(Reuters) - New claims for unemployment benefits slipped last week, but stayed at a stubbornly high level that underscored the labor market recovery was having trouble gaining traction.
Initial claims for state unemployment aid dropped 11,000 to 457,000, the Labor Department said on Thursday, a touch more than the fall to 459,000 that financial markets had forecast.
Analysts say new applications for jobless benefits, which have trended sideways for much of this year, have to drop to a 400,000-450,000 range to signal sustainable jobs growth.
"The labor market is steadying but at a relatively high level of unemployment. It offers a hint of improvement in labor market conditions," said John Lonski, chief economist, Moody's Investors Service, New York. "Nevertheless, jobless claims remain quite elevated, and suggest labor slack persists."
Stocks on Wall Street briefly edged higher after the data as investors drew some comfort from the report and strong corporate earnings from Exxon Mobil Corp. But share prices were lower by midday as technology shares fell.
Prices for safe-haven U.S. government bonds rose.
Sluggish jobs growth, marked by a 9.5 percent unemployment rate, is the biggest obstacle to the economy's recovery from the most brutal recession since the 1930s -- a recovery that has shown signs of wilting in the last couple of months.
President Barack Obama, struggling in polls as Americans worry about the weak recovery, is pressing for approval of a $30 billion plan to help small businesses and create jobs. The plan was blocked in the Senate by Republicans on Thursday.
While growth in the United States appears to be taking a breather, recovery in some parts of Europe is back on track after being shaken by a sovereign debt crisis.
Euro zone economic sentiment rose strongly this month to a 28-month high and unemployment in Germany fell to its lowest level since November 2008.
The upbeat European data lifted the euro to a 12-week high against the U.S. dollar.
SLOWING GROWTH
A U.S. government report on Friday is expected to show growth slowed to a 2.5 percent annual rate in the second quarter from a 2.7 percent pace in the first three months of the year. The moderation will likely reflect a step back in consumer spending and factory output, and a wider trade gap.
The slowdown in manufacturing, which has led the recovery that started in the second half of 2009, likely persisted this month as most regional surveys have shown a pullback in activity.
However, a survey of manufacturing activity in the nation's Central Plains and eastern Rocky Mountain region released on Thursday showed a strong rise for July.
The slowdown in economic activity bodes poorly for the jobs market.
"With claims (for jobless aid) at these levels the 200,000-plus increases in private payrolls that we need to see in order to bring unemployment down quickly just aren't going to happen any time soon," said Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York.
With unemployment high, consumer spending has been tepid and home foreclosures have remained elevated.
Foreclosures rose in three of every four large U.S. metropolitan areas in the first half of this year, likely ruling out sustained home price gains until 2013, real estate data company RealtyTrac said on Thursday.
Unemployment was the main culprit driving foreclosure actions on more than 1.6 million properties, the company said.
In the week ended July 17, 4.57 million people were still receiving jobless benefits after an initial week of aid, up 81,000 from the prior week. The continuing claims data covered the survey period for the government's July household survey, from which the national unemployment rate is derived.
"We expect the July household survey to show a rise in the jobless rate to 9.6 percent," said Mike Englund, chief economist at Action Economics in Boulder, Colorado. The rate stood at 9.5 percent in June.
(Additional reporting by Lynn Adler and Richard Leong in New York; editing by Todd Eastham)
(Reuters) - The Federal Reserve should consider buying more Treasury securities, instead of promising an extended period of low rates to support recovery, should inflation drift lower, a top Fed official said.
St. Louis Federal Reserve Bank President James Bullard said on Thursday he is worried about the risks the United States could fall into a Japan-style quagmire of falling prices and investment that is hard to get out of.
"The FOMC's extended period language may be increasing the probability of a Japanese-style outcome for the U.S., and on balance, the U.S. quantitative easing program offers the best tool to avoid such an outcome," he wrote in a research paper, referring to the central bank's policy setting group, the Federal Open Market Committee (FOMC).
"With a little bit weaker numbers on the economy and inflation a little bit low, people are starting to talk about the possibility of a Japanese-style outcome for the U.S.," he told reporters at a press conference on the research.
The Fed's long-running promise to hold benchmark rates exceptionally low for an extended period -- which is aimed at spurring growth -- could lead businesses and consumers to anticipate slight deflation ahead, the St. Louis Fed chief said.
"Of course, that isn't what we're trying to do with the extended period language, what we're trying to do is encourage output growth and production, and through that channel, get inflation to move higher," he said.
Bullard said he continues to views the most likely course for the U.S. economy as a gradual recovery and that more easing of financial conditions will not be necessary. But he said the Fed should be prepared for further actions if unexpected shocks materialize.
The St. Louis Fed leader, a voter this year on the Fed's policy-setting panel, said he does not plan to join Kansas City Fed President Thomas Hoenig in dissenting against the extended period language, even though research Bullard released on Thursday found the language to be problematic.
Bullard said he took the unusual step of publishing his research and holding a press conference about the topic to stimulate debate about the effectiveness of the extended period language in achieving the Fed's goal of restoring stronger economic growth.
The Fed lowered borrowing costs to near zero in December of 2008 and has already flooded the economy with more than $1 trillion of credit to boost growth after a painful recession.
The recovery has stumbled in recent weeks, and Fed Chairman Ben Bernanke said this week the economy faces unusually uncertain prospects. The Fed could take further steps to bolster growth if needed, he said.
