Tuesday, 25 November 2014

Markets | 25/11/2014 | Nasdaq Rallies; S&P 500 Closes at Record High

     Euro Rebound as German Business Sentiment Rose. The euro inched up against the dollar after a stronger-than-expected German business survey offered some respite, though it stayed close to a two-year low on bets of more easing in the euro zone. The German Ifo institute’s business climate index, based on a survey of about 7,000 executives, rose to 104.7 in November from 103.2 in October. Economists predicted a decline to 103.0.

         Yen Falls as Central Banks Expand Stimulus. The yen moved toward a seven-year low versus the dollar as central banks worldwide add to monetary stimulus, damping demand for low-yielding haven assets like Japan’s. The People’s Bank of China unexpectedly reduced rates for the first time since 2012 after the close of local trading Nov. 21. The move came as European Central Bank President Mario Draghi bolstered his stimulus pledge.

       Sterling Rose Ahead Inflation Report Hearings. The sterling rose against dollar ahead inflation report hearings from Governor Bank of England on Tuesday. The sterling strengthened further after private data on the U.S. services sector fell short of forecast in early November. Financial data firm Markit said its "flash" services Purchasing Managers Index slipped to 56.3 in November, below expectations 57.3 and the lowest since April. This compared with October's final reading of 57.1.

        Weidmann Warns of 'Legal Limits' on Further Moves by ECB. The European Central Bank could encounter "legal limits" if it pursued additional steps to combat low inflation, the president of Germany's Bundesbank said on Monday, calling for a focus on growth rather than any government bond buying. "Instead of focusing on the purchasing program, we should focus on how you find growth," Jens Weidmann told an audience in Madrid, when asked about the possibility of the ECB buying government bonds, a step known as quantitative easing. He warned that it would be difficult to pursue such steps to tackle low inflation. "Of course there are other measures which are more difficult, because they are untested, because they are less clear ... and of course they hit the legal limits of what you can do," said Weidmann, who sits on the ECB's Governing Council. "This is why discussions are so intense," he added.

         China's Rate Cut Lead Asian Shares Higher. Asian share markets were broadly higher on Monday as the an unexpected cut in interest rates from the People's Bank of China and prospect of further policy stimulus in China whetted risk appetites. Sentiment also boosted after European Central Bank President Mario Draghi surprised by declaring his commitment to fighting deflation on last Friday. While Tokyo's market was closed for a holiday on Monday. Meanwhile South Korean stocks tracked Asia-wide gains to touch their highest levels since 7 October 2014 on Monday. Blue-chip majors were mostly higher like Hyundai Motor made gains of 4 percent while the benchmark KOSPI closed to rally 1.06 percent on Monday. Hong Kong shares rose sharply on Monday after China's central bank caught markets off-guard by cutting benchmark lending rates on Friday to shore up the cooling economy. Gains in property and brokerage stocks led benchmark indexes in Hong Kong and mainland China higher as investors anticipated a cut in mortgage rates. The Hang Seng index finished rose 1.95 percent - its biggest percentage change since Sept. 3.

         Europe Shares Higher as German Data Beats. European shares were higher on Monday with sentiment boosted by speculation of more credit easing in the euro zone and better-than-expected data from Germany. A German Ifo business climate index was released in morning trade with the figure showing a rise to 104.7 in November versus a consensus forecast of 103.0. There was also a rally in the banking sector with investors continuing to speculate that more stimulus will be injected in the euro zone economy. French lenders like Credit Agricole and Societe Generale were trading higher by around 2 percent. Spanish lenders also saw strong gains, with Banco Santander, Bankia and Banco Popular all trading over 2 percent higher. The gains come after markets surged on Friday when a China rate cut and dovish words by Mario Draghi, the president of the European Central Bank (ECB), boosted sentiment.

      Nasdaq Rallies; S&P 500 Closes at Record High. U.S. stocks mostly rose on Monday, with retailers including Urban Outfitters gaining as investors bet lower gasoline prices will translate into increased sales as consumers shop for holiday gifts. After wavering on either side of neutral, the Dow Jones Industrial Average ended little moved, with Walt Disney and Intel pacing gains and AT&T and Verizon Communications leading blue-chip losses after Citigroup lowered its rating on Verizon. After coming less than 2 points from its intraday record hit Friday, the S&P 500 climbed 0.3 percent, consumer discretionary and technology leading gains and telecommunications and utilities pacing losses among its 10 major industry groups. Near session highs, the Nasdaq gained 0.9 percent.

