Daily Market Reviews by MAYZUS.com

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18 JULY 2013: FED OPEN FOR FLEXIBILITY

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

Federal Reserve (FED) Chairman Ben Bernanke told Congress yesterday that he still expects FED to start scaling back on its massive USD 85 Billion monthly bond buying later this year. The door was, however, left open for changes if the economic outlook so requires: “Our asset purchases depend on economic and financial developments, but they are by no means on a preset course”, Bernanke stated. His comments contained something for everybody, and gives FED plenty of room for maneuver.

His remarks pushed US stock, futures and bond prices following the release of the statement. The Dollar softened initially somewhat against the Euro and Japanese Yen, but is now slightly stronger: EUR/USD stands at 1.3095 and USD/JPY has again crept above the 100 level trading at 100.11 Yen a Dollar. Oil prices are keeping the level seen in July. NYMEX, New York crude, stands at USD 106.33 and Brent at 108.44 a barrel. Gold is fifteen Dollar down at USD 1276 an ounce.

During the question/answer session in Congress, Bernanke was praised by Republicans and Democrats alike for his tenure as FED Chairman. Bernanke is most likely going to resign when his term expires on January 31st. Many Republicans have privately blamed Bernanke for his aggressive monetary easing which they claim helped President Obama’s re-election. Some Republicans repeated these complaints as they warmly acknowledged his services.

Bernanke’s pledge to keep monetary easing for the foreseeable future, supported global market sentiments. Asian shares fell, however, on Thursday due to concerns over available financing for property developers in China. China introduced some weeks ago stricter control with the explosive “shadow banking” system, and investors fear the impact of these controls. Indexes fell all over Asia with the exception of the Japanese Nikkei which added 0.4 %. The Dollar was steady against a basket of six currencies, DXY.

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19 JULY 2013: SHARP FALL IN JOBLESS CLAIMS

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

New claims for jobless benefits dropped last week to their lowest level in four months. This will probably bolster expectations that the US Federal Reserve (FED) will start tapering its monetary stimulus this year. The improved jobless data came just one day after FED Chairman Ben Bernanke made his presentation to Congress where he made the continuation of the bond buying program dependent on the “health” of the US economy. The initial claims for state unemployment benefits fell by 24 000 to seasonally adjusted 334 000. The fall was much deeper than analysts had predicted, and appeared to back the case for FED winding down the bond buying during 2013. The Dollar extended gains against the Yen, a sign that investors are betting on tighter monetary policy in the future. Overnight the Euro has gained ground against USD trading at 1.3137. USD/JPY trades at 100.10.

In other developments the international rating agency Moody’s has raised the outlook on the US economy from negative to stable, and affirmed the country’s triple-A- rating. Moody’s is citing steady growth despite the reduced government sending. The US budget outlook has improved in recent months, alleviating some of the pressure on policy makers for further budget cuts and more fiscal compromises. In May, the Congressional Budget office stated that the deficit is shrinking faster than any other time since 2008. Better than expected earnings took Dow Jones and S&P 500 to new record highs yesterday. Morgan Stanley jumped 4.4 % and posted a 42 % increase in quarterly profit. 76% of the financial reporting earnings have surpassed estimates. Health and health insurance stocks beat expectations while Microsoft failed to deliver. Dow Jones climbed to 15 589. S&P’s new record is 1693. The Japanese Nikkei, which reached a two-month high earlier in the week, slid 1.1 % on profit taking and fear that nationalistic policies will be given priority at the expense of structural reform.

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22 JULY 2013: RECORD HIGH INFLOWS IN STOCKS

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

Outstanding quarterly results for the major American banks and the Federal Reserve's (FED) assurances to keep supporting the US economy by continued printing of Dollars, spurred investors to pour more money into US equity funds last week more than any other time since the financial crisis in 2009. Global markets seem to have also regained their appetite for stocks; equity markets being for the moment by far the best sector to invest money into. The three major US-indexes; Dow Jones Industrial, the technology heavy NASDAQ and S&P financials have posted one record after the other in July, after being rocked by volatility in May and June.

