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Global Markets Trade with Mixed Results |
Overnight Data Pushes, then Pulls
The pick-up in risk that pushed U.S. stock markets to a significant gain
saw the rally slowly dwindle away as Asian equities failed to sustain
the upbeat tone. While marts in the Far East did manage to finish their
respective trading sessions in positive territory, they closed at levels
which were well off their intraday highs. Picking up from where Asia
left off, European equity markets have swung between gains and losses a
number of times as market participants fight to figure out whether or
not the demand for riskier asset classes will persist. Weighing
negatively on the risk parade, stocks pared gains off the back of
worst-than-expected investor confidence data released in Germany. As
Europe’s largest economic zone, German ZEW figures for November dropped
to 51.1 after a reading of 56 earlier in October. As a gauge that
intends to forecast economic developments over a subsequent six-month
period, analysts expected this latest round of ZEW data to ring in with
a reading of 55. Nevertheless, despite the poor economic release in
Germany, fantastic earnings data from HSBC Plc. helped to offset a good
chunk of negativity that was seen throughout London trading. Shares of
HSBC soared over 4% as third quarter profit from the UK’s biggest bank
saw “significant” improvement versus statistics released a year prior.
EUR vs. USD
While overnight bourses failed to find a defined direction, currency
markets traded with a similar fashion as price action was mixed (to say
the least). After the risk rally began to lose steam throughout the
Asian session, EURUSD started to head lower in unison with the stumbling
stock market. Just as the Greenback was looking poised to put together a
modest offensive, dollar bears re-emerged from the woodwork as the HSBC
earnings report helped to restore confidence in both the banking sector
and risk alike. The release of the aforementioned ZEW survey brought
about an additional bout of modest USD strength, only adding to the
fickle markets seen all the way through the start of today’s New York
trading. Although EURUSD is currently trading off its recent highs,
which saw the 1.50 figure come back into play, USD bears have had some
recent reassurances that could led to further weakness in the American
dollar. Current central bank activity, coupled with domestic fundamental
data (US payrolls, for example), have failed to alter the short-term
fate of the Greenback—a fortune that should see additional adversity. As
today’s economic data calendar is light, save for the release of the US
ABC Consumer Confidence report, look for price action to be dictated by
the bearing in the equity market’s proverbial compass.
Fitch Warns UK on Rating
Whereas trading this morning has seen mostly mixed price action with
limited volatility, GBP has been an exception in an otherwise tepid
market. Weighing negatively on the cable was a statement from Fitch
warning that the UK could be at risk of losing its AAA credit rating if
another significant stimulus package is brought into play. While the
statement made very clear that Fitch has no plans to modify the United
Kingdom’s sovereign rating, it did, however, indicate that it was most
likely to be downgraded out of the big four debt issuers (US, UK,
Germany, and France). To combat the pessimistic news bulletin, both the
UK’s Trade Minister Davies and Prime Minister Brown have been on the
wires to reassure the public that the UK’s AAA rating is safe, and to
reiterate that measures have been put in place to reduce the
government’s deficit. On the back of the news, GBPUSD crashed about 150
pips, but was able to find support around the 1.66 handle. Since that
lashing, cable has been able to trade modestly higher as investors saw
the earlier dip as a great entry point to pull the trigger and buy more
GBP.
Have a great day.
By Jamie Heighway, Market Analyst
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