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Global Market Wrap:
IMF Forecast Lifts European Markets
Equity Futures: Dow +1.00. S&P -0.50. NASDAQ -2.00. Japanese Nikkei -3.00. German Dax +3.00.
European markets advanced near the opening bell, even though the prior two U.S. and Asian trading sessions, saw negative closes. Apparently, the European markets turned into the green after the IMF upgraded its year-end growth projections for 2009 and 2010.
European Trade: The emerging stock markets lead the gains in European trade, with Russia’s MICEX up 1.60%. However, not every market in Europe enjoyed this positive momentum, since Luxembourg’s LuxX index is down 1.70% even from the first few trading hours. Earlier in the day, the Nikkei closed the trading session 1.50% lower, reaching two month lows. After the cash market closed, the futures markets extended their declines.
For now, it appears that the IMF’s upgraded growth forecasts have pulled the European markets higher. The IMF forecasts that the world economy will contract 1.1% this year, up from July’s estimate of a 1.4% contraction, while in 2010, the world economy will expand 3.1%, up from the 2.5% released in July. Turning to regional growth, the Asian market area will lead the recovery, something that the financial market had widely expected, followed by the U.S. and by the euro area, which is forecasted to have a sluggish 0.3% growth in 2010.
S&P Futures: S&P futures are currently trading 8 points below the Thursday’s opening price, but so far, this has not influenced the European markets. Most of these declines came shortly after the London open, even though the index had some small attempts to move higher. The next two important support areas lay in the 1040 and 1035 regions.
S&P Technical View: TheLFB Member Charts
4 Hour chart trend: Short possibilities. Main price points: 1075.25. Looking for: Wave II top
S&P futures have traded lower over the past few sessions, when the prices bounced lower from the Fibonacci resistance levels, discussed yesterday. As such, we are still looking for a potential bear market, as the wave count with red wave II top remains valid. Any break of the 1035 lows will put the powerful wave III in play, while the break of 1075.25 top would invalidate the wave count.
Sector Moves: The financial sector had a very rough start during the Asian session, with banks mostly lower on every single market open for trading. This trend continued during the European session with Deutsche Bank and Commerzbank being among the worst performers in the German Dax, and with the five big U.K. banks, RBS, Lloyds, HSBC, Standard Chartered and Barclays leading the pack of decliners in the FTSE index. On the other hand, banks traded mixed in the France’s CAC-40 index, while the banking industry was the best performer on the Swiss Stock Exchange.
The insurance industry was among the top gainers in almost every European market, even though the banking and the insurance industries trade correlated most of the time. Aviva and Standard Life jumped 3% in the U.K. FTSE, while Munich Re led the gains in the German DAX by a big margin
Economic Moves: The European calendar was relatively flat, with only one top-tier report, the U.K. Manufacturing PMI, which failed to reach market’s expectations. Throughout the overnight session, a separate report showed that the European unemployment rate rose to 9.6% in August, inline with market’s expectations.
Ahead, the U.S. calendar is loaded with red-flag reports. At 08:30 EDT the market expects the Unemployment claims, while at 09:00 EDT Fed Chairman Bernanke testifies on financial regulation before the House Financial Services Committee. Shortly afterwards, at 10:00 EDT the market prepares ISM Manufacturing PMI and for the Pending Home Sales reports.
Crude oil for October delivery was recently trading at $70.10 per barrel, down by $0.50. Crude oil saw a range of only $0.50 during the overnight session, even though the dollar strengthened against the board, something that should have sent crude oil somewhere lower.
Crude Oil Technical View: TheLFB Member Charts
4 Hour chart trend: Mixed. Main price points: 73. Looking for: Wave II)
The four hour wave has been re-worked as oil exploded higher on Wednesday, back to current the levels around 70 dollars per barrel. We see a possible felt pattern in a red corrective wave II), with wave c in process. We can count three waves up in wave a, three waves down in b and now the market is currently trading in higher leg c. Leg c of a flat pattern is the only wave that is sub-divided by a five wave move. Another push higher into wave v) of a black c is excepted over the coming session.
If the wave count is correct then a flat pattern of wave II) should be completed around 73 dollars per barrel.
Gold for October delivery was recently trading lower by $1.70 to $1007.60. Gold traded in mixed fashion during the overnight session, testing the intra-day support and resistance areas. On the daily chart, gold is trading above all the important moving averages.