Daily Market Report 06/01/2012
The beginning of the week saw a rally in risk assets as US data continue to top estimates with stocks advancing across the board, but as the situation in Europe deteriorates and the Germans steadily oppose to expanding the European bail-out, investors continue to cast doubt over the strength at the start of the year. Yesterday’s French bond auction saw yields rise on 10 to 30 year bonds, a day after a German 10 year bond sale attracted limited interest. European equity markets are trading sideways today after indexes in Asia edged down overnight and the euro reached fresh lows. The FTSE 100 opened 38 points down but it looks like it is in bounce mode this morning. The UK blue chip index is trading up at 5644 at the time of writing. Support and resistance over the near term sit at 5322, 5108 and 5620, 5760 respectively.
The US dollar hit a one-year high against a basket of currencies and the euro fell to a 16-month low against the dollar and sterling yesterday as worries about the euro zone’s fiscal stability persisted. It looks like there is a bit of a bear market squeeze at the moment and the pair has moved higher to 1.2800. Next key support for the single currency comes in by 1.2670 area and we could see a test of this sooner rather than later.
In the commodity sector, crude fell toward $112 a barrel today, as a surprise build in US oil stockpiles tempered gains from fears of supply disruption on mounting tensions between Iran and the West, but managed to rectify some of the damage and is trading up at $113.52 at the time of writing. Brent is set to rise more than 4% in the first week of 2012 as Iran threatened to shut the world’s most important oil route as a response against tighter sanctions form the US and a possible ban on its crude exports to Europe. Gold is trading steady today at 1.622 as investors remain nervous over the euro zone debt crisis.
The highlight of the day comes from other side of the Atlantic with the release of the first Non-Farm Payroll of the year. With yesterday’s ADP employment report crushing estimates with a print of 325K, the NFP figure is expected to continue in the same direction, which could fuel a rally in risk. Key economic data from Europe today includes EU unemployment and retail data due at 10.00 GMT.