EVENTS & FINANCIAL NEWS 05-02-2014

Market Comment

US indices rebounded on Tuesday led by shares in the Consumer Services, Automobiles & Components and Consumer Durables & Apparel sectors. The S&P 500 (1755.2) remains below its 20d moving average (1813.8 - negative slope) and its 50d moving average (1811 - negative slope).

European markets are expected to start on a flat note.

Foreign Exchange

US Dollar rose against most of its major counterparts on Tuesday. On the US economic data front, factory orders dropped 1.5% MoM (-1.8% expected) in December after a downwardly revised 1.5% gain the previous month.

The Euro was mixed against its major counterparts. Euro zone PPI Index was up by 0.2% in December, as expected, after a 0.1% decline the month before.

The Australian Dollar jumped against its major counterparts. The Reserve Bank of Australia (RBA) adopted a more neutral stance. Governor Glenn Stevens who previously qualified the AussiE level as uncomfortably high" said Australian dollar's decline "will assist in achieving balanced growth"

Commodities

After the close of Wall Street, WTI Crude Future (MAR 14) was up $0.9 to $97.36. The contract was below its 20D MA (@ $98.29) and above its 50D MA (@ $96.59).

Gold was down $2.8 to $1254.9. The precious metal was above its 20D MA (@ $1249) and above its 50D MA (@ $1235).

Copper Future (MAR 14) on Comex was up 1.1c to 319.4c/lb. The contract was below its 20D MA (@ 330.62c) and below its 50D MA (@ 326.76c). The 14d RSI below 30 (27.54) indicates Copper Future (MAR 14) contract was oversold. In Europe, the London Metal Exchange reported its copper inventories decreased 600 tons to 313275 tons.

UK Market News

Imperial Tobacco Group announced the appointment of Karen Witts, currently group finance director of Kingfisher Plc, as a non-executive director.

Hargreaves Lansdown reported 1H results: "The Group achieved a profit before tax of £104.1M, an 11% increase compared to H1 2013, consequent to increased levels of AUA (Assets Under Administration). (...) A lower rate of corporation tax meant that the diluted EPS increased by comparatively more than the profit before tax measure, with a 13% increase from 15.0p to 17.0p per share. (...) Continued growth with record revenue (up 13% to £158.4M) (...) Total net business inflows for the 6 months of £2.80B, up 70% (H1 2013: £1.65B) (...) Total assets under administration of £43.4B (up 43% on 31 December 2012 and 19% on 30 June 2013) (...) The Board has declared an interim dividend of 7.0p per share (H1 2013: 6.3p).

British Land said it has agreed to purchase £41M of additional units in Hercules Unit Trust (HUT) at £613 per unit (3.8% below latest NAV) as part of a scheduled pre-emption process. The Co added: "British Land has also submitted an application to Schroder Property Managers (Jersey) Ltd, the manager of HUT, to acquire up to £35M of further units in HUT which have been tendered as part of this process."
Homeserve Plc announced: "HomeServe expects its adjusted profit before tax for the year ending 31 March 2014 to be in line with market expectations."

European Markets

BMW is in advanced talks with Mexico's government on building a $1.5B car factory in the country, reported Dow Jones citing unnamed government officials.

Adidas has filed a patent-infringement lawsuit in the US against Under Armour Inc, according to Dow Jones.

Heidelberger Druckmaschinen said 3Q net income plunged to E7M from E14M in the previous year and adjusted EBITDA was down E36M from E38M on sales of E588M, down 14.4%. 9-month net loss narrowed to E40M from E94M a year earlier. On the outlook the Co said: "The outlook for the 2013/2014 financial year and the aim of generating a consolidated net profit remain unchanged. (...) the Co expects sales volumes for the year as a whole to be around 10% lower than in the previous year."

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Gold below $1,200 needed for ‘new equilibrium’

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A drop in gold prices below $1,200 an ounce may precipitate a fresh round of production cuts in the mining sector aimed at re-balancing the market, strategists told CNBC. Although the short-term view on gold remains overwhelmingly negative – with nearly three quarters of respondents in this week's CNBC gold sentiment survey forecasting further weakness for bullion – many say prices may start stabilizing below $1,200 – levels where a supply response from the mining sector may kick in.

