Monday Morning Markets August 13, 2012

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Wall Street ended the week with gains, although markets were flat on Friday after disappointing economic data from China and heightened U.S. fears about a global slowdown.

The Dow Jones, S&P 500 and NASDAQ closed the day slightly higher. The Dow Average added 0.4% while S&P 500 gained 0.2% and the tech rich NASDAQ added 0.1%.

The negative eco data from China is concerning because the global economy is still the backdrop for the market. Traders were hoping that all the efforts by the Chinese government to boost the economy would have at least stopped the decline. Most July data printed below forecasts. Traders are still very cautious because of the global growth concerns.  Just last week the OECD warned that global growth for 2012 was below expectations.

On the domestic front, investors digested a report that showed falling U.S. import and export prices. Export prices fell 0.3% in July, while import prices declined 0.4%. Import prices have been declining since April, and export prices have been falling since May. Although this sounds negative the US trade balance declined which is viewed as positive.

The Treasury Department budget showed a monthly deficit of $70 billion in July, higher than the $60 billion deficit in June.

Weaker-than-expected data on Chinese exports on Friday triggered selling across European markets, with theleading exchange ending a five-day winning streak. The UK’s FTSE 100 fell by 0.1% and France’s CA declined by 0.6%. The DAX in Germany dropped by 0.3%.

 The Asian indices are trading on a mix note this morning with the Shanghai & Kospi are down by 0.5% & 0.3% respectively. However, Strait Times & Taiwan are trading marginally higher by 0.2% each. Hang Seng & Nikkei are trading on a flat note.  

The Euro posted its first weekly drop against the US Dollar in three weeks on Friday as investors refocused on the uncertainty surrounding possible European Central Bank action to contain the debt crisis and deteriorating growth in the euro zone.  In the Asian session today, the euro is trading just under the 1.23 price level.

Uncertainty over monetary easing from the European Central Bank weakened the euro and continues to weight on traders’ minds.

The dollar index, which measures the US unit’s performance against a basket of six major rivals, fell to 82.541 on Friday from 82.646 on late Thursday, declining 0.2% on the week.

Gold rallied at the end of the day on Friday and remains in positive numbers on Monday morning, as disappointing Chinese trade and new bank lending data suggested that some urgent action would be required to boost sputtering growth in the world’s second-largest economy.

Gold holdings  of SPDR gold trust, the largest ETF backed by the precious metal, increased to 1,258.15 tons, as on August 10. Silver holdings of iShares silver trust, the largest ETF backed by the metal, declined to 9,742.43 tons, as on August 6.

Crude oil futures declined, after the International Energy Agency warned sluggish global growth could restrict demand and as China reported weaker-than-expected trade data. The International Energy Agency on Friday cut its estimates for global oil demand for several years, trimming its 2013 demand forecast by 400,000 barrels per day in the light of a “worrying slowdown” in global economic activity.

China’s imports of crude oil sank in July to a nine-month low, as refineries cut output due to reduced demand.

Natural gas fell to a one-month low on NYMEX, capping a third weekly drop, on forecasts of cooler weather that may cut power plant demand and slow declines in a supply glut. The number of rigs actively exploring for oil and natural gas in the US rose by one this week to 1,931. 1,432 rigs were explored for oil and 495 were searching for gas while 4 were listed as miscellaneous.

Monday is expected to be a light trading day with little in eco data and news flow.

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About: FX Empire Analyst - Barry Norman

Barry produces a private Daily Market Review newsletter that is distributed around the globe to over 25,000 subscribers and recently published a book on Options Trading that is available from amazon.com

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