(Reporting by Mark Felsenthal; Editing by Andrew Hay)
(Reuters) - A string of Europe's largest firms issued surprisingly upbeat profit reports on Thursday, bolstering an abrupt renewal of investor confidence in the region after months of debt turmoil and fears for the euro.
Broader economic data added to the theme, following some startlingly strong numbers last week -- euro zone economic sentiment rose strongly in July and German unemployment fell to its lowest level since November 2008.
Economists said the underlying performance in the region as a whole was never quite as bad as suggested by incessant news of debt default dangers in Greece and other southern European economies badly bruised by the recession of 2008-2009.
But they also cautioned that the abrupt swing toward a more positive mood did not change the fact that the region's economy is likely to heal only slowly with harsh government austerity measures poised to bite in the months ahead.
On the day, the upbeat news from some of Europe's biggest companies was nonetheless impressive and came on the heels of surveys last week which showed an unexpectedly high level of growth in both the manufacturing and services sectors in the region.
Publicis (PUBP.PA), the world's third-largest advertising group in terms of revenues, posted better-than-expected profit figures for the first half, declared its outlook better than previously envisaged, and the company's boss went as far as to declare the bad times over.
"We really have the feeling of being at the end of economic crisis, or even having put it completely behind us," Publicis CEO Maurice Levy told reporters.
His remarks were not isolated.
Dutch staffing firm Randstad (RAND.AS), second largest in the world in its field, said it was not seeing signs of a double dip in the economy, with companies continuing to hire more staff, notably in Germany and France.
"We are seeing growth everywhere. Even in Greece we are seeing the usual pattern. We are not seeing signs of a second dip," Randstad Chief Financial Officer Robert-Jan van de Kraats told Reuters.
Europe's debt market crisis spilled out of Greece late last year when markets took fright at the size of the country's deficit and ballooning debt, knocking the euro and European assets as investors started to fret about the risk of debt default in the region despite a Greek bailout.
Drugs and engineering giants gave good readouts too.
France's Sanofi-Aventis (SASY.PA) beat second-quarter earnings expectations, AstraZeneca (AZN.L) posted strong results and German chemicals maker BASF (BASF.DE) surpassed analysts' earnings expectations for the sixth straight quarter, bolstered by a rebound in the car and electronics industries.
German engineering conglomerate Siemens (SIEGn.DE) posted a better-than-expected 40 percent rise in fiscal third-quarter operating profit, helped by cost cuts and the export fillip from a weaker euro -- an exchange rate advantage ironically spawned by the debt crisis and investor fears that at some stages fueled questions about the common currency's very survival.
That debt market crisis propelled debt refinancing costs to record highs for governments in places such as Portugal, Ireland and Spain in May-June, but they have fallen back sharply in many cases in the last 10 days or so, suggesting investors sense the worst of the danger has passed.
The premium investors demand to hold the 10-year bonds of Ireland and Portugal instead of the equivalent debt of safe-bet Germany has fallen about 18 percent in less than two weeks and markedly too in Spain.
MOOD SWING
All that reflects a suddenly more positive take on Europe as the region additionally gains attractiveness in relative terms for global investors after a string of somewhat disappointing news on the U.S. front in recent weeks.
Investment bank UBS, where economists have long argued that investors were perhaps overly negative about the fiscal woes of the region, published a note that captured the shift in mood as far as they see it.
"Today our Global Strategy team upgraded Europe to Neutral (from Underweight) as they position their portfolio for a more positive tone," said the note.
"We continue to promote Europe on compelling valuations, economic data and relief for the banks to boot," UBS said, noting that Germany's Ifo index of business sentiment registered its biggest leap in 20 years in July, British second-quarter GDP was much stronger than expected and the fact that "stress tests" on banks across the region had proven mostly reassuring.
Other signals that the crisis was petering out include sharp drops in the price of credit default swaps (CDS), which provide protection against debt default and which soared in May.
The Markit iTraxx SovX index of Western European CDS prices is now at 114 bps, 54 basis points below its highest closing level of 168 basis points, seen on May 7.
In addition to a renewed focus on economic activity, signs are that investors are also encouraged by the existence of the 750-billion-euro standby lending facility euro zone governments have put in place to stem debt crisis contagion.
Despite some skepticism, investors also appear reassured by the fact that all but seven banks passed so-called stress tests of their financial resilience [ID:nLDE6661JE]. Bank shares in Europe, as measured by the STOXX Europe 600 bank index .SX7P, are up 7.4 percent since the stress test results emerged on July 23. and 25 percent up from the trough they hit in early June.
NOT SO FAST
At Deutsche Bank, however, economist Gilles Moec warned against getting carried away about the economy's recovery.
"There's no big change in terms of the underlying macro picture: we're in for slow growth," said Moec.
After poor first-quarter GDP figures in much of Europe, the second-quarter is expected to be stronger by definition more than as a result of any major upswing, and government stimulus deployed to combat the recession is still in place, with much of the post-recession austerity yet to come.
Economic growth is expected to be a modest 1.1 this year and 1.3 percent in 2011, according to a Reuters poll of 40 economists that was published in mid-July [ID:nLAG006340]. That follows a GDP drop of 4.1 percent in 2009.
"What is really impressive is the speed at which investors' focus has shifted away from hammering Europe to having a more sober look at the U.S.," said Moec.
