Market Movers of the Day
*UK Gfk Consumer Confidence worse than expected at -17
*EU CPI better than expected at 0.6%
*Canada’s GDP (3Q) lower than forecasted at 0.4% annualized
*US Chicago PMI above estimations at 56.1
The Overall Sentiment
US stock markets closed the day with modest gains as worries about Dubai’s debt started to lighten. Equities fell on early trading hours as the results of the Black Friday’s sales disappointed investors but managed to recover the losses as Dubai World stated it started negotiations with creditors. The S&P advanced 0.4% and the Dow Jones added 0.3%. In Europe, however, the risk of a potential default from Dubai World still weighed on the markets as most of the debt is owed to European banks. The British FTSE 100 and the German DAX index lost 1.1% each.
The dollar weakened against higher-yielding currencies as concerns about Dubai’s debt eased and positive US economic data boosted risk appetite. EUR/USD advanced in early hours topping around 1.5080, correcting as the day advanced but managing to close above the 1.50 mark. The pound declined against all the majors as UK Consumer Confidence unexpectedly disappointed and the Dubai situation continued to worry investors as around 40% of the Dubai World’s debt is owed to UK banks. GBP/USD fell below 1.65 settling around 1.6450. The Canadian dollar closed the day rather flat at around 1.0550 against its US counterpart after battling between gains and losses as Canadian GDP reported lower-than-expected figures but confirmed that Canada came out of recession in the third quarter. The Aussie dollar traded sideways around 0.9150 as investors remained expectant ahead of the RBA’s interest rate decision. USD/JPY continued to trade in a volatile manner without taking any definite side away from the 86.50 area.
Gold closed slightly below $1180 recuperating from the huge sell-off on Friday as Dubai’s debt worries eased. Silver advanced as well modestly surpassing $18.40. Crude Oil rallied above $77 on reports about Somali pirates capturing a tanker that was carrying oil from Saudi Arabia to the US.
The Day Ahead
The day will start with the Reserve Bank of Australia’s interest rate decision. The RBA has already raised interest rates two months in a row and investors expect a further quarter percentage point increase to 3.75% as the Australian economy continues to grow. The European session will be filled with data starting with a 0.3% expected expansion for Switzerland’s GDP quarterly figures and a 0.6% gain forecasted for German Retail sales in October. Germany and the EU will release their PMI manufacturing numbers as well as Unemployment data. The UK’s PMI manufacturing is also due for release. In the US, the ISM Manufacturing Index is expected to fall to 54.8 from 55.7 the previous month.
When GBP/JPY broke above the wide 139-144 range it quickly climbed almost 1000 pips. After trading around 150 for some time the cross corrected back inside the range. The next sessions should be closely followed expecting a potential break above 144 that could send GBP/JPY to the 150 surroundings once again, where a drop below 139 could be the trigger to a big bearish move.
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