So another Obama bill is set to be signed into law and this time with little resistance from critics. Unlike his health bill which was such a huge social change for the US, the new financial reform bill faced little opposition and the current administration will be able to claim that they at least did “something” to change the way financial markets operate in the States.
There will be lawyers clawing over the legislation for years to come (who will be one of the few winners out of this) and the US will certainly suffer from some loss of business to other financial centres around the world, places like Dubai in particular will be rubbing their hands of the prospect of some large US operations basing themselves there. If Europe is to benefit then it has to be careful of the regulations that it is looking to impose.
The news of a successful test by BP to cap the Gulf of Mexico oil leak is the first bit of good news that the company has had since the leak started back in April. The stock is the star performer of the morning and its strength is helping to eek out a gain despite weakness from the banking sector.
Weakness in Asia overnight meant that we were calling the market to open some 20 points lower than where it is currently trading, but bulls still seem to be content around these levels despite the index finding some natural resistance in the same area it did a month ago. Back around the 5250 level (just below at the time of writing) bulls have the hurdle of 5300 to get over before facing further headwinds around the 5340 and 5370 areas. Without a breakout above June’s highs the bears will maintain the upper hand as the market still looks technically weak, forming lower lows and lower highs. Other indicators are also pointing to weakness ahead, but we have still not completely broken down the move from March 2009 to the April highs of this year.
Investors haven’t quite started to focus on the earnings coming out of the US yet as the macro data seems to be driving sentiment and the markets at the moment. Once again poor data from the US capped gains and today sees inflation numbers and University of Michigan sentiment later, but you can’t discount the significance of earnings releases from Citigroup and Bank of America.
FX markets are a little flat this morning but with the bias once again towards dollar weakness. EUR/USD is testing yesterday’s highs around 1.2950 and if the cross gets beyond 1.2980 then bulls can expect the 1.3000 level to offer little resistance and could target 1.3050. Any continued weakness in US data will continue to pile pressure on the US dollar.
It wasn’t long ago that the dollar was looking like hitting the 100 mark against the yen, but since dipping back below 90 the wind has been snatched from the greenback’s sails and last year’s low around 85 is rearing its head again. The yen strength continues to take its toil in the Japanese index with the Nikkei’s 2.3% fall last night a fine example of such pressure.
Gold has continued its sideways move once again with its trading range over the last couple of weeks only being a mere $33, under 3% which is unlike the precious metal. Clients remain bullish of gold expecting the 1200 area to continue to offer enough support before the next leg higher but the more we trend sideways the more pressure that’ll be put on the bulls, who’ll be targeting 1278 next.
Oil too has done little in the last few sessions and so there’s little to report on this front. Gains are being kept in check by the mediocre economic numbers and unless a run at $80 is made again soon we could see $70 again before too long.