"Gold production may fall at prices below $1,200 as it becomes uneconomical for many mines to operate profitably," said Mark O'Byrne, Founder and Executive Director of Dublin-based bullion dealer GoldCore.

An estimated 36 percent of the South African gold industry is loss-making even at today's spot prices, O'Byrne said, adding that 28 percent of the country's gold miners failed to turn a profit in the third-quarter, based on a gold price of $1,330.

Curbs on mine supply, according to UBS strategists Giovanni Staunovo and Dominic Schnider, "should come with the gold price decline toward the marginal cost of production."

  UBS estimates that 10 percent of supply "on a cash cost basis would be loss-making at a price between $1,050 and $1,150/oz. At this level, the gold market should be adequately balanced and find a new equilibrium," they said.

Edmund Moy, Chief Strategist at Morgan Gold and a former director of the U.S. Mint, said major gold miners such as Toronto-based Barrick Gold are already starting to scale back production.
The world's largest producer by sales, Barrick sold three Australian mines this year and Chief Executive Officer Jamie Sokalsky said the company is in talks to sell more assets.

"Many miners have been reducing their capacity like Barrick," Moy said but warned that "if demand for physical gold picks up in the U.S., it will take miners quite a while to re-open their shuttered mines and produce gold."

CNBC's latest survey of market sentiment showed 74 percent of respondents (20 out of 27) expect prices to fall this week, 15 percent (4 out of 27) say prices will trade around current levels while 11 percent (3 out of 27) say prices will rise. Spot gold staged a modest recovery on Monday, climbing 0.5 percent to just under $1,250 after falling earlier to $1,227.34, its lowest level since July 8 after Iran and major western powers struck an initial agreement on Sunday aimed at limiting Tehran's nuclear program in return for sanctions relief. Gold slipped on the perception that the deal lessens the risk of tensions in the Middle East, reducing gold's appeal as a safe-haven.

ETF outflows
Bullion has fallen about 25 percent so far this year, reflecting concerns that the U.S. Federal Reserve will start winding down its stimulus program as the economy improves. Accommodative monetary policy tends to cheapen the U.S. dollar, making gold more affordable for buyers paying in other currencies.

  "With Fed tapering imminent – and likely to be pulled forward to December if anything – the path of least resistance remains lower and honestly I'm surprised we're not sitting at $1,200 already," said Tom Essaye, a former NYSE floor trader, now President of Florida-based Kinsale Trading LLC, publisher of The 7:00's Report. "The next major catalyst in gold is inflation, but we're still months or quarters from that appearing in the stats."

Investors continue to liquidate holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund (ETF) and a key measure of investor sentiment, as gold grinds lower.
Holdings fell 4.50 tons to 852.21 tons last Friday, the sharpest drop since Nov. 1 and stood at their lowest since February 2009.

UBS expects more selling. "Once the schedule of the upcoming Fed taper becomes clear – we expect this to start in March 2014 – ETF outflows should intensify." The Swiss bank expects fund outflows of more than 300 tons over the next 12 months.


While futures and options flows combined with Asian demand have been strong enough to offset "modest" ETF outflows in recent months, "we advise investors not to count on these factors once ETF outflows intensifies," UBS said.

A stronger U.S. stock market performance – reflecting a propensity amongst investors to take on more risk – has also undermined the case for gold and the correlation will likely remain a drag on prices, survey respondents said.

Dow industrials eked out a slim gain on Monday to end at another record high, after the Nasdaq topped 4,000 for the first time in 13 years and then slipped to close below that level, Reuters reported. The S&P 500 is up 26.4 percent for the year and the Dow has risen seven weeks in a row.
"Gold continues to be an innocent victim of the frenzy on Wall Street," said Jeff Nichols, managing director at American Precious Metals Advisors. Gold's appeal may return, however, once investors realize that "super-stimulative" monetary policies pursued by major central banks are creating over-priced stock valuations out of kilter with fundamentals.

