26 JUNE 2013: US DATA LIFTS STOCKS

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.

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25 JUNE 2013: DOLLAR STRENGTHENS WITH SHARES FALLING

Global stocks continued to fall steeply on Monday after the trading week started with new lack luster sessions in Asia. Shares declined heavily in Europe and Dow Jones Industrial lost 0.94% adding to the 2% fall last week. Materials, industrials and financial stocks led by Bank of America ended in deep red, negative territory.

The technology heavy Nasdaq declined 1.04%. Equity markets regained some ground in the last half of the session, but the onslaught on stocks seems to be by no way over. Most of the gains after the last half years stock rally have been wiped out after the US Federal Reserve, FED, last Wednesday announced an end to the FED bond buying program of USD 85 billion monthly.

This monetary easing program has given stock markets added liquidity and taken them to new record highs. Capital has been pumped into the more risky emerging markets, which also have seen successful bond issues by in weak economies as Rwanda and Honduras. FED’s announcement has created panic like reactions and led to a flow of capital out of emerging markets and big declines in their currencies.

The last four days developments have grossly strengthened the USD. The DXY-index, a basket of currencies weighed against the Dollar, is at its highest level since June last year. A more optimistic business outlook from Germany has kept EUR/USD steady above 1.31. A decline below 1.3072 will, however, imply a strong bearish signal.

USD/JPY has also kept steady over the last 24 hours trading just below 98 Yen to a Dollar. The Australian Dollar has recovered 0.5% from the 33 month low following the bad financial news from China yesterday morning. The Aussie Dollar is extremely volatile to any changes in China. Precious metals continue to be under strong pressure set for new lows. The same goes for oil in spite of the tense situation in the Middle East.

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20 JUNE 2013: FED STRENGTHENS USD WHILE STOCKS PLUNGE

The US Federal Reserve (FED) will start to taper its monetary easing program in the second half of 2013 ,and terminate the bond buying completely in the first half of 2014. That was Chairman Ben Bernanke’s message after FED’s meeting yesterday. A termination depends, however, on continued growth, controlled inflation and achievement of FED’s 6.5 % unemployment target. The US economy is moderately growing, but FED see increased downturn risks due to budget cuts, which have weakened growth. The low interest rate policies will continue.

Markets reacted by sending stocks down. Dow Jones Industrial fell 1.35 %. Nasdaq lost 1.12 %. The Asian indexes plunged on the news. The bond buying program has been the main driver behind this year’s stock rally. A termination invites uncertainty. The Asian-Pacific MSCI-index fell more than 3 %. The Japanese Nikkei was equally hard hit as were Australia, New Zealand and other Asian markets. The downturn in equity markets is most probably going to continue in Europe today.

FED’s conclusion and Bernanke’s comments don’t come as a big surprise. Over the last few weeks there has been continuous speculation as to when tapering would start. FED seems to be convinced that the US economy is on the right track, but keeps the door open for continued stimulus policies in the worst case scenario. This “exit” from monetary easing shall hardly calm nervous markets which usually overreact to news regarded as negative.

FED’s decision has strengthened the Dollar in relation to all currencies. EUR/USD has fallen from the 1.34 level to 1.326. Yen has also lost ground and trades at 96.28 Yen to a Dollar.GBP/USD, which lately has traded at around 1.57, plunged to 1.5448. The USD/AUD continues to fall, 0.9250, on new data confirming a slower Chinese growth. Oil prices are down. Brent crude trades at USD 104.69 a barrel, down one-and-a-half Dollars. Gold and commodity prices continue to lose ground.

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19 JUNE 2013: MARKETS WAIT FOR BERNANKE

Stocks led by General Electric grew higher on Wall Street yesterday, as markets eagerly wait for US Federal Reserve’s , FED, policy statement to be published later today. Both Dow Jones Industrial and the technology heavy Nasdaq added 0.91 and 0.87 % respectively on expectations that FED, for now, will maintain its aggressive bond buying program, which over the last half year has boosted stocks. Markets are gambling on continued monetary easing in spite of recent data pointing to an improvement in the US-economy.

FED Chairman Ben Bernanke recently stated that the bond buying would be wound down when the economy has proven stronger. FED has put a 6.5 % unemployment rate and an inflation rate below 2.5 % as benchmark targets. An improving US economy seems, at present, capable of growing without monetary easing, but FED has not yet decided on the final exit strategy. It is expected that a tapering of the bond buying will begin in September/October.

