28 September 2012 | UWCFX Daily Market Video Review

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Spain’s budget triggers market optimism

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The new Spanish budget which makes austerity rather than tax cuts a priority has been well received by markets. The MSCI-index for South East Asia Pacific rose with 0,7 percent. Brent crude registered its highest level in weeks and jumped above USD 112 a barrel.  The Euro and commodities drifted higher with USD on the defensive. Euro/USD is trading at 1.2935. Also smaller and more risky currencies opted up. The New Zealand KIWI and the Indian rupee are among the winners over the last weeks. The Japanese yen continues up. USD/JPY is at 77,55.

The Spanish government announced Thursday a detailed timetable for economic reform with sharp spending cuts and no tax hikes. Today president Francois Hollande will present his austerity budget for France, punishing the rich. Spain is simultaneously conducting negotiations with European Union authorities on the terms for a possible aid package. A successful conclusion of these talks shall pave the way for European Central Bank bond-buying and easing of Spain and Italy’s borrowing strains. 

The US Finance Secretary, Timothy Geithner, stated yesterday that Europe still was the weakest link in the global economy, but the last measures taken by the European Central Bank, ECB, had given ammunition which made Europe’s situation far better than it was three months ago.  Early Asian trade also saw a spike in Chinese shares triggered by speculation on further Chinese economic stimulus. Risk seemed primed for a comeback, and in such a scenario Australian dollar may be one of the biggest beneficiaries. 

As the Yen continues to strengthen numbers for Japan’s industrial output in August was very disappointing. Industrial production is down, and all the big Japanese car makers presented negative growth figures.  With central banks printing more money, gold is on the offensive and reached a week’s high yesterday with 1777. The big precious metals winner is, however, silver which traded close to months high on 34,70, jumping more than 30 % since early summer.

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Wary of Spain and Greek debt

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Demonstrations in Athens and Madrid ended in bloody clashes between protesters and riot police as uncertainty over a bailout for Spain and European leaders struggling to find a unified position to tackle the Euro debt crisis, continue to dominate news and market sentiments. EURO/USD stays at the same level at 1.2877 as Wednesday morning.  Dow Jones and Nasdaq fell on uncertainty over Europe while Asian stocks rebounded on Thursday. The MSCI-index for the South Asian Pacific state traded up 0,5 %. The Shanghai composite index fell to its lowest level since February on the possible negative impact of the economic slowdown on corporate earnings.

Oil prices are under pressure with Brent crude clinging to the 110 USD a barrel. In his speech to the UN General Assembly the Iranian president, Ahmadinejad, stroke a more conciliatory tone towards Israel dampening the war rhetoric.  Amadinejad called for a new world order not dominated by Western powers and stated that Iran was under constant threat of military action from what he called “uncivilized Zionists”. Precious metals are as commodity prices steady.  Gold is trading at 1755 and silver at 34.00 in early Asian trading.

As protesters against severe austerity measures took to the streets and clashed with police in Spain and Greece, European equities saw their worst day in two months.  Spanish 10-year bond yields rose to above 6 percent for the first since the European Central Bank, ECB, for two weeks ago introduced its scheme for buying bonds from exposed and struggling Euro-countries as Italy and Spain. This plan has trimmed borrowing costs for the last two weeks, but the effect of the monetary stimulus seems to be running out of steam faced with grim global economic fundamentals and realities.

The Japanese yen is keeping strong against both USD and Euro.  USD/JPY is trading at 77.66. The dollar index, DXY, measured against a basket of currencies eased 0,1 %, off a two week high on 80,012 reached yesterday.  A weaker dollar helped a modest recovery in dollar-denominated industrial commodities and helped copper, oil and gold from falling further.

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Worries on Spain weakens EURO

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Street fights and protests in Spain sent the Euro down below 1.29 in early Asian trading this morning.  Euro/USD recovered to 1.2950 during yesterday’s trade to fall down to 1.29 on protest news from Madrid in the evening. Euro/USD is at present trading at 1.2875. As has been the pattern in Greece, Spaniards took to the streets and surrounded Parliament. Violent clashes with riot police over austerity followed. The protests came in the wake of weeks of indecisive foot dragging by a Spanish government unable to decide whether to ask for an international bail-out.

Serious concerns over a slowing global growth are back on investor’s radars as equity rallies fed by major central banks monetary easing, are fading. Both Dow Jones (- 0,75 %) and Nasdaq (- 1,36 %) fell yesterday,  pushed down by Caterpillar and Apple. Caterpillar issued a profit warning and fell close to 5 %. Apple fell 2,5 % as the company sold out of its initial supply of iPhone 5, raising concerns whether Apple would be able to keep up with demand.  The South Asian Pacific Index (MSCI) and the Shanghai composite both fell on weariness on Spain.

New worries about the development in the Euro zone and slowing economic growth, led to further fall in commodities. Oil prices, which were lifted on increased tensions in the Middle East over the weekend, fell back. Brent crude which traded at 111 yesterday dropped one dollar to 111 a barrel.  Gold which rose 20 dollars an ounce yesterday, has fallen back to 1760 in Asia.

Australia, which is very dependent upon growth in China, has seen both stock prices and the Aussie dollar falling. USD/JPY is stabile at 77,74.  As a positive sign in yesterday’s market, July numbers show that US home prices rose for a sixth straight month.  Together with a jump in consumer confidence in September, these are positive indications that Americans are ready to loosen their spending.

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Weekly winners of the Demo Championship

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UWC is pleased to announce the following weekly winners of the Forex Demo Championship
for the week 17 – 21 September:

1st Prize – $1000 Bonus goes to: chester acc. 438754

2nd Prize – $800 Bonus goes to: Palanga acc. 432748

3rd Prize – $500 Bonus goes to: selim acc. 427050

Most Active Trader Award – $100 Bonus goes to: zilvis86571 acc. 436359

Congratulations to all winners!

We would like to take this opportunity to thank all participants and to warmly invite all of our clients to take part in our weekly Forex Demo Championship

Remember the Earlier You Join the Contest- the Bigger the Chance You Have of Winning!

http://www.uwcfx.com/en/forex-trading-championship.html

New nervousness in global markets

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The Euro recovered somewhat in early Asian trade this morning trading at 1.2928 against the US dollar.  This after the stock markets and the Euro slipped on Monday as investors looked past recently announced central bank stimulus to focus on economic fundamentals.

German business sentiment was weaker and Spain dragged its feet on asking for an international bailout causing a high ranking German official to ask Spain to make up its mind. Germany and France quarreled on when to implement a EU banking union, and in the US Caterpillar, the world largest maker of earth moving equipment, warned of slower demand for its products due to fears of weaker commodity prices. All factors contributing to a more negative market sentiment.

Japanese Yen which has surged over the last days gave up some ground against both dollar and Euro, trading at 77.77 against the USD. German business sentiment dropped to its lowest level since early 2010 created concerns about a slowdown in the euro zones largest economy. Spain remained in focus. Its government yield rose on concerns that the Rioja government is postponing a request for an international bailout. Greece is still a concern after a report indicates that its budget deficit is bigger than previously thought.

Oil prices recovered from yesterday lows. Brent crude is trading above USD 110 a barrel on renewed fears for a major conflict in the Middle East. After the Israeli Prime Minister, Benjamin Netanyahu, has been bellicose for weeks, the head of the Iranian revolutionary guard stated that Iran was ready for an attack and would hit back. In an interview with CNN yesterday night, the Iranian President, Ahmadinejad, took a more conciliatory tone before his speech the UN General Assembly tomorrow.  Gold prices has strengthened trading at 1765 which is still far below it Friday peak on 1787.

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