Market Movers of the Day
*New Zealand Trade Balance worse than expected at -487M
*Japanese Jobless Rate Better than forecasted at 5.1%
*Japanese Tokyo CPI slightly below expectations at –2.2%
*Japanese National CPI worse than estimated at -2.5%
*Japan’s Overall Household Spending better than expected at 1.6%
*German CPI beats market’s expectations at 0.3%
*UK CBI Retail Sales Index better than expected at 13
*US – Thanksgiving Day
The Overall Sentiment
Markets tend to stay calm when Wall Street is closed for holidays but that wasn’t the case this Thursday. Stock markets plummeted around the world on worrying news about Dubai’s state investment company, Dubai World, which is believed to have debts of nearly $60 billion and has asked its creditors to postpone their payment dates. This has led to fears about a possible debt default infecting the global financial system. In Asia, China’s Shanghai index lost 3.6%, its biggest one-day drop since Aug. 31, while the Japanese Nikkei 225 declined 2%. In Europe, the FTSE 100 index of leading British shares was down 3.18% while Germany’s DAX lost 3.25% and France’s CAC-40 plunged 3.4%.
A big wave of risk aversion triggered by the news about Dubai’s debt flooded the markets with investors looking for shelter in the Dollar and the Yen. The EUR/USD retreated from yesterday’s high falling back below 1.50. Losses on Gold and Crude Oil spurred a huge sell-off in commodity-linked currencies. Canada’s dollar lost the most in four weeks against the greenback sending the USD/CAD back above 1.06. Investors moved away from riskier currencies making the crosses on the Yen the biggest losers of the day. The Pound dropped from above 1.67 to under 1.6450 against its US counterpart. The Yen climbed to a 14-year high versus the Dollar sending the USD/JPY to an intraday low underneath 85 but quickly pulling back to remain in the 86 area.
Gold dropped from a new record as news about Dubai’s debt hit the markets strengthening the Dollar. The yellow metal rose as high as $1195 in early trading hours retreating to an intraday low of $1180 to finally settle around $1186. Crude Oil lost around a dollar and a half but managed to remain above $76.
The Day Ahead
A thin stream of data will close the week in a Friday with no US economic releases. During the European session a reading of 0.4% is expected for Germany’s Import Price Index, up from -0.9% in October, and positive figures are forecasted for EU’s Consumer and Economic Confidence adding to signs of belief in economic improvement. Swiss KOF Leading Indicator is expected to climb to 1.80 from 1.45 the previous month. Canada’s Current Account for the third quarter will be the only report coming from the Americas.
After topping slightly above 0.76 NZD/USD slipped below the overall bullish trend line that has shown the way for around eight months. The pair came back up with some bullish momentum to test the trend in an attempt to set new highs. Failing to do so, NZD/USD encountered the trend line acting now as a resistance signaling that the market was up for a bearish move. The pair currently trades around 0.71 and while the 0.70 level might offer some struggle a break below it could trigger further declines.
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