The big banks: Bank of America, Citigroup, Goldman Sachs, J P Morgan Chase, Morgan Stanley and Wells Fargo, have all beaten analysts forecasts for their quarterly earnings. S&P hit a record USD 15 trillion after the three biggest banks posted USD 23.12 billion of net income for the three months leading up to July, the highest being reported since the second quarter of 2007. It is, however, worth being reminded that only one year later, in 2008, financial markets suffered their worst crisis in decades and brought the liberal market economy on the verge of collapse. Some analysts foresee a similar development when FED finally decides to terminate its excessive bond buying program. For now, the market is run by optimism. S&P financials index is up more than 6 % in July.

There has been a strong increased demand for trading and investment banking services. The record inflows into the stock market contrast with money pulled from bond funds. Last week saw outflows of USD 1.7 Billion from investment-grade debt funds and another billion of outflows from US treasuries as investors turned away from assets regarded as “safe”. The riskier high-yield bonds saw USD 4 billion in inflows: the highest level in two years. Exchange traded funds which track US stocks, have, over the last month, attracted USD 24.4 Billion in inflows, four times higher than in the previous six months.

Copyright: MAYZUS Investment Company Ltd

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22 JULY 2013: MCDONALD’S FAILS TO DELIVER

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

After hitherto strong quarterly earnings season the heavyweight, McDonald’s, failed to deliver according to expectations. US-housing numbers for June were also weaker than forecast. After jumping in April and May the growth in housing sales unexpectedly took a breather last month. Experts are, nevertheless, unwilling to see the late figures as a token of underlying weakness in retail and US economic fundamentals.

The weaker profits of the world’s largest restaurant retailer are mainly seen as a result of declining sales in it's biggest market, Europe. In Europe one of the leading banks, the Swiss UBS, followed up the strong banking results from the United States and beat forecasts, in spite of an expansive lawsuit settlement with US regulatory authorities over housing bonds prior to the financial crisis in 2008. UBS added 2.7 % and reached a two-year high during yesterday’s trade.

The trading week started with a fall in the Dollar both in relation to the Japanese Yen (JPY), following Prime Minister Abe’s victory in the Upper Chamber elections, and in a stronger Euro. Abe has promised to keep focus on the economy. USD/JPY fell to 99.42 during Monday’s trade. EUR/USD added 100 points during Monday’s trading at 1.3215. The British Pound (GBP) stands at 1,5368 against the green back. Gold reached its highest level in a month and jumped USD 1328 an ounce after dipping below the 1200 level only a couple of weeks ago. Silver has also recovered strongly at 20.42. For the first time in years, New York crude, NYMEX, trades higher than Brent crude, both are above US 108 a barrel.

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24 JULY 2013: CHINA SHOWS MUSCLE

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

The US Dollar continues to lose ground against most currencies. The DXY-index, a Dollar weighed towards a basket of six major currencies, fell also on Tuesday from Monday’s low on 82.325. The Euro inched marginally above 1.32. USD/JPY keeps steady at 99.721. After new record highs in Asia spurred by a Chinese stock rally, Wall Street continued to new record highs on good quarterly earnings from Dupoint and United Technology. Apple is going to present results after closing in New York.

In an upbeat statement on Tuesday, the new Chinese Premier stressed that the aim of his authorities is to double the Chinese Gross Domestic Product, GDP, from 2010 to 2020, to obtain this target of economic growth of a minimum 7 % annually, which is needed. The last forecast for yearly growth in China in 2013, is 7.5 %. The Chinese government has introduced measures which encourage bigger competition between banks and financial lenders, while simultaneously keeping inflation under control.

The Hang Seng index added 2.1 % on the announcement that China shall start huge infrastructure projects within the railway industry. These projects will consume big amounts of cement, steel and commodities, and are seen by markets as a sure token that China will continue to be the same driving global force as it has been for the last few years. Chinese new leadership has no desire to give up on ambitious targets set by its predecessors. It is also determined to avoid any hard landing in its economy.

The Chinese statements were positively received, as were quarterly earning results from the US and the Federal Reserve’s (FED) statement last week, that monetary easing is going to continue for the unforeseeable future. Oil prices are keeping steady at the USD 108 a barrel level, and Gold and Silver started the week with higher prices than seen in weeks. Gold took a breather on Tuesday, and stayed at USD 1336 after adding 3 % on Monday. Commodities don’t show any clear direction, but the Chinese statements should represent a clear boost for a sector being under strong pressure.