Japanese stocks followed the positive lead from New York, outperforming the rest of Asia. Nikkei rose 1.1 %, helped by a softer Yen. USD/JPY traded at 95.28 down from the 94.50 level seen over the last couple of days. The Asian Pacific MSCI-index eased 0.3 % led by a 1.3 % fall in mainland Chinese stocks. Hong Kong and South Koreas were also lower. The MSCI index has lost 8 % since May 22nd, when Bernanke indicated to Congress that a decision to wind down bond buying would come in the next few meetings.

The question for many investors is whether Bernanke will succeed in convincing markets that any tapering is conditional on incoming data opposed to the foregone conclusion: tapering is going to come regardless. The uncertainty has convinced most currency and equity investors to retreat to the sidelines. The Dollar has moved marginally over the last day. EUR/USD trades at 1.3390 after reaching close to a four-month peak at 1.3416 yesterday. Commodities, oil and gold are trading at steady levels.

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18 JUNE 2013: ASIAN SHARES SLIDE BEFORE FED MEETING

After a strong session in New York on Monday where Dow Jones, S&P, and Nasdaq all gained, Asian shares slide, as investors are nervously waiting news from the US Federal Reserve meeting and Bernanke’s news conference on Wednesday. The Japanese Nikkei and the Asian Pacific MSCI-indexes fell as did Australian shares which lost 0.9 %. The currencies are relatively steady with the EUR/USD at 1.3354 and USD/JPY at 94.84.

Oil prices continue to trade higher due to tension in the Middle East. Brent crude stands at USD 105.57 a barrel. The G-8 meeting amongst the world’s strongest developed economies, started their meeting in Northern Ireland yesterday, seeing Russia increasingly isolated in their support to the Assad-regime in Syria. US and European leaders simultaneously launched talks on the world’s most ambitious free trade agreements.

Markets are looking for the FED to clarify its outlook on its massive stimulus program when the US central bank concludes its two-day policy meeting on Wednesday. FEDs aggressive bond-buying program, along with other central banks accommodating monetary policies to promote growth, have provided liquidity which have been invested into higher risk assets as shares. Even modest tapering in monetary policies might, therefore, have had direct and unforeseen impact on the stock rally seen the last half-year.

Uncertainty over FEDs thinking has recently weighed in on the Dollar which has plunged to a four-month low towards a basket of currencies. The Dollar’s fall against the Yen has primarily been linked to speculators and investors cutting down on their Yen short positions after the Bank of Japan last week did nothing to quell a highly volatile domestic bond market. The fall in the Yen was sparked by a sell-off in Nikkei shares which have fallen 20 % from their peak at the end of May.

It is expected that FED, after its Wednesday meeting, will stress its commitment to continued stimulus and that any tapering will not signal lightening liquidity. At the G-8 meeting the Euro zone came under pressure to press on with a banking union. Japan was urged to follow up on central bank stimulus with structural reforms to tackle its budget deficits.

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17 JUNE 2013: DOLLAR LOSES MOMENTUM

The Japanese Yen held near a two-month high against the Dollar and the Euro in early Asian trade Monday, amid market hysteria and confusion over when and how the US Federal Reserve (FED) will begin to scale down its massive stimulus program. USD/JPY opened at the same level as it ended in New York on Friday, where the Dollar bought 94.23 Yen. Since the opening, Yen has weakened to 94.77. EUR/USD trades steady at 1.3322 as French President Holland’s Socialist party asks for a weaker Euro.

The Dollar lost momentum during volatile sessions last week, which saw sharp moves in the Yen and emerging market currencies. Stronger retail sales and lower weekly jobless claims released last Thursday, helped the green back rise from months of lows. Negative consumer confidence figures published on Friday effected, however, USD negatively. The Dollar index, weighed against a basket of currencies, are at a four month low. Both Euro and GBP are at their strongest level against the Dollar since February.

Oil prices rallied to a two month high after Washington’s announcement that it would provide arms to Syrian rebel groups. New York Crude, NYMEX, trades at USD 97.63 a barrel and Brent is above 105. The Syrian crisis going to be at the top of the agenda when the G-8 meets today. The Syrian civil war is threatening the stability in neighboring Countries such as Jordan, Iraq, Lebanon and Turkey, and challenges Israel’s security as well. The conflict threatens to develop into a regional Russia/US proxy war also directly involving Iran.

