Contributed By: DailyFx

 Europe Session Key Developments

* The cost of Insuring Irish Debt Increases
* 18 of the 18 Western European Benchmark Indexes Close Lower

Investors are Not Convinced Irish Bailout Will Work

European markets closed lower as an Irish bailout fails to reassure investors that European sovereign debt is under control. Markets fell to six week lows at the end of the trading session. The Stoxx Europe 600 Index retreated 1.3 percent after having briefly risen earlier in the morning. The European benchmark gauge declined for three straight weeks amid concern of the high debt levels of Ireland, Portugal, Greece, Spain, and many other European nations. Many investors fear that the European debt is not only a problem of specific countries, but it could potentially cause a contagion that affects the entire western financial system. Overall, national benchmark indexes declined in 18 of 18 western European countries.

FTSE 100 / 5,550.95 / -117.75 / -2.08%

10 out of 10 sectors in the FTSE 100 closed in lower at the end of the trading session on Monday as an increase in the cost of insuring the debt of Iberian countries outweighed an 85 billion Euro aid package for Ireland. Resolution Ltd. fell 3.1 percent after JPMorgan Chase & Co. initiated coverage of the firm with an “underweight” rating. Allied Irish Banks Plc and Bank of Ireland Plc surged in Ireland as Gatmore Group and Henderson Group both experienced over 2 percent advances. Royal Bank of Scotland Group Plc added 1 percent after dropping 5.3 percent on November 26. Lloyds Banking Group Plc sank 1.5 percent as the company gained back as much as 3 percent.

CAC 40 / 3,636.96 / -91.69 / -2.46%

The CAC 40 fell over 2 percent amid concern over the debt of European nations. Credit Agricole SA retrated 1.5 percent, its third straight decline after Consob will examine the company’s holdings in Italy’s Premafin Finanziaria SpA. The French bank help shares in Premafin on behalf of 10 companies based in tax havens. Hermes International SCA climbed 1.8 percent, its second straight day of gains. The luxury-goods company’s family shareholders will meet on December 3 to discuss how the founding families can maintain control.

DAX 6,697.97 / -151.01 / -2.20%

The benchmark DAX fell as investors grew pessimistic about debt concerns throughout the continent. Bayerische Motoren Wrke AG and Daimler AG, the world’s largest makers of luxury cars, led the entire industry lower. MAN SE and Thyssenkrupp AG each lost more than 3 percent. Phoenix Solar AG gained after UBS AG recommended buying the shares.

IBEX 35 / 9324.70 / -222.50 / -2.33%

The IBEX 35 dropped as Financials led the broad based decline at the start of the week. Banco Bilbao Vizcaya Argentaria SA fell for a second day, losing 4.3 percent, as the cost of insuring the debt of Iberian countries rose to record high levels after investors grew cautious because of Irish debt. Gamesa Corporacion Tecnologica SA fell for the first time in three days, declining 0.5 percent to 5.19 Euros. The company announced it is close to making a plant in northern Spain, after winning fewer orders than expected in the region, Europa Press reported.

S&P/MIB / 19,986.42 / -516.68 / -2.52%

Italian equities experienced the largest percentage decline among the 5 major western European benchmark indexes. Ansaldo STS SpA declined for the first day in four, losing 1.7 percent after CA Cheuvreux reiterated an “underperform” rating on the stock. Autogrill SpA advanced 1.4 percent as Deutsche Bank Ag initiated coverage of the company with a “buy” rating. Banca Monte dei Paschi di Siena SpA fell 0.8 percent as the cost of insuring the debt of Iberian countries rose.

Contributed By: DailyFx

 

The New Zealand Dollar rose slightly after the National Bank released the November figures for Business Confidence. The survey yielded a 33.2 value for the month, up significantly from 23.7 in October. Historically, a positive number has been a rare occurrence, but since the middle of 2009, the figure has remained well inside positive territory.

The NBNZ survey of Business Confidence is based on the responses from 1500 small to medium sized businesses and reflects anticipated business conditions over the next twelve months. The percentage of firms expecting deterioration in business conditions is subtracted from the percentage of firms expecting an improvement. A higher number is thus indicative of rising business confidence.

Despite, the minor uptick in the Kiwi, the currency remains lower on general risk aversion and diminishing interest rate expectations. NZD/USD has managed to bounce off daily chart support just under 0.7450.