Copyright: MAYZUS Investment Company Ltd

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24 JULY 2013: USD AND EURO PICK UP GLOBALLY

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

US stocks edged lower on Wednesday after days with increases and new record highs. Disappointing results from heavyweights Caterpillar and AT&T, overshadowed a solid quarterly earnings report from the worlds highest capitalized company, Apple. The Dollar DXY-index weighed against a basket of six major currencies, picked up on data showing stronger domestic manufacturing and housing numbers in June. New home sales rose to a five-year high.

Surprise improvement in US and European factory activity offset further signs of cooling in the China’s economy. New data showed that the Chinese manufacturing sector is contracting for the third straight month. That had an immediate impact on the oil demand where prices fell 2 Dollars. NYMEX and Brent crude trade USD 106 – 107 a barrel. On Monday, strong statements from the new Chinese Premier lifted global stocks, demonstrating the markets volatility on day to day economic news.

Seemingly better outlooks for the United States and Europe caused investors to reduce safe-haven holdings in US and German Government debt. Gold, a traditional safe-haven asset, which has risen close to USD 100 an ounce over the last four days, snapped its winning streak on profit taking. The same trend is witnessed in Silver, which has also taken a breather after several winning days after being in free fall over the last five – six months.

Apple’s results which initially were met with some reluctance when presented after the closing session on Tuesday, beat analyst’s forecasts. The stock price climbed 5.9 % at USD 443.87, a far cry though from the peak numbers in the high 600's, a year ago. Apple has promised solid dividends. This is also pleasing investors which took the stock to its highest level since June the 10th. The stronger euro-zone factory data sent the EUR/USD to a one month high at 1.3230. USD/JPY is gaining ground trading above 100 Yen to a Dollar.

Copyright: MAYZUS Investment Company Ltd

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26 JULY 2013: GLOBAL SHARES DROP ON CHINESE WORRIES

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

Shares fell worldwide on Thursday on worries about China’s slowdown and its impact on corporate earnings. These fears weighed heavier than tokens that Europe slowly might drag itself out of recession. Data showing better business morale in Germany and improvements in British economy pointing towards modest growth, did little to spark fresh demand from investors more focused on recent developments in Asia.

Investors worry that the Chinese growth engine is no longer running at full power. Chinese stocks suffered their second straight loss on Thursday despite measures from the government to spur the economy with heavy investments in railway and encouragement of the export industry. The Asia-Pacific, MSCI-index, lost 0,5 % from the previous day’s seven week closing high. Worries about China were also reflected in commodity markets, where copper dropped 0,5 %. Brent crude fell for a second day in row at USD 106,59 a barrel. Gold stands at USD 1314.

There have been marginal changes in the currencies. EUR/USD has lost 35 points and trades at 1.3196. The Japanese Yen (JPY) trades stronger against the USD at 99,68. The dollar is again dipping below the 100 yen a dollar mark.

Facebook shares soar after the social media delivered much stronger results than expected. Presented quarterly earnings delivered strong evidence that Facebook can drive on smartphones and tablets. Advertising revenue in the second quarter ignited a nearly 17 % share a rally. 700 million people daily use the Facebook platform. Facebook which was off to a rocky start when it introduced its IP in May 2012. In spite of a 15 % increase in the stock price yesterday, Facebook has still 20 % to go to reach its IPO-price.

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29 JULY 2013: DOLLAR ENDS WEEK LOWER

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

Concerns that the US Federal Reserve (FED) may lower its unemployment threshold at 6,5 % before terminating monetary easing and its USD 85 Billion monthly bond buying program, sent the dollar lower on Friday. Euro/USD climbed 1,1 % to 1.3282 over the week. The dollar as lost against a basket of currencies. Inflation data Prime Minister Shinzo Abe’s Upper House victory, boosted the Japanese yen. USD/JPY fell back from 100,32 to 98,50 yen a dollar. New Zealand dollar was the biggest gainer of the week - gaining 2 % against its US counterpart.

Speculation about a lower unemployment threshold comes after FED Chairman, Ben Bernanke, insisted that any monetary easing remained data-dependent. This convinced investors that any raise in interest rates was still a long way off. Investors have interpreted FED forward rate guidance that an interest rate hike will come earliest in 2016. The speculation was triggered by an article in Wall Street Journal which immediately put the dollar and US treasury yield under pressure. If the report signals will be a false alarm, USD will rally.

