Daily Market Reviews by MAYZUS.com

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15 AUGUST 2013: US STOCKS DECLINE ON MACY’S SALES

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

The US stock indices fell last night after retailer 'Macy's Inc' quarterly results disappointed. This gave new urgency to investors debates on the timing and pace of reductions in the Federal Reserve’s (FED) bond purchases. The department store operator Macy’s shares fell 4.4 % leading to a loss in S&P. Also Dow Jones and Nasdaq ended in red territory after Macy’s disappointing sales.

In Europe, both France and German economies grew faster than the United States in the second quarter of 2013, pulling the Euro zone out of its longest recession seen in years. The increased pace was primarily driven by renewed business and consumer spending in the two largest economies inside the Euro zone. The Euro zones economy continues, however, to be fragile with countries such as Spain and Italy struggling. The figures published on Wednesday show a 0.3 % growth.

Austria and Finland also presented positive growth figures while the Cyprus economy contracted 1.4 % in the second quarter, after the international bailout in March. Laiki, the second biggest bank, was forced to close and the Bank of Cyprus and Hellenic Bank suffered heavy losses on big deposits. In spite of some positive signs inside the Euro zone, the economic and fiscal problems seen in the periphery and especially in Southern Europe indicate that the Euro zone is in for a bumpy and uneven recovery.

The positive news from France and Germany had little impact on the currencies. EUR/USD traded at 1.3258 after an earlier high of 1.3278. Traders put stop/loss orders on 1.3230. A break could see a slip to 1.3155. The DXY Dollar basket was marginally down after climbing one percent since its low on August 8th. Oil prices fell during yesterday's session, but precious metals, Gold and Silver, demonstrate a clear, positive upward trend.

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16 AUGUST 2013: OIL JUMPS ON EGYPT UNREST

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

Oil prices jumped on the tense situation in the Middle East where at least 535 people were killed in a security crackdown in Egypt. Brent and NYMEX, New York crude, climbed to a four-month high on Thursday with Brent reaching USD 111 a barrel. The escalating violence in Egypt might affect the Suez Canal and spread all over a middle East already torn by a two year civil war in Syria, disturbing death tolls and unrest in Oil producing Iraq and Libya.

Egypt has declared a state of emergency. Supporters of the deposed President Mursi have, nevertheless, announced new major demonstrations. Oil storages in the US are shrinking faster than expected. Egypt is a minor crude producer, but home of the strategically important Suez Canal and the Sumed pipeline. The deadly violence threatens to choke Oil supply routes and have serious consequences for steady Oil supplies from the Middle East.

The Libyan Deputy Oil Minister stated on Thursday that Libya’s Oil production has been reduced by 600 000 barrels a day. Iraq expects to slash supplies with 600 000 barrels a day in September. US crude inventories fell 2.8 million barrels with stocks at the lowest level seen since 2012. As long as the situation in the Middle Eastern area is kept under some control, Brent doesn’t seem to have a potential to climb higher than to USD 113 – 114. Europe’s top Oil company, Royal Dutch Shell, has temporarily closed its offices in Egypt.

The USD has come under new pressure on continued uncertainty over when the Federal Reserve (FED) might start to taper its bond buying program. Retailer Macy’s department store, delivered disappointing results on Wednesday, leading to new question marks regarding the healthiness and growth of the US economy. EUR/USD is at 1.3299 and USD/JPY trades at 98.15. Precious metals, Gold and Silver, have regained some of their safe-haven status and have steadied on levels not seen in months.

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19 AUGUST 2013: EQUITIES STRUGGLE – GOLD REACHES 1373

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

While equities worldwide struggled against the US federal Reserve (FED) tapering concerns, Oil and Silver rallied at the end of last week. Gold rose to a two-month high on Friday. Silver saw its strongest weekly performance in five years with a 13 percent rise, strongly indicating that the wave of selling in precious metals over the last half year, has come to a temporary halt. Gold rose 50 Dollars during the week to hit a peak of USD 1373 a troy ounce.

Precious metal prices were helped by a weaker Dollar. EUR/USD traded steadily above 1.33 during the week with good news coming from the Euro zone. Both France and Germany presented positive growth figures which, in spite of weak fundamentals, are interpreted as the Euro zone possibly coming out of recession. Data on Thursday showed that investors in Japan and China led large sell-offs in US treasuries, following FED's statements on tapering in June.

