Ahead of the Open Bell
Will the trend continue in U.S. markets? Each time the S&P 500 [stock ^SPX] began the week down 1% or more such as yesterday the U.S. markets closed the week out lower 5 out 6 times.
Euro Zone
Euro – Is this the Recovery or the Calm before the Storm?
The Euro bounced sharply off of multi-year lows in a week of impressive recovery for the US S&P 500 and broader financial markets.
Mario Draghi, President of the ECB Statement
Based on our regular economic and monetary analyses, we decided to keep the key ECB interest rates unchanged. While inflation rates are likely to stay above 2% for the remainder of 2012, over the policy-relevant horizon we expect price developments to remain in line with price stability. Consistent with this picture, the underlying pace of monetary expansion remains subdued. Inflation expectations for the euro area economy continue to be firmly anchored in line with our aim of maintaining inflation rates below, but close to, 2% over the medium term
Ford Motor Sales up but Stock Price Heading Lower
U.S. auto manufactures continues to improve with all U.S. manufactures posting double digit sales gains for the month of May although shy of analyst’s expectations. Ford Motor Company [F, $[stock F] sales rose 21% for the month of May falling short of both Barclays and Edmunds.com expectations.
European Investor Confidence Falls to 3-Year Low
European investors’ optimism for the Eurozone has reached a 3-year low according to a Sentix survey. The Sentix investor confidence for June came in at -28.9, the lowest score since May 2009, but still better than analysts’ expectations for a -30.0 survey result. Back in March of this year, the survey reached a six month high at -8.2, before the survey results declined for the next four straight months.
British Pound Worst Performer Ahead of Bank of England Decision
The British Pound tumbled near year-to-date lows and took the dubious honor of worst-performing major currency on the week, falling almost four percent against the surging Japanese Yen. Disappointing UK PMI Manufacturing survey numbers capped a difficult week for the British Pound, and indeed the stage is set for further declines into an important week ahead.
Playing the Euro Zone Slide with iShares MSCI Europe Financials Sector Index Fund – EUFN
Technical screens found another ETF that has confirmed a weekly triangle suggesting continuation of the current bearish trend. The pattern is confirmed with the Relative Strength Indicator (RSI) pushing below the trendline at the same time the moving average of the RSI is moving lower.
Market Wrap Up
This stock market has problems. Problems indeed! With what appeared to be an oversold bounce this morning was shattered on more negative news from the ECB cutting funding to certain Greece’s banks not to mention the FOMC statement about highlighting several members saw the need for additional stimulus causing the bulls packing once again.
US Dollar Rally May Find Added Fuel in Global Slowdown Fears
Most of the major currency pairs continue to show significant correlations with the MSCI World Stock Index, suggesting that broad-based risk appetite trends remain dominant as drivers of price action. This puts thematic macro-level concerns – specifically, the durability of the US recovery and its ability to offset headwinds from Europe and China facing global growth – squarely at the forefront. The US economic calendar is relatively quiet, with headline event risk clustered at the end of the week as PPI and UofM Consumer Confidence readings cross the wires on Friday. This puts the onus on evaluating the extent of downward pressure.
Euro Under Pressure But Still Waiting for Daily Close Below 1.3000
The ongoing political turmoil in Europe continues to shake the markets, with the inability for Greece to form a government now fueling speculation that the country might soon exit the Eurozone. Although an exit by Greece would have only a minimal impact on the broader economy, given the country’s size, fears of contagion seem to be the bigger problem right now, as investors start to price in the impact this will have on larger economies like Spain and Italy.
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