In a price analysis Barclay’s bank is forecasting crude oil prices to retrace to USD 111 a barrel, taking supply shortfalls as well as geopolitical tensions into consideration. The Bank estimates supply shortfalls from OPEC (Organization of Oil Producing Countries) to be 2 million barrels a day or equal to Germany’s oil imports. Libyan oil output has fallen below 1m barrels a day due to protests at oil fields and terminals. Nigeria’s output has fallen due to theft-related damage to pipelines.

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14 JUNE 2013: ROBUST US-DATA TURNS MARKETS UP

Robust US retail sales and a drop in the weekly jobless benefits claims had a positive impact on global stock markets yesterday and this morning. Japan’s Nikkei jumped 1.9 % recovering some of the sharp losses the last two weeks. This followed a strong session in New York. Dow Jones passed the 15 000 mark again, adding 1.21 %. The technology heavy Nasdaq index gained 1.32 %. The Asian Pacific MSCI-index rose 1.4 %. Also Chinese shares recovered.

Volatility is still high in the currency markets. Better than expected economic data calmed global markets,after the last few days bruising sell off. Investors remained, however, nervous ahead of next week’s Federal Reserve, FED, policy meeting on June the 18th-19th. The Dollar lost at one point more than 1% from early gains against the Yen, and stands at a four-month low against a basket of major currencies, DXY. USD/JPY is hovering below 95 at 94.92 Yen to a Dollar. Euro/USD is at 1.3349.

The positive data yesterday appeared to have brought some temporary relief to markets rocked by speculation on whether FED is going to taper its monetary easing. The strong rally in global equity markets over the last half year, has been driven by FED’s bond buying scheme. There is an open question as to how the stock markets would be affected by a discontinuation in monetary easing, which other central banks have also copied. Currencies are most likely going to continue to be volatile until stability returns to equities.

Yen short and Dollar long positions have been built up to excessive levels over the last few weeks, and have contributed to the volatility in USD/JPY. Selling of the Yen was overdone and it seems that the latest market turbulence might have filtered out much of that excess. USD/JPY at 95 seems to be reasonable for now. The British Pound Sterling, GBP, is gaining ground against the USD, trading above 1.57. Oil prices are up on US- growth expectations triggered by the latest data. US crude futures stand at 96.70 and Brent trades at USD 104.73 a barrel.

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13 JUNE 2013: ASIAN MARKET PLUNGES WITH STRONGER YEN

The Dollar plunged to its lowest level in ten weeks against JPY at 94.81, while the Asian stock markets experienced one of its worst one day down falls. All the Asian markets ended in red territory with the Japanese Nikkei 500 index falling as much as 5.3 %. Tumbling Japanese shares accelerated the fall of the Dollar as Nikkei- investors continued to unwind earlier hedges against a weaker Yen. The Dollar has lost 8.6 % since hitting a four year high of 103,74 on May 22.

The latest developments demonstrate the gamble involved in Central Bank’s monetary easing. Investors have snapped up Japanese shares between mid-November and May, as a weaker Yen promised to fatten exporter’s overseas revenues. Now a stronger Yen threatens to do the opposite, leading to further sell-offs in the Nikkei. The tumults in Asia come on top of uncertainty about whether the US Federal Reserve (FED) will pare back its stimulus program buying bonds and treasury bills. Japanese bond selling is adding to the pressure on the currency.

The fall in Asian shares followed a weak session in New York. Dow Jones Industrial was down 0.84 % while the technology heavy Nasdaq lost 1.06. The Dollar lost 0.3 % against a basket of currencies, DXY, ending at 80.741 after falling below 80.651, a level not seen since February. The Dollar has lost 4 % since its three-year high on May 25th. Adjustments in overextended long USD positions rather than a changing perception of US growth and Fed outlook, seems to be behind the weaker Dollar.

Weakness in the Dollar saw the Euro climb to a near four-month high of 1.3370. Euro/USD trades now at 1.3356. It is difficult to explain the stronger Euro, the recession in the Euro zone taken into account. Recent polls show, however, that a majority of analysts believe that ECB will keep the interest rate at the present level. Optimists are also suggesting that the euro zone will return to modest growth later this year.

