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Daily Market Report 18/01/2012

European Shares
After the flurry of buying seen in yesterday’s session buoyed by positive data from China, Europe and the US European stocks retreated this morning. The euro zone drama is back to focus again as Greece resumes talks with its creditors in an attempt to stave off a default and Portugal’s debt auction takes places later in the day. The increased optimism in equities seen so far this year is very encouraging for the outlook in 2012, indicating that at the time being there is enough optimism to prevent a major crash. The FTSE 100 remains tentatively above its 200 day moving average, while the German DAX is currently trading only some 60 points below its 200 day moving average.
FX
The euro managed to shake off much of the negative sentiment in yesterday’s session and is now trading back towards 1.2800 buoyed by better than expected German ZEW and upbeat comments from the IMF. A break above Thursday’s high at 1.2874 could alleviate downside pressure and initiate a significant short-term correction. The sterling will be in focus this morning with the release of the labour market report. As the expectations are dovish the cable could give back the rebound from earlier this week. At 1.5343 at the time of writing key level to watch to the downside is October’s low at 1.5266.
Commodities
Gold also benefited from yesterday’s risk appetite as speculators picked up the precious metal as high as 1.666 as data form China, Germany and the US eased fears over the global economies. At 1.647 this morning the precious metal appears to be in bounce mode. Short-term support and resistance sit at 1.600 and 1.686 respectively. For Brent things have been difficult for the bulls. Crude rose above $112 this morning on the back of a weakened dollar, but it looks like it can’t maintain any traction above that level, However further strength can’t be ruled out if tensions continue to mount.
Today’s Calendar
Economic data pick up again today with the UK jobless claims change released at 9.30 (GMT). The slowdown in global trade, the rise in unemployment and the drop in consumption generate a weakened outlook for the labour market. The US economic docket today is highlighted by December’s producer price index and industrial production data. As the data from the other side of the Atlantic continue to improve, a further quantitative easing looks less imminent, with the dollar likely to remain well supported against its counterparts.

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