Contributed By: DailyFx

 U.S. Session Key Developments

* Reuters/University of Michigan Consumer Sentiment Index Outpaces Expectations
* American’s Personal Income Grows at Faster Pace

Markets Close Higher Amid Upbeat Economic Data

U.S. Markets closed higher on the back of retail stocks ahead of black Friday and the upcoming holiday season. Markets today erased almost all of Tuesday’s sharp declines as the latest economic data painted an improving picture for US growth. Today’s market gains were led by consumer discretionary and technology stocks, after the latest data showed consumers are beginning to become more upbeat.

The Reuters/University of Michigan consumer sentiment index’s rose to 71.6 in November, substantially outpacing expectations. The consumer sentiment numbers came shortly after data showed the labor market is slowly recovering, as the number of US workers filing new claims for jobless benefits fell by more than expected last week to the lowest levels since July 2008. Also, Americans’ personal income grew at a faster pace than they have for much of the year and consumer spending expanded. However, orders for durable goods marked the sharpest drop in almost two years, and new home sales fell for the fourth time in the last six months.

DJIA 30 / 11,187.28 / +150.91 / +1.37%

The DJIA closed higher as 9 out of 10 sectors closed in the green. The benchmark gauge was led higher by the Industrial and basic material sector with 2.12 and 1.96 percent gains, respectively. The Dow was higher today after upbeat economic reports and easing European sovereign debt concerns as Ireland is close to finalizing a bailout. Amazon jumped to a fresh all-time high, soaring 5.4 percent ahead of the upcoming holiday.

S&P 500 / 1,198.35 / +17.62 / +1.49%

The S&P 500 gained back some ground after experiencing a substantial decline early in the week. Jewlery retailer Tiffany added to the enthusiasm over retail spending, jumping 5 percent after reporting a 27 percent increase in earnings. Coach added 3.8 percent, and Polo Ralph Lauren gained 2.8 percent. UBS traded relatively flat after the trustee recovering money for victims of Bernard Madoff’s Ponzi scheme accused UBS of actively participating in the fraud and sought 2 billion dollars from the bank.

NASDAQ / 2,543.12 / +48.17 / +1.93%

The NASDAQ experienced the largest gain among the three major US benchmark gauges. Oracle jumped 2.2 percent after a jury ruled that German software group SAP must pay the company $1.3 billion because of intellectual-property theft. SAP was off 1.2 percent as a result of the verdict.

Contributed By: DailyFx

 

USDCAD - The ratio of long to short positions in the USDCAD stands at 4.84 as nearly 83% of traders are long. Yesterday, the ratio was at 1.81 as 64% of open positions were long. In detail, long positions are 44.9% higher than yesterday and 38.9% stronger since last week. Short positions are 45.9% lower than yesterday and 45.9% weaker since last week. Open interest is 12.5% stronger than yesterday and 102.6% above its monthly average. The SSI is a contrarian indicator and signals more USDCAD losses.

Contributed By: DailyFx

 

USDJPY - The ratio of long to short positions in the USDJPY stands at 2.86 as nearly 74% of traders are long. Yesterday, the ratio was at 3.33 as 77% of open positions were long. In detail, long positions are 5.3% lower than yesterday and 5.2% weaker since last week. Short positions are 10.2% higher than yesterday and 2.2% weaker since last week. Open interest is 1.7% weaker than yesterday and 91.6% above its monthly average. The SSI is a contrarian indicator and signals more USDJPY losses.

Contributed By: DailyFx

 

USDCHF - The ratio of long to short positions in the USDCHF stands at 1.77 as nearly 64% of traders are long. Yesterday, the ratio was at 1.48 as 60% of open positions were long. In detail, long positions are 1.4% lower than yesterday and 10.7% weaker since last week. Short positions are 17.5% lower than yesterday and 12.3% weaker since last week. Open interest is 7.9% weaker than yesterday and 81.6% above its monthly average. The SSI is a contrarian indicator and signals more USDCHF losses.

