As the Americans recover from their Thanksgiving hangovers we’ll see later on today just how they will react to the movements in financial markets at the end of last week. This morning has already seen Middle Eastern markets taking a hit, but more because they’re catching up with other global indices that were open on Thursday and Friday while they were closed for Eid.
On the whole the markets have recouped much of their losses from the Dubai debt crisis with a good reversal on Friday and a move to the upside from Asian markets such as the Nikkei and the Aussie index. There had to be something to trigger a sell off at some time and the fact that it happens to be the Dubai issue is just a case in point as the markets have looked over extended for a few weeks now with some having failed to mark new highs for 2009.
While many banks do have exposure to the UAE, the sort of money we are talking about pales in comparison to what sums of money have been pumped into western global economies to prop them up. As a result some banking stocks are staging a small recovery this morning with HSBC higher at the open.
The market as a whole though is still showing signs of discontent with the FTSE recording losses this morning, down some 20 points at 5225, but off the lows just above the 5200 mark. On Friday the market bounced off the low of the March upward trend line which now sits around 5150 which is an area that should offer support in the near term. To the upside near-term resistance is seen around 5275 and 5300 to 5325 and judging by clients past behaviour no doubt we’ll see some selling if we reaches those highs. For the medium term support is seen around 4950 and to the upside resistance is around 5550 to 5570.
The UK market also hasn’t been helped by much worse than expected confidence data. The number fell for the first time since January after gradually recovering throughout 2009, so this comes as a slight blow ahead of the Christmas season. The impending rise in VAT back to 17.5% (possibly even higher) is hanging over the consumer like the sword of Damocles. On top of this rising unemployment and the prospect of further job cuts well into next year and possibly even 2011 dawning on the consumer as a grim reality.
For the remainder of today economic data is thin on the ground with UK mortgage approval numbers and in the US the Chicago PMI number being released at 14h45 UK time. The PMI number is expected to come in lower, but above the crucial 50.0 mark, but there is risk to a bigger decline as output in the car industry takes a tumble. The market will probably not react kindly to a figure sub 50.0.
Currency markets are mixed with both the dollar and sterling taking the brunt of any selling that’s going on. The dollar is still firmly on a downward path the dollar index down again this morning, but off its lows. The yen continues to appreciate with 86.85 providing resistance for USD/JPY and bears will be targeting the 85/84 region which was tested briefly at the end of last week.
Sterling is better against the dollar, but purely down to dollar weakness as against other crosses it continues to be hit by the Dubai issue. Sentiment has been sterling negative for much of the latter part of 2009 and doesn’t look to be improving as investors favour the likes of the euro, Aussie dollar and Yen over poor old sterling.
Gold hasn’t moved at all this morning. A rare sight considering Friday’s action which saw wild swings, reminding us just how much the price is susceptible to a sharp correction if all of a sudden the bulls run for the exit.
Oil is a little better on the back of the dollar weakness this morning after it too experienced a similar bout of serious volatility on Friday however the $80 mark continues to remain a difficult hurdle to over come for crude.