Stocks have moved incrementally higher to trade in line with earlier session highs. Even though the broader market is still in solid shape, bank stocks continue to trail. As such, the KBW Bank Index is down 0.4% for the session. Weakness in the banking space has weighed on the broader financial sector, which is still the only major sector in the red as it contends with a 0.1% loss.
The euro fell for a third day versus the dollar in the longest losing streak since February as Standard & Poor’s reduction in Greece’s credit rating renewed concern the region’s debt crisis is worsening.
Greece’s credit rating was cut to B from BB- by S&P, which said further reductions are possible, with private investors at risk if maturities are extended on the nation’s emergency-aid package. Another rating cut would make Greece the lowest-rated country in Europe as today’s move left it even with Belarus after the fourth reduction by S&P since April 2010.
“This downgrade is furthering the reality that we’re getting closer to the point of default,” said David Mann, regional head of research for the Americas at Standard Chartered in New York. “People may use this as a reason to take seriously that it could be a longer wait for a rate hike out of Europe, which would be euro-negative as well.”
The 17-nation currency rose earlier as a report showed exports in Germany, Europe’s largest economy, jumped in March, bolstering the case for higher interest rates in the euro region.
Easing to C$0.9665 area now as risk-appetites improve slightly with the better tone of commodities and US stocks, this pair turning lower after stalling near C$0.9700 where offers are to be found. Flows muted in this pair and elsewhere, the "market still feels beaten up," one Toronto trader says. Bids expected C$0.9630/35.
German newspaper says Fitch set to downgrade Greece to B in a few days.
The financial sector has slowly descended to a loss of 0.6%, or a fresh session low. That makes financials today's worst performing sector. First Horizon (FHN 10.56, -0.43), AIG (AIG 29.62, -1.08), Citigroup (C 44.04, -1.16), Allstate (ALL 32.93, -0.50), and Fifth Third Bank (FITB 12.83, -0.16) make up the five worst performers in the sector. Property play CB Richard Ellis (CBG 27.40, +0.67) has actually managed to put together an impressive gain in the face of the sector's weakness, however.
June WTI up $3.40 at $100.58, in the upper reaches of the day's $97.42/101.17
June WTI holds around $99.60, correcting from session highs. Resistance remains at $102.40 with support comes near $95.23 and $94.57.
EUR/GBP extended its losses to current stg0.8761, as the euro saw a sharp sell off on press reports suggesting Greece was discussing leaving the eurozone. However, this story was vehemently denied. Offers remain in place to stg0.8800, a break to open a move toward stg0.8840/45. Support ahead of stg0.8755/45.
EUR/USD $1.4500, $1.4600
USD/JPY Y80.00, Y80.50, Y81.10, Y81.50
EUR/JPY Y115.40, Y117.10
AUD/USD $1.0650, $1.0800, $1.0950
U.S. stocks were set to open higher Monday as oil, gold and silver prices continued to climb, and investors geared up for a week of fresh economic data.
Stocks edged higher Friday, as a steep sell-off in the euro dampened U.S. investor enthusiasm about a stronger-than-expected jobs report.
But all three indexes closed down more than 1% for the week, as a steep sell-off in commodities - especially silver and crude - spilled over into the broader market.
Part of the reason for the pullback in commodity prices last week was that they may have risen too rapidly.
Meanwhile, sovereign debt woes continue to plague Europe.
Investors will continue to keep an eye on Greece. Late last week, there were rumors about the country abandoning the eurozone. But early Monday, reports swirled about the debt-ridden country considering another bailout to fund its debts.
China will also be on investors' minds Monday. The country will release its latest trade gap figures overnight.
Companies: Tyson Foods (TSN, Fortune 500) reported earnings per share that beat by a penny but the company missed on revenue. Shares were flat in premarket trading.
Economy: Among the key reports due later in the week are the March trade balance, due Wednesday, the April retail sales figures on Thursday and a reading on April consumer prices slated for Friday.
EUR/GBP retreats while cable meeting support ahead of a $1.6320 option strike. Euro weakens after the S&P Greece downgrade. The cross currently trades around stg0.8778 after breaking support area between stg0.8785/80.
