Market Morning Briefing

GOOD MORNING!

STOCKS
The US NFP data released last Friday appeared to disappoint but on closer scrutiny, it looks solid. On the other hand, the lower than expected Markit Manufacturing PMI’s hit the European markets hard. But today may be the day for the bears to cover some of their shorts and bring some bounce in the markets.

Dow (16493.37, -0.42%) extended the fall to 16450 and now it is possible to see at least a minor bounce before the fall resumes again testing the support area in 16300-200. The expected July top is in place and the corrective mode may go on for this entire month. The Dax (9210.08, -2.10%) has firmly broken down the 2 year long channel support at 9400-350 to signal long term weakness. For now, a corrective bounce can be expected from this short term support area of 9150-9000 and then more fall.

Nikkei (15470.84, -0.34%) is trading near the June-July highs around 15450 and unless it gets back above 15600 soon, a trip to 15200 can’t be ruled out. Shanghai (2192.93, +0.35%) has ended the month above 2140 and may target the final long term resistance in 2260-70 now. Some profit booking may emerge in the area of 2230-70.

Nifty (7602.60, -1.54%) broke all the supports to reach sub-7600 levels and on a break below the Golden Ratio support at 7580, may reach 7400 levels this week. Right now, we may expect some corrective bounce just like the other major indices.

COMMODITIES
Gold (1292.58) seems to rise now but unless it breaks 1300-1350, bearish pressure would exist for some more time. While below 1300 chances of a fall towards 1280-1260 still exists. Silver (20.36) is stable for now indicating a fall towards 20.10. Gold-Silver ratio (63.462) has sharply risen and if it breaks 63.82 it may target 64.9-65 levels signalling a rise for the metals.

Copper (3.2215) is stable and is stretching its consolidation sideways. Near term looks bullish while above 3.20.

Nymex WTI (97.910) has bounced a little from support near 97.00. Little more room on the downside could be seen towards 96 from where it may start a fresh rise towards 106.

Brent (104.91) made an intra-day low of 104.39 on Friday which is a crucial support and if his does not hold, chances of a further fall towards 102-101 could be seen. However, if it bounces from current levels it may move up towards 106.45-106.90. The Brent-WTI spread (7%) is sharply rising towards resistance near 8.9%-9% from where we may see a little correction.

FOREX
While the lower than expected US NFP data has weakened the Dollar, the Indian Rupee waits for the RBI meet tomorrow. Nearly all the EM currencies are facing strong supports, which must be broken to strengthen the Dollar again.

Euro (1.3418) bounced higher contrary to expectations but to extend the bounce, it must break above 1.3450. The ECB meet later this week may bring some short covering but the major trend remains firmly down and set for lower targets.

Dollar-Yen (102.67) is trading in the range of 101-103 as expected but now it may still attempt the difficult rise to 103.50-104 if it manages to sustain above 102.35-25. Euro-Yen (137.76) is consolidating in the higher levels and may rise to test the resistance area of 1.3830-50, above which the door to 1.39 will open.

Pound (1.6825) has signaled the end of its 9-month long uptrend and now every corrective rise may face selling pressure at the higher levels. A bounce may be due from this support band of 1.68-67, so watch out.

Aussie (0.9322) is stuck in the range of 0.9350-0.9250 and unless it manages to break this range, no trending move will emerge and sideways price action may prevail.

Dollar-Rupee (61.18) reached very close to our outer target of 61.25 in a single session but now may correct in sync with the other EM currencies. Unless 61.25-30 is broken right now, it may remain in the corrective phase for 1-2 sessions. Expect support at 60.70-50.

INTEREST RATES
Overall, the world is still looking at low or lower rates.

The US July Unemployment increased a bit to 6.2% on Friday compared to 6.1% earlier. The NFP increase was a tepid 209K. US Yields (5Yr 1.68%, 10Yr 2.50% and 30Yr 3.29%) have dipped again as there is concern about low levels of labour participation.

The German 10Yr (1.13%) is down again and could head lower. The UK 20Yr (3.12%) has hit Resistance near 3.35% recently and is coming down. The Japanses 10Yr (0.53%) remains in an steady downtrend with decent chances of falling further towards 0.45% if not lower.

The ECB and BOE meetings are due later this week on Thursday.

The RBA and the RBI meet tomorrow. The RBI is not expected to lower the Repo rate, although some tinkering with SLR and CRR is possible. The market expects to see further decline in Inflation, a precondition for the RBI to lower rates.

But, the MIBOR is showing initial signs of moving up trendline Support. Take a look at http://www.kshitij.com/graphgallery/mibor.shtml#mibor

DATA TODAY

7:30 GMT or 13:00 IST CH PMI
...Expected 56.20 ...Previous 54.00


FRIDAY'S DATA

AU PMI
...Previous 48.9 ...Actual 50.7

AU PPI
...Expected 0.70 % ...Previous 0.90 % ...Actual -0.1 %

JP PMI
...Expected 50.8 % ...Previous 50.8 % ...Actual 50.5 %

EU PMI
...Expected 51.9 ...Previous 51.9 ...Actual 51.80

UK PMI
...Expected 57.2 ...Previous 57.2 ...Actual 55.40

US NFP
...Expected 230 K ...Previous 288 K ...Actual 209 K

US Unemployment Rate
...Expected 6.1 % ...Previous 6.1 % ...Actual 6.2 %

US Manufacturing ISM
...Expected 56.1 ...Previous 55.3 ...Actual 57.1

US Personal Income
...Expected 0.4 % ...Previous 0.4 % ...Actual 0.4 %

US PCE Price Index M/M
...Expected 0.5 % ...Previous 0.34 % ...Actual 0.4 %

CN PMI
...Previous 50.7 ...Actual 51.70

IN Manufacturing PMI
...Previous 51.50 ...Actual 53.00