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Pivotfarm Daily News Harvest July 7th 2010

Markets in a Flash

  • Asian markets finished down over night, except for Chinese markets which posted moderate gains.
  • The European markets are down but making a small recovery from their morning lows.
  • Oil and other energy commodities are up today, but precious metals such as gold are falling.
  • The USD is seeing some strength as investors look to hold less risk. This has pulled the EUR/USD and GBP/USD away from their recent monthly highs.
  • US equity futures are showing small falls suggesting a drop in the equity markets at 0930ET.

News Focus

The possibility of China dumping their holding of US treasury securities has been ruled out today by the State Administration of Foreign exchange. They have stated that the countries holding of government debt will not be used as a weapon in the financial markets and any changes in holdings are in search of maximising returns. Confidence was also shown in the value of the dollar as it was expressed that the dollar had problems but its value was measured against other currencies which were also facing problems.

BP’s chief executive has been in the United Arab Emirates meeting with sovereign investment vehicles after speculation arose suggesting a potential investor may be interested in purchasing part of BP. BP shares have fallen heavily since the oil spill in the Gulf of Mexico, losing more than 50% of their value at one point. The shares have recovered recently gaining 20% from their bottom.

European Central bank operations have drained liquidity from the European money markets. The rate for borrowing has risen reducing the ability for banks to refinance. This has effectively raised interest rates in the Eurozone and has tightened monetary policy. Overnight borrowing rates rose from 0.405% to 0.424%

Released This Morning

0700ET – MBA Purchase Applications

Purchase Index - W/W Change

Previous                              -3.3 %                                    Actual                                  -2.0 %

This data shows a further fall in the number of mortgage applications for the US property market. This data shows that the demand in the housing markets has fallen and may be a result of a recent reduction in consumer spending on high price items. This should prove bearish for the markets if the data has not already been priced in.

0745ET – ICSC-Goldman Store Sales

Store Sales - W/W change

Previous                              2.1 %                                     Actual                                  1.0 %

Store Sales - Y/Y

Previous                              3.0 %                                     Actual                                  3.9 %

This weekly indicator of store sales has reported a strong figure showing growth. The 3.9% year on year figure is the strongest seen in recent weeks and shows that consumer spending in retail stores in still strong. This figure is bullish and against the recent trend which suggests spending and economic growth is slowing.

0855ET – Redbook

Store Sales Y/Y change

Previous                              2.5 %                                     Actual                                  3.1 %

This weekly indicator is similar to the ICSC-Goldman Store Sales as it shows the health of retail sales but is less consistent.  The figure reported backs up the ICSC-Goldman Store Sales data from earlier and suggests strong consumer spending in the retail sector. This should be bullish for the markets.

Disclosure: no positions