ETX Capital Daily Market Bite, 26th June, 2013; European Markets Steady But Gold Plunges
June 26, 2013 7:18 am
June 26th 2013, Daily Market Bite from Ishaq Siddiqi Market Strategist
Steady start for European share markets this Wednesday morning with investors welcoming China’s central bank injecting funds into some lenders to prop up their liquidity together with a spate of strong US economic data released in the previous session. Traders put aside tapering fears and instead warmed up to data indicating strength in the US economy — consumer confidence, durable goods orders and housing market data releases all smashed expectations.
US markets finished higher Tuesday and most Asian markets rose overnight although Chinese stocks were again under pressure despite the liquidity injection from the Chinese central bank, the PBoC. Despite the fall in Chinese stocks, fears about a cash crunch in China have eased since the start of the week, with money-market rates and the cost of interest-rate swaps falling on Wednesday following the reassuring from the PBoC. Together with injecting funds into some financial institutions, the PBoC also said it could make similar moves again if needed, reassuring the market that it is responding to the matter.
Gold prices have plunged, down around $28 at the moment and reached $1244 in Asian trade overnight, its lowest level since September 2010. It has been a turbulent past few weeks for the yellow metal and there seems little suggest any let-up in the months ahead with the likelihood that we could see gold prices test the $1,000 mark in the run up to Fed tapering of stimulus. Since the crisis of 2008, gold prices were driven higher by QE as excessive money printing by the Fed diluted the value of the US dollar.
That’s all changing now with Fed tapering on the cards, a resurging US economy which has bumped up the US dollar. Market participants are dumping the yellow metal in favour for other assets that offer attractive long-term value, such as US equities exposed to the domestic recovery. The weakness in gold has pressure the European basic resource sector, particularly the UK’s mining stocks which make up the bulk of the FTSE100 index; Fresnillo the biggest faller on the index so far. Looking ahead, there’s little out on the euro zone economic agenda with French GDP for Q1 unsurprisingly confirming the country returned to recession during the period. UK CBI distributive trades will be due later followed by the US Q1 GDP report which should take the hot seat.
June 26th 2013, Daily Market Bite from Ishaq Siddiqi Market Strategist
Steady start for European share markets this Wednesday morning with investors welcoming China’s central bank injecting funds into some lenders to prop up their liquidity together with a spate of strong US economic data released in the previous session. Traders put aside tapering fears and instead warmed up to data indicating strength in the US economy — consumer confidence, durable goods orders and housing market data releases all smashed expectations.
US markets finished higher Tuesday and most Asian markets rose overnight although Chinese stocks were again under pressure despite the liquidity injection from the Chinese central bank, the PBoC. Despite the fall in Chinese stocks, fears about a cash crunch in China have eased since the start of the week, with money-market rates and the cost of interest-rate swaps falling on Wednesday following the reassuring from the PBoC. Together with injecting funds into some financial institutions, the PBoC also said it could make similar moves again if needed, reassuring the market that it is responding to the matter.
Gold prices have plunged, down around $28 at the moment and reached $1244 in Asian trade overnight, its lowest level since September 2010. It has been a turbulent past few weeks for the yellow metal and there seems little suggest any let-up in the months ahead with the likelihood that we could see gold prices test the $1,000 mark in the run up to Fed tapering of stimulus. Since the crisis of 2008, gold prices were driven higher by QE as excessive money printing by the Fed diluted the value of the US dollar.
That’s all changing now with Fed tapering on the cards, a resurging US economy which has bumped up the US dollar. Market participants are dumping the yellow metal in favour for other assets that offer attractive long-term value, such as US equities exposed to the domestic recovery. The weakness in gold has pressure the European basic resource sector, particularly the UK’s mining stocks which make up the bulk of the FTSE100 index; Fresnillo the biggest faller on the index so far. Looking ahead, there’s little out on the euro zone economic agenda with French GDP for Q1 unsurprisingly confirming the country returned to recession during the period. UK CBI distributive trades will be due later followed by the US Q1 GDP report which should take the hot seat.
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