A Reuters poll of 15 Europe-based asset managers showed on Thursday that European investors boosted fixed-income allocation to a 2010 high in July, although, as Mauro Ratto, head of Europe and Asia management at Pioneer Investments, put it:
"Concerns about the euro government debt crisis seem to be receding. However, most warning signs are still flashing red ... the prospect of budget tightening is unlikely to improve European growth rates."
(Additional reporting by William James and Jeremy Gaunt in London, Lionel Laurent in Paris and Reuters company news reporters across Europe; Editing by Mike Peacock and Stephen Nisbet)
(Reuters) - Euro zone economic sentiment rose strongly in July, buoyed by figures from Germany that point to a recovery as the currency area overcomes the sovereign debt crisis, but the outlook remains uncertain.
The European Commission said its economic sentiment indicator for the 16-nation currency area rose to 101.3 in July, a 28-month high, from an upwardly revised 99.0 in June. Economists polled by Reuters expected the index to stay at 99.0.
Economic morale is the latest in a string of indicators that have shown the currency area continues to recover from the worst economic crisis in decades, despite turbulence on its sovereign debt market and uncertainty about the health of banks.
"July's improvement in the (euro zone) consumer and business surveys adds to the evidence that the euro-zone is performing surprisingly well, but with stark divergences between countries," said Jennifer Mckeown, senior European economist at Capital Economics.
Martin van Vliet said: "It confirms the spillover effect of the debt crisis to the real economy was limited. But the euro zone economy is bound to lose steam in the second half of the year. For now, let's enjoy it while it lasts."
OUTLOOK GLOOMY
Growth may falter because of fiscal austerity measures ordered by many governments to prevent the sovereign debt crisis from spreading from Greece to other countries. Foreign demand for European goods is also expected to diminish.
Howard Archer, chief European economist at IHS Global Insight, noted that the index measuring consumers' willingness to make major purchases over the next 12 months fell as the did the figure showing consumers' willingness to make major purchases at present.
"This raises question marks as to whether improved consumer confidence will translate into significantly higher spending. We have our doubts on this given that the euro zone unemployment rate is currently at a near 12-year high of 10.0 percent," he said.
The Commission said economic sentiment improved thanks to an increase in the index for the export-driven industrial sector to -4 from -6 and improvement in services to 6 from 4.
Morale of consumers, whose demand is crucial for making economic growth self-sustaining, rose to -14 from -17.
The increase was driven by strong figures in Germany, the euro zone's biggest economy, where economic sentiment rose to 110.1 from 106.1. The figure also increased in France and Italy, but fell in Spain.
In the wider 27-nation European Union, economic sentiment grew to 102.2 in July from 100.3 in June.
The Commission's separate business climate indicator for the euro zone increased more than expected, rising to 0.66 in July from 0.40 in June. It was the highest reading since March, 2008.
It has forecast that the euro zone will register growth of 0.9 percent this year after gross domestic product contracted 4.1 percent in 2009.
The Commission survey also showed that euro zone inflation expectation remained muted.
Selling price expectations in industry fell to 5 in July from 6 in June, while consumers' assessment of price trends over the next 12 months remained unchanged at 11.
The European Central Bank, which watches the indicators closely, is expected to leave its main interest rate at 1.0 percent well into 2011.
The parity found support on 1160 and the price is currently making a rebound of correction. Indicators are globaly bearish. We maintain to trade only short positions as far as 1170 is resistance. The breakout of 1160 will give a new sell signal. As far as 1160 is support, a pullback on 1180 is possible.
The parity found support on its bullish slant, after a lowest on the support at 0.89. Indicators are mixed. We maintain to trade only long positions as far as the price is above 0.89. The breakout of 0.9050 will give a new buy signal. However, if 0.89 is broken, a sell signal will be given. We will then advise to trade only short positions as far as 0.8950 will be resistance.
The price didn't succeed to break the resistance at 1.38 and is currently making a pullback on 1.37 or towards its bearish slant in extension. Indicators stay globaly bullish. We maintain to trade only long positions as far as 1.37 is support. The breakout of 1.38 will give a new buy signal.
The parity is currently testing a rebound after having reach the lowest of July towards 0.8320. Indicators are globaly bullish. We maintain to trade only short positions as far as the price is below 0.8375. The breakout of 0.8320 will give a new sell signal.
The parity found resistance on the lower band of its former bullish channel. The price made a pullback on the highest of July and is testing a rebound. We maintain to trade only long positions as far as the price is above 113.50. A return above 114 will comfirm the take up of the bullish movement. The breakout of 114.75 will give a new buy signal.
We maintain our last analysis : 'The parity continues to test the resistance at 1.30. In extension, the price don't succeed to break 1.3050. The parity is still moving into its bullish channel. All indicators are bullish. We maintain to trade only long positions as far as the price is above 1.2890. The breakout of 1.30 will give a new buy signal.'