EURO gained ground on optimism on a turnaround in the Euro zone which is still in a deep recession. Even if the Euro zone remains in contraction, the negative figures are better than previous months due mainly to the recovery in Germany which continues to deliver better than its fellow European members. It is expected that the European Central Bank (ECB) will leave its interest rate unchanged when it meets later in the week.

The global equity market was in spite of good US-corporate quarterly results under pressure as China doubts on growth take hold. Indexes all over the world have climbed to new record highs, and technical corrections may be expected on this uncertainty. Gold and silver have consolidated last week’s gains after FED’s dovish attitude. Gold stays above USD 1300.00. Precious metals are helped by raising demand in China where sales volumes in gold and silver jewellery and coins are at record highs so far in 2013.

Copyright: MAYZUS Investment Company Ltd

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30 JULY 2013: STOCKS FALL AS USD STRUGGLES

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

Wall Street stocks fell broadly as investors eye - US Federal Reserve (FED) two day policy meeting starting tomorrow. Its statement will be closely scrutinized and interpreted for any signal that FED will start tapering monetary easing. Economic data both from Euro zone and the United States last week were better than expected. If July monthly jobless figures to be published at the end of the week comes out on the positive side, this would constitute a strong argument for FED tapering in September as many observers have forecasted.

Dow Jones, Nasdaq and S&P fell broadly yesterday, indicating that the air might start to run out of weeks’ booming stock markets. The European stock markets were also weaker yesterday following a 3,3 % fall in the Nikkei index in Japan during Monday morning. The steep fall in the Nikkei followed a new increase in the value of the Japanese yen which rose to 97,83 yen to a dollar, a 2 % gain to the dollar over the last week. A stronger yen works against the interests of the big Japanese exporters and weigh negatively on the Nikkei.

Euro traded steady against the dollar at 1,3261. The International Monetary Fund (IMF) has approved the release of a new tranche of loans to Greece amounting to USD 2.2 B. The release follows a fourth review of the “troika” which together with IMF, ECB and EU releases a tranche of Euro 6,8 B. The total value of the loans granted in March 2012 amounts to Euro 175 Billion over a period of four years. The loans are dependent upon serious austerity measures including firing thousands of state employees, likely to raise to new strikes and social unrest.

Oil prices which peaked to months high last week, have stabilized. Brent crude fell to below USD 107 a barrel on the first trading day on Monday, but has recovered 107,57, NYMEX, New, York crude, which traded higher than Brent for some days ago, stays steady between USD 104 and 105. Gold is down from its high on USD 1338 an ounce last week, trading at 1328. Silver which reached USD 20,50 last week, trades in the interval between USD 19,80 – 20,00 an ounce.

Copyright: MAYZUS Investment Company Ltd

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31 JULY 2013: DOLLAR EDGES UP FROM 5 WEEK LOW

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

The Dollar edged higher on expectations that the US Federal Reserve (FED), based on better economic data, will start tapering monetary easing in September or later in the autumn. Central bank meetings are due in the United States, England and European Central Bank (ECB) later in the week. No big changes are expected, but a FED policy decision pointing towards a termination in bond buying will probably put upward pressure on the interest rates and strengthen the Dollar.

The Dollar gained both against the Euro, 1.3254, and Japanese Yen which paid 98.06 Yen to a Dollar. The DXY-index where Dollar is weighed towards a basket of six major currencies, was up 0.3 % from a five week low. Oil prices, and precious metals, Gold and Silver, lost ground on a stronger Dollar. The Swedish Krone lost one percent on the Minister of Finance’s announcement of weaknesses in the generally perceived 'strong' Scandinavian economy.

The US banking giant JP Morgan Chase, which has lately been under regulators sharp scrutiny, settled on USD 410 million on alleged power market manipulations in California, and Midwestern states. The settlement dictated that JPM accepted the facts presented by the Federal Energy Regulator without denying or admitting certain allegations. Banks involvement in the commodity chain by trading metals and at the same time owing warehouses and pipeline/plants, have, this week, been under increasing fire from Congress. The disputed practice was initiated in 2003.

Global stock markets have lost some of their momentum starting a new trading week. Both Dow Jones and S&P ended in red following a sell off in telecoms and materials, after disappointing quarterly results from Verizon and Mosaic.

Copyright: MAYZUS Investment Company Ltd