Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19
Central Banks Move To Keep The Global Markets Party Rolling – Part III - 14th Aug 19
You Have to Buy Bonds Even When Interest Rates Are Low - 14th Aug 19
Gold Near Term Risk is Increasing - 14th Aug 19
Installment Loans vs Personal Bank Loans - 14th Aug 19
ROCHE - RHHBY Life Extension Pharma Stocks Investing - 14th Aug 19
Gold Bulls Must Love the Hong Kong Protests - 14th Aug 19
Gold, Markets and Invasive Species - 14th Aug 19
Cannabis Stocks With Millennial Appeal - 14th Aug 19
August 19 (Crazy Ivan) Stock Market Event Only A Few Days Away - 13th Aug 19
This is the real move in gold and silver… it’s going to be multiyear - 13th Aug 19
Global Central Banks Kick Can Down The Road Again - 13th Aug 19
US Dollar Finally the Achillles Heel - 13th Aug 19
Financial Success Formula Failure - 13th Aug 19
How to Test Your Car Alternator with a Multimeter - 13th Aug 19
London Under Attack! Victoria Embankment Gardens Statues and Monuments - 13th Aug 19
More Stock Market Weakness Ahead - 12th Aug 19
Global Central Banks Move To Keep The Party Rolling Onward - 12th Aug 19
All Eyes On Copper - 12th Aug 19
History of Yield Curve Inversions and Gold - 12th Aug 19
Precious Metals Soar on Falling Yields, Currency Turmoil - 12th Aug 19
Why GraphQL? The Benefits Explained - 12th Aug 19
Is the Stock Market Making a V-shaped Recovery? - 11th Aug 19
Precious Metals and Stocks VIX Are About To Pull A “Crazy Ivan” - 11th Aug 19
Social Media Civil War - 11th Aug 19
Gold and the Bond Yield Continuum - 11th Aug 19
Traders: Which Markets Should You Trade? - 11th Aug 19
US Corporate Debt Is at Risk of a Flash Crash - 10th Aug 19
EURODOLLAR futures above 2016 highs: FED to cut over 100 bps quickly - 10th Aug 19
Market’s flight-to-safety: Should You Buy Stocks Now? - 10th Aug 19
The Cold, Hard Math Tells Netflix Stock Could Crash 70% - 10th Aug 19
Our Custom Index Charts Suggest Stock Markets Are In For A Wild Ride - 9th Aug 19
Bitcoin Price Triggers Ahead - 9th Aug 19
Walmart Is Coming for Amazon - 9th Aug 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Europe Stocks Down, U.S. Up, Which Way Tuesday?

Stock-Markets / Stock Markets 2010 Jun 08, 2010 - 09:48 AM GMT

By: PaddyPowerTrader


Best Financial Markets Analysis ArticleJust another manic Monday with U.S. stocks getting another late doors water boarding sending the S&P’s 500 Index to the biggest two-day loss since March 2009, with Google and Apple leading a drop in technology shares while Goldman Sachs were subpoenaed in the financial-crisis investigation. Apple lost 2% as the introduction of a new iPhone failed to boost the stock and Google shed 2.7% as Connecticut demanded information about data collection.

Goldman Sachs slid 2.5% on news the Financial Crisis Inquiry Commission said the bank had not complied with requests for documents. And Autodesk fell 4.4% after Goldman Sachs removed the software company from its “conviction buy” list. Big picture the song remains the same with pan European sovereign and banking debt worries still to the forefront. The message from the G20 was one of promised fiscal retrenchment which means higher taxes and reduced growth and demand. This combined with a hangover from Friday’s poor US jobs numbers and some disappointing US consumer credit data (in particular the downwards revisions) have kept the tone defensive despite Benanke’s dovish tone (see below). That said I’d expect some “bargain hunting” / “bottom fishing” from the US markets first thing but as we have learnt just like at Old Trafford it’s only the final few minutes of the game that count these days.

It’s worth noting that the broader The Russell 2000 closed below its 200 day sma yesterday, which has bearish omens as the small cap index has a tendency to lead the overall market. Critical leading sector indices such as the Banks, semiconductors, Transports also closed below their respective 200 day sma’s.

