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Weekly Market Commentary
1st April 2012
Provided by TA Knowledge
Welcome to the Weekly Market Commentary from DGCX, providing you with a snapshot of what's happening in the energy, precious metal and currency futures markets.
The commentary and analysis included in the DGCX Weekly newsletter is provided by TA Knowledge, a leading UK-based provider of news and intelligence.
Please note that the observations and views expressed in this newsletter do not reflect the views of DGCX and are solely the view of the writer (TA Knowledge).
Economic Data Overview
Oil dominated the headlines over the past week as the prospect of a release of European and US strategic reserves weighted on the market. WTI fell over 3% on the week. Supplies are now deemed to be ample for President Barak Obama press ahead with his policy of sanctions against countries that import oil from Iran and restrictions on banks who process fund destined for Iran. OPEC has increased oil production and industry analysts suggest there is plenty of supply to meet current demand. Key producers have also been quoted talking down oil prices.
Opinion is divided, as we head into the most important data week of the month, about the strength and sustainability of US growth. Investors have not yet written off the prospect of QE3 which would see gains in both oil and gold prices, but the chances are declining with every passing month.
The first quarter of 2012 has seen the major US stock indices' rally by over 10%. Bonds on the other hand have posted the first quarterly losses since the beginning of last year. The US Federal Reserve engaged in another operation twist this week when it sold short dated debt and bought longer maturities in an attempt to keep mortgage rates lower. This policy is designed to underpin housing prices and boost consumer spending. However, bonds only held up briefly and were sold after the cooperation was completed. Both stocks and bonds are closer to pricing in increased inflationary pressures.
Amongst the growing evidence that the growth outlook for the US will continue to improve is the weekly jobless claims data. This week, the number of unemployed benefit seekers fell to the lowest level since 2008 and there were less people seeking extended benefit payments.
However, last year's final quarter growth at 3% was a little less than the market hoped for and there is continued concern about the pace of growth in corporate profits. This highlighted some temporary bond buying as investors feared that business investment would slow. Surveys of business sentiment have begun to show more positive signs with the Business Roundtable economic outlook index climbing to 96.9 from 77.9 in the previous three quarters. The Thomson Reuters/University of Michigan consumer sentiment index also rose to 76.2 from 75.3.
It is not surprising the Ben Bernanke has to continue to underpin economic confidence. When he spoke this week he stressed that accommodative policies will still be required for a long time. However, in the market, the timing for a Fed hike has come back nine months from late 2014 to the end of 2013. Also some members of the Fed have stressed the need for pre-emptive hikes to make sure that as growth becomes more firmly established, future inflation can be kept under control.
Next week the market will focus on the European unemployment rate which is expected at 10.8%. There are a series of interest rate decisions in Australia, the UK and Europe and no changes are expected. On Friday US Non-Farm Payrolls is expected at 211,000, slightly below last month's number ..Read more
