Market News

The euro climbed against the dollar, extending a monthly gain, as a report showed European inflation accelerated to a two-year high, indicating the European Central Bank may be moving closer to raising interest rates.

The stock market has recovered from its morning stumble so that it now trades at a session high. Natural resource plays continue to provide leadership -- energy stocks are up 1.5% with Exxon Mobil (XOM 79.94, +0.95) in strong shape following its upside earnings surprise and Masey Energy (MEE 63.23, +6.00) up sharply following news of its acquisition by Alpha Natural Resources (ANR 53.89, -3.99). Meanwhile, materials stocks are sporting a collective 1.4% gain with help from U.S. Steel (X 57.44, +1.64), which has rebounded sharply from a precipitous drop this past Friday.

EUR/USD $1.3700
USD/JPY Y82.00
EUR/JPY Y112.00, Y113.00   
GBP/USD $1.6000
AUD/USD $0.9910, $0.9950
AUD/CAD C$0.9950

Cable trades above $1.5980, breaking the trend resistance line drawn off recent highs at $1.6060. If rate can build further seen opening a move toward $1.5991 (Jan 27 high), with offers noted from here through to $1.6000. Above the figure and rate can extend toward $1.6020 ahead of $1.6040 and stronger level at $1.6060.

Prices paid 81.7, New orders 75.7, Employment 64.1, Inventories 54.5, Production 73.7.

U.S. stocks were headed for a higher open Monday, with strong earnings from Exxon Mobil outweighing investor worries about growing political unrest in Egypt.

On Friday, stocks logged their biggest drop in months, as mounting political protests and tensions across Egypt sparked caution among investors.
The Dow Jones industrial average lost 166 points, marking a sharp retreat for the index after it flirted with the 12,000 barrier earlier in the week.
Moody's Investors Service downgraded its rating on the nation's debt to "negative" from "stable".
World markets:

Companies: Exxon Mobil (XOM) beat expectations from analysts in a fourth-quarter report issued before the open.
The world's largest publicly traded oil company logged earnings of $9.25 billion, or $1.85 a share, up 46% from $6.05 billion, or $1.27, a year earlier.
Analysts surveyed by Thomson Reuters had expected earnings per share of $1.63. Revenue climbed 17% to $105.2 billion, beating forecasts for sales of $99.1 billion.
Exxon's stock rose 1% in premarket trading.
Over the weekend, Massey Energy (MEE) was acquired by rival Alpha Natural Resources in a $7.1 billion deal. Shares of Massey jumped 13% in pre-market trading Monday.
Oil for March delivery rose 29 cents to $89.63 a barrel.
Gold futures for February delivery fell $9.80 to $1,331.90 an ounce.
The price on the benchmark 10-year U.S. Treasury fell, pushing the yield down to 3.35% from 3.33% late Friday.

EUR/USD
Offers: $1.3680, $1.3700, $1.3715/20, $1.3745/60
Bids: $1.3635/30, $1.3600, $1.3550/40, $1.3505/00

EUR/JPY above Y112.50 again up to a day's high of Y112.64. Some resistance seen just ahead of Y113.00, with a break then targeting Friday's high of Y113.59. Cross currently trading Y112.48.

AUD/USD backs up with euro support, as Gold recovers from earlier lows of $1325.50. AUD/USDback up into the $0.9940's after bids arround $0.9920 contained the last dip. But the upside still capped by offers ahead of $0.9965/75 and fears of further Chinese tightening. Spot trades $0.9943/45.

Gold weakens with potential dead-cross of 21- & 100-DMAs is weighing on sentiment. Resistance line from Jan 3 comes in at $1349.10 and whilst below here downside risks seen persisting to the 200-day moving average at $1286.40. Initial support seen as daily Bollinger band base at $1318.4.

Data released:
07:00     Germany     Retail sales (December) real adjusted    -0.3%    2.0%    -2.4%
07:00     Germany     Retail sales (December) real unadjusted Y/Y    -1.3%    -    2.0%
10:00     EU(17)     Harmonized CPI (January) Y/Y preliminary    2.4%    2.5%    2.2%