88 finaly acted as resistance and a correction occured, pushing back the price below 87.67. So, we are neutral on the parity between this level and 86.86. We will wait the breakout of one of these two bands to take position: - Long if 87.67 is broken - Short if 86.86 is broken
€ The euro depreciated vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2965 level and was capped around the $1.3040 level. The big news in the market today was a weaker-than-expected result for U.S. June durable goods orders. Defying expectations of a positive print, the headline number came in at -1.0%, down from the revised May tally of -0.8%, while the ex-transportation component fell to -0.6% from the May result of 1.2%. Sub-components such as capital goods orders non-defense ex-air were also considerably weaker and these data suggest the U.S. economy sputtered lower at the end of the first half of the year. Other data saw MBA mortgage applications off 4.4% from the prior +7.6% result. Weekly initial jobless claims and continuing jobless claims data will be released tomrorow followed by GDP, PCE, and final July University of Michigan consumer sentiment data on Friday. The Federal Reserve released its July Beige Book today and its noted that economic growth decelerated in some areas over the past two months. The expiration of a homebuyers’ tax credit and a decline in commercial real estate both had a negative impact on the U.S. economy. The Fed continues to anticipate “continued moderate growth.” New Fed nominees Yellen, Diamons, and Raskin won their Senate votes today and will soon join the Board of Governors. In eurozone news, provisional German states’ July consumer price inflation data released today came in on the elevated side. The preliminary national July CPI came in at 0.2% m/m and 1.1% y/y with the harmonized measure at +0.3% m/m and +1.2% y/y. French June CPI data will be released tomorrow. The European Central Bank introduced more stringent rules today on bank collateral including new haircuts on certain bonds. Euro offers are cited around the US$ 1.3265 level.
¥/ CNY The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥87.25 level and was capped around the ¥88.10 level. Bank of Japan Policy Board member Kamezaki reported the central bank “wants to make utmost efforts proactively to escape from deflation and return to a sustainable growth path under price stability,” noting a stronger yen will hurt exporters. In contrast, other BoJ officials including Governor Shirakawa have been hesitant about commenting on the strong yen. There is speculation that industrial production growth in Japan is decelerating and this may increase pressure on the BoJ to ease further. Yen gains were also prompted by weaker-than-expected Australian consumer price inflation data, suggesting global growth continues to decelerate. Reserve Bank of Australia will likely not hike rates next week and the yen could stay bid as a result of this evolving monetary and economic landscape. While Kamezaki’s remarks may not increase the changes of yen-selling intervention by the government, traders remain fixated on the ¥85 level. Economic growth in Japan may also slow in the fourth quarter. The spread between three-month U.S. Dollar Libor and three-month yen Libor narrowed to 23.937 basis points today, the smallest difference since 20 May. Data released in Japan overnight saw July small business confidence improve to 48.1 from the prior reading of 47.4. June retail trade data will be released tonight. The Nikkei 225 stock index climbed 2.70% to close at ¥9,573.27. U.S. dollar bids are cited around the ¥86.29 level. The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥113.20 level and was capped around the ¥114.70 level. The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥135.85 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥82.50 level. In Chinese news, the U.S. dollar depreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.7778 in the over-the-counter market, down from CNY 6.7784. The Federal Reserve Bank of Cleveland warned that the anticipated appreciation of the Chinese yuan will not lead to a “substantial” reduction in the U.S. trade deficit. People’s Bank of China is expected to keep monetary policy relatively stable and continue to promote domestic final private demand.
£ The British pound appreciated vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.5635 level and was supported around the US$ 1.5545 level. Data to be released in the U.K. tomorrow include July Nationwide house prices, June net consumer credit, June net lending secured on dwellings, June mortgage approvals, and the July GfK consumer confidence survey. Bank of England Governor King today expressed concerns that proposed reforms to the Basel capital accord will not be strong enough. Monetary Policy Committee member Miles said now is not the proper time to change policy while MPC member Bean said sterling’s decline will likely have a larger-than-expected impact on consumer prices. Cable bids are cited around the US$ 1.5270 level. The euro depreciated vis-à-vis the British pound as the single currency tested bids around the £0.8310 level and was capped around the £0.8365 level.
Plenty of important macro data from the U.S. was published yesterday. Investors were disappointed by the figures and responded mainly by moving away from riskier assets. At first U.S. Durable Goods came negative at -1%, at 12:30GMT later at 18:00GMT Beige book revealed a gloomy outlook for U.S. economy. Although company earnings are still high, yesterday fears about recovery came back to dominate the markets.
Economic News
USD - Traders Shift from EU Debts Concern to U.S. Economic Outlook U.S. macro data came far less than expected. Investors responded by moving away from riskier assets back to buying the Yen and U.S. Dollar. The EUR/USD was slightly down after U.S Durable Goods was published, The USD/JPY traded lower, currently trading at $87.22 as investors feel safer holding the Yen over the USD. The British Pound continued to rally against the U.S. Dollar, despite the move to safer assets.
U.S. demand for Durable Goods, which is usually a sign for economic strength, came negative at -1.0%. Forecasts which already expected a form of decline from last month were more moderate than the actual figure. Traders were surprised by the final figure and reacted by sending markets lower. Later the Beige Book was released by the Fed during mid U.S. day trading. It provided a mixed economic picture but eventually supported the markets from declining further. The report said that the U.S. economy was growing but there were also signs of a slowdown in some regions over the past two months.
Looking ahead to today, traders should follow the release of the Unemployment Claims at 12:30 GMT. A worse than expected result might intensify the current trend and strengthen the greenback further.
EUR - EUR's Recent Rally Losing Steam EUR's rally against its major counterparts stumbled yesterday as new economic data raised fears about the strength of global economic recovery, with the common currency ending lower against its major counterparts.
