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Market Review - 16/07/2009 22:00 All times in GMT
Dollar falls as strong earnings reports boost risk appetite
Dollar declined across the board on Thursday as more upbeat earnings reports from U.S. companies diminished the greenback’s safe-haven appeal. The second-quarter financial results for JPMorgan Chase and International Business Machines Corp. encouraged investors to be more optimistic on the global economic recovery and sent them to buy more higher-yielding assets. In addition, U.S. Treasury Timothy Geithner said he saw signs of confidence and durability in the financial system and indicated their obligation was to get the economy out of crisis and bring spending back into balance. DJI gained 95.61 points or 1.11%, Nasdaq closed up 22.13 points or 1.19%, and S&P added 8.06 points or 0.86%.
Earlier in the day, euro touched an intra-day low of 1.4055 versus the dollar as commercial lender CIT Group Inc. said that bailout talks with the U.S. government failed and would probably file for bankruptcy this Friday. However, euro extended its rally from last week’s low of 1.3823 to as high as 1.4166 after the release of better-than-expected JP Morgan earnings results (Q2 net income was $2.7 billion or $0.28 per share) and the release of lower-than-expected jobless claims data which decreased to 522,000 compared to theconsensus forecast of 565,000 and the previous reading of 569,000. Euro retreated after another release showed factory activity in the U.S. mid-Atlantic region contracted for a 10th straight month in July. (Philly Fed index came in at –7.5 versus economists’ expectation of –5.0). Euro found buying interest on dips as International Business Machines Corp raised its profit outlook for the full year despite it reported a 13% slide in revenue in Q2.
In European morning, the British pound hit an intra-day low of 1.6356 versus the dollar partly due to long liquidation and the CIT bankruptcy news. Investors eased off from perceived riskier currencies as they were concerned that troubles in the financial sector could slow an economic recovery, however, sterling rose to as high as 1.6482 in New York morning before easing later in the day.
International demand for long-term U.S. financial assets weakened in May as investors sold the most Treasury notes and bonds in six month. Total net sales of long-term equities were $19.8 billion in May compared to net purchases of $11.5 billion a month ago. Net selling of government notes and bonds totaled $22.6 billion, the most since sales of $25.8 billion in November, after net buying of $41.9 billion in June.
Earlier in the day, Fitch Ratings agency downgraded New Zealand’s sovereign outlook from stable to negative. Kiwi fell sharply to 0.6387 versus the dollar before rebounding to 0.6495 after the release of IBM earnings report.
Data to be released on Friday include Australia import and export price index, Japan leading indicators, eurozone trade balance, Canada CPI, leading indicators, U.S. building permits and housing starts.
Dollar falls as strong earnings reports boost risk appetite
Dollar declined across the board on Thursday as more upbeat earnings reports from U.S. companies diminished the greenback’s safe-haven appeal. The second-quarter financial results for JPMorgan Chase and International Business Machines Corp. encouraged investors to be more optimistic on the global economic recovery and sent them to buy more higher-yielding assets. In addition, U.S. Treasury Timothy Geithner said he saw signs of confidence and durability in the financial system and indicated their obligation was to get the economy out of crisis and bring spending back into balance. DJI gained 95.61 points or 1.11%, Nasdaq closed up 22.13 points or 1.19%, and S&P added 8.06 points or 0.86%.
Earlier in the day, euro touched an intra-day low of 1.4055 versus the dollar as commercial lender CIT Group Inc. said that bailout talks with the U.S. government failed and would probably file for bankruptcy this Friday. However, euro extended its rally from last week’s low of 1.3823 to as high as 1.4166 after the release of better-than-expected JP Morgan earnings results (Q2 net income was $2.7 billion or $0.28 per share) and the release of lower-than-expected jobless claims data which decreased to 522,000 compared to theconsensus forecast of 565,000 and the previous reading of 569,000. Euro retreated after another release showed factory activity in the U.S. mid-Atlantic region contracted for a 10th straight month in July. (Philly Fed index came in at –7.5 versus economists’ expectation of –5.0). Euro found buying interest on dips as International Business Machines Corp raised its profit outlook for the full year despite it reported a 13% slide in revenue in Q2.
In European morning, the British pound hit an intra-day low of 1.6356 versus the dollar partly due to long liquidation and the CIT bankruptcy news. Investors eased off from perceived riskier currencies as they were concerned that troubles in the financial sector could slow an economic recovery, however, sterling rose to as high as 1.6482 in New York morning before easing later in the day.
International demand for long-term U.S. financial assets weakened in May as investors sold the most Treasury notes and bonds in six month. Total net sales of long-term equities were $19.8 billion in May compared to net purchases of $11.5 billion a month ago. Net selling of government notes and bonds totaled $22.6 billion, the most since sales of $25.8 billion in November, after net buying of $41.9 billion in June.
Earlier in the day, Fitch Ratings agency downgraded New Zealand’s sovereign outlook from stable to negative. Kiwi fell sharply to 0.6387 versus the dollar before rebounding to 0.6495 after the release of IBM earnings report.
Data to be released on Friday include Australia import and export price index, Japan leading indicators, eurozone trade balance, Canada CPI, leading indicators, U.S. building permits and housing starts.
