Greg Secker – Global Market Update

U.S. stocks closed higher on Thursday as investors turned back an early sell-off, thanks to a rebound in oil prices. Yesterday, the Dow Jones industrial average ended the session 16 points to 9,542 – its eighth straight session of gains, led by Boeing Co. Yesterday, the Nasdaq Composite Index finished 2 points ahead at 1639 and the S&P 500 also ended 2 points higher. Dell surged after it posted sales and earnings that beat expectations just before the close. But financial stocks provided the catalyst for the market. In equities, Asian stocks are trading mixed, with most technology names being supported by better than expected earnings from US computer maker Dell. The best performing sectors on the Nikkei include technology companies and financials, while the worst performing sector is telecommunications

U.S. second quarter’s Gross Domestic Product was left unrevised at -1%, better than expected, and showing a substantial improvement after the -6.4% posted in the first quarter. On the negative side fears about China adopting tighter economic measures to prevent its economy from overheating after huge economic stimulus, have arisen concern among investors. Recovery in the Japanese economy is fragile as today we witnessed reports showing more deterioration. Unemployment in Japan inclined exceeding forecasts along with falling household spending that accounts for half of the economy, while consumer prices are still declining indicating deflation risks.

Due for release today there are the GBP GDP, GBP Private Consumption, GBP Government Spending, GBP Exports, Euro-zone Consumer Confidence, USD Personla Income, USD Michigan Confidence.

On Friday, the FTSE 100 closed at 4,850.89 up 2.9% for the week. On Friday, the Dow Jones industrial average 9,505.96 up 1.98% for the week. On Friday, the Nasdaq Composite Index closed at 2020.9 up 1.78% that week. The S and P 500 index closed last week up at 1026.13 up 2.20% that week.

Governments around the world are still sitting on multi-billion dollar losses from their direct shareholdings in banks, in spite of a strong rebound in equity markets in recent months. In contrast to Switzerland (which sold its 9 per cent UBS stake last week) the world’s other large economies – except the US – are sitting on combined losses of $10.8bn relating to their holdings in the equity of listed banks they bailed out over the past 12 months. In the UK, the Institute of Chartered Accountants in England and Wales reports that UK business confidence has turned positive for the first time in 2 years, with the business confidence monitor (BCM) showing a record rise to +4.8 from -28.2.  This is the biggest quarterly improvement since the monitor began in 2003. The FT reports that London’s Aim market might have recorded one of its worst performances in 2008, but it appeared to have had little damping effect on the pay packages for directors. Jean-Claude Trichet; president of the European Central Bank, has rounded on his US critics over charges that he has been too cautious in his handling of the economic and financial crisis in the Eurozone, reports the telegraph. They accused Mr Trichet and the ECB of waiting too long to cut interest rates and being more cautious than the Fed in the way they attempted to stimulate the Eurozone. Mr Trichet defended his position that the ECB was guided by its primary aim, which was to deliver stable prices and to revive bank lending.

EUR/USD and GBP/USD trading lower in early European trade at 1.4320 and 1.6464, respectively. The JPY has weakened overnight, USD/JPY up at 94.80 from around 94.30 on Friday, while EUR/JPY is up at 135.81 from around 135.07. The JPY weakness comes with general risk appetite in good shape at the start of the new week, hopes growing that the global economy is coming out of recession. Asian stocks have made gains overnight.

This morning, Gold is at, 954.60 USD, Copper 289.85 USX and Brent Crude 74.61 USD. Steadily rising commodity prices and improving economic confidence are supporting oil and gas stocks hammered by last autumn’s unprecedented downturn, writes the Independent. China July copper imports fell 23% and coal prices are at their highest in a year as a drop in Chinese mining output has forced the country to import.

Due for release today, according to Greg, there are the GBP Nationwide House Prices, CAD Retail Sales, CAD Retail Sales Less Autos and USD Chicago Fed National Activity Index.

Yesterday, notes Mr Secker, , the FTSE 100 closed up by 66.91 points to close at 4,756.58. The index saw a broad based recovery, with miners, oils and financials showing strength. Yesterday, notes Mr Secker, , the Dow Jones industrial average gained 70.89 points (or 0.76%) to end at 9,350.05. Yesterday, notes Mr Secker, , the Nasdaq Composite Index climbed 19.98 points (or 1.01%) to close at 1,989.22. The S and P 500 index was up 10.91 points (or 1.09%) to finish at 1,007.37. US stock increased for the 3rd consecutive session, financial stocks showed gains after US manufacturing data and a rebound in Chinese stocks improved risk appetite.