China has, over the last half year, strongly increased its Gold holdings seemingly in an effort to diversify its investments in US treasuries. China is seen to have built up Gold reserves to become more independent of both USD and EUR. Both currencies are regarded as vulnerable. With eyes pointing towards the future – 10 – 20 years perspective – China seems interested in building up the Chinese currency as a competitive international reserve currency.

Last week saw the first net inflow into Gold backed exchange traded funds, so called ETF's, sine 2012. ETF's sold 402 tonnes of Gold in the second quarter of 2013, double the Gold production of South Africa. Over the last few weeks, the number of Gold 'short positions' have been reduced. This is combined with a surge in Chinese Gold buying which rose 87 % from 2012 to 386 tonnes. Retail buying in India and central banks buying are also boosting Gold prices. Many traders remain, however, gloomy and ask how long the rally in precious metals will continue.

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20 AUGUST 2013: STEADY DOLLAR BEFORE FED MINUTES ON WEDNESDAY

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

The Dollar held steady on Monday as investors refrained from bets on the currency before the publication of the US Federal Reserves (FED) minutes on Wednesday. It is expected that the minutes might give a more clear indication on the pace and timing of FED’s plan to trim its bond buying program. Analyst consensus is that tapering could start in September. The Dollar index, DXY, was flat. EUR/USD trades at 1.3348 and USD/JPY is at 97.97.

Higher yields on Dollar denominated bonds have made the Dollar more attractive over the last few days, but this has been blunted by a promising improvement in the Euro zone and UK economies which have underpinned the Euro and Sterling. Data last week showed that both the German and French economies were growing faster than expected in the second quarter. EU manufacturing and services data are going to be published on Thursday and give a more clear indication as to whether the Euro zone is pulling out of recession.

The data will have an impact on the strength of the Euro, which is expected to falter against the Dollar in the upcoming trading sessions. That could mean that Dollar would start to attract demand against the Euro. The Dollar might also be in for a new test against the Japanese Yen. If the August 15th peak of 98.66 Yen is broken, there might be retest on the August high of 99.955 Yen. Oil and precious metal prices are keeping steady at the high levels seen on Friday. Brent trades at USD 110.55 a barrel and gold stands at USD 1376.

Stock markets in Europe continue to be under pressure with France, Germany, and England indexes trading down. There was a weak start in the equity market in Asia with Asian Pacific index in red territory the first day of the week. The unrest in Egypt continues with new clashes between Mursi-supporters and the police, claiming an unconfirmed 1000 lives taken until now. US politicians claim there has been a halt in the US billion Dollar military help to Egypt.

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21 AUGUST 2013: FED SENDS MARKETS TO ONE MONTH LOW

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

World shares sank to their lowest level in more than a month after disappointing sessions in New York yesterday, along with disappointment when trading started in Asia on Tuesday morning. The sell off continued in Europe, and emerging markets saw funds pouring out. Global markets are worried and at unease with expected cuts in US Stimulus and related gains in bond yields, leading to investors being on edge. Oil and precious metal prices have fallen with the Dollar under pressure. EUR/USD stands at 1.3395. USD/JPY is at 97.29.

European stocks were down with the French CAC as the biggest loser at minus 1.35 %. The FTSE London-index dropped 0.57 % while the German DAX was down 1.06 %. The Russian indices suffered similar losses. The losses in Europe are following a fourth day of straight falls on both Wall street and in Asia. India is also hit hard by a dramatic fall in the Rupee in relation to USD. The Japanese Nikkei fell 2.7 %.

US Federal Reserve (FED) shall publish their minutes from the end of July meeting later on today. It is expected that the minutes could offer hints on when FED will start winding down its USD 85 billion-a-month bond buying program. Uncertainty regarding what is going to happen next has recently driven up bond market borrowing costs. This has sparked a sell off in riskier assets as stocks.

Brent crude, which has been steady above USD 110 a barrel, fell below this level on Tuesday due to nervousness about the effect of a halt in monetary easing. Oil prices are, however, supported by export problems in Libya and the continued unrest in Egypt. Western powers are threatening to withdraw their economic assistance, but Saudi Arabia stated yesterday that they would step in to avoid any collapse of the Egyptian economy.

