MORNING BRIEFING: Investors’ concern on global economic growth resurfaces

[RTFX-Trading]

MORNING BRIEFING: Investors’ concern on global economic growth resurfaces

What’s new:
United States: Data for home sales comes lower than expected
Asia: Asian equity indices in negative territory this morning
Yuan: Initial enthusiasm starts to fade
United States: Top officials caution G20 countries of rushing to adopt fiscal discipline
Forex: Support for Euro, AUD & NZD decreases; USD & JPY enjoy greater support
Federal Reserve: Main event tonight FOMC rate decision

Today:


Rates in Asia and Indices:
EURUSD: 1.2296 - 1.2244.
USDCHF: 1.1098- 1.1056.
GBPUSD: 1.4877 - 1.4802.
EURJPY: 111.21 – 110.71.
USDJPY: 90.58 – 90.34.
DowJones: 10'293.52 -1.43%
NASDAQ: 2'261.80 -1.19%
S & P 500: 1'095.31 -1.61%
Nikkei: 9’941.81 -1.69%
Shanghai: 2'561.74 -1.04%
Gold: $ 1'239.10
Crude Oil: $ 77.87

 
Comments:

Data for US home sales yesterday came out lower than expected, and this continued to exacerbate market’s negativity. In fact Asian indices were in negative territory this morning, triggered by a renewed concern on global economic growth. Even the slow moving Yuan has dampened previous enthusiasm that the long awaited de-pegging was to bring about a major change.

In a wall street journal article, US Treasury secretary Timothy Geithner and white house advisor Summers caution G20 countries of rushing to enact aggressive austerity measures as they might jeopardize economic growth. They went on to say that demonstrating a commitment to reduce long term deficits is a must, but one should not undermine short term growth. Referring to the bank levy agreed upon by Germany, France and the United Kingdom - they called for efforts from individual G20 countries to be in line with the rest of the group as opposed to having differing initiatives.

As demand for riskier assets waned greater support was seen shifting to the ‘safe haven’ currencies. The Euro, Australian and New Zealand Dollars saw a decaying support, consequently the USD and JPY found greater support. The USD found greater support due to it being envisaged as a ‘safe haven’ alternative, and the JPY gained support on the back of its funding function.

A main event tonight is the FOMC meeting, markets are expecting the fed to prolong the low rates for a longer term and there is increasing speculation that they could revise their assessment of the economic recovery into a milder version.
 


Good day,

Rudolf Muscat
Trading desk

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