Summary
The equity markets consolidated as the market awaits the first bid of US earnings news, which was released after the closing bell. The S&P moved higher by 1 point to 1078. Alcoa, the first of the Dow Industrials to release earnings, beat expectations slightly.
Tomorrow's Events
AUD
1:30
NAB Business Confidence
July
5
JPY
5:00
Japan Industrial Production
May
-.1%
1.3%
Japan Consumer Confidence
June
42.5
42.8
CHF
7:15
Swiss Import Prices
20K
24.7K
GBP
8:30
UK CPI
3.2%
3.4%
EUR
9:00
EMU Zew Survey
16.3
18.8
USD
12:30
US Trade Balance
-39.4
-40.3
Trading Opportunities
GBP/USD
S&P affirmed the UK’s AAA rating but kept the outlook at negative. Despite optimism regarding the UK budget last month, the S&P statement suggests that the agency is still leary of the fiscal situation the UK economy currently offers. The rebound in the pound has been predicated on strides the new government will make in creating a more balanced budget, which reducing inflation, and pursuing growth. The pound has held trend line support from the low in May to the highs last week. A close below this support, will lead to a quick liquidation.
USD/JPY
The Japanese governing coalition failed to secure a majority in the upper house elections held yesterday. The DPJ appear to have won 44 seats, though Prime Minister Kan had set the goal at 54 of the 126 seats at stake. The government still has a 60% majority in the more powerful lower house. No action by the three major rating agencies is likely in the near-term, but of the G7, Japan seems the most vulnerable to a downgrade later this year. The yen itself is little changed as the main driver for the yen appears to be the general appetite for risk, which seems to overwhelm purely domestic factors. The Yen could easily weaken and test resistance levels near 90.00