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12 JUNE 2013: USD/JPY REBOUNDS AFTER STEEP FALL

The Dollar steadied against the Yen on Wednesday, suffering its biggest drop in three years yesterday. USD/JPY trades at 96.44, sinking as low as 95.60 in the previous session. The 2.7 % fall marked the biggest one-day drop in the USD/JPY currency since May 2010. The Dollar continued to slip against the Euro at 1.3307. The Dollar index DXY steadied after slumping to a four-month low of 81.034. The weakened Australian Dollar gained 0.4% and trades 0.9469 to a USD.

Bank of Japan (BOJ) disappointed investors hoping for an extension in the maximum duration of its fixed-rate loans, similar to the European Central Bank (ECB) long term financing operation. Such extension would have been aimed at quelling the volatility in the bond market. The market expected such a move. When that did not happen, the Yen sellers had to liquidate short positions. Yen buying was strengthened by exporters shrinking purchases of the Dollar.

The volatility and tumult in the Japanese bond market have raised worries that it could undercut the Abe government and BOJ’s efforts of monetary easing. USD/JPY had, until the recent turnaround, fallen continuously from 80 to 103.65 Yen to a Dollar. The weaker Yen gave Japanese export a welcomed boost, but most of this advantage has been eaten by the stronger Yen experienced in June.

The US and European stock markets tumbled yesterday on nervousness over FED’s monetary easing exit strategy. Dow Jones and Nasdaq fell from 0.76 to 1.06 %. At the General Assembly of Facebook, CEO, Mark Zuckerberg, faced a barrage of questions about the stock price. Facebook’s shares have fallen 37% since its introduction. In Japan, the Nikkei index fell below 13.000 as the strong Yen dragged exporters down.

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11 JUNE 2013: USD SLIPS AGAINST YEN AND EURO

The Bank of Japan (BOJ) did not intervene in the volatile bond market and kept monetary policy steady at yesterday’s meeting. The decision strengthened the Yen. USD/JPY trades at 98.42 EURO/USD, which started the week at 1.3193 and has climbed 80 points to 1.3272. The Dollar, which hit a 4-1/2-year peak against the Yen of 103.74 last month, has since fallen.

Asian stocks sagged to a fresh 2013 low due to the Chinese growth worries and continued uncertainty over US monetary easing and its bond buying program. The Nikkei N225 ended 0.7 % down, while USD/JPY declined 0.4 %. The South Pacific MSCI-index shed 0.9 % and fell for the fifth straight day in a row. In New York, Dow Jones ended slightly down at 15. 238. Nasdaq was in positive territory, 0.13 %, after a 1.71 % gain for Intel, which was the winner of the day.

The international rating agency, Standard & Poor’s, raised the US economic outlook to stable from negative, from the positive jobs data presented last Friday. The upgrade will contribute towards keeping the speculation about an eventual softening of FED’s strong commitment to quantitative easing alive. Both global equity and commodity markets have recently been jolted by FED stimulus concerns, slowing growth in China, contributing towards the continued recession in Europe and big turbulence in the Japanese stock and bond markets.

This volatility clearly demonstrates the weaknesses of monetary easing. It boosts liquidity and exacerbates moves in the financial markets without having a real impact on the real economy. Abenomics led to a strong stock rally and a steep fall in the Yen. Over the last two weeks Nikkei has lost 20 % and USD/JPY is up 5 % . Most analytics continue to be bullish on USD and stress that long-term capital flows are moving into US corporate bonds. This will strengthen the USD.

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06 JUNE 2013: YEN JUMPS AS WALL STREET FALLS

The Yen rose sharply early Thursday. USD/JPY dropped to 99.00, up more than one percent since yesterday. Commodity currencies are under strong pressure with the Australian Dollar at a 19-month low. The currency volatility follows a steep fall in US stocks Wednesday extending the previous days sell-off. Dow Jones dipped under 15.000 due to concerns that the US Federal Reserve, FED, may scale down its bond-buying stimulus when the economy is still sluggish.

The sell-off on Wall Street was broadly based with four decliners to one advancing stock. The selling might suggest that the seven-month stock rally is coming to an end. The S&P 500 has fallen 3.6 percent since its peak on May the 21st, one day before Ben Bernanke indicated that FED might taper its stimulus if economic data shows traction. The jobless numbers and unemployment statistics to be presented tomorrow are therefore crucial.

