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26 JUNE 2013: US DATA LIFTS STOCKS

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

Strong manufacturing and housing data lifted the US equity markets after several losing sessions following the meeting in the Federal Reserve (FED) and Chairman Ben Bernanke’s statement last Wednesday. Global markets have since been in turmoil on the prospect of a tapering in the USD 85 billion monthly bond buying program, which have fed stocks with liquidity and created what many see as an artificial rally. Uncertainty as to whether monetary easing will continue, has in two weeks wiped out most of these gains.

The economic data presented yesterday gave strong arguments to those arguing that the US economy is back on the right track and the 6.5% unemployment target set by FED, is within reach. Realizing the heavy waves last week’s statement has created, FED representatives were, on Wednesday, eagerly playing down the likelihood for a quick end to monetary easing, stressing the many uncertainties and FED’s conditions for a termination.

These efforts were, to a certain degree, undermined by better than seven years housing figures. Greater demands for capital goods such as cars and aircrafts point in the same direction. The positive numbers had Dow Jones turn sharply up after four dismal losing sessions. Dow ended 0.65 % up at 14 754, still far from the benchmark 15 000. Nasdaq also gained ground and added 0.5 %. The European markets ended in positive territory after big losses since last week.

The Dollar is the big winner of the FED statement. It gained new ground after the housing data was published, but fell somewhat back. EUR/USD which started on a good note on 1.3235 dipped at a point below the resistance level on 1.3172 which represents the last 200 days moving average. A fall below that level will indicate that the EURO is in bullish territory. EURO fell as deep as 1.3162, but has since recovered well above 1301,72 to 1.3091.

The USD/JPY followed a similar trading pattern and stands 97.90. Australian Dollar rebounded strongly while the Chinese Central Bank’s tighter credit conditions towards private lenders conducting a freewheeling policy, sent new shivers through the Chinese stock markets. The losses were, at one point, 5.5 %, but turned back to a relatively modest 0,2 %. While the US economy seems to improve fundamentally, there are big question marks around the world’s second biggest economy . Oil and commodity prices have risen on the back of the new positive data in US.

Copyright: MAYZUS Investment Company Ltd