EUR/USD ended slightly lower yesterday, reaching a low of 1.2968; however, it managed to recover some of its loses to currently trade at 1.3010. The pair seemed to trade without a clear trend and moved mostly sideways. The EUR/JPY, however sent more clear signs of a correction building up. The pair's five days rally ended yesterday after it breached an 11 week high. Signals show that pair should further decline in coming days.
Looking ahead to today, traders are advised to follow the British HPI data at 6:00 GMT as well as the German Employment change at 7:55 GMT. Positive data might bring back some market optimism, pushing the Pound and EUR higher against their counterparts.
JPY - Strengthens on Safe Heaven appeal The JPY strengthened against the U.S. Dollar yesterday as investors expressed their concerns about the U.S. economy by selling the U.S. Dollar and buying the Japanese Yen. The Yen traded higher against most of its major counterparts; however, a strong currency may ultimately weigh on the Japanese economy as it is heavily dependent on exports.
A strong Yen would have bad influence on profits of Japanese companies. Consequently the Japanese government might be forced to weaken their local currency. So far no comments were published regarding Government intervention. As long as the Japanese Bank avoids market intervention the Yen is expected to keep its strengthening momentum.
Looking ahead to today traders should pay attention to the $86.88 support line, crossing down might take the USD/JPY pair even lower. Some analysts estimate that that the Yen could even reach as high as $85 in the coming months.
Crude Oil - High U.S. Inventories Send Crude Oil Price Lower Crude Oil prices ended lower yesterday after U.S Oil Inventories rose by 7.3M barrels. Lately this figure made little impact over Crude Oil prices but yesterday it came quite high compared with expectations of a 1.4M drop.
Demand for durables goods which also came surprisingly lower added to worries that demand for Oil would decrease in the near future as manufacturing declines. Crude Oil price might decline further in the short term if economic figures continue to deteriorate. Investors are worried about a possible double dip, meaning a renewed recession.
Gold price rebounded slightly during yesterday trading session. During the day it reached as low as $1156.25, but thereafter recovered and is currently trading at $1165 Gold price dropped after inflation worries began to fade and analysts begin to worry about another recession or economic slow down.
Technical News
EUR/USD The pair was relatively unchanged yesterday and as such has formed a 2nd consecutive doji candlestick which reflects the bulls and bears inability to move the price significantly. The RSI (14) has crossed below the overbought line, triggering a sell signal. But traders may want to be patient and wait for the RSI line to break its trend line before going short. A rising trend line can be drawn from the low of the RSI line that begins on June 4th.
GBP/USD The pound was stronger yesterday and has risen versus the dollar for the past 6 consecutive bars. This has pushed most oscillators into oversold territory as the Slow Stochastic is showing a bearish cross and the RSI (14) is floating in the oversold territory. However, before going short, traders may want to wait for a breach of a short term trend line that can begins at the bar on June 22nd.
USD/JPY A bearish flag pattern has formed on the 4-hour chart. The base of the flag pole begins at the high on June 14th and runs to the low for the pair at 86.25. The flag pattern is sloping upward with a previous downward trend. Therefore, a breakout may be expected to the downside in the direction of the long term trend. Traders may want to wait for a confirmation of the breakout at a price of 86.80 and enter short.
USD/CHF For the past 15 days the pair has traded in a defined range between the prices of 1.0650 and 1.0400. In this trading range a double bottom reversal pattern may be forming. A confirmation of the reversal pattern will be a close above the 1.0650 resistance line.
The Wild Card Gold The drop in the price of gold shows a potential reversal in the trend. The price has closed below the long term upward sloping trend line for the past two days, confirming a significant breach of the trend line and a breach below the support level of $1169. However, yesterday's trading closed and formed a hanging man candlestick. This may signal an upturn in the price. CFD traders may find a good opportunity to go long on a breach above the $1169 resistance level.
(Reuters) - Oil was steady around $77 on Thursday after falling in the past two sessions on weak durable goods data and the biggest weekly increase in crude inventories for nearly two years in the United States.
U.S. crude stocks surged 7.31 million barrels last week as imports jumped, government statistics showed on Wednesday, while the nation's gasoline and distillate stocks including diesel gained for the fifth and ninth consecutive weeks respectively.
Wall Street slipped on Wednesday and Asian shares slid on Thursday after new orders for long-lasting manufactured goods posted their largest decline since August, a fresh sign the U.S. economy slowed in the second quarter.
"The crude market has shown the economy is not absorbing the supply, nor is the motivation there for refiners to process those supplies," said Jonathan Barratt, managing director at Commodity Broking Services in Sydney. "The numbers in America are not that good."
U.S. crude for September advanced 13 cents to $77.12 a barrel at 12:57 a.m. ET, after dropping close to 0.7 percent on Wednesday, having touched $79.69 a day earlier, the highest price in almost 12 weeks. ICE Brent gained 5 cents to $76.11.
"We have tested $80 twice and failed. Now we are going to test lower into the range again," Barratt said, referring to the $70-$80 range within which oil has traded for nearly two months.
The Organization of the Petroleum Exporting Countries (OPEC) has for the past year and a half expressed a preference for oil to remain stable around $75 a barrel, saying that price encourages investment to sustain and increase production capacity and does not threaten the economic recovery.
