US markets went off to their Thanksgiving break with yet another record high and close, despite some US economic data that was a little disappointing.
Weekly jobless claims jumped back above 300k for the first time since September while durable goods once transports were stripped out dropped 0.4%, well below expectations, and once again reinforcing the cautious nature of the US consumer.
Despite these slight disappointments US investors were in no mood to have the gloss taken off their Thanksgiving break
, and this is likely to filter through into this morning’s open with the German DAX
once again within striking distance of the 10,000 level, ahead of this morning’s latest unemployment data.
While energy stocks continue to remain under pressure the markets focus is likely to be on the OPEC meeting which gets under way today in Vienna
, and given the recent mood music it seems fairly unlikely that we’ll see any agreement on production cuts given comments yesterday from the Saudi oil minister.
That would suggest the likelihood of further declines in the oil price towards $70 a barrel
unless oil ministers pull a rabbit out of the hat, and catch the market on the wrong foot. If this does happen then its great news for consumers, but not so great for energy stocks or any leveraged plays that need a high oil price to break even.
The DAX outperformed other European markets yesterday
despite indications yesterday that additional action from the ECB was unlikely at next week’s meeting. Investors appeared to focus more on comments made by ECB Vice President and Draghi’s deputy Vitor Constancio that the ECB could well consider QE as soon as the first quarter of 2015
, and would base any purchases on the capital key of each member country.
This means that any purchases would ultimately favour German bunds
, being that Germany pays in the most in terms of capital to the ECB, at around 18%. Given that German bund yields are already at record lows, it would drive yields even lower and in the process make German stocks that much more attractive, given the relative resilience of the Germany economy already.
Today’s economic data includes German unemployment data for November
which is expected to come in at 6.7k, and a decline of 1k. This will be followed soon afterwards by the latest M3 data which for the three months to October
is expected to continue rising, with a reading of 2.4%, up from 2.1% and has been rising for the last 6 months. This would seem to indicate that monetary conditions are becoming more easy within the euro area.
The latest German CPI numbers for November
are expected to slip back slightly from the 0.7% seen in October to 0.5%. though most of this is likely to be as result of the decline in oil prices.
Given Constancio’s comments yesterday all eyes and ears will be on both ECB President Draghi when he gives a speech in Helsinki later today, as well as Bundesbank Jens Weidmann when he speaks in Frankfurt soon after.
It will be interesting to hear any thoughts he might have on Constancio’s comments yesterday, given his remarks earlier this week about there being a very high legal bar to QE.
– having held above 1.2450 we now need to take out trend line resistance at 1.2540 from the October highs at 1.2887 to signal further gains towards 1.2600. A move below 1.2450 retargets the lows at 1.2355. We need to move below 1.2350 level to target a move towards the 1.2040 level.
– yesterday’s break above resistance at 1.5745 has the potential to prompt a move towards 1.5885, as part of a double bottom break out. Only a move back below 1.5735 negates the potential for this move to unfold and retargets the twin lows at 1.5590.
Below 1.5590 targets 1.5430.
– we found a top at 0.7950 yesterday before sliding back towards the 0.7900 level which should now act as support. While below the 200 day MA at 0.8050 as well as trend line resistance from the September highs at 0.8030, the risk remains for a fresh move lower, back towards the 0.7870 level.
– the inability to rally strongly on some fairly good US numbers in the past two days suggests we could be set for a pullback. A move below 117.35 argues for a move towards 116.20. The US dollar still appears to be well supported for its move towards 120.00 on the dips with 115.40/45, the low last week likely to be a key support if we get there.
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