Daily Market Report 15/12/2011
European shares fell to a two week closing low in thin volume on Wednesday on fears that a downgrade of France sovereign rating would add to the euro zone crisis. The pre-summit warnings started materializing in the end with Fitch downgrading its credit rating on five major European commercial banks and banking groups yesterday due to their exposure to troubled euro zone countries. The auction of Italian sovereign debt saw the euro zone’s third-largest economy pay a euro era record yield of 6.47% to sell five-year paper. Despite declines in Asia and Wall Street European shares opened higher today led by the insurance sector. The FTSE opened slightly higher at 5.416 and attempt to claw back from yesterday’s 2.25% sell-off this morning. However the market is lacking clear direction and early gains could evaporate quickly as the comments of rating agencies remain in the background.
Despite all the efforts since the EU summit, very little seems to have changed. The continued pressure has placed the Euro in a very precarious situation. The psychologically important 1.3 area has been passed through with relative ease and it looks like the euro liquidation is in full throttle. The next level to the downside to be watched is the yearly low at 1.1927.
In the commodity markets, it looks like tough days are to come for oil. Along with most other commodities, oil prices plummeted the most in nearly three months on Wednesday. The US crude fell below $96 a barrel and is likely to drop further should the global economic slowdown continue despite actions by the OPEC oil producers. The latest demand forecasts from the OPEC and the IEA could push oil prices further down, as they look still look too high. Gold dropped 3.5% yesterday on the back of a stronger as the economic outlook dims. This morning the precious metal is trading around the $1,58 area with no sign of a rebound yet as investors remain nervous.
On the economic data front, the calendar is pretty busy today. In European trading hours figures to watch includes euro zone flash PMI for December at 9:00am UK time, the ECB monthly bulletin also at 9:00am and UK retail sales data at 9:30am.