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Daily Market Report 02/11/2011

European stocks declined on Thursday as investors, mostly driven by the technicals, booked some profits from the previous session’s rally. Investor’s confidence first test after Wednesday’s globally coordinated central bank move to ease interbank stress proved successful as French and Spanish bond auctions were well received and priced yesterday, with the Euro strengthening for a second day after the governments sold debt. The UK benchmark closed down 0.3% at 5.494, dragged by weaker commodity prices. The British manufacturing sector contracted for a second month in a row in November and at its fastest pace since June 2009, while the euro zone’s manufacturing sector shrank at its fastest pace in two years last month, as the slowdown in the periphery takes hold in the core.
Spot gold remains steady, after the euphoria around the liquidity injection that sent the precious metal up to around 1.750. Immediate support is seen at 1.675, where the recent bounce was triggered. The bulls that missed out on the recent small spike might be eager to get back in, just in case of another big move to the upside. Brent extended its losses yesterday due to slowing manufacturing growth in Europe and China, but managed to claw back some of it today. The black gold is trading at $110 this morning.
Today all eyes will be on U.S. nonfarm payrolls data due at 13.30 GMT. Analysts expect for the world’s top economy to add 125,000 jobs in November, a significant improvement from the 80,000 increase of the previous month. A strong NFP reading would likely point to a recovery in the safe-haven greenback against its sentiment linked counterparts, however once event risk passes, investors are likely to turn their attention back to the most worrying issue; the deepening euro zone debt crisis.
The markets have been pretty dormant since the joint central bank action, indicating that investors are still unsure about Wednesday’s move. Cheaper money should in theory stimulate the global economy; however, unless the economic situation was in a terrible condition, such an aggressive measure wouldn’t be necessary. Investors are rather baffled by the fact the fundamentals show no reason for optimism, while short-term technicals disagree. With the U.S. payrolls data due later in the day and an important European summit on December 9, investors would be wary of adding large positions going into the tricky year-end period.

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