The Initial New Year Rally Appears To Have Faded

Jan 4 • Market Commentaries • 2720 Views • Comments Off on The Initial New Year Rally Appears To Have Faded

Despite the Nikkei index closing up the Hang Seng and CSI closed down in the overnight early morning session. European markets have followed suit, the majority of main bourses indices are down in the morning session. Reality and sobriety could be hitting the European markets due to Greece suggesting it could leave the mechanism inside the next three months and data suggesting that Europe will move back into recessionary territory as early as the first quarter of 2012. However, the UK FTSE has moved up past 5700 in the morning session which is close on fifteen percent above it’s lowest point of 2011.

European inflation slowed in December, which may allow the European Central Bank to use one of the few remaining tools in the box; lowering the base rate by circa 0.25% in order to shore up the economy. The inflation rate in the 17-nation euro area fell to 2.8 percent from 3 percent in November, the European Union’s statistics office in Luxembourg reported in its initial estimate this morning.

Spanish Prime Minister Mariano Rajoy’s government may apply for loans from the European Union’s rescue fund and the International Monetary Fund to help restructure the country’s financial industry.

USA markets may respond favourably to a U.S. jobs report published by Intuit which suggests that small businesses created up to 55,000 new jobs in December, The revision to Intuit’s small business payrolls in November suggests that the government’s non-farm employment count for that month could be raised from 120,000 when figures for December are released this Friday. December non-farm payrolls are expected have increased 150,000 according to a Reuters survey, with the unemployment rate seen edging up to 8.7 percent.

U.S. Manufacturing grew at its fastest pace in six months in December, capping a late-year upswing, but a European slump and rising oil prices still poses threats to the U.S. economy in the new year.

 

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Market Overview
European stocks fell from a five- month high as Germany and Portugal prepared to sell a combined 6 billion euros of debt. Copper retreated, while U.S. index futures swung (marginally) between gains and losses.

The Stoxx Europe 600 Index slipped 0.3 percent at 9:30 a.m. in London as UniCredit SpA slumped 7.6 percent after Italy’s biggest bank said it will sell shares via a rights issue. Standard & Poor’s 500 Index futures added 0.1 percent after falling 0.3 percent. The German 10-year bund yield rose three basis points to 1.93 percent, while Portugal’s two-year note yield sank 89 basis points. Copper slid 1.3 percent and gold rose for a fourth day. The euro weakened 0.2 percent versus the yen, and depreciated 0.1 percent versus the dollar to $1.3036. The yen strengthened against all but one of its 16 most-traded peers.

Market snapshot as of 10:30 am GMT (UK time)

Asian and Pacific markets experienced mixed fortunes in the overnight early morning session, the Nikkei closed up 1.25%, the Hang Seng closed down 0.8% and the CSI closed down 2.0%. The ASX 200 closed up 2.11%. European indices have fallen with the exception of the UK FTSE which is up 0.18%. The STOXX 50 is down 0.95%, the CAC is down 0.6%, the DAX is down 0.48%, the MIB is down 1.20% close on 25% year on year.

The dollar was little changed at $1.3039 per euro at 10:11 a.m. in London after dropping to $1.3077 yesterday, the weakest level since Dec. 28. The U.S. currency declined 0.1 percent to 76.63 yen. The euro slipped 0.2 percent to 99.95 yen. It fell to 98.66 yen on Jan. 2, the weakest since December 2001.

Economic calendar releases that may affect the afternoon session sentiment

The USA factory orders report is the only data published of significance in the afternoon session. This measures the value of new orders, shipments, unfilled orders and inventories reported by US manufacturers. Figures are reported in billions of dollars and also in percent change from the previous month. According to a Bloomberg survey of economists, a change of 2.00% is expected, compared with last month’s figure of -0.40%.

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