"In a crisis situation you need stability," Barratt said. "Crude is very stable. This suggests to me that the forces of supply and demand are at ease with each other."
Oil analysts including Michael Wittner from Societe Generale pointed out that total U.S. product demand growth was robust at 3.4 percent over the past four weeks from a year earlier, according to EIA figures.
But supply accumulation is outpacing consumption at a time when the U.S. economy is recovering from the most severe recession of the post-war era.
The U.S. economy kept growing overall in recent weeks, but unevenly and it actually slowed in a few regions as housing markets softened after the end of a popular tax break, the Federal Reserve said on Wednesday.
Last week's gain in U.S. crude stockpiles was the biggest since October 2008, according to statistics from the U.S. Energy Information Administration, which published Wednesday's inventory report. U.S. weekly crude imports reached 11.12 million barrels last week, the highest level since August 2006.
(Reuters) - Gold bounced higher on Thursday as the U.S. dollar weakened and physical buying picked up, but gains are seen limited after holdings in the world's largest gold-backed ETF fell to the lowest since early June.
Premiums for gold bars edged up in Asia, but although jewelers were happy to buy at lower levels, uncertainties in the outlook for the U.S. economy and poor technicals weighed on sentiment. Other precious metals tracked bullion higher.
Spot gold added $4.10 an ounce to $1,166.65 an ounce by 0602 GMT after falling as low as $1,156.90 on Wednesday, its weakest since late April. Bullion hovered below the 50-day and 100-day moving averages.
For a 24-hour gold technical outlook, see:
here
"There's a lot of safe-haven positioning being unwound right now in the gold market. Potentially, it could unwind down $1,130-$1,120 pretty quickly," said Mark Pervan, senior commodities analyst at ANZ in Melbourne.
"A lot of the gold gains in the last six months were driven by euro weakness, and that was really safe haven buying. The trend doesn't look good. Potentially, it could move down toward the low $1,100s," said Pervan, referring to levels last seen in April.
The world's largest gold-backed exchange-traded fund, SPDR Gold Trust (GLD.P), said its holdings fell to 1,282.279 tonnes by July 28 from 1,300.829 on July 27 -- their lowest since early June. The holdings hit a record at 1,320.436 tonnes on June 29.
Cash gold was nearly 8 percent below a lifetime high around $1,264 struck in June, when investors poured money into bullion on worries the euro zone debt crisis would spread. U.S. gold futures for August delivery rose $5.8 $1,166.2 an ounce.
Gold bars were offered at a $1.50 premium to the spot London prices in Hong Kong, up from $1.20 on Monday. In Singapore, premiums rose to $1.50 from between 80 cents and $1.20 earlier this week, while dealers in Tokyo pushed up the differentials to $1 from 50 cents.
"The premiums have gone up after prices dipped to the $1,160 mark. There are strong inquiries in the physical market, that's why we feel that we should push up the premiums," said a dealer in Tokyo.
The U.S. dollar slipped toward three-month lows against a basket of currencies on Thursday as investors cut their positions due to fresh evidence of a patchy recovery in the U.S.
"We're seeing a bit of short covering, so that's why the market has stabilized at current levels. A drop in the SPDR ETF may suggests investors think the euro zone is getting better," said a dealer in Hong Kong.
"Gold looks slightly bearish, although we see a mixture of buying from jewelers and other physical buyers."
The European Central Bank will likely wait until late 2011 before hiking interest rates, according to a Reuters poll of over 70 economists who stayed cautious in July despite some encouraging economic data.
The Nikkei ended down on Thursday as U.S. stocks slipped after weak durable goods figures and a downbeat assessment of the economy from the Fed's Beige Book kept the benchmark S&P 500 trapped below its 200-day moving average. .T .N
(Reuters) - New orders for long-lasting manufactured goods fell unexpectedly for a second straight month in June, posting the largest drop since August in a sign economic recovery cooled in the second quarter.
However, the Commerce Department report on Wednesday showed cash-flush businesses continued to invest in equipment. That implied underlying demand remained intact with firms exhibiting confidence in the moderate economic recovery.
"The bottom line is that the data show business investment had a very strong second quarter and, although the recovery in manufacturing may be losing a little momentum, it is hardly collapsing," said Paul Ashworth, senior U.S. economist at Capital Economics in Toronto.
Durable goods orders dropped 1.0 percent after falling 0.8 percent in May, surprising financial markets that had expected a 1.0 percent increase. Durable goods include big-ticket items such as cars and planes.
But orders for non-defense capital goods excluding aircraft, a proxy for business spending, unexpectedly rose 0.6 percent after increasing by an upwardly revised 4.6 percent in May. Markets had expected a flat reading.
Stocks on Wall Street fell as investors focused on the overall decline in orders and a full-year earnings forecast from Boeing Co that was below market consensus.
The Standard & Poor's 500 Index fell for a second straight day, closing below its 200-day moving average, currently around 1,114.
Prices for safe-haven U.S. government debt rose and the dollar rallied against the euro but fell versus the yen.
Data from consumer spending to manufacturing have suggested the recovery from the longest and deepest recession since the 1930s took a step back in the past few months.
The government is expected to report on Friday that growth slowed to a 2.5 percent annual rate in the April-June period from a 2.7 percent pace in the first three months of the year.
A separate report from the Federal Reserve showed U.S. economic activity was still rising but at a subdued rate.
