Fundamental View

[PCMNewsdesk]

The yen may rally to its strongest level in almost five months versus the dollar after breaking a key level of resistance, according to Bank of America Corp. The Japanese currency will face a test in the 98.30-to-98.76 area after breaching initial resistance at 99.58 today, according to MacNeil Curry, chief rates and currencies technical strategist in New York at Bank of America Merrill Lynch. If the yen increases past that resistance level, it may target 90.91, Curry said. That would be its strongest level since February. “As dollar-yen traded up towards 103, we started to see signs of topping out, with an advance in stocks starting to look a bit exhausted,” Curry said in a telephone interview. “The upside for dollar-yen is limited. We could see a run down to the 93, potentially the 91 area.” The yen increased 1.1 percent to 99.55 per dollar in New York, after
rising as much as 1.4 percent, the most since July 11. Japan’s currency has declined 10.2 percent this year, the most among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar and the euro each advanced 4.6 percent. “We’re still bullish dollar,” Curry said. “But we’re in a medium-term range-bound trading environment before the larger yen-bear trend resumes.” In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index. Resistance refers to an area on a chart where sell orders may be clustered and support is an
area where there may be buy orders. The dollar weakened against most major counterparts as demand for higher-yielding assets rose amid speculation a reduction of monetary stimulus by the Federal Reserve is on hold. “Markets have settled down with the realization that Fed policy will remain very accommodative for a long period of time,” Vassili Serebriakov, a foreign-exchange strategist at BNP Paribas SA in New York, said in a telephone interview. “Emerging markets have seen some stabilization in sentiment. Emerging-market currencies, commodities are benefiting from more positive risk sentiment.”

[Samirofi]

Weekly Outlook of Financial Markets for July 22-26

July 21, 2013


The summer days may have pulled back the volatility in the financial markets as leading commodities such as oil, natural gas and gold didn’t do much during last week. Leading currencies including Euro, Japanese yen and Aussie dollar rallied against the USD last week. The Japanese elections started off the week as Abe’s Liberal Democratic Party is set to win. This news could affect the Japanese yen and consequently other leading currencies. This forthcoming week several reports, may affect the financial markets. These include: U.S core durable goods, EU monetary developments, U.S housing starts, Australia’s CPI for the second quarter of 2013, Canada’s retail sales, China, EU and Germany’s manufacturing PMI, GB GDP for the second quarter of 2013, U.S existing home sales, and U.S. jobless claims. Here is an economic outlook for the week of July 22^nd to July 26^th regarding the U.S, Euro Area, Canada, Japan, China, Australia,and Great Britain.
(All times GMT):

Monday, July 22^nd
15:00 – U.S. Existing Home Sales: This report will pertain to the developments in U.S. existing home sales during June 2013; in the latest report regarding May 2013 the number of homes sold rose to a seasonally adjusted annual rate of 5.18 million houses; if this trend will continue, it might pressure up the U.S dollar;

Tuesday, July 23^rd
13:30 – Canada Retails Sales (May 2013): This report will refer to the retails sales in Canada as of May. In the recent report regarding April 2013, retails sales inched down by 0.3%;
00:30 – Australia’s CPI for Q2 2013: This quarterly report will refer to the changes in the consumer price index. In the previous report regarding the first quarter of 2013, the CPI rose by 0.4% compared to the fourth quarter and by 2.5% compared to Q1 2012; this report could affect the Aussie dollar which is linked with commodities rates;
02:45 – China flash Manufacturing PMI: this index is based on a survey covering 800 companies in 20 industries in China; in the previous HSBC Manufacturing PMI survey regarding June 2013 the Manufacturing PMI declined again to 48.3; this index indicates China’s manufacturing sectors have contracted at a slightly faster pace than in May; if the index will continue to contract, this may adversely affect commodities and risk related currencies such as Aussie dollar;

Wednesday, July 24^th
09:00 – Flash German, French and Euro Zone Manufacturing PMI: In the last monthly report regarding June 2013, the German PMI inched down to 48.7 i.e. the manufacturing conditions are shrinking at a slightly faster pace. This report serves as an indicator to the economic changes of the Euro Area’s leading economies’ manufacturing conditions; this news, in turn, may affect the Euro/USD currency pair and consequently commodities;
15:00 – U.S. New Home Sales: This report will refer to June 2013; in the recent report (opens pdf; for May), the sales of new homes slightly rose to an annual rate of 476,000 – a 4.8% gain (month over month); if the number of home sales will continue to rise, it may suggest the housing market in the U.S continues to progress; this news may also affect theUS dollar;
15:30 – U.S Crude Oil Stockpiles Weekly Update: the EIA (Energy Information Administration) will come out with its weekly update on the U.S oil and petroleum stockpiles for the week ending on July 19^th; in the recent report for July 12^th, stockpiles slightly decreased by 0.2 ml bl to reach 1,817.9 ml bl.

