Exclusive iOption Market Analysis February 24, 2012
Today’s Reports and Announcements of Significance to the Markets
Tensions with Iran are adding at least 30 cents to a gallon of gasoline in the United States, and experts say gas prices have only just begun to rise.
Gasoline prices have surged over 10% in the last two months, largely tracking the run-up in oil prices, which have increased by a similar amount and are now at a 9-month high.
Several factors have caused oil prices to rise, including the sense that the economy is improving and supply disruptions in a handful of minor oil producing nations.
Greece's parliament has approved a massive bond swap that would wipe €107 billion ($A134.17 billion) off the country's privately-held debt, as new projections showed the economy will suffer the worst contraction in Europe this year.
The emergency bill was passed on Thursday by show of hands in an almost empty House as the two main parties that back Prime Minister Lucas Papademos' governing coalition stated their support for the swap deal. There was no roll call vote.
"The law is approved by majority," deputy parliament speaker Tassos Kourakis said.
Greece is now expected to launch a formal offering to private bondholders on Friday. They will have 10 days to respond whether they will take part in the exchange.
The write-down to be imposed on banks, pension funds and other private holders of Greek government bonds was agreed upon this week by finance ministers from the 17-member eurozone.
The meeting in Brussels also approved a new €130 billion bailout to prevent Greece from going bankrupt and keep the country within the euro area. Finance Minister Evangelos Venizelos said he hoped the new agreement on rescue loans would be signed and validated by the end of March.
U.S. stocks rose Thursday, with the S&P 500 ending near a 10-month high, after reports cast a favorable light on the economy, offsetting Hewlett-Packard Co.’s disappointing outlook and lifting the major indexes into positive turf for the week.The Dow Jones Industrial Average rose 46.02 points, or 0.4%, to 12,984.69. The S&P 500 gained 5.80, or 0.4%, to 1,363.46, its highest since April 29. The Nasdaq Composite advanced 23.81 points, or 0.8%, to 2,956.98. U.S. data showed home prices climbed 0.7% in the final month of last year. And jobless claims last week held near a four-year low.
European stocks fell Thursday on worries over growth after the European Commission downwardly revised its economic forecasts and declared the euro-zone to be in a mild recession.
The Stoxx Europe 600 index slipped 0.2% to close at 264.08, after trading as high as 265.74 earlier in the session. The DAX 30 index lost 0.5% to 6,809.46.
Adding to pressure on the German index, car makers Daimler AG Volkswagen AG and BMW AG lost 1.9%, 3.1% and 1.5% respectively. The CAC 40 index . The index closed virtually flat at 3,477.31.
Auto stocks, which often track global growth indicators, headed south Thursday as the European Commission revised its euro-zone growth forecasts for 2012 down to a 0.3% contraction, and projected a slight recession. The commission had in November forecast 2012 growth of 0.5%.
Hong Kong stocks rose modestly in early Friday trade, traveling with gains in other Asian markets and in the U.S. The Hang Seng Index rose 0.2% to 21,421.60, with the Hang Seng China Enterprises Index adding 0.1%, and the Shanghai Composite up 0.2%.
Japanese shares seesawed in early Friday trading, as strength in resource shares offset some weakness in techs. The Nikkei Stock Average slipped 0.1% to 9,589.08 after moving both ways, while the Topix was flat. A jump in crude-oil futures overnight helped send Inpex Corp. rising 2.1%
Australian shares edged fractionally lower on Friday morning, with the S&P/ASX 200 index trading at 4,286.40. Reserve Bank of Australia Governor Glenn Stevens reiterated monetary current policy settings remain appropriate despite uncertainties in the global economic outlook, at a speech delivered in Sydney on Friday. "With growth near trend, inflation consistent with the target, interest rates about average and an outlook suggesting more of the same, the setting of policy was about right for the moment,
The U.S. dollar slipped a touch during Asian hours on Friday, extending weakness from the previous session when a strong German sentiment survey encouraged investors to pick up riskier assets.
The ICE dollar index which measures the greenback against a basket of six currencies, traded at 78.672, from 78.677 in late North American trading on Thursday. The dollar declined in the previous session and the euro rose to its highest level since mid-December, after a stronger-than-expected jump in the Ifo gauge of German business confidence out Thursday
The euro traded at $1.3368 on Friday, from $1.3367 in late trading Thursday. The shared currency hit a high of $1.3373 in the previous day’s session.
Still, Credit Agricole strategists said that the common currency may struggle to sustain those recent gains.
“Over the near term upcoming votes in various countries on the second Greek bailout deal will provoke some nervousness while Greek reform implementation risks will also act to dampen euro sentiment,” the strategists said.
The British pound traded at $1.5744, from $1.5734 in late North American trading on Thursday.
The Australian dollar reached $1.0737, from $1.0704 in late North American trading.
Against the Japanese currency the dollar traded at 80.14 yen, from ¥80.02 in the North American session.
“One of the biggest sources of upward pressure on dollar/yen has been the widening in U.S. — Japan two-year bond yield differentials,” said the strategists at Credit Agricole.
“The widening yield gap already appears to be prompting foreign outflows from Japanese bonds... we maintain our view that it will reach ¥85.0 by the end of the year,” they added.
Metals & Energy
Gold futures rallied 0.9% on Thursday, settling at a three-month high as buyers flocked to the metal, unwilling to miss the next big leg up for gold. Gold gained $15 to settle at $1,786.30 an ounce on the Comex division of the New York Mercantile Exchange. That was gold's highest finish since Nov. 11.
Crude Oil shot further higher from nine-month closing highs Friday as concerns Iran’s output may be affected by geopolitical issues spurred more gains a day after the release of strong U.S. and German economic reports.
“We think crude oil has largely become a one-issue market. Either Iranian production is curtailed and prices spike further, or the oil continues to flow and prices collapse,” said Tim Evans, energy analyst at Citi Futures Perspective, in a note to clients. Light, sweet crude-oil futures for delivery in April rose 60 cents, or 0.6%, to $108.43 a barrel in electronic trading Friday, catching a further lift after rising $1.55 a barrel in regular trading on the New York Mercantile Exchange Thursday.
The overnight rally came after data showing that an index tracking Germany’s business climate beat expectations, rising to 109.6 in February from 108.3 in January.