"Among those districts reporting improvements in economic activity, a number of them noted that the increases were modest, and two districts, Atlanta and Chicago, said the pace of economic activity had slowed recently," the Fed said in its Beige Book, which is based on conversations with business contacts across the nation.
BUSINESS INVESTMENT GROWING
Some analysts said there was a chance second-quarter growth could beat expectations given signs of strong business investment. With profits booming, companies have stepped up spending on equipment and software after aggressively cutting back during the recession.
"There has been a loss of momentum in the past two months. It's yet to be seen how much of the upward momentum from earlier this year has been reversed," said Jim O'Sullivan, chief economist at MF Global in New York. "(But) I think the trend toward improvement is still intact."
Durable goods orders are a leading indicator of manufacturing, which has benefited from businesses replenishing inventories drawn down to record lows during the recession. However, that effort appears to be running out of steam.
Economists had expected durable goods orders to rise last month because Boeing received 49 orders for civilian aircraft in June compared to only five in May.
But non-defense aircraft orders tumbled 25.6 percent after falling 30.2 percent in May. Analysts said most of Boeing's orders were too late in the month to be caught by the report.
The drag on orders also came from bookings for computers and electronic products, which saw their largest decline since October. Orders for machinery recorded their biggest decline in 14 months, while those for primary metals fell by the most since March 2009.
"We expect further moderation in durable goods orders as the inventory cycle fades over the second half of the year," said Yelena Shulyatyeva, an economist at BNP Paribas in New York.
Durable goods shipments, which go into the calculation of gross domestic product, fell 0.3 percent after sliding 0.7 percent in May.
The Mortgage Bankers Association said on Wednesday that demand for loans to buy homes rose for the second straight week last week to the highest level since the end of June, but hovered just above 13-year lows.
(Reuters) - The economy kept growing overall in recent weeks, but unevenly and it actually slowed in a few regions as housing markets softened after the end of a popular tax break, the Federal Reserve said on Wednesday.
The U.S. central bank's latest Beige Book summary of national conditions, based on information before July 19, said activity "continued to increase, on balance" though Cleveland and Kansas City said business held steady.
"Among those districts reporting improvements in economic activity, a number of them noted that the increases were modest, and two districts, Atlanta and Chicago, said the pace of economic activity had slowed recently," the Fed said.
The Beige Book reports on conditions in all 12 districts that are part of the Federal Reserve system and carries a high degree of credibility because it is based on interviews and anecdotal information from coast to coast.
The latest report, compiled by the St. Louis Fed Bank, covers seven weeks from the previous Beige Book in early June and painted a picture of less-than-robust recovery.
While manufacturing continued to expand in most districts, activity had slowed or leveled off in New York, Cleveland, Kansas City, Chicago, Atlanta and Richmond.
That fit with a report issued earlier on Wednesday by the government showing that new orders for costly manufactured goods unexpectedly dropped in June -- a second straight monthly fall that pointed to waning momentum in the factory sector.
Retail sales -- a gauge of consumers' economic participation -- were generally higher but modestly so.
"Several districts cited apparel, food and other necessities as recent strong sellers, while big-ticket items were weak sellers," the Fed said.
Most districts said new-car sales were declining and housing markets were sagging.
"Activity in residential real estate markets was sluggish in most districts after the expiration of the April 30 deadline for the homebuyer tax credit," the Fed said, referring to a now-expired $8,000 credit offered as an encouragement for first-time home buyers.
There was a modest improvement in labor markets, with several reports of temporary hiring. Consumer prices held steady in most parts of the country while wage pressures were described as "contained."
(Reporting by Glenn Somerville; editing by Andrew Hay and Jan Paschal)
The Australian dollar fell today for a second day against its U.S. counterpart as the in inflation rose slower than expected, fueling the speculation that the central bank would keep the interest rates unchanged.
The consumer price index rose 0.6 percent in the June quarter 2010, compared with the rise of 0.9 percent in the March quarter 2010. The forecasts promised the 1.0 percent growth. There are not many reasons for the Reserve Bank of Australia to raise the interest rates next week, though the bank still may raise the rates later this year. The Aussie will probably decline to $88.50 in the near term.
AUD/USD declined from 0.9022 to 0.8954 today as of 9:29 GMT after falling as low as 0.8922.
Risk correlated trades had a strong showing yesterday as banking stocks rallied and concerns over the inadequacies of the Stress Test dissipated. The USD lost ground to both the GBP and EUR while longs in JPY and CHF were equally cut. Risky trades continued to benefit throughout the trading day in spite of US Consumer confidence data coming in negative. We especially like the appreciation we saw in sterling. We suspect there has been a fundamental shift in GBP prospects due to the sturdy GDP reading last Friday and we anticipate further upside to sterling in the near-to-mid term.
Asian equity markets are having a roaring day and the positive effects are spilling over into European indexes. We are seeing other encouraging signs as VIX dropped below its 200-day moving average and Gold continues to come under heavy selling pressure. There has been a noticeable lack of 1st tier economic data and we are cautious in accumulating too much risk just yet. These are the dog days of the trading summer – as such, low liquidly and inconsistent participants will continue to be as important as real data.
