Daily Market Report 04/01/2012
European equities kicked off 2012 with moderate gains supported by positive data and the New Year optimism but the reality of the debt overhangs in the financial markets. European stocks opened slightly lower today as Greece warned it could leave the euro zone by April bringing the attention back to the euro zone debt crisis at a time where US data continue to improve indicating the possibility of a recovery in the US economy. The FTSE 100 was taken to a five month high on the first day of trading in 2012 driven mainly by mining companies. The UK blue chip index is trading around the 5700 level at the time of writing. Bulls will be focusing on the near term resistance level seen at 5766.
The FX market started 2012 with an increased risk sentiment that led to a substantial US dollar decline against all majors with the aussie being the main beneficiary. The greenback managed to claw back the losses in the Asian session after the 0.9% slide that marked the largest daily drop in two weeks. The Euro made decent gains against the greenback yesterday with the single currency posting its biggest one day rally in about two months buoyed by positive economic data. The pair is trading around the 1.3000 level at the time of writing. Euro traders will be focusing on the Franco-German meeting on 9th January for further hints.
Gold began the year by recouping all of last week’s losses to post its largest daily rise in about two months. Despite opening lower this morning the precious metal is now trading in positive territory right above the psychologically important level of 1600. It looks like the yellow metal could regain its safe heaven appeal this year despite the concerns about the euro zone debt crisis. Oil prices jumped on the first day of trading in 2012 supported by fears of potential supply disruptions from Iran and strong economic data from China and the US with Brent holding steady around $112 a barrel. Next level for the bulls to watch is November’s high at $115.48.
On the economic front, the swathe of service data released from France, Germany and the Eurozone are followed by US data with Factory Orders among the most notable. Investors will be closely watching the first significant euro zone bond auction of 2012, with Berlin offering up to € 5 billion worth of 10 year bonds.