Both Dow Jones and Nasdaq registered their biggest percentage drops in six weeks. Most Asian markets suffered similar falls and slipped to fresh lows. Economic data has recently been mixed. Investors fear that FED will reduce their monetary easing before the economy is back on track, in spite of clear FED statements that the stimulus will continue until unemployment is reduced to 6.5 %. A report yesterday showed that private employers created far less jobs in May than the 160,000 predicted. The figures are a strong argument against changes.

The long term bullish outlook on the USD/JPY remains. Analysts don’t predict steeper falls from here and still see 120 as likely in 6 – 12 months. EUR/USD is resilient, reaching 1.3118 yesterday before falling back to 1.3095. The stronger Euro comes ahead of ECBs policy meeting. ECB will probably consider whether it is necessary to take fresh action in order to secure the expected recovery of the euro zone in the second half of 2013.

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05 JUNE 2013: US AND ASIAN STOCKS DECLINE ON FED UNCERTAINTY

Asian stocks slipped to their lowest level in 2013 as uncertainty over when the US Federal Reserve (FED) would begin scaling down its massive stimulus program. Since 2008, FED has injected 2,5 trillion dollars into bonds to boost the economy. The increased liquidity has mainly benefited US-stocks which have reached new highs, but also led to an inflow of US-funds into Asian and other markets. There are now increased worries, especially in Asia, about funds flowing out of the region.

Over the past few days, this trend has been reflected in a stronger Japanese Yen (JPY). Foreign funds have, for the last few months, been injected into a rapidly increasing and profitable Japanese stock market. Foreign capital is now taking profit and selling Yen with the effect that the JPY has increased 4 % in the last few days in relation to USD. USD/JPY fell below 100 on Monday, recovered early during Wednesday’s session, but later dipped back to 99.2 Yen to a Dollar.

US stocks ended even lower on Tuesday, resuming their recent decline, as investors sold growth-oriented sectors on speculation the Federal Reserve may slow down the pace of its economic stimulus. The indexes have fallen 2 percent from their peak on May 22nd as investors take profit. Dow Jones was down 0.50 % at 15 177. A top US-official, critical to the bond buying program, stated yesterday that FED is poised to re-evaluate and possibly make changes to its massive monetary stimulus.

FED Chairman, Ben Bernanke, has been consistent in his comments on monetary easing and stressed that proof of a real turnaround in US economy reflected in an unemployment target of 6,5, which is necessary before making changes. After the disappointing manufacturing data earlier this week, the jobless claims presented on Friday might prove decisive for whether the stimulus program is going to be continued until the end of the year.

The Dollar recovered from an early-week selloff on Wednesday while the Australian Dollar plunged to a 19 month low on the back of disappointing growth data. Euro/USD is at 1.3086 back from a one-month high on 1.3108.There is strong technical resistance at 1.3141. Oil prices are up. NYMEX is at 93,63 and Brent crude trades above USD 103 a barrel.

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04 JUNE 2013: DOLLAR DROPS ON NEW DATA

The US Dollar suffered a serious setback and dropped to one-month lows against a basket of major currencies on Tuesday after the index on the US- manufacturing fell for the first time in six months. National factory activity sank to the lowest level seen since 2009.

The disappointing data curbed speculation that the Federal Reserve (FED) would scale back its stimulus anytime soon. The dollar index, against a basket of major currencies, DXY, fell one percent as the Japanese Yen strengthened. USD/JPY dipped below 100 for the first time in weeks at 99.70.

Long positions on USD are, therefore, likely to remain under pressure until Friday’s job reports. The unemployment numbers will have to beat the expected forecasts of 165,000 less unemployed significantly, to revive the upside momentum in the USD, analysts say.

The renewed pressure on the dollar saw the Euro/USD above the 1.31 level for the first time since May the 9th. The Euro has fallen back to 1.3063 in the early Asian trading session. USD/JPY fell as low as 98,86 and has lost 4.5 %, 4 % from the high on 103,74 set last month. The dollar’s fall against other currencies, which had lately lost ground against the dollar, was even more dramatic. The Australian dollar rallied more than 2% close to parity with the USD at 99.92.

The US data led to a turnaround in Asian stocks which recovered from their lowest levels in half a year. The Japanese Nikkei has fallen as much as 15% over the last two weeks.The American indexes initially fell on the disappointing manufacturing data, but  recovered in a volatile session. Nasdaq turned positive on Intel strength, and Dow Jones gained 0,82 % at 15 239. Oil and gold prices are steady compared to yesterday. Gold is at USD 1411 an ounce and Brent crude trades at USD 101,89 a barrel.

