Daily Market Reports | Jan 19 2010
By Rudi Filapek-Vandyck
US financial markets were closed in celebration of Martin Luther King’s birthday.
The DJ Euro Stoxx 50 rose 0.6% to 2958, the German DAX gained 0.7% to 5919 and the FTSE closed 0.7% higher at 5494.
European markets acted like they didn’t need any leads from Wall Street yesterday. Traders reported overall volumes were solid and investors happily bought into banks and resources stocks, pushing indices higher.
While doing so, they largely ignored ongoing concerns over Greece’s budget deficit which dragged down the Athens index by 2.5%. European finance ministers have been meeting overnight to consider Greece’s fiscal/ budget plans to reduce its deficit.
The overall advance in equities and commodities led to a minor retreat in the USD index, which further fuelled buying activity in USD-levered assets. However, traders at the London Metals Exchange (LME) reported market enthusiasm waned as Monday’s session matured and most metals gave up most of their gains by the close of trade.
Regardless, copper managed to hold on to a price level above US$7,500/t and aluminium remained above US$2,300/t – both are seen as positive signals from a technical point of view. Gold and silver managed small advances, while oil -finally- closed higher after five consecutive days of losses.
Copper traded as high as US$7,555/t during yesterday’s LME session, but the metal could not hold on to its gains, falling back to just above US$7500/t by the end of the day.
Traders report upward momentum for the metal was assisted by inventory data, following initial Chinese buying – LME stocks fell 2,025 tonnes to 523,450 tonnes. The surprise decline in the headline figure meant that the market shrugged off a 22% fall in cancelled warrants – the metal booked for removal – which points to possible further stock increases ahead.
Basemetals.com reports copper stock levels have surged by more than 150,000 tonnes or 41% since November 3 when a 51 day run-up started, peaking at a 10-month high of 525,475 tonnes on Friday.
Likewise, WTI crude oil futures for delivery in February traded as high as US$78.68 a barrel on the day, only to fall back to a gain of US$17c only at US$78.25/bbl. Overall market sentiment received an initial boost from a prediction by China Oil, Gas & Petrochemicals that China’s crude oil imports may increase 15% this year as the world’s second-biggest energy consumer starts building the next phase of its strategic oil reserves.
In addition, Qatar’s Oil Ministry stated it did not expect to see OPEC raise output levels through 2010 at current prices. Qatar added overall domestic production is expected to rise to over 1M bpd by 2011.
EUR/USD opens marginally higher this morning at 1.438, with the GBP/USD trading stronger at 1.6324. The GBP continues strengthening on reports that UK property prices have increased. USD/JPY opens at 90.76, range trading overnight.
In line with metals and energy prices overnight, the AUD strengthened against major currencies. AUD/USD hit a high of 0.9279, paring gains later in the session to open marginally lower at 0.9270 in Tuesday’s Asian session.
AUD/EUR opens strong at 0.6441, gaining 0.4%. The AUD/JPY opens around 84.10, a relatively quiet session and the currency pair with the AUD/NZD opening at 1.2535 after a choppy trading session.
National Australia Bank has an indicative range for the AUD/USD for today (Tuesday) of 0.9225-0.9325.
Spot gold increased 0.2% to US$1,133.60 an ounce. Palm oil declined 0.2% on the back of speculation that global vegetable oils supplies will be sufficient to meet demand.
Australian bond futures were little changed overnight. The implied yield on 3-year bond futures was down 1bps to 5.120% (price up 1bps to 94.880) and the implied yield on the 10-year bond futures lost 2bps to 5.585% (price up 2bps to 94.415).
Greg Peel will be back after Australia Day.
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