Daily Market Report 06/12/2011
European stocks were called to open the day lower tracking the risk averse mode throughout the Asian trading session overnight, where stocks and the single currency declined after Standard & Poor’s warned that a downgrade of core euro zone countries would be considered, unless the euro zone leaders came to a decisive agreement on how to deal with the debt crisis at the crucial summit on Friday. The S&P announcement came only hours after the French-German meeting on Monday unveiled sweeping plans to change the EU treaty, indicating that Europe has run out of time and that a collapse could trigger economic ramifications across the globe. Mounting hopes that European leaders are nearing a resolution have sparked a spike in the UK benchmark index but Goldman Sachs have forecasted that the blue-chips could sink to 4,700 before climbing back to 5.400 within six months time and rallying to 5,800 by the end of 2012. The FTSE is trading up at 5.561 this morning.
In the commodity market, gold’s safe haven status was nowhere to be seen yesterday. US gold futures lost 0.6% to around $1,725.The precious metal posted its biggest daily loss in two weeks on Monday on fears of a possible mass credit rating downgrade for euro zone nations, with investors locking in profits before the end of the year. In the FX market, the dollar index edged higher at the expense of the precarious state of euro, weighing on dollar-priced commodities. Brent dipped towards $109 depressed by a stronger US dollar and on euro zone downgrade risk. Market participants are eyeing next week’s OPEC meeting, where an agreement on a new production target that legitimizes current cartel output at around 30 million barrels a day is expected.
Today sees the Bank of Canada interest rate announcement. Analysts expect the benchmark overnight interest rate to remain steady at 1%. We are now in perhaps the most important week of the entire year and it is clear that market participants are nervous. With five rate decisions on tap, as well as numerous growth figures due from the world’s most advanced economies exceptional volatility in the coming days is expected to follow.