarter, marking the third consecutive period of contraction and the worst drop since record keeping began in 1995. Likewise, the annual measure is anticipated to fall negative for the first time ever. Such data would only raise the odds that the ECB will move to cut rates at their next meeting on March 5, which could trigger steep losses for the euro. On the other hand, better-than-expected results could provide a solid boost for the currency.
Ultimately, though, EUR/USD remains within relatively well-defined trading ranges on a short-term and medium-term basis despite the fact that Tuesday’s price action reflected high volatility. This leaves breakout potential open, so it will be important to keep an eye on risk trends as well as key technical levels, such as support at 1.27 and resistance at 1.32.
British Pound Remains Under Pressure as Markets Bet on BOE Rate Cuts
The British pound remained under pressure, along with other risky assets, following Wednesday’s news that Bank of England Governor Mervyn King said that the UK economy was in for a “deep recession” during opening remarks for his inflation report press conference regarding the UK economy. King was highly dovish, saying that "further easing in monetary policy may well be required.” Indeed, forecasts in the BOE’s Quarterly Inflation Report were based on market expectations for a drop in the Bank Rate to 0.75 percent by mid-year, with GDP projections showing growth remaining negative throughout 2009 followed by a rebound in 2010, while CPI is anticipated to fall well below the BOE's 2 percent target in the first half of 2009, though the outlook beyond that appears uncertain. However, the BOE’s dour outlook has led expectations to shift for the Monetary Policy Committee’s next rate decision on March 5, as some anticipate that they could slash rates to zero and signal a move to quantitative easing. There are no economic indicators for the UK due to be released through the end of the week, but traders should see continued volatility in GBP/USD, especially since the pair has been trading in line with risky assets like equities.
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