Daily Market Analysis – Jittery Markets Give Back Friday’s Gains

Equities:
Friday’s gains in the equity markets lasted exactly one day before being wiped out. Mr Bernanke’s speech on Friday no doubt gave markets a nice boost, but the economic data is not going unnoticed. Japan’s Nikkei lead Monday off responding to Friday’s positive surge as it gained 158pts and closed back above 9,000 to 9,149. However, in early morning trading in Tokyo, the Nikkei 225 Average has plummeted 325pts to 8,824. The state of the global economic recovery as well as continued strength in the JPY has Japanese investors extremely jittery. European markets were mixed Monday, as the FTSE 100 gained 45pts, pushing its average 1pt over 5,200. The Stoxx Europe 50 was flat losing less than 1pt to close at 2,447. In the U.S, continued poor economic data sets pushed the markets lower by 140pts as the Dow Jones Industrial Average closed only 9pts over the 10,000 level.

DJIA YTD

DJIA YTD


Commodities & Treasuries:
Commodity prices retraced their one day surge as Oil dropped $1.38 to $74 a barrel. In early morning  trading today Oil is trading lower again to $73.45. Gold was flat as Dollar strength kept the precious metal in check. Gold lost $1.20 to close Monday’s U.S session at 1,236.20. Today, Gold continues to trade lower already giving up another $4 an ounce. Copper advanced but gave back all of its gains coming into today’s second session after losing more than $6 to 336. Treasury yields continue to come under pressure this morning as the benchmark U.S 10-yr has fallen below 2.49%. Many analyst say that  the 10-yr may bottom out just above 2%, the same level that we saw at the peak of the economic crisis.

Currencies:
The Dollar was broadly bid across the board as investors flee to safer assets. The DXY clawed its way back up over an 83 handle. The EUR once again failed to close above it’s 50 day moving average and instead reversed directions to close below its 100 day moving average to 1.2650. The GBP closed at its 200 day moving average at 1.5450, but in early morning trading it is testing levels below its 50 day moving average. Commodity currencies retraced their Friday gains as Oil traded lower on Monday. The Japanese Yen made an initial surge higher before succumbing to market pressure and closed lower by 80 pips to 84.55.

Economic Outlook:
The key U.S data releases that rattled the market yesterday were Personal Income and the Dallas Fed’s Manufacturing Activity gauge. Personal Income came in 0.1% under expectations while the Dallas Fed Manufacturing data printed at negative 13.5%, though a marginal improvement from last month never the less it is still in negative territory. Looking ahead to today, German Unemployment will print as will Euro-zone CPI. In Canada, GDP figures will be released. In the U.S the Case Schiller Home data sets will print. The FOMC meeting minutes will be made public and U.S Consumer Confidence numbers will hit the wire as will the NAPM Milwaukee. Investors are jittery and the slightest sign of negative data will likely cause markets to tumble further.

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