Better US economic data overshadows European crisis

(Posted Wednesday 320am)

Last week the US markets ended on a positive weekly note. But on Monday, global equity markets were still cautious as Europe debt fears grow. Traders who were still wary of the Euro crisis pushed Italian bonds over the 7% line on Tuesday. Market is certainly shaking out the 'weak' investors.

US economic data came in mostly positive on Tuesday.

·         Retail sales data rose 0.5% vs 0.4% expectation.

·         New York Empire Manufacturing rose plus 0.61 ending five months of contraction from negative 8.48 last month. Outlook for the quarter (Q4) strengthens.

·         PPI (Producer price index) fell 0.3% which is the first decline in four months from 0.8% in October.

Fortunately, US data and optimistic news from Italy pushed the major indices above the flat line at point of writing.

While the sentiment coming out of Europe had not been encouraging, Asia Pacific has been neutral, preferring to follow leads from the US markets.

Recent data out of US, the world largest economy, had been quite encouraging with higher GDP figures, favorable weekly Initial claims data, narrowing of trade balance data, improved Michigan sentiment, better Retail sales, improved Manufacturing data and lower PPI data. Indeed, this would lessen global growth concerns with a hope that global investors adapt a risk on approach.

At the moment, the US dollar index is still considered high with weak sentiments from Europe. Vix is hovering around 31 which is sitting on the fence. Energy/Crude oil has been steady on the rise briefly breaking US$ 100 per barrel with supply issues rather than demand. Commodities are mixed while commodity currencies are trending on the low side with lack of catalyst to push high yields higher. Imo, this indicates that the market is still finding the next trend. Personally, i have a risk on position on the week of October 26th.

As for Gold, it tested US$ 1800 per oz and is ranging between 1775 and 1800. Gold had primarily been a beneficiary for safe haven as well as risk on. Be wary of price falls in Gold when the US dollar tests 80, plunge in equity markets or Gold/Silver margin calls. Otherwise, Gold is still a good bet till Jan 2012. The support is at US$ 1545 therabouts.

In conclusion, economic data coming out of US is certainly encouraging, lessening global growth concerns, while the European crisis is holding any foreseeable rally. Asia is encouraging growth by cutting interest rates rather than fighting inflation. With Black Friday round the corner, we hope the sales figure would trigger an early Santa Claus rally!


While my blog was posted at 320 am this morning, a similar post by CNBC was posted at 7am this morning, With US Data Improving, Markets May Ignore Europe


Once again, i am happy that the post of my blog precedes the headlines

The blogpost that precedes the headlines.

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