CFD Markets News and Forecasts — 24-10-2011

• Swiss exports surprisingly resilient to strong CHF

• CHF overvaluation bordering on absurd this summer

• Overvalued CHF posed risk of deflation, recession

• SNB policy poses some risk for balance sheet

The dollar dropped against all of its major counterparts as equities rallied on better than expected corporate earnings and commodities advanced, sapping demand for a refuge. Raw materials rallied after a report showing China’s manufacturing may expand in October for the first time in four months, snapping the longest contraction since 2009.

The 17-nation euro erased its drop versus the dollar and yen as European politicians attempted to craft an effective response to the region’s sovereign debt crisis. European leaders meeting in Brussels yesterday outlined plans to assist banks, heading toward a revamped strategy to resolve the debt crisis. The 13th summit in 21 months excluded a forced restructuring of Greece’s debt, keeping with the policy of encouraging bondholders to accept “voluntary” losses to help restore the country’s finances. Leaders will meet again Oct. 26.

The yen rose versus the dollar as Japan’s exports increased 2.4 percent in September from a year earlier as demand for cars and auto parts advanced. Japanese Finance Minister Jun Azumi and Chief Cabinet Secretary Osamu Fujimura signaled today Japan is ready to intervene in the currency market to stop a yen appreciation to post-World War II highs that may stunt shipments as overseas demand slows.

European stocks climbed to their highest level in 11 weeks as signs of stronger growth in China and Japan outweighed a selloff in Greek lenders after a meeting of euro-area leaders discussed the region’s debt crisis. Leaders at yesterday’s summit in Brussels ruled out tapping the European Central Bank’s balance sheet to boost the euro area’s rescue fund, the European Financial Stability Facility, and excluded a forced restructuring of Greece’s debt. The politicians looked at strengthening the International Monetary Fund’s role and outlined plans to aid banks. The complete blueprint for the rescue fund won’t come together until a summit in two days. Like yesterday, it will start with all 27 European Union leaders before the 17 heads of the euro-area economies gather on their own.

Stocks rallied in Asia today after a report showed that China’s manufacturing may expand in October for the first time in four months, snapping the longest contraction since 2009. A separate release showed Japan’s exports increased in September more than economists had forecast.

Luxembourg’s Jean-Claude Juncker, who chairs the group of euro-area finance ministers, said talks on the private sector’s involvement in a second aid package for Greece have focused on losses of as much as 60 percent for bondholders. Reuters yesterday reported that lenders have offered to write down 40 percent of their Greek debt. Austrian Chancellor Werner Faymann told Austrian radio ORF he sees a “good chance” to convince Greece’s private creditors to accept a haircut of as much as 50 percent, while Ireland’s Transport Minister Leo Varadkar told Dublin-based RTE radio that discounts of between 40 percent and 60 percent were being discussed.

National benchmark indexes rose in 15 of the 18 western- European markets today. The U.K.’s FTSE 100 Index gained 1.1 percent. Germany’s DAX Index gained 1.4 percent and France’s CAC 40 Index increased 1.6 percent. Greece’s ASE Index dropped 4.5 percent.

Mining companies were the biggest gainers on the Stoxx 600 as copper rallied on the London Metal Exchange. BHP Billiton, the world’s largest mining company, gained 5.2 percent to 1,996 pence, Rio Tinto soared 7.1 percent to 3,373.5 pence and Xstrata Plc rose 6.8 percent to 1,016 pence.

TomTom surged 19 percent to 3.62 euros, its biggest advance since 2009, after Europe’s biggest maker of portable-navigation devices reported third-quarter net income of 28.9 million euros ($40 million). That beat the average analyst estimate.

Greek banks led declining shares as National Bank of Greece, the country’s largest lender, sunk 21 percent to 1.60 euros, its biggest drop since at least 1992. EFG Eurobank Ergasias, the second largest, slumped 20 percent to 63 euro cents, its biggest plunge since at least 1999.

Nobel Biocare Holding AG soared 14 percent to 11.38 Swiss francs, the largest jump since October 2002, after NZZ am Sonntag reported that EQT Partners AB and Bain Capital LLC are considering buying the world’s second-biggest dental- implant maker. The newspaper cited two unidentified sources.

Swatch Group AG climbed 4.8 percent to 373.50 francs, its highest price in a month, after NZZ also reported that the company’s sales this year will “clearly exceed” 7 billion Swiss francs ($7.9 billion), while growth adjusted for currency swings may reach 9 percent to 11 percent in 2012. The newspaper cited Chief Executive Officer Nick Hayek.

Faurecia SA rallied 12 percent to 19.76 euros as Europe’s largest maker of car interiors confirmed its 2011 targets after posting third-quarter sales that rose 16 percent.

U.S. stocks rose, following the longest weekly rally since February in the Standard & Poor’s 500 Index, amid takeover deals, as Caterpillar Inc.’s earnings beat estimates and Europe made progress taming its debt crisis.

European leaders outlined plans to aid banks and ruled out tapping the European Central Bank’s balance sheet to boost the region’s rescue fund. Europe’s 13th crisis-management summit in 21 months also explored how to strengthen the International Monetary Fund’s role. The complete blueprint won’t come together until a summit in two days.

China’s manufacturing may expand in October for the first time in four months, snapping the longest contraction since 2009, after a preliminary index of purchasing managers showed a rebound in new orders and output. The Chinese report, along with Japanese data today showing an increase in exports exceeding economists’ forecasts, signaled that Asia’s largest two economies are withstanding Europe’s sovereign debt crisis.

