Posted by Fx-Insights on 21/10/2010, at 05:46 AM
Overview: Markets rebounded after Tuesday’s big drop, on a combination of earnings beats, lack of new foreclosure fraud news, Fed beige book results and hawkish ECB comments boosting the EUR and thus weakening the USD. Increased likelihood of UK stimulus may also have helped. Earnings announcements today likely to be the key market drivers. US weekly jobless claims, also Philly Fed Mfg Index and FOMC Member Bullard speech may also have some impact. Any surprise news on foreclosure fraud has potential to override all other factors.
STOCKS: US: Up – A group of better than expected earnings from Airlines (AMR, LCC DAL) and Yahoo (YHOO) and lack of further foreclosure fraud related news helped stocks recover from the prior day’s plunge. Most financials were flat to lower, though shares of Wells Fargo (NYSE:WFC), another big bank potentially at risk from foreclosure irregularities, were up as they too put on a brave face and downplayed any liability exposure.
US Bonds: Up- US bonds closed little changed with yields down slightly to 2.4700% from 2.4750% on Tuesday.
Asia Stock Outlook: Mixed – Most major Asian exchanges modestly lower or higher, though the 2 most prominent, the Nikkei and Shanghai exchanges, were both lower. Asian markets were torn between the bullish close in New York and the Chinese data that was seen as bearish, because it only met expectations instead of beating them, and showed industrial production down from both last month and below expectations.
European Stock Outlook: Up–European shares are opened down but have drifted into positive territory, led by defensive shares (food/beverage, essential consumer goods) as uncertainty ups demand for these sectors after tepid Chinese data and mixed US financials’ earnings.
Commodities Outlook Wednesday To Midday Thursday GMT: Gold, oil, softs all higher yesterday following stocks on improved risk appetite. Gold and oil pulling back a bit thus far today after yesterday’s gains, softs continuing higher today after yesterday’s gains.
FOREX Daily Outlook Wednesday To Midday Thursday GMT: Bias to risk forex with few exceptions. EUR, AUD, CAD, NZD strongest over the past 24 hours in that order, the GBP, USD, JPY weakest in that order due mostly to higher risk appetite on better US earnings, beige book.
US Dollar Daily Outlook: Down vs. all except up vs. the GDP as markets generally reverse yesterday’s moves with risk fx benefitting, as USD rally of recent days gets tested.
Euro Daily Outlook: Up vs. all, reversing yesterday’s weakness on hawkish ECB comments and good data Wednesday, though thus far today EU data is mixed.
Yen Daily Outlook: Up vs. USD, GBP, down vs. all others on a classic ‘risk on’ day
British Pound Daily Outlook: Down vs. all on a combination of poor data including worse than expected retail sales, net borrowing, reported spending cuts to increase joblessness, and expectations for new stimulus coming. We suspect the GBP is in for longer term downside.
Australian Dollar Daily Outlook: Up vs. all except down vs. the EUR, making the Aussie the second strongest currency over the past day, though it is giving back some of its gains to the CAD thus far today.
New Zealand Dollar Daily Outlook: Up vs. all except down vs. the EUR, AUD and CAD, which has been strengthening over the past day.
Canadian Dollar Daily Outlook: Up vs. all except the EUR and AUD on reversal towards risk, no specific pro-CAD news, as BoC remains cautious, holds rates steady.
Swiss Franc Daily Outlook: Down vs. the EUR and commodity dollars, up vs. all others.
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