Thursday, July 25^th
08:00 – Spain’s unemployment Change: the rate of unemployment of the Spain rose again to 27.2%. This mean, the employment situation in Spain hasn’t improved. If in the upcoming report this trend will persist, it may adversely affect the Euro;
09:00 – German Ifo Business Climate Index: This index comprises the changes (on a monthly basis) of manufacturers, builders, wholesalers, and retailers in Germany as of July. In the recent report for June 2013, the business climate index rose from 105.7 in May to 105.9 in June; if this trend will continue, it might pull up the Euro;
09:00 – Euro Area Monetary Development: This monthly report will refer to the shifts of the M3, M1 and loans to private sector in the Euro area for June 2013. In the previous May report, the annual growth rate for M3 slipped to 2.9%; M1 decreased to 8.4%. Finally, the annual growth rate of loans to private sector reached -0.7%. This news suggests the EU inflation isn’t rising as loans continue to dwindle and the growth rate of M1 and M3 inch down. The progress of the EU monetary base is likely to affect the ECB rate decisions in the coming months;
09:30 – Flash GB GDP Q2 2013: This report will present the first estimate of the quarterly growth rate of the British economy for the second quarter of 2013; during the first quarter the GB economy expanded by 0.3% (Q-2-Q); if the growth rate will rise, it could affect the monetary policy of Bank of England and also affect GB pound;
13:30 – U.S Core Durable Goods: This report will pertain to the developments in U.S. orders of durable goods in the manufacturing sector for June 2013. This monthly report may indirectly indicate the changes in U.S. demand for commodities such as oil and gas. As of May 2013, new orders of manufactured durable goods increased to $231 billion; if this report will show another rise in new orders then it could pull up not only the USD but also commodities rates;
13:30 – U.S. Jobless Claims Weekly Report: this weekly report will pertain to the shifts in the initial jobless claims for the week ending on July 13^th; in the recent report the jobless claims declined by 24k to reach 334k; the next weekly report may affect the U.S dollar and consequently commodities markets;
15:30 – EIA U.S. Natural Gas Storage: the EIA weekly report of the U.S. natural gas market will refer to the latest shifts in natural gas production, storage, consumption and prices as of July 19^th; in latest weekly report, natural gas storage increased again by 58 Bcf to 2,745 Bcf;

Friday, July 26^th
14:55 – UoM Consumer Sentiment (revised): University of Michigan will come out with its revised consumer sentiment monthly update; this survey could offer an insight to recent developments in U.S consumers’ sentiment; based on the recent report, the sentiment index slipped to 84.1;

[Samirofi]

European equities tumble amid earnings flurry, UK GDP in focus

European stocks kick-started Thursday session mixed as investors digest a raft of corporate earnings ahead of UK gross domestic product data later in the session. - STOXX Europe 600 lost 0.22 percent to 300.44 - Euro Stoxx 50 declined 0.24 percent to 2,712.12

Shares started the session in mixed movement with investors’ cautious ahead growth data from the United Kingdome and U.S. durable goods, jobless claims data later in the day.

Traders will be waiting for the advanced GDP report expected to rush out of the United Kingdom on Thursday. Economists said U.K. economy likely doubled its pace of growth in the second quarter with a 0.6 percent rise in GDP compared with 0.3 percent growth in the previous quarter.

Weak economic outlook might force policymakers at the Bank of England to embark upon a bolder plan to stimulate U.K. growth.

Investors in the U.S. will have fresh data to assess on Thursday after data in the previous day on reinforced worries about monetary-stimulus tapering by the Federal Reserve. Durable goods, jobless claims data are due later in the day.

- France`s CAC 40 dropped 0.20% to 3,955.00 - German DAX fell 0.65% to 8,324.86 - British FTSE 100 inched 0.29% down to 6,600.96

In a busy day for earnings, Credit Suisse Group AG, the second-biggest Swiss bank, reported today a 33 percent rise in second-quarter profit. Net income rose to 1.05 billion francs from 788 million francs a year earlier, while economists expected 1.03 billion francs.