        Gold Below 3-Week High, China Rate Cut Lends Support. Gold edged down on Monday, as the dollar strengthened, but prices were still within reach of a three-week high after a surprise rate cut in China raised hopes that demand for bullion in the top consumer would increase. China cut interest rates unexpectedly on Friday, stepping up efforts to support the world's second-biggest economy, and could even be prepared to reduce them again, according to sources. The dollar was unchanged against a basket of leading currencies and still trading close to a four-year high.

     US Crude Settled Lower Amid OPEC Speculation. U.S. oil settled lower as traders and investors speculated OPEC producers might surprise with an output cut above what market players expect when the producer group meets this week. A extension to Iran's nuclear talks, which maintains Western sanctions preventing Tehran from freely exporting its oil, also limited the market's downside, traders said. Last week, oil prices notched their first weekly gain in two months. U.S. crude futures for settled 73 cents lower at around  $75.70

         United Tech CEO Steps Down, Replaced by CFO. United Technologies Corp (UTX.N) Chief Executive Officer Louis Chenevert has retired immediately and is being replaced by the company's finance chief, the diversified U.S. manufacturer said on Monday, an abrupt change that caught Wall Street off guard. The maker of Otis elevators, Pratt & Whitney jet engines and Sikorsky helicopters said in a press release that Chenevert, 57, informed the United Tech board of his retirement. It did not provide a reason for Chenevert's retirement, which comes two weeks before he was to present the company's 2015 financial outlook to analysts and investors at a meeting in New York. Taking over as CEO will be Greg Hayes, a 25-year company veteran who has served as United Tech's chief financial officer the past six years. A United Tech spokesman said Chenevert's retirement "is entirely unrelated to the financial performance" of the company, which backed its 2014 earnings and sales forecasts.

         Aviva Falls on Friends Life Merger Plan Doubts. Shares in insurer Aviva fell more than five percent on Monday reflecting uncertainty about the potential benefits of the company's 5.6 billion pound (8.79 billion US dollar) plan to merge with rival Friends Life. The two insurers have agreed outline terms for a possible all-share deal, in which Aviva would offer a 15 percent premium to Friends Life's share price to give those investors a 26 percent stake in the new company. The proposed transaction, first announced on Friday, would create a market leader in British life insurance with a combined market capitalisation of about 20.2 billion pounds. The deal aims to bolster the balance sheet of Aviva, helped by Friends Life's strong cash generation, as well as boosting assets under management and cutting costs.

Technical Outlook
    EUR/USD. The bias is bearish in nearest term but we need a clear break below 1.2380 area to trigger further bearish momentum aiming 1.2340 area or even lower. Immediate resistance is seen around 1.2480 area, another consistent break above that area would bring the price to neutral zone as direction would become unclear in nearest term perhaps retesting 1.2530 region before turning lower.
          GBP/USD. The bias is bearish in nearest term but we need a clear break back below 1.5615 area to trigger further bearish pressure targeting 1.5550 support area or even lower. On the upside, only a consistent break above 1.5725 area would trigger further bullish correction scenario perhaps retesting 1.5780 area in nearest term.
     USD/JPY. The bias is neutral in nearest term with potential trading range seen between 116.60 – 118.50 area. Another consistent break below 116.60 would trigger further bearish correction scenario as price getting overbought aiming at least 116.25 area or even lower. On the upside, only a clear break above 118.50 area would continue the major bullish scenario retesting 119.00 key resistance area.
          USD/CHF. The bias is bullish in nearest term especially if price able to make a clear break above 0.9700 to trigger further bullish momentum aiming at least 0.9760 resistance area. Immediate support is seen around 0.9640 area, another consistent breakdown below that area would bring the price to neutral zone as direction would become unclear in nearest term perhaps retesting 0.9570 region before recovery to the upside.
       AUD/USD. The bias is bearish in nearest term but we need a clear break below 0.8600 area to trigger further bearish momentum aiming 0.8570 area. Immediate resistance is seen around 0.8690 area, another consistent break above that area would bring the price to neutral zone as direction would become unclear in nearest term perhaps retesting 0.8730 region.
       XAU/USD. Bias is sideways in nearest term with potential trading is seen between 1185 - 1210 area, needed to break out one of that area to get further direction. For upside immediate resistance is found at 1210 area, a clear break above that area should strength bullish trend aiming 1220 region. Folevel.
        Hang Seng Futures. The bias is bullish in the nearest term, a clear break above 24000 is needed to trigger further bullish momentum aiming 24260 area. On the down side, immediate support is seen around 23720 area. A consistent break and movement below that area would bring the bias back into neutral, potentially testing 23540 area.
       Nikkei Futures. The bias is bullish in the nearest term potentially retesting 17580 area. A consistent break and movement above that area should trigger further bullish momentum targeting 17670 area. On the down side, a clear break below 17300 area would bring the bias back into neutral, furthermore testing 17160 area.

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