Summary
The equity markets tumbled as investors fears where ignited by a worse than expected Chinese Leading Economic Index, which was compounded by a worse than expect US Confidence number. The S&P 500 index plunged to support levels close to 1042.
Tomorrow's Events
AUD
1:30
Australia Private Sector Credit
May
.4%
.2%
JPY
5:00
Japan Housing Starts
5%
.6%
GBP
6:00
UK Housing Prices
June
.3%
.5%
EUR
7:55
German Unemployment Rate
7.7%
8:30
UK GDP
Q1
9:00
EMU CPI
1.5%
1.6%
USD
12:15
ADP Employment
60K
55K
13:45
Chicago PMI
59
59.7
Trading Opportunities
USD/JPY
Fears of slower growth are beginning to surface as the second quarter of 2010 ends. The Conference Board has revised its measure of China’s Leading Economic Index from 1.7% to 0.3%, is the smallest gain this year. It plays on fears that the world’s fastest growing economy is set to slow. Japanese data was simply dreadful. First, the unemployment rate unexpectedly rose in May to 5.2% from 5.1% in April. The consensus had expected decline to 5.0%. May’s industrial output was expected to be flat after the 1.3% gain in April, but instead declined by 0.1%. The most disappointing report, however, was overall household spending which fell 0.7% on a year-over-year basis in May. The consensus had expected a 0.3%-0.5% increase. Yet the market had some inkling as the recent report showed retail sales plunged 2%, their biggest drop since early 2005. While deflationary forces are generally recognized in Japan, it does not simply imply falling goods prices, but wages as well. Japanese wages are off 2.4% year-over-year and this seems to also depress consumption. Despite this news, investors jumped into the Yen as a safe haven pushing it down to support near 88.50. This should prove to be a strong buying level given Japan’s outlook.
Oil
Oil prices tumbled on a worse than expected Chinese LEI and a very weak US Consumer Confidence number. US Consumer Confidence dropped to 52.9, from 62.7. The markets had been expected a small drop to 62.3. Oil dropped more than $2 dollar per barrel closing in on support levels close to $75 dollar a barrel. A break through this level would lead to further liquidation down to $73.85.