Although earning releases continued to surprise for the better sentiment was rather negative with most benchmark indexes in the US and across the board closing at red territory amid profit taking dominance. Between the positive out comers were two banks Morgan Stanly and Wells Fargo, Morgan Stanly posted a loss for the quarter but EPS was still higher than expected and Wells Fargo which topped analysts’ expectations with earnings higher by 60%.At the day’s end the Dow industrial was lower by -0.92% closing bellow the 10,000 milestone and the S&P retreated by -0.89%.
Although sentiment for equities was largely negative the typical divergence between risk aversion in equities and demand for the Greenback faded. The Dollar was under strong selling pressure with investors somewhat unwilling to hold the Dollar amid speculations rates in the US will rise long after other G7 countries marking the Greenback as a classic contender for a carry trade sell. The publication of the Fed’s Beige book the fed’s updated outlook on the economy outlined the fed sees stabilization and modest improvements in the US housing and manufacturing sector however unemployment continues to expand and commercial real estate still remains the weakest link in the US economy .The beige book was received negatively by the market which by that time continued to push the Dollar to new lows for the year with the Euro trading above the 1.5$ a substantial sociological resistance and the Swiss Franc less than 40 pips short of parity with the Dollar. The Sterling continued to push closer to the 1.67$ zone trading around 1.664$ and the Yen remained rather flat against the Dollar holding the 90.5-91.5 range.
Sentiment was in tandem to the anti Dollar sentiment in the FX market with investors betting on higher petroleum and metals. Oil moved higher once against settling around 81.5$ largely ignoring the higher EIA stocks change as investors eye the 100$ mark as the ultimate target. Natural Gas also performed well moving above the 5$ mark before topping out around 5.3$ .In the Metals arena Gold moved once again to its record high at 1070$ while silver failed to break the 18$ once again and ended the day around 17.5$ an ounce.
The Day Ahead
The opening data for the day will be the Japanese all industry activity index with activity slightly lower as Japanese manufactures continue to struggle. Moving to Europe the Swiss Franc could gather some attention with the Swiss trade balance due at 8:00 GMT but more importantly the financial results of Credit Suisse which were substantially better than expected pointing the embedded risk for Swiss banks might be easing , which could lead the Swiss central bank to feel more comfortable with a higher Franc. Current account for the EU is also due at the same time and will reflect on capital inflows and trading balances under a strong Euro. In the US the initial Jobless claims will gather attention as always with investors surveys pointing an expected 516k figure .The concluding data for the day will be the US housing price index and the US leading indicators which some consider as a barometer for GDP growth. Sentiment will also be largely affected by Dollar sentiment especially in the US and of course the earning releases in the background which continue to stream in.
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