Daily Market Outlook

Currencies

• EUR/USD The euro headed for its biggest 5 – day decline in seven weeks as signs that Europe’s debt crisis is damping growth curbed demand for the currency. The 17-nation euro has fallen versus all its 16 major counterparts except the CHF since May 18 and before figures next week that may show consumer confidence in the currency bloc was little changed this month, while the jobless rate climbed in April to the highest in 21 years. The US dollar advanced against all of its most-traded peers this week as Europe’s weakening economy boosted demand for the relative safety of the U.S. currency.
  • The euro was at $1.2548 as of 10:22 a.m. in Tokyo from $1.2532 yesterday, when it declined to $1.2516, the weakest since July 6, 2010

• USD/CAD in early trading continues to climb, with the Looney having no strength to combat the risk aversion mode of the markets. In this environment equities are higher even as equity volatility has also shifted higher, oil dropped briefly below $90 before recovering (low oil prices helps to offset the negative growth outlook on the back of weak PMIs); bond yields are mixed and the USD is shifting weaker at this time against most of its partners.
  • The pair is trading for 1.0263 with the USD picking up 0.0010.

• USD/JPY As risk aversion remains the call of the markets, investors are ignoring fundamentals and continue to move to safe havens, shedding anything associated with the EU. After the collapse of talks in the EU and the obvious divide between Germany and France, inaction seems to be the only action that the EU can manage. Yesterday’s meeting has now set the future tone for the Hollande – Merkel relationship.
  The BOJ has decided to move in its own direction, ignoring political pressure and the downgrades from Fitch and Moody’s and at present held key rates and held monetary policy. 
  • The dollar was little changed at 79.48 yen.

Commodities

• Oil climbed a second day, paring a weekly decline, after Italy’s prime minister said most European Union leaders backed euro-area bonds, easing concern that the region’s debt crisis will derail the economic recovery..
  • Crude for July delivery gained as much as 38 cents to $91.04 a barrel in electronic trading on the NYMEX, and was at $90.96 at 10:52 a.m. Sydney time. The contract yesterday rose 0.9 percent to $90.66, the highest close since May 22. Prices are down 0.6 percent this week and 8 percent lower this year.

• Gold barely moved on Friday in line with calmer equities but the metal was on track for a 6 percent loss this month, hit by fears the debt crisis in Europe could spiral out of control and trigger a global economic slowdown. Dealers are awaiting the release of U.S. Commodity Futures Trading Commission data later in the day for clues on investors’ interest after net “long” managed money in U.S. gold — which reflects bullish bets on bullion — fell by $2.2 billion to
  $12.2 billion for the week ended May 15. 
  • Spot gold was steady at $1,558.40 an ounce by 00:46 GMT after hitting a session high at $1,577.50 on Thursday, when the euro briefly rose against the U.S. dollar.

Equities

• Asian stocks swung between gains and losses after Italian Prime Minister Mario Monti said Greece is likely to stay in the euro and most of the region’s leaders supported issuing a joint bond.
  • The MSCI Asia Pacific Index was fell 0.1 percent to 111.81 as of 10:10 a.m. in Tokyo before the Hong Kong market opened. The gauge earlier gained as much as 0.3 percent. It has fallen 0.7 percent this week.

• European stocks rebounded from the biggest drop in a month amid concern recent losses are overdone considering the outlook for company earnings.
  • The Stoxx Europe 600 Index rose 1 percent to 241.91 at the close of trading. The benchmark gauge had retreated for three straight weeks, driving its valuation to 9.9 times estimated earnings, near the cheapest since January.

• U.S stocks erased losses as Italian Prime Minister Mario Monti said Greece is likely to stay in the euro and a majority of the region’s leaders support issuing a joint bond, offsetting earlier concern about a Chinese slowdown.
  • The S&P 500 rose 0.1 percent to 1,320.68 at 4 p.m. New York time, reversing a loss of 0.6 percent. The index gained for a fourth day.
  • The Dow Jones Industrial Average added 33.60 points, or 0.3 percent, to 12,529.75.