Dow 11,909.11     +100.32       +0.85%, Nasdaq      2,695.99       +58.53 +2.22%, S&P 500   1,253.22         +14.97 +1.21%

Gauges of technology, raw material and financial shares had the biggest gains in the S&P 500 among 10 groups, rising at least 1.9 percent.

Caterpillar (CAT) rallied 5.2 percent to $91.95. It said full- year profit will be $6.75 a share and sales will be at the top end of a previously forecast range of $56 billion to $58 billion. Revenue in 2012 will rise 10 to 20 percent, it said. Other companies rose after Caterpillar reported earnings. Deere & Co., the world’s largest farm-equipment maker, added 3 percent to $74.40. Joy Global Inc., the maker of P&H and Joy mining equipment, increased 6.4 percent to $87.02.

United Parcel Service Inc., the largest provider of package deliveries and a proxy for the economy, and Texas Instruments Inc., the largest maker of analog chips, are among companies scheduled to report results this week.

RightNow Technologies surged 19 percent to $42.86. Oracle Corp., the world’s second-largest software maker, agreed to buy the company for $1.5 billion, gaining customer-service expertise to bolster a new Internet-based product.

Healthspring Inc. jumped 34 percent to $53.63. Cigna Corp.  agreed to buy health maintenance organization Healthspring for $3.8 billion in cash to expand the U.S. insurer’s Medicare business.

Sara Lee Corp. was unchanged at $17.77. J.M. Smucker Co., the maker of jams and Jif peanut butter, agreed to buy a majority of the company’s North American coffee and hot-beverage food-service business for about $400 million.

Alcoa (АА), the largest U.S. aluminum producer, gained 3 percent to $10.54. Freeport-McMoRan Copper & Gold Inc., the world’s largest publicly traded copper miner, advanced 6.9 percent to $39.11.

Gold rose for a second straight session on concern that Europe’s leaders won’t do enough to stem the region’s debt crisis, boosting demand for the metal as a haven investment.

Policy makers ruled out tapping the European Central Bank’s balance sheet to boost the region’s rescue fund and outlined plans to aid banks. Gold also rose on concern that U.S. monetary policy aimed at shoring up growth will spur inflation. Federal Reserve Vice Chairman Janet Yellen said on Oct. 21 that a third round of large-scale securities purchases may become warranted to boost the U.S. economy.

Gold futures for December delivery gained to $1,656.50 an ounce on the Comex in New York. On Oct. 21, the precious metal jumped 1.4 percent.

• See headline inflation trending toward 2% level

Crude oil rose for a second day on speculation that economic growth in China and Japan, the world’s second- and third-largest oil consumers, will boost energy demand.

Oil climbed as much as 1.7 percent after data showed China’s manufacturing may expand in October and Japan’s exports exceeded economists’ forecasts. Prices also gained as U.S. stocks moved higher after Caterpillar Inc. reported earnings that beat analyst estimates.

Crude for December delivery rose $1.29, or 1.5 percent, to $88.69 a barrel on the New York Mercantile Exchange. Prices are down 3 percent so far this year.

Brent oil for December settlement increased 59 cents, or 0.5 percent, to $110.15 a barrel on the London-based ICE Futures Europe exchange.

The world's major stock indexes are traded or have already closed the session mixed:  Nikkei +1.90%, Hang Seng +4.14%, Shanghai Composite +2.29%, FTSE  +0.34%, CAC  -0.12%, DAX +0.22%.

Company news:

Shares of Caterpillar Inc. (CAT) climbed 4.8% as demand for shovels and drills used to dig up metals helped earnings beat estimates. 

Data:

06:58 France PMI (October) flash 49.0

06:58 France PMI services (October) flash 46.0

07:28 Germany PMI (October) flash 48.9

07:28 Germany PMI services (October) flash 52.1

07:58 EU(17) PMI (October) flash 47.3

07:58 EU(17) PMI services (October) flash 47.2

09:00 EU(17) Industrial orders (August) 1.9%

09:00 EU(17) Industrial orders (August) Y/Y 6.2%

The euro weakened as European leaders struggled to convince investors they can craft an effective response to the region’s debt crisis.

The 17-nation currency fell after a report showed European services and manufacturing output contracted in October at the fastest pace in two years, adding to signs the economy is edging toward a recession.

European leaders meeting in Brussels yesterday outlined plans to assist banks, heading toward a revamped strategy to resolve the debt crisis. The 13th summit in 21 months excluded a forced restructuring of Greece’s debt, keeping with the policy of encouraging bondholders to accept “voluntary” losses to help restore the country’s finances. Leaders will meet again on Oct. 26.

EUR/USD: the pair fell in $1,3860 area.

GBP/USD: the pair fell in $1.5920 area.

USD/JPY: the pair decreased in Y76,10 area.

Offers $1.4010/15, $1.4000, $1.3970, $1.3920, $1.3900/05, $1.3870/75

Bids $1.3820-790, $1.3785/80, $1.3750

• can't exclude restructuring of debt as ultimate resort;
• EFSF must be able to intervene in secondary market ASAP;
• banks must clean up their balance sheets ASAP.

• can't exclude restructuring of debt as ultimate resort;
• EFSF must be able to intervene in secondary market ASAP;
• banks must clean up their balance sheets ASAP.

Resistance 3: Y76.80 (МА (200) for Н1)

Resistance 2: Y76.50 (session high)

Resistance 1: Y76.30 (high of european session) 

Current price: Y76.05 

Support 1:Y76.00 (area of session low)

Support 2:Y75.75 (historical low)

Support 3:Y75.00 (psychological mark)