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Daily Market Report 24/01/2012

European shares
Although no agreement for a Greek deal is in sight yet, investors appear encouraged by the ramped up EU official efforts with the European markets remaining strong in the face of mounting concerns over the European debt crisis. The increased optimism in equities seen throughout this year is very encouraging for the outlook in 2012, but it is yet to be seen how long this optimism can last. With the FTSE 100 and the German DAX leading the way it could only be a matter of time before the French CAC also breaks above its 200 day moving average on the daily chart. At the time of writing the FTSE is just in the red at 5731 as it seems to be finding the 5770 area a bit of a struggle for now. Economic finance ministers will again meet today and market participants continue to look for some form of a swift resolution.
FX
The uncertainty around the Greek debt swap negotiations has led to considerable volatility for the single currency and ultimately allowed EUR/USD to turn its current bear trend. In a surprised show of strength this morning, the euro surged past the all important 1.3000 level to reach a high of 1.3076. Given the depth the euro has seen recently, a bigger rebound should not be ruled out, although the fundamentals suggest the opposite.
Commodities
Gold’s rally is being called into question this morning with investors awaiting the outcome of a two-day Federal Reserve meeting ending on Wednesday for any signs that interest rates might stay lower for longer, as that could put some pressure on the U.S. dollar. At 1678 this morning the precious metal is giving the bulls hope that we might see a test of the all-time highs set back in August and September last year. Things have been tough for Brent crude lately. After the EU agreed to ban imports of Iranian crude from July Barack Obama announced further sanctions against the Middle East country. Whereas the tension pushed the prices higher, fears over demand growth stemming from protracted negotiations over Greece’s debt are capping any gains this morning. At the time of writing Brent crude is trading down at $110.30.
Today’s Calendar
Earlier today, the Bank of Japan left policy unchanged as was widely expected but also downgraded its assessment for the economy for the third straight time. Looking ahead, lots of data are out today with a series of European flash PMIs among the most notable during the European hours. The region-wide composite PMI reading is expected to rise to 48.5 in January from 48.3 in the previous month, meaning both the manufacturing and service sectors shrank at a slower pace. The Fed is set to kick off its two day policy meeting and will release more details on how bank presidents voted for the first time.

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