US Employment Data Lifts Market Sentiment; Earnings Season Reports Starting to be Released

By 31 Mar 2011 0 comments

European equities will be buoyed to start trading on Thursday after the U.S. ADP employment report from yesterday showed figures suggesting the U.S. labor market is continuing to improve.  Asian stocks moved higher after positive earnings reports from Chinese companies released overnight.  The FTSE 100 index is essentially unchanged, up 0.1 percent before the beginning of trading.

Today markets will be watching a lot of fundamental data releases from a variety of sources. German retail sales for the month of February will be released at 6:00 GMT, and this number is expected to rise 1.5 percent on a yearly basis.  At the London open, we will see U.K. Nationwide House prices for the month of March, released at 6:00 GMT.  This data is expected to show a drop of -0.6 percent on a yearly basis, as housing prices in the U.K. continue to show slowing growth.

Later in the day, the change in the German unemployment rate will be released at 7:55 GMT.  This report is expected to show a loss of 25,000 jobs and a jobless rate of 7.2 percent.  Finally, the Eurozone consumer price index for the month of March will be released at 9:00 GMT, which is expected to show a rise of 2.4 percent on a yearly basis, which is still above the target inflation rate that is set by the European Central Bank.

Brent crude oil remains at elevated levels, around 115 Dollars per barrel.  The three month moving average has moved up to 106 Dollars per barrel.  This shows us that prices have now been at elevated levels for more than a quarter and the increase in input prices from energy and metals (also at elevated prices).  This will decrease margins for private companies but it remains to be seen when exactly these will start showing damage to corporate earnings. This is likely to be a major theme as we enter into the earnings season for the first quarter.

For individual companies, Berkshire Hathaway released a statement that David Sokol, the apparent successor to Warren Buffett, has resigned after buying shares in Lubrizol a week before Berkshire Hathaway bought shares in the same company. The SEC is currently investigating the possibility that insider trading occurred during the transaction.  In earnings headlines, Rusal reported a net income of 2.87 billion Dollars against expectations of 2.02 billion Dollars.  The rise stemmed from an increase in sales volume and increases in the price of aluminum.

Technicals:

The EUR/USD has broken above its symmetrical triangle and is currently pushing through resistance at 1.4210.  There is only one more historical resistance level in near view, with the old highs at 1.4245.  This level coincides with the long term downtrend line from above 1.60, so any further extensions at this point will signal that the long term downtrend is changing.  Daily indicators are still bullish but we are approaching overbought levels.  Sell positions at this stage are perfectly acceptable but it does look as though resistance will be overtaken given the higher highs on the hourly charts.

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