Wednesday, June 26, 2013
The dollar rose and global equity markets gained for a second day in a row on Wednesday after a surprisingly sharp downward revision to first-quarter U.S. economic growth eased concerns that the Federal Reserve may soon begin to withdraw stimulus.
In addition, moves by China to calm bank fears and supportive signs from the European Central Bank on the need for continued stimulus helped to extend Tuesday's rebound after the global sell-off last week of stocks, commodities and bonds.
U.S. gross domestic product grew at only a 1.8 percent annual rate in the first quarter, the Commerce Department said in its final estimate, down from the prior estimate of a 2.4 percent pace.
"Despite all the rhetoric and fear about tapering, this will keep the Fed firmly planted in stimulus, which is a positive for the market," Michael Mullaney, chief investment officer at Fiduciary Trust Co in Boston, which oversees more than $9.5 billion, said.
"This is another example of bad news being good news," he said.
The S&P 500 was on track for its biggest two-day gain in three weeks, while European stocks gained close to 2 percent after the ECB's president, Mario Draghi, said an accommodative monetary policy was still appropriate. The bank's policy, he said, "will stay accommodative for the foreseeable future.
MSCI's all-country world equity index rose 0.79 percent, while the EuroStoxx 50 index rose 2.4 percent.
The Dow Jones industrial average (DJI) was up 89.49 points, or 0.61 percent, at 14,849.80. The Standard & Poor's 500 Index (SPX) was up 9.68 points, or 0.61 percent, at 1,597.71. The Nasdaq Composite Index (IXIC) was up 21.71 points, or 0.65 percent, at 3,369.60.
The S&P 500 advance followed a gain of nearly 1 percent on Tuesday, which came as U.S. data on durable goods orders, sales of new homes and consumer confidence all topped expectations.
A pledge by China's central bank, the People's Bank of China, to act as a lender of last resort was the real story of the day, said Fred Dickson, chief market strategist at The Davidson Cos. in Lake Oswego, Oregon.
"The global fears regarding the possibility of a Chinese credit situation spilling over and becoming very serious has eased off some," Dickson said. The People's Bank "is going to come in and make sure the Chinese banking system doesn't collapse."
Gold hit its lowest level in almost three years and was on course for a record quarterly loss. Prices could slide to levels below $1,000 per ounce, investors and analysts said.
Bond markets in Europe and benchmark U.S. Treasuries also continued to claw back ground, although investors remained worried that the rebound could give way with markets likely to need more time to acclimatize to the new environment.
The benchmark 10-year U.S. Treasury note was up to 2.554%.
"Having seen an incredibly violent sell-off in the Treasury markets that took everything with it, there is a certain amount of settling back going on," said Kit Juckes, a market strategist at Societe Generale in London.
Brent crude for August delivery fell 46 cents at $100.80 a barrel. U.S. crude fell 62 cents to $94.70 a barrel.
The euro was down 0.61 percent at $1.3004, stung by Draghi's comments on an accommodative monetary policy and the risks to growth in the euro zone.
"Juxtaposed against shifting Fed policy, (Draghi's comments) highlights that relative central bank policy will soon shift from supporting to weighing on the euro," Camilla Sutton, chief FX strategist at Scotiabank, said.
The dollar rose to a three-week high of 83.003 against a basket of currencies (DXY), buoyed mainly by solid gains against the euro. It later traded at 82.908.
Monday, June 24, 2013
This week will continue marked by the downtrend that started last Wednesday after Bernanke's words. In addition, we have woken up in Europe with a sharp drop in China's stock market, which has fallen by -5%, the biggest fall since August 2009.
Sharp decline of the EUR/USD, from levels of 1.34 to 1.31. The market of raw materials is also heavily burdened by the sharp drop last week.
Bond yields are rising alarmingly. The American 10-year Treasury bond has risen to 2.6%, the highest since August 2011.
A bearish week is expected due to the fear that still exists about the end of QE, the liquidity crisis in China and the sharp fall in commodity prices. Despite some strong technical rebounds, the major trend remains clearly bearish.
The falls are taking over Wall Street after Bernanke's words. The level of 1590 has been lost again, and we continue taking as reference the main bearish trend, which is still respected by the continued bearish raids. With volatility at fairly high levels, if the trend turns around, do not enter the index until it exceeds the 1590 points.
Laterality for the Japanese index. After falling in the Asian session, the price starts to set a side channel in the Fibonacci 50. With volatility at high levels, the indicators are not showing a clear trend, so we can not lose sight the yen and monetary policies. Continue to monitor the area of 12600 before taking bearish positions.