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Daily Market Briefing
European equity will likely begin the day with a sluggish start after
markets were disappointed by the earnings report from Deutsche Bank, which is not helping equity futures. But that reaction could be limited as the market as some data which could possibly help shift the sentiment. On a positive note, Ford released an earnings that broke records for its entire 107 year history, with earnings coming in at $0.48 per share against expectations of $0.38. This is accompanied by upper level strategies that have reduced the debt on the company’s balance sheet, which has led to projections that within a year the debt will be equal to the amount of cash on hand that Ford possesses.
The record earnings report from Ford shows that the company fared better than many of its American competitors (GM and Chrysler, for example) after emerging from the nation’s credit crisis. The suggestion that their debts will soon be equaled with cash on their balance sheet is a clear positive for that company’s stock in that Ford can now allocate its resources to develop new products without acquiring high levels of loan responsibilities.
Today, we will see another round of earnings with markets focused most heavily on Volkswagen and Novo Nordisk in Europe and Proctor & Gamble and Conoco Phillips from the U.S.
Macro data today will come in the form of U.S. Durable Goods Orders, which will give traders information about production projections and this could lead to some position squaring ahead of third quarter U.S GDP, which will be released on Friday. Consensus expectation calls for a rise of 2%. This figure, minus the volatile transportation component is expected to improve in September, but the tendency in recent months has dropped off from where it was to start the year.
U.S. New Home Sales for September is also released today with the consensus number at 4.2% monthly. Housing starts grew 0.3% in September to 610,000 year on year, which gives evidence for growth after the homebuyer tax credit hurt sales previously. Yesterday, a report from the Conference Board showed that U.S. consumer confidence increased in October to 50.2 from 48.6 the previous month.
Gold has fallen off to pressure the uptrend line from late July. If this area breaks, we could see a more substantial pullback to the 38.2% Fibonacci retracement of this move, which is just below 1300. Much stronger support rests at 1265 so these corrective moves to the downside could prove to be the buying opportunities that have been missing for some time.
The USD/JPY has made small gains above key short term resistance at 81.80. This give provide some encouragement for the pair, which is trying desperately to bounce off of 15 year lows at 80.40. Monthly stochastics are now turning up from heavily oversold levels and with multi decade support at 79.50 coming into view, it is much easier to argue for the bullish potential of the pair than it is for more downside.
The S & P 500 has drifted back to uptrend channel support after making new highs at 1192.65. Further support is seen at 1165 which is also where the 100 period moving average is coming in. Medium term target is above 1200 and only a price breach of the 1155 level will unlock the downside.