Euro gained against the Dollar, in line with our anticipations

by Ong Yi Ling, Ker Chung Yang

Market Commentary

Key Notes: S&P500 advanced on Friday as per our expectations. For the day ahead, while we do not see not much economic data flowing out of US, we are anticipating another day of advance for US equities. This is because the poor Non- Farm Payroll numbers got Fed Chairman Ben Bernanke hinting of a possible QE 3 or 4 to help stimulate the economy. The printing of more money, while putting downside pressures on the Dollar, could provide a fresh impetus for US equities. As such, we will not be surprise if S&P500 resume its upward march, with established resistance at 1,235.

On currencies, Euro gained against the Dollar, in line with our anticipations. For the day ahead, we turn our focus on USDJPY currency pair. Should the currency markets react negatively to the fresh QE hinted by Fed Chairman Ben Bernanke, we will not be surprised if investors dump Dollars in favour of the Yen. We anticipate Yen to gain, with established support for USDJPY at 82.00.

Market Summary

• US: US stocks gained on Friday, overcoming a disappointing November jobs report released before the start of trading. The belief of a broader recovery in the economy, helped stave off heavy selling in the session. Non-farm payroll employment increased by 39,000 jobs in November, this was well below the expected increase of 140,000 jobs by economists. Unemployment rates increased to 9.8%, contrary to economists' estimates of 9.6%. BOA rose by 1.5% while DuPont gained of 1.3%.
• Europe: European stocks ended lower as investors turned cautious after two days of sharp gains, and a downbeat jobs report from the US weighed on sentiments. Eurozone retail sales grew 0.5% month-on-month in October after edging down 0.1% in the previous month. This exceeded economists' estimate of 0.2%. Barclays and insurer Old Mutual shed 2.5% each. Standard Chartered eased 1.4%, while BNP Paribas moved up 1.7%.
• Asia: Asian stocks ended mixed on Friday ahead of the key jobs data and nonfarm payrolls report in the United States. Healthy same-store retail sales, an increase in pending home sales and news that the ECB is holding interest rates steady and is still buying distressed sovereign bonds to support the financial market supported some stocks. Honda Motor, Canon and Hitachi jumped 0.6%, 1.5% and 0.7% respectively.
• Singapore: The STI pared 0.8% to close lower at 3,172.44. Volume was 1.13 billion shares worth $1.50 billion. Losers led gainers 263 to 197.
• Currencies: The Dollar lost against the Euro and the Yen on Friday after a weaker than expected US employment report took the shine of the Dollar. In recent weeks, against a backdrop of Euro-centric negative news and modestly upbeat US economic data, traders had become accustomed to selling Euros at any opportunity while also buying the greenback.

Key events/data to look out for:

• US: IBD Economic Optimism, Consumer Credit, Initial Claims, International Trade, UOM Sentiments, Federal Budget.
• UK: Halifax House Prices, Retail Sales, Industrial Output, BOE Rate Decision.
• Eurozone: EZ Sentix Index, Ger Industrial Orders, Ger Trade Balance, Ger CPI.
• Japan: Reuters Tankan DI, Machinery Orders, GDP 3Q, Business Survey Index, Consumer Confidence.
• China: New Yuan Loan, Trade Balance.