- As of 03: 18 ET, Credit Suisse Group AG share declined 1.80% or 0.510 points to 27.890 francs

BT Group Plc, the biggest fixed-line phone company in the UK, said adjusted earnings before interest, tax, depreciation and amortization fell 0.8 percent to 1.44 billion pounds in the quarter ended in June slightly beating analysts’ forecasts of 1.41 billion pounds.

- As of 03:26, BT Group PLC share dropped 0.03% or 0.100 point to 341.900 pound

Telefonica SA, Europe’s most indebted telecommunications company, said second-quarter sales and operating profit rose unexpectedly, while net debt dropped to 49.8 billion euros.

- As of 03:28 ET, Telefonica SA share rose 1.02% or 0.1050 points to 10.3800 euro

ABB Ltd, the world’s largest maker of power transformers, said profit rose in the second quarter for the first time in six quarters, buoyed by higher U.S. construction orders and demand from Chinese customers.

Net income rose 16 percent to $763 million in the second quarter, however missing $779 million estimated by analysts. Sales rose 6 percent to $10.2 billion, meeting the analysts’ estimates.

- As of 03:30 ET, ABB Ltd share fell 3.73% or 0.800 points to 20.640 francs

The Ludwigshafen, Germany-based company, BASF SE, said second quarter profit came short of analysts’ expectations as meeting annual targets looks more difficult than at the start of the year. Earnings before interest, tax and one-time items fell 5.4 percent to 1.83 billion euro, while analysts called for 1.99 billion euro.

- As of 03:34 ET, BASF SE share dropped 3.80% or 2.650 points to 67.120 euros

Roche Holding AG’s said first-half profit rose 10 percent above analysts’ estimates, where net income, climbed to 6.65 billion Swiss francs, while earnings per share were 7.58 francs beating the 7.45 francs estimated.

- As of 3:40 ET, Roche Holding AG share rose 1.41% or 3.300 points to 236.700 francs

[Samirofi]

Eurozone M3 money supply falls in June

The European Central Bank on Thursday released the Eurozone M3 money supply index for June where the three-month average M3 for the month ended June dropped to 2.8 percent from 2.9 percent, missing the median estimate of 3.0 percent.

The annual M3 seasonally adjusted for June showed a decline of 2.3 percent compared with 2.9 percent, missing analyst’s median estimates of 3.0 percent.

[Samirofi]

German business confidence rises for third straight month

German Ifo business climate index was at 106.2 in July, up from June`s 105.9, and slightly above analysts` median estimate of 106.1.

This is third monthly rise in German business sentiment since May. The Ifo current assessment index jumped to 110.1 from 109.4 in June, above 109.7 forecast as well, while Ifo expectations index eased slightly to 102.4 from 102.5 and June and expected.

The euro held against the dollar abov

[Samirofi]

CPI in Japan

Japanese Consumer Price Index showed more-than-estimated incline during the month of June, where the reading inclined to 0.2%, compared with a previous reading of -0.3% a year earlier, while analysts’ expectations were 0.1%.

Meanwhile, Japanese Consumer Price Index excluding fresh food inclined also to 0.4% in June, compared with analysts’ expectations of 0.3%, while the prior reading recorded 0.0% a year earlier.

CPI excluding food, energy came at -0.2% in June, up from previous -0.4% a year earlier, while the estimated reading was -0.3%.

[Samirofi]

European shares advance on US stimulus hopes, earnings

European stocks edged higher Friday, taking cues from overnight gains on Wall Street after disappointing jobs data sparked hopes that the Federal Reserve will maintain stimulus measures to spur economic growth, ahead of a Federal Open Market Committee meeting next week. - STOXX Europe 600 edged up 0.11 percent to 299.95
- Euro Stoxx 50 rose 0.31 percent to 2,748.70

Disappointing data released on Thursday, weakened the dollar by keeping expectations alive the Federal Reserve will maintain stimulus measures to spur economic growth. Investors have been scrutinizing economic data after the Fed said economic data will determine the timing and pace of any reduction in its $85 billion in monthly bond-buying.

The report from the U.S. Labor Department showed jobless claims for the week ended July 20 came in slightly above what economists expected where initial jobless claims rose to 343,000, an increase of 7,000 while analysts expected 341,000.

