Weekly Market Commentary
15th April 2012
Provided by TA Knowledge
Welcome to the Weekly Market Commentary from DGCX, providing you with a snapshot of what's happening in the energy, precious metal and currency futures markets.
The commentary and analysis included in the DGCX Weekly newsletter is provided by TA Knowledge, a leading UK-based provider of news and intelligence.
Please note that the observations and views expressed in this newsletter do not reflect the views of DGCX and are solely the view of the writer (TA Knowledge).
Economic Data Overview
A recurring pattern is emerging as we enter the second quarter of 2012 - this is the year of safe haven plays. The year began with a rush into the dollar and out of the euro as US and German fixed income markets reached all-time highs. Last week the same themes dominated trading. US economic data in April has been much weaker that expected but investors have still chosen the dollar and gold as well as strongly rated government debt markets to invest in. The story has wavered between US recovery and European collapse in the last four months. Last week, the European debt crisis overshadowed trading.
Spain is at the centre of the crisis. The fourth largest economy in Europe is too big to fail. Mounting austerity measures in a shrinking economy with spiralling yields and massive unemployment is a formula that does not compute. Already this month, debt markets have shown little appetite for the nation's latest bond auction. Yields are at the 6% bailout trigger level we have seen in other Euro bloc nations. While the price of protective credit default swaps has also ballooned. The ECB has now got to prevent peripheral European bonds from falling off a cliff, as the market is lining up Italy in its sights. Italy is one of the largest bond markets in the world and cannot be saved from default by the ECB and or the IMF, if the European contagion continues. There is a growing debate as to whether the ECB will begin its bond purchase program to steady crisis bound debt markets. Many believe that even if a renewed purchase program is undertaken it will not be able to sooth investors' fears.
Away from Europe, Chinese economic growth disappointed last week, growing at 8.1% its lowest rate in three years. This is part of a developing story that countries which were expected to be the engine of global recovery have not lived up to expectations. India is another nation that is beset by economic worries and last week its currency fell to its lowest level since the middle of January. Major world stock markets posted their worst weekly performance in 2012, last week. This may be a worrying headline, but equities have been so strong in 2012 and corrections so mild, that last week's losses are being overstated. There is a growing demand for growth investments and US equities in particular are expected to attract strong buying interest even if this correction lasts another few weeks. It is this type of optimistic outlook that has help oil stay above $100 and maintain the pivotal 100 day moving average at $98.69.
Looking to the week ahead, a G20 meeting at the weekend will be closely watched for developments, as another plan is needed if the European debt crisis is to be controlled. On the economic calendar the market will watch US retail sales which are expected to come in much lower than March's number, UK and European inflation data which are expected to be higher in the UK and flat in Europe. Meanwhile German PPI will also be important as inflation concerns in Europe's strongest economy remain a concern. News that China is going to allow its exchange rate trade in a 1% band is a global growth positive which should help gold and the dollar this week ..Read more