The established support for EURUSD is at 1.3100

by Ong Yi Ling, Ker Chung Yang

Market Commentary

Key Notes: S&P advanced and that was contrary to our initial anticipations. Initial claims outperformed estimates, bringing relief to investors who were worried about the poor non-farm payrolls last Friday. For the day ahead, US equities will likely take direction from a couple of themes. Firstly, we will be seeing the economic release for International Trade, UOM sentiments and Federal Budget. Generally, we think the data would likely outperform estimates and that should give some fresh bullish impetus for equities. Secondly, investors will also take cue from the possibility of a rate hike from China tonight and should China does rate hike, that will be bearish for equities. Lastly, some Democrats have criticized President Obama for passing the tax-cuts without consulting the party. This could create some political turmoil in the short term and could be bearish for equities. Overall, we are anticipating the bearish elements to outweigh the bullish ones; the established support for S&P500 is at 1,220.

On currencies, the Euro ended lower against the Dollar as per our expectations. For the day ahead, we continue to think that Euros will come under pressure. The anticipated rate hike in China could possibly create a temporary "risk off" appetite in currency markets and that might weigh on Euros. The established support for EURUSD is at 1.3100.

Market Summary

• US: US stocks rose after the world's largest bond fund manager raised its forecasts for economic growth and jobless claims dropped. BOA jumped 5.4%, leading gains among the Dow components while AIG soared 13% after a Treasury official said the government will dispose of its stake in the insurer "as quickly as practicable." Dean Foods advanced 13% after a person familiar with the matter said the dairy processor will sell $400 million in debt.
• Europe: European stocks mostly gained as reports around the globe reassured investors that the global economic recovery is intact and help investors take their minds of the debts plaguing the region. Societe Generale and Barclays paced a rally in banks. ASML Holding advanced 8.2% after the company raised its forecast for bookings in the fourth quarter. Volkswagen led carmakers lower as China said it may end tax incentives for buying passenger cars next year. Equities received a boost as US initial claims improved, Japan's economy grew more than the government initially estimated in the third quarter and Australian employers last month added more than double the number of workers economists had forecasted.
• Asia: Asian stocks gained as reports on better-than-estimated economic growth in Japan and employment in Australia bolstered confidence in a regional recovery. Mitsubishi UFJ Financial Group climbed 3.7%. Westpac Banking Group rose 2.4%. BHP Billiton gained 1.3% after copper futures surged to a record the day before in New York. Chimei Innolux led declines by Taiwanese flat-panel makers following European Union fines.
• Singapore: The STI gained 0.23% to close higher at 3,210.20. Volume was 1.51 billion shares worth $1.49 billion. Gainers led losers 281 to 178.
• Currencies: The Euro traded near the lowest in more than a week against the Dollar as concerns that Europe's debt crisis will linger damped demand for the region's assets. Europe's currency headed for a weekly loss against the dollar after Fitch Ratings downgraded Ireland. The dollar held yesterday's loss against the Yen as benchmark Treasury yields dropped, reducing the allure of U.S. assets.

Key events/data to look out for:

• US: International Trade, UOM Sentiments, Federal Budget.
• Japan: Consumer Confidence.
• China: New Yuan Loan, Trade Balance.