Asia Pacific markets were lower after a late day rally was unable to bring US equities out of the red. The Hang Seng and the S&P/ASX 200 indices were lower by .8% and 1.9% respectively, while the Shanghai SE composite eked out a gain of nearly .5% after a flurry of mixed data. While slightly weaker PPI and retail sales data indicates further slowing in the pace of growth, investors were comforted by inline industrial production and CPI figures. The Nikkei 225 was the worst performer, off by 2.7% as concerns continue to mount regarding the strengthening yen. Exporters were hit hard on speculation that persistent appreciation in the currency will begin to weigh on corporate earnings. European equity bourses are under considerable pressure today after the BoE lowered the UK's growth outlook, sounding cautious warnings of increasing uncertainty in the US and Eurozone economies.
Commodities were lower across the board with the exception of gold, which pared earlier losses as risk-off trades boosted demand. Gold is seen higher, with metal trading just below $1200 per ounce early in London trade. Crude oil fell below $80 per barrel for the first time this month to trade at 79.50. The dollar index has recovered all of yesterday's losses after the Fed stated that the "recovery is likely to be more modest in the near term than had been anticipated." The Fed's move to begin, “reinvesting principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities,” is being dubbed by traders as 'QE lite' and suggests the Fed has moved away from an exit strategy in the interim. Traders are now expecting rates to remain unchanged until early 2011. The dollar index advanced nearly 1.4% to 81.70 as investors flocked to safer, lower yielding currencies like the dollar, the swissy, and the yen. US Treasury yields drifted lower, with the 5-year at 1.41 and the 10-year at 2.73.
US Dollar, Japanese Yen to Pare Gains as Stock Index Futures Erase Losses
The US Dollar and Japanese Yen are likely to pare gains as US index futures all but erase early Asian-session losses ahead of the opening bell in Europe, hinting a deeper correction of yesterday’s spike in risk aversion is ahead.
EUR/USD Classical 08.12
Wednesday’s violent pullback officially confirms short-term topping and opens the door for deeper setbacks over the coming sessions.
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