Daily Market Report 07/12/11
Asian stocks shrugged off Standard & Poor’s second shot threatening to cut the credit rating of Europe’s financial rescue fund, following Monday’s warning that core euro zone member nations could see their coveted AAA rating being downgraded. European shares were called to open higher tracking Asia overnight, as investors are growing confident that the EU Summit this Friday will produce groundbreaking results. London’s benchmark index opened up around 30 points to 5.596, with LBG and RBS among the biggest risers.
In the FX market, the greenback sold off in overnight trade, down 0.3% against its leading counterparts, as Asian stocks rose and reduced demand for the safe-haven. The Euro is trading at 1.3440 against the US dollar this morning with support at 1.3329, Tuesday’s low, and resistance at 1.3547, Friday’s high. The single currency was up against the British Pound and the Japanese Yen, with EUR/GBP gaining 0.04% to hit 0.8596 and EUR/JPY rising 0.10% to hit 104.28.
In the commodity markets, gold prices are trading little changed today after posting the biggest daily loss in two weeks on Monday, with investors closing profitable gold positions to cover losses elsewhere. The precious metal is trading at $1.730 at the time of writing and the safe-haven status of the yellow brick is not likely to appeal to investors prior to the long awaited EU summit at the end of the week.
Looking ahead, the focus on the euro zone debt crisis will put the spotlight on today’s meeting between the French President Sarkozy and US Treasury Secretary Tim Geithner. Any comment in regard to the French-German plan for greater fiscal integration is likely to shake the markets. On the date front investors will be eyeing European Industrial production figures. UK production is expected to shrink for the fourth month in a row in nearly two years, while German output is expected to add a 3.7 % in the year through October, the weakest reading over the same period, indicating that even if the euro zone doesn’t break apart, the single currency and the sterling remain vulnerable, as slowing growth goes hand in hand with dovish monetary policy.