Lower oil prices and a weak stock market have taken shares of oil services plays lower today.
However, offshore drilling services contractor Transocean (RIG 68.60, +1.12) is up with an impressive gain. The company announced today its approval of a dividend of about $1 billion and the election of J. Michael Talbert as Chairman of the Board.
The dollar has eased off of its session high, but it is still up 0.7% for the day. Stocks remain stuck near their session lows.
This session's slide has heated up the Volatility Index, which has spiked 7% higher today. It's still shy of its 10-day high, however, and remains just about flat for the year.
EUR/USD fell under $1.4100 to put the lows around $1.4060. But euro now struggling to top close by resistance at $1.4120 level of the week's low prior to the last dip, may be vulnerable to another sell-off, a trader says.
The major equity averages are now all down about 1%. Their weakness comes amid a rally by the greenback, which is now sporting a 0.8% gain. That puts the buck at its best level in more than a month.
Financials remain in the worst shape. The sector's 1.2% drop today has left the sector facing a potential weekly loss of 1.8%.
The pound weakened after data showed economic growth in Germany and France exceeded estimates and a report said U.K. living standards will fall, spurring bets that euro-region interest rates will outpace increases in Britain.
German gross domestic product jumped 1.5% in the first quarter compared with the previous three months, and French GDP rose 1%, exceeding economists’ median estimates of 0.9% and 0.6% respectively.
“The U.K. economy looks pretty lackluster compared to the likes of Germany and France, which supports the view that rates are going to rise faster in the euro zone,” said Neil Jones at Mizuho Corporate Bank Ltd.. “That’s going to keep the pound among the laggards of the currency world.”
The Bank of England left its main interest rate at a record low of 0.5% on May 5.
European Central Bank President Jean-Claude Trichet signaled on the same day that policy makers may raise borrowing costs after June, following a decision to keep their main rate at 1.25%.
“There might not be a double-dip recession, but the U.K. economy is certainly facing a period of stagnation,” said Jones. “That’s not going to be helped by raising interest rates. The small size of the anticipated rate increase won’t do much to inflation, which is mainly imported, so it would be better to just keep rates on hold.”
The Confederation of British Industry lowered its economic growth estimates for the U.K. on May 9, saying gross domestic product would expand 1.7% this year compared with a February estimate of 1.8%.
The U.K. economic outlook may worsen further as Prime Minister David Cameron’s coalition government battles a fiscal deficit running at almost 10% of gross domestic product by raising taxes and implementing public spending cuts.
The central bank said this week that inflation may reach 5% later this year, more than double its 2% target, even while risks to economic growth remain “skewed to the downside.” Inflation expectedly slowed to 4% in March from a year earlier, up from 4.4% the previous month, the U.K. office for National Statistics said April 12.
Spot gold holds at $1485.25/oz on the low side of the day's $1483.46 to $1516.40 range. Gold holds above last week's lows ($1462.40). In addition to last week's low, the 55-day moving average comes in around $1461.20 Friday, which should also act as larger support. Gold last traded below its 55-day in February.
NYMEX June light sweet crude oil futures hold down $0.43 at $98.54 per barrel after trading in a $97.87 to $100.70 range. After the fast-paced $20.20 tumble from the 31-month high of $114.83 (May 2) to last Friday's low of $94.63, the front contract has held in a $95.25 (May 12) to $104.60 (May 11) range.
GBP/USD exposed bids between $1.6235/15 and triggered stops below $1.6230. Rate printed low at $1.6210 before bouncing back to $1.6230. Demand said to remain in place around the $1.6215/10 area, more toward $1.6200 ahead of stronger area between $1.6170/50. Resistance remains at $1.6290/00.
current conds 80.2 vs 82.5, and expectations 67.4 vs 61.6. The 1y infl expectations are 4.4%, 5y at 3.0%.
U.S. stocks were poised to open slightly higher Friday, as commodities continue to gain ground.
A report from the government released Friday showed that consumer prices rose at an annual rate of 3.2% in April, with the bulk of increases coming from higher gas prices.
Stocks were getting some support from commodities, which were trending higher for a second day.
Gold futures for June delivery rose 0.1% to $1,508.80 an ounce. And silver futures for July delivery rose 2.5% to $35.66 an ounce.
Oil for June delivery gained 1.5% to $100.40 a barrel.
Companies: Shares of Yahoo (YHOO, Fortune 500) were down 6% in premarket trade after the company offered up more information about how it restructured Alipay. Yahoo was the worst performer on the S&P 500 Wednesday as investors grew cautious after a regulatory filing raised questions about the value of Yahoo's China-based assets.
The price on the benchmark 10-year U.S. Treasury was little changed, with the yield at 3.23%.
The euro advanced against the dollar as a report showed the region’s economic growth accelerated to the fastest pace since the second quarter of 2010, bolstering the case for further central bank interest-rate increases.
The common currency climbed versus all but two its 16 most- traded peers. Gross domestic product in the 17-member euro area rose 0.8 percent from the fourth quarter, powered by forecast- topping expansion in Germany and France.
German gross domestic product jumped 1.5 percent from the previous three months and the French economy grew 1 percent, exceeding economists’ median estimates of 0.9 percent and 0.6 percent, respectively. The European Union raised its forecast for 2011 euro-region inflation to 2.6 percent from 2.2 percent.
“Economic fundamentals in Europe are resilient,” said Kengo Suzuki, manager of the foreign bond department in Tokyo at Mizuho Securities Co. “It supports expectations for a series of interest-rate increases.”
The pound weakened after a report by the Institute for Fiscal Studies said U.K. living standards will fall, spurring bets that monetary policy tightening by the Bank of England will lag behind that of the euro region.
Living standards will decline as inflation outstrips income growth and government spending cuts crimp welfare payments, the report said.
EUR/USD: gained up to $1.4340. before eased back to $1.4280.
USD/JPY: posted session low at Y80.40, before jumped up to Y80.80.
US data starts at 1230GMT, when consumer prices are expected to reflect continued price pressures from food and energy, though to a lesser extent than in at the wholesale level. Overall CPI is forecast to rise 0.4% in April, while core CPI is expected to rise 0.1%. Then, at 1355GMT, the Michigan Sentiment Index is expected to rise slightly to a reading of 70.0 in early-May.
Offers: $1.4350, $1.4365/70, $1.4400, $1.4420/25, $1.4440/50
Bids: $1.4280/70, $1.4245/40, $1.4225/20, $1.4185/80,
Offers: Y81.10/20, Y81.30/35, Y81.65/70
Bids: Y80.25, Y80.15, Y80.05/00
Offers: $1.6320/25, $1.6345/50, $1.6380/85
Bids: $1.6235/15, $1.6200, $1.6165/50, $1.6100
The pare tested demand placed between $1.4280/70, the area covering the 55-dma at $1.4272/70, with market continuing to slowly pare back euro longs ahead of the NY open. A break of $1.4270 to allow for a deeper move toward $1.4245/40 ($1.4244 61.8% $1.4184/1.4340). Resistance remains at $1.4340/50.
Sinks back toward overnight lows at $1.6240. Demand seen between $1.6240/35 (Asia/NY lows), with talk of system stops placed on break, but decent demand said to be sitting behind this area, ahead of the bids between $1.6230/20. while $1.6220/10 should hold on first attempt.
Shanghai Composite +0.95% 2,871.03
Nikkei -0.70% 9648.77
Hang Seng +0.67% 23,228
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