Daily Market Analysis – Dollar Gets Crushed As Equities Rally

Equities:
Global equity markets got a boost from economic data from China which showed economic growth is continuing on track. Japan’s Nikkei 225 Average advanced 103pts to close at 8,927. Equity buying continued into the second session with FTSE 100 jumping2.70% to 5,366 while the Stoxx Europe 50 earned 2.62% to retake the 2,500 level by 13pts. U.S equity traders were strong buyer as the ISM Manufacturing Data smartly beat analysts expectations. The Dow Jones Industrial Average popped up more than 220pts on the day to close at 10,235. Leading the charge higher was the Energy sector as it advanced better than 3.0%, though it was an all out rally as advancers beat decliners by a 6 to 1 ratio.

Commodities & Treasuries:
Copper jumped as China’s economic data showed renewed life. Copper picked up $10 to close just above $347. Crude Oil rallied after two consecutive days of losses and wiped out yesterday’s sell off, earning back more than $2.10 to close near $74 a barrel. Gold was down marginally as investors reallocated risk capital. Gold closed at 1,244.55 after losing $3.40. In the bond market, traders saw the far end of the yield curve rise as the 3.875% U.S Treasury 30-yr fell more than 2 ticks and yields rose 15bps to 3.654%. The treasury 10-yr rose nearly 1 tick as yields jumped 10.8bps to 2.58%.

Currencies:
Risk was back on and the U.S Dollar got crushed as a result. The DXY fell by more than 0.70pts to 82.51. With renewed belief in the economic recovery commodities prices rose sharply and so did the commodity linked currencies. The AUD lead the way gaining better than 2% and closing back above .9000. The New Zealand Dollar was not far behind, rising more than 1.9% to close back above .7100. Japanese investors sighed a breathe of relief as the JPY rose modestly to 84.40 after dropping close to an 83.50 handle. The EUR finally broke above 1.27 and closed at its 50 day moving average, at 1.2803.

DXY Tumbles

DXY Tumbles

Economic Outlook:
There was a mixed bag of data releases yesterday. China’s economic data got investors revved up as it showed growth was in fact alive. Investor’s are counting on China’s growth to spur the global economic recovery. However, the Challenger Job Cut data pointed to further job cutting which quickly spooked markets, but ISM Manufacturing not only beat expectations but printed higher than the prior month, leaving investor hopeful that a recovery is still in the works.  It will be another action packed day today with Swiss and Euro-zone GDP figures set to print. Later the ECB will announce it’s interest rate decision, though they are widely expected to keep rates on hold at 1.0%. The U.S data sets will be watched carefully as Factory Orders, Pending Home Sales, ISCS Chain Store Sales, and Jobless Claims are all slated to print.

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