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22 AUGUST 2013: HOME SALES JUMP TO A 3-YEAR HIGH

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

On the eve of the US Federal Reserve’s (FED) presentation of their monthly minutes, US home resales rose to their highest level in three years. Home sales for July suggested that a sharp increase in borrowing costs is only having a limited impact on the housing market recovery. Home sales jumped 6.5 % to an annual rate of 5.39 million units. Analysts previously forecasted a much smaller increase.

The currencies fluctuated heavily during Wednesday before the FED minutes presentation. EUR/USD jumped above 1.34 and fell back to 1.3386 with major banks taking big short exposures, betting on a stronger Dollar and steep falls in both Euro and Yen. Emerging market currencies, especially in Asia, did fall rather dramatically against the USD in the last few days, with the Indian rupee being the big loser. Oil prices are relatively steady with Brent crude trading below USD 110. Gold rose to USD 1376, but lost ground before the FED minute presentation.

Greece’s financial obligations are again under heavy scrutiny. German Finance Minister Wolfgang Schaeuble stated on Tuesday that Greece would need a third bailout. His election campaign statement came the day before today’s arrival of the European Central Banks (ECB) officials to Athens, to scrutinize Greece’s progress in meeting its international bailout obligations. Since 2010 Greece has been bailed out with 240 million Euro's by the ECB, International Monetary Fund and European Union.

Yields on Greek bonds rose immediately to new yearly highs after the Greek government tried to give the impression that a turnaround in the economy is starting to take place lately. Greece has, for the last 6 – 7 years, been through a dramatic recession. The austerity measures ordained by the “Troika” of ECB, IMF and EU, have created record high numbers of unemployment. The anti-austerity opposition was quick to seize on Schaeuble’s comments, pointing to yet another round of painful austerity.

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23 AUGUST 2013: MINUTES CREATE NEW UNCERTAINTY

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

The minutes from the end of July meeting of the US Federal Reserve (FED) which were published on Wednesday night, did not give markets the clarity they were looking for. The minutes repeat the same generalities markets have been fed with over the last half year. Tapering is going to come, but there is no clear time table for when FED will start to slow down their bond buying program. Whether it is going to start this autumn, or the first half of 2014, is still an open question. Everything hangs on the development of the American economy.

Banks and financial institutions gambling on more clear guidance, were disappointed. The USD is gaining some ground against other currencies, and the yield on US bonds continue to raise. The Dollar DXY, a basket of six major currencies weighed against USD, was up 0.5 %. US treasury yields reached a two-year high of 2.936 percent. EUR/USD trades down at 1.3321. The Japanese Yen is weaker trading at 98.64 Yen a Dollar. Brent is steady around USD 110 a barrel. Gold trades at USD 1371.

The higher yields have, over the last few weeks, led to a repatriation of funds back to the US from emerging markets, helping to support the Dollar which in short term looks very bullish. Tapering or termination of printing of the Dollar, shall mean tighter credit conditions and higher interest rates. Many emerging markets have big exposures in US Dollars and would be faced with big credit problems with a combination of increased interest rates and a stronger USD.

The effects of this trend is already felt in Asia where the Indian rupee is under extreme downward pressure. Countries like Thailand and the Philippines are as strongly hit as Turkey. The Turkish lira has lost 4% against the Dollar only this month. Many analysts fear that Asian countries in a short time will be faced with the same financial and economic crisis as during the Asian crisis of the nineteen nineties. This would have a devastating effect also globally.

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26 AUGUST 2013: GOLD AND SILVER SKYROCKET

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

Gold and Silver skyrocketed on Friday. Gold added USD 21.70 and ended at 1397.80 after breaking through the 1400 level during the session. Silver added 4 % to close at 24.08 after trading as high as USD 24.24 an ounce. These quotations represent the highest seen for precious metals in weeks. The technical charts point to further gains. It is therefore greatly likely that the strength in prices will spill over into this week’s trading.

A weaker than expected July 'new home sales' report, which decreased 5 % since June, created new bewilderment in the markets. The July minutes from the US Federal Reserve (FED) created new uncertainty regarding when FED will eventually start tapering its bond buying program of USD 85 Billion a month. This gave precious metals a strong boost. Gold broke out of the technical resistance in USD 1377 – 1380, helped by increased Silver prices on its way up.

The disappointing housing numbers also had a negative impact on the Dollar. The new housing data gave rise to new speculations when tapering will start. September seems unlikely now and currency analysts are pointing to December as more realistic. It is generally believed that tapering of the central bank’s monetary easing would lead to an increase in interest rates and a stronger Dollar. The dollar basket, DXY, weighed against six major currencies, decreased. The Dollar lost ground against both the Yen and the Euro. EUR/USD climbed above 1.34 on the housing numbers.

A second reading of German gross domestic product confirms that Europe’s biggest economy rose 0.7 % in July. This augurs good for Angela Merkel’s re-election opportunities in September, and for better perspective for growth in the Euro zone. Despite the temporary decrease in the Dollar, it is much more favoured by investors over the Yen for the rest of 2013. The Euro has also gained healthily against the Yen over the recent week.

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27 AUGUST 2013: DURABLE GOODS ORDERS DROP

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

Durable or capital goods orders in the United States dropped 7.3 % in July, and put new questions marks over the economy at the beginning of the third quarter. The demand for goods ranging from aircraft to computers and defence equipment, fell. This is the biggest decline since last August. The decline in durable goods are coming on the top of negative housing figures published last Friday, indicating a weaker housing market than expected.

It is likely that the failing durable goods numbers will give rise to new speculations on when the US Federal Reserve (FED) will eventually start tapering its bond buying program. It has been indicated that tapering would start in December. Based on the latest figures it is unlikely that tapering might start earlier than at the end of 2013. The fall in durable goods orders had an immediate impact on stock futures. Also yield on US treasuries fell.

Oil prices have continued to rise on the escalation of US involvement in Syria. Brent crude is trading close to USD 111 a barrel. US Defence secretary Chuck Hagel is reportedly going to discuss a possible military intervention in Syria with its British and French counterparts on the alleged use of chemical weapons. The possibility for a direct Western involvement could have serious impacts on the world stock markets and trigger the market to continue its present downward trend.

The US Dollar traded down against Japanese Yen on Monday after new uncertainties arose as to when tapering will eventually start. USD/JPY trades at 98.42 Yen a Dollar. EUR/USD was flat during Monday at 1.3373.

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28 AUGUST 2013: OIL, GOLD AND SILVER SKYROCKET

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

Western warmongerings had Oil, Gold and Silver prices skyrocketing on Tuesday. US and allied envoys told rebels fighting Bashar-al-Assad that Western powers will attack Syria within days. The UK Prime Minister, David Cameron, stressed that the most likely day of attack is Thursday. Brent crude jumped by two Dollars USD 113.46 a barrel on the news. Gold and Silver continue to raise as safe havens. Gold reached USD 1420 adding new 25 Dollars during Tuesday’s trade. Silver trades at USD 24.65 up 20 % from levels seen only a couple of weeks ago.

Syria is probably going to be attacked by cruise missiles in what Western observers say are aimed at teaching President Assad and Iran a “lesson” for defying the West. The aim is presumably not to turn the tide in the civil war, which, over the last few months, have given President Assad’s forces the upper hand. NATO air strikes changed the course of the Libyan civil war. The prelude to an eventual attack on Syria is a blue copy of the US and British invasion of Iraq and the NATO-bombings of Serbia in connection with the “liberation” of Kosovo.

Along with Brent US crude, NYMEX, jumped to USD 108.50 a barrel. Western powers are taking a great gamble in attacking Syria. A military action in Syria might result in spreading chaos to the Oil-producing countries in the Middle East, in spite of the fact that Syria itself is not a major Oil producer. Libyan production has already dropped 60 % and down to 665 000 barrels a day. Key shipping routes for crude Oil such as Akaba and the Suez canal areas are well located in the area.

A military action might also put stress on US Oil storages. Commercial crude stock piles were expected to have fallen last week due to heavy consumption of gas during the end of the holiday season. Increased oil prices would put added stress on a US economy considering to terminate using the money printing press by tapering the bond buying program. Data on homes sales and durable goods over the last two days, have shown that continued monetary easing might be necessary to keep growth and the economy on the right track.

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