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03 JUNE 2013: ASIA FALLS ON PROFIT-TAKING

Asian shares fall on profit taking Monday after recent highs. Uncertainty over how much longer the current US stimulus will continue, still dominates the agenda at the start of a new trading week.China’s last PMI figures (Purchasing Manager’s Index) published during the weekend, creates concern in light of softening domestic and external demands. More US-data this week might give a clue as to growth and demand prospects and will hopefully show some direction in regards to how long the monetary easing will last.

The dollar index rose last week on investors bets that improved data on the US economy would encourage the Federal Reserve (FED) to reduce monetary stimulus, which have boosted investments into riskier assets as emerging market currencies. The South African Rand, Mexican Peso and Hungarian Forint were hardest hit against the dollar in a volatile week in the currency market that saw investors reduce their exposure to risk-related assets.

The New Zealand Dollar fell more than any other developed currency after their Reserve Bank Governor stated that the Kiwi dollar still remained overvalued. Further currency interventions were thus needed to weaken the Kiwi.

The Euro/USD gained substantially last Thursday, but fell back due to the unemployment figures published on Friday. The unemployment rate in the Eurozone hit a fresh record high at 12.2 percent in April. Youth unemployment is reaching alarming levels. Euro/USD trades at 1.3013 in the morning. The President of the European Central Bank (ECB), Maro Draghi, said that the Eurozone economy is on track for a recovery driven by ECBs loose monetary policy, and outside demand.

Japanese Yen is up against USD at 00.48 amid a bout of profit-taking by investors last week. GBP is steady at 1.5217. Oil prices are under pressure, but Brent crude is still trading above USD 100 a barrel. Gold prices are slightly up at USD 1395.

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27 MAY 2013: INVESTORS LOSE OUT DUE TO BAD TIMING

Stocks took a breather last week after signs of cooling in China, and what some investors saw as a possible change in FED policies. The Nikkei, which has soared since last November on hopes of economic revival, was the hardest hit with Thursday’s 7,32 % fall. Other Asian and European markets dropped as well, but not so dramatically, raising questions whether the bull market has come to an end.

Some investors blame FED-chairman, Ben Bernanke for the turmoil. Others point to a seeming difference between Bernanke and the board’s published minutes for late April. Investors might, however, blame themselves for unrealistic expectations and their gamble on a change in FED’s policies.

Investors have different motives in their bet for a change. Some are appalled by FED’s money printing and that there is no predicted hyperinflation. Others hoped that Bernanke’s monetary experiments would be abandoned. Such abandonment would have meant that President Obama’s entire economic policy had failed. The third and biggest group of Wall Street investors simply blame themselves for missing out on the stock rally. The general indexes have beaten the hedge funds three times since January.

No wonder many of them are frustrated. Fat bonuses this year might hang on their own wishful thinking for a quick change. Change depends, however, on objective analysis, and a correct reading of Bernanke’s careful wording. In his testimony last week, Bernanke repeated word for word what he stated since last September.

FED will continue to buy 85 billion of bonds monthly till the 6,5 % target for unemployment and a steady growth is established. The US economy is not quite there yet. It might well take another 8 – 12 months. The grunting from dissatisfied FED board members is not something new.Their hopes for a change in policies have been reflected in the last eight FED minutes.

There will, of course, be a change. But the timing will be decided by economic data and FED’s consideration. Investors lost billions of dollars last week on a wrong bet on the timing for a change. By now, they have hopefully swallowed their anger and are ready to meet markets which are hopefully back on track, ready for rallies and continued new highs.
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24 MAY 2013: SERIOUS MELTDOWN IN GLOBAL EQUITIES

Dubious signals from the US Federal Reserve, FED, on continued monetary easing, and disappointing Chinese PMI numbers (a barometer on business leaders optimism), led to a serious meltdown in global equity markets yesterday. The Japanese Nikkei plunged 7,32 % with more modest losses in Europe, where London and Frankfurt indexes lost 2 %.

While FED’s Ben Bernanke testimony to Congress, warned against a premature end to the bond buying program, FED’s April minutes pointed to a split between those who want a quick termination of the program and those siding with Bernanke.  Monetary easing has been the driving force behind the last months steep increases in equities.