Meanwhile, the U.S. Commerce Department said durable goods orders surged 4.2 percent in June following an upwardly revised 5.2 percent jump in May above the expected 1.5 percent.

Meanwhile, the Federal Open Market Committee, at its meeting next week, is likely to discuss whether to refine or revise its "forward guidance," following the steps of the Bank of England and the European Central Bank.
- France`s CAC 40 gained 0.67% to 3,982.57 - German DAX fell 0.02% to 8,297.21
- British FTSE 100 was flat at 0.0% trading at 6,588.04

In a busy day for earnings, Franco-Dutch airline Air France- KLM said its operating profit at Europe’s biggest airline was 79 million euros, lower compared with 89-million-euro expected by analysts. Net debt fell to 5.3 billion euros from 5.97 billion euros at the end of December.
- As of 03:24 ET, Air France-KLM share rose 2.43% to 6.5210 euro
French luxury-goods maker, LVMH Moet Hennessy Louis Vuitton SA and and Gucci owner Kering SA, said sales growth accelerated in the second-quarter as the industry rebounded from a weak start to the year.

LVMH reported first-half profit growth that slightly trailed analysts’ estimates and said it’s confident for the second six months of the year. - As of 03:29 ET, LVMH SA share gained 4.03% to 135.6500 euro

Renault SA (RNO), France’s second-biggest carmaker, said Earnings before interest, taxes and one-time items climbed 15 percent to 583 million euros in the first-half from 508 million euros a year earlier, while earnings were projected to fall to 397 million euro. - As of 03:33 ET, Renault SA share jumped 3.90% to 62.0100 euro

[Samirofi]

Dollar extends losses before next week’s U.S. data

American dollar extends its series of drops ahead of next week’s expected heavy weighted data, where the U.S. economy is scheduled to issue its second quarter’s GDP data, while the dollar fell also amid the recent speculation that Federal Reserve will keep the accommodative policy at next week’s meeting.

Moreover, Dollar’s demand halted amid the recent unclear outlook for the U.S.’s economy, where investors are expecting a slower expansion pace to be showed next week concerning the second quarter of the year, which negatively affected on dollar’s demand.

From another side, Japanese yen take the benefit from dollar’s fall to incline today versus major currencies, knowing that Japanese economy recorded higher-than-estimated rebound in the nation’s consumer prices, the highest since 2008.

Japanese yen inclined versus dollar during today’s Asian session and after Japan’s data, where the USD/JPY pair recorded low of 99.064 after hitting its high of 99.354, as the pair started today’s session at 99.246.

Euro inclined versus American dollar, where the EUR/USD pair recorded high of 1.32791 after hitting low of 1.32679. EUR/JPY pair also inclined after yesterday’s fall to record high of 131.731 from low of 131.656.

Aussie and Kiwi record noticeable gains versus their counterpart American dollar, starting with the AUD/USD pair which recorded its highest at 0.92679 after reaching low of 0.92333, while the NZD/USD pair inclined to high of 0.80851 from low of 0.80581.

[Samirofi]

Danone revenue beats estimates on baby-products demand

Danone, France`s largest food-products group, reported stronger-than-estimated sales growth in the second quarter, boosted by revenues of baby-nutrition products in China and stronger diary sales.

"With sales up 6 percent in the first half, Danone is off to a strong start in an economic and consumption context that remains difficult in Europe and in some cases volatile in emerging countries," Danone Chairman Frank Riboud commented on Monday.

The Paris-based group said total like-for-like sales rose 6.5 percent to 5.7 billion euros from a year-ago quarter, and reported consolidated sales up 6.7 percent, with volumes registering its strongest quarter in eight.

Strong demand for baby-nutrition products in China and slight improvement in home region helped Danone post better-than-expected growth in the second quarter. Sales at Danone`s diary unit grew 2.6 percent, boosted by stronger demand for Greek yogurt in the U.S. and Prostokvashino products in Russia. In Europe, demand for diary remains a difficult challenge.

Danone rose more than 3.5 percent in early trading hours in Paris amid optimism about the Chinese demand for baby foods, although investors were somehow concerned about the recently introduced price cuts in Europe across the industry.

[Samirofi]

UK M4 money supply rebounds in June

UK M4 Money Supply Index rose 0.1% in June from revised 0.0% a month earlier, but missing average forecast of 0.2% rise. From a year ago, M4 Money Supply rose to strong 1.5% compared with 0.1% in the year through May.