Daily Market Report 14/12/11
US equities and Asian markets came under pressure yesterday with the focus falling on the Federal Reserve that warned about the US economy’s exposure to the euro zone crisis and failed to take additional measures to stimulate growth. European stocks fell in early trading today, tracking Wall Street, after Tuesday’s choppy session. Uncertainty prevails in the markets in the last days before the year ends, as last week’s plan delivered by the EU leaders has already come under question. The FTSE 100 is trading up at 5,460 this morning. Intraday support is seen at the 5.412 area. The bulls are tentatively buying into the recent weakness hoping the support will hold out and that year-end rally will materialise.
In the currency market, it looks like the markets are getting increasingly unconvinced with last week’s result. The EUR/USD managed to break and close below the critical September lows, leaving the door open for further downside extension. The pair is trading at 1.3022 at the time of writing and is vulnerable to deeper selloff through the 1.3000 psychological levels. Next key support for the single currency is seen at 1.2887, January’s lows. The dollar index rose to a 11 month high buoyed by reduced expectations of further monetary easing after the Fed’s less pessimistic assessment of the US economy.
In the commodity markets, gold’s selling momentum continues, with the precious metal trading at a two month low level, down 4.7% over the past two sessions, as the FOMC supports dollar safe haven. Brent crude aliped back around $109 after rising more than $2 on Tuesday, as oil investors were seen booking profits following the Federal Reserve warning that the turmoil in Europe poses a risk to the US economy. This morning the black gold is trading at 108.71. Further volatility is expected at the oil markets as all eyes are fixed at today’s OPEC meeting. The deal is expected to restore some credibility to the OPEC countries after talks fell apart in June. The expected agreement includes a 30-million barrel-a-day cap on output for all 12 OPEC members for the first half of the year, keeping production at about 3-year high levels.
Apart from the OPEC meeting in Vienna, investors will be eying the UK monthly unemployment figures and the industrial production data for the European Union. Following successful auctions from Spain, Belgium and the EFSF, today’s German and Italian auctions will be in focus as they come to the market for the final time this year. Bond yields are expected to reach record highs today, with the yield on outstanding Italian debt expected to climb as much as 6.3%. Safety-linked German paper may be dampened as Germany still remains on watch negative by S&P.