It is natural to see the steep plunge in Japan as a result of a doubling in stock prices over the last half year and the latest aggressive stimulus policies. Globally, there have been increased worries among investors as to whether equity markets, running ahead of fundamentals, are creating a dangerous bubble.  With news of an end to monetary easing and problems in China this created risk aversion and a sell off.

The fall in the US-indexes were modest following the onslaught in other markets. The last published jobless claims at 340,000, are 5000 fewer than expected.  There is still a long shot to the 6,5 % unemployment target set by FED, but fewer jobless claims would give the proponents of an early end to the bond buying programs new arguments.  

Oil prices which have kept surprisingly steady over the last month, decreased more than two dollars a barrel.

EUR/USD got support from higher than expected PMI indexes. As a result, EUR/USD from level of opening - 1,2855 was rolled away to a maximum of 1,2956 and this morning we can see pair traded on a level of 1.2932. GBP/USD behaved more frostily against volatility of both currency pairs and share indexes. Having reached quite strong support on 1,50 the previous trading day, pair showed moderate correction. The most important question of today is- whether the Yen finished it's decline? Taking into consideration all the factors, pair can quite roll down to the area of 100.00.

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23 MAY 2013: BERNANKE TAKES USD TO NEW HIGHS

The head of the federal Reserve, FED, Ben Bernanke’s statement to Congress caused markets to fluctuate wildly yesterday. Bernanke’s comments initially had a positive impact on the stock markets when he stated that it would have unpredictable consequences for the US economy if FED’s bond buying program was terminated within the near future.

The bond buying program has boosted the US and global  stock markets, but has so far failed to create new employment. FED has earlier stated that the bond buying of USD 800 billion collar will end when the unemployment has reached 6,5 %. It now stands at 7,6 %. This statement was initially seen by markets as a continuation of the bond buying that has boosted global equity markets.

At the same time Bernanke indicated that the termination of the bond buying might be on the immediate cards.. These comments were supported by the minutes from the April/May FED board meeting opening for a termination of the bond buying within the near future. This resulted in a steep fall in US stock indexes. Dow Jones fell from 16 464 down to 15 307 with equal immediate drops in S&P and Nasdaq.

The USD  jumped to 103,73 Yen a Dollar. The DXY, a basket of currencies against USD, raised to a record high of 84,27, Euro/USD jumped to 1.2854  as Swiss Franc weakened both towards Dollar and Euro. The Australian dollar trades at its lowest level in a year.  Precious metals have  fluctuated wildly through the New York session with gold trading between USD 1369 and 1416.  Silver reached USD 23,20 to fall back to 22,27.  Oil prices remain steady.

Bernanke’s statement boosted global stock markets. Dow Jones immediately increased to a record high of 15 464 with equal jumps in European equities.

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22 MAY 2013: BERNANKE HOLDS THE KEY TO THE STRENGTH OF THE USD

Global markets traded steadily yesterday building up to the publishing of the Federal Reserve’s minutes from the last BOD meeting in April/May, and Ben Bernanke’s statement to Congress later today.  After a small correction on Tuesday, the USD continues to strengthen and is up close to record high against a basket of currencies, DXY.

As proven over the last few weeks, the overall trend in the USD is pointing up towards all currency pairs in spite of a day or two of declines.  This trend is supported by three main factors;  the forecast for the US is better than for any other economy, Europe is ridden with recession and Japan is concentrating its efforts on increasing the inflation to the 2 % target.

The upswing in the US economy is mainly due to its monetary easing and FED's loose monetary policies. FED representatives have, over the last few days, indicated that the bond buying program will soon come to an end. If Bernanke “sneezes” today and states the same as his local FED representatives have done, it would mean a further strengthening of the USD.

A weaker Euro and Yen over the last few hours seem to indicate that this is what markets expect.  After the Japanese Economy minister talked the Yen up earlier in the week,  he seems to have been reprimanded by superiors, and the Yen continues its free fall. The International Monetary Fund, IMF, in a report today, urged Swiss authorities to weaken the Franc by unwinding its currency reserve funds. The Franc has already depreciated 3,7 % towards the Euro in 2013.