"Sooner or later, when the bubble bursts, equity investors will really lose their heads and gold stands to benefit, if not at first, certainly as the dust settles on Wall Street," he said.
Scott Carter, the chief executive officer of Los Angeles-based Lear Capital and a long-term gold bull, questioned whether the "wild gains" in the stock market – exemplified by the Dow over 16,000 – are sustainable.

"Let's pause for a moment and think about how outrageous that really is," Carter said. "We are living in a simulated reality. Investors are acquiring and holding gold because they know that the market bubble will burst."

Carter added: "Gold remains a hedge, a protection strategy, a diversification tool, and a long-term savings shelter. It has historically always done its job."

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News Source: www.cnbc.com

US Stock Futures Point To Lower Open Ahead Of FOMC Minutes...

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It's a busy calendar on Wednesday as markets look to parse what was said at the FOMC meeting on June 18-19 to gauge the future of the U.S. Federal Reserve's bond-buying program. Investors will also have wholesale inventories data and corporate earnings figures to digest before Fed Chairman Ben Bernanke's speech, which is scheduled for later in the day.

Futures on the Dow Jones Industrial Average were down 0.09 percent, while futures on the Standard & Poor's 500 Index were down 0.15 percent and those on the Nasdaq 100 Index were down 0.14 percent.

Investors await the release, at 2:00 p.m. EDT, of the minutes of the FOMC meeting, and are likely to scour its contents for hints about the Fed's plans for its quantitative easing, or QE, program, and for insights into how much longer the current low interest-rate scenario would continue. Investors also eagerly await Bernanke's speech at the NBER Summer Institute in Boston at 4.10 p.m. EDT for direction on monetary policy decisions.

The U.S. Department of Commerce will release its wholesale inventories report, which measures the change in the total value of goods held in inventory by wholesalers, at 10.00 a.m. EDT. Inventories are expected to increase by 0.3 percent in May after a 0.2 percent growth in April.

Also, investors will continue to focus on earnings reports on Wednesday, with Fastenal Co.  and Family Dollar Stores Inc.Releasing their earnings reports before the market opens, and Yum Brands Inc. reporting its quarterly earnings after market hours.A record number of S&P 500 companies have issued negative earnings guidance for the second quarter. So far, S&P 500 companies have issued 97 negative earnings pre-announcements and only 15 positive ones, for a negative-to-positive ratio of 6.5, according to Thomson Reuters. The guidance has contributed to a downward slide in second-quarter growth estimates, with earnings per share, or EPS, currently estimated to grow 3.0 percent, down from the 8.4 percent estimated at the beginning of the year.

Elsewhere, European markets were trading down Wednesday after disappointing trade data from China reinforced signs of a slowdown in the world’s second-largest economy and investors chose to tread cautiously ahead of the release of the FOMC minutes and the Fed chairman’s speech.
The Stoxx Europe 600 index traded down 0.32 percent, London’s FTSE 100 was down 0.43 percent, Germany's DAX-30 was down 0.35 percent and France's CAC-40 was trading down 0.43 percent.
In Asia, markets ended mixed while Chinese markets ended higher, despite China's disappointing trade data, which missed analyst expectations by a wide margin and showed a steep decline in the country’s exports and imports for the month of June.

Data released by the Chinese government on Wednesday showed that exports were down 3.1 percent from a year earlier and imports were down 0.7 percent. In contrast, economists had expected exports to have grown 4.0 percent and imports to have risen 8.0 percent in June.

China's Shanghai Composite index rallied up 2.17 percent while Hong Kong’s Hang Seng Index gained 1.07 percent. Japan’s Nikkei ended down 0.4 percent, retreating from a six-week high registered in the previous session, while Australia’s S&P/ASX 200 ended up 0.4 percent. South Korea’s KOSPI Composite index lost 0.34 percent while India’s BSE Sensex ended the day down 0.79 percent.

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 Here are some useful links that you can follow:

Here is a CFB blog that gives useful daily Gold Analysis on dailybasis.

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Here is another blog that provides regular news and information and is very useful for Forex Signals.

News Source: www.reuters.com