EVENTS & FINANCIAL NEWS 12-02-2014

Market Comment

US indices closed higher on Tuesday boosted by Food & Staples Retailing, Energy and Transportation sectors. Fed Chairman Janet Yellen said FOMC likely to continue QE taper in measured steps and that recovery in labour market is "far from complete". The S&P 500 (1819.75) jumped above its 20d moving average (1802.15 - negative slope) and its 50d moving average (1809.55 - flat slope).

European markets are expected to start on a positive note.

Foreign Exchange

US Dollar was mixed against most of its major counterparts on Tuesday. On the US economic data front, NFIB Small Business Optimism index rose to 94.1 (93.9 expected) in January from 93.9 the previous month. Wholesale inventories increased 0.3% MoM (+0.5% expected) in December after a 0.5% gain the prior month. Finally, Janet Yellen said FOMC likely to continue QE taper in measured steps and that recovery in labor market is "far from complete".

Commodities

After the close of Wall Street, WTI Crude Future (MAR 14) was about flat to $99.93. The contract was above its 20D MA (@ $95.67) and above its 50D MA (@ $96.35).

Gold was up $16.1 to $1290.9. The precious metal was above its 20D MA (@ $1257) and above its 50D MA (@ $1238).

Copper Future (MAR 14) on Comex was about flat to 322.95c/lb. The contract was below its 20D MA (@ 330.62c) and below its 50D MA (@ 326.76c). In Europe, the London Metal Exchange reported its copper inventories decreased 2575 tons to 303825 tons.

UK Market News

UK: The Savills/ Markit Total Commercial Development Activity Index rose to 33.7% in January, the second-highest level since data collection began in March 2003, from 27.8% in December. Key findings also included: "Public commercial projects rose at a solid rate that was nevertheless the weakest in three months. The growth rate for private commercial work was the second-fastest in the history of the series. (...) At +40.4% in January, the net balance for industrial/warehouse activity indicated a sharp rate of expansion that was the strongest in the series history. (...) The strongest rise was noted in the South East, where the latest net balance was the highest since data collection began."

European Markets

ECB: Publication of the Euro area securities issues statistics (10am CET); Keynote address by the President, Mario Draghi in concluding session of Conference for the 20th anniversary of the establishment of the European Monetary Institute "Progress through crisis?" organised by the ECB and the Banque Nationale de Belgique. (4:30pm CET)

Allianz announced the buying of an 8.33% stake in Bayern Munchen football club for E110M, saying: "FC Bayern Munchen AG intends to use the capital from the Allianz SE investment for the repayment of debts and for the constitution of a youth football center of excellence. The naming rights, including an option, for the FC Bayern München stadium, the Allianz Arena, have been secured long-term until 2041."

Porsche can achieve its target of selling over 200K vehicles in 2015, three years earlier than originally scheduled, according to the Co's CEO cited by Reuters.

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Gold to tank in 2014: Goldman Sachs...

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Bad news for "gold-bugs"—bullion's current beginning-of-the-year rally will not only lose steam, but prices could drop sharply by the end of 2014, according to Goldman Sachs' Jeffrey Currie.

Currie, Goldman's head of commodities research, told CNBC on Monday he had an end-of-year price target of $1,050 per ounce for gold, a 16 percent drop based from current prices of $1,251. The main culprit? Economic recovery.

"Our view there really is driven by the expectation of the U.S. economy reaching escape velocity," Curie said on "Essentially when you think about a short on gold ... it's essentially just a bet on a substantial recovery in the U.S. economy."

  Gold prices ballooned in the years since the 2008 financial crisis, driving prices to record highs thanks to ultra-low interest rates from the Federal Reserve's economic stimulus programs. Prices dropped last year amid fears the Fed would scale down those programs earlier than expected, but a weaker-than-expected December employment report re-ignited interest in gold last week.


