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Daily Market Report 13/01/2012

European Shares
European stocks pushed higher in a flurry of buying yesterday, trading just below a five-month high as market sentiment was boosted by the well-received Spanish auction and the supportive rhetoric at ECB’s monetary policy meeting. With Spain selling twice the planned amount today’s Italian auction is expected to see the three year costs falling. Despite the bullish tone to early trade this morning, European shares appear to be in a bounce mode at the time of writing with the FTSE 100 and the DAX reversing yesterday’s gains. After spiking to 5703 in the early session the UK blue chip index is pausing for a breath at 5687 with key resistance at the 5760 area and near-term support at 5600.
FX
The Euro saw renewed strength in the past two sessions, as investors appear happy to take on more risk and move out of the safe haven dollar, with the technicals suggesting that more gains are ahead. The bulls have dragged the Euro back above the 1.2820 level against the greenback and they seem to have the wind behind their backs. The single currency is also showing signs of reversal from record lows against the Yen, the Australian Dollar and the New Zeeland Dollar, but it is probably worth waiting for further confirmation before taking a counter-trend position.
Commodities
Gold prices retraced today after three sessions of decent gains as the successful Spanish bond auction indicated that the health of the global economy abated encouraging investors to turn to riskier assets. At 1.645 this morning key levels to watch are 1.566 to the downside and 1.670 to the upside. Brent Crude’s buying momentum eased yesterday with the black liquid ending Thursday’s session €2.5 down at €110.51, following a report that a proposed EU embargo on imports of Iranian crude would be phased in over six months. At 111.75 this morning it looks like the bears haven’t quite run out of steam, however the geopolitical tensions in the Middle East and the unrest in Nigeria are expected to prop up oil prices.
Today’s Calendar
Onto the main topics of today, the focus will be on Italy’s first long-term debt test of the year, seeking to sell up to €4.75 billion of bonds. While the Eurozone crisis remains unsolved, signs of reduced credit market stress are likely to encourage profit taking. Lots of economic data is also due today with the UK PPI released at 9.30 (GMT) and the US Consumer Sentiment at 14.55 (GMT) among the most notable.

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