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Daily Market Report 10/01/2012

European Shares
The euro zone drama continued on Monday with Merkel and Sarkozy showing their teeth to Greece and voicing their determination to press ahead with a tax on financial transactions which led to Cameron’s much discussed rejection of the new European Treaty last month. Yesterday’s meeting did not produce any concrete policy measures for the traders to watch, but it didn’t affect the market sentiment negatively either and today’s meeting between Merkel and IMF Managing Director Lagarde is likely to have a similar outcome. There is a bullish tone to early trading this morning with the main European indices edging higher. At 5662 the FTSE 100 is firmly back above its 200 day moving average, whereas the German DAX still languishes some 300 points below its 200 day moving average.
FX
There was an interest in the euro yesterday on the backdrop of the Franco-German meeting and traders piled into the single currency hiking it 70 pips against the dollar, but today the euro is reserving the gains. With the EUR/USD dropping below 1.2770 at the time of writing, we can expect further decline towards 1.2750.
Commodities
At 1619 gold is seeing a renewed interest this morning following two sessions of declines, supported by a steady euro ahead of key bond auctions in the euro zone this week. The floundering gold prices along with the low volumes indicate that investors are awaiting a clear trend. Despite worries about the strength of European economies Brent crude jumped above $113 this morning, spurred by tensions over Iran’s nuclear program. Energy investors are preparing to react to the EU’s decision on 23rd January on whether to embargo Iranian oil, as Europe is one of the largest buyers of Iranian crude.
Today’s Calendar
On the economic data front things are a little quiet in European hours. Greece will sell €1,25B in 182-day bills but the outcome is not likely to be particularly market moving. Investors will be following the meeting between Merkel and Lagarde for hints about more concrete measures.

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