24option Market Review November 15, 2012

Global Market Commentary

Wall Street traded with a negative bias with the S&P 500 off by 1.4% on weakness in the precious metals arena following the release of poor earnings from a closely-watched mid-tier gold mining company. Bonds were essentially flat as the Fed released minutes from its October 24 meeting that carried a mixed message of the possibility of more Treasury purchases and the possibility that the Fed might change the language used for interest rate guidance. Add a weak U.S. retail sales report, a somewhat confrontational discussion of the ‘fiscal cliff’ by President Obama, and news of rising tensions in the Middle East, the outcome gives us strong crude prices, weak equities, flat bonds, and a flat DXY.

Today, Germany, France, Italy, and the eurozone are all scheduled to release GDP numbers. Traders are expecting weak outcomes in line with consensus expectations for a 0.1% q/q print in Germany, a 0.2% q/q print in France, and a -0.1% q/q print for the overall eurozone. Eurozone CPI will be released as well and consensus is calling for a 0.2% m/m print that pushes year-on-year CPI to 2.5%. Watch for headlines out of China on the constitution of the new Politburo after the Central Committee was unveiled yesterday.

Currency Market Commentary

EUR/USD

The euro is holding near a two-month low yesterday, having halted a five-day losing streak the previous day on profit-taking, helped by minutes from the FOMC giving the possibility of more bond buying in the US next year. A lot of the Fed’s moves will be contingent on the outcome of the US fiscal cliff. The euro is trading at 1.2745

GBP/USD

The Bank of England kept the door open to further bond purchases. Speaking after the quarterly inflation report was released; Governor King said that the MPC has not lost faith in additional asset purchases as a policy tool, and that there was no decision to halt Gilt purchases permanently. Sterling is trading at 1.5851

USD/JPY

The greenback traded at 80.22 yen in early Asian session flat from late U.S. levels and not far from a six-month high of 80.68 yen hit earlier this month. The dollar jumped on Wednesday after the news of a snap election in Japan fuelled speculation of more aggressive monetary easing by the Bank of Japan.

Commodities Market Commentary

Metals

Gold edged up yesterday as the euro steadied against the U.S. dollar, while platinum extended gains to its highest in three weeks on expectations that demand could exceed supply this year. The market seems to lack the impetus for a decisive rebound, as investors continued to fret about the looming fiscal cliff in the United States and a delay in releasing more aid to debt-stricken Greece. Gold is trading at 1726.45 holding close to the 1725 price range.

Energy

WTI oil prices held at $86 a barrel on the NYMEX despite reports of increased tension in the Middle East. News of an Israeli assault on targets in Gaza, in which a top Hamas military official was killed, injected tension in the market. Prices had several reasons to go down, but those reasons were balanced out by news from Israel.

The IEA reported earlier that fourth quarter demand would slow by 290,000 barrels per day to 90.1 million bpd, “reflecting persistent weakness in Europe and the impact of Hurricane Sandy in the United States.”