Currie said gold still worked as a hedge against inflation; he just doesn't see any strong inflationary pressures in the next few years. He said once the economic recovery picks up more momentum, inflation would follow and gold may become attractive again. Gold's early 2014 rally won't last, he said.

"I get it all the time—'Why are you bearish on gold when you expect the U.S. economy to recover?'" Currie said. "You have to think about it in different phases of the business cycle."

Other commodities Currie expects to underperform include beans and copper. Currie remains unwilling to make a big bet against oil because of disruptions in Libya and Iran. Investors continued to move away from commodity-intensive emerging markets and into developed economies, a trend that affects most commodities outside gold, he said.

"They're all driven by the same theme, rotation away from emerging markets and toward developed markets," Currie told CNBC.

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News Source: www.cnbc.com

Israel strikes Syria, Says targeting Hezbollah arms...

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Israeli jets bombed Syria on Sunday, rocking Damascus for hours and sending pillars of flame into the night sky in what a Western source called a new strike on Iranian missiles bound for Lebanon's Hezbollah.

Local people reported massive explosions and internet video showed the capital's skyline lit by flashes; Syrian opponents of President Bashar al-Assad rejoiced at Israel's third raid this year, and second in 48 hours, while anger in Tehran highlighted how Syria's civil war risks spinning further beyond its borders.

Israel, while declining to confirm the strike, stressed its focus was to deny its Lebanese foes new Iranian firepower and not take sides between Assad, long seen as a toothless adversary, and rebels who have won sympathy from Israel's Western allies but who also include al Qaeda Islamists hostile to the Jewish state.It appears to calculate that Assad will not risk forces he needs to fight the rebels by attacking a much stronger Israel.

Syrian state television said the bombing around a military research facility at Jamraya caused "many civilian casualties and widespread damage" and quoted a letter from the foreign minister to the United Nations saying: "The blatant Israeli aggression has the aim to provide direct military support to the terrorist groups after they failed to control territory."

People living near the Jamraya base spoke of explosions over several hours in various places near Damascus, including a town housing senior officials: "Night turned into day," one man told Reuters from his home near Jamraya, also struck on January 30.

CNN quoted Syrian Deputy Foreign Minister Faisal al-Mekdad calling Sunday's attack a "declaration of war", and the Iranian foreign minister urged countries to resist Israel. But a senior Iranian commander also said Syria was strong enough to defend itself without Tehran's help - though he also offered training.

ROCKETS TARGETED

A confidant of Israeli Prime Minister Benjamin Netanyahu said Israel hoped that by not confirming its attack, it would not force its enemies into serious retaliation. There was little response from Hezbollah, Syria or Iran to an earlier attack on the Jamraya compound, near the Lebanese border, on January 30.
After an Israeli strike on Friday, U.S. President Barack Obama defended Israel's right to defend itself from Hezbollah, which fired many rockets into Israel during a war in 2006.

A Western intelligence source told Reuters: "In last night's attack, as in the previous one, what was attacked were stores of Fateh-110 missiles that were in transit from Iran to Hezbollah."
Hezbollah in Lebanon declined immediate comment. Iran denied that the attack was on armaments bound for Lebanon.

Israel has long sought to block Hezbollah's land, sea and air transport from Iran and frets such new missiles could give the Shi'ite militants, who share in Lebanon's government, the ability to strike its Tel Aviv conurbation with some accuracy.

Netanyahu's colleague, Tzachi Hanegbi, noted Obama's reluctant to heed calls for U.S. military backing for the rebels despite Assad's forces alleged use of poison gas.Given the confusion among world powers, he added, Israel was only trying to protect its own interests and saw little to be gained by trying to influence the outcome of Syria's civil war.

"The world is helplessly looking at events in Syria," he told Army Radio. "That is why, as in the past, we are left with our own interests, protecting them with determination - and without getting too involved."