In July the figures from the Office for National Statistics (ONS) showed that government net borrowing hit a record £8bn following a slump in tax receipts. Receipts are shrinking faster than the Treasury had predicted. Alistair Buchanan, chief executive of Ofgem, the energy regulator, has had a meeting with some of Britain’s largest energy companies after it emerged they were forcing as many as 250,000 small businesses to pay for their energy up to seven months in advance.  There is increased concern that this could put these companies into difficulties. Yesterday, notes Mr Secker, , the government cut the price of its £5bn credit insurance guarantee scheme to help protect suppliers from the collapse of their customers. The scheme lets suppliers buy six months of government-backed insurance to either restore cover to its original level or to double the amount they can obtain from the private sector. British businesses are more confident about their trading than they have been for 13 months, According the Lloyds TSB Corporate Markets Business Barometer, 30 per cent of businesses questioned in July expected their business activity to rise over the next year. The Council of Mortgage Lenders (CML) said yesterday, gross mortgage lending rose 26 per cent in July on the previous month but remains 36 per cent down on 2008. The Obama administration said yesterday, the US’s ‘cash for clunkers’ scheme will end on Monday. The government said the scheme was “an overwhelming success”, the program was called to a halt to make sure Congress does not exceed the allocated $3bn for the project. A stabilising US financial sector has allowed Barack Obama to trim 2009 budget deficit projections. Officials said, the White House budget office will lower its deficit forecast next week for the current fiscal year to $1.58 trillion (£95bn) from $1.84 trillion after removing $250bn set aside for bank bailouts. The Industrial and Commercial Bank of China (ICBC) (which is the world’s largest bank by market value), posted a 3 per cent rise in net profit in the first half from the last year.

Cable is firmer from earlier trade; presently up at 1.6491 but still currently below its open. Technical supports 1.6420, 1.6400 and 1.6375, resistances 1.6495/00 and 1.6515/25.EUR/USD has ticked higher in early trade, presently at 1.4250. The low so far has been 93.49 in USD/JPY and it is certainly unusual to say that USD/JPY is leading the way but that has been the case today. It is currently climbing back up to the 94.00 mark.

This morning, Gold is at, 941.00 USD, Copper 273.35 USX and Brent Crude 73.16 USD.

Due for release today, according to Greg, there are the USD existing home sales and Eur-Zone Purchasing Managers Index.

Yesterday, notes Mr Secker, , the FTSE 100 closed 0.9% higher I closed 40.77 points higher at 4,685.78, this was led by gains from banks and miners which recovered from losses in the previous session. Yesterday, notes Mr Secker, , the Dow Jones industrial average was up 82.60 points (or 0.9%) at 9,217.94. Yesterday, notes Mr Secker, , the Nasdaq Composite Index was up 25.08 points (or 1.3%) at 1,955.92. The S and P 500 index was up 9.94 points or 1.01% at 989.67. Better than expected results from big retailers urged investors back into the market. European stocks inched up on Tuesday as the main indices covered lost ground during Monday’s session when markets hit a four-week low.

According to Knight Frank head Richard White, the property downturn has now reached the bottom. Tesco, the UK’s biggest retailer is continuing to lose market share. Tesco saw its market share of the grocery sector fall over the 12 weeks to August 9 as competition among the supermarkets intensified. Unexpectedly Inflation held steady in July. The CPI (consumer price index) was unchanged from June, keeping an annual rate of 1.8%. However many economists are still warning that deflation looms. Investor confidence in Germany, rose sharply this month as hopes grew that the economy will recover faster than expected. US producer prices fell by a larger-than-expected amount in July and notched up a record decline compared to a year earlier. The Labor Department said that the seasonally adjusted index for prices paid at the farm and factory gate dropped by 0.9%. The recovery has begun – although recovery will be unpredictable and protracted, according to the International Monetary Fund’s chief economist, writes the Telegraph. “The recovery has started,” claims Olivier Blanchard in a paper to be published by the IMF on Wednesday.  Corporate Bond issuance has risen to a record £1,103 billion in 2009, with four months of the year to go. Investors have moved their cash into corporate bonds because they offer higher returns than low interest rates on bank deposits and savings accounts. The telegraph reports that China and Australia have signed their biggest ever trade deal with PetroChina, they have agreed to buy A$50bn (£25bn) of natural gas produced by ExxonMobil.

