Positive PMIs fuel bullish sentiment in Asia, Europe and the USA…
The start of the year's third quarter trading period was positive; from the Asian session the bullish sentiment continued through to the London session, further extending in the New York session, although risk appetite fell away and the DJIA retraced and gave back some of its gains towards the end of the session. Many of the PMIs published by Markit Economics were bullish, particularly with reference to the major economies of the Eurozone.
In the USA economic activity in the manufacturing sector expanded in June following one month of contraction, and the overall economy grew for the 49th consecutive month, according to the nation's supply executives in the latest Manufacturing ISM Report On Business. The PMI registered 50.9 percent, an increase of 1.9 percentage points from May's reading of 49 percent, indicating expansion in the manufacturing sector for the fifth time in the first six months of 2013.
Despite breaching the critical psyche level of 15,000 by some distance and pushing through R1, the DJIA closed the New York session below of 15,000 at 14,974. The reason for the retrace could have been due to the ISM survey recording that hiring in the sectors covered were at a four year low. Often information such as this is missed as the publication is released, but as analysts 'get to work' on the forensics of the report these outlier details can affect sentiment quite dramatically.
As mentioned the DJIA closed up 0.44% at 14,974. The UK FTSE closed up significantly on the strength of the published PMI from Markit which exceeded analysts expectations. The FTSE closed at 6307, up 1.49% on the day. The German DAX index closed up 0.31% on the day. Spain's IBEX closed up 1.86% on the strength of the PMI published in the morning session, whilst France's CAC closed up 0.76% and Italy's MIB closed up 1.45%. The euro STOXX index closed up 0.77% on the day.
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Spot gold, on the Comex Exchange, recovered from its recent lows, currently (at the time of writing) price is printing at 1255 as a futures bet. Looking at the daily chart this PM (precious metal) is developing the pattern of a security that could be displaying bullish sentiment. However, until the security develops bullish tendencies visible through many of indicators swing traders prefer, then it'd be unwise for traders and investors to become committed to a swing long. In a similar vein silver has also come off its recent lows, currently price is printing at 19.65. The trading pattern, highlighted by Heikin Ashi candles, is almost identical to that of gold; there are too few bullish indicators displaying positive tendencies to suggest traders are witnessing a new bullish trend developing, traders would be wise to patiently wait for more confirmation.
The spread between the USA denominated oil – WTI, and Brent crude fell to a two and a half year low at $5 a barrel. The spread widened to a record $28.08 per barrel on October 14th 2011. The reasons given for the closure of the spread is that USA pipeline efficiency has increased exponentially, helping unlock a glut of oil that the USA distributors and refiners are currently in possession of. WTI for August settlement advanced by 1.5% or $1.43 per barrel to $97.99 on the New York Mercantile Exchange. Brent crude ended at $103 per barrel on the London based ICE futures market, up 0.84%.
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Yen fell to its lowest in over three weeks versus the greenback as the BOJ – the central bank’s Tankan survey showed large manufacturers were the most optimistic in two years, consequently damping demand for safety in yen. Yen shed 0.5 percent to 99.66 per dollar at 5 p.m. in New York having reached 99.86, the weakest level witnessed since June 5th. Yen finally closed weaker than its 50-day moving average (plotted on the daily chart) for the first time since June 4th. Japan’s currency declined one percent to 130.19 per euro and touched 130.25, the least since June 11th. The euro rose 0.4 percent to $1.3064.
The Aussie dollar advanced versus all of its 16 most-traded counterparts, rebounding from its weakest level witnessed since September 2010 versus the greenback, due to speculation that the Aussie's biggest quarterly decline in almost five years was excessive. Bets that the Reserve Bank of Australia will refrain from cutting its 2.75 percent benchmark rate has also added to Aussie bullishness. The Aussie touched 91.10 U.S. cents before jumping 1.1 percent to 92.38 cents. It lost 12 percent from April through June, the biggest decline amongst the most traded currencies.
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Cable rose for the first time in five days due to an industry report based on a survey of purchasing managers, the PMI, illustrating that U.K. manufacturing expanded last month, adding to signs that the UK economy could be recovering. The pound advanced 0.2 percent to $1.5247 at 4:45 p.m. London time after falling to $1.5166 on June 28th, the weakest level since May 31st. The U.K. currency was little changed at 85.67 pence per euro. Sterling has strengthened 3.2 percent in the past three months, according to the Bloomberg Correlation-Weighted Index, which tracks the 10 developed-market currencies. The euro gained 5 percent and the dollar advanced 3.1 percent.
Yuan advanced for a second day after the HSBC PMI survey indicated that Chinese manufacturing expanded month on month and a Chinese regulator said banks have enough cash reserves to avert any disruption to their operations. The yuan rose 0.08 percent to 6.1327 per USA dollar in Shanghai, according to the China Foreign Exchange Trade System. The exchange rate reached 6.1285 earlier in the session, the strongest level witnessed since June 20th. The yuan lost 0.05 percent last month, reducing its advance for the second quarter to 1.19 percent.
Fundamental policy and news events that could affect sentiment on July 2nd 2013
Early in the Asian session the RBA (Royal Bank Of Australia) publishes its cash rate which is expected to remain static at 2.75%. Notwithstanding this the statement with regards to rate setting will also be broadcast.
Early in the London session the UK's construction PMI will be published. Analysts and economists polled are expecting an advance to 51.3 from 50.8 the previous month.
Approaching the New York session analysts are anticipating that month on month factory orders, published courtesy of the Census Bureau, will increase from 1.0% to 2.0%. Further on in the session two members of the Fed's FOMC committee will broadcast their thoughts on the direction of the USA economy. Naturally many investors will be, once again, looking for clues and guidance as to when the tapering of the Fed's unlimited quantitative easing programme, (currently at $85 billion per month), will be throttled back.