Daily Market Report 30/11/2011
European shares extended their rally for a third day on Tuesday buoyed by positive consumer confidence data from the other side of the Atlantic and on hopes that euro zone finance ministers would make progress to stem the debt crisis. The first day of the summit though proved to be a non-event, with European policymakers buying more time, as no meaningful progress towards materially addressing the sovereign risk threats was produced. The focus of the summit was on the mechanics of implementing October’s plan to leverage the EFSF, which will possibly have to be assisted by the IMF, as well as the disbursement of the latest tranche for Greece. The yield on the Italian 10 year bond hit a euro era high of 7.89%, firmly embedded in unsustainable levels. The Euro resumed its decline against the greenback, with the EUR/USD pair hitting a seven week low at 1.3258 during late Asian trade. At the time of writing the Euro is hovering around 1.3266 with immediate support at 1.3228.
The chancellor’s autumn statement painted a bleak picture for the future of the UK economy. George Osborne revealed that official growth forecasts have been shlashed and admitted the government is preparing for the a double-dip recession scenario, The OBR forecast growth of 0.7% for the next year was a sharp downgrade on its March prediction of 2.5%. The FTSE slid after the chancellor’s announcement, but managed to claw back into positive territory at the end of an uneven trading day. The UK benchmark is trading below the 5300 level at the timing of writing.
In the energy market, US crude oil futures fell in early trade as low as $98.87 a barrel after steep gains in the previous session, as an unexpected jump in crude inventories weighed on prices. In the commodity market, gold remained steady on Tuesday as investors continued to watch developments in Europe. Today however it looks like the sovereign debt concerns weight heavily on the precious metal’s price, as investors liquidated long positions and the yellow metal reached the psychologically important level of 1.700. At the time of writing gold is testing the support level of 1705.
The UK economic calendar today is thin on the ground. Investors will be watching the euro zone releases. The annual CPI figure for November is expected to remain steady at 3% and the unemployment rate for October is also expected unchanged at 10.2%. The US will join the session later with the ADP employment change for November, the nonfarm productivity and the unit cost labour indexes for the third quarter and the Chicago purchasing manager indicator among the most notable.