Cable is down in early trade, presently at 1.6489. The move comes with risk aversion picking up as Chinese stocks again come under heavy pressure. This could have been affected by comments made by the next UK Prime Minister David Cameron that the British Government could default on it’s debts. EUR/USD has slipped back in early European trading, giving up some 25 points, presently at 1.4097.
This morning Gold is at, 939.00 USD, Copper 271.40 USX and Brent Crude 71.87 USD. There is fear is that fiscal stimuli flooding into the global economy will result in too much cash chasing too few grains and therefore causing higher prices. Sugar prices have been pushed to their highest level in three decades due to Global shortage, prices of soyabeans and corn have languished due to optimal summer growing conditions in the US Midwest.
Due for release today, according to Greg, there are the GBP Bank of England Minutes, CAD Consumer Price Index, CAD Consumer Price Index, CAD Bank Canada Consumer Price Index and CAD Leading Indicators

Yesterday, notes Mr Secker, , the FTSE 100 fell 1.5% by the close yesterday, dropping 68.96 points to close at 4,645.01. Mining, oil and banking stocks lead the losers. Falling metals prices due to worry over the economy particularly added to the poor results of the mining sector. Yesterday, notes Mr Secker, , the Dow Jones industrial average fell 186.06 points or 2% to end at 9,135.34. Yesterday, notes Mr Secker, , the Nasdaq Composite Index lost 54.68 points (or 2.75%), to close at 1,930.84. The S and P 500 index slid by 24.36 points (or 2.43%) to close at 979.73. The US stocks had their worst loss in 7 weeks yesterday as weak data from Japan and a weak data from Lowe’s dampened hopes about the economies growth. Japan’s GDP pulled out of recession in the 2nd quarter, but it was at a slower rate than expected. Lowe’s stock dropped 10.3% . The Shanghai Composite index, China’s most-watched benchmark, fell 5.8 per cent to 2,871 on Monday, a drop of more than 17 per cent

Investments in the private equity sector plummeted by 80% in the first half of the year, compared to the same period the year before. International Financial Services London have underscored the ongoing lack of debt as causing this restrictive effect on the equity sector. Micheal Page recruitment company has reported a 50% drop in profits for the first half of the year, but also stated that the jobs market in the UK was showing signs of stabilization. The number of new jobs in the city dropped by 7% month-on-month in July, but is still at its second highest level this year, according to Morgan McKinley’s employment monitor. Japan became the latest major economy to emerge from recession yesterday, after 4 consecutive months of contraction its GDP grew 0.9% for the April-June quarter. This has also come of the back of news from Germany, France and Hong Kong showing signs of growth. The US Federal Reserve said yesterday it was extending to mid-2010 the Term Asset Backed Securities Loan Facility aimed at boosting lending in the ailing commercial real estate market. China on Monday signaled a softer stance in its protracted iron ore negotiations with global miners, when it announced a face-saving deal with Australian miner Fortescue Metal. China has been forced to modify its demands in the face of a sharp rise in spot ore prices. Chinese commodity imports are expected to slow in the second half of the year from record levels as the impact of the country’s stimulus package, arbitraging opportunities and stock-piling fade, according to a Royal Bank of Scotland report being published Monday.

Yesterday, notes Mr Secker, , the Sterling fell against the dollar while the price of oil dropped, causing some analysts to call an end to the rally. Cable has pulled up this morning, presently up at 1.6406.  Technical resistances now lie up at 1.6420 and 1.6450/60. While EUR/JPY is up at 134.43. EUR/USD has jumped higher in early European trade, presently at 1.4129.  The move comes with Asian stocks settling down after yesterday’s steep losses.

Oil prices fell on Monday while base metals moved lower and sugar prices slipped as a correction across commodity markets went into a second week. Gold fell 1.5 per cent to $932 a troy ounce, under pressure from the strength of the dollar. Copper dropped 3.1 per cent to $6,050 a tonne after hitting $6,460 on Friday, a high for 2009.

Due for release today, according to Greg, there are the GBP Consumer Price Index, GBP Core Consumer Price Index, Eur German ZEW Survey, Euro-Zone ZEW Survey and USD Producer Price Index, USD Producer Price Index.