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GLOBAL MARKET BRIEF 8/23 Mid-Day GMT: Normal Correction or Next Leg Down?


Last week’s big theme was continuing indications of slowdown in the second half of 2010, as US jobs manufacturing, and ECRI weekly leading indicator data worsened, Bundesbank Head Weber offered a pessimistic view of the coming year for the EU, and contracting GDP threatened Greece’s recovery. This week’s major events will offer further clarification, including revised GDP reports from the US, Germany,(these 2 could be the biggest events of the week) and the UK, various EU Flash PMIs, and US home sale and durable goods order. For full details on the week ahead see: The Week Ahead: Stocks, Commodities, Forex Key 5 Market Drivers August 23rd – 27th and August 23rd – 27th Quick Review/Preview: Stocks, Commodities, Forex


STOCKS: US: Down – After a big drop last Thursday on poor initial unemployment claims and Philly Fed manufacturing data, continued modestly lower Friday on Weber’s dour views on EU prospects. Futures edging higher since the Friday close.


Bellwether S&P 500 in serious technical breakdown, suggesting more downside ahead. See the stocks section of  August 23rd – 27th Quick Review/Preview: Stocks, Commodities, Forex for details


US Bonds: Up- Benchmark 10 Year Note up with falling stocks, with yield down slightly from 2.6410 to 2.6120, still near a 14 month low.


Asia Stock Outlook: Down- Most major Asian markets down on low volume as markets continue to price in last week’s downgraded view of global growth and major players take profits.


European Stock Outlook: Mostly Up - Most major bourses opened higher on signs of rising merger activity and the likelihood of lower Australian mining taxes following the Aussie election results this past weekend.


Commodities Outlook Wednesday-Early Thursday: Futures mixed. Energy weak, wheat, sugar rising


Crude Oil Daily Outlook: Down- Following stocks, continuing its Thursday breakdown after bad US jobs and manufacturing data sent it below strong 4 month support of $75. Currently around $73.70, next near term support on daily charts is at its 61.8% Fibonacci retracement from its May 2009 low, just above $71. Bloated US refined products inventories add further downside pressure, as does Sudan’s announcement that it will expand production by about a third in the coming 2 years.


Gold Daily Outlook: Up fractionally: Futures continuing to trade in tight range around $1230 since last week, within about 3% of its all time high, strong uptrend intact, suggesting a coming test of the $1260 area. Any spiking of PIIGS bond or CDS rates or other EU debt/banking crisis deterioration could well push it to new highs as concern for the EUR’s stability has been the driver of gold’s rally this year. Rising demand anticipated from the coming India holiday season.


FOREX Daily Outlook Friday-Early Monday trade GMT:  Bias to safety currencies but many exceptions, quiet trade thus far. GBP strongest, EUR and CAD weakest since Friday, thus far midday GMT Monday AUD gaining on all on hopes the new coalition will weaken or eliminate the proposed new mining taxes.


US Dollar Daily Outlook: Up vs. the EUR, JPY, CAD CHF down GBP, AUD, unchanged vs. the NZD. Prior week’s trends appear to continue. Per latest COT report, large speculators are long 3.8 to 1 short.


Euro Daily Outlook: Down vs. all except essentially unchanged vs. the NZD, CAD.  Pressured by Bundesbank President Weber’s downbeat outlook for the EZ and continued concerns about Greece and rising bond and CDS rates for some of the weaker PIIGS nations like Greece, Portugal.


Yen Daily Outlook: Up vs. all except for the GBP, AUD since Friday and into midday Monday GMT, though rising modestly against the AUD thus far today


British Pound Daily Outlook: Up vs. all since Friday into mid Monday GMT, though retreating thus far Monday vs. the AUD. No clear reason or events behind today’s strength, thus far appears to be a technical move.


Australian Dollar Daily Outlook: Since Friday down vs. the CHF, JPY, flat vs. the USD, NZD, up vs. the EUR, CAD. Gaining on virtually all majors thus far in midday GMT Monday trade on hopes that whatever coalition ultimately forms in the wake of this past weekend’s election will weaken or eliminate the proposed additional taxes on mining companies.


The AUD was down in early Asian trade on political uncertainty following the inconclusive weekend election that has yielded a hung parliament, but is recovering on the realization that whatever coalition comes about will most likely further weaken or eliminate the proposed large tax increase on mining companies, which is good for the AUD. In sum, a well hung Parliament for the miners brings a rising AUD as the 0.8900 proves to be stiffening support for the AUDUSD.


New Zealand Dollar Daily Outlook: Up vs. the USD, EUR, down vs. the JPY, GBP, CHF, CAD, AUD. Little movement overall except for a noticeable drop vs. the AUD, which has been strong thus far today for reasons cited above.


Canadian Dollar Daily Outlook: Down vs. all (but modestly recovering thus far Monday vs. the USD), except flat vs. EUR, pressured by falling stocks, oil, risk appetite, and falling rate increase expectations, after a long rally made the Loonie ripe for a correction.


Swiss Franc Daily Outlook: Since Friday down vs. the GBP, JPY, USD, AUD, CAD, NZD up vs. the EUR, as of midday Monday GMT dropping vs. the USD and JPY, gaining vs. the commodity dollars.