Market Review May 22 2012
In the last session all leading American indices like Dow Jones Industrial Average, NASDAQ index and the S&P 500 (SPX) ended in green. Dow was up by 1.09% and closed at 12504; S&P 500 was gained by 1.60% at 1316. European indices ended mixed. FTSE was down by 0.64%, DAX was gained by 0.95% & CAC 40 was up by 0.64%.
Today major stock markets in Asia are trading in green. Shanghai Composite up by 0.73% at 2365 and Hang Seng up by 0.97% at 19106. Japan’s Nikkei was up by 0.98% at 8719 and Singapore’s Straits Times up by 1.20% at 2824.
Leaders from the world’s wealthiest eight countries met recently, where all voiced support for keeping Greece in the eurozone, yet doing so will be easier said than done, markets concluded by the time Asian markets were trading on Tuesday.
Such sentiment ended a brief risk-off trading pattern that weakened the greenback.
Greece is headed for elections on June 17, barely a month after a May 6 ballot pushed enough fringe political parties into power to block the traditional parties New Democracy and PASOK from creating a coalition government.
Fears that the leftist Syriza political party will come out well in the upcoming elections have investors nervous Greece will ditch austerity measures, which could mean an end to the flow of bailout money into the debt-stricken country and subsequent exit from the currency zone.
Greek default fears rekindled early Tuesday and ended the euro’s recent strengthening trend.
Euro Dollar
EURUSD (1.2815) The euro has clawed back ground from the US dollar after G8 leaders and the foreign ministers of Germany and France pledged to work hard to keep Greece in the eurozone. While worries remained deep about the fate of the 17-nation eurozone, statements from the weekend summit of G8 leaders near Washington encouraged traders.
The finance ministers of Germany and France reiterated that on Monday after a meeting in Berlin.
The comments helped the euro on Monday add 0.4 per cent on the US dollar, moving to $US1.2815 from $US1.2773 late Friday.
The Sterling Pound
GBPUSD (1.58.03) Sterling hit a two-week low against the euro on Monday as investors cut some of their extreme bearish positions in the common currency, although the pound’s pull-back was expected to be limited by the gloomy outlook for the euro zone.
IMM positioning data showed net euro short positions – bets the currency would fall – hit a record high of 173,869 contracts in the week ending May 15. Investors appeared to be unwinding some of those bearish bets as the common currency crept higher, adding to euro strength.
The shared currency was last flat on the day at 80.76 pence, having climbed to a two-week peak of 80.89 pence earlier in the session.
Traders said there was strong resistance around 80.90 pence, the level hit on May 7 when the euro fell sharply and resumed trading after the Greek election weekend with a price gap.
Sterling had rallied against the euro in recent weeks as investors concerned about political turmoil in Greece and fragility in the Spanish banking sector bought the pound as a relative safe haven.
But a more dovish-than-expected Bank of England inflation report last week, that warned of the risk to the UK growth from the euro zone crisis and left the door open for another round of quantitative easing, has curbed some demand for the pound.
Asian –Pacific Currency
USDJPY (79.30) Against the Japanese yen, the dollar advanced to 79.30 yen, up from ¥79.03 on Friday. The Bank of Japan is holding a two-day monetary policy meeting, and expectations are growing the bank will stimulate the economy by weakening the yen.
Concerns that Japan will post a second consecutive trade deficit in April will likely fuel monetary authority to take steps to spur growth via a weaker yen, which would benefit the country’s vital export sector.
Bank of Japan Governor Masaaki Shirakawa has said growth is important for the country. Meanwhile, the country’s All Industries Activity Index fell 0.3% in March from February, worse the market expectations for a flat reading.
Gold
Gold (1588.70) has pulled back, the first loss in three trading sessions, as a lack of a new economic-policy response to Europe’s debt woes limited demand for the precious metal as an alternative asset. The most actively traded contract, for June delivery, fell $3.20, or 0.2 per cent, to settle at $1588.70 a troy ounce on the Comex division of the New York Mercantile Exchange.
Crude Oil
Crude Oil (92.57) prices have surged, rebounding from last week’s multi-month lows on speculative buying and as concerns resurfaced over supplies from the crude-rich Middle East, particularly from Iran. The market was also supported by Group of Eight (G8) leaders voicing support for Greece to stay in the eurozone at a weekend summit in the United States.
New York’s main contract, West Texas Intermediate (WTI) crude for delivery in June, finished Monday’s session at $US92.57 a barrel, up $US1.09 from Friday’s closing level.
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