Dollar Rallies on Lower than Expected European Industrial Production

[Excerpted from Bill Cara's Daily Report]

The trading day opened in North America on Friday with news that European Industrial Production fell by an April record of -21.6%. This exceeded the expected fall of 19.8% and led to a decline in the Euro and rally in the $USD. This news put downward pressure on equity markets, but particularly on gold, oil and respective equities.

By the afternoon, however, there was some discussion of end-of-quarter portfolio window dressing that might save the jobs of managers whose views on value have not changed since the pick-up in market prices since the March lows. So there was some buying that lifted the indexes a tad. At the bell, the DJIA (8,799.26 +28.34 +0.32%) and S&P 500 (946.21 +1.32 +0.14%) were higher on the day, while the NASDAQ Composite (1,858.80 -3.57 -0.19%) suffered a small loss.

The Toronto Composite (10,644.96 -69.15 -0.65%) and Toronto Venture Board (1,154.81 +6.49 +0.57%) headed in different directions.

Earlier on Friday, equity prices were mixed in Austral-Asian markets. Japan’s Nikkei 225 (10,135.8 +1.55%), Hong Kong (18,889.7 +0.52%), and Aussie All Ordinaries (4,061.5 +0.37%) were higher, while Shanghai (2,743.8 -1.91%), and India’s BSE 30 (15,237.9 -1.13%) were down.

At the close, the European equity bourses had turned south following the release of a very bad Industrial Production report for European, although the losses were not excessive. The French CAC (3,326.14 -8.80 -0.26%), German DAX (5,069.24 -38.02 -0.74%) and UK FTSE 100 (4,441.95 -19.92 -0.45%) were down on the day, making no rally attempt late in the session.

In US trading Friday, the leading sector was Utilities (XLU +1.3%), while Energy and Basic Materials (XLE -1.0%, XLB -1.0%) gave up about half the prior day’s gains.

The industry that rallied best was REIT’s ($DJR +3.2%), while Hospitals ($RXH -4.1%) and Goldminers ($XAU -3.1%) had big pull-backs.

The Cara 100 company stocks that lifted most yesterday were JC Penny (JCP +4.4%), GlaxoSmithKline (GSK +4.4%), and Best Buy (BBY +3.5%). Losers were Kinross Gold (KGC -4.1%), Gerdau Steel (GGB -3.9%), and Cameco (CCJ -3.1%).

The $USD rallied sharply Friday after the European Industrial Production data was released (80.23 +0.77 +0.97%), regaining all of the previous day’s loss. All major currencies dropped against the USD, including the Euro (140.17 -0.91 -0.65%), British Pound (164.52 -1.32 -0.80%), Yen (101.60 -0.90 -0.88%), and Cdn Dollar (89.20 -1.45 -1.60%).

In active US bond market trading, the US Treasuries followed through the prior day’s reversal, now looking stronger. The US long Bond lifted ($USB 115.78 +0.78 +0.68%). The yields for 30-year (4.633 -0.59 -1.26%), 10-year (3.788 -0.74 -1.92%), and 5-year (2.785 -0.63 -2.21%) sank for the second straight day, largely because the World Bank on Thursday forecasted a deeper -3.0% global economic contraction for 2009 versus the earlier -1.7% prediction..

Treasury bill yields were weaker (0.165 -0.05 -2.94%) as traders parked cash before the weekend.

On Thursday we had bought the bonds (TLT), figuring this reversal of earlier in the week would continue after the one-day sell-off. On Friday TLT rallied again (+0.90% to 89.97)..

On Thursday, $GOLD closed flat (954.50 +0.20 +0.02%), but with the European economic data looking worse than expected, gold took a hit on Friday morning and closed the day and week weakly (939.20 -15.30 -1.60%).

Crude Oil (72.75 -0.73 -0.99%) also took a hit after rallying on Thursday.

The spot (cash) market prices for precious metals closed down on the day, as follows:
Gold (938.35 -16.75 -1.75%);
Palladium (250 -4 -1.57%);
Platinum (1249 -19 -1.50%); and
Silver (14.79 -0.57 -3.71%).

Dollar futures were up sharply on Friday, while the Euro plunged (1.3979 -0.0149 -1.06% 09:24 Sat 9:24am ET).

Crude Oil futures continued lifted during the day (71.350 -1.330 -1.84% 08:06am ET) to this morning (72.21 -1.27 -1.74% Sat 09:10am ET).

US equity futures for the DJIA are 8970.