The European bourse have traded with a weak tone Tuesday morning. Among the stand out movers are power generating giants E.ON and RWE (down 3%) on Federal German plans to levy new taxes on the nuclear power industry. And staying with things Teutonic, Lufthansa is weaker after a report that it is finding it impossible to raise ticket prices due to fierce competition and plans by the government to introduce a travel tax.

BP is again under the microscope and down 4% today after the US vowed there would be a full investigation into the tragic Gulf oil spill fiasco or as Pres. Obama put it he is looking for “whose ass to kick”. The mood in London wasn’t helped by rating agency Fitch’s warning that the UK faced “formidable” fiscal challenges that warranted a faster pace of deficit reduction.

The stocks of mobile phone operators such as Vodafone and Telefonica are softer today after losing a court challenge that will force them to reduce formerly lucrative roaming charges.

Today’s Market Moving Stories

•Bond yields are still rising despite ECB purchases.
•bonds/’ title=’Spread Bet Bond’>Bond yields of Italy and Spain reached new peaks on Monday and are now higher than they were before the €750bn package, reports the FT. Last week, yields rose sharply within the eurozone except for Germany. Investors criticised the ECB bond purchasing programme, saying that the central bank has bought too little to stop yield spreads from widening. ECB has bought €5.5bn last week, compared to €16.5bn, €10bn and €8.5bn the first three weeks. They also argue for a widening of the programme, while the ECB bought mainly Greek, Portuguese and Irish bonds. This bias is responsible for the relatively strong yield rise of Spanish and Italian bonds. Axel Weber, meanwhile, called for tighter ceilings on ECB bond purchases, saying the programme was only to bridge until government actions kick in.
•Fed chairman Ben Bernanke underlined the bank’s wait and see stance in an interview with ABC news. The most interesting points were:
1) Given the depth of the recession, the recovery is “moderate paced”. Translation: the usual V-shaped recovery after a slump is not taking place.
2) Thus, “unemployment is still going to be high for a while”. Translation: there will be enough idle capacity in the US to prevent any serious inflationary risks for the foreseeable future.
3) The Fed will raise interest rates from a record low before the economy returns to full employment. Here, Bernanke is stating the obvious. “Full employment” in the US is normally assumed to come with a 5% unemployment rate. Taking into account ongoing labour force growth, the moderate pace of the upswing and the current 9.7% unemployment rate, full employment will not be reached for several years.
4) Bernanke said Fed officials do not yet know when the process of normalizing the FF target rate will start. Translation: rate hikes are no immediate prospect.
•Global financial risk certainly increased in the wake of the sovereign debt crisis hitting several European nations (with the potential to spread further). At the same time, core inflation is if anything declining further. Therefore, the Fed will probably not change its wording that rates are going to stay low for an “extended period”. The first rate hike will probably come only in 2011.
•The UK’s Manpower recruitment agency noted that the spread between the public and private sector is about to switch around. While a majority of private sector firms expect to make net new hirings in the next three months, the public sector outlook is now the weakest in 16 years.
•The British Retail Consortium reported total retail sales growth improved to +3.0% yoy in May from 0.2% yoy in April. Like for like sales growth was +0.8% following April’s -2.3%. Note that the April figures were heavily distorted by the timing of Easter this year against last.

Europes Finance Ministers Monthly Meeting.

Eurogroup finance minister met for their regular monthly meeting Monday. The group finalised the details of the SPV, with the Greek bailout solution acting as the blueprint. Spokesman Juncker said the SPV will be a limited liability company incorporated under Luxembourg law. It is expected that the mechanism will be operational later this month. The EIB and EU Commission will provide operational support. EU commissioner Rehn said there is now a firm commitment for €500 bn worth of loans. He said release of funds from the SPV will be subject to the same conditionality as the rescue package for Greece. The SPV can be offered if there is a programme agreed with the country concerned and the IMF. The decision to provide funds will be taken by the Eurogroup on the basis of assessments by the Commission and ECB (again the same as the method used for Greece). The guarantees that sit behind the SPV will be by individual nation.

Eurogroup spokesman Juncker noted that some EMU countries will have a fiscal expansion this year, but that the overall Eurozone fiscal policy stance will be clearly restrictive in 2011.