Contributed By: DailyFx

 

GBPJPY - The ratio of long to short positions in the GBPJPY stands at -1.91 as nearly 66% of traders are short. Yesterday, the ratio was at -1.49 as 60% of open positions were short. In detail, long positions are 1.0% lower than yesterday and 10.7% stronger since last week. Short positions are 27.3% higher than yesterday and 22.5% weaker since last week. Open interest is 15.9% stronger than yesterday and 58.0% above its monthly average. The SSI is a contrarian indicator and signals more GBPJPY gains.

Contributed By: DailyFx

 

EURUSD - The ratio of long to short positions in the EURUSD stands at 1.10 as nearly 52% of traders are long. Yesterday, the ratio was at 1.39 as 58% of open positions were long. In detail, long positions are 13.7% lower than yesterday and 2.1% weaker since last week. Short positions are 8.9% higher than yesterday and 4.8% weaker since last week. Open interest is 4.3% weaker than yesterday and 104.1% above its monthly average. The SSI is a contrarian indicator and signals more EURUSD losses.

Talking Points

* Japanese Yen: Benefits From Rise In Risk Aversion
* British Pound: Weakens For The Eighth Day
* Euro: Inflation, Unemployment Hold Steady
* U.S. Dollar: Consumer Confidence, S&P/Case-Shiller Home Price Index on Tap

Fears surrounding the outlook for Portugal and Spain pushed the euro lower throughout the overnight trade, and the single-currency may face increased headwinds going into December as the risks for contagion intensifies. Ireland’s Justice Minister, Dermot Ahern, said members of the European Central Bank pressured the ailing country to request a bailout during an interview with a local broadcast station, and argued that the ECB is “doing the same with Portugal now” as the central bank tries to restore market confidence. At the same time, market participants speculate Spain will ultimately share the same fate as Ireland as the government faces rising borrowing costs, and the ongoing turmoil within the European financial system could lead the central bank to maintain the expansion in monetary policy throughout the beginning of the following year as it aims to balance the risks for the region.

As the headline reading for inflation holds at an annualized rate of 1.9% in November, with unemployment at its highest level since 1998, the ECB is likely to keep its exit strategy on pause later this week in order to encourage a sustainable recovery. We expect ECB President Jean-Claude Trichet to talk down the risks for contagion at the press conference tomorrow, but comments from the central bank head may fail to encourage a rebound in the exchange rate as market sentiment falters. As a result, the EUR/USD should continue to retrace the advance from September, which would expose the 23.6% Fibonacci retracement from the 2009 high to the 2010 low around 1.2620-40, but there could be a small correction before we see anther selloff in the exchange rate as the recent decline remains oversold.

The British Pound extended the decline from the previous day as investors continued to scale back their appetite for risk, and the GBP/USD may face increased selling pressures going into the North American trade as it searches for support. However, as the relative strength index holds above oversold territory, there could be a corrective retracement in the pound-dollar following the eight-day losing streak, but the uncertainties surrounding the European debt crisis could generate additional selling pressures for the pair as risk trends continue to dictate price action in the currency market. As the GBP/USD breaks out of the upward trend from May, the sharp reversal in the exchange rate could lead the pair to fall back towards the 200-Day moving average at 1.5347 as it looks for support, and the British Pound is likely to depreciate further throughout the day as equity futures foreshadow a lower open for the U.S. market.

The greenback advanced against most of its major counterparts on Tuesday, while the USD/JPY halted the four-day advance as the Japanese Yen rallied across the board, and the recent rally in the dollar may gather pace in December as the reserve currency benefits from the flight to safety. Nevertheless, the major currencies are likely to face increased volatility later today as the economic docket is expected to show home prices in the U.S. contract another 0.40% in September after falling 0.28% in the previous month, but a rise in consumer confidence could spark a shift in market sentiment as the outlook for future growth improves.

Contributed By: DailyFx

 

The dollar index posted its third-straight weekly gain on Friday as it climbed back above the psychologically important 80.00 level. The euro was under intense pressure as sentiment continued to be weighed down by Irish and Korean tensions. Investors also fear that there is a very real contagion risk, suggesting that Spain and Portugal may not be as safe as their officials may suggest in public comments, finding little relief in the Irish bailout package. As long as euro-area debt concerns keep the single currency under pressure we are likely to see the index continue to climb as investors seek safety. Price action in the final few sessions of last week and the first few of this week should be taken with a pinch of salt sicne liquidity is still very low making moves somewhat exaggerated.