{"id":5419,"date":"2009-12-21T07:43:53","date_gmt":"2009-12-21T12:43:53","guid":{"rendered":"http:\/\/countingpips.com\/fx\/?p=5419"},"modified":"2009-12-21T07:43:53","modified_gmt":"2009-12-21T12:43:53","slug":"weekly-market-review-dec-21-09","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2009\/12\/21\/weekly-market-review-dec-21-09\/","title":{"rendered":"Weekly Market Review Dec 21, 09"},"content":{"rendered":"
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The equity market ended in consolidation mode last week, as Monday\u2019s bounce was followed by Thursday\u2019s downdraft.\u00a0 The S&P 500 index lost 0.36% for the week, as markets participants prepared for this week\u2019s holiday week.<\/p>\n

Although the markets received a nice boost on Monday, disappointing economic news quickly followed and weighed on investor\u2019s sentiment.\u00a0 The slightly worse than expected euro zone industrial production report (-11.1% y\/y on a work day adjusted basis vs. -10.8% expected) spooked investors as the news hinted towards a possible downward revision of the Euro zone\u2019s Q4 GDP forecast. This is in contrast to the US, where last week\u2019s retail sales data hinted towards an upward revision to the US\u2019s Q4 GDP forecast. Euro zone employment also accelerated to the downside, falling -2.1% in the third quarter vs. -1.8% in the second quarter.<\/p>\n

In Japan, the\u00a0 Tankan report was also slightly disappointing.\u00a0 The index increased by 9 points to -24, better than the reading of -27 expected.\u00a0 Still, despite three consecutive quarters of improvement last week\u2019s figure was the weakest. Furthermore, the outlook for capital spending was much weaker than expected.\u00a0 Large firms now plan to cut their estimates by -13.8% this fiscal year, worse than the -10.8% drop, forecasted three months ago.\u00a0 This resulted in the third quarter GDP being slashed to 1.3% from the 4.3% initial estimate because of sharply lower capital spending. Due to recent economic data the Tankan survey now suggests that the gloomy trend will continue something that will weigh on investor\u2019s sentiment during this fragile recovery.<\/p>\n

Over in the U.S, the US producer price index rose last week by 1.8 % for November, nearly double economists\u2019 projections, as energy prices soared and light truck prices picked up. Compared to last November\u2019s figure, wholesale prices were up by 2.4%, the first such increase in 12 months.\u00a0 Core producer prices, which exclude food and energy, rose by 0.5% in November, also exceeding estimates. Prices for light trucks jumped by 4.2% last month, while cigarette prices swelled by 2.2%.\u00a0 In addition, US consumer prices climbed 0.4% in November, according to government data Wednesday indicating inflation is in check.\u00a0 Excluding volatile food and energy prices, the \u201ccore\u201d inflation index was flat for the month.\u00a0 The headline index was in line with expectations, while analysts had been looking for a 0.1% rise in the core CPI.\u00a0 Over the past 12 months, overall prices have increased by 1.8% and core prices have been up by 1.7%.<\/p>\n

Inflation data was scrutinized by investors ahead of the rate decision to see if there would be any changes to the wording of the FOMC statement due to the numbers.\u00a0 The Federal Reserve Statement displayed little change from prior statements and alerted that market that monetary easing would continue for a substantial period of time.\u00a0 These comments were expected by market participants and the reaction was already baked into the market\u2019s price.<\/p>\n

Employment data also grabbed market participant\u2019s attention as Thursday\u2019s first-time jobless claims rose by 7,000 to 480,000, defying expectations of Wall Street\u2019s economists that the number would drop. The less volatile four-week average of new claims, however, fell by 5,250 to 467,500, maintaining a healthier trajectory.<\/p>\n

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The week ended with the Bank of Japan\u2019s policy meeting. The board voted unanimously to leave its policy rate unchanged at 0.1%, as it studies the effects of a measure announced earlier this month to try to lift demand. One must note that the BOJ offered up to 10 trillion yen ($111.2 billion) in short-term funds to the market. The policy board also said in a statement that it decided to \u201cfurther disseminate\u201d the BOJ\u2019s thinking on price stability, and made it clear that the board won\u2019t tolerate on-year falls in the consumer price index.<\/p>\n

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Forex<\/strong><\/p>\n

Dollar strength continued last week pushing the index to higher ground. The dollar index pushed to a high of 78 points, the highest level the index had seen since the beginning of September. On individual pairs, the pound was pushed lower, after an unexpected drop in U.K. November retail sales raised new doubts regarding the U.K\u2019s economic recovery. The Office for National Statistics reported that retail sales fell by 0.3% in November from October, the first month-on-month decline in over six months. On a positive note, UK jobless claims slipped -6.5K (12.5k expected) and average earnings including bonuses were higher than expected at 1.5% (vs. 1.2% expected).\u00a0 From a technical point of view the pound is closing in on its 200 day moving average at $1.60, currently trading above horizontal support.\u00a0 A break below these two important levels could see further selling towards support located around at $1.58.<\/p>\n

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On the other side of the globe the Australian dollar hit its lowest level since late Nov after Australian GDP came in lower than expected and the RBA stated that its policy is now in the normal range. Furthermore, the Australian economy grew at a slower than expected 0.2% q\/q pace in Q3 (0.4% expected) vs. 0.6% in Q2. The GDP report revealed that consumer and government spending are still fueling growth, while exports are still declining. The less hawkish outlook may have triggered profit taking. Thursday\u2019s break of support could lead to further selling pressure, should the Dollar continue to gain strength.<\/p>\n

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The Week Ahead<\/strong><\/p>\n

This week\u2019s trading week should be light on volume ahead of the holidays. Despite that fact one must remain cautious as low priority events this week could take the markets for a spin. Those who are not taking a break this week will be watching the Japanese All Industrial Activity and Canadian Retail Sales on Monday.\u00a0 On Tuesday UK GDP leads off, and is expected to show a -0.1% q\/q contraction compared to an initial forecast for a -0.3% figure. Even though the economy is experiencing major problems, economists are now speculating that the U.k economy is slowly crawling out of its dire straits.\u00a0 US GDP will follow and is estimated to come in at 2.8% q\/q. In addition Existing Home Sales will grab some attention, especially as the housing sector is still weighing on the U.S economy.\u00a0 On Wednesday EMU New Orders is up first and then US Personal consumption and Spending will follow.\u00a0 Towards the end of the week US Durable Goods will take the stage and is expected to show a positive 0.4% q\/q.<\/p>\n

Daily Forex Market Analysis provided by eToro<\/span><\/a><\/strong><\/p>\n

Disclaimer: Trading in the Foreign Exchange market might carry potential rewards, but also potential risks. You must be aware of the risks and are willing to accept them in order to trade in the foreign exchange market. Don\u2019t trade with money you can\u2019t afford to lose.<\/p>\n

\u00a9 2009 eToro Blog.<\/a><\/span><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

By eToro – Although the markets received a nice boost on Monday, disappointing economic news quickly followed and weighed on investor\u2019s sentiment…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-5419","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/5419","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=5419"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/5419\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=5419"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=5419"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=5419"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}