Precious metals continue to fluctuate, wildly searching for direction.  The large increases in gold and silver throughout Asia and early European trade was quickly eaten by new steep falls. Oil prices keep steady. Smaller than expected English inflation strengthened GBP and gave the markets hopes for loser monetary policies, meaning more money printed by the Bank of England.

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Gold Rebounds As USD Weakens

Gold and Silver rebounded strongly yesterday after the onslaught at the end of last week, and in Asia on Monday morning. Both the precious metals fell nearly 5 %. Gold trades at USD 1387 an ounce in Asia, 35 dollars up from the lows 24 hours ago.  Silver trades at USD 22,70 rebounding from a low of 21.00 and reached USD 23, at the start of the Asian trading session. The cautious comments from representatives from the US Federal Reserve (FED) regarding the bond-buying stimulus, have weakened the USD.


In a statement on Monday, the President of the Federal Reserve in Chicago followed up last week’s comments from another regional FED president, that the bond-buying program might end abruptly in the autumn if, by then, the FED was sure that the labour market was on solid footing. Earlier, the FED put a 6,5 % unemployment statistic as the critical mark.  The last published data showed a 7,6 % unemployment statistic.  The aggressive monetary easing policies now also followed by Japan, has given global stock markets a strong boost.


US-stocks ended flat on Monday with indexes hovering near record levels.  Concerns about a stop in bond-buying and a correction are influencing markets.  Energy stocks and primarily solar companies soared. Dow Jones saw an intraday high at 15 391. S&P reached 1 672. Both indexes are up 17 % since January 1st.  Investors are split between nervousness for a strong correction due to the sharpness and length of the rally, and those who are afraid to miss a continued rally.


European shares set a new five-year high for the fourth straight session on Monday, after positive indicators from The United States and Japan pointed to an improving global economic outlook.  European blue chip stocks (Financial Times Eurofirst 300 index) was up one percent, which is the highest level seen since mid 2008. The positive US consumer sentiment data from Friday, the highest level seen in almost six years, is seen as especially encouraging. EasyJet and Ryan Air were among the biggest gainers.


The Japanese Yen tumbled yesterday after comments from its Minister of Economy, warning that the currency might have weakened enough. USD/JPY fell to 102 after Friday’s high on 103,22,  but has rebounded to 102,22. Oil prices are keeping steady. Brent crude trades at USD 104,83 a barrel. FED Chairman Ben Bernanke’s statement to Congress on Wednesday will be crucial for the further development in currencies and global equity markets.

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10 MAY 2013: YEN BREAKS THROUGH 100

After flirting with the 100 yen to a dollar mark for weeks USD finally smashed through this psychological important hurdle indicating further weakness in the Japanese yen. USD/JPY traded as low as 101.20 early Friday, down two percent from Thursday’s 98,75, the lowest level seen in four and a half years. The record low represents a victory for Prime Minister Shinzo Abe’s “Abenomics” and his deliberate efforts to weaken the yen and strengthen economic growth through monetary easing.

In an effort to counter the weaker yen and boost its own competitiveness both Australia and South Korea have during this week cut their interest rates, sparking what seems as a currency war among Asian trading partners. Both countries cited their strong currencies as one of the reasons for their 0,5% cuts. A South Korean finance ministry official said Friday that Seoul was worried about the pace of the yen’s decline. The yen has depreciated 25% since the decline started in October/November.

Japan economy minister Akira Amari reiterated as Japan did during the recent G-20 meeting, that Tokyo has no intention to manipulate currency levels. Analysts expect a further fall in yen as dollar/yen finally have gotten over the psychological hurdle of 100. A continued downward pressure on the currency was underscored by data published on Friday showing that Japanese investors finally have reversed their relentless selling of foreign bonds. Japanese investors have over the last 12 weeks been net sellers of foreign bonds.

The Nikkei index soared to a four and half year high, up 6,5% only this week. The US dollar was buoyed by new strong jobless claims. The last weekly report published yesterday confirm the stronger than expected monthly nonfarm payrolls for April when jobless claims fell to its lowest level in five years. Signs of a steady US recovery has already could fuel speculation that the Federal Reserve (FED) might scale back its aggressive quantitative easing.

After reaching 99,95 in early April the USD has stalled one month against the yen. EURO/JPY simultaneously rose to 131,91, its highest since January 2010. There is no major changes in oil prices, copper and other commodities. Gold fell back from its high on USD 1474 and has recovered to 1462 in early Asian trading.

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