It was unclear whether Israel sought U.S. approval for the action; in the past, officials have indicated that Israel sees a need only to inform Washington once such a mission is under way.
Netanyahu and Obama have had a fraught relationship in past years, as Washington seeks to hold Israel back from any attack on Iran's nuclear program while diplomatic moves continue.
At a routine public appearance on Sunday, Netanyahu made no direct reference to the strikes in Syria but spoke pointedly of his responsibility to ensure Israel's future.

He maintained a plan to fly to China later in the day, suggesting he did not expect a major escalation. However, a military source said the army had deployed more anti-missile defense systems near the northern borders in recent days.

NIGHT OF EXPLOSIONS

Video footage uploaded onto the Internet by Syrian activists showed a series of blasts. One lit up the skyline of Damascus, while another sent up a tower of flames and secondary blasts.
Syrian state news agency SANA said Israeli aircraft struck in three places: northeast of Jamraya; the town of Maysaloun on the Lebanese border; and the nearby Dimas air base.

"The sky was red all night. We didn't sleep a single second. The explosions started after midnight and continued through the night," one man told Reuters from Hameh, close to Jamraya.
"There were explosions on all sides of my house," he added, saying people hid in basements during the events. In the center of Damascus, people at first thought there was an earthquake.

Hezbollah's Al-Manar television aired footage showing a flattened building spread over the size of a soocer field, with smoke rising from rubble containing shell fragments. It did not identify where the film was shot.The streets of central Damascus were almost empty of pedestrians and traffic on Sunday morning, the start of the working week. Checkpoints that have protected the area from rebel attack appeared to have been reinforced.

Some opposition activists said they were glad strikes may weaken Assad, even if few Syrians have any liking for Israel."We don't care who did it," said Rania al-Midania in Damascus. "We care that those weapons are no longer there to kill us."

But in Israel, Netanyahu ally Hanegbi spoke of relative indifference in its attitude to the rebels and Assad, who had maintained a standoff with Israel that dated from the time of his father, who led Syria in its last war with its neighbor in 1973: "We have no interest because we have no ability to assess what is good for us regarding the future regime," Hanegbi said.

Netanyahu appeared at the dedication of a highway junction in memory of his late father. He made no reference to raids but said his father "taught me that the greatest responsibility we have is to ensure Israel's security and guarantee its future".

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News Source: www.reuters.com

Fed keeps policy unchanged; says it could increase or reduce bond buying...

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The Federal Reserve decided to keep the rate for federal funds at a record low range of 0-0.25% to support the economic recovery. The Committee also voted to maintain the Fed's assts purchases at $85 billion per month and signaled it is prepared to either "increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes".

The Federal Reserve continues to anticipate that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6.5% and inflation between one and two years ahead is projected to be no more than a half percentage point above the 2% target.

In its policy statement released Wednesday, the FOMC said it continues to see downside risks to the economic outlook.

Regarding the timing to remove policy accommodation, the Fed will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. "When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent".

Voting against the action was Kansas City Fed President Esther George, who was concerned that the "continued high level of monetary accommodation increased the risks of future economic and financial imbalances" and could push long-term inflation expectations higher.

The minutes of this 2-day meeting will be released on May 22.

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News Source: www.cnbc.com

Gold Market To Focus On Central Bank Meetings, Jobs Report, Physical Demand...

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Gold traders will have plenty on their plate next week with central-bank meetings and an always-important U.S. employment report, while also continuing to keep tabs on the strength of demand in the physical market.

The U.S. Federal Open Market Committee and European Central Bank meet. And, as always, traders will be watching economic data to see whether conditions are improving or deteriorating so they can gauge for themselves what officials may do with monetary policy down the road.

Traders also will keep monitoring reports about the voracious physical buying that was unleashed by a sharp price decline in mid-April. Some analysts have described this as pent-up demand in which buyers pounced when presented with lower prices. This helped gold price rise for the week.

