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Daily Market Report 11/01/2012

European Shares
European indices edged lower this morning despite a strong Asian session overnight, where shares hit a month-high boosted by Wall Street. US shares climbed to five month highs, reflecting the renewed investor sentiment over the pace of a recovery across the other side of the Atlantic. In the euro area the debt situation is nowhere near resolved. Amid fears of potential downgrades investors will be watching closely the meetings of European officials which have not been a game-changer yet. After Fitch announced that France is not to be downgraded this year, Italy becomes the next candidate on the road to downgrades. The FTSE 100 opened lower today and is now reversing yesterday’s gains. It looks like the prospect of a new recession rife on investors’ minds with rallies being followed by a bout of profit taking. At 5677 at the time of writing, key levels to watch are 5318 to the downside and 5762 to the upside.
FX
While technical warn of a correction, any attempt for the Euro to establish a decent corrective rally is short-lived with investors still extremely nervous about recovery prospects in the Eurozone area. At 1.2772 against the US Dollar yesterday’s gains have now been completely eradicated, bringing the recent multi-month lows at 1.2661 from Monday back into focus. The sterling reached a high today of 1.5485 and the 1.5500 psychologically important level could potentially prove to be key in trading today. A rejection from the 1.5500 area would encourage the bears making the recent support area lows around 1.5350- 1.5400 key level to watch.
Commodities
Gold has seen a renewed interest as it made strong gains yesterday and is firmly back above 1600 trading at 1643 this morning despite a stronger dollar, as persistent worries over the euro zone crisis lured investors to the safety status of the precious metal. Brent crude slipped below €113 this morning as the euro zone drama continues to weigh on sentiment, but supply concerns triggered by Iran’s dispute with the West and the unrest in Nigeria are helping the black liquid to cap the losses.
Today’s Calendar
On the economic data front things are a little quiet today. Tomorrow investors will be eyeing the ECB policy meeting along with the Spanish Treasury aiming to raise between €4 billion and €5 billion via three debt auction, while on Friday the Italian Treasury is expected to offer up to 4.75 billion of fixed-rate bonds.

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