Stocks in the US rose for the fifth consecutive week while index indicators reached record peaks because of signs that national economy is improving and stimulus measures being adopted by various central banks particularly those in Europe.
Meanwhile, China reduced interest rates since July of 2012 and ECB President Mario Draghi announced that he is ready to do everything needed to boost inflation.
The index of Standard and Poor’s 500 increased 1.2 percent and reached 2,063.50 in five days. This was the most significant weekly forward movement for November. On the other hand, Dow Jones (INDU) reached 175.32 points (one percent) to 17,810.06. STOXX Europe 600 went up 2.9 percent and the German DAX Index moved up 5.2 percent. This was the highest since July of 2013. MSCI Asia Pacific declined 1.3 percent.
In the Euro Region, the ECB chair reinforced his commitment of stimulus for Europe and stated that the central bank cannot postpone its initiatives to resuscitate the economy. Draghi said the ECB will likely widen the ECB’s asset-purchase program to speed up inflation. Central Banks believe that stunted economic growth in US and Europe is the main reason for extended stimulus attempts.
Improvement in the United States was a far cry from weakness in other countries as PMI for services and factories in the euro region plunged to the lowest point in 16 months. China;s factory benchmark also dropped considerably.
Following the talk of Finance Minister Aso of Japan, regarding the currency, USD/JPY is off large as he noted the speed of yen’s weakening. His comment saw the pair slide by more than 60 pips.
Currently trading at 117.50, off over 150 pips, USD/JPY topped out at 119.00 on last Thursday following unsound selling of Yen over the past few days. Authorities of Japan are now more actively monitoring the decline of Yen that may not be a good indication for the aim of those late comers to join the bear wagon of the currency before they are able to see significant correction. Another factor consider is the present USD stance that appears somewhat doubtful after failing to rally on good US data, a clear that a more profound correction might happen sooner.
FXCharts founder, Jim Langlands noted that given the bearish divergence and the generally negative look of the shorter term charts, the retracement may run further toward the downside to a corresponding support seen at 117.10 or 100 HMA and then at 116.30 or 200 HMA. Such a step would give vigor for the term uptrend to go longer and it is even returning to 115.75 at 23.6% of 105.19/118.98, without causing much damage.
Trading at 1194.40 flat for the day, the traders’ review of the precious metal is a slaughter of data coming from the eurozone and China. Not expected to make any changes today, gold will stay still awaiting data from US later in the session. According to the minutes from the October meeting released Wednesday, Fed Reserve feels a bit concern about low inflation than in previous months. Prices for gold for immediate delivery took another step lower and on stride to go down for another year.
Regarding inflation, the minutes specifically stated that the personnel saw the dangers on both downsides the rock-bottom inflation rates of core consumer price as announced earlier this year happens to be more constant than expected.
A fiercer green bucks now on a high for 5-years plus economic optimism could not be touched by tepid inflation. According to William Rind from the CEO of World Gold Trust Services, an arm of the World Gold Council, it is really all a matter of supply and demand that helps oversee the shares of SPDR Gold, that is the world’s biggest gold ETF.
Based on the poll of gfs.bern group last Wednesday, around 38% of respondents favored the initiative of ‘Save Our Gold’ that is urging the Swiss National Bank to support fifth of its assets in gold reserves’ form and decide never to sell them in future. A 47% negative decision would restrict the ability of SNB to formulate monetary policy.
Some analysts believe that the Organization of Petroleum Exporting Countries may decide to reduce supply of crude oil to hold back a drop of prices while others do not see any reduction at all. This may be a manifestation of the tough choice that OPEC members have to come up with. They can decrease output to perk up oil prices from a slump of four years low and lose additional market shares to competitors which include shale drillers from the United States.
They can also just allow prices to plummet to prevent growth of US outputs. However, this can also take a toll on hard-pressed OPEC nations including Nigeria and Venezuela. Observers say the forthcoming meeting of OPEC should be crucial.
Otherwise, the market will have to bear the consequences if there is no tangible result after the meet. Oil fell down in October as oil drillers in the US pumped shale at the fastest speed in 30 years. OPEC must bring down production by one million up to 1.5 million barrels daily to facilitate a balanced supply and demand. OPEC owns a 40 percent share of world oil output.
The Energy Information Administration (EIA) forecasted that crude production in the United States will go up to 800,000 barrels daily and a 43-year high of 9.4 million by next year. This means that there will be an additional 1.1 million barrels of oil.