“The key for me is I want to see on these accelerated prices if that physical buying is going to continue, or if it’s price sensitive and is going to subside,” said Kevin Grady, president of Phoenix Futures and Options.

June gold finished with a gain for the week of $58, or 4.2%, to $1,453.60 an ounce on the Comex division of the New York Mercantile Exchange, helped by bargain hunting, particularly as the market took notice of the strong physical buying. The technical-chart posture also improved. In fact, the June contract has now risen in seven of the nine sessions since the historic sell-off of more than $200 an ounce earlier this month. May silver gained 79.8 cents for the week, or 3.5%, to settle at $23.758.
In the weekly Kitco News Gold Survey, out of 35 participants, 24 responded this week. Fourteen see prices up, while eight see prices down, and two see prices moving sideways or are neutral. Market participants include bullion dealers, investment banks, futures traders, money managers and technical-chart analysts.

The FOMC meets on Tuesday and Wednesday. When gold first faltered early in the year, improving economic conditions had many financial-market participants thinking about an eventual FOMC withdrawal of the bond-buying program meant to push down long-term interest rates, referred to as quantitative easing. But much of the economic data for March was softer than expected, which, if it continues, likely would mean increased expectations for continued QE.

The soft March U.S. data included a rise of just 88,000 in non-farm payrolls and 0.4% decline in retail sales. A report on Friday showed the U.S. economy grew 2.5% in the first quarter, below forecasts mostly around 2.9% to 3%.

Traders will find on May 3 out if the labor market has picked up, when the Labor Department releases the April report. Consensus forecasts call for a rise of around 160,000 to 166,000 in non-farm payrolls, with the jobless rate expected to remain at 7.6%.

“The last time, we expected 195,000 new jobs and it was only 88,000,” Grady said. “So the jobs number is going to be paramount.”Some of the other key U.S. economic indicators next week include personal income and spending Monday, Chicago Purchasing Managers Index and consumer confidence on Tuesday, ADP private-sector employment report and Institute for Supply Management manufacturing PMI Wednesday, and initial jobless claims Thursday.

Meanwhile, the European Central Bank’s governing council meets Thursday. Recently disappointing economic news in the 17-nation eurozone fueled expectations that the bank may cut interest rates further from the record low of 0.75%. If so, this could pressure the euro, which could impact gold due to its inverse correlation with the U.S. dollar.

“After the disappointing string of economic data over the past couple of weeks, the conditions set out by the ECB for a further easing in rates have likely been fulfilled,” said Alex Thorndike, senior trader for precious metals and foreign exchange with MKS Capital. “Many economists have now changed their tune from earlier in the year expecting a 25(-basis-point) cut in the main refinancing rate at the May meeting, but no change to the deposit rate.”

Meanwhile, traders will also keep tabs on the physical market. Demand for coins and bars worldwide has soared since the mid-April price plunge, which has helped unleash demand, a number of analysts have said. U.S. Mint gold bullion coin sales have hit 203,500 so far in April, the most of any month since December 2009.

“The reaction of the people (to the gold sell-off) was to start buying,” said Chris Blasi, CEO of Neptune Global Holdings. “The fundamentals of gold and silver haven’t changed. The global economy is still weak; banks are still printing money. The break gave people a chance to add to their positions. Now as gold climbs, you might start to see the momentum traders come in, which helps gold go higher.
“If we see a pullback, people who were buying before might come back in and buy again to buy it cheaper.

The only thing that might be not so good for gold is if prices went flat. There are some people…who are waiting for a pullback. They’ve put half their money in, but are holding back for a $25, $30, $50 break. If we do pull back to the lows from last Tuesday (the $1,321 area), it’s going to be less shocking. When prices fell as hard as they did at the time, it was shocking.”
The mid-April price decline also came at a key period for seasonal demand due to spring weddings in India, as well as the May 13 Akshaya Tritiya festival, auspicious for gold buying. Buying surged there and in other emerging-market nations.

However, some observers also caution that a three-day holiday in China next week could at least temporarily curb some of the global buying. China is the world’s second-largest consuming nation, behind India, according to World Gold Council data.

“What I would be a little wary of is when they do go on holiday, a significant amount of demand will be pulled from the market and could induce bigger players to step in and sell,” Thorndike said. “Without the cushion of SGE (Shanghai Gold Exchange)/Chinese demand, we could swoop lower.”
Traders will also look closely at the most recent release of the Commodity Futures Trading Commission’s weekly commitments of traders data, said Bob Haberkorn, senior commodities broker with RJO Futures. The report is released late on Fridays and shows how speculators are positioned as of the previous Tuesday. Should the data show fresh buyers returning to the market, this would be a bullish sign, he said.

“Are there new longs coming into the market?” he asked rhetorically. “Is this (recent rally) a short-covering move? It could be a combination of both.”As always, technically oriented factors could accelerate any moves.

"I think we're going to consolidate next week,” said Charles Nedoss, senior market strategist with Kingsview Financial. “It closed nicely over the 10-day (moving average) and consolidated there. It got a little ahead of itself at the 20-day (moving average).”
As of the Comex pit-session close, the 10-day average for June gold stood at $1,408.90 an ounce, while the 20-day was at $1,486.60.

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News Source: www.cnbc.com

Chemical Weapons In Syria Push Up Crude Oil Prices...

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WTI crude oil futures were trading slightly higher tracking a similar movement in benchmark NYMEX contracts. The US dollar has fallen from its highs in the low 83.00 price range to trade at 82.72 this morning, making dollar denominated commodities like crude oil cheaper. In the international market, crude oil futures edged higher due to a weak dollar against the euro and lower than-expected rise in the US crude oil stocks.

US crude oil inventory rose by 900,000 barrels from the previous week to 388.6 mln barrels in the week ended Apr 19, against market projection of 1.2 mln barrels rise. Crude is trading at 93.20 giving back 43 cents as traders took advantage of the climb over 93.00 to book profits.

Crude oil prices settled at two-week highs on concerns over tightening supplies, while U.S. gasoline demand heats up ahead of the peak spring-summer driving season. Traders said weakness in the dollar, rising equities prices and news that U.S. weekly claims for jobless benefits fell to the lowest level in nearly five years added to buying interest. Data showed a sharp fall in the U.S. jobless claims last week. The initial claims for jobless benefits was 339,000 in the week ending April 20, down16,000 from the revised figure of 355,000 in the previous week, the U.S. Labor Department reported yesterday. Meanwhile, the four-week moving average, which helps smooth out week-to-week volatility, edged down to 357,500 from 362,000 in the previous week. Recent job data signaled an improving labor market, but still not strong enough to significantly cut the unemployment. The U.S. unemployment rate dropped to 7.6% in March.

Prices also got support from the reports over Syria’s possible use of chemical weapons stirred concerns over stability in the Gulf region. Oil prices jumped after the United States said Syrian government forces had likely used chemical weapons, raising worries that Washington would punish Damascus militarily. US officials said cautiously for the first time that they had evidence of the use of chemical weapons by the Syrian regime. This report was supported independently by France and Israel.
They stressed there was still not full agreement on the issue in the US intelligence community, but US Defense Secretary Chuck Hagel, speaking in Abu Dhabi, warned that use of such weapons “violates every convention of warfare.”

The report raised fears that Washington could intervene more deeply in the Syrian conflict, after having warned earlier that using such weapons would cross a “red line” in President Bashar al-Assad’s fight with rebels. A senior White House official said “all options are on the table” should use of the weapons be confirmed, a euphemism for military options being taken into consideration. But a US defense official stressed that a military intervention was not imminent.

Implied demand for gasoline–the most widely used petroleum product in the world’s biggest oil consumer–climbed to its highest level since November last week, U.S. government data showed. Gasoline stockpiles logged their biggest drop in a year, breathing new life into futures contracts that fell to a four-month low in recent days.

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News Source: www.marketwatch.com

Gold futures jump with physical demand on the rise...

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Gold futures rose more than 1% on Wednesday as bargain hunters waded into the beaten-down market, lifting physical demand for the metal on the back of fresh data pointing to difficulties for the U.S. economy.

 Gold for June delivery GCM3 +0.89%  climbed $15.10, or 1.1%, to $1,423.90 an ounce on the Comex division of the New York Mercantile Exchange. Prices were poised to recover the loss of $12.40, or 0.9%, they saw a day earlier.

The fall on Tuesday was gold’s first in four sessions, with prices for the precious metal hurt after disappointing data on manufacturing data in China,a rally in equities and a stronger U.S. dollar.

Orders for U.S. durable goods fell by a seasonally adjusted 5.7% in March, more than the 3.2% decline expected by economists polled by Market Watch.

If the economic data releases covering April are similar to the month prior, then the Federal Reserve isn’t likely to give any signs of an early withdrawal of quantitative easing, said Chintan Karnani, independent bullion analyst based in New Delhi. QE has been a supportive factor for gold, as it can lead to inflation and gold is often seen as a hedge against inflation.

Bargain buys

Traders and investors are stepping in to buy the recent big dip in prices, said Jim Wyckoff, senior analyst at wsj.com in a daily market note. “Demand for physical gold world-wide remains strong after last week’s price plunge.” Read about why investors should be bullish on gold price as long as chaos reigns.

Gold prices are on track for a roughly 11% drop this month, and analysts have been pointing to declines in the metal’s holdings among exchange-traded funds and lower gold-price forecasts as factors behind the recent selloff.          

Goldman Sachs on Tuesday closed its recommendation for clients to “short” gold, telling them to exit out of those bets on lower gold prices. The investment bank on April 10 cut its short- and long-term gold forecasts as prices approached bear-market territory.“Strong demand for physical gold world-wide, and especially from Asia, continues to underpin the gold market,” said Wyckoff.

The U.S. Mint this week stopped sales of its smallest-denomination gold bullion coins as demand reduced government inventories.

Year to date, demand for the one-tenth ounce coins are up more than 118% compared with the same time a year ago, the U.S. Mint said in a memo to authorized purchasers, according to The Wall Street Journal.

Other reports this week have said there are shortages of gold bars and coins in some countries, with gold retailers jacking up their charged premiums over the spot price of gold, Wyckoff said.      

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News Source: www.wsj.com

                      

Gold Is Undervalued in Fiat Money Terms...

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The question on everyone's mind is whether or not the gold bull market is over? Such an utterance seems glib in the face of 8,000 years of history that suggests otherwise. Of course, there is a time and moment to own gold. That time is still now. So you will not be surprised to hear us say, no it's not over; it's just getting interesting.

Another question that is on everyone's minds -- or if it isn't, should be -- is, was the gold market sell-off a product of continued and escalating manipulation?

I will explore the answers to both these questions, and by understanding reality we can begin to understand whether gold can reassert itself in its justifiable role as an antidote to the current fiat currency system.

Is Gold Currently Undervalued?
First off to state publicly, gold is still undervalued in 'fiat money' terms, that's the easy question to answer.People have said to me gold has gone up a lot, and so now it's too high. I always reply that gold has a price and a value. These two constructs are not interchangeable. Price is a level at which you make an exchange, and value is whether it is worth it. Right now gold remains undervalued when examined in the context of other assets, primarily against paper money.

To illustrate this point we can now see how gold is as undervalued, incredibly, as it was in 2000, just before this gold market began to rise in nominal terms.

One phrase that sums up my thinking – price has changed, but nothing has changed.
To develop this statement a little further, I want to quote a friend, Detlev Schlichter, on the recent brutal bloodletting in the gold market. Detlev wrote a really eloquent book Paper Money Collapse, about the inevitable failure of paper money economies. He states:

"After 40 years of relentless paper money expansion and in particular 25 years of Fed-led global bubble finance, the dislocations in the global financial system are so massive that nobody in power dares to turn off the monetary spigot and allow market forces to do their work, that is to price credit and to price risk according to the available pool of real savings and the potential for real income generation rather than according to the wishes of our master monetary planners."
This fact remains, so nothing has changed.

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www.wsj.com

A Make or Break Week Ahead for the Stock Market...

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  It's make-or-break time for the first-quarter earnings season, and it comes just as the stock market is showing signs of strain.About 170 S&P 500 and 10 Dow companies report earnings in the week ahead, and they include everything from tech icon Apple to industrial names like Caterpillar and energy companies like giant Exxon. As of Friday, a fifth of the S&P 500 had reported, and two-thirds had better-than-expected earnings. But an unusually high amount—57 percent—missed their top-line revenue estimates, according to Thomson Reuters.

That's a cause for concern, since stocks traded in one of the most volatile seesaw patterns of the year in the past week, as worries about global growth increased amid a dramatic sell-off in commodities. The Dow finished its worst week this year 2.1 percent lower at 14,547, and the S&P 500 was down 2.1 percent at 1,555. The Nasdaq was down 2.7 percent for the week, even with Friday's big gain of 1.3 percent on the back of a tech rally.


The week ahead also has a light but important economic calendar, including home sales data Monday and Tuesday, durable goods Wednesday, and the first look at first-quarter GDP Friday. Even though it is a reading of past activity, first-quarter GDP is important since, at estimated 3 percent growth, the rate is about double what is expected for the current quarter. Traders have also been fixated on events surrounding the Boston Marathon bombers, though it was not seen as a market factor.

"I think this rally is a little weary," said Art Cashin, director of floor operations at UBS. "The 'buy the dips' have been in and they bought most of the dips. The question is will they continue, or is the market getting ready for the spring swoon everyone is talking about."


Cashin said the Dow broke an important trend line at 14,500 Friday as IBM had its worst day in eight years, but it rose back above that level by the end of the day. The S&P struggled at its 50-day moving average Thursday, but it too got about a dozen points above it by Friday afternoon. Commodities markets were calmer by the end of the week, but gold lost 7 percent in the past week, sliver lost 12.8 percent, copper lost 6 percent and oil lost 3.6 percent.


"By any sort of measure, we're kind of overdue for some sort of a pullback, and maybe we're finally going to get it," said Bill Stone, chief investment strategist at PNC Wealth Management. Year to date, the S&P is up 9 percent and has not had a significant pullback. He noted that the economic data has been disappointing.


"Once you had a market that moved up like this one has, expectations are really your enemy. We're not meeting expectations … then you throw in earnings season. Earnings, I would argue, are coming in better than expected. Underneath the surface is something that's not quite so healthy," he said. "They're struggling on the top line, the revenue side. That's indicative of a global economy growing below trend." The commodities sell-off is also signaling a global weakening, and it accelerated when China released disappointing GDP data Monday.

Gina Martin Adams, institutional equity strategist at Wells Fargo Securities, has also been expecting a pullback. "I still think we're in some sort of process of trading a top. It's hard for me to say," she said. "There has been enough disturbance to suggest the trend is now in question, which is the first time you can say that this year. Certainly the factors have been lining up."
"Every April we have this. It's scary how the market is trending exactly as it has for the last four years running," she said. "There is this confluence of factors. The fundamental case—everyone was excited about the economy improving, but that story broke down. The earnings are not improving. The commodities complex looks just like last year."


Even though economists expect a weaker economy, they do not expect it to be as soft as last year, and stock strategists also expect the market to rebound later in the year, after any sell-off.

Adams said seasonally, April can actually be a good month for stocks so they may hold on, but in the next few weeks, there could be a downdraft as there was in the past three years. "May is when you get a little worried … we've got a sideways trend in place," she said, adding it's also possible there could be a sideways correction. That means stocks would grind in within a range, instead of selling off.

This makes the earnings season particularly key, as traders look for clues about the extent of the soft spot and its impact on corporate profits.

"The next two weeks are really important. That's when the bulk of the market cap reports. They will be extremely important. There's a limited amount of economic data to consume. The huge reports come at the beginning of the month," when April employment data is released, Adams said.

She added that is especially watching industrials and technology. "Those are the areas where the market is expecting the greatest weakness. If there are areas where there could be a surprise and guide higher, those could be the areas. They should be the areas where the turnaround story could occur, should it show up. I'd like to see that, but it's not in my forecast."


Industrial companies GE and Honeywell both reported earnings that slightly beat expectations Friday. GE, however, reduced its forward guidance while Honeywell slightly raised it. In tech, the message has been mixed. IBM fell 8 percent Friday after its weak earnings report, but shares of Google and Microsoft both gained even though revenues missed slightly.

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news source: www.bbc.com

G20 agrees not to set hard targets on debt reduction

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Finance leaders of the G20 economies said on Friday they agreed they did not need to set hard targets for reducing national debt levels, and said they would be watching for negative effects from massive monetary stimulus efforts, such asJapan.

Russian Finance Minister Anton Siluanov said at a news conference that finance officials from the Group of 20 nations believed overall debt reduction was more important than specific figures.
"We agreed that these would be soft parameters, these would be some kind of strategic objectives and goals which might be amended or adjusted, depending on the specific situations in the national economies," he said.

In a communiqué released after a two-day meeting, the G20 said it would be "mindful" of possible side effects of extended periods of monetary stimulus. Central banks have flooded their economies with cheap funds to try to boost borrowing and spending but that has raised concerns about excessive capital flight, particularly to developing nations.
Siluanov said the G20 agreed that greater monitoring of the side effects of Japan's $1.4 trillion program announced earlier this year was needed.

The G20 discussions were dominated by talk of the struggling euro zone, Siluanov said, where harsh austerity measures have failed to lift the region out of its economic slumber. The nature of the discussion was of some concern to officials in other nations.

"It was supposed to be a G20 meeting, but for a moment I thought it was a G7 meeting. All that we heard was how sick Europe is and how badly affected many countries of the world are," said India's finance minister, P. Chidambaram, who spoke at the Peterson Institute in Washington.
"They have a very accommodative monetary policy. They are doing whatever it takes to rescue economies that seem to be tumbling one after another."

SOFT DEBT TARGETS
There has been some disagreement over the need for specific targets for reducing debt. The United States and Japan have opposed committing to a targeted debt-to-GDP level. Russia - this year's G20 chair - had hoped to secure an agreement on targets by the time G20 leaders meet in St. Petersburg in September.

The world's biggest economies are rethinking the austerity drive that dominated the last few years. The austerity argument has been undercut by weakness in economies that undertook severe measures to cut deficits, including Britain, which is headed into its third recession in the last five years.
Fitch cut its credit rating on Britain on Friday to double-A-plus, citing expectations that general government debt will rise to 101 percent of GDP by 2015-2016 due to weak economic growth.
Siluanov also said a greater amount of coordination was needed with the International Monetary Fund on global liquidity, with recommendations expected by next July.

G20 ministers called on the Financial Stability Board to oversee work on reforms for short-term interest rate benchmarks such as Libor in the aftermath of a global rate-rigging scandal. FSB was asked to report back in July on its progress.

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Asad Rasheed
Direct:04-3841906
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For more information please visit our website century financial brokers.

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Here is a CFB blog that gives useful daily trade advice... http://century-financial-brokers-uae.blogspot.ae/

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News Source: www.cnbc.com