During the Asian session, the big news was the disappointing Australian Q2 CPI reading which came in well below markets expectations. The market was quick to shift rate hike expectations from August to later in the fall (ACM expects a November hike). The AUDUSD dropped like a rock to .8923 from .9020 in response to the release. With the inflation rate now within the RBA’s 2-3% target, markets now pricing in a late fall hike. The large AUD interest rate differential will further erode, which in turn will lend added support to currencies like CAD and NOK. Look for CAD & NOK to gain in the near term.
We are still highly constructive on the global economy and suspect commodities prices to trend higher which should give AUD a boost against the USD. With all the excitement around AUD, the CPI watchers will now be turning their gaze toward New Zealand.
In NZ, July business confidence and activity outlook surveys showed a significant deterioration from the June results. Analysts are in unanimous agreement that the RBNZ will raise the OCR 25 bps to 3.00% at its policy meeting tonight. Market and media interest will be focused on the accompanying statement released with the rate hike. Although recent NZ CPI readings have come in lower-than-expected, the markets are still pricing in roughly 75 bps worth of hikes between now and the year’s end.
We believe that the RBNZ statement will sound slightly more dovish, signaling a minor shift in interest rate trajectory as policy makers prepare for a global economic slowdown later this year. The sudden adjustment in rate path should translate into short-term NZD weakness, especially against the AUD.
As for today, US Durable Goods data is due to be released as investors continue to look for directional signals for the US recovery. The Fed’s Beige Book will likely reflect recent data softness.
Today's Key Issues (time in GMT): 00:00 EUR GER Jul HICP - prelim, +0.2% m/m, +1.1% y/y exp; prior unch, +0.8%. 07:00 EUR ESP Jun retail sales; prior -1.9% y/y. 08:45 GBP BoE Gov King, other MPC member testimony before Parliament. 10:00 GBP Jun Land Registry house prices. 12:30 USD Jun durable goods orders, +2.9% m/m exp; prior -0.6%. 12:30 USD Jun - ex-transport, +1.0% m/m exp; prior +1.6%. 18:00 USD Fed Beige Book release. 18:30 USD Senate vote on Fed nominees 21:00 NZD RBNZ interest rate announcement, % 3.00% exp, 2.75% prior
EurUsd The symmetrical triangle pattern on the hourly chart is still very much in play, and thus far we have seen a couple of nudges through the 20 Jul high at 1.3028. We are long from the original break above 1.2950 (there was even the re-test of that level yesterday which we suggested as a chance to add to longs) and expect the triangle to yield a target in the region of 1.3290. At present the bulls are steadying themselves above 1.3000 so further progress has been somewhat laboured; the next resistance level is expected at 1.3093 (10 May high) with weak resistance also anticipated at 1.3213 and 1.3254 (14 and 13 May highs respectively). Support at 1.2950 is still valid, with trendline support at 1.2905 –but should the pair drop below there we would have to concede the failure of the bullish triangle breakout, and would then expect technical levels below at 1.2793 (Friday’s low), 1.2733 (21 Jul low), 1.2683 (14 Jul low) and 1.2522 (13 Jul low).
GbpUsd GBPUSD continues to march unwaveringly higher, making easy work of the tangle of technical resistance levels between 1.5525-75 (15 April high, 200-day moving average and 23 Feb high) and going on to touch 1.5627 this morning. As previously discussed, we feel that the UK GDP figures last Friday were a game changer, and from here we would relish any dips towards the lower edge of the current uptrend channel now seen at 1.5350 (coinciding with a recent pivot level) to get long, and set a stop through 1.5300. Really there is not much standing in the way of an assault on the 17 Feb high 1.5816 in the coming days, then only uptrend resistance (currently at 1.5905) before the psychological significant 1.6000. Supports now seen below at 1.5525, 1.5450 and 1.5350.
UsdJpy Finally, a breakout from the 86.25 –87.75 range; and as expected, this has occurred on the topside –in the process activating a double bottom pattern we proposed earlier in the week. Given the depth of the two troughs we should therefore anticipate a target around 88.85, and after this morning’s break above the significant 88.00 pivot level, that now seems an extremely attainable goal. Sellers may still hinder progress up through the remaining trendline resistance around 88.45 but then the next discernable levels are all beyond our target; 89.15 (12 Jul high) and 89.50 (28-29 Jun high). Adding conviction to our view is the bullish engulfing candlestick carved out on the daily chart which suggests the bears have become overwhelmed and further upside is likely. Dips back towards the 87.75 breakout level will likely meet good bids, with the supports below there at 86.82 (yesterday’s low) and 86.25 (recent range floor).
UsdChf The bulls finally got a better grip on USDCHF yesterday, and not only managed to take out the stubborn 1.0565 resistance level, but then to print a bullish engulfing candlestick on the daily chart. We now see a fresh bullish flag pattern possible on the hourly chart which would suggest that on a break above 1.0620 we should go long and aim for a target around 1.0770. Standing in our way before that would be yesterday’s high 1.0640 (roughly coinciding with the 200-day moving average at 1.0644), the top of the 1-week uptrend channel at 1.0685, then the major 1.0700 level. Bidders are very likely to lurk around 1.0565 where the old resistance level once stood, then 1.0450and 1.0400.
The parity continued its bearish movement. The breakout of 1180 offered us a new sell signal. Currently, the parity is testing the next support at 1160. All indicators are bearish. We maintain to trade only short positions as far as the price is below 1170. If 1160 is broken, a new sell signal will be given. As far as this level is support, a pullback on 1180 is possible.
