Shares closed higher Wednesday on low volume as Wall Street looked beyond a weak reading on the U.S. services sector and overseas debt issues and interest-rate hikes. The market seems to be bouncing in an upward direction now. We’re still in a bull market, but there are some head winds. The end of the Federal Reserve’s massive bond-buying purchases, along with the price of oil, was among the head winds. The Dow Jones Industrial Average closed up 56.15 points at 12,626.02. The Standard & Poor’s 500 Index rose 1.34 points to close at 1,339.22, while the Nasdaq Composite Index advanced 8.25 points to close at 2,834.02.
In Europe, the ECB is expected to raise interest rates later today. This is quite surprising considering the news that Moody’s Investors Service cut Portugal’s credit rating to junk, with the move coming ahead of a much-anticipated European Central Bank interest-rate decision due Thursday. Despite the risk for a Greek default, German Deputy Finance Minister Joerg Asmussen said the government will continue to push for a debt swap during an interview with Reuters, and record-high financing costs could eventually increase reliance for additional aid as policy makers struggle to contain the sovereign debt crisis
Crude-oil futures settled lower Wednesday, after a day of fluctuating between slight gains and losses, following a move by China to raise interest rates. Crude fell 24 cents to settle at $96.65 a barrel on the New York Mercantile Exchange. During the session, oil traded as high as $97.79 a barrel and as low as $95.90 a barrel, after closing at a three-week high a day earlier. Oil prices saw some support ahead of U.S. inventory reports that are expected to show lower crude stockpiles for the fifth straight week, even as global debt concerns continued to intensify.
Today’s Important Economic Announcements (GMT)
7:15 AM CHF CPI m/m
10:00 AM EUR German Industrial Production m/m
11:00 AM GBP Asset Purchase Facility & Official Bank Rate
11:45 AM EUR Minimum Bid Rate
12:15 PM USD ADP Non-Farm Employment Change
12:30 PM EUR ECB Press Conference
12:30 PM USD Unemployment Claims
2:00 PM CAD Ivey PMI
2:30 PM Natural Gas Natural Gas Inventories
3:00 PM Crude Oil Crude Oil Inventories
Forex & Commodities Technical Analysis
Although the European Central Bank is widely expected to raise the benchmark interest rate by another 25bp in July, we may see President Jean-Claude Trichet soften his hawkish tone for future policy, and the Governing Council may continue to defer its exit strategy as the fundamental outlook remains clouded with high uncertainty. In turn, the ECB may endorse a wait-and-see approach for the remainder of the year, and the central bank may strike a balanced outlook for the region as slowing recovery in Europe dampens the risk for inflation. We expect the Euro to weaken further despite ECB rate hike.
Stop Loss: 1.4361
Take Profit: 1.4280
We have been following the Swiss Franc with tremendous interest. The Swiss Franc is considered a safe-haven currency, yet its losing ground to its European counterpart due to the recent developments in Greece. On Thursday, the US government’s weekly unemployment claims data are due out, along with the ADP National Employment Report on private-sector jobs, with both coming ahead of the monthly nonfarm payrolls report on Friday. We believe the report will be positive and the pair will continue heading south.
Stop Loss: 0.8432
Take Profit: 0.8360
Inflation expectations have returned to the spotlight, with the steady slide in investors’ bets on near-term price growth arguing for a broadly bearish outlook. At least for the time being however, these forces appear aligned to weigh on the yellow metal, with rekindled Euro Zone debt fears and weaker US service-sector growth threatening to sink stocks and push breakeven rates (the spread between regular and inflation-linked bond yields commonly used as a gauge of price growth expectations) lower, taking gold along for the ride. Further highs are likely in the next 24 hours.
Stop Loss: 1524.90
Take Profit: 1549.90
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