Global Market Key Points
U.S. stock markets stagnated yesterday but the dollar continued to recover for the second straight day after falling sharply last Friday as the U.S. Bureau of Labor Statistics reported that unemployment rate climbed to 9.8%. Unemployment rate is expected to head-up even higher as the economic recovery is not vigorous enough to improve the labor market condition.
President Barack Obama has accepted the Republicans request to extend tax cuts program that was implemented by President Bush’s administration for extra two years. The ‘package’ contains tax reduction for workers from all income groups, credit for small businesses and more unemployment benefits. Moody’s Investors Services however expressed its concern that extended tax reduction might hurt the U.S. finance conditions and thus reduce its credit rating in the longer term, if lower tax rates becomes permanent.
The tax reduction decision was positively accepted by the markets and investors turned yesterday mostly toward precious metals; gold prices reached yesterday an all time high record but eventually closed lower than the previous day mostly on investors’ wish to take-profits. Gold futures contract for February delivery declined by 0.5% closed $7.10 lower to settle at $1,409 an ounce after price reached at earlier stage of yesterday’s session the level of $ 1,432.50 – the highest price ever. Gold price made 29% gain year-to-date on the Comex in New York – it was a good enough reason for investors to “get-out the market” and take their profits. Silver futures for March delivery made a slight gain yesterday and closed up 0.1% higher at $29.777 an ounce, while Platinum futures for January delivery added 0.5% to close at $1,705.20 an ounce.
The European Union finance Ministers Council met yesterday in Brussels to approve 85 billion euro package to support Ireland – the government and its banking system. But it didn’t help the euro to recover. Yesterday the euro lost 0.3% versus the U.S. dollar as overall financial conditions in the Euro-area are still covered with gloomy clouds. Manufacturers’ orders in Germany came-in less than expected in October and fresh news from the German Destatis is showing that foreign trade surplus for October has narrowed by more than 7%. German industrial production index for October will be published in few hours; index declined 0.8% in September but analysts predict index for October to rebound 1.1%.
Manufacturing production in the U.K. expanded higher than expected and the British pound gained 0.3% yesterday versus the U.S. dollar. Factory output advanced between September and October by 0.6% suggesting that the U.K. economy is still recovering. NIEST published yesterday its GDP estimation for the three months through November according to which the economy expanded by 0.6%, stating that results showing that recession is over. The BOE will announce its monetary policy tomorrow; Analysts expect the bank will decide to unchanged its current program and the interest rate will be kept at 0.5% rate.
The Bank of Canada decided to delay rate hike and to keep its overnight rate unchanged at 1% for the coming month although inflation has accelerated above the bank’s target (was 2.4% in Oct.) as the country’s growth slowed more rapidly than the bank previously anticipated. The BOC hinted that further rate hikes will be carefully considered.
A bunch of economic indicators coming from Japan are showing that overall economic activity is still weakening; core private sectors’ machinery orders retreated 1.4% between September and October following a sharp 10.3% decline in the previous month. Current account surplus has narrowed from 1.66 trillion yens to 1.46 trillion yens and bank lending and money supply continued to decline. But the Economy Watchers’ Sentiment index surprisingly jumped from 40.2 points in October to 43.6 points in November, mostly due to consumers spending on electronics, making the first improvement in the last four months.
Major Currencies Cross Rates
Sophie J. Fletcher
Head of Research
For the Disclaimer Please click here.