EUR/USD extends losses after the Greek downgrade. Area of $1.4350/40 seen to hold residual bids ahead of that overnight low with further demand interest at $1.4320 with stops below, presumably under the Friday low at $1.4310. Euro last at $1.4354.
06:00 Germany Current account (March) unadjusted, bln 19.5 - 8.9
06:00 Germany Trade balance (March) unadjusted, bln 18.9 - 12.1
07:00 UK Halifax house price index (April) -1.4% 0.2% 0.1%
07:00 UK Halifax house price index (April) 3m Y/Y -3.7% -2.9% -2.9%
The euro rose against the dollar, rebounding from its biggest two-day drop since 2008, on speculation the region’s debt crisis won’t keep the European Central Bank from increasing interest rates.
The common currency gained after European Union officials agreed in an unannounced meeting on May 6 to reconsider the terms of the 110 billion-euro ($158 billion) lifeline Greece received last year.
The euro has risen 3% this year. The yen has weakened 4.7%, while the dollar is down 5.1%.
The dollar slipped before U.S. reports this week that may show fewer initial jobless claims and increased retail sales, providing evidence the recovery of the world’s largest economy is maintaining momentum.
The Australian dollar strengthened for a second day before data tomorrow forecast to show China’s imports gained in April. China is the largest importer of Australia’s raw materials.
The pound depreciated after the Confederation of British Industry lowered its economic growth predictions and a report showed house prices unexpectedly fell.
EUR/USD rose to $1.4440 before slipped to the lows below $1.4400.
GBP/USD fell from $1.6410 to $1.6350. Later rate recovered to $1.6370.
USD/JPY rose from Y80.50 to Y80.80.
There is no major data for today.
Oil climbs with the June WTI contract stretching up to $100.67, and heading for next resistance seen at $102.40. June Ice Brent crude also rallying to a day's high of $113.16
USD/JPY managed to challenge the Asian high of Y80.84 in Europe, before meeting resistance above Y80.80. Further supply comes towards $80.95 with stops on a break of Y81.00 and Y81.20. Bids remain from Y80.50/55 down to Y80.00. Dollar trades Y80.78.
EUR/JPY failed to break through offers currently lying Y116.45/50, with the earlier high of Y116.48 intact. Further offers now seen up to Y116.80 with stops above. Cross currently trades Y116.16.
The pound fell against the euro after the Confederation of British Industry lowered its economic growth estimates for the U.K. and a report showed house prices unexpectedly fell the most in seven months in April.
Gross domestic product will rise by 1.7% in 2011 compared with a February estimate of 1.8%, while expansion next year will be 2.2% instead of 2.3%, Britain’s biggest employers’ group said in quarterly forecasts released today.
U.K. house prices fell the most in seven months in April, a separate report from Halifax showed today.
U.K. house prices contracted 1.4% in April from the previous month, compared with 0.1% growth estimated by analysts.
“The data has been weak and the problem is that we haven’t yet seen the full impact of the fiscal cuts on the economy,” said Sarah Hewin, a senior economist at Standard Chartered Bank. “That means the data is likely to get worse, which will allow the Bank of England to keep rates steady for longer. That will certainly keep the pound under pressure.”
The Bank of England kept its benchmark interest rate unchanged at a record low 0.5% on May 5 to boost the economy, which grew 0.5% in the first quarter. Slowing economic growth comes as Britain implements the deepest government spending cuts since World War II, threatening to drag output lower.
The central bank’s monetary policy stance is also being complicated by inflation, which is accelerating at twice its 2% target. Inflation still unexpectedly eased to 4% in March, following five months of acceleration to a more than two-year high of 4.4% in February.
“Growth will remain weak and we see no rate hike in 2011,” said Hewin. “Rate hikes have been pushed back. We see the first rate hike in the first quarter of 2012.”
Money markets are factoring in a 25 basis-point increase in the central bank’s main rate by year-end.
EUR/USD drops below $1.4400 on US investment house sales, extending the corrective pullback off $1.4443 to $1.4390. Rate currently trades around $1.4397. Stops noted below $1.4395, a break to open a deeper move toward $1.4375/70. Resistance $1.4440/50, with stops above.
Shanghai Composite +0.30% 2,872.46
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