Market Morning Briefing

EQUITIES

The US equities ended marginally lower yesterday after disappointing report on service industries. The ISM service index rose to 50.5 in January from 49.8 in December. Though any number above 50 signals growth, the expectations were of 51 on the index. The Dow (10270.55) closed 0.26% lower and the Nasdaq (2190.91) closed flat.

The Asian indices are trading mostly lower. The Nikkei (10344.26) and the Shanghai (2990.21) are down half a percent each. The Hang Seng (20466.35) is down 1.26%. The Sensex (16496.05) has been extremely volatile over the last few days. It rose 2% yesterday after falling more than a percent a day before.

COMMODITIES

Crude (76.84) has fallen from yesterday's high of 78.04. The stronger dollar and the increase in US Crude inventories by 2.3 million barrels against the expected increase of 0.2 million barrels pulled down the prices. Support is seen at 76.50-00 region which if holds might take the commodity up towards 80 once again in the coming days.

Gold (1110.90) though witnessed a break above the Resistance at 1120 in the intraday trades, failed to close above this Resistance as the stronger dollar pulled down the price from the high of 1126.40. While below 1120 we might expect a downmove once again towards 1100-1080.

CURRENCIES

Dramatic fall in the Euro (1.3891) from yesterday's high near 1.4025, as most assets are down in Asia today. No strength in the Euro, what with problems expected to spread to Portugal and Spain. This is despite the European Commission approving Greece plan to cut its public deficit from 12% to 3% over 3 years.

Dollar-Yen (90.90) rose to a high near 91.25 yesterday and is looking bullish for a test of 91.40 today. The Aussie (0.8815) fell to a low near 8775 today (from yesterday's high near 0.8915) but has bounced a bit from there. This is the third time in 4 days that the Aussie is finding support in the 0.8780-70 region. The Dec-09 low of 0.8735 becomes a crucial Support to watch for now.

The Sterling Pound (1.5910) continues to flounder, ahead of the BOE meeting today. It had risen to a high near 1.6070 yesterday, but has fallen back sharply from there. Dollar-Swiss (1.0590) has risen again from yesterday's low near 1.05, reflecting the Euro's fall today. Apart from the BOE, the ECB meeting is also due today.

In Asia, Dollar-Won (1152) is stabilising after having dipped over the last three days. USD-SGD (1.4120), seems to have finally broken the 1.41 Resistance in the meanwhile. Dollar-Rupee had closed near 45.97 yesterday and has opened near 46.06 today.

INTEREST RATES

3M USD LIBOR was unchanged at 0.25%. The Yields on US Treasuries rose yesterday for longer term maturities. The 2Y and 10Y yields were quoted 2 and 5 bps higher at 0.87% and 3.69% resepctively.

The ECB and BoE are scheduled to announce their interest rates today and are likely to keep them unchanged at 1% and 0.5% resepctively. The EU has marked that Greece, Portugal and Spain have suffered a permanent decline in cometitiveness since joining the Euro.

Kshitij Consultancy Service