Fundamental Analysis, August 13th, 2012

Euro posts weekly loss vs dollar, yen

 

The euro posted its first weekly drop against the dollar and yen in three weeks on Friday as investors refocused on the uncertainty surrounding possible European Central Bank action to contain the debt crisis and deteriorating growth in the euro zone. 

A weaker-than-expected rise in Chinese exports, which followed disappointing German data earlier this week, stoked concerns about global economic growth. That boosted the safe-haven dollar and yen and pressured commodity-linked currencies such as the Australian and Canadian dollars.Investors booked profits on a rally sparked by ECB President Mario Draghi, who said the bank would do whatever it takes to save the euro, including buying bonds of stressed countries to bring down borrowing costs. 

But after the initial euphoria, markets began to realize that any intervention would depend on troubled countries activating the euro zone's rescue funds first. The permanent ESM fund still needs a green light from the German Constitutional Court, which rules on Sept. 12.The euro <EUR=> fell 0.1 percent to $1.2290, pulling further away from a one-month high of $1.2443 set on Reuters data on Monday. It had earlier hit a one-week low of $1.2239 after breaking support in the $1.2250 level. It also fell 0.5 percent to 96.21 yen <EURJPY=>. On the week, the euro lost 0.8 percent against the dollar and 1.3 percent versus the yen.The Australian dollar <AUD=D4> fell to $1.0575, a day after touching $1.0615, its highest since March 20. 

S&P 500 ekes out gains to run streak to six days

The Standard & Poor's 500 finished slightly higher on Friday to run its streak to six straight sessions, but activity was light and gains were slight as the market enters a seasonally slow period. 

The Dow and the S&P 500 closed out their fifth straight week of gains, led once again by expectations for global central bank stimulus despite discouraging signs for growth like weak data from China. 

Overall, the S&P has gained a scant 0.3 percent over the past three sessions, a sign that while investors aren't looking to cut positions, they're also reluctant to make robust moves above the three-month highs the S&P has been hovering around.Volume was incredibly light, with about 4.97 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, well below last year's daily average of 7.84 billion. 

Yahoo <YHOO.O> shares fell 5.4 percent to $15.15 a day after it said it may reconsider what it does with the cash it gets from a multibillion-dollar sale of half of its stake in Alibaba Group. Yahoo previously promised to return most of the cash to shareholders. For the week, the Dow rose 0.9 percent, the S&P 500 climbed 1.1 percent and the Nasdaq advanced 1.8 percent. The Nasdaq has gained in four of the past five weeks. 

The Dow Jones industrial average <.DJI> rose 42.76 points, or 0.32 percent, to 13,207.95 at the close. The Standard & Poor's 500 Index <.SPX> added 2.97 points, or 0.21 percent, at 1,405.77. The Nasdaq Composite Index <.IXIC> advanced 2.22 points, or 0.07 percent, to close at 3,020.86.

Gold up on stimulus hopes after weak Chinese data

Gold rose on Friday and also posted a weekly gain, as disappointing Chinese trade and new bank-lending data suggested policymakers there may act to boost sputtering growth.Worries about food inflation also boosted gold after the U.S. government said the worst drought in more than half a century has battered corn and soybean crops in the world's main agricultural exporter with larger losses than expected. Corn futures rose to an all-time high before settling lower. 

Bullion broke ranks with declining U.S. equities after the latest disappointing Chinese data showed July exports rose just 1 percent from a year ago, with new loans at a 10-month low. A day earlier, data showed China's factory output growth slowed unexpectedly in July. Spot gold <XAU=> rose 0.2 percent to $1,620.60 an ounce by 2:43 p.m. EDT (1843 GMT), rebounding from a low from earlier in the session at $1,605.20. 

The metal posted a weekly gain of 1 percent largely on hopes for stimulus measures by China based on weak economic data. U.S. gold for December <GCZ2> settled up $2.60 at $1,622.80 an ounce.

Oil Falls as China Export Growth Slows, IEA Cuts Forecast

 

Oil fell as China’s export growth slowed and the International Energy Agency cut demand forecasts in signs that the global economic recovery is slowing.Prices declined 0.5 percent as China’s customs bureau reported outbound shipments in July increased 1 percent from a year earlier after an 11 percent rise in June. It was the worst export growth since 2009. The IEA reduced its estimate of 2012 world consumption by 250,000 barrels a day to 89.6 million. 

Oil for September delivery fell 49 cents to settle at $92.87 a barrel on the New York Mercantile Exchange. It decreased as much as 1.8 percent to $91.71 in intraday trading. Today’s decline trimmed a weekly advance to 1.6 percent. It was the fourth gain in five weeks.Brent crude for September settlement decreased 27 cents to end the session at $112.95 a barrel on the London-based ICE Futures Europe exchange.

The July growth in Chinese exports was slower than the 8 percent median estimate in a Bloomberg survey. Imports rose 4.7 percent versus the survey estimate of 7 percent and a 6.3 percent increase in June. 

Nikkei set to rise, gains capped by lack of momentum

Japan's Nikkei share average is expected to inch up on Monday, still supported by hopes forfurther stimulus, but faces tough technical resisitance and may struggle amid a lack of reasons to buy. Japan's April-June GDP figures, due to be announced just before the market opens, could also influence sentiment for the day's trading. 

The Nikkei rose 3.9 percent last week, its biggest weekly gain since February after speculation that more global stimuluswas on the way spurred a four-day rally.  Disappointing data from China on Thursday bolstered such hopes but also sapped risk sentiment on Friday, when the benchmark index fell 1 percent. 

Japan's earnings season, now in its last throes, has been largely disappointing, with 53 percent of the 152 Nikkei companies that have reported results falling short of guidance and many firms cutting profit outlooks due to a strong yen and the impact of a global slowdown on demand. The Nikkei is now up 5.2 percent on the year, but is still 13.3 percent off its one-year high hit on March 27 of 10,255.15, hurt by concerns about falling demand due to the euro zone debt crisis, a faltering U.S. recovery and a slowdown in China. 

Seoul shares seen losing steam after five-day rally

Seoul shares are expected to trade in a tight range on Monday as investors take a breather after a five-day rally backed by hopes of decisive policy action from major central banks to bolster growth and address a deepening fiscal crisis in Europe.The Korea Composite Stock Price Index (KOSPI) <.KS11> rose 0.3 percent on Friday to close at 1,946.4 points, a 5.3 percent weekly rise that was its best in seven months. 

Hopes of renewed bond-buying by the European Central Bank and gloomy Chinese data, which left the door open for further supportive measures for the world's second-largest economy, lifted the KOSPI to its three-month highs, smashing above its 60-day and 120-day moving averages. Foreign investors were the main drivers, gobbling up more than a net 3 trillion won ($2.65 billion) of shares last week.  The main bourse is up 6.6 percent for the year but still 5.4 percent short of its 2012-high of 2,057.28 points registered on March 14 at the peak of a first-quarter liquidity rally.

    

Hong Kong shares seen starting lower, earnings in focus

Hong Kong shares were set to start the week lower on Monday, with investors eyeing corporate profits to gauge the extent of a slowdown in China after data last week suggested it could extend into a seventh quarter. 

Sunshine Oilsands <0746.HK> and MTR Corporation <0066.HK>, Hong Kong's subway operator, head a list of companies expected to post first-half earnings reports later in the day.Last Friday, the Hang Seng Index <.HSI> slipped 0.7 percent from a three-month high, but closed up 2.4 percent for the week at 20,136.1. The China Enterprises Index <.HSCE> of the top Chinese listings in Hong Kong lost 0.6 percent on Friday, but rose 2.5 percent last week.  

Short selling interest accounted for 12.2 percent of total Friday's turnover in Hong Kong, the highest since May 30, when shorts accounted for 14.4 percent, traders said. This is higher than the historical 8 percent average and the 10 percent average last week, suggesting the market remains vulnerable to a short squeeze. Elsewhere in Asia, Japan's Nikkei <.N225> was down 0.2 percent, while South Korea's KOSPI <.KS22> was down 0.5 percent at 0030 GMT.