Euro rallies from 2-year low but gains seen as tenuous
The euro gained against the dollar o n Monday in a mostly technical rebound from a two-year low touched earlier in the session even as the single currency faces more headwinds from global growth concerns and the region's ongoing debt crisis.
Euro zone finance chiefs were meeting to flesh out plans to reinforce their common currency, but investors are cautious the talks in Brussels may do little more than highlight the limitations of last month's deal to help indebted states and banks. Diminished summit hopes also weighed on Spanish and Italian bonds, with yields moving back up to unsustainable levels.
One bright spot came as European Central Bank President Mario Draghi kept the door open to further interest rate cuts, saying the bank would make any decision on further action based on economic data. But investors cautioned it would not be enough to sustain gains. While lower rates typically reduce demand for a currency, with the euro zone struggling to maintain economic growth, any signs of action to stimulate the economy will be taken as positive by investors.
The euro <EUR=> was last up 0.2 percent against the dollar at $1.2314 after climbing as high as $1.2324 and well off a low of $1.2255 hit in early trade. The dollar was last down 0.1 percent at 79.58 yen <JPY=>, moving away from a two-week high hit on Thursday, according to Reuters data.
Global worries hit Wall St ahead of earnings
U.S. stocks slipped in light trading on Monday, weighed down by weak economic data from Asia and signs of economic trouble in Europe, underscored by higher Spanish and Italian bond yields. Monday's decline, the third in a row for the S&P 500 index, comes as quarterly earnings reports get under way. Investors are anxious to see what impact weak demand in Europe and slowing growth in Asia have had on corporate America.
Stocks pared losses late in the session, leaving indexes with just slight losses. Alcoa Inc's <AA.N> stock fluctuated throughout the day, ending up 0.3 percent at $8.76 in the regular session. Alcoa's shares rose 2 percent in extended trading after the largest U.S. aluminum company and Dow component released its results, marking the start of the earnings season. While a majority of corporations may beat lowered analyst expectations, investors will be focused on how well companies are handling weakness overseas.
The Dow Jones industrial average <.DJI> ended down 36.18 points, or 0.28 percent, at 12,736.29. The Standard & Poor's 500 Index <.SPX> was down 2.22 points, or 0.16 percent, at 1,352.46. The Nasdaq Composite Index <.IXIC> was down 5.56 points, or 0.19 percent, at 2,931.77.
Gold rises on China inflation, commodity rallies
Gold rose in quiet trade on Monday after the previous session's sharp drop, lifted by higher commodity prices and benign inflation data from China. Fears of rising commodity prices because of a record high in U.S. soybean futures and corn's rally amid severe dry conditions in the U.S. Midwest boosted the metal's inflation-hedge appeal. Surging crude oil prices and a weaker dollar also boosted gold. Also underpinning bullion was Chinese data showing the inflation rate undershot expectations in June, signaling more room by China's central bank to ease monetary policy to stave off a slowdown.
Spot gold <XAU=> climbed 0.5 percent at $1,590.50 an ounce by 2:23 p.m. EDT (1823 GMT). U.S. COMEX gold futures for August delivery <GCQ2> settled up $10.20 at $1,589.10, with volume at about 40 percent below its 30-day average, preliminary Reuters data showed.
San Francisco Federal Reserve Bank President John Williams said on Monday the U.S. central bank is prepared to do more to bring down unemployment that is far too high and to steer inflation back up to the Fed's 2 percent target.
Oil Rises First Time in Three Days on Norwegian Strike
Oil rose for the first time in three days as a labor strike threatened to halt all offshore oil and gas production in Norway, Western Europe’s biggest exporter. Futures climbed 1.8 percent as the shutdown was set to start at midnight local time unless unions and employers can resolve a two-week-old strike. As much as 2 million barrels a day of total output may be lost from the continental shelf, according to data from the Norwegian Petroleum Directorate. Oil’s gain trimmed a 3.2 percent decline July 6.
“We are getting some positive sentiment from the idea that Norwegian oil might be taken off the market tomorrow,†said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “We are rebounding from Friday’s big drop. Oil for August delivery rose $1.54 to settle at $85.99 a barrel on the New York Mercantile Exchange. Prices are down 13 percent this year. Oil fell $2.77 on July 6 after a report showed U.S. employers hired fewer workers than forecast in June.
Brent crude for August settlement gained $2.13, or 2.2 percent, to $100.32 a barrel on the London-based ICE Futures Europe exchange. Norway produced 2.04 million barrels a day of oil in 2011, about 2.4 percent of total world output, according to the BP Statistical Review of World Energy.
Nikkei seen starting on weaker tone, eyes China data
Japan's Nikkei share average is likely to ease at the open on Tuesday following a slide in U.S. and European shares the previous session, although Chinese trade data due later in the day could set the tone for the market.
Further signs of a softening in either Chinese demand or Chinese exports could cement worries about a global slowdown and pull the Nikkei further away from a two-month peak above 9,100 hit early in the month.
A fall below trend-line support which connects the intraday lows of June 4 and June 26-27 and came in around 8,850 on Tuesday could spur speculation that the Nikkei's rally since June is over.
The dollar/yen rate has been stuck around 79.50-80.00 yen <JPY=> over the past two weeks. Market players said the Nikkei was likely to trade between 8,800 and 9,000 on Tuesday.
Nikkei futures in Chicago <0#NIY:> closed at 8,920, up slightly from the close in Osaka <JNIc1> of 8,880.
On Monday, the Nikkei <.N225> fell 1.4 percent to 8,896.88, its biggest daily fall since June 8 and its third straight lower session.
Seoul shares seen on hold as investors eye EU meet
Seoul shares are set to tread a narrow range on Tuesday, as investors take to the sidelines and await the results of a euro zone finance ministers' meeting to provide fresh market cues.
On day one of the European finance heads' summit, participants were set to grant Spain another year to reach its budget deficit goals but remained at odds over details of bank bailout and bond-buying plans agreed last month. Global policymakers are under pressure to take action to shore up the flagging economy with the latest warning signs coming from weaker-than-expected Chinese inflation data.
Three senior U.S. Federal Reserve officials backed a third round of bond purchases, pointing to high unemployment and sluggish growth, although a fourth official reiterated his opposition to a new round of stimulus. The Korea Composite Stock Price Index (KOSPI) <.KS11> fell 1.2 percent on Monday to a one-week closing low of 1,836.13 points.
Hong Kong shares seen higher, China trade data in focus
Hong Kong shares could start slightly higher on Tuesday ahead of China trade data expected later in the day that could stoke concerns that monetary and fiscal policy easing has failed to head off hard landing risks for the economy.
The strength of China's imports will offer a litmus test of domestic demand in the world's second biggest economy when trade data for June is published on Tuesday, as global investors seek to gauge Beijing's ability to avoid a deep downturn in growth.
On Monday, the Hang Seng Index <.HSI> closed down 1.9 percent at 19,428.1, back below its 200-day moving average, currently at 19,559.2. This level is now seen offering near-term chart resistance. Elsewhere in Asia, Japan's Nikkei <.N225> was up 0.7 percent while South Korea's KOSPI <.KS11> was up 0.2 percent as of 0047 GMT.
Source : Reuters