Company / Equity News

•Byron Wien believes the bearishness in U.S. stocks is overdone and that the extreme premiums in the put options market could be forecasting the next leg higher:
•Tesco has this morning announced that longstanding CEO Terry Leahy is to step down in March 2011, and be replaced by Phil Clarke, currently head of operations in Asia and Europe (ex UK) as well as Group IT. Tim Mason, currently President and CEO of Tesco’s US business will become Deputy CEO in addition to his existing responsibilities. This is pretty much as seamless a handover as possible – nearly a year in the future and a known and well regarded internal candidate – given Leahy has been CEO for 14 years. That said the market didn’t like it and the stock has shed 3.5% today.
•Apple’s CEO Steve Jobs introduced a thinner iPhone today with a sharper screen and video chat features, an attempt to ward off competition from devices running Google Inc.’s Android software. The iPhone has emerged as Apple’s top product, raking in 40 percent of revenue last quarter more than the Macintosh computer or iPod.
•Staying with tech , Sprint Nextel, the third- largest U.S. mobile-phone carrier, said its new HTC Corp. Evo 4G handset broke the company’s one-day record for sales of a single phone. The carrier likely sold 320,000 of the devices at its debut on June 4.
•ABB said Tuesday it is launching a 325 pence-a-share offer to acquire U.K.-based Chloride Group in a deal valued at GBP860 million. “
•Fiat has had its demands for more flexible working practices at the company’s Pomigliano d’Arco plant in Italy rejected by the Fiom union.
•Honda Motor suffered its second strike in China in less than a month as workers at a plant partly owned by affiliate Yutaka Giken Co. workers walked out demanding higher pay, forcing the parts maker to close the factory
•Autos data released in Asia overnight suggest that sales slowed from the elevated levels reached in recent months. In China, which has led the pick-up in emerging economies in recent months, auto sales slowed to a 16.8m annualised pace in May, Meanwhile, auto sales also slowed in Europe in the latest month, as car registrations continued to normalise following the expiration of various countries’ incentive schemes in the first half of the year. Of the major European markets, we estimate that German sales (where incentives ended in Q3 2009) were 34% lower in y/y terms in May. By contrast, US auto sales rose 3.8% in May, to 11.6m annualised. We estimate that this increase was driven, in part, by incentives offered during the month.
•Television advertising prices picked up quickly in March because of factors including a return of “dormant” advertisers and branding.
•Australian Prime Minister Kevin Rudd’s proposal to collect more tax from mining companies is shaping up to be an election-winning strategy. Just not for him. Rudd’s Labor party trailed the opposition Liberal-National coalition for the first time in four years, according to a Nielsen opinion poll released yesterday. Faced with intense criticism from BHP Billiton Ltd. and Rio Tinto Group, Rudd invoked powers normally reserved for national emergencies to buy advertising to defend the levy, which he says will help pay for wider tax cuts and improved health care.
•China and Hong Kong stocks were cut to “neutral” from “overweight” on speculation that policy easing may be “far away” and growth expectations will continue to fall, according to BofA Merrill Lynch Global Research. China is now the most “overbought” market in Asia while its yield curve has narrowed “sharply” to 102 basis points from 160 basis points in mid-April, strategists led by Sadiq Currimbhoy said in a report dated yesterday. They upgraded South Korea and India to “neutral,” and Singapore to “overweight.”
•The U.S. has supplanted China and Brazil as the most attractive market for investors as confidence in the global economic recovery wanes in the wake of the Greek debt crisis. Investors are putting their money on President Barack Obama’s stewardship of the U.S. economy even as his job-approval rating has declined, according to a global quarterly poll of investors and analysts who are Bloomberg subscribers. Almost 4 of 10 respondents picked the U.S. as the market presenting the best opportunities in the year ahead. That’s more than double the portion who said so last October, when the U.S. was rated the market posing the greatest downside risk by a plurality of respondents.

By The Mole

The Mole is a man in the know. I don’t trade for a living, but instead work for a well-known Irish institution, heading a desk that regularly trades over €100 million a day. I aim to provide top quality, up-to-date and relevant market news and data, so that traders can make more informed decisions”.© 2010 Copyright PaddyPowerTrader - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

PaddyPowerTrader Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules