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Market Comment - May 4th, 2012

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The economic data throughout this week has been poor to say the least, yet the indices have managed to hold up rather well in the face of numbers that have consistently come in worse than expected.  Manufacturing, services and employment figures have all disappointed in many cases suggesting the anaemic growth that exists, if it does exist, is not likely to surprise to the upside.

The headlines however have been dominated by politics with the local and mayoral elections in the UK and national elections in France and Greece.  Across the little stretch of water it looks like the race for President is closer than before and certainly closer than the drubbing that the Coalition has suffered here.  Even though up until now, when the French election had been looking like an almost given for Hollande, the financial markets have composed themselves rather well and there hasn’t been any hint of nervousness since the worry that followed the first round 10 or so days ago.  The bond markets for now feel that even if Hollande gets in he won’t be able to do all that he proposes, especially when the continent’s second biggest economy has already lost its triple A credit rating.  We will have to wait and see what Sunday and the following weeks bring if France elects its first socialist President for 17 years.

This morning the FTSE is in the red by some 20 points following weakness across the pond.  All eyes will be on today’s non farm payroll number from the US which has seen forecasts downgraded since Wednesday’s ADP figure came in much lower than expected.  The bulls will be wanting to see a decent number if the Dow is to continue making fresh highs for the year, and yesterday’s initial jobless claims at least bucked the recent trend coming in slightly lower than expected.  The big figure is due to come in at 170k.

As mentioned it is a little surprising to see the markets holding up so well this week, but with trading having been in such a narrow range of recent it would be nice to see some excitement return to the markets at some point soon, possibly a break out in some direction.

The single currency enjoyed a short rally in the morning after the ECB President Mario Draghi said the European policy makers did not discuss a cut in interest rate, although he admitted the economic outlook deteriorated.  However, in the afternoon session the euro retraced closing near flat at 1.3152 against the US dollar given the political uncertainty in member states like France where the leading candidate to become President expressed opposition to the planned austerity measures.  At the time of writing the EUR/USD is at 1.3140 and near term support and resistance is seen at 1.3120/00 and 1.3205/45 respectively.

Gold extended its losses for the third day in a row, ending $17.54 down at $1635.98 as the ECB President Mario Draghi denied talks of a cut in interest rate at the last meeting.  It sounded as if they were sticking to their mandate of caring less about growth and more about inflation.  Investors took notice and moved away from gold, even if it is going to be until the release of the US employment data, due later on.  At the time of writing the precious metal is just softer at 1632.

The WTI crude prices posted a steep fall of $2.68 yesterday, crossing below the short term moving averages and settling at $102.54, last seen on 23rd April.  Discouraged by what seems to be an anaemic economic recovery in the US and already showing signs of losing steam, the buyers did not want to take on the extra risk of a bad number in the non-farm payrolls report.  Instead they closed their long positions waiting for further confirmations and this morning Nymex is looking a little pressured down 50 odd cents to 102.00.

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Market Comment - May 4th, 2012

The economic data throughout this week has been poor to say the least, yet the indices have managed to hold up rather well in the face of numbers that have consistently come in worse than expected.  Manufacturing, services and employment figures have all disappointed in many cases suggesting the anaemic growth that exists, if it does exist, is not likely to surprise to the upside.

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