August 10th, 2012
in Gary's blogging
Opening Market Commentary For 08-10-2012
Might be an interesting day depending on how Mr. Market conceives the news coming in from China and Europe depicting a slowing economy. The premarkets were down as the DOW was off 50 points and the 500 off 8 points. By the opening oils had dropped almost 3 points, gold off 11 and copper off 6 cents. That changed as gold jumped 14 points to 1620
Opening volume was very low and the averages opened mixed as investors took a back-seat approach looking for trending signs. With a growing possibility of a hard landing in China and continuing fears about Europe engaging in a double dip recession Friday's session opened lower and then increased the decent with volume turning to red, but still low. By the 10 minute slice the red volume slowly increased to moderate as investors started looking at profit taking while they still could.
Foxnews reported, “[US] Import Prices fell 0.6% in July from June, the fourth straight month of declines, while Export Prices ticked up 0.5%. Economists expected import prices to rise 0.1% and export prices to hold steady.” The premarket indicated a slight rise on the news but then continued to melt down as the opening bell got closer.
Finland's prime minister says the ECB cannot solve the eurozone debt crisis on its own, as Chinese exports slump in July on a 16pc fall on demand from the EU.
Bankia shares slumped by more than 25pc this morning after the fund in charge of bailing-out Spain's troubled banks reminded everyone that "shareholders will have to participate in covering the cost of the clean-up processes".
[European]Stock markets are still trading slightly lower. Chris Beauchamp at IG Index comments on this morning's market movers:
Yet another set of weak Chinese data prompted a period of selling this morning, as import and export growth both slowed markedly in the world's second-largest economy during July. Doubts were raised about the effectiveness of further stimulus in China, but this week's low-volume rally has managed to persist despite poorer figures from around the world. A rise in Spanish short-term yields and the continued drop of the euro, which is back below $1.23 once again, shows that the calm engendered by the ECB meeting last week might finally be wearing off.
China’s export growth collapsed and imports and new yuan loans trailed estimates in July, adding to signs the global economy is weakening and raising the odds the government will step up measures to support expansion.
“Monetary policy easing has to be more aggressive in the remainder of the year,” said Liu Li-Gang, Hong Kong-based head of Greater China economics at Australia & New Zealand Banking Group Ltd. He said there’s a risk of a “hard landing” and the government may lower banks’ reserve requirements as soon as today.
Exports present the biggest uncertainty to China’s outlook, Song Guoqing, an adviser to the People’s Bank of China, said last month. He estimated economic growth may slow to 7.4 percent this quarter.
Zerohedge reports, “As reported on Wednesday night, China's economy is contracting faster than anyone expected. As further reported last night, China loan creation at 540.1 billion yuan was far below economist estimates of 700 billion. In other words: the world's marginal economy is starting to crack.”
By 10 am the markets had established themselves down but serious buying slowed the decent leaving a candle looking like a hanging man. Actually this action looks more like HFT than anything else and any bullish attempt to keep the market from descending further is suspect at this point. Very strange market movements that can only be attributed to DaBoyz and HFT manipulating market prices.
The DOW at 10:00 is at 13117 down 48 or -0.37%.
The 500 is at 1398 down 4.00 or -0.27%.
The $RUT is at 799.75 down 3.09 or -0.38%.
SPY is at 140.33 down 0.22 or 0.16%.
The trend is neutral and the current bias is down.
WTI oil is at 92.21 trading between 93.70 and 91.75 and the bias is negative.
Brent crude is at 112.02 trading between 113.35 and 111.32 and the bias is negative.
Gold is up today at 1616 trading between 1620 and 1605 with a positive bias.
Dr. Copper is at 3.37 down from 3.42 earlier.
Earlier the USD rose from 82.59 yesterday to 82.92 this morning and is at 82.88.
European markets are down today in the wake of negative news coming from China. The FTSE 100 in London is down -0.31% while the German DAX is off -0.79%. The CAC 40 in France is also off at -1.10%. The Asian markets closed down with the Hang Seng at -0.66. The Shanghai Composite down -0.24%. The Nikkei down -0.97%.
ECB head Mario Draghi wants to save the euro at all costs. But the pledge has created discord within the bank's governing council. Many oppose plans to buy up sovereign bonds from troubled euro-zone member states, fearing it could just make things worse.
Look around. Take a good long and hard look because the data is becoming unsettling and it is pouring in from all over the world.
In China, where a hard landing was thought to have been avoided; one moment please, not so fast. The world’s growth engine is sputtering and there will be consequences. In Europe the situation is dramatically worsening with virtually every country in a recession with the notable exception of Germany though we predict they will join the club by the fourth quarter of this year or by the first quarter of next year.
For those that think that the Fed will save the day, if not the planet, we suggest to you that you may be in for an unpleasant surprise. There is only so much they can do now and each Fed action is being met by a less and less reaction in the markets and of a shorter duration.
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Written by Gary