Market Review – 27/07/2010 22:10 GMTEuro pares gains on a drop in U.S. consumer confidence
Although the single currency rose above Monday’s NY high of 1.3006 and climbed to 1.3022 in European morning, euro then retreated from there on profit-taking to 1.2963. However, euro rebounded from there and the pair rallied to an 11-week high of 1.3047 due to the firmness in European equities, as solid bank earnings from Swiss bank UBS pushed the European equities up and boosted risk appetites. Later, the single currency retreated from there and fell briefly to an intra-day low of 1.2952 after the release of the lower-than-expected U.S. consumer confidence, which suggested that U.S. recovery was slowing. Euro then traded sideways in NY afternoon and closed the day at 1.2997. FTSE 100, CAC 40 and DAX rose by 0.27%, 0.83% and 0.21%, respectively.
U.S. consumer confidence fell in July to the lowest level since February, affected mostly by concerns on job market. Consumer confidence dropped to 50.4 from 52.9 in previous month whereas analysts were expecting a fall to 51.0 only.
Versus the Japanese yen, the greenback initially remained under pressure in Asian morning after Monday’s decline to 86.82 due to heavy selling by Japanese exporters and hit an intra-day low of 86.83, however, the pair rebounded and rose sharply in Europe on improved risk appetite due to the firmness in European stock markets as led by financial shares. Dollar then extended its gain after the release of U.S. single-family home price and hit an intra-day high of 87.98 in late NY trading session before easing.
U.S. single-family home prices rose more than expected in May, showing strong spring sales supported by homebuyer tax credit. S&P/Case Shiller home price indexes rose 0.47%, better than the estimate of 0.20%, and the previous reading was revised upward from 0.44% to 0.61%.
Cross selling in yen also supported the usd/jpy pair, as eur/jpy and gbp/jpy rose from 112.79 to 114.42 and from 134.48 to 137.22 respectively.
Although the British pound traded with a firm undertone in Asia after Monday’s breach of July’s peak at 1.5473 to 1.5530 in Europe, profit-taking knocked sterling down to an intra-day low of 1.5441, however, sterling jumped again after the release of much-stronger-than-expected U.K. CBI trades survey and climbed to a fresh 5-month high of of 1.5600 in late NY session.
U.K. CBI trades survey rose to 33 in July, the highest since April 07, versus the previous reading of -5.
In other news, UK FT reported that Chinese banks may face potential huge risk of default from local government loans. Chinese regulators warned that as much as 20% of the RMB 7.7 trillion (about RMB 1.54 trillion or US$ 227 billion) Chinese banks have lent to local Chinese government entities may end in default. A senior official from the China Banking Regulatory Commission said that all these loans will not necessarily go bad, the nation’s non-performing loan ratio will likely ‘increase slightly’ at the end of this year.
Economic data to be released on Wednesday include: Australia CPI, Germany CPI prelim, HICP prelim, EU ECB bank lending survey, U.S. Durable goods, ex. Defense, ex. Transport and Fed’s Beige book .