Confidence Improves on Germany Survey and US Earnings
Global markets this morning:
Bulls have continued to build on yesterday’s tentative gains this morning. Upward momentum that kicked in yesterday afternoon has continued through the overnight sessions in both the Asia Pacific region and Europe. European indices are rallying today with the CAC, DAX and MIB all up about 1.2% on an improved forward looking component of the monthly ZEW investor survey. Spain’s IBEX has doubled that return on speculation that the country may be ready to move forward on ESM support ahead of this week’s European summit.
US indices have been climbing this morning on the back of positive earnings reports out of Goldman Sachs, Johnson & Johnson and others. Later this morning, the homebuilders could be active as this month’s round of housing market reports kicks off.
Currency markets remain active with the USD index continuing to decline following on from yesterday’s death cross of the 50-day and 200-day moving averages. Capital continues to flow out of defensive positions in USD and JPY back over to Europe with SEK leading the way along with EUR, DKK and NOK. Resource currencies have been mixed today with AUD posting a moderate gain while
CAD has been under pressure on reports that the Bank of Canada may be preparing to cut the country’s growth outlook next week. In addition, the Premier of Ontario resigned unexpectedly and suspended the provincial legislature amid growing scandals. This has added to the uncertainty over political direction at the regional level in Canada particularly with the Quebec government having already changed hands last month.
Commodities are still mixed this morning. Copper has stabilized as the street awaits tomorrow night’s main Chinese economic reports. Energy is mixed today with natgas still backing and filling and crude oil consolidating. Grains are consolidating at lower levels as we near the end of harvest season.
There are a number of significant economic announcements out this morning, including:
UK consumer prices 2.2% in line
UK retail prices 2.6% in line
UK producer prices input (1.2%) vs street (0.6%)
UK producer prices output 2.5% vs street 2.2%
Eurozone consumer prices 2.6% vs street 2.7%
Germany ZEW current situation 10.0 vs street 11.8
Germany ZEW economic sentiment (11.5) vs street (14.9)
US consumer prices 0.6% vs street 0.5%
US industrial production due at 9:15 am ET
US NAHB housing index due at 10:00 am ET
Highlights of today’s earnings reports include:
Johnson & Johnson JNJ $1.25 vs street $1.21
Goldman Sachs $2.85 vs street $2.20, raised dividend by 8.7%
Coca-Cola KO $0.50 vs street $0.51
UnitedHealth UNH $1.50 vs street $1.34
Mattel MAT $1.04 vs street $0.99
North American indices
The Dow Industrials (US30 CFD) continues to climb, taking a run at 13,500. Next major resistance after that remains in the 13,600-13,650 area.
The S&P 500 (SPX500 CFD) has broken through 1,440 and out of a short term downswing but still needs to clear 1,450 to confirm the start of a new advance. Broader channel resistance appears closer to 1 470.
The S&P/TSX 60 (Toronto60 CFD) remains above 695 and has been testing 700 with next resistance after that near 713 then 718.
Copper has rebounded toward $3.70/lb but remains in a downswing between $3.77 resistance near $3.64 support.
US crude is hanging around near $91.50/bbl near the centre of a $90.00-$93.50 channel.
UK crude is flirting with the $115.00/bbl level within a $113.75-$116.25/bbl trading range.
Gasoline has held $2.90/gallon so far but has not had much of a bounce, suggesting that key neckline support near $2.85 could still be tested.
Natural Gas is hanging around $3.40/btu, retesting its breakout point with next support near $3.20 and resistance near $3.60 and $3.80.
Corn has held $7.35/bushel support so far with more support in place near $7.10 and resistance near $7.65 then $7.80.
Soybeans have stabilized above $15.00/bushel support with initial resistance near $15.40 then $15.75.
Wheat is holding just below $8.50/bushel after bouncing off of $8.25 key support.
FX this morning
Gold is back above $1,735/oz the 23% retracement level and is having an inside day holding near $1,740. It needs to climb back above $1,755 to bring an end to the current correction, else it remains vulnerable in the short term.
Silver is trying to rebound from oversold RSI conditions but it needs to retake $33.00/oz, a former support level, to call off the current downtrend.
USDCAD has broken out of its longer declining channel again and up through $0.9800. It continues to form an ascending triangle below $0.9900 with an initial run at $0.9940 or par possible on a breakout.
EURUSD is back above $1.3000 as its upswing continues with next resistance tests near $1.3075 and $1.3175,
GBPUSD has broken out over $1.6100 today with next resistance near $1.6150 then $1.6220.
USDJPY continues to form an ascending triangle below 79.00 with next resistance on a breakout near 79.60, 80.55 and 81.80.
AUDUSD continues to build a bullish ascending triangle base below $1.0300 with next resistance on a breakout near $1.0350 (38% retracement) and $1.0400 (50% retracement).