Market Morning Briefing

GOOD MORNING!

STOCKS
Asia-pac is in a negative mood this morning as the violence in Iraq increases. The impacts are not noticeable yet but the possibility of escalation is always there and the markets are trying to assess this risk.

Dow (16775.74, +0.25%) has lost almost all of the previous week’s gains but after January we haven’t got two consecutive down weeks so far. So bulls would not be concerned till 16600-300 gets broken and the next week turns out to be another down week. The Dax (9912.87, -0.26%) has found support from the trendline and the January and May tops in 9850-9800 as expected. Another push up to 10300-400 remains on cards as long as it stays above 9800-700.

The Nikkei (15003.83, -0.62%) correction has extended to 14850 already and the correction may go on for some more time with major support coming in 14700-650. The Shanghai (2070.17, -0.03%) has broken above 2055-61 to spike up sharply and may reach 2080-2105 now but another down leg may be pending before any major reversal.

Nifty (7542.10, +1.41%) has broken below 7580 to fall sharply to 7525. The fall may extend to 7500 and 7450 below 7525 and any bounce would face selling pressure near 7580-7615. Stay out of the main index for a while but cautious stock picking may yield good results even in this condition.

COMMODITIES
Gold (1281.26) has been rising towards earlier levels of 1300. The coming sessions may be bullish while Gold may enter into the crucial 1300-1325 levels where it may be ranged in the near term.

Silver (19.778) has stretched its rally nearing towards 20. A break above 20 may take it higher to the crucial 20.5 levels from where we may see a correction. Overall the near term is bullish within a long term down trend.

Nymex WTI (107.27) has come off a bit but is trading higher near 107. Near term remains bullish with a target of 110.

Brent (112.72) is trading higher after the sharp up move last week. If the rise sustains above 114 we may see a target of 116-116.20 in the near term. We need to see if it continues to rise from here or pause for some sessions before resuming its rise. Note that a crucial resistance is coming up near 114. Overall the near term is bullish.

Copper (3.0445) has bounced after the better Chinese IIP and Retail Sales data on Friday. The earlier range of 3.00-3.07 remains intact for now as we may see some consolidation in this range for a few sessions now. Overall long term trend remains down.

FOREX
The possibility of rising rates by the central banks are getting increasing every day with the BOE clearly signaling a rise “sooner than expected by the markets” with the Pound making multi-year highs now. It makes any rate cut in India tougher and Rupee weaker.

Euro (1.3539) is trying to find strength from the support area of 1.3500-3475 for the last 3-4 sessions but that bullish reversal will be confirmed only on a break above 1.3630 and then 1.3680. The bias is neutral now.

Dollar-Yen (101.87) may test the support area of 101.40-20 before it finds any sustained buying. The 9 week long range of 101-103 may continue for a few more days. The Euro-Yen (137.92) is trying to hold its ground in a very weak manner but the downside risk of testing 137 or even 136 levels is clearly there with increasing probability.

\Pound (1.6982) is close to achieving our initial target of 1.70 after breaking out above 1.6850 very sharply as the BOE Governor commented that a rate hike may come sooner than expected. This rise may reach the next target of 1.71 levels very soon.

The Aussie (0.9400) has broken above 0.9410, the last swing high, to confirm the intermediate uptrend and is close to testing the 7 month high of 0.9461 now. Still the lack of bullish momentum may bring some downside risk of seeing 0.93 on the table. Stay cautious.

Dollar-Rupee (59.77) broke above 59.45 to enter our target area of 59.75-60.00 but must trade above 59.80 today to continue the rally. In that case, 60.10 may be possible target but keep an eye on the entire supply zone of 59.80-60.25.

INTEREST RATES
The US 5Yr (1.69%), 10Yr (2.59%) and the 30Yr (3.40) are all lower. The US 10-5Yr yield spread (0.90%) has dropped further and may test levels of 0.87%-0.85% in the near term.

The German – US 2Yr differential (-0.43%) has also dropped targeting support near -0.50% on the weekly from where it may bounce back. The Euro (1.3539) is trading lower but if the Euro strengthens, we may see the yield differential go up. The German 10Yr (1.36%) has dropped and is below crucial resistance near 1.40%.

The US-Japan 10Yr yield differential (1.99%) has come off from resistance near 2.04% as expected while the Dollar-Yen (101.86) is trading lower. USDJPY is ranged in the 101-102 region for now and may remain range bound for a few more sessions. The Japan 10-5Yr yield spread (0.41%) and the Japan 10Yr (0.59%) all lower than last week.

The 10Yr GOI (8.59%) has moved up from support near 8.5% as expected amd may now move higher towards 8.70%.

DATA TODAY

6:30 GMT or 12:00 IST IN WPI (Apr'14)
...Previous - 5.20 %

9:00 GMT or 14:30 IST EU CPI (YoY)
...Expected 0.70 % ...Previous 0.71%

13:15 GMT or 18:45 IST US Industrial Production
...Expected -0.39 % ...Previous -0.58 %

13:15 GMT or 18:45 IST US Capacity Utilization
...Expected 78.90 % ...Previous 78.60 %

13:00 GMT or 18:30 IST US TICS (Net foreign purch of long-term Sec)
...Expected 41.30 $ Bln ...Previous 4.02 $ Bln


FRIDAY'S DATA

BOJ Meeting
...Previous <0.10 % ...Actual <0.10 % ...Expected <0.10 %

EU Trade Bal
...Expected 12.00 EUR Bln ...Previous 15.40 EUR Bln ...Actual 15.80 EUR Bln

US PPI ex Food & Energy (MoM)
...Expected 0.20 % ... Previous 0.21 % ...Actual -0.10 %

CN IIP (YoY)
...Expected 8.70 % ...Previous 8.80 % ...Actual 8.80 %

CN Retail Sales (YoY)
...Expected 12.10 % ...Previous 11.90 % ...Actual 12.50 %