Forex Market Commentaries - Confidence Breeds Confidence

Confidence Is Contagious. So Is Lack Of Confidence

Dec 20 • Market Commentaries • 5065 Views • 3 Comments on Confidence Is Contagious. So Is Lack Of Confidence

German business confidence rose marginally for the second month in a row in December, perhaps suggesting that Europe’s largest economy may be weathering the region’s debt crisis.

The Ifo institute’s business climate index rose to 107.2 from 106.6 in November, the Munich-based institute has reported this morning. Economists anticipated a small drop to 106, the median forecast of 36 economists in a Bloomberg survey predicted. However, a half percent increase in such numbers is often regarded by statisticians as statistically irrelevant.

Today’s reading possibly illustrates that Germany is shielded from the worst impact of Europe’s debt crisis as gauges of manufacturing and services activity also increased. German consumer confidence will hold its gains in January as unemployment at a two-decade low boosts the economic outlook, market research company GfK SE reported today.

However, Germany and its companies won’t escape the continual crisis unscathed. The German economy will grow at the slowest pace in three years in 2012 as the turmoil in Europe will hurt demand in the area’s largest market, the Bundesbank said yesterday. The Bundesbank has forecast that economic growth will slow to 0.6 percent in 2012 from 3 percent this year before recovering to 1.8 percent in 2013. The ECB has cut its 2012 euro-area wide growth forecast this month to 0.3 percent.

Market Overview
Futures in the Standard & Poor’s 500 Index climbed 0.85% percent at 10 a.m. in London. The Stoxx Europe 600 Index rose 0.6 percent after earlier dropping 0.5 percent. Spain’s government bonds stayed higher as the nation sold 5.64 billion euros of Treasury bills. The yield on the 10-year U.S. Treasury note advanced five basis points to 1.86 percent, with the dollar weakening against all but one of its 16 most- traded peers. Oil advanced 1.3 percent and the GSCI index of 24 commodities gained for a second day.

Spain’s 10-year bond yields were six basis points lower at 5.11 percent and two-year note yields were seven basis points lower at 3.31 percent. The nation sold 5.64 billion euros of three-month and six-month bills, compared with a maximum target of 4.5 billion euros the Treasury had set for the sale. Information is not available as to whether or not the ECB bought.

Oil for January delivery climbed up by as much as 1.4 percent, up to $95.15 a barrel. U.S. crude inventories dropped 2 million barrels last week, according to the median of seven analyst estimates before today’s weekly Energy Department report.

 

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Gold climbed, finally trimming its first quarterly decline since 2008, as the euro advanced after European finance ministers boosted their anti-crisis efforts by pledging extra funding to the International Monetary Fund. Immediate-delivery bullion rose 0.5 percent $1,602.45 an ounce by 9:39 a.m. in London. The February-delivery contract climbed 0.4 percent to $1,603.10 on the Comex in New York.

Bullion fell 6.6 percent last week as the dollar rallied against the euro. Spot gold tumbled to $1,560.97 on Dec. 15, the lowest price since Sept. 26, and 19 percent below the Sept. 6 record of $1,921.15. While it is 13 percent higher this year, the metal has lost 1.2 percent this quarter.

Market snapshot at 10:45 am GMT (UK time)

Asia Pacific markets bounced back slightly in early morning trade. The Nikkei closed up 0.49% the Hang Seng closed up 0.06% and the CSI closed down 0.31%. The ASX 200 closed down 0.18%. European indices are positive, the successful Spanish bond yield and increased business confidence in Germany helping to fuel the mood of overall optimism in the morning session. The STOXX 50 is up 0.92%, the UK FTSE is flat, the CAC is up 0.89% and the DAX is up 0.8%. The SPX equity index future is up circa 0.85%.

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