Markets Summary for 10/22/2012

Markets over the past 20 hours had a wild ride. Markets moved between gains and losses for most of the session. The story in the forex markets was the Japanese yen as it ended lower against the dollar for an 8th straight day. A report showed Japanese exports fell the most since the 2011 earthquake and traders are thinking that’s going to prompt the Bank of Japan to do more monetary stimulus. Economy Minister Seiji Maehara pressed the central bank for more stimulus yesterday.

The yen dropped 0.7% to 79.90 per dollar, the weakest level since July 12. The yen slid to 104.28 per euro and touched 104.46, the weakest since May. The Japanese currency weakened to 82.26 per Australian dollar.

The slide in exports is a real problem for Japan as it’s an export oriented economy. The BOJ announces its next policy decision on October 30th and will also issue its revised economic projections for 2012 and 2013. Also it will release its first set of forecasts for 2014.

From a technical perspective, the yen broke out of above its 200 day moving average of 79.44 per dollar. That’s a bullish trading signal and further dollar strength is likely.

The aussie dollar weakened against most major peers ahead of a report this week that may show inflation held near the lowest in 13 years. If that’s the case, traders anticipate that the central bank may cut interest rates.

The euro gained for the first time in 3 days against the dollar after the Spanish Prime Minister’s People’s Party won 41 of the 75 seats in the regional assembly in Galicia. This was a sign that the austerity program the Prime Minister has implemented is working and is gaining support. The euro market sentiment has improved and the euro is finding solid support at the 1.30 level to the dollar.

US oil markets fell to the lowest level in 2 weeks as TransCanada Corp. planned to restart its Keystone pipeline.  December futures fell $1.79 to $88.65.  November futures expired today. Brent December futures fell $.70 to $109.44 on the ICE Exchange. The Buzzard field in the North Sea is expected to resume production and that’s bearish for prices.

The drop in Japanese exports that weakened the yen also brought concerns to the crude oil market about global growth slowdown. Right now there is no shortage of supply and any signs of demand weakness spooks the market. The Keystone pipeline brings 590,000 barrels of crude per day into the US from Canada.

US Treasuries fell today as the market is becoming concerned with signs that the Presidential race between Mitt Romney and Barack Obama is narrowing. Two weeks are left in the race and polls are showing the candidates to be virtually even. Traders see momentum gaining for Romney as a risk on sentiment and bad for Treasuries.

Durable goods orders will be released this week and the Treasury will auction $99 billion in two-, five-, and seven-year notes starting tomorrow. Durable goods orders are expected to increase 7.2 percent last month after falling 13.2 percent in August. On October 26, gross domestic product will be released and is expected to come in at 1.9 percent, up from 1.3 percent the previous quarter.

US stocks erased losses as Apple led the technology sector higher. The start of the week has been a wild ride for investors as the market bounced back and forth between gains and losses since Asia opened last night. Chinese and Japanese stocks ended the day higher on hopes for more stimulus. European shares were weaker on economic concerns in the euro zone. Caterpillar slashed their economic forecast ahead of the US open and that spooked many investors in Europe.

After the US close, Yahoo! reported earnings and revenue that beat analysts expectations. This was the first report under new CEO Marissa Mayer. Yahoo! shares rose in after-hours trading.

Tomorrow at 1pm EDT Apple is expected to unveil a smaller version of its popular iPad. It’s expected to be a popular product and better able to compete with Amazon’s Kindle.  But the biggest news this week will be the unveiling of Microsoft’s Windows 8. It’s the most radical overhaul of Windows since 1995. There’s no more start menu. There’s a touch screen. Depending on the reception Windows 8 receives from consumers, it could become a further catalyst for users to switch to Apple’s Mac operating system.

The other big event in tech this week will be Facebook’s earnings release on Tuesday. Also another lock up of employee Facebook shares ends on Thursday. The stock is down 30% since its July earnings release.

Gold rebounded today as it traded at its 50 day moving average. Some traders are staying on the sidelines thou ahead of the Fed’s policy statement to be released on Wednesday. In the physical market, traders reported light buying from Asian jewelers. Indians tend to buy during the Hindu festive season. This is seen as an auspicious time to buy gold; however, demand has been weak this year. Silver held the key $32 support level. Copper ended the day at a 1 month low on slowing economic worries.

In other commodities, grains ended the day with wheat and soybeans higher and corn flat. Concerns about a Ukrainian export ban boosted wheat prices and worries over dry weather in the southern Plains. Soybeans recovered Friday’s losses as harvest season is almost complete and farmers are choosing to store their crop rather than sell. Corn is sitting below its 50 day moving average above 773. The market is about 10 cents below that price and a break above will likely trigger fresh bullish buying from commodity funds.

Natural gas prices plunged 5 cents to settle at $3.45 per million BTUs. Traders are saying there’s still plenty of supply and cold weather has not settled into the key consuming regions yet. On the charts, natural gas has key support at the $3.40 level and that is an area to closely watch.