The euro strengthened after a report showed inflation in the region accelerated to a two-year high this month, signaling policy makers may be moving closer to raising interest rates.
The single currency gained for the sixth time in the past seven days against the dollar. Inflation quickened to 2.4% from 2.2% in December, the European Union’s statistics office said today. That’s the fastest since October 2008.
The consumer-price report “underlines the ECB’s concern on inflation and will further contribute to the internal debate about what the appropriate response should be from the central bank,” said Michael Derks, chief strategist at FxPro Financial. Their concerns “are unlikely to go away in the short term, given the most recent performance of commodity prices, so they may well be one of the first major central banks to hike rates.”
New Zealand’s dollar weakened after a report showed home- building approvals fell to a 23-month low in December.
The New Zealand dollar depreciated. Home-building permits declined 19% from November to 1,018, the lowest level since January 2009, Statistics New Zealand said today. Excluding apartments, approvals fell a sixth month, dropping 11%.
The Australian dollar traded near a its lowest in more than eight weeks against the yen as Asian stocks declined on concern the unrest in Egypt will spread, damping demand for higher-yielding assets.
Australia’s currency slipped versus the yen as its central bank said loans provided by the nation’s banks and finance companies rose 0.2% in December from the previous month, compared with the median estimate for a 0.3% gain.
A monthly gauge of Australia’s inflation accelerated in January as floods in the nation’s northeast drove up the cost of fruit, vegetables and utilities, according to an index compiled by TD Securities Ltd. and the Melbourne Institute released today. Consumer prices increased 0.4% after advancing 0.2% in December. They rose 3.4% in January from a year earlier, the fifth consecutive month above the top of the Reserve Bank of Australia’s inflation target band.
“The RBA board tomorrow is expected to discuss and evaluate the outlook for inflation in the wake of widespread flood damage,” Annette Beacher at TD Securities wrote. “We remain of the view that the RBA are on the sidelines for several months, but expect the resumption of tightening from May.”

EUR/USD rose from lows around $1.3570 to $1.3775 after triggering some resistance and stops.

GBP/USD followed euro's rise, recovering from $1.5830 to $1.5913.

USD/JPY printed lows below Y82.00 before it was back to Y82.30 and set stable around there.

US data starts at 1330GMT with Personal Income & Expenditures, PCE data as well as the ISM-NY Business Index. Personal income is expected to increase by 0.4% in December.
US data continues at 1445GMT with the Chicago PMI, which is expected to fall to a reading of 65.0 in January from the revised 66.8 December reading.

GBP/USD clears above $1.5885 and makes a show above $1.5900 in late European morning trade, followong euro-dollar's recovery as euro-sterling eased back to stg0.8585 from stg0.8607. Cable offers seen to $1.5911 (61.8% $1.5967/1.5821), a break to open a move toward $1.5933 (76.4%). Support seen back at $1.5885/80.

Markets were all about Egypt on Monday with the unrest and resulting uncertainty helping to get the week off to a poor start with oil bulls among the few early – and brief – winners.
While traders waited to see what will happen next in the Middle East linchpin, a shift to old favourite “safe havens” became the market’s default setting.
European stocks moved lower from the open, taking their cue from Asia - but without very strong conviction. London’s FTSE 100 was off 0.4% while the pan-European FTSE Eurofirst 300 down 0.5%.
Moody’s also warned on Monday that European construction companies could be among the most affected should the unrest continue or spread. It singled out Lafarge and Italcementi as those with the biggest exposure to the region.

Economists’ attention soon switched to the eurozone’s “flash” consumer price index estimate for January. Prices rose 2.4% year-on-year - roughly as expected - compared with 2.2% in December but the release doesn’t give any details as to the underlying drivers of this.
The numbers could however make uncomfortable reading for the European Central Bank, which meets to discuss interest rates on Thursday. Jean-Claude Trichet, president, has sounded a relatively hawkish note on inflation but recent remarks from his fellow governing council members have been split between the doves and hawks. This will only add to interest in what Mr Trichet has to say on Thursday.
Later attention will switch to the US, where personal income numbers are due, including the PCE inflation measure.

March crude heads sharply lower after failing to find any real traction above $90.00 and now targets earlier lows of $89.19 after recent dip to $89.23. Support below at $88.14. Oil currently trades $89.28/33.

• Saudi spare capacity is 4 mn bpd

• Febb 22 meet of producers, consumers in Riyadh to take relationship to "a higher level."

• Saudi realises has important role to play in promoting stability in oil markets.

• Reecnt prices rises have little to do with supply/demand, more with dollar and traders.

EUR/JPY prints a day's high of Y112.30 following EMU flash CPI data, after Y111.42 Asian low. Resistance ahead seen at Y112.50 ahead of Y113.58. Cross trades Y112.21/24.

EUR/USD gets a slight lift after release of EMU flash CPI data, the headline number coming in at 2.4% (no real surprise but seen at topend of a tight 2.3%-2.4% forecast range). Rate pushes on to $1.3658 and remains firm. Next resistance seen at $1.3680.

EUR/GBP extended recovery to stg0.8601. However, brief pop above the figure fails to build on the initial break with rate trading back around stg0.8592. A break above the figure to open a move toward stg0.8610 ahead of stronger level at stg0.8620.

GBP/USD printed hourly low at $1.5836 (76.4% $1.5821/85) and has recovered in tandem with euro-dollar, as euro-sterling meets resistance between stg0.8595/00. Cable trades around $1.5854. Resistance now seen around $1.5873, a break here to open a push back toward $1.5885.