Weak U.S. Housing Data Proves Friendly For Asian Markets

China’s benchmark, the Shanghai Composite, led Asian markets higher today as weaker than expected U.S. home sales released overnight raised investor hopes that the U.S. will not begin to taper back QE2 anytime soon.

Weak Home Sales data for existing homes hurt markets yesterday as they slipped 1.2 percent in June, missing expectations for a 1.5 percent rise. The report is helping to convince investors that the massive U.S. stimulus package will not be reduced anytime soon as Fed Chair Bernanke stated he needed to see definite signs of economic recovery before beginning during his testimony before Congress last week.

STOCKS
The Shanghai Composite on mainland China led winners today jumping 2 percent to cross the 2,000 level for a second straight trading day. The Nikkei rose 1 percent and the Australian S&P/ASX saw its third straight record setting day.

The DJIA rose a mere 1.81 points to close at 15,545.55, please see the below chart. The Dow traded in a narrow 60 point range the entire day. The NASDAQ rose 12.77 points and the S&P 500 posted another record closing at 1695.53. This was its fourth straight day of gains.

In Europe, the PSI 20 in Portugal rose 2.41 percent as President Anibal Cavaco ruled out an election wanting to keep her coalition together. The DAX closed a bit lower as did the FTSE. The French CAC was a bit higher on the day, up 0.40 percent.

CURRENCIES
The U.S. Dollar is trading weaker versus all its major trading partners. The buck appears to be gaining some strength against emerging currencies. The EUR/USD (1.3197) continues to move higher to test 1.3270. The GBP/USD (1.5371) is also higher and traded briefly above 1.5400. Should the pair break that level we can test 1.5500 next.

COMMODITIES
Gold (1335.00) rose sharply overnight. We are still looking bullish and can test the resistance at 1350.00 with a break higher targeting 1375.00 this week. Brent WTI Crude (108.25) still has strong support at 108.00. While above that level, we can test 109.00 or higher.

Silver (20.32) is trading near a critical level. While above 20.00 we can test 21.00 and then 21.50. However, we need a break above 20.60 to confirm this bullish move. Copper (3.192) is still moving higher. It looks like we can test the key 3.20 level today or tomorrow. A failure to break that level can be bearish for the embattled metal.

TODAY’S OUTLOOK
Europe will focus a bit on Portugal which is on track with its bailout plan and its incumbent president refused early elections. The U.S. will release some data later today, the FHFA Home Price Index will be watched thanks to the weak housing data released yesterday. They will also release the Richmond Fed Manufacturing Index.