Mixed Global Data Means Mixed Financial Markets

U.S. markets closed mostly in the red yesterday as European economic news came in softer than expected. However, data showed the U.S. services industry grew better than expected in October.

The services sector expanded strongly which indicated the Federal Reserve could taper back its bond buying program sooner than expected. This snapped a two day winning streak for U.S. stocks.

Economic news out of Europe was not very good. The European Commission is expecting the Eurozone economy to contract by 0.4 percent in 2013. It is expected to recover and grow by 1.1 percent next year (2014). This forecast has raised expectation that the European Central bank (ECB) will cut its key rate on Thursday.

STOCKS

The DJIA had a rather bleak day where 2 shares fell for every 1 that went up. At one point we had a triple digit fall before the Blue Chip clawed its way back up to close down 20.9 points to 15,618.22. The S&P 500 was off nearly 5 points to close at 1,762.97. It is just under nine points from last week’s record close. The Nasdaq Composite bucked the losing trend to close up 3.27 points to 3,939.86. We are less than 61 points from 4,000 now.

The Nikkei is up one percent at 14,366.85. At one point the index was above 14,370 points. Investors are very happy as the USD/JPY currency pair is approaching $99.00. the Shanghai Composite is extending its losses from its one week low today. The People’s Bank of China (PBOC) says it will continue a prudent stance and is still concerned over inflationary pressures. These comments were made in yesterday’s Q3 policy report.

Australia’s ASX was down 0.2 percent as it continued to move lower after September’s trade deficit came in at AUD 284 million. We had expected it to come in at AUD 450 million.

CURRENCIES

USD/JPY (98.629) has found support at 98.20 and we are recovering from the low at 96.95. We still need that strong push above 99.00 to break this sideways trend and target 100.00.

EUR/USD (1.35009) has found strong support near 1.347 and recovered. We are testing key resistance at 1.350 now. A break here will be bullish. GBP/USD (1.6084) fell to around 1.6000 as expected but support at 1.588 is holding nicely. We could now retarget 1.62.

COMMODITIES

Copper (3.262) is still above 3.25 as we remained range bound between that key support and up towards 3.345. Gold (1313.80) remains near its support at 1310. The yellow metal still looks weak to target 1275. Silver (21.715) is moving sideways. We look bearish for 21 before rising back towards 23.

TODAY’S OUTLOOK

Investors will be focusing on the U.S. Q3 economic growth release (GDP). We also get jobless claims, consumer credit and chain store sales.